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Cir vs. William Suter

The Commissioner of Internal Revenue claimed that a limited partnership dissolved due to the marriage of the general partner to a limited partner. However, the Court of Tax Appeals ruled that the marriage did not dissolve the partnership under Philippine law. Limited partnerships, unlike general partnerships, allow married couples to be partners. This partnership involved monetary contributions from partners and was not an industrial partnership barred by the Civil Code. Therefore, the marriage did not automatically dissolve the pre-existing limited partnership.

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126 views1 page

Cir vs. William Suter

The Commissioner of Internal Revenue claimed that a limited partnership dissolved due to the marriage of the general partner to a limited partner. However, the Court of Tax Appeals ruled that the marriage did not dissolve the partnership under Philippine law. Limited partnerships, unlike general partnerships, allow married couples to be partners. This partnership involved monetary contributions from partners and was not an industrial partnership barred by the Civil Code. Therefore, the marriage did not automatically dissolve the pre-existing limited partnership.

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Irish Llarenas
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G.R. No.

L-25532 February 28, 1969 their acquisition of Carlson's interests in the partnership in 1948 is not a
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ground for dissolution of the partnership, either in the Code of Commerce
WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents. or in the New Civil Code, and that since its juridical personality had not
been affected and since, as a limited partnership, as contra distinguished
FACTS: from a duly registered general partnership, it is taxable on its income
"William J. Suter 'Morcoin' Co., Ltd.,", a limited partnership, was registered similarly with corporations, Suter was not bound to include in his individual
with the Securities and Exchange Commission, respondent William J. Suter return the income of the limited partnership.
as the general partner, and Julia Spirig and Gustav Carlson, as the limited
partners. The partners contributed, respectively, P20,000.00, P18,000.00 The thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd.,
and P2,000.00 to the partnership. The firm was engaged with importation, has been dissolved by operation of law because of the marriage of the only
marketing, distribution and operation of automatic phonographs, radios, general partner, William J. Suter to the originally limited partner, Julia Spirig
television sets and amusement machines. It had an office where they one year after the partnership was organized is rested by the appellant
handle and carry their merchandise, using invoices, bills and letterheads upon the opinion of now Senator Tolentino in Commentaries and
bearing its trade-name. Jurisprudence on Commercial Laws of the Philippines, Vol. 1, 4th Ed., page
58, that reads as follows:
Sometime in 1948, GP Suter and LP Spirig got married and limited partner A husband and a wife may not enter into a contract of general
Carlson sold his share in the partnership to Suter and his wife, such sale copartnership, because under the Civil Code, which applies in the
was duly recorded with the Securities and Exchange Commission. The absence of express provision in the Code of Commerce, persons
limited partnership had been filing its income tax returns as a corporation, prohibited from making donations to each other are prohibited from
without objection by the herein petitioner, Commissioner of Internal entering into universal partnerships. (2 Echaverri 196) It follows that
Revenue, in an assessment, they found out that the consolidated income of the marriage of partners necessarily brings about the dissolution of
the firm and the individual incomes of the partners-spouses Suter and a pre-existing partnership. (1 Guy de Montella 58)
Spirig had a deficiency income tax amounting to P2,678.06 for 1954 and
P4,567.00 for 1955. The CIR evidently failed to observe the fact that William J. Suter "Morcoin"
Co., Ltd. was not a universal partnership, but a particular one. As appears
Respondent Suter protested the assessment, and requested its from Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was
cancellation and withdrawal, as not in accordance with law, but his request the law in force when the subject firm was organized in 1947), a universal
was denied. Unable to secure a reconsideration, he appealed to the Court partnership requires either that the object of the association be all the
of Tax Appeals, which court, after trial, rendered a decision, reversing the present property of the partners, as contributed by them to the common
decision of the Commissioner of Internal Revenue. 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.
ISSUE: was not such a universal partnership, since the contributions of the partners
Whether or not the partnership was dissolved after the marriage of the were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by
partners, respondent William J. Suter and Julia Spirig Suter and the Julia Spirig and neither one of them was an industrial partner. It follows that
subsequent sale to them by the remaining partner, Gustav Carlson, of his William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses
participation of P2,000.00 in the partnership for a nominal amount of P1.00. were forbidden to enter by Article 1677 of the Civil Code of 1889.

HELD:
No, the marriage of the general partner William J. Suter and limited partner
Julia Spirig does not dissolve the limited partnership of the spouses. As the
Court of Tax Appeals held, that his marriage with limited partner Spirig and

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