Tai Tong Chuache & Co. vs.

Insurance Commission, 158 SCRA 366 ,

February 29, 1988
FACTS:

Azucena Palomo bought a parcel of land and building from Rolando

Gonzales and assumed a mortgage of the building in favor of S.S.S.
which was insured with S.S.S. Accredited Group of Insurers
April 19, 1975: Azucena Palomo obtained a loan from Tai Tong Chuache
Inc. in the amount of P100,000 and to secure it, the land and building was
mortgaged
June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering
the building for P50,000 with Zenith Insurance Corporation
July 16, 1975: another Fire Insurance policy was procured from
Philippine British Assurance Company, covering the same building for
P50,000 and the contents thereof for P70,000
Before the occurrence of the peril insured against the Palomos had
already paid their credit due the
July 31, 1975: building and the contents were totally razed by fire
Palomo was able to claim P41,546.79 from Philippine British Assurance
Co., P11,877.14 from Zenith Insurance Corporation and P5,936.57 from
S.S.S. Group of Accredited Insurers but Travellers Multi-Indemnity
refused so it demanded the balance from the other three but they refused
so they filed against them
Insurance Commission, CFI: absolved Travellers on the basis that
Arsenio Cua was claiming and NOT Tai Tong Chuache
Palomo Appealed

Travellers reasoned that the policy is endorsed to Arsenio Chua,

mortgage creditor
Tai Tong Chuache & Co. filed a complaint in intervention claiming
the proceeds of the fire Insurance Policy issued by travellers
affirmative defense of lack of insurable interest that before the
occurrence of the peril insured against the Palomos had already paid their
credit due the petitioner

ISSUE: W/N Tai Tong Chuache & Co. has insurable interest
HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache &

Co.

when the creditor is in possession of the document of credit, he need

not prove non-payment for it is presumed
The validity of the insurance policy taken b petitioner was not
assailed by private respondent. Moreover, petitioner's claim that the loan
extended to the Palomos has not yet been paid was corroborated by
Azucena Palomo who testified that they are still indebted to herein
petitioner
Chua being a partner of petitioner Tai Tong Chuache & Company is an
agent of the partnership. Being an agent, it is understood that he acted
for and in behalf of the firm

Upon its failure to prove the allegation of lack of insurable interest on

the part of the petitioner, Travellers must be held liable

Evangelista & Co. vs. Abad Santos, 51 SCRA 416 , June 28, 1973
FACTS:
On October 9, 1954 a co-partnership was formed under the name of
"Evangelista & Co." On June 7, 1955 the Articles of Co-partnership were amended so
as to include herein respondent, Estrella Abad Santos, as industrial partner, with
herein petitioners Domingo C. Evangelista, Jr., Leonarda Atienza Abad Santos and
Conchita P. Navarro, the original capitalist partners, remaining in that capacity, with
a contribution of P17,500 each
On December 17, 1963 herein respondent filed suit against the three other
partners, alleging that the partnership, which was also made a party-defendant, had
been paying dividends to the partners except to her; and that notwithstanding her
demands the defendants had refused and continued to refuse to let her examine
the partnership books or to give her information regarding the partnership affairs or
to pay her any share in the dividends declared by the partnership
The defendants, in their answer, denied ever having declared dividends or
distributed profits of the partnership; denied likewise that the plaintiff ever
demanded that she be allowed to examine the partnership books; and by way of
affirmative defense alleged that the amended Articles of Co-partnership did not
express the true agreement of the parties, which was that the plaintiff was not an
industrial partner; that she did not in fact contribute industry to the partnership.
ISSUE:
Whether Abad Santos is entitled to see the partnership books because she is
an industrial partner in the partnership
HELD:
Yes, Abad Santos is entitled to see the partnership books.
The Supreme Court ruled that according to
ART. 1299. Any partner shall have the right to a formal account as to partnership
affairs:
(1)If he is wrongfully excluded from the partnership business or possession of its
property by his co-partners;
(2)If the right exists under the terms of any agreement;
(3)As provided by article 1807;
(4)Whenever other circumstances render it just and reasonable."
In the case at hand, the company is estopped from denying Abad Santos as an
industrial partner because it has been 8 years and the company never corrected
their agreement in order to show their true intentions. The company never bothered
to correct those up until Abad Santos filed a complaint.

