113. Collector of Internal Revenue v. Isasi (G.R. No. L-9186, 29 April 1957)Full Title: Collector of Internal Revenue vs. Juan Isasi, M. Salustiana Aldecoa, Claudio Zuloaga, Miren Zuloaga, Hugo P. Rodriguez, And The Court Of Tax AppealsTopic: LIMITED PARTNERSHIPPonente: Felix, J.Nature: Petition for ReviewDoctrine: 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. Facts: Juan Isasi, M. Salustiana Aldecoa, Claudio Zuloaga, Jr., and Miren Zuloaga formed a partnership known as "Aldecoa, Zuloaga e Isasi" for the exploitation of Haciendas Manucao and Conchita, located in Negros, Occidental. The partnership agreement was styled Escritura de Constitucion de la Sociedad Agricola Limitada Aldecoa, Zuloaga e Isasi,During its life, the firm paid P26,873.66 corporate income tax. The partners also filed and paid their individual ITRs. The partnership later filed a claim for income tax refund for the P26,873.66, which was not acted upon, so a complaint was filed with the CFI Negros Occidental. Argument of the Partners: The partnership was a duly registered general co-partnership (sociedad colectiva) and therefore not subject to income tax. It had the form and style of a general co-partnership. They also argued that a partnership, whether civil or commercial, would be entitled to the exemption as long as it is a general partnership, because the Tax Code makes qualification to this effect. [Note: This case is governed by the old Civil Code (Art. 2253, new Civil Code) and the Code of Commerce, where there was a distinction between civil and commercial partnership. There are no such distinctions in the New Civil Code. This matter is, therefore, irrelevant to class discussion.]Argument of BIR: Aldecoa, Zuloaga e Isasi is not a general or regular collective partnership, but a limited partnership and as such cannot be exempt from income tax. Being a civil partnership that adopted the form of compaias colectivas, whether registered or not, Aldecoa, Zuloaga e Isasi could be taxed as a corporation.CTA: the partnership was general and is not liable for income tax as a juridical person. Refund justified.Issue: Was Aldecoa, Zuloaga e Isasi a limited partnership, which is subject to corporate income tax?Held: No.Ratio: The terms of the partnership agreement show that it is a general partnership. They have a firm name Aldecoa, Zuloaga e Isasi composed of all the surnames of the partners - to which the words "and company" (to indicate the limited partnership Art. 146 of the Code of Commerce) is not added; the management of the firm was entrusted to a partner, Don Juan Isasi; there is no person contributing a specific amount of capital to a common fund to become liable for the business transactions of the firm executed exclusively by others under a collective name, as is the case in limited partnerships; the duration of the partnership was made to last until June 30, 1952; and it allowed its manager, Don Juan Isasi to engage in the same kind of undertaking. It is unmistakable, notwithstanding the title of the partnership agreement (Escritura de Constitucion de la Sociedad Agricola Limitada Aldecoa, Zuloaga e Isasi), that the partners intended to organize a general partnership.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. Moreover, a limited partner in a limited partnership cannot perform any act in the management of the partner interests and cannot even examine the condition and state of partnership administration except at stated times (Articles 122(2), 148 and 150, Code of Commerce), unlike the partnership Aldecoa, Zuloaga e Isasi, wherein all the partners exercised powers of management and administration.SC We, therefore, declare that the Partnership "Aldecoa, Zuloaga e Isasi" was a duly registered general co-partnership (sociedad colectiva) within the meaning and contemplation of sections 24 and 26 of the National Internal Revenue Code.REYES, J.B.L., J., concurring: (Theres no way to abridge this without taking away important concepts)In laying emphasis on the terms "sociedad agricola limitada" used in the partnership articles, the Solicitor General overlooks that in the Spanish legal terminology, the word "limitada" has no significance whatever. The partnership, sociedad or compaia, had to be either colectiva or comanditaria (en comandita) or anonima. Legally, there is no such entity as a sociedad limitada under the Code of Commerce. The English law speaks of limited copartnerships; but the correlative Spanish term is sociedad en comandita or sociedad comanditaria, not "sociedad limitada." If the firm "Aldecoa, Zuloaga e Isasi" was not a "sociedad en comandita," it had necessarily to be a "sociedad colectiva." It could not be a sociedad anonima, because these could not be organized after 1906, when the corporation law was enacted (Benguet Consolidated v. Pineda, 52 Off. Gaz. (No. 4) 1961).