COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs. WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents

FACTS: A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on 1947 by
respondent William J. Suter as the general partner, and Julia Spirig and Gustav Carlson, as the limited
partners. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership.
The firm engaged, among other activities, in the importation, marketing, distribution and operation of
automatic phonographs, radios, television sets and amusement machines, their parts and accessories.
In 1948, general partner Suter and limited partner Spirig got married and, thereafter, limited partner Carlson
sold his share in the partnership to Suter and his wife.

The limited partnership had been filing its income tax returns as a corporation, without objection by
petitioner,until in 1959 when the latter, in an assessment, consolidated the income of the firm and the
individual incomes of the partners-spouses Suter and Spirig resulting in a determination of a deficiency
income tax against respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955.

Respondent Suter protested the assessment, and requested its cancellation and withdrawal, as not in
accordance with law, but his request was denied. Unable to secure a reconsideration, he appealed to the
Court of Tax Appeals, which court rendered a decision reversing that of the Commissioner of Internal
Revenue.

Petitioner claimed that the marriage of Suter and Spirig and their subsequent acquisition of the interests of
remaining partner Carlson in the partnership dissolved the limited partnership, and if it did not, the fiction of
juridical personality of the partnership should be disregarded for income tax purposes because the spouses
have exclusive ownership and control of the business; consequently the income tax return of respondent
Suter for the years in question should have included his and his wife's individual incomes and that of the
limited partnership.

On the other hand, respondent Suter maintained that his marriage with limited partner Spirig and their
acquisition of Carlson's interests in the partnership is not a ground for dissolution of the partnership, either
in the Code of Commerce or in the New Civil Code, and that since its juridical personality had not been
affected, Suter was not bound to include in his individual return the income of the limited partnership.

ISSUES: 1.) WON partnership was dissolved after the marriage of the partners, respondent William J. Suter
and Julia Spirig Suter and their subsequent acquisition of the interests of remaining the partner, Carlson,
in the partnership. NO

RULING: The opinion of Senator Tolentino in Commentaries and Jurisprudence on Commercial Laws of
the Philippines, Vol. 1, 4th Ed., page 58, reads as follows:

A husband and a wife may not enter into a contract of general co-partnership, because under the
Civil Code, which applies in the absence of express provision in the Code of Commerce, persons
prohibited from making donations to each other are prohibited from entering
into universal partnerships. (2 Echaverri 196) It follows that the marriage of partners necessarily
brings about the dissolution of a pre-existing partnership. (1 Guy de Montella 58)

The petitioner has evidently failed to observe the fact that William J. Suter "Morcoin" Co., Ltd. was not a
universal partnership, but a particular one. As appears from Articles 1674 and 1675 of the Spanish Civil
Code, of 1889 (which was the law in force when the subject firm was organized in 1947),
a universal partnership requires either that the object of the association be all the present property of the
partners, as contributed by them to the common fund, or else "all that the partners may acquire by
their industry or work during the existence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not
such a universal partnership, since the contributions of the partners were fixed sums of money, P20,000.00
by William Suter and P18,000.00 by Julia Spirig and neither one of them was an industrial partner. It follows
that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter by
Article 1677 of the Civil Code of 1889.

Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of
the causes provided for that purpose either by the Spanish Civil Code or the Code of Commerce. The
capital contributions of partners William J. Suter and Julia Spirig were separately owned and contributed
by them before their marriage; and after they were joined in wedlock, such contributions remained their
respective separate property under the Spanish Civil Code. Thus, the individual interest of each in William
J. Suter "Morcoin" Co., Ltd. did not become common property of both after their marriage in 1948.

34. ) G.R. No. L-2888 October 23, 1906

HUNG-MAN-YOC, in the name of KWONG-WO-SING, plaintiff-appellee, vs.KIENG-CHIONG-SENG, ET

AL., defendants-appellants.

FACTS: Private respondents came into an agreement to engage in the importation of goods for sale at a
profit under the firm name of Kieng-Chiong-Seng. The private respondents were as follows:

a. Chua-Che-Co
b. Yu-Tec-Pin - Manager
c. Ang-Chu-Keng
d. Kiong-Tiao-Eng - Manager

The problem arose when Yu-Tec-Pin and Kiong-Tiao-Eng contracted obligations in favor of the petitioner.
When the respondents failed to comply with the alleged obligation, the petitioner instituted an action for its
enforceability. The lower court entered judgment against each and all respondents for the sum of 7,372.75
pesos with 6% interest per annum. It further ruled that the respondents were partners under the firm name
of Kieng-Chiong-Seng.

Aggrieved by the decision, Chua-Che-Co appealed the decision contending that there was no partnership
that existed and that they only formed an association. In fact, such organization was never registered and
is not evidenced by any public document. Also he never contracted with the petitioner.

The petitioner contended that there is no doubt that the partnership of Kieng-Chiong-Seng was a mercantile
partnership organized for the purpose of engaging in commercial pursuits, although such organization was
not evidenced by any public document as required by Article 119 of the Code of Commerce, nor was it
registered as required by Article 17 of the said code.

ISSUES: 1.What kind of partnership existed? – a de facto partnership

2. WON all the respondents can be held liable to the petitioner. NO

RULING: 1.The partnership in dispute was a de facto partnership. Although it had no legal standing, since
it contracted obligations in favor of the plaintiff, the liability arising from such obligations must be enforceable
against someone.

The partnership in question not being included in any of the classes of partnership defined by the Code of
Commerce there should be applied to it the general provisions applicable to all partnerships contained in
Article 120 of the Code of Commerce, which reads as follows:
 “The persons in charge of the management of the association who do not comply with the
provisions of the foregoing article (art. 119, which requires that the articles of partnership be recorded in
the Mercantile Register) shall be responsible together with the persons not members of the association with
whom they may have transacted business in the name of the same.”

It has not been proven that Kieng-Chiong-Seng was the firm name, but rather the designation of
the partnership.

It cannot be the firm name of a general partnership because this should contain the names of all
the partners, or some of them, or at least one of them to be, followed in the two latter cases by the words
“and company”, whereas in this case none of the four names of those who it is alleged were members of
the firm appear in the firm name of the partnership.

Neither can it be considered as the firm name of a limited partnership for the reason that this should
contain the same requisites as the firm name of a general partnership, and in addition thereto the word
“limited”. The firm name in question has absolutely none of these requisites.

2. Not all respondents cannot be held liable. The defendant, Chua-Che-Co, was not in charge of
the management of the association, nor did he make any contract at all with the plaintiff, as clearly appears
from the testimony of the various witnesses, the agent of the partnership, Yu-Yec-Pin, being the person
who made all the contracts for the partnership; also Kieng-Tiao-Eng according to two of the witnesses. It
is evident, therefore, that Chua-Che-Co has incurred no liability and that he cannot be held individually
responsible for the payment of the plaintiff’s claims, as the court below found.