Campos Rueda & Co v Pacific Commercial (44 Phil 916)

Facts:
Campos, Rueda & Co., a limited partnership, is indebted to the appellants: Pacific Commercial Co. , Asiatic Petroleum Co, and
International Banking Corporation amounting to not less than P1,000.00 (which were not paid more than 30 days prior to the date of
the filing by petitioners of the application for voluntary insolvency).
The trial court denied their petition on the ground that it was not proven, nor alleged, that the members of the firm were insolvent at
the time the application was filed. It also held that the partners are personally and solidarily liable for the consequences of the
transactions of the partnership.
Issue:
Whether or not a limited partnership may be held to have committed an act of insolvency.
Held:
Yes. A limited partnerships juridical personality is different from the personality of its members. On general principle, the limited
partnership must answer for and suffer the consequence of its acts. Under our Insolvency Law, one of the acts of bankruptcy upon
w/c an adjudication of involuntary insolvency can be predicated is the failure to pay obligations.
The failure of Campos, Rueda & Co., to pay its obligations constitutes an act w/c is specifically provided for in the Insolvency Law
for declaration of involuntary insolvency. The petitioners have a right to a judicial decree declaring the involuntary insolvency of said
partnership.

Vargas & Co. vs. Chan Hang Chiu, et.al

TAI TONG CHUACHE & CO. VS. INSURANCE COMMISSION

FACTS:

Azucena Palomo bought a parcel of land and building from Rolando Gonzales and assumed a mortgage of the building in
favor of S.S.S. which was insured with S.S.S. Accredited Group of Insurers
April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000 and to secure it,
the land and building was mortgaged

June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000 with Zenith Insurance

Corporation
July 16, 1975: another Fire Insurance policy was procured from Philippine British Assurance Company, covering the

same building for P50,000 and the contents thereof for P70,000
Before the occurrence of the peril insured against the Palomos had already paid their credit due the
July 31, 1975: building and the contents were totally razed by fire

Palomo was able to claim P41,546.79 from Philippine British Assurance Co., P11,877.14 from Zenith Insurance

Corporation and P5,936.57 from S.S.S. Group of Accredited Insurers but Travellers Multi-Indemnity refused so it demanded the

balance from the other three but they refused so they filed against them
Insurance Commission, CFI: absolved Travellers on the basis that Arsenio Cua was claiming and NOT Tai Tong Chuache
Palomo Appealed

Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage creditor

Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire Insurance Policy

issued by travellers
affirmative defense of lack of insurable interest that before the occurrence of the peril insured against the
Palomos had already paid their credit due the petitioner

ISSUE: W/N Tai Tong Chuache & Co. has insurable interest
HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache & Co.
when the creditor is in possession of the document of credit, he need not prove non-payment for it is presumed

The validity of the insurance policy taken b petitioner was not assailed by private respondent. Moreover,

petitioner's claim that the loan extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who

testified that they are still indebted to herein petitioner

Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is

understood that he acted for and in behalf of the firm

Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner, Travellers must be held
liable

ALFREDO AGUILA, JR. VS. CA

In April 1991, the spouses Ruben and Felicidad Abrogar entered into a loan agreement with a lending firm called A.C. Aguila
& Sons, Co., a partnership. The loan was for P200k. To secure the loan, the spouses mortgaged their house and lot located
in a subdivision. The terms of the loan further stipulates that in case of non-payment, the property shall be automatically
appropriated to the partnership and a deed of sale be readily executed in favor of the partnership. She does have a 90 day
redemption period.
Ruben died, and Felicidad failed to make payment. She refused to turn over the property and so the firm filed an ejectment
case against her (wherein she lost). She also failed to redeem the property within the period stipulated. She then filed a civil
case against Alfredo Aguila, manager of the firm, seeking for the declaration of nullity of the deed of sale. The RTC retained
the validity of the deed of sale. The Court of Appeals reversed the RTC. The CA ruled that the sale is void for it is a pactum
commissorium sale which is prohibited under Art. 2088 of the Civil Code (note the disparity of the purchase price, which is
the loan amount, with the actual value of the property which is after all located in a subdivision).
ISSUE: Whether or not the case filed by Felicidad shall prosper.
HELD: No. Unfortunately, the civil case was filed not against the real party in interest. As pointed out by Aguila, he is not the
real party in interest but rather it was the partnership A.C. Aguila & Sons, Co. The Rules of Court provide that every action
must be prosecuted and defended in the name of the real party in interest. A real party in interest is one who would be

