Digest Cases Partnership

8/11/2019 Digest Cases Partnership

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Tai Tong v Insurance G.R. No. L-55397 February 29, 1988

Facts:

Azucena Palomo obtained aloanfrom Tai Tong Chuache Inc. in the amount of P100,000.00. To

secure the payment of theloan,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 forthe building and

P30,000.00 for the contents thereof)

Pedro Palomo secured aFire InsurancePolicy covering the building for P50,000.00 with respondentZenith Insurance Corporation. On July 16, 1975, anotherFire Insurancewas 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 thefireInsurancePolicy 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 theircreditdue the

petitioner. However, they were never able to prove that Tai had a lack ofinsurable interest. Hence, the

decision must be adverse against them.


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However respondent Insurance Commission absolved respondent insurance company fromliability 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 thecreditextended 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 offeredas 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 ofcredit,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 theloanextended 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 theloangranted 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.

Heirs of Tan Eng Kee Vs CA

Benguet Lumber has been around even before World War II but during the war, its stocks were

confiscated by the Japanese. After the war, the brothers Tan Eng Lay and Tan Eng Kee pooled their

resources in order to revive the business. In 1981, Tan Eng Lay caused the conversion of Benguet Lumber

into a corporation called Benguet Lumber and Hardware Company, with him and his family as the

incorporators. In 1983, Tan Eng Kee died. Thereafter, the heirs of Tan Eng Kee demanded for an

accounting and the liquidation of the partnership.

Tan Eng Lay denied that there was a partnership between him and his brother. He said that Tan Eng Kee

was merely an employee of Benguet Lumber. He showed evidence consisting of Tan Eng Kees payroll;

his SSS as an employee and Benguet Lumber being the employee. As a result of the presentation of said

evidence, the heirs of Tan Eng Kee filed a criminal case against Tan Eng Lay for allegedly fabricating those

evidence. Said criminal case was however dismissed for lack of evidence.

ISSUE: Whether or not Tan Eng Kee is a partner.

HELD: No. There was no certificate of partnership between the brothers. The heirs were not able to

show what was the agreement between the brothers as to the sharing of profits. All they presented

were circumstantial evidence which in no way proved partnership.

It is obvious that there was no partnership whatsoever. Except for a firm name, there was no firm

account, no firm letterheads submitted as evidence, no certificate of partnership, no agreement as to

profits and losses, and no time fixed for the duration of the partnership. There was even no attempt to

submit an accounting corresponding to the period after the war until Kees death in 1984. It had no


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business book, no written account nor any memorandum for that matter and no license mentioning the

existence of a partnership.

In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a sole proprietorship. He

registered the same as such in 1954; that Kee was just an employee based on the latters payroll and SSS

coverage, and other records indicating Tan Eng Lay as the proprietor.

Also, the business definitely amounted to more P3,000.00 hence if there was a partnership, it should

have been made in a public instrument.

But the business was started after the war (1945) prior to the publication of the New Civil Code in 1950?Even so, nothing prevented the parties from complying with this requirement.

Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an accounting. The

essence of a partnership is that the partners share in the profits and losses. Each has the right to demand

an accounting as long as the partnership exists. Even if it can be speculated that a scenario wherein if

excellent relations exist among the partners at the start of the business and all the partners are more

interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in the

profits is perfectly plausible. But in the situation in the case at bar, the deferment, if any, h ad gone on

too long to be plausible. A person is presumed to take ordinary care of his concerns. A demand for

periodic accounting is evidence of a partnership which Kee never did.

The Supreme Court also noted:

In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as

to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or

co-possessors do or do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons

sharing them have a joint or common right or interest in any property which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a

partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installment or otherwise;

(b) As wages of an employee or rent to a landlord;(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or

otherwise.

Evangelista, et al. v. CIR, GR No. L-9996, October 15, 1957

Facts:

Herein petitioners seek a review of CTAs decision holding them liable for income tax, real estate

dealers tax and residence tax. As stipulated, petitioners borrowed from their father a certain sum for

the purpose of buying real properties. Within February 1943 to April 1994, they have bought parcels of

land from different persons, the management of said properties was charged to their brother Simeon

evidenced by a document. These properties were then leased or rented to various tenants.

