G.R. No.

L-42115             March 30, 1935

TEC BI & COMPANY, INC., plaintiff-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellant.

Facts:

Suit was brought by Tec Bi & Company, Inc., against the Collector of Internal Revenue to recover the sum of
P4,387.75 paid under protest as income taxes by Yu Yiong & Co. (the predecessor of the said corporation) for the
calendar years 1921, 1923, 1924, 1926 and 1927. Judgment was rendered requiring the collector to refund the taxes
paid for the years 1921, 1923 and 1924 only. Both parties appealed to the SC.

Under the Income Tax Law, a registered general copartnership is exempted from the payment of income tax but an
unregistered general copartnership is subject to the payment of income tax. It is admitted by the Collector of Internal
Revenue that Yu Yiong and Company was a duly registered general copartnership, its articles of association having
been registered in the Mercantile Register on November 12, 1920. But it is argued that the association Yu Yiong and
Company ceased to be a registered general copartnership during the years 1921 to 1927 inclusive for the purposes
of the income tax law because the copartnership failed to register until July 11, 1927, the transfers made on
November 1, 1921, by Yu Yiong and Company of the following interests in the association: P9,500 to Heng Shiu Nian
and P9,022.23 to Tee Huan as set out in the above agreed statement of facts. It is to be noted, however, that these
transfers were not recognized by the association until February 21, 1924, when Yu Yiong and Company, by a notarial
document, admitted the said assignees as new partners.

Issue #1: W/N the failure of the association to record these transfers in the Mercantile Register until July 11, 1927,
have the legal effect of converting the registered association of Yu Yiong and Co. into an unregistered association?

Issue #2: W/N the admission of Yu Siong, Heng Shiu Nian and Uy Quioco as additional partners in the firm under the
circumstances mentioned have the effect of dissolving the duly registered general partnership of Yu Yiong and
Company and of creating a new unregistered copartnership for the interval between February 21, 1924, and July 11,
1927?

Held #1 and #2: No

Having regard to the requirements of the articles of association and the provisions of article 143 of the Code of
Commerce, it is clear that the transfers made on November 1, 1921, as aforesaid, had no effect as regards the
partnership until February 21, 1924, and that the trial court was correct in so holding, regardless of the incidental fact
that by agreement of the parties the assignees received the accumulated dividends upon their respective shares
since November 1, 1921.

It did not have that effect for the following reasons: First, there is no provision in the Code of Commerce that such a
conversion should take place. Second, there is no provision in the Code of Commerce that the registration of the
transfers in the Mercantile Register on July 11, 1927, should have the effect of reviving or recreating the alleged
extinct registered general copartnership of Yu Yiong and Company. Third, articles 24 and 25 of the Code of
Commerce, construed together, plainly contemplate the continued existence of the association in the manner and
form in which it appears in the Mercantile Register regardless of the unregistered changes therein. Article 25
specifically provides in its last paragraph the consequences of the omission to register the resolutions or acts of a
mercantile association which modify or alter the conditions of the recorded articles of association; that is to say, any
changes not so registered are binding between the members of the association but shall not prejudice third persons,
who, on the other hand, may avail themselves thereof insofar as it may be advantageous to them. Fourth,
uncertainties and confusion in trade and commerce would necessarily arise if the public could not rely upon the
Mercantile Register to ascertain the status of a registered commercial partnership.

There is not the slightest indication that the transfers in question were dishonest or fraudulent, or, that the delay in
registering them has caused loss or disadvantage to the Government or anyone else.

The judgment appealed from must be modified in the sense that the Collector of Internal Revenue be adjudged and
required to refund to the plaintiff-appellant Tec Bi & Company, Inc. the sum of P4,387.75 income tax and charges
paid under protest.

Note: The case of Tan Senguan & Co. vs. Collector of Internal Revenue, insofar as it may be in conflict with this
decision, is to be considered overruled. In that case, merchants must make their records speak the truth. Merchants
who sell to them have the right to know when partners withdraw capital and when other partners are admitted.
Dealing with partnerships are on the faith of appearances.
Article 1843 – Limited Partnership definition

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.

Facts:

The partnership Campos Rueda & Co., voluntarily filed an application for a judicial decree adjudging itself insolvent,
which is just what the petitioners and appellants tried to obtain from the lower court.

The SC found that the limited partnership was indebted to the appellants in various sums which were not paid more
than thirty days prior to the date of the filing by the petitioners of the application for involuntary insolvency.

Accordingly, 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: W/N the partners are personally and solidarily liable for the consequence of the transactions of the
partnership?

Held: No

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.

The SC added that the liability of the limited partners for the obligations and losses of the partnership is limited to the
amounts paid or promised to be paid into the common fund except when a limited partner should have included his
name or consented to its inclusion in the firm name (arts. 147 and 148, Code of Commerce).

Article 1844 – requisites to form Limited Partnership

G.R. No. 19892           September 6, 1923

TECK SEING AND CO., LTD., petitioner-appellee.
SANTIAGO JO CHUNG, ET AL., partners,
vs.
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-appellants.

Facts:

Following the presentation of an application to be adjudged an insolvent by Petitioner Teck Seing & Co., Ltd.," the
creditors, the Pacific Commercial Company, et.al, filed a motion in which the Court was prayed to enter an order: "(A)
Declaring the individual partners as described in paragraph 5 parties to this proceeding; (B) to require each of said
partners to file an inventory of his property in the manner required by section 51 of Act No. 1956; and (C) that each of
said partners be adjudicated insolvent debtors in this proceeding." The trial judge first granted the motion, but,
subsequently, on opposition being renewed, denied it. It is from this last order that an appeal was taken in
accordance with section 82 of the Insolvency Law.

The document providing for the partnership contract purported to form "a limited partnership and the counsel for the
petitioner's first contention was that Teck Seing & Co., Ltd., was not a “ general partnership”

Issue: W/N the petitioner established a limited partnership?

Held: No.
To establish a limited partnership there must be, at least, one general partner and the name of the least one of the
general partners must appear in the firm name. But neither of these requirements have been fulfilled. The general
rule is, that those who seek to avail themselves of the protection of laws permitting the creation of limited partnerships
must show a substantially full compliance with such laws. A limited partnership that has not complied with the law of
its creation is not considered a limited partnership at all, but a general partnership in which all the members are liable.