CASE #6

G.R. No. L-18703

August 28, 1922

INVOLUNTARY INSOLVENCY OF CAMPOS RUEDA & CO., S. en C., appellee,

vs.
PACIFIC COMMERCIAL CO., ASIATIC PETROLEUM CO., and INTERNATIONAL BANKING
CORPORATION,petitioners-appellants.
ROMUALDEZ, J.:
Turning to the merits of this appeal, we find that this limited partnership was, and is, indebted
to the appellants in various sums amounting to not less than P1,000, payable in the Philippines,
which were not paid more than thirty days prior to the date of the filing by the petitioners of the
application for involuntary insolvency now before us. These facts were sufficient established by the
evidence.
The trial court denied the petition on the ground that it was not proven, nor alleged, that the
members of the aforesaid firm were insolvent at the time the application was filed; and that was said
partners are personally and solidarily liable for the consequence of the transactions of the
partnership, it cannot be adjudged insolvent so long as the partners are not alleged and proven to be
insolvent. From this judgment the petitioners appeal to this court, on the ground that this finding of
the lower court is erroneous.
Issue: Whether or not a limited partnership, such as the appellee, which has failed to pay its obligation
with three creditors for more than thirty days, may be held to have committed an act of insolvency, and
thereby be adjudged insolvent against its will
Held: YES. Unlike the common law, the Philippine statutes consider a limited partnership as a juridical
entity for all intents and purposes, which personality is recognized in all its acts and contracts (art. 116,
Code of Commerce). This being so and the juridical personality of a limited partnership being different
from that of its members, it must, on general principle, answer for, and suffer, the consequence of its acts
as such an entity capable of being the subject of rights and obligations. If, as in the instant case, the
limited partnership of Campos Rueda & Co. Failed to pay its obligations with three creditors for a period of
more than thirty days, which failure constitutes, under ourInsolvency Law, one of the acts of bankruptcy
upon which an adjudication of involuntary insolvency can be predicated, this partnership must suffer the
consequences of such a failure, and must be adjudged insolvent. We are not unmindful of the fact that
some courts of the United States have held that a partnership may not be adjudged insolvent in an
involuntary insolvency proceeding unless all of its members are insolvent, while others have maintained a
contrary view. But it must be borne in mind that under the American common law, partnerships have no
juridical personality independent from that of its members.

.If, as in the instant case, the limited partnership of Campos Rueda & Co. Failed to pay its
obligations with three creditors for a period of more than thirty days, which failure constitutes, under
ourInsolvency Law, one of the acts of bankruptcy upon which an adjudication of involuntary insolvency
can be predicated, this partnership must suffer the consequences of such a failure, and must be adjudged
insolvent.
CASE #12
G.R. No. L-45425

April 29, 1939

JOSE GATCHALIAN, ET AL., plaintiffs-appellants,

vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee
FACTS:Gatchalian and company (appellants)purchased a lotto ticket which won a P50,000 prize. The
Collector of Internal Revenue(CIR) demanded from Jose Gatchalian and company to pay the assessed
amount of tax of the said prize. At first appellants did not pay the tax being collected by the CIR on the
ground that they did not form a partnership but merely a community of property hence exempted from
paying the tax of the said prize. Thereafter the CIR ordered the levy of the property of the plaintiffs. To
avoid embarrassment, appellants paid the assed tax under protest. The CFI of Manila ruled in favor of the
CIR. Hence this petition to recover the amount of tax paid by the appellants with legal interest.
ISSUES:
(1) Whether the plaintiffs formed a partnership, or merely a community of property
without a personality of its own; in the first case it is admitted that the partnership thus formed is
liable for the payment of income tax, whereas if there was merely a community of property, they
are exempt from such payment; and (2) whether they should pay the tax collectively or whether
the latter should be prorated among them and paid individually.
HELD: There is no doubt that if the plaintiffs merely formed a community of property the latter is
exempt from the payment of income tax under the law. But according to the stipulation facts the
plaintiffs organized a partnership of a civil nature because each of them put up money to buy a
sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they
did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only
formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian
personally appeared in the office of the Philippines Charity Sweepstakes, in his capacity as copartner, as such collection the prize, the office issued the check for P50,000 in favor of Jose
Gatchalian and company, and the said partner, in the same capacity, collected the said check. All
these circumstances repel the idea that the plaintiffs organized and formed a community of
property only.
Having organized and constituted a partnership of a civil nature, the said entity is the one bound
to pay the income tax which the defendant collected under the aforesaid section 10 (a) of Act No.
2833, as amended by section 2 of Act No. 3761. There is no merit in plaintiff's contention that the
tax should be prorated among them and paid individually, resulting in their exemption from the
tax.
In view of the foregoing, the appealed decision is affirmed, with the costs of this instance to the
plaintiffs appellants. So ordered.

