Republic of the Philippines Assurance Company, covering the same
SUPREME COURT building for P50,000.00 and the contents
Manila
FIRST DIVISION
G.R. No. L-55397 February 29, 1988
TAI TONG CHUACHE & CO., petitioner,
vs.
THE INSURANCE COMMISSION and TRAVELLERS MULTI-
INDEMNITY CORPORATION, respondents.
GANCAYCO, J.:
This petition for review on certiorari seeks the reversal of the
decision of the Insurance Commission in IC Case
#367 1 dismissing the complaint 2 for recovery of the alleged
unpaid balance of the proceeds of the Fire Insurance Policies
issued by herein respondent insurance company in favor of
petitioner-intervenor.
The facts of the case as found by respondent Insurance
Commission are as follows:
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 for
P25,000.00.
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. (Exhibit
"1" and "1-A"). On April 25, 1975, 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)
(Exhibit "A-a," contents thereof) (Exhibit "A-
a").
On June 11, 1975, Pedro Palomo secured a
Fire Insurance Policy No. F- 02500 (Exhibit
"A"), covering the building for P50,000.00
with respondent Zenith Insurance
Corporation. On July 16, 1975, another Fire
Insurance Policy No. 8459 (Exhibit "B") was
procured from respondent Philippine British
based on the Adjustment Standards
Corporation Report of September 22, 1975.
thereof for P70,000.00.
On July 31, 1975, the building and the
contents were totally razed by fire.
Adjustment Standard Corporation submitted
a report as follow
xxx xxx xxx
... Thus the apportioned share of each
company is as follows:
We are showing hereunder another
apportionment of the loss which includes the
Travellers Multi-Indemnity policy for
reference purposes.
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 (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
(P5,732.79-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 admitted the material
allegations in the complaint, but 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.
Instead of filing an answer, SSS Accredited
Group of Insurers informed the Commission
in its letter of July 22, 1977 that the herein
claim of complainants for the balance had
been paid in the amount of P 5,938.57 in full,
Travellers Insurance, on its part, admitted
the issuance of the Policy No. 599 DV and
alleged as its special and affirmative
defenses the following, to wit: that Fire
Policy No. 599 DV, covering the furniture
and building of complainants was secured
by a certain Arsenio Chua, mortgage
creditor, for the purpose of protecting his
mortgage credit against the complainants;
that the said policy was issued in the name
of Azucena Palomo, only to indicate that she
owns the insured premises; that the policy
contains an endorsement in favor of Arsenio
Chua as his mortgage interest may appear
to indicate that insured was Arsenio Chua
and the complainants; that the premium due
on said fire policy was paid by Arsenio
Chua; that respondent Travellers is not liable
to pay complainants.
On May 31, 1977, Tai Tong Chuache & Co.
filed a complaint in intervention claiming the
proceeds of the fire Insurance Policy No. F-
559 DV, issued by respondent Travellers
Multi-Indemnity.
Travellers Insurance, in answer to the
complaint in intervention, alleged that the
Intervenor is not entitled to indemnity under
its Fire Insurance Policy for lack of insurable
interest before the loss of the insured
premises and that the complainants,
spouses Pedro and Azucena Palomo, had
already paid in full their mortgage
indebtedness to the intervenor. 3
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, petitioner herein, 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 herein respondent. It likewise dismissed petitioner's
complaint in intervention in the following words:
We move on the issue of liability of
respondent Travellers Multi-Indemnity to the
Intervenor-mortgagee. The complainant
testified that she was still indebted to
Intervenor in the amount of P100,000.00.
Such allegation has not however, been
sufficiently proven by documentary
evidence. The certification (Exhibit 'E-e')
issued by the Court of First Instance of
Davao, Branch 11, indicate that the
complainant was Antonio Lopez Chua and
not Tai Tong Chuache & Company. 4
From the above decision, only intervenor Tai Tong Chuache filed
a motion for reconsideration but it was likewise denied hence,
the present petition.
It is the contention of the petitioner that respondent Insurance
Commission decided an issue not raised in the pleadings of the
parties in that it ruled that a certain Arsenio Lopez Chua is the
one entitled to the insurance proceeds and not Tai Tong
Chuache & Company.
This Court cannot fault petitioner for the above erroneous
interpretation of the decision appealed from considering the
manner it was written. 5 As correctly pointed out by respondent
insurance commission in their comment, the decision did not
pronounce that it was Arsenio Lopez Chua who has insurable
interest over the insured property. Perusal of the decision reveals
however that it readily absolved respondent insurance company
from liability on the basis of the commissioner's conclusion that
at the time of the occurrence of the peril insured against
petitioner as mortgagee had no more insurable interest over the
insured property. It was based on the inference that the credit
secured by the mortgaged property was already paid by the
Palomos before the said property was gutted down by fire. The
foregoing conclusion was arrived at 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,
Antonio Lopez Chua stands as the complainant and not
petitioner Tai Tong Chuache & Company.
