Tai Tong v Insurance G.R. No.

L-55397 February 29, 1988

J. Gancayco

Facts:
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. Arsenio Chua, representative of Thai Tong Chuache & Co. insured the
latter's interest with Travellers Multi-Indemnity Corporation for P100,000.00 (P70,000.00 for the
building and P30,000.00 for the contents thereof)
Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent
Zenith Insurance Corporation. On July 16, 1975, another Fire Insurance was procured from
respondent Philippine British Assurance Company, covering the same building for P50,000.00 and
the contents thereof for P70,000.00.
The building and the contents were totally razed by fire.
Based on the computation of the loss, including the Travellers Multi- Indemnity, 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 P5,936.57 by S.S.S. Group of
Accredited Insurers 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 in the amount of P30,894.31 (P5,732.79-Zenith
Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the same was refused,
hence, this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on
the ground that the claim of the complainants had already been waived, extinguished or paid. Both
companies set up counterclaim in the total amount of P 91,546.79.
SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the
balance had been paid in the amount in full.

Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire
Policy, covering the furniture and building of complainants was secured by a certain Arsenio Chua
and that the premium due on the fire policy was paid by Arsenio Chua.
Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire
Insurance Policy issued by respondent Travellers Multi-Indemnity.
As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on
the ground that the insurance policy subject of the complaint was taken out by Tai Tong Chuache &
Company, for its own interest only as mortgagee of the insured property and thus complainant as
mortgagors of the insured property have no right of action against the respondent. It likewise
dismissed petitioner's complaint in intervention in the following words:
From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it
was likewise denied hence, the present petition.
Issue: WON Tai Tong had insurable interest

Held: Yes. Petition granted.

Ratio:
Respondent advanced an affirmative defense of lack of insurable interest on the part of the petitioner
that before the occurrence of the peril insured against, the Palomos had already paid their credit due
the petitioner. However, they were never able to prove that Tai had a lack of insurable interest.
Hence, the decision must be adverse against them.
However respondent Insurance Commission absolved respondent insurance company from liability
on the basis of the certification issued by the then Court of First Instance of Davao, Branch II, that in
a certain civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and not
Tai Tong Chuache.
From said evidence respondent commission inferred that the credit extended by petitioner to the
Palomos secured by the insured property must have been paid. These findings was based upon a
mere inference.

The record of the case shows that the petitioner to support its claim for the insurance proceeds
offered as evidence the contract of mortgage which has not been cancelled nor released. It has
been held in a long line of cases that 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 by
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.
Public respondent argues however, that if the civil case really stemmed from the loan granted to
Azucena Palomo by petitioner the same should have been brought by Tai Tong Chuache or by its
representative in its own behalf. From the above premise, respondent concluded that the obligation
secured by the insured property must have been paid. However, 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. Petitioner's declaration that Arsenio Lopez Chua acts 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.
Public respondent's allegation that the civil case flied by Arsenio Chua was in his capacity as
personal creditor of spouses Palomo has no basis. The policy, then had legal force and effect.

Lim Tong Lim vs Philippine Fishing Gear Industries, Inc.

FACTS: It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing with him and one
Antonio Chua. The three agreed to purchase two fishing boats but since they do not have the money they borrowed
from one Jesus Lim (brother of Lim Tong Lim). They again borrowed money and they agreed to purchase fishing nets
and other fishing equipments. Now, Yao and Chua represented themselves as acting in behalf of “Ocean Quest
Fishing Corporation” (OQFC) they contracted with Philippine Fishing Gear Industries (PFGI) for the purchase of fishing
nets amounting to more than P500k.
They were however unable to pay PFGI and so they were sued in their own names because apparently OQFC is a
non-existent corporation. Chua admitted liability and asked for some time to pay. Yao waived his rights. Lim Tong
Lim however argued that he’s not liable because he was not aware that Chua and Yao represented themselves as a
corporation; that the two acted without his knowledge and consent.
Respondent filed a collection against Chua, Yao and petitioner Lim in their capacities as general partners because it
turned out that Ocean Quest Fishing Corporation is a non-existent corporation. The trial court issued a Writ of
Preliminary Attachment, which the sheriff enforced by attaching the fishing nets. The trial court rendered its
decision ruling that respondent was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general
partners, were jointly liable to pay respondent. Lim appealed to the Court of Appeals, but the appellate court
affirmed the decision of the trial court that petitioner Lim is a partner and may thus be held liable as such. Hence,
the present petition. Petitioner claimed that since his name did not appear on any of the contracts and since he
never directly transacted with the respondent corporation, ergo, he cannot be held liable.