CASE #18
G.R. No. L-4935

May 28, 1954

J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA ARANETA, INC.,
plaintiff-appellee,
vs.
QUIRINO BOLAOS, defendant-appellant
Facts:
This is an action originally brought in the Court of First Instance of Rizal, Quezon City Branch, to
recover possesion of registered land situated in barrio Tatalon, Quezon City.
Plaintiff's complaint was amended three times with respect to the extent and description of the
land sought to be recovered. The original complaint described the land as a portion of a lot registered in
plaintiff's name under Transfer Certificate of Title No. 37686 of the land record of Rizal Province and as
containing an area of 13 hectares more or less. But the complaint was amended by reducing the area of 6
hectares, more or less, after the defendant had indicated the plaintiff's surveyors the portion of land
claimed and occupied by him. The second amendment became necessary and was allowed following the
testimony of plaintiff's surveyors that a portion of the area was embraced in another certificate of title,
which was plaintiff's Transfer Certificate of Title No. 37677. And still later, in the course of trial, after
defendant's surveyor and witness, Quirino Feria, had testified that the area occupied and claimed by
defendant was about 13 hectares, as shown in his Exhibit 1, plaintiff again, with the leave of court,
amended its complaint to make its allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself thru "open, continuous,
exclusive and public and notorious possession (of land in dispute) under claim of ownership, adverse to
the entire world by defendant and his predecessor in interest" from "time in-memorial". The answer further
alleges that registration of the land in dispute was obtained by plaintiff or its predecessors in interest thru
"fraud or error and without knowledge (of) or interest either personal or thru publication to defendant
and/or predecessors in interest." The answer therefore prays that the complaint be dismissed with costs
and plaintiff required to reconvey the land to defendant or pay its value.
After trial, the lower court rendered judgment for plaintiff, declaring defendant to be without any right to
the land in question and ordering him to restore possession thereof to plaintiff and to pay the latter a
monthly rent of P132.62 from January, 1940, until he vacates the land, and also to pay the costs.
ISSUE: Business Org. Issue: Whether or not the case was not brought by the real party in interest?
HELD:
As to the first assigned error, there is nothing to the contention that the present action is not
brought by the real party in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of Court require
is that an action be brought in the name of, but not necessarily by, the real party in interest. (Section 2,
Rule 2.) In fact the practice is for an attorney-at-law to bring the action, that is to file the complaint, in the
name of the plaintiff. That practice appears to have been followed in this case, since the complaint is
signed by the law firm of Araneta and Araneta, "counsel for plaintiff" and commences with the statement
"comes now plaintiff, through its undersigned counsel." It is true that the complaint also states that the
plaintiff is "represented herein by its Managing Partner Gregorio Araneta, Inc.", another corporation, but
there is nothing against one corporation being represented by another person, natural or juridical, in a suit
in court. The contention that Gregorio Araneta, Inc. can not act as managing partner for plaintiff on
the theory that it is illegal for two corporations to enter into a partnership is without merit, for the
true rule is that "though a corporation has no power to enter into a partnership, it may
nevertheless enter into a joint venture with another where the nature of that venture is in line with
the business authorized by its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R.,
1043, citing 2 Fletcher Cyc. of Corp., 1082.) There is nothing in the record to indicate that the venture in

which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line with the
corporate business of either of them.