TAI TONG CHUACHE & CO. v.

THE
INSURANCE COMMISSION and
TRAVELLERS MULTI-INDEMNITY
FACTS:
Complainants acquired from a certain
Rolando Gonzales a parcel of land and
a building located at San Rafael
Village, Davao City. Complainants
assumed the mortgage of the building
in favor of S.S.S., which building was
insured with respondent S.S.S.
Accredited Group of Insurers
forP25,000.00.On April 19, 1975,
Azucena Palomo obtained a loan from
Tai Tong Chuache Inc. in the amount of
P100,000.00. To secure the payment
of the loan, a mortgage was executed
over the land and the building in favor
of Tai Tong Chuache & Co. On April 25,
1975, Arsenio Chua, representative of
Thai Tong Chuache & Co. insured the
latter's interest with Travellers MultiIndemnity Corporation for P100,000.00
(P70,000.00 for the building and
P30,000.00 for the contents
thereof).On June 11, 1975, Pedro
Palomo secured a Fire Insurance Policy
No. F- 02500, covering the building for
P50,000.00 with respondent Zenith
Insurance Corporation. On July 16,
1975,another Fire Insurance Policy No.
8459 was procured from respondent
Philippine
British Assurance Company, covering t
he same building for P50,000.00 and t
he contents thereof forP70,000.00.On
July 31, 1975, the building and the
contents were totally razed by fire.
Based on the computation of the loss,
including the Travellers MultiIndemnity, respondents, Zenith
Insurance, Phil. British Assurance and
S.S.S. Accredited Group of Insurers,
paid their corresponding shares of the
loss. Complainants were paid the
following: P41,546.79 by Philippine
British Assurance Co., P11,877.14 by
Zenith Insurance Corporation, and
P5,936.57by S.S.S. Group of
Accredited Insurers (Par. 6. Amended

Complaint). Demand was made from

respondent Travellers Multi-Indemnity
for its share in the loss but the same
was refused. Hence, complainants
demanded from the other three (3)
respondents the balance of each share
in the loss based on the computation
of the Adjustment Standards Report
excluding Travellers Multi-Indemnity in
the amount of P30,894.31 (P5,732.79Zenith Insurance: P22,294.62, Phil.
British: and P2,866.90, SSS
Accredited) but the same was refused,
hence, this action.
ISSUE: Whether the suit was properly
filed by petitioners as real party in
interest.
HELD: Yes. It should be borne in mind
that petitioner being a partnership
may sue and be sued in its name or by
its duly authorized representative. The
fact that Arsenio Lopez Chua is the
representative of petitioner is not
questioned. Petitioner's declaration
that Arsenio Lopez Chuaacts as the
managing partner of the partnership
was corroborated by respondent
insurance company. Thus Chua as the
managing partner of the partnership
may execute all acts of administration
including the right to sue debtors of
the partnership in case of their failure
to pay their obligations when it
became due and demandable. Or at
the very least, 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. Public respondent's
allegation that the civil case filed by
Arsenio Chua was in his capacity as
personal creditor of spouses Palomo
has no basis. The respondent
insurance company having issued a
policy in favor of herein petitioner
which policy was of legal force and
effect at the time of the fire, it is

bound by its terms and conditions.

Upon its failure to prove the allegation
of lack of insurable interest on the part
of the petitioner, respondent insurance
company is and must be held liable.
EVANGELISTA & CO. v. ABAD
SANTOS
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
Facts:
Plaintiff and defendant organized a
civil partnership which they named
"Galvan y Compaia" to engage in the
manufacture and sale of paper and
other stationery. Plaintiff ask for
dissolution which the defendant
confirm but with a condition that
having covered a deficit incurred by
the partnership amounting to P4,000
with his own money, plaintiff
reimburse him of one-half of said sum.
Juan D. Mencarini, assigned as
receiver and liquidator. Upon acting on
his duty, the court ordered him to
deliver certain machines which were
then at Nos. 705-707 Ylaya Street. But

before he could take actual possession

of said machines, upon the strong
opposition of defendant, the court, on
motion of the latter, suspended the
effects of its order. In the meantime
the judgments rendered in cases Nos.
42794 and 43070 ordering Clemente
to pay a sum of money.vHe mortgage
the machines with his nephew, the
intervenor (plaintiff in the herein
case.) For having expired the terms in
the mortgage the intervenor
commenced case No. 49629 to collect
his mortgage credit.
Issue:
W/N the mortgage between Clemente
and his nephew (intervenor, plaintiff in
the case) is valid?
Rule:
No. The machines in contention
originally belonged to the defendant
and from him were transferred to the
partnership Galvan y Compania. This
being the case, said machines belong
to the partnership and not to him, and
shall belong to it until partition is
effected according to the result
thereof after the liquidation. Also,
Clemente did not have actual
possession of the machines, he could
not in any manner mortgage them.
TECK SEING AND CO., LTD.,
petitioner-appellee.SANTIAGO JO
CHUNG, ET AL.,
partners,vs.PACIFIC COMMERCIAL
COMPANY, ET AL., creditorsappellants.
Facts:
In an insolvency proceedings of
petitioner-establishment,
Sociedad Mercantil, Teck Seing &Co.,
Ltd., creditors Pacific Commercial and
others filed a motion with the Court to
declare the individual partners parties
to the proceeding, for each to file an