benefited or injured by the judgment, or who is entitled to the avails of the suit. Any decision rendered against a person who
is not a real party in interest in the case cannot be executed. Hence, a complaint filed against such a person should be
dismissed for failure to state a cause of action, as in the case at bar.
Under Art. 1768 of the Civil Code, a partnership has a juridical personality separate and distinct from that of each of the
partners. The partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a
different juridical personality is being used for fraudulent, unfair, or illegal purposes. In this case, Felicidad has not shown
that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair, or illegal purposes. Moreover,
the title to the subject property is in the name of A.C. Aguila & Sons, Co. It is the partnership, not its officers or agents, which
should be impleaded in any litigation involving property registered in its name. A violation of this rule will result in the
dismissal of the complaint.

Jose Gatchalian, et.al.

plaintiffs-appellants, vs.
The Collector of
Internal Revenue,
defendant-appellee.
distraint warrant
is a document served by the sheriff thatindicates the amount of overdue taxes, the due date andinstructions
prohibiting the removal or destruction of any propertywithin the business.
Facts:

Plaintiffs purchased, in the ordinary course of business, from oneof the duly authorized agents of the National
CharitySweepstakesOffice one ticket for the sum of two pesos (P2), said ticket wasregistered in the name of
Jose Gatchalian and Company.

The ticket won one of the third-prizes in the amount of P50,000.

Jose Gatchalian was required to file the corresponding income taxreturn covering the prize won.

Defendant-Collector made an assessment against JoseGatchalian and Co. requesting the payment of the sum
ofP1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan.

Plaintiffs, however through counsel made a request forexemption. It was denied.

Plaintiffs failed to pay the amount due, hence a warrant ofdistraint and levy was issued.

Plaintiffs paid under protest a part of the tax and penalties toavoid the effects of the warrant.

A request that the balance be paid by plaintiffs in installments wasmade. This was granted on the condition that a
bond be filed.

Plaintiffs failed in their installment payments.

Hence a request for execution of the warrant of distraint and levywas made.

Plaintiffs paid under protest to avoid the execution.

A claim for refund was made by the plaintiffs, which wasdismissed, hence the appeal.
Issue:
Whether the plaintiffs formed a partnership or community ofproperty. If a partnership, hence liable for income tax.
Held:

Yes
. The plaintiffs formed a formed a partnership.

According to the stipulation facts the plaintiffs organized apartnership of a civil nature because each of them put up
moneyto buy a sweepstakes ticket for the sole purpose of dividingequally the prize which they may win, as they did in
fact in theamount of P50,000.

The partnership was not only formed, but upon the organizationthereof and the winning of the prize, Jose Gatchalian
personallyappeared in the office of the Philippines Charity Sweepstakes, in his capacity as co-partner, as such
collection the prize, the officeissued the check for P50,000 in favor of Jose Gatchalian andcompany, and the said
partner, in the same capacity, collectedthe said check.

All these circumstances repel the idea that the plaintiffs organizedand formed a community of property only.

