G.R. No. 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 petitioners-appellants (Pacific Commercial Co., Asiatic Petroleum Co., and International Banking Corporation) filed an application for the involuntary insolvency of the limited partnership Campos Rueda & Co. They alleged that the partnership had failed to pay its obligations to them, amounting to not less than P1,000, for more than thirty days. The trial court denied the petition, holding that for a partnership to be adjudged insolvent, it must be alleged and proven that its individual partners are insolvent, given their personal and solidary liability. The petitioners appealed. During the pendency of the appeal, the partnership voluntarily filed for insolvency. The appellants moved to dismiss the appeal as moot, but the Supreme Court denied the motion, noting that the date of the involuntary insolvency decree sought (December 1921) was different from the date of the voluntary filing (July 1922), and solvency at a later date does not prove solvency at an earlier date.

ISSUE

Whether a limited partnership, which has committed an act of insolvency under the law (failure to pay debts for more than thirty days), can be adjudged involuntarily insolvent irrespective of the solvency or insolvency of its individual partners.

RULING

Yes. The Supreme Court reversed the trial court’s decision. Under Philippine law, a limited partnership (sociedad en comandita) is a juridical entity with a personality separate from its members, as recognized by the Code of Commerce. Consequently, it can be subject to rights and obligations independently. The Insolvency Law (Act No. 1956) provides that failure to pay debts for more than thirty days is an act of insolvency. Since the partnership committed this act, it can be adjudged insolvent. The Court distinguished American common law doctrines, which often require the insolvency of all partners, noting that such doctrines stem from the lack of a separate juridical personality for partnerships under common law and a specific provision in the U.S. Bankruptcy Act, which has no counterpart in Philippine law. Therefore, the solvency of the individual partners is not a prerequisite for declaring the partnership itself insolvent. The case was remanded to the trial court to issue the proper decree of involuntary insolvency as of December 28, 1921.