inventory, and for each to be

adjudicated as insolvent debtors.
ISSUE:
Whether the fact that the firm name
"Teck Seing & Co.,Ltd." does not
contain the name of all or any of the
partners asprescribed by the Code of
Commerce prevents the creation of a
general partnership.
HELD:
Professor Jose A. Espiritu, as
amicus curi, states: My opinion is
that such a fact alone cannot and will
not be a sufficient cause of preventing
the formation of a general partnership,
especially if the other requisites are
present and the requisite regarding
registration of the articles of
association in the Commercial Registry
has been complied with, as in the
present case. I do not believe that the
adoption of a wrong name is a
material fact to be taken into
consideration in this case; first,
because the mere fact that a person
uses a name not his own does not
prevent him from being bound in a
contractor an obligation he
voluntarily entered into; second,
because such a requirement of the law
is merely a formal and
not necessarily an essential one to
the existence of the partnership, and
as long as the name adopted
sufficiently identity the firm or
partnership intended to use it, the acts
and contracts done and entered into
under such a name bind the firm to
third persons; and third, because the
failure of the partners herein to adopt
the correct name prescribed by law
cannot shield them from their personal
liabilities, as neither law nor equity will
permit them to utilize their own
mistake in order to put the blame on
third persons, and much less, on the
firm creditors in order to avoid their
personal possibility.

PNB v. LO
FACTS: In September 1916,
Severo Eugenio Lo and Ling, together
with Ping, Hun, Lam and Peng formed
a commercial partnership under the
name of Tai Sing and Co., with a
capital of P40,000 contributed by said
partners. The firm name was
registered in the mercantile registrar
in the Province of Iloilo. Ping, in the
articles of partnership, was assigned
as the general manager. However, in
1917, he executed a special power of
attorney in favor of Lam to act in his
behalf as the manager of the firm.
Subsequently, Lam obtained
aloan from PNB the loan was under
the firms name. In the same year,
Ping died in China. From 1918 to 1920,
the firm, via GM Lam, incurred
other loans from PNB. The loans were
not objected by any of the partners.
Later, PNB sued the firm for nonpayment. Lo, in his defense, argued
that he cannot be liable as a partner
because the partnership, according to
him, is void; that it is void because the
firms name did not comply with the
requirement of the Code of Commerce
that a firm name should contain the
names of all of the partners, of
several of them, or only one of them.
Lo also argued that the acts of Lam
after the death of Ping is not binding
upon the other partners because the
special power of attorney shall have
already ceased.
ISSUE: Whether or not Lo is correct in
both arguments.
HELD: No. The anomalous adoption of
the firm name above noted does not
affect the liability of the general
partners to third parties under Article
127 of the Code of Commerce. The
object of the Code of Commerce in
requiring a general partnership to
transact business under the name of

all its members, of several of them, or

of one only, is to protect the public
from imposition and fraud; it is for the
protection of the creditors rather than
of the partners themselves. It is
unenforceable as between the
partners and at the instance of the
violating party, but not in the sense of
depriving innocent parties of their
rights who may have dealt with the
offenders in ignorance of the latter
having violated the law; and that
contracts entered into by a
partnership firm defectively organized
are valid when voluntarily executed by
the parties, and the only question is
whether or not they complied with the
agreement. Therefore, Lo cannot
invoke in his defense the anomaly in
the firm name which they themselves
adopted. Lo was not able to prove his
second argument. But even assuming
arguendo, his second contention does
not deserve merit because (a) Lam, in
acting as a GM, is also a partner and
his actions were never objected to by
the partners, and (b) it also appeared
from the evidence that Lo, Lam and
the other partners authorized some of
the loans.
Elmo Muasque vs CA
Facts:Elmo Muasque, in behalf of Gal
an and Muasque partnership as Con
tractor,entered into a written contract
with Tropical Commercial Co., through
its branch
manager Ramon Pons, for remodeling
of
Tropicals building in
Cebu. The consideration for the entire
services is P25,000 to be paid: 30%
upon signing of contract, and balance
on 3 equal installments of P6,000
every 15working days. First payment
of check worth P7,000 was payable
to Muasque, who indorsed it to Galan
for purposes of depositing the amount
and paying the materials already
used. But since Galan allegedly

misappropriated P6,183.37 of the

check for personal use, Muasque
refused to indorse the second
check worth P6,000. Galan then
informed Tropical
of the misunderstanding between hi
m and Muasque and this prompted Tr
opical to change the payee of the seco
nd check from Muasque to Galan an
dAssociates (the duly registered nam
e of Galan and Muasque partnership).
Despite the misappropriation,
Muasque alone was able to finish the
project. The two remaining checks
were properly issued to Muasque.
Muasque filed a complaint for
payment of sum of money plus
damages against Galan, Tropical and
Pons for the amount covered by the
first and second checks.
Cebu Southern Hardware Co and Blue
Diamond Glass Palace were allowed as
intervenors having legal interest
claiming against Muasue and Galan
for materials used.
Issue: W/N Muasque and Galan are
partners?
Held:
YES. Tropical had every right to
presume the existence of the
partnership:
a.Contract states that agreement was
entered into by Galan and
Muasque
b. The first check issue in the name of
Muasque was indorsed to Galan The
relationship was made to appear as a
partnership.
LA COMPAIA MARITIMA v.
MUOZ
FACTS:
On the 31st day of March, 1905, the
defendants Francisco Muoz, Emilio
Muoz, and Rafael Naval formed on
ordinary general mercantile
partnership under the name of

