NAME: Reyna Marez D.

Micabalo
CASE 1 - PARTNERSHIP
1. Commissioner of Internal Revenue vs. Suter and Court of Tax Appeals, 27 SCRA 152 [1969].
FACTS:
• Respondent William J. Suter established a limited partnership with Julia Spirig and Gustav
Carlson. This partnership was registered with the SEC under the name "William J. Suter
'Morcoin' Co.,Ltd." The partners each gave the partnership P20,000.00, P18,000.00, and
P2,000.00, respectively. The company was involved in importing, marketing, distributing, and
running automated phonographs, radios, televisions, and amusement devices, as well as their
parts and accessories.
• However, in 1948, limited partner Carlson sold his interest in the company to general partner
Suter and his wife. Shortly after, on December 18, 1948, limited partner Spirig and general
partner Suter were married.
• The Internal Revenue Commissioner combined the business's earnings and the personal earnings
of partners-spouses Suter and Spirig in 1959, resulting in the assessment of a deficit income tax
on respondent Suter.

ISSUES:
• Whether or not the corporate personality of the William J. Suter "Morcoin" Co., Ltd. should be
disregarded for income tax purposes, considering that respondent William J. Suter and his wife,
Julia Spirig Suter, actually formed a single taxable unit; and
• Whether or not the partnership was dissolved after the marriage of the partners, respondent
William J. Suter and Julia Spirig Suter.

RULING:
• The Civil Code, which is applicable in the absence of a specific provision in the Code of
Commerce, prohibits people from entering into universal partnerships. As a result, a husband and
a wife are not permitted to enter into a contract of general co-partnership. The marriage of
partners inevitably results in the dissolution of an earlier partnership (2 Echaverri196). It being a
basic tenet of the Philippine law that the partnership has a juridical identity of its own, distinct
and separate from that of its partners.
• Because in the case of compaias colectivas, the members are taxable in their individual
capacities for any dividend or share of the profit generated from the duly registered general
partnership, rather than the business, the code taxes the latter on its income but not the former.
• Since Julia Spirig contributed P18,000 and William Suter P20,000, respectively, and neither of
them was an industrial partner, William J. Suter "Morcoin" Co., Ltd. was not a general
partnership but rather a specific one. It follows that Article 1677 of the Civil Code of 1889's
prohibition against spouses entering partnerships did not apply to William J. Suter "Morcoin"
Co., Ltd.

2. Woodhouse vs. Halili, 83 Phil. 526 [1953].

FACTS:
• Plaintiff Woodhouse and defendant Halili signed a written agreement on November 29, 1947,
which stated, among other things: 1) that they would form a partnership for the bottling and
 distribution of Mission soft drinks, with plaintiff serving as the industrial partner or manager and
the defendant as the capitalist, providing the funding necessary; 2) that plaintiff would obtain the
Mission soft drinks franchise for and on behalf of the proposed partnership; and 3) that they
would organize the partnership.
• Fortunato F. Halili and/or Charles F. Halili and the Mission Dry Corporation signed a franchise
agreement on December 10, 1947. Defendant received exclusive rights, a license, and permission
from Woodhouse to create, bottle, distribute, and sell Mission beverages in the Philippines.
• The plaintiff requests that the partnership arrangement be implemented and that she receives a
30% stake as well as P200,000 in damages. On the other hand, the defendant asserts that: 1) the
plaintiff's representation that he was the owner of, or was about to become the owner of, an
exclusive bottling franchise was false and that the defendant's consent to the agreement was
secured by that representation; the defendant counterclaims for P200,000 as damages.

ISSUES:
• Whether the defendant had misrepresented that he held a license to exclusively bottle Mission
beverages, and
• Whether, if so, this misrepresentation or fraud rendered the partnership agreement invalid.

RULING:
• When it came to the execution of the agreement, Woodhouse did misrepresent his ownership of
an exclusive franchise to the defendant Halili because the agreement had already expired. The
plaintiff was represented to the defendant as the exclusive franchisee, or so the defendant was led
to believe. As a result, it was also decided that the franchise would be given to the partnership
and given back to the plaintiff upon the partnership's dissolution or termination.

3. Aurbach vs. Sanitary Wares Manufacturing Corporation, 180 SCRA 130 [1989].
FACTS:
• In an agreement with Saniwares and a few Filipino investors, ASI, a foreign corporation with
legal residence in Delaware, the United States, pledged to: share in the ownership of a company
that would manufacture vitreous China and sanitary items in the Philippines and market them
domestically and internationally. The parties agreed that an organization would be formed to
conduct business operations in the Philippines, and that organization's first name would be
"Sanitary Wares Manufacturing Corporation."
• The Board of Directors, which will be made up of nine people, will be in charge of running the
Corporation. As long as American-Standard holds at least 30% of the Corporation's outstanding
shares, three of the nine directors shall be designated by American-Standard, and the other six
shall be designated by the other stockholders of the Corporation.
• The Filipino group claimed that the main reason for their conflict with ASI was that they wanted
to increase the company's export operations, but ASI opposed since it appeared that ASI had
other subsidiaries or joint venture groups in the nations where Philippine exports were being
considered.
• The annual stockholders' meeting was place on March 8, 1983.