We find the petition to be impressed with merit. It is a well known
postulate that the case of a party is constituted by his own
affirmative allegations. Under Section 1, Rule 1316 each party
must prove his own affirmative allegations by the amount of
evidence required by law which in civil cases as in the present
case is preponderance of evidence. The party, whether plaintiff
or defendant, who asserts the affirmative of the issue has the
burden of presenting at the trial such amount of evidence as
required by law to obtain favorable judgment.7 Thus, petitioner
who is claiming a right over the insurance must prove its case.
Likewise, respondent insurance company to avoid liability under
the policy by setting up an affirmative defense of lack of
insurable interest on the part of the petitioner must prove its own
affirmative allegations.
It will be recalled that respondent insurance company did not
assail the validity of the insurance policy taken out by petitioner
over the mortgaged property. Neither did it deny that the said
property was totally razed by fire within the period covered by the
insurance. Respondent, as mentioned earlier 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.
Respondent having admitted the material allegations in the
complaint, has the burden of proof to show that petitioner has no
insurable interest over the insured property at the time the
contingency took place. Upon that point, there is a failure of
proof. Respondent, it will be noted, exerted no effort to present
any evidence to substantiate its claim, while petitioner did. For
said respondent's failure, the decision must be adverse to it.
However, as adverted to earlier, respondent Insurance private respondent Travellers Multi-Indemnity Corporation to pay
Commission absolved respondent insurance company from petitioner the face value of Insurance Policy No. 599-DV in the
liability on the basis of the certification issued by the then Court amount of P100,000.00. Costs against said private respondent.
of First Instance of Davao, Branch II, that in a certain civil action
against the Palomos, Arsenio Lopez Chua stands as the
SO ORDERED.
complainant and not Tai Tong Chuache. From said evidence
respondent commission inferred that the credit extended by
herein petitioner to the Palomos secured by the insured property Teehankee, C.J., Narvasa, Cruz and Griño-Aquino, JJ., concur.
must have been paid. Such is a glaring error which this Court
cannot sanction. Respondent Commission's findings are 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 (Exh. 1) 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. 8 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. 9
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.
The premise is correct but the conclusion is wrong. Citing Rule 3,
Sec. 2 10 respondent pointed out that the action must be brought
in the name of the real party in interest. We agree. 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. The fact that Arsenio Lopez Chua is the
representative of petitioner is not questioned. Petitioner's
declaration that Arsenio Lopez Chua acts as the managing
partner of the partnership was corroborated by respondent
insurance company. 11 Thus Chua as the managing partner of
the partnership may execute all acts of administration 12 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.13 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 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.
IN VIEW OF THE FOREGOING, the decision appealed from is
hereby SET ASIDE and ANOTHER judgment is rendered order
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11624 January 21, 1918
E. M. BACHRACH, plaintiff-appellee,
vs.
"LA PROTECTORA", ET AL., defendants-appellants.
Vicente Foz for appellants.
A. J. Burke for appellee.
STREET, J.:
In the year 1913, the individuals named as defendants in this
action formed a civil partnership, called "La Protectora," for the
purpose of engaging in the business of transporting passengers
and freight at Laoag, Ilocos Norte. In order to provide the
enterprise with means of transportation, Marcelo Barba, acting
as manager, came to Manila and upon June 23, 1913,
negotiated the purchase of two automobile trucks from the
plaintiff, E. M. Bachrach, for the agree price of P16,500. He paid
the sum of 3,000 in cash, and for the balance executed
promissory notes representing the deferred payments. These
notes provided for the payment of interest from June 23, 1913,
the date of the notes, at the rate of 10 per cent per annum.
Provision was also made in the notes for the payment of 25 per
cent of the amount due if it should be necessary to place the
notes in the hands of an attorney for collection. Three of these
notes, for the sum of P3,375 each, have been made the subject
of the present action, and there are exhibited with the complaint
in the cause. One was signed by Marcelo Barba in the following
manner:
P. P. La Protectora
By Marcelo Barba
Marcelo Barba.
The other two notes are signed in the same way with the word
"By" omitted before the name of Marcelo Barba in the second
line of the signature. It is obvious that in thus signing the notes
Marcelo Barba intended to bind both the partnership and himself.