Clemente vs. Galvan., 67 Phil. 565 , April 26, 1939

Machuca vs. Chuidian, Buenaventura & Co., 2 Phil., 210 , May 13, 1903

Jo Chung Cang vs. Pacific Commercial Co., 45 Phil. 142 , September 06,
1923
Muasque vs. Court of Appeals, 139 SCRA 533 , November 11, 1985
Compaia Maritima vs. Muoz et al., 9 Phil., 326 , December 12, 1907
Business Organization Partnership, Agency, Trust Liability of Industrial Partners to Third
Persons
In 1905, Francisco Muoz, Emilio Muoz, and Rafael Naval formed an ordinary general
mercantile partnership in accordance with the Code of Commerce. They named the
partnership Francisco Muoz & Sons. Francisco was the capitalist partner while the other
two were industrial partners. In the articles of partnership, it was agreed upon by the three
that for profits, Francisco shall have a 3/4 th share while the other two would have 1/8 th each.
For losses, only Francisco shall bear it.
Later, the partnership was sued by La Compaia Martitama for collection of sum of money
amounting to P26,828.30. The partnership lost the case and was ordered to make said
payment; that in case the partnership cant pay the debt, all the partners should be liable for
it.
The ruling is in accordance with Article 127 of the Code of Commerce which states:
All the members of the general copartnership, be they or be they not managing partners of
the same, are liable personally and in solidum with all their property for the results of the
transactions made in the name and for the account of the partnership, under the signature
of the latter, and by a person authorized to make use thereof. (emphasis supplied)
Francisco now argues that the industrial partners should NOT be liable pursuant to Article
141 of the Code of Commerce which states:
Losses shall be charged in the same proportion among the partners who have
contributed capital, without including those who have not, unless by special agreement
the latter have been constituted as participants therein. (emphasis supplied)
ISSUE: Whether or not the industrial partners are liable to third parties like La Compaia
Martitama.
HELD: Yes. The controlling law is Article 127. There is no injustice in imposing this liability
upon the industrial partners. They have a voice in the management of the business, if no
manager has been named in the articles; they share in the profits and as to third persons it
is no more than right that they should share in the obligations. It is admitted that if in this
case there had been a capitalist partner who had contributed only P100 he would be liable
for this entire debt of P26,000.
Article 141 relates exclusively to the settlement of the partnership affairs among the
partners themselves and has nothing to do with the liability of the partners to third persons;
that each one of the industrial partners is liable to third persons for the debts of the firm; that
if he has paid such debts out of his private property during the life of the partnership, when
its affairs are settled he is entitled to credit for the amount so paid, and if it results that there

is not enough property in the partnership to pay him, then the capitalist partners must pay
him.
In relation to this, the Supreme Court noted that partnerships under the Civil Code provides
for a scenario where all partners are industrial partners (like when it is a partnership for the
exercise of a profession). In such case, if it is permitted that industrial partners are not liable
to third persons then such third persons would get practically nothing from such
partnerships if the latter is indebted.

Pacific Commercial Co. vs. Aboitiz & Martinez, 48 Phil. 841 , March 02,
1926
Business Organization Partnership, Agency, Trust Industrial Partner Obligations as to
Losses vs as to Liabilities
In 1919, Arnaldo de Silva, Guillermo Aboitiz, Vidal Aboitiz and Jose Martinez formed a
partnership. De Silva, Guillermo, and Vidal were the capitalist partners while Martinez was
the industrial partner. The articles of partnership contained, among others, that Martinez
may also be liable for losses but only to the extent of his shares in the profits which was at
30%.
The partnership incurred loans from Pacific Commercial Company which the partnership
failed to pay. The partnerships property was exhausted but there remained an unpaid
balance for which PCC sued the partnership. The trial court issued a judgment where it
ordered that the deficiency should be satisfied by the properties of the three capitalist
partners; that in the event the properties of the three will not be enough, the remaining
balance shall issue against the property of Martinez. Martinez appealed the decision.
ISSUE: Whether or not Martinez is liable for the said debt.
HELD: Yes. As held in the case of La Compaia Maritama vs Francisco Muoz et al, all
the members of a general partnership are liable with all their property for the results of the
duly authorized transactions made in the name and for the account of the partnership. All
the members of the general copartnership, be they or be they not managing partners of the
same are liable personally and in solidum with all their property for the results of the
transaction made in the name and for the account of the partnership.
The Supreme Court also emphasized that liability for losses relates merely to the
distribution of losses among the partners themselves in the settlement of the partnership
affairs and has no reference to partnership obligations or liabilities to third parties.
NOTE: An industrial partner is not liable for losses. A provision exempting an industrial
partner from losses is naturally valid but the same provision exempting a capitalist partner is
void. A provision making an industrial partner liable for losses is permissible. An industrial
partner may be held liable by third persons but he may recover from the capitalist partners
for after all, he is not liable for losses.