HEIRS OF LIM VS. JULIET VILLA LIM

In 1980, the heirs of Jose Lim alleged that Jose Lim entered into a partnership agreement with Jimmy Yu and Norberto Uy.
The three contributed P50,000.00 each and used the funds to purchase a truck to start their trucking business. A year later
however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim, took over the trucking business and under his
management, the trucking business prospered. Elfledo was able to but real properties in his name. From one truck, he
increased it to 9 trucks, all trucks were in his name however. He also acquired other motor vehicles in his name.
In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a heart attack. Elfledos wife, Juliet Lim, took over the
properties but she intimated to Jimmy and the heirs of Norberto that she could not go on with the business. So the properties
in the partnership were divided among them.
Now the other heirs of Jose Lim, represented by Elenito Lim, required Juliet to do an accounting of all income, profits, and
properties from the estate of Elfledo Lim as they claimed that they are co-owners thereof. Juliet refused hence they sued
her.
The heirs of Jose Lim argued that Elfledo Lim acquired his properties from the partnership that Jose Lim formed with
Norberto and Jimmy. In court, Jimmy Yu testified that Jose Lim was the partner and not Elfledo Lim. The heirs testified that
Elfledo was merely the driver of Jose Lim.
ISSUE: Who is the partner between Jose Lim and Elfledo Lim?
HELD: It is Elfledo Lim based on the evidence presented regardless of Jimmy Yus testimony in court that Jose Lim was the
partner. If Jose Lim was the partner, then the partnership would have been dissolved upon his death (in fact, though the SC
did not say so, I believe it should have been dissolved upon Norbertos death in 1993). A partnership is dissolved upon the
death of the partner. Further, no evidence was presented as to the articles of partnership or contract of partnership between
Jose, Norberto and Jimmy. Unfortunately, there is none in this case, because the alleged partnership was never formally
organized.
But at any rate, the Supreme Court noted that based on the functions performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was himself the partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, as share in the partnership, on a date that coincided with the
payment of the initial capital in the partnership;

2.) Elfledo ran the affairs of the partnership, wielding absolute control, power and authority, without any intervention or
opposition whatsoever from any of petitioners herein;
3.) all of the properties, particularly the nine trucks of the partnership, were registered in the name of Elfledo;
4.) Jimmy testified that Elfledo did not receive wages or salaries from the partnership, indicating that what he actually
received were shares of the profits of the business; and
5.) none of the heirs of Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. As
repeatedly stressed in the case of Heirs of Tan Eng Kee, a demand for periodic accounting is evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show that the real and personal properties acquired and registered
in the names of Elfledo and Juliet formed part of the estate of Jose, having been derived from Joses alleged partnership
with Jimmy and Norberto.
Elfledo was not just a hired help but one of the partners in the trucking business, active and visible in the running of its affairs
from day one until this ceased operations upon his demise. The extent of his control, administration and management of the
partnership and its business, the fact that its properties were placed in his name, and that he was not paid salary or other
compensation by the partners, are indicative of the fact that Elfledo was a partner and a controlling one at that. It is apparent
that the other partners only contributed in the initial capital but had no say thereafter on how the business was ran. Evidently
it was through Elfredos efforts and hard work that the partnership was able to acquire more trucks and otherwise prosper.
Even the appellant participated in the affairs of the partnership by acting as the bookkeeper sans salary.

ONA VS. COMMISSIONER OF INTERNAL REVENUE

Facts:
Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her five children. A civil case was instituted for the
settlement of her state, in which Oa was appointed administrator and later on the guardian of the three heirs who were still minors
when the project for partition was approved. This shows that the heirs have undivided interest in 10 parcels of land, 6 houses and
money from the War Damage Commission.
Although the project of partition was approved by the Court, no attempt was made to divide the properties and they remained under
the management of Oa who used said properties in business by leasing or selling them and investing the income derived therefrom
and the proceeds from the sales thereof in real properties and securities. As a result, petitioners properties and investments
gradually increased. Petitioners returned for income tax purposes their shares in the net income but they did not actually receive
their shares because this left with Oa who invested them.
Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore, subject to the corporate
income tax, particularly for years 1955 and 1956. Petitioners asked for reconsideration, which was denied hence this petition for
review from CTAs decision.
Issue:
W/N there was a co-ownership or an unregistered partnership