In the body of the note the word "I" (yo) instead of "we"
(nosotros) is used before the words "promise to
pay" (prometemos) used in the printed form. It is plain that the
singular pronoun here has all the force of the plural.
As preliminary to the purchase of these trucks, the defendants
Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and Modesto
Serrano, upon June 12, 1913, executed in due form a document
in which they declared that they were members of the firm "La
Protectora" and that they had granted to its president full
authority "in the name and representation of said partnership to
contract for the purchase of two automobiles" (en nombre y
representacion de la mencionada sociedad contratante la
compra de dos automoviles). This document was apparently The Court of First Instance seems to have founded its judgment
executed in obedience to the requirements of subsection 2 of against the appellants in part upon the idea that the document
article 1697 of the Civil Code, for the purpose of evidencing the executed by them constituted an authority for Marcelo Barba to
authority of Marcelo Barba to bind the partnership by the bind them personally, as contemplated in the second clause of
purchase. The document in question was delivered by him to article 1698 of the Civil Code. That cause says that no member
Bachrach at the time the automobiles were purchased. of the partnership can bind the others by a personal act if they
have not given him authority to do so. We think that the
document referred to was intended merely as an authority to
From time to time after this purchase was made, Marcelo Barba
enable Barba to bind the partnership and that the parties to that
purchased of the plaintiff various automobile effects and
instrument did not intend thereby to confer upon Barba an
accessories to be used in the business of "La Protectora." Upon
authority to bind them personally. It is obvious that the contract
May 21, 1914, the indebtedness resulting from these additional
which Barba in fact executed in pursuance of that authority did
purchases amounted to the sum of P2,916.57
not by its terms profess to bind the appellants personally at all,
but only the partnership and himself. It follows that the four
In May, 1914, the plaintiff foreclosed a chattel mortgage which he appellants cannot be held to have been personally obligated by
had retained on the trucks in order to secure the purchase price. that instrument; but, as we have already seen, their liability rests
The amount realized from this sale was P1,000. This was upon the general principles underlying partnership liability.
credited unpaid. To recover this balance, together with the sum
due for additional purchases, the present action was instituted in
As to so much of the indebtedness as is based upon the claim
the Court of First Instance of the city of Manila, upon May 29,
for automobile supplies and accessories, it is obvious that the
1914, against "La Protectora" and the five individuals Marcelo
document of June 12, 1913, affords no authority for holding the
Barba, Nicolas Segundo, Antonio Adiarte, Ignacio Flores, and
appellants liable. Their liability upon this account is, however, no
Modesto Serrano. No question has been made as to the
less obvious than upon the debt incurred by the purchase of the
propriety of impleading "La Protectora" as if it were a legal entity.
trucks; and such liability is derived from the fact that the debt was
At the hearing, judgment was rendered against all of the
lawfully incurred in the prosecution of the partnership enterprise.
defendants. From this judgment no appeal was taken in behalf
either of "La Protectora" or Marcelo Barba; and their liability is
not here under consideration. The four individuals who signed There is no proof in the record showing what the agreement, if
the document to which reference has been made, authorizing any, was made with regard to the form of management. Under
Barba to purchase the two trucks have, however, appealed and these circumstances it is declared in article 1695 of the Civil
assigned errors. The question here to be determined is whether Code that all the partners are considered agents of the
or not these individuals are liable for the firm debts and if so to partnership. Barba therefore must be held to have had authority
what extent. to incur these expenses. But in addition to this he is shown to
have been in fact the president or manager, and there can be no
doubt that he had actual authority to incur this obligation.
The amount of indebtedness owing to the plaintiff is not in
dispute, as the principal of the debt is agreed to be P7,037. Of
this amount it must now be assumed, in view of the finding of the From what has been said it results that the appellants are
trial court, from which no appeal has been taken by the plaintiff, severally liable for their respective shares of the entire
that the unpaid balance of the notes amounts to P4,121, while indebtedness found to be due; and the Court of First Instance
the remainder (P2,916) represents the amount due for committed no error in giving judgment against them. The amount
automobile supplies and accessories. for which judgment should be entered is P7,037, to which shall
be added (1) interest at 10 per cent per annum from June 23,
1913, to be calculated upon the sum of P4.121; (2) interest at 6
The business conducted under the name of "La Protectora" was
per cent per annum from July 21, 1915, to be calculated upon
evidently that of a civil partnership; and the liability of the
the sum of P2,961; (3) the further sum of P1,030.25, this being
partners to this association must be determined under the
the amount stipulated to be paid by way of attorney's fees.
provisions of the Civil Code. The authority of Marcelo Barba to
However, it should be noted that any property pertaining to "La
bind the partnership, in the purchase of the trucks, is fully
Protectora" should first be applied to this indebtedness pursuant
established by the document executed by the four appellants
to the judgment already entered in this case in the court below;
upon June 12, 1913. The transaction by which Barba secured
and each of the four appellants shall be liable only for the one-
these trucks was in conformity with the tenor of this document.
fifth part of the remainder unpaid.