ISSUES:
• Fails to fully enforce the basic intent of the agreement and the law. And whether it was a joint
venture or a corporation.
 RULING:
• The general rule is that the laws regulating the interpretation and construction of contracts must
be followed in order to identify the parties' genuine intention, which determines whether they
have created a joint venture or some other relationship. A joint venture and not a typical
company is more consistent with Saniwares' organizational background and the odd structures
that control its policy-making body. The legal idea of a joint venture has its roots in common
law. Although there is no exact legal definition for it, it is widely understood to signify an
organization created for a brief period of time. The primary contrast stated by the majority of
opinions in common law jurisdictions is that a joint venture is created to carry out a specific
transaction and is therefore of a temporary nature, whereas a partnership envisions a general
business with some degree of continuity.

4. Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc., 317 SCRA 728 [1999].

FACTS:
• Antonio Chua and Peter Yao signed a contract dated February 7, 1990 on behalf of "Ocean Quest
Fishing Corporation" to buy various-sized fishing nets from Philippine Fishing Gear Industries,
Inc. (herein respondent). They stated that Petitioner Lim Tong Lim, who was not a signatory to
the agreement, was a partner in a business enterprise. The nets were P532,045 in value overall.
Additionally, the Corporation purchased 400 pieces of floats for P68,000. But because the
purchasers did not make payment for the fishing nets and floats, a private respondent filed a
lawsuit in collection against Chua, Yao, and petitioner Lim Tong Lim and asked for a writ of
preliminary attachment.
• On the grounds that "Ocean Quest Fishing Corporation" was a nonexistent corporation, as
demonstrated by a Certification from the Securities and Exchange Commission, the three were
sued in their positions as general partners. The lower court granted a Writ of Preliminary
Attachment on September 20, 1990, and the sheriff carried it out by fastening the fishing nets to
the F/B Lourdes when it was parked at the Fisheries Port in Navotas, Metro Manila. The trial
court issued its decision on November 18, 1992, finding that Chua, Yao, and Lim were
collectively accountable for the debt as general partners and that Philippine Fishing Gear
Industries was entitled to the Writ of Attachment.

ISSUES:
• The court of appeals made a mistake by determining that Chua, Yao, and petitioner Lim had a
partnership agreement based on a compromise agreement they entered into in a different case.
• The court of appeals was unjustified in imposing liability to petitioner Lim as well, as it was only
Chua who represented that he was acting for
ocean quest fishing corporation when he bought the nets from Philippine fishing.

RULING:
• In affirming the trial court's decision, the CA determined that the petitioner was Chua and Yao's
partner in a fishing enterprise and may therefore be held accountable as such for the nets and
floats the partnership bought and used.
• "The evidence establishes that all defendants, including the appellant Lim Tong Lim, entered
into a partnership for a specific undertaking, namely for commercial fishing. Obviously, the
ultimate undertaking of the defendants was to divide the profits among themselves, which is
 what a partnership, in its most basic form, is by a contract of partnership, two or more persons
bind themselves to contribute money, property, or industry to a common fund with the intention
of dividing the profits.

5. Council of Red Men vs. Veterans Army, 7 Phil. 685 [1907].

FACTS:
• Post No. 1 of the General Henry W. Lawton Post. W. signed a lease agreement for a portion of a
certain building in the city of Manila on the first day of March 1903. Albert E. McCabe acting
for and on behalf of Lawton Post, Veteran Army of the Philippines, as lessee, and W. Lewis, E.
C. Stovall, and V. O. Hayes serving as trustees of the Apache Tribe, No. 1, Improved Order of
Red Men, as lessors. The lease had a two-year term that began on February 1st, 1903, and ended
on February 28th, 1905. The Lawton Post paid the rent while occupying the disputed property
for thirteen months.
• This association's goal is to uphold the spirit of patriotism and fraternity among the men who
defended the Stars and Stripes in the Philippine Islands during the Spanish War and the
Philippine Insurrection. It also seeks to advance the welfare of its members in every just and
honorable way, to help the sick and suffering, to bury the dead, and to uphold among its
members in times of peace the same unity and harmony with which they defended their country
in times of war.
ISSUES:
• The Great Council of the United States of the Improved Order of Red Men, the plaintiff in the
case, cannot maintain its claim, according to the appellant, because it did not create the leasing
agreement.
• Additionally, it is asserted that the Veteran Army of the Philippines cannot be sued because it
never disagreed with the plaintiff or Apach Tribe No. 1 and never gave anyone permission to
enter into a contract on its behalf.

RULING:
• As a result, one partner may only enter into a contract on behalf of the partnership if the
management of the partnership company is not covered by the articles of partnership. It is
believed that the Veteran Army of the Philippines' writings give this in the case at hand.
Although there isn't an express tendency to such effect in those articles, it is believed one can be
legitimately inferred from their contents. They state what each officer's responsibilities are and
the ability to make contracts is not mentioned in any of these different provisions, nor is it
specifically granted to any officer. Therefore, it was reserved for the department as a whole,
meaning that the department was present in any situation that was not expressly covered by the
rules defining the officers' responsibilities. It is hard to imagine that the individuals who created
this organization would have intended to grant any one of the sixteen or more members of the
department the authority to enter into any agreement relating to the society that particular officer
deemed necessary, or that an agreement made in this manner without the consent or knowledge
of the other department members would bind the department.