W/N the petitioners are liable for the deficiency corporate income tax
Held:
Unregistered partnership. The Tax Court found that instead of actually distributing the estate of the deceased among
themselves pursuant to the project of partition, the heirs allowed their properties to remain under the management of Oa and let
him use their shares as part of the common fund for their ventures, even as they paid corresponding income taxes on their respective
shares.
Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into an unregistered partnership the
moment the said common properties and/or the incomes derived therefrom are used as a common fund with intent to produce
profits for the heirs in proportion to their respective shares in the inheritance as determined in a project partition either duly
executed in an extrajudicial settlement or approved by the court in the corresponding testate or intestate proceeding. The reason is
simple. From the moment of such partition, the heirs are entitled already to their respective definite shares of the estate and the
incomes thereof, for each of them to manage and dispose of as exclusively his own without the intervention of the other heirs, and,
accordingly, he becomes liable individually for all taxes in connection therewith. If after such partition, he allows his share to be held
in common with his co-heirs under a single management to be used with the intent of making profit thereby in proportion to his
share, there can be no doubt that, even if no document or instrument were executed, for the purpose, for tax purposes, at least, an
unregistered partnership is formed.
For purposes of the tax on corporations, our National Internal Revenue Code includes these partnerships

The term partnership includes a syndicate, group, pool, joint venture or other unincorporated organization,
through or by means of which any business, financial operation, or venture is carried on (8 Mertens Law of
Federal Income Taxation, p. 562 Note 63; emphasis ours.)
with the exception only of duly registered general copartnerships within the purview of the term corporation. It is, therefore,
clear to our mind that petitioners herein constitute a partnership, insofar as said Code is concerned, and are subject to the income
tax for corporations. Judgment affirmed.

SARDANE VS. COURT OF APPEALS

FACTS:
Petitioner Sardane is the owner of a Sardane Trucking Services. One day Sardane borrowed money from the other guy by making
promises and issuing several promissory notes. On the due date the other guy wanted his money back but instead of paying
Sardane apologized for his failure to pay on time, and he promised the other guy that he would pay him next time. After so many
failed attempts to collect his money the other guy got mad and finally decided to seek the intervention of the court. Now after
so many failed attempts to collect the promised payment, the other guy, Mr.Acojedo (Private Respondent), with so much hate on
his heart, finally filed a collection case against Sardane. Even during the scheduled date of the trial, Sardane, as usual he did not
show up. On motion by the petitioner(herein private respondent), the Court issued an order declaring the Sardane in default and
eventually after presentation of evidence ex parte, the court rendered judgment by default in favor of the petitioner. Sardane
then appealed to the CFI, and he claimed that the promissory notes were his contribution to the partnership; and that there is no
contract of loan; thus he is not indebted to the other guy. The CFI, believing the arguments of Sardane, ruled on his favor thereby
reversing the decision of the lower court by dismissing the complaint and ordered the plaintiff-appellee Acojedo to pay said
defendant-appellant P500.00 for moral damages
ISSUE:
whether or not a partnership existed?