The promissory notes constitute the obligation exclusively of "La
Protectora" and of Marcelo Barba; and they do not in any sense
constitute an obligation directly binding on the four appellants. Let judgment be entered accordingly, without any express finding
Their liability is based on the fact that they are members of the of costs of this instance. So ordered.
civil partnership and as such are liable for its debts. It is true that
article 1698 of the Civil Code declares that a member of a civil
Arellano, C.J., Torres, Araullo, Malcolm, and Avanceña,
partnership is not liable in solidum (solidariamente) with his
JJ., concur.
fellows for its entire indebtedness; but it results from this article,
in connection with article 1137 of the Civil Code, that each is
liable with the others (mancomunadamente) for his aliquot part of
such indebtedness. And so it has been held by this court. (Co-
Pitco vs. Yulo, 8 Phil. Rep., 544.)
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16318 October 21, 1921
PANG LIM and BENITO GALVEZ, plaintiffs-appellees,
vs.
LO SENG, defendant-appellant.
Cohn, Fisher and DeWitt for appellant.
No appearance for appellees.
STREET, J.:
For several years prior to June 1, 1916, two of the litigating
parties herein, namely, Lo Seng and Pang Lim, Chinese
residents of the City of Manila, were partners, under the firm
name of Lo Seng and Co., in the business of running a distillery,
known as "El Progreso," in the Municipality of Paombong, in the
Province of Bulacan. The land on which said distillery is located
as well as the buildings and improvements originally used in the
business were, at the time to which reference is now made, the
property of another Chinaman, who resides in Hongkong, named
Lo Yao, who, in September, 1911, leased the same to the firm of
Lo Seng and Co. for the term of three years.
Upon the expiration of this lease a new written contract, in the
making of which Lo Yao was represented by one Lo Shui as
attorney in fact, became effective whereby the lease was
extended for fifteen years. The reason why the contract was
made for so long a period of time appears to have been that the
Bureau of Internal Revenue had required sundry expensive
improvements to be made in the distillery, and it was agreed that
these improvements should be effected at the expense of the
lessees. In conformity with this understanding many thousands
of pesos were expended by Lo Seng and Co., and later by Lo
Seng alone, in enlarging and improving the plant.
Among the provisions contained in said lease we note the
following:
Know all men by these presents:
xxx xxx xxx
1. That I, Lo Shui, as attorney in
fact in charge of the properties of
Mr. Lo Yao of Hongkong, cede by
way of lease for fifteen years more
said distillery "El Progreso" to
Messrs. Pang Lim and Lo Seng
(doing business under the firm
name of Lo Seng and Co.), after
the termination of the previous
contract, because of the fact that
they are required, by the Bureau
of Internal Revenue, to rearrange,
alter and clean up the distillery.
2. That all the improvements and
betterments which they may
introduce, such as machinery,
apparatus, tanks, pumps, boilers
and buildings which the business
may require, shall be, after the
termination of the fifteen years of
lease, for the benefit of Mr. Lo
Yao, my principal, the buildings
being considered as
improvements.
3. That the monthly rent of said
distillery is P200, as agreed upon
in the previous contract of
September 11, 1911,
acknowledged before the notary
public D. Vicente Santos; and all
modifications and repairs which
may be needed shall be paid for
by Messrs. Pang Lim and Lo
Seng.
We, Pang Lim and Lo Seng, as partners in
said distillery "El Progreso," which we are at
present conducting, hereby accept this
contract in each and all its parts, said
contract to be effective upon the termination
of the contract of September 11, 1911.
Neither the original contract of lease nor the agreement
extending the same was inscribed in the property registry, for the
reason that the estate which is the subject of the lease has never
at any time been so inscribed.
On June 1, 1916, Pang Lim sold all his interest in the distillery to
his partner Lo Seng, thus placing the latter in the position of sole
owner; and on June 28, 1918, Lo Shui, again acting as attorney
in fact of Lo Yao, executed and acknowledged before a notary
public a deed purporting to convey to Pang Lim and another
Chinaman named Benito Galvez, the entire distillery plant
including the land used in connection therewith. As in case of the
lease this document also was never recorded in the registry of
property. Thereafter Pang Lim and Benito Galvez demanded
possession from Lo Seng, but the latter refused to yield; and the
present action of unlawful detainer was thereupon initiated by
Pang Lim and Benito Galvez in the court of the justice of the
peace of Paombong to recover possession of the premises.