Santiago Syjuco, Inc. vs. Castro, 175 SCRA 171 , July 07, 1989

Facts:
The private respondents, Eugenio Lim, et al., borrowed from petitioner Santiago Syjuco,
Inc., the sum of P800,000.00. The loan was given on the security of a first mortgage on property
registered in the names of said borrowers as owners in common under Transfer Certificates of
Title Numbered 75413 and 75415 of the Registry of Deeds of Manila. Thereafter, additional
loans on the same security were obtained by the private respondents from Syjuco, so that as of
May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of interest, and the
security had been augmented by bringing into the mortgage other property, also registered as
owned pro indiviso by the private respondents under two titles: TCT Nos. 75416 and 75418 of
the Manila Registry.

The private respondents failed to pay it despite demands therefore; that Syjuco consequently
caused extra-judicial proceedings for the foreclosure of the mortgage to be commenced by the
Sheriff of Manila; and that the latter scheduled the auction sale of the mortgaged property on
December 27, 1968. The attempt to foreclose triggered off a legal battle that has dragged on for
more than twenty years now, fought through five (5) cases in the trial courts, two (2) in the
Court of Appeals, and three (3) more in the Supreme Court.

One of the complaints filed by the private respondents was filed not in their individual
names, but in the name of a partnership of which they themselves were the only partners: "Heirs
of Hugo Lim." The complaint advocated the theory that the mortgage which they, together with
their mother, had individually constituted (and thereafter amended during the period from 1964
to 1967) over lands standing in their names in the Property Registry as owners pro indiviso, in
fact no longer belonged to them at that time, having been earlier deeded over by them to the
partnership, "Heirs of Hugo Lim," more precisely, on March 30, 1959, hence, said mortgage was
void because executed by them without authority from the partnership. Syjuco filed an instant
petition for certiorari, prohibition and mandamus. It prays in its petition that the default judgment
rendered against it by Judge Castro be annulled on the ground of, among others, estoppel, res
judicata, and Article 1819 of the Civil Code.

Issue:
Whether or not the private respondents are estopped to avoid the aforementioned mortgage.
Held:
Yes. The Supreme Court ruled that the respondent partnership was inescapably chargeable with
knowledge of the mortgage executed by all the partners thereof, its silence and failure to impugn
said mortgage within a reasonable time, let alone a space of more than 17 years, brought into
play the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly
unauthorized. Equally or even more preclusive of the respondent partnerships claim to the
mortgaged property is the last paragraph of Art. 1819 of the Civil Code, which contemplates a
situation similar to the case at bar. It states that where the title to real property is in the names of
all the partners, a conveyance executed by the entire partners pass all their rights in such
property. Consequently, those members' acts, declarations and omissions cannot be deemed to be
simply the individual acts of said members, but in fact and in law, those of the partnership.
Finally, the Supreme Court emphasizes that the right of the private respondents to assert the
existence of the partnership could have been stressed at the time they instituted their first action,
considering that the actions involved property supposedly belonging to it, and therefore, the
partnership was the real party in interest. What was done by them was to split their cause of
action in violation of the well-known rule that only one suit may be instituted for a single cause
of action.