ISSUE: WON petitioner can be held liable as a general partner and liable to respondent.

HELD: Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage
in a fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from Jesus
Lim. In their Compromise Agreement, they subsequently revealed their intention to pay the loan with the proceeds
of the sale of the boats, and to divide equally among them the excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money, fell under the term “common fund” under Article 1767. The
contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the
parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them
also shows that they had indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be imputed to Yao and Chua.
Unquestionably, Lim Tong Lim benefited from the use of the nets found in his boats, the boat which has earlier been
proven to be an asset of the partnership. Lim, Chua and Yao decided to form a corporation. Although it was never
legally formed for unknown reasons, this fact alone does not preclude the liabilities of the three as contracting
parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a corporation and those
benefited by it, knowing it to be without valid existence, are held liable as general partners.
The Supreme Court denied the petition. The Court ruled that having reaped the benefits of the contract entered
into by Chua and Yao, with whom he had an existing relationship, petitioner Lim is deemed a part of said
association and is covered by the doctrine of corporation by estoppel. The Court also ruled that under the principle
of estoppel, those acting on behalf of a corporation and those benefited by it, knowing it to be without valid
existence, are held liable as general partners.

ROJAS VS. MAGLANA

FACTS:

Maglana and Rojas executed their Articles of Co-partnership called “Eastcoast Development Enterpises” which had
an indefinite term of existence and was registered with the SEC and had a Timber License.
One of the EDE’s purposes was to apply or secure timber and/or private forest lands and to operate, develop and
promote such forests rights and concessions. M shall manage the business affairs while R shall be the logging
superintendent. All profits and losses shall be divided share and share alike between them. Later on, the two
availed the services of Pahamotang as industrial partner and executed another articles of co-partnership with the
latter. The purpose of this second partnership was to hold and secure renewal of timber license and the term of
which was fixed to 30 years. Still later on, the three executed a conditional sale of interest in the partnership
wherein M and R shall purchase the interest, share and participation in the partnership of P. It was also agreed
that after payment of such including amount of loan secured by P in favor of the partnership, the two shall become
owners of all equipment contributed by P. After this, the two continued the partnership without any written
agreement or reconstitution of their articles of partnership. Subsequently, R entered into a management contract
with CMS Estate Inc. M wrote him re: his contribution to the capital investments as well as his duties as logging
superintendent. R replied that he will not be able to comply with both. M then told R that the latter’s share will
just be 20% of the net profits. Such was the sharing from 1957 to 1959 without complaint or dispute. R took funds
from the partnership more than his contribution. M notified R that he dissolved the partnership. R filed an action
against M for the recovery of properties and accounting of the partnership and damages.

CFI

: the partnership of M and R is after P retired is one of de facto and at will; the sharing of profits and losses is on
the basis of actual contributions; there is no evidence these properties were acquired by the partnership funds
thus it should not belong to it; neither is entitled to damages; the letter of M in effect dissolved the partnership;
sale of forest concession is valid and binding and should be considered as M’s contribution; R must pay or turn
over to the partnership the profits he received from CMS and pay his personal account to the partnership; M must
be paid 85k which he should’ve received but was not paid to him and must be considered as his contribution.

ISSUE: what is the nature of the partnership and legal relationship of M-R after P retired from the second
partnership? May M unilaterally dissolve the partnership?

HELD:

There was no intention to dissolve the first partnership upon the constitution of the second as everything else was
the same except for the fact that they took in an industrial partner: they pursued the same purposes, the capital
contributions call for the same amounts, all subsequent renewals of Timber License were secured in favor of the
first partnership, all businesses were carried out under the registered articles. M and R agreed to purchase the
interest, share and participation of P and after, they became owners of the equipment contributed by P. Both
considered themselves as partners as per their letters. It is not a partnership de facto or at will as it was existing
and duly registered. The letter of M dissolving the partnership is in effect a notice of withdrawal and may be done
by expressly withdrawing even before expiration of the period with or without justifiable cause. As to the
liquidation of the partnership it shall be divided “share and share alike” after an accounting has been made.

R is not entitled to any profits as he failed to give the amount he had undertaken to contribute thus, had become a
debtor of the partnership.
M cannot be liable for damages as R abandoned the partnership thru his acts and also took funds in an amount
more than his contribution