From the decision of the justice of the peace the case was
appealed to the Court of First Instance, where judgment was
rendered for the plaintiffs; and the defendant thereupon appealed
to the Supreme Court.
The case for the plaintiffs is rested exclusively on the provisions
of article 1571 of the Civil Code, which reads in part as follows:
ART. 1571. The purchaser of a leased estate shall be
entitled to terminate any lease in force at the time of
making the sale, unless the contrary is stipulated, and
subject to the provisions of the Mortgage Law.
In considering this provision it may be premised that a contract of
lease is personally binding on all who participate in it regardless
of whether it is recorded or not, though of course the unrecorded
lease creates no real charge upon the land to which it relates.
The Mortgage Law was devised for the protection of third parties,
or those who have not participated in the contracts which are by
that law required to be registered; and none of its provisions with
reference to leases interpose any obstacle whatever to the giving
of full effect to the personal obligations incident to such
contracts, so far as concerns the immediate parties thereto. This
is rudimentary, and the law appears to be so understood by all
commentators, there being, so far as we are aware, no authority
suggesting the contrary. Thus, in the commentaries of the
authors Galindo and Escosura, on the Mortgage Law, we find the
following pertinent observation: "The Mortgage Law is enacted in
aid of and in respect to third persons only; it does not affect the
relations between the contracting parties, nor their capacity to
contract. Any question affecting the former will be determined by
the dispositions of the special law [i.e., the Mortgage Law], while
any question affecting the latter will be determined by the general
law." (Galindo y Escosura, Comentarios a la Legislacion
Hipotecaria, vol. I, p. 461.)
Although it is thus manifest that, under the Mortgage Law, as
regards the personal obligations expressed therein, the lease in
question was from the beginning, and has remained, binding
upon all the parties thereto — among whom is to be numbered
Pang Lim, then a member of the firm of Lo Seng and Co. — this
does not really solve the problem now before us, which is,
whether the plaintiffs herein, as purchasers of the estate, are at
liberty to terminate the lease, assuming that it was originally
binding upon all parties participating in it.
Upon this point the plaintiffs are undoubtedly supported, prima
facie, by the letter of article 1571 of the Civil Code; and the
position of the defendant derives no assistance from the mere
circumstance that the lease was admittedly binding as between
the parties thereto. 1awph!l.net
The words "subject to the provisions of the Mortgage Law,"
contained in article 1571, express a qualification which evidently
has reference to the familiar proposition that recorded
instruments are effective against third persons from the date of
registration (Co-Tiongco vs. Co-Guia, 1 Phil., 210); from whence
it follows that a recorded lease must be respected by any
purchaser of the estate whomsoever. But there is nothing in the
Mortgage Law which, so far as we now see, would prevent a
purchaser from exercising the precise power conferred in article
1571 of the Civil Code, namely, of terminating any lease which is
unrecorded; nothing in that law that can be considered as
arresting the force of article 1571 as applied to the lease now
before us.
Article 1549 of the Civil Code has also been cited by the
attorneys for the appellant as supplying authority for the
proposition that the lease in question cannot be terminated by
one who, like Pang Lim, has taken part in the contract. That
provision is practically identical in terms with the first paragraph
of article 23 of the Mortgage Law, being to the effect that
unrecorded leases shall be of no effect as against third persons;
and the same observation will suffice to dispose of it that was
made by us above in discussing the Mortgage Law, namely, that
while it recognizes the fact that an unrecorded lease is binding
on all persons who participate therein, this does not determine
the question whether, admitting the lease to be so binding, it can
be terminated by the plaintiffs under article 1571.
Having thus disposed of the considerations which arise in
relation with the Mortgage Law, as well as article 1549 of the
Civil Coded — all of which, as we have seen, are undecisive —
we are brought to consider the aspect of the case which seems
to us conclusive. This is found in the circumstance that the
plaintiff Pang Lim has occupied a double role in the transactions
which gave rise to this litigation, namely, first, as one of the
lessees; and secondly, as one of the purchasers now seeking to
terminate the lease. These two positions are essentially
antagonistic and incompatible. Every competent person is by law
bond to maintain in all good faith the integrity of his own
obligations; and no less certainly is he bound to respect the
rights of any person whom he has placed in his own shoes as
regards any contract previously entered into by himself.