On September 1954, CIR demanded the payment of income tax on corporations, real estate

dealers fixed tax, and corporation residence tax to which the petitioners seek to be absolved from such

payment.

Issue:Whether petitioners are subject to the tax on corporations.

Ruling:


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The Court ruled that with respect to the tax on corporations, the issue hinges on the meaning of

the terms corporation and partnership as used in Section 24 (provides that a tax shall be levied on

every corporation no matter how created or organized except general co-partnerships) and 84 (provides

that the term corporation includes among others, partnership) of the NIRC. Pursuant to Article 1767,

NCC (provides for the concept of partnership), its essential elements are: (a) an agreement to contribute

money, property or industry to a common fund; and (b) intent to divide the profits among the

contracting parties.

It is of the opinion of the Court that the first element is undoubtedly present for petitioners have agreedto, and did, contribute money and property to a common fund. As to the second element, the Court fully

satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide

the same among themselves as indicated by the following circumstances:

1. The common fund was not something they found already in existence nor a property

inherited by them pro indiviso. It was created purposely, jointly borrowing a substantial portion thereof

in order to establish said common fund;

2. They invested the same not merely in one transaction, but in a series of transactions. The number

of lots acquired and transactions undertake is strongly indicative of a pattern or common design that

was not limited to the conservation and preservation of the aforementioned common fund or even of

the property acquired. In other words, one cannot but perceive a character of habitually peculiar to

business transactions engaged in the purpose of gain;

3. Said properties were not devoted to residential purposes, or to other personal uses, of petitioners

but were leased separately to several persons;

4. They were under the management of one person where the affairs relative to said properties have

been handled as if the same belonged to a corporation or business and enterprise operated for profit;

5. Existed for more than ten years, or, to be exact, over fifteen years, since the first property was

acquired, and over twelve years, since Simeon Evangelista became the manager;

6. Petitioners have not testified or introduced any evidence, either on their purpose in creating the

set up already adverted to, or on the causes for its continued existence.

The collective effect of these circumstances is such as to leave no room for doubt on the existence ofsaid intent in petitioners herein.

Also, petitioners argument that their being mere co-owners did not create a separate legal entity

was rejected because, according to the Court, the tax in question is one imposed upon "corporations",

which, strictly speaking, are distinct and different from "partnerships". When the NIRC includes

"partnerships" among the entities subject to the tax on "corporations", said Code must allude, therefore,

to organizations which are not necessarily "partnerships", in the technical sense of the term. The

qualifying expression found in Section 24 and 84(b) clearly indicates that a joint venture need not be

undertaken in any of the standard forms, or in conformity with the usual requirements of the law on

partnerships, in order that one could be deemed constituted for purposes of the tax on corporations.

Accordingly, the lawmaker could not have regarded that personality as a condition essential to the

existence of the partnerships therein referred to. For purposes of the tax on corporations, NIRC includes

these partnerships - with the exception only of duly registered general co partnerships - within the

purview of the term "corporation." It is, therefore, clear that petitioners herein constitute a partnership,

insofar as said Code is concerned and are subject to the income tax for corporations.

As regards the residence of tax for corporations (Section 2 of CA No. 465), it is analogous to that

of section 24 and 84 (b) of the NIRC. It is apparent that the terms "corporation" and "partnership" are

used in both statutes with substantially the same meaning. Consequently, petitioners are subject, also,

to the residence tax for corporations.


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Finally, on the issues of being liable for real estate dealers tax, they are also liable for the same

because the records show that they have habitually engaged in leasing said properties whose yearly

gross rentals exceeds P3,000.00 a year.

