Commissioner of Internal Revenue vs.
William j. Suter and the Court of Tax Appeals
G.R. No. L-25532, February 28, 1969
Facts:
William J. Suter as the general partner, and Julia Spirig and Gustav Carlson, as
the limited partners formed a limited partnership named "William J. Suter 'Morcoin' Co.,
Ltd.," on 30 September 1947. William J. Suter contributed 20,000.00 while Julia Spirig
and Gustav Carlson contributed 18,000.00 and 2,000.00 respectively. On 1 October
1947, the limited partnership was registered with the Securities and Exchange
Commission. In 1948, however, general partner Suter and limited partner Spirig got
married and, thereafter, on 18 December 1948, limited partner Carlson sold his share in
the partnership to Suter and Spirig. The sale was duly recorded with the Securities and
Exchange Commission on 20 December 1948. The limited partnership had been
regularly filing its income tax returns as a corporation, without objection by the herein
petitioner, Commissioner of Internal Revenue. However, in 1959, in an assessment
made by the CIR on the consolidated income of the firm and the individual incomes of
the partners-spouses Suter and Spirig, they determined a deficiency income tax against
them in the amount of P2, 678.06 for 1954 and P4, 567.00 for 1955. Partner-Spouses
Suter protested the assessment in an attempt to provide their defense.
Issue:
1. 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.
2. Whether or not the partnership was dissolved after the marriage of the partners,
William J. Suter and Julia Spirig Suter and the subsequent sale to them by the
remaining partner, Gustav Carson.
Ruling:
The petitioner, Commissioner of Internal Revenue, evidently failed to realize that
“William J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a particular
one. From here on, it can be inferred that the partnership entered by the Partner-
spouses was not a partnership they were prohibited to enter into in accordance with
Article 1782 of the New Civil Code.
Moreover, the subsequent marriage of the Partner-spouses and the subsequent
sale to them of Gustav Carson does not constitute a ground of dissolution of their
partnership. The capital contributions of partners William J. Suter and Julia Spirig were
separately owned and contributed by them before their marriage and such contributions
remained their respective separate property after their marriage.
MAGALONA V. PESAYCO
G.R. No. L-39607. February 6, 1934
Facts:
In September 1930, Encarnacion Magalona, Juan Sermeno, and Juan Pesayco,
formed a partnership for the purpose of catching “semillas de bañgus o aua” in the sea
and rivers of San Jose, Antique Province. Magalona and Sermeno, the plaintiffs, agreed
that Pesayco, the defendant, would put in a bid for this privilege and if such is granted
he would become the manager and that each partner would contribute 1/3 of the capital.
Pesayco offered a bid amounting to P5, 550.09 which was the highest bid thus the
privilege was awarded to him. It was required that 1/4 of the bid should be deposited in
accordance with their oral agreement that each partner would be contributing 1/3 of the
said amount. Pesayco, having only P410 on hand, wired Atty. Tiburcio Lutero, the
representative of Magalona to complete the payment of the required deposit which the
latter sent P1, 000 to the municipal treasurer of San Jose, Antique. Since January 1,
1931 the business was managed by Pesayco but he never gave his partners any
update on the business’ account pertaining to catches or sales with the exception of the
two sales of “semillas de bañgus” which he gave to Lutero as the representative of
Magalona. It came to Magalona and Sermeno’s attention that before April 20, 1931,
Pesayco sold 975,000 “semillas de bañgus” equivalent to P2, 925 in market value. He
did not pay his partners any part of the said sale which he did not deny that it had
occurred insisting that there was no partnership because the partnership agreement
was not in writing. Moreover, on April 21, 1931, a complaint was filed stipulating that (1)
a receiver be appointed by the court to manage and take charge of the funds and affairs
of the partnership; (2) Pesayco be ordered to pay his partners for their participation in
the profits pertaining to the unreported sales; (3) Pesayco be required to turn over to the
receiver all the funds of the partnership in his custody and (4) Pesayco to pay the costs
incurred as a result of this endeavor. Thereafter, a receiver was appointed by the court
which took over the management and possession of all devices and implements used in
the partnership.
Issue:
Whether or not there is a partnership agreement despite it being an oral agreement and
not in writing.
Ruling:
Article 1771 of the New Civil Code provides that “A partnership may be constituted in
any form, except where immovable property or real rights are contributed thereto, in
which case a public instrument shall be necessary”. As attested by the oral testimony of
the plaintiffs, Magalona and Sermeno together with two witnesses namely Attorneys
Lutero and Maza, it can be inferred that it is not required that the partnership agreement
be in writing. Therefore, the decision was affirmed with costs against Pesayco.