While yet a partner in the firm of Lo Seng and Co., Pang Lim
participated in the creation of this lease, and when he sold out
his interest in that firm to Lo Seng this operated as a transfer to
Lo Seng of Pang Lim's interest in the firm assets, including the
lease; and Pang Lim cannot now be permitted, in the guise of a
purchaser of the estate, to destroy an interest derived from
himself, and for which he has received full value.
The bad faith of the plaintiffs in seeking to deprive the defendant
of this lease is strikingly revealed in the circumstance that prior to
the acquisition of this property Pang Lim had been partner with
Lo Seng and Benito Galvez an employee. Both therefore had
been in relations of confidence with Lo Seng and in that position
had acquired knowledge of the possibilities of the property and
possibly an experience which would have enabled them, in case
they had acquired possession, to exploit the distillery with profit.
On account of his status as partner in the firm of Lo Seng and
Co., Pang Lim knew that the original lease had been extended
for fifteen years; and he knew the extent of valuable
improvements that had been made thereon. Certainly, as
observed in the appellant's brief, it would be shocking to the
moral sense if the condition of the law were found to be such that
Pang Lim, after profiting by the sale of his interest in a business,
worthless without the lease, could intervene as purchaser of the
property and confiscate for his own benefit the property which he
had sold for a valuable consideration to Lo Seng. The sense of
justice recoils before the mere possibility of such eventuality.
Above all other persons in business relations, partners are
required to exhibit towards each other the highest degree of
good faith. In fact the relation between partners is essentially
fiduciary, each being considered in law, as he is in fact, the
confidential agent of the other. It is therefore accepted as owners pro indiviso, according to the proportion of their
fundamental in equity jurisprudence that one partner cannot, to respective contribution to the purchase price. But it is well
the detriment of another, apply exclusively to his own benefit the recognized that one tenant in common cannot maintain a
results of the knowledge and information gained in the character possessory action against his cotenant, since one is as much
of partner. Thus, it has been held that if one partner obtains in entitled to have possession as the other. The remedy is ordinarily
his own name and for his own benefit the renewal of a lease on by an action for partition. (Cornista vs. Ticson, 27 Phil., 80.) It
property used by the firm, to commence at a date subsequent to follows that as Lo Seng is vested with the possessory right as
the expiration of the firm's lease, the partner obtaining the against Pang Lim, he cannot be ousted either by Pang Lim or
renewal is held to be a constructive trustee of the firm as to such Benito Galvez. Having lawful possession as against one
lease. (20 R. C. L., 878-882.) And this rule has even been cotenant, he is entitled to retain it against both. Furthermore, it is
applied to a renewal taken in the name of one partner after the obvious that partition proceedings could not be maintained at the
dissolution of the firm and pending its liquidation. (16 R. C. L., instance of Benito Galvez as against Lo Seng, since partition can
906; Knapp vs. Reed, 88 Neb., 754; 32 L. R. A. [N. S.], 869; only be effected where the partitioners are cotenants, that is,
Mitchell vs. Reed 61 N. Y., 123; 19 Am. Rep., 252.) have an interest of an identical character as among themselves.
(30 Cyc., 178-180.) The practical result is that both Pang Lim
and Benito Galvez are bound to respect Lo Seng's lease, at least
An additional consideration showing that the position of the
in so far as the present action is concerned.
plaintiff Pang Lim in this case is untenable is deducible from
articles 1461 and 1474 of the Civil Code, which declare that
every person who sells anything is bound to deliver and warrant We have assumed in the course of the preceding discussion that
the subject-matter of the sale and is responsible to the vendee the deed of sale under which the plaintiffs acquired the right of
for the legal and lawful possession of the thing sold. The Lo Yao, the owner of the fee, is competent proof in behalf of the
pertinence of these provisions to the case now under plaintiffs. It is, however, earnestly insisted by the attorney for Lo
consideration is undeniable, for among the assets of the Seng that this document, having never been recorded in the
partnership which Pang Lim transferred to Lo Seng, upon selling property registry, cannot under article 389 of the Mortgage Law,
out his interest in the firm to the latter, was this very lease; and be used in court against him because as to said instrument he is
while it cannot be supposed that the obligation to warrant a third party. The important question thus raised is not absolutely
recognized in the articles cited would nullify article 1571, if the necessary to the decision of this case, and we are inclined to
latter article had actually conferred on the plaintiffs the right to pass it without decision, not only because the question does not
terminate this lease, nevertheless said articles (1461, 1474), in seem to have been ventilated in the Court of First Instance but
relation with other considerations, reveal the basis of an estoppel for the further reason that we have not had the benefit of any
which in our opinion precludes Pang Lim from setting up his written brief in this case in behalf of the appellees.
interest as purchaser of the estate to the detriment of Lo Seng.