Francisco Muoz & Sons for the

purpose of carrying on the mercantile
business in the Province of Albay
which had formerly been carried on by
Francisco Muoz. In the articles of
partnership, it is expressly stated that
they have agreed to form, and do
form, an ordinary, general mercantile
partnership. The object of the
partnership, as stated in the fourth
paragraph of the articles, is a purely
mercantile one and all the
requirements of the Code of
Commerce in reference to such
partnership were complied with. The
articles of partnership were recorded
in the mercantile registry in the
Province of Albay. Rafael Naval was
entitled by the articles of agreement
to a fixed salary of P2,500 as long as
he was in charge of the branch office
established at Ligao. The argument of
the appellees seems to be that,
because no yearly or monthly salary
was assigned to Emilio Muoz, he
contributed nothing to the partnership
and received nothing from it.
ISSUE:
Whether Muoz is liable to third
person even if he is an industrial
partner
HELD:
Yes, Muoz is liable to third persons
even if he is an industrial partner. The
Supreme Court held that in limited
partnership, the Code of Commerce
recognizes a difference between
general and special partners, but in a
general partnership there is no such
distinction all the members are
general partners. The fact that some
may be industrial and some capitalist
partners does not make the members
of either of these classes alone such
general partners.
Our construction of the article is that it
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. Our
conclusion is upon this branch of the
case that neither on principle nor on
authority can the industrial partner be
relieved from liability to third persons
for the debts of the partnership
Pacific Commercial Company v.
Aboitiz & Martinez
FACTS: 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 co-partnership, 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.
Santiago v. Castro
FACTS:
Back in November 1964, the Lims,
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 Lims 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 Lims under two titles: TCT Nos.
75416 and 75418 of the Manila
Registry. On November 8, 1967, the

Lims 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 Lims 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.
ISSUE:
Whether the mortgage
executed by the Lims be attributable
to their partnership
HELD:
Yes, the mortgage executed by the
Lims is attributable to their
partnership. The Supreme Court held
that the legal fiction of a separate
juridical personality and existence will
not shield it from the conclusion of
having such knowledge which
naturally and irresistibly flows from
the undenied facts. It would violate all

precepts of reason, ordinary

experience and common sense to
propose that a partnership, as such,
cannot be held accountable with
knowledge of matters commonly
known to all the partners or of acts in
which all of the latter, without
exception, have taken part, where
such matters or acts affect property
claimed as its own by said partnership.
The silence and failure of the
partnership to impugn said mortgage
within a reasonable time, let alone a
space of more than seventeen years,
brought into play the doctrine of
estoppel to preclude any attempt to
avoid the mortgage as allegedly
unauthorized. There is no reason to
distinguish between the Lims, as
individuals, and the partnership itself,
since the former constituted the entire
membership of the latter. In other
words, despite the concealment of the
existence of the partnership, for all
intents and purposes and consistently
with the Lims' own theory, it was that
partnership which was the real party
in interest in all the actions; it was
actually represented in said actions by
all the individual members thereof,
and 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.
Macdonald v. Natl City Bank of New
York
Facts:
Stasikinocey is a partnership formed b
y da Costa, Gorcey, Kusik and Gavino.
It was denied registration by the SEC
due to a confusion between the
partnership and CardinalRattan.
Cardinal Rattan is the business name
or style used b yStasikinocey. Da
Costa and Gorcey are the general
partners of Cardinal Rattan. Moreover,
Da Costa is the managing partnerof

Cardinal Rattan. Stasikinocey had an

overdaft account with Nationa City
Bank, which was later converted into
an ordinary loan due the partnerships
failure in paying its obligation.
Theordinary loan was secured by a cha
ttel mortgage over 3vehicles. During
the subsistence of the loan, the
vehicles were sold to MacDonald and
later on, MacDonald sold 2 of the 3
vehicles to Gonzales. The bank
brought an action for recovery of
its credit and foreclosure of
the chattel mortgage upon learning of
these transactions.
Issue:
WON the partnership, Stasikinocey is e
stoppedfrom asserting that it does not
have juridicalpersonality since it is an
unregistered commercial partnership
[YES]

Held:
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.
Where a partnership not duly
organized has been
recognizedas such in its dealings with
certain persons, it shall beconsidered
as partnership by estoppel and the p
ersonsdealing with it are
estopped from denying its partnership
existence