HELD:
NONE .The fact that he had received 50% of the net profits does not conclusively establish that he was a partner of the private
respondent herein. Article 1769(4) of the Civil Code is explicit that while the receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in the business, no such inference shall be drawn if such profits were received
in payment as wages of an employee. Furthermore, herein petitioner hadno voice in the management of the
affairs of the basnig. Under similar facts, this Court in the early case of Fortis vs. Gutierrez Hermanos, denied the claim of the
plaintiff therein that he was a partner in the business of the defendant. The same rule was reiterated in Bastida vs. Menzi & Co.,
Inc., et al. which involved the same factual and legal milieu.
DELUAO VS. CASTEEL
26 SCRA 475
FACTS:
Nicanor Casteel filed a fishpond application for a big tract of swampy land in the then Sitio of Malalag
(now the Municipality of Malalag), Municipality of Padada, Davao for three times since 1940 but no
action was taken thereon by the authorities concerned. Despite the said rejection, Casteel did not lose
interest. Meanwhile, several applications were submitted by other persons for portions of the area covered
by Casteel's application, one of them was Felipe Deluao, uncle of Casteel.
Because of the threat poised upon his position by the above applicants who entered upon and spread
themselves within the area, Casteel sought financial aid from his uncle Deluao with which to finance the
needed improvements on the fishpond. Hence, a wide productive fishpond was built. But despite the
improvements introduced, Casteels application was still rejected. He then appealed the rejection made
with the Secretary of Agriculture and Natural Resources.
Pending appeal, Inocencia Deluao (wife of Felipe Deluao) and Nicanor Casteel executed a contract
denominated as contract of service whereby Deluao hires and employs the Casteel. The latter will be
the Manager and sole buyer of all the produce of the fish that will be produced from said fishpond while
the former will be the administrator of the same she having financed the construction and improvement of
said fishpond. At the same time, Inocencia Deluao executed a special power of attorney in favor of Jesus
Donesa, extending to the latter the authority to represent her in the administration of the fishpond.
Meanwhile, the Secretary of Agriculture and Natural Resources issued a decision stating that Nicanor
Casteel should be, as hereby it is, reinstated and given due course for the area applied for. Nicanor Casteel
then forbade Inocencia Deluao from further administering the fishpond, and ejected the latter's
representative, Donesa, from the premises.
Alleging violation of the contract of service entered into between Deluao and Casteel, Deluao filed an
action in the CFI for specific performance and damages against Casteel and one Juan Depra (who, they
alleged, instigated Casteel to violate his contract).
ISSUES:
(1) Whether or not the agreement made by the parties created a contract of co-ownership and partnership.
(2) Whether the reinstatement made by casteel over the subject land constitute the a dissolution of the
partnership between him and deluao.
HELD:
The evidence preponderates in favor of the view that the initial intention of the parties was not to form a
co-ownership but to establish a partnership Inocencia Deluao as capitalist partner and Casteel as

industrial partner the ultimate undertaking of which was to divide into two equal parts such portion of
the fishpond as might have been developed by the amount extended by the plaintiffs-appellees, with the
further provision that Casteel should reimburse the expenses incurred by the appellees over one-half of
the fishpond that would pertain to him. This can be gleaned, among others, from the letter of Casteel to
Felipe Deluao showing the intention to divide the fishpond.
TAI TONG CHUACHE VS. INSURANCE COMMISSION
FACTS:

Azucena Palomo bought a parcel of land and building from Rolando Gonzales and assumed a mortgage of

the building in favor of S.S.S. which was insured with S.S.S. Accredited Group of Insurers
April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000 and

to secure it, the land and building was mortgaged

June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000 with Zenith

Insurance Corporation
July 16, 1975: another Fire Insurance policy was procured from Philippine British Assurance Company,

covering the same building for P50,000 and the contents thereof for P70,000
Before the occurrence of the peril insured against the Palomos had already paid their credit due the
July 31, 1975: building and the contents were totally razed by fire
Palomo was able to claim P41,546.79 from Philippine British Assurance Co., P11,877.14 from Zenith

Insurance Corporation and P5,936.57 from S.S.S. Group of Accredited Insurers but Travellers Multi-Indemnity
refused so it demanded the balance from the other three but they refused so they filed against them
Insurance Commission, CFI: absolved Travellers on the basis that Arsenio Cua was claiming and NOT Tai

Tong Chuache
Palomo Appealed
Travellers reasoned that the policy is endorsed to Arsenio Chua, mortgage creditor
Tai Tong Chuache & Co. filed a complaint in intervention claiming the proceeds of the fire Insurance

Policy issued by travellers

affirmative defense of lack of insurable interest that before the occurrence of the peril insured

against the Palomos had already paid their credit due the petitioner
ISSUE: W/N Tai Tong Chuache & Co. has insurable interest
HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache & Co.

when the creditor is in possession of the document of credit, he need not prove non-payment for it is
presumed

The validity of the insurance policy taken b petitioner was not assailed by private respondent.

Moreover, petitioner's claim that the loan extended to the Palomos has not yet been paid was corroborated by
Azucena Palomo who testified that they are still indebted to herein petitioner
Chua being a partner of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an

agent, it is understood that he acted for and in behalf of the firm

Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner, Travellers
must be held liable