The judgment appealed from will be reversed, and the defendant
It will not escape observation that the doctrine thus applied is will be absolved from the complaint. It is so ordered, without
analogous to the doctrine recognized in courts of common law express adjudication as to costs.
under the head of estoppel by deed, in accordance with which it
is held that if a person, having no title to land, conveys the same
Johnson, Araullo, Avanceña and Villamor, JJ., concur.
to another by some one or another of the recognized modes of
conveyance at common law, any title afterwards acquired by the
vendor will pass to the purchaser; and the vendor is estopped as
against such purchaser from asserting such after-acquired title.
The indenture of lease, it may be further noted, was recognized
as one of the modes of conveyance at common law which
created this estoppel. (8 R. C. L., 1058, 1059.)
From what has been said it is clear that Pang Lim, having been a
participant in the contract of lease now in question, is not in a
position to terminate it: and this is a fatal obstacle to the
maintenance of the action of unlawful detainer by him. Moreover,
it is fatal to the maintenance of the action brought jointly by Pang
Lim and Benito Galvez. The reason is that in the action of
unlawful detainer, under section 80 of the Code of Civil
Procedure, the only question that can be adjudicated is the right
to possession; and in order to maintain the action, in the form in
which it is here presented, the proof must show that occupant's
possession is unlawful, i. e., that he is unlawfully withholding
possession after the determination of the right to hold
possession. In the case before us quite the contrary appears; for,
even admitting that Pang Lim and Benito Galvez have purchased
the estate from Lo Yao, the original landlord, they are, as
between themselves, in the position of tenants in common or
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178782 September 21, 2011
JOSEFINA P. REALUBIT, Petitioner,
vs.
PROSENCIO D. JASO and EDEN G. JASO, Respondents.
DECISION
PEREZ, J.:
The validity as well as the consequences of an assignment of
rights in a joint venture are at issue in this petition for review filed
pursuant to Rule 45 of the 1997 Rules of Civil
Procedure,1 assailing the 30 April 2007 Decision2 rendered by
the Court of Appeals’ (CA) then Twelfth Division in CA-G.R. CV
No. 73861,3 the dispositive portion of which states:
WHEREFORE, the Decision appealed from is SET ASIDE and
we order the dissolution of the joint venture between defendant-
appellant Josefina Realubit and Francis Eric Amaury Biondo and
the subsequent conduct of accounting, liquidation of assets and
division of shares of the joint venture business.
Let a copy hereof and the records of the case be remanded to
the trial court for appropriate proceedings.4
The Facts
On 17 March 1994, petitioner Josefina Realubit (Josefina)
entered into a Joint Venture Agreement with Francis Eric Amaury
Biondo (Biondo), a French national, for the operation of an ice
manufacturing business. With Josefina as the industrial partner
and Biondo as the capitalist partner, the parties agreed that they
would each receive 40% of the net profit, with the remaining 20%
to be used for the payment of the ice making machine which was
purchased for the business.5 For and in consideration of the sum
of ₱500,000.00, however, Biondo subsequently executed a Deed
of Assignment dated 27 June 1997, transferring all his rights and
interests in the business in favor of respondent Eden Jaso
(Eden), the wife of respondent Prosencio Jaso.6 With Biondo’s
eventual departure from the country, the Spouses Jaso caused
their lawyer to send Josefina a letter dated 19 February 1998,
apprising her of their acquisition of said Frenchman’s share in
the business and formally demanding an accounting and
inventory thereof as well as the remittance of their portion of its
profits.7
Faulting Josefina with unjustified failure to heed their demand,
the Spouses Jaso commenced the instant suit with the filing of
their 3 August 1998 Complaint against Josefina, her husband,
Ike Realubit (Ike), and their alleged dummies, for specific
performance, accounting, examination, audit and inventory of
assets and properties, dissolution of the joint venture,
appointment of a receiver and damages. Docketed as Civil Case
No. 98-0331 before respondent Branch 257 of the Regional Trial
Court (RTC) of Parañaque City, said complaint alleged, among
other matters, that the Spouses Realubit had no gainful
occupation or business prior to their joint venture with Biondo;
that with the income of the business which earned not less than
₱3,000.00 per day, they were, however, able to acquire the two-
storey building as well as the land on which the joint venture’s ice
plant stands, another building which they used as their office
and/or residence and six (6) delivery vans; and, that aside from
appropriating for themselves the income of the business, the
Spouses Realubit have fraudulently concealed the funds and
