G.R. No. 37160 ; March 2, 1933
E. WALCH, assignee of the insolvent estate of Lim Hai Tao (alias Guan Hoo), plaintiff-appellant, vs. LIM CHAI SENG, defendant-appellee.

FACTS

A limited partnership, Lim Hai Tao, S. en C., was formed between Lim Hai Tao (general partner) and Lim Chai Seng (limited partner). On January 6, 1930, Lim Chai Seng retired from the partnership pursuant to a written agreement. The purchase price for his participation (capital share and credit) was paid by a third-party buyer, Liong Kee Ho, through Lim Hai Tao. Later, on June 14, 1930, Lim Hai Tao was adjudged insolvent. The assignee of his insolvent estate, E. Walch, sued Lim Chai Seng to recover the amount paid for his capital share (P24,191.81), alleging the payment was fraudulent to the creditors of both the partnership and Lim Hai Tao individually.

ISSUE

Whether the assignee of the insolvent individual partner (Lim Hai Tao) can recover from the retired limited partner (Lim Chai Seng) the amount paid for his partnership interest by a third party, on the ground of fraud against creditors.

RULING

No. The Supreme Court affirmed the dismissal of the complaint. Recovery cannot be had primarily because: (1) the partnership itself was never declared insolvent; and (2) the payment for the defendant’s interest came from a third party (Liong Kee Ho), not from the partnership assets, so the partnership’s assets were not diminished and its creditors were not injuriously affected by the transaction.

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