MacDonald, et al. vs. Nat. City Bank of N.Y., 99 Phil. 156 , May 21, 1956
MACDONALD v. THE NATIONAL CITY BANK OF NEW YORK FACTS: 1) STASIKINOCEY
is a partnership doing business in San Juan, Rizal. 2) This partnership was denied
registration in the SEC. 3) The CARDINAL RATTAN, sometimes called the CARDINAL
RATTAN FACTORY, is treated as a copartnership, of which Defendants Gorcey and da
Costa are considered general partners, we are satisfied that, as alleged in various
instruments appearing of record, said Cardinal Rattan is merely the business name
or style used by the partnership Stasikinocey. 4) Defendant Stasikinocey had an
overdraft account with The National City Bank of New York, a foreign banking
association duly licensed to do business in the Philippines. 5) The overdraft showed
a balance of P6,134.92 against the Defendant Stasikinocey or the Cardinal Rattan.
6) Due to the failure of the partnership to make the required payment, was
converted into an ordinary loan for which the corresponding promissory joint note
non-negotiable was executed on June 3, 1949, by Louis F. da Costa for and in the
name of the Cardinal Rattan, Louis F. da Costa and Alan Gorcey (Exhibit D). 7) This
promissory note was secured by a chattel mortgage executed by Louis F. da Costa,
Jr., General Partner for and in the name of Stasikinocey, alleged to be a duly
registered Philippine partnership, doing business under the name and style of
Cardinal Rattan. 8) The mortgage deed was fully registered by the mortgagee in the
Office of the Register of Deeds for the province of Rizal. 9) While the said loan was
still unpaid and the chattel mortgage subsisting, Defendant partnership, through
Defendants Gorcey and Da Costa transferred to Defendant McDonald the Fargo
truck and Plymouth sedan. 10) Paul Mcdonald, notwithstanding Plaintiffs existing
mortgage lien, in turn transferred the Fargo truck and the Plymouth sedan to
Benjamin Gonzales. 11) The National City Bank of New York, Respondent herein,
upon learning of the transfers made by the partnership Stasikinocey to William
Shaeffer, from the latter to Paul McDonald, and from Paul McDonald to Benjamin
Gonzales, of the vehicles previously pledged by Stasikinocey to the Respondent,
filed an action against Stasikinocey and its alleged partners Gorcey and Da Costa,
as well as Paul McDonald and Benjamin Gonzales, to recover its credit and to
foreclose the corresponding chattel mortgage. 12) McDonald and Gonzales were
made Defendants because they claimed to have a better right over the pledged
vehicle. 13) The CFI annulled the sale of the vehicles in question to Benjamin
Gonzales. 14) The CA modified the CFIs decision, relieving Appellant William
Shaeffer of the obligation of paying, jointly and severally, together with Alan W.
Gorcey and Louis F. da Costa, Jr., any deficiency that may remain unpaid after
applying the proceeds of the sale of the said motor vehicles, hence this appeal.
ISSUE: Whether partners herein are already stopped in denying that they are
partners of the partnership Stasikinocey
RULING: YES. While an unregistered commercial partnership has no juridical
personality, nevertheless, where two or more persons attempt to create a
partnership failing to comply with all the legal formalities, the law considers them as
partners and the association is a partnership in so far as it is a favorable to third
persons, by reason of the equitable principle of estoppel. In Jo Chung Chang vs.
Pacific Commercial Co., 45 Phil., 145, it was held that although the partnership with
the firm name of Teck Seing and Co. Ltd., could not be regarded as a partnership
de jure, yet with respect to third persons it will be considered a partnership with all
the consequent obligations for the purpose of enforcing the rights of such third
persons. Da Costa and Gorcey cannot deny that they are partners of the
partnership Stasikinocey, because in all their transactions with the Respondent they
represented themselves as such. Petitioner McDonald cannot disclaim knowledge of
the partnership Stasikinocey because he dealt with said entity in purchasing two of
the vehicles in question through Gorcey and Da Costa. As was held in Behn Meyer &
Co. vs. Rosatzin, 5 Phil., 660, where a partnership not duly organized has been
recognized as such in its dealings with certain persons, it shall be considered as
partnership by estoppel and the persons dealing with it are estopped from
denying its partnership existence. The sale of the vehicles in question being void as
to Petitioner McDonald, the transfer from the latter to Petitioner Benjamin Gonzales
is also void, as the buyer cannot have a better right than the seller. It results that if

the law recognizes a defectively organized partnership as de facto as far as third

persons are concerned, for purposes of its de facto existence it should have such
attribute of a partnership as domicile. In Hung-Man Yoc vs. Kieng-Chiong-Seng, 6
Phil., 498, it was held that although it has no legal standing, it is a partnership de
facto and the general provisions of the Code applicable to all partnerships apply to
it. The registration of the chattel mortgage in question with the Office of the
Register of Deeds of Rizal, the residence or place of business of the partnership
Stasikinocey being San Juan, Rizal, was therefore in accordance with section 4 of the
Chattel Mortgage Law.