Deluao VS Casteel

(Property Rights of Partners)-Ca steel was the or iginal occ upant and appl icant of a fishpond areasince bef ore the last World War. He wanted to precludesubsequent applicants from entering

and spreading themselves within the area by expanding his occupation thereof by theconstruction of dikes

and the cultivation of marketable fishes.-Thus, he borrowed P27, 000 from the Deluaos to finance

neede d i mproveme nts for the fishpond, and was compel led by forceof this circumstance to

enter into the contract of partnership, with an agreement to divide the fishpond after the

award.Eventually, Casteel administered the said property and single-handedly opposed rival applicants

who occupied portions of the fishpond area. He relentlessly pursued his claim to the said area up to the

Office of the DANR Secretary, until it wasfinally awarded to him.Issue: WON the parties can now validly divide the

said fishpond as agreed upon by them? NO.Ruling:-Spouses Deluaos statement that the beneficial right

over the fishpond in question is the

"specific partnership property"contemplated by art. 1811 of the Civil Codeis incorrect. A reading of the

said provision will show that what is meant istangible property, such as a car, truck or a pie ce of

land, but not an intangible thing such as the beneficial right to afishpond. If what they have in mind

is the fishpond itself, they are grossly in error. A fishpond of the public domain can neverbe considered a specific partnership

property because only its use and enjoymentnever its title or ownership is grantedto specific private persons.-Since

we held as illegal the second part of the contract of partnership between the parties to

divide the fishpond betweenthem after the award, a fortiori, no rights or obligations could have

arisen therefrom. Inescapably, no trust could haveresulted because trust is founded on equity and can

never result from an act violative of the law. Art. 1452 of the Civil Codedoes not support the appellees'

stand because it contemplates an agreement between two or more persons to purchaseproperty

capable of private ownership the legal title of which is to be taken in the name of one of them for thebenefitof all. In the case at bar, the parties did not agree to purchase the fishpond, and even if they did, such is prohibited

by law, afishpond of the public domain not being susceptible of private ownership.-I t must be observed that,

despite the decisions of the DANR Secretary in DANR cases 353 and 353-B awarding the

area toCasteel, and despite the latter's proposal that they divide the fishpond between them,

the Deluaos unequivocally expressedin their aforequoted letter their decision not to share the fishpond

with Casteel. This produced the dissolution of the entirecontract of partnership (to jointly administer and to divide

the fishpond after the award) between the parties, not to mentionits automatic dissolution for being contrary to law.-

Pettioners final proposition that only by giving effect to the confirmed intention of the

parties may the cause of equity and justice be served, we must state that since the contract of

service is contrary to law and, therefore, null and void, it is notand can never be considered as the law between

the parties.

39. Agad vs Mabato

Facts: Petitioner Mauricio Agad claims that he and defendant Severino Mabato are partners in afishpond

business to which they contributed P1000 each. As managing partner, Mabato yearly renderedthe accounts of the

operations of the partnership. However, for the years 1957-1963, defendant failedto render the accounts


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despite repeated demands. Petitioner filed a complaint against Mabato to whicha copy of the public instrument evidencing

their partnership is attached. Aside from the share of profits (P14,000) and attorneysfees (P1000), petitioner

prayed for the dissolution of the partnership and

winding up of its affairs.Mabato denied the existence of the partnership alleging that Agad failed to pay hisP1000

contribution.He then filed a motion to dismiss on the ground of lack of cause of action. The lower court

dismissed thecomplaint finding a failure to state a cause of action predicated upon the theory that the

contract of partnership is null and void, pursuant to Art. 1773 of our Civil Code, because an inventory of

thefishpond referred in said instrument had not been attached thereto.Art. 1771. A partnership may be constituted in anyform, except where immovable property or realrights are contributed thereto, in which case a public instrument shall be

necessary.Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if inventory

of said property is not made, signed by the parties; and attached to the public instrument.

Issue: Whether or not immovable property or real rights have been contributed to the partnership.

Held: Based on the copy of the public instrument attached in the complaint, the partnership

wasestablished to operate a fishpond", and not to "engage in a fishpond business.Thus,

Mabatoscontentionthat itis really inconceivable how a partnership engaged in the fishpond business

could exist without said fishpond property (being) contributed to the partnershipis without merit. Their

contributions were limited to P1000 each and neither a fishpond nor a real right thereto wascontributed to the

partnership.Therefore, Article 1773 of the Civil Code finds no application in the case at bar. Case remanded to thelower

court for further proceedings

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Digest Cases Partnership