assets thereof thru their relatives, associates or dummies.8
Served with summons, the Spouses Realubit filed their Answer
dated 21 October 1998, specifically denying the material
allegations of the foregoing complaint. Claiming that they have
been engaged in the tube ice trading business under a single
proprietorship even before their dealings with Biondo, the
Spouses Realubit, in turn, averred that their said business
partner had left the country in May 1997 and could not have
executed the Deed of Assignment which bears a signature
markedly different from that which he affixed on their Joint
Venture Agreement; that they refused the Spouses Jaso’s
demand in view of the dubious circumstances surrounding their
acquisition of Biondo’s share in the business which was
established at Don Antonio Heights, Commonwealth Avenue,
Quezon City; that said business had already stopped operations
on 13 January 1996 when its plant shut down after its power
supply was disconnected by MERALCO for non-payment of
utility bills; and, that it was their own tube ice trading business
which had been moved to 66-C Cenacle Drive, Sanville
Subdivision, Project 6, Quezon City that the Spouses Jaso
mistook for the ice manufacturing business established in
partnership with Biondo.9
The issues thus joined and the mandatory pre-trial conference
subsequently terminated, the RTC went on to try the case on its
merits and, thereafter, to render its Decision dated 17 September
2001, discounting the existence of sufficient evidence from which
the income, assets and the supposed dissolution of the joint
venture can be adequately reckoned. Upon the finding, however,
that the Spouses Jaso had been nevertheless subrogated to
Biondo’s rights in the business in view of their valid acquisition of
the latter’s share as capitalist partner,10 the RTC disposed of the
case in the following wise:
WHEREFORE, defendants are ordered to submit to plaintiffs a
complete accounting and inventory of the assets and liabilities of
the joint venture from its inception to the present, to allow
plaintiffs access to the books and accounting records of the joint
venture, to deliver to plaintiffs their share in the profits, if any,
and to pay the plaintiffs the amount of ₱20,000. for moral
damages. The claims for exemplary damages and attorney’s
fees are denied for lack of basis.11
On appeal before the CA, the foregoing decision was set aside in
the herein assailed Decision dated 30 April 2007, upon the
following findings and conclusions: (a) the Spouses Jaso validly
acquired Biondo’s share in the business which had been
transferred to and continued its operations at 66-C Cenacle
Drive, Sanville Subdivision, Project 6, Quezon City and not
dissolved as claimed by the Spouses Realubit; (b) absent
showing of Josefina’s knowledge and consent to the transfer of
Biondo’s share, Eden cannot be considered as a partner in the
business, pursuant to Article 1813 of the Civil Code of the
Philippines; (c) while entitled to Biondo’s share in the profits of
the business, Eden cannot, however, interfere with the
management of the partnership, require information or account of
its transactions and inspect its books; (d) the partnership should
first be dissolved before Eden can seek an accounting of its
transactions and demand Biondo’s share in the business; and,
(e) the evidence adduced before the RTC do not support the
award of moral damages in favor of the Spouses Jaso.12
The Spouses Realubit’s motion for reconsideration of the
foregoing decision was denied for lack of merit in the CA’s 28
June 2007 Resolution,13 hence, this petition.
The Issues
The Spouses Realubit urge the reversal of the assailed decision
upon the negative of the following issues, to wit:
A. WHETHER OR NOT THERE WAS A VALID
ASSIGNMENT OF RIGHTS TO THE JOINT
VENTURE.
B. WHETHER THE COURT MAY ORDER
PETITIONER [JOSEFINA REALUBIT] AS PARTNER
IN THE JOINT VENTURE TO RENDER [A]N
ACCOUNTING TO ONE WHO IS NOT A PARTNER
IN SAID JOINT VENTURE.
C. WHETHER PRIVATE RESPONDENTS [SPOUSES
JASO] HAVE ANY RIGHT IN THE JOINT VENTURE
AND IN THE SEPARATE ICE BUSINESS OF
PETITIONER[S].14
The Court’s Ruling
We find the petition bereft of merit.
The Spouses Realubit argue that, in upholding its validity, both
the RTC and the CA inordinately gave premium to the
notarization of the 27 June 1997 Deed of Assignment executed
by Biondo in favor of the Spouses Jaso. Calling attention to the
latter’s failure to present before the RTC said assignor or, at the
very least, the witnesses to said document, the Spouses Realubit
maintain that the testimony of Rolando Diaz, the Notary Public
before whom the same was acknowledged, did not suffice to
establish its authenticity and/or validity. They insist that
notarization did not automatically and conclusively confer validity
on said deed, since it is still entirely possible that Biondo did not
execute said deed or, for that matter, appear before said notary
public.15 The dearth of merit in the Spouses Realubit’s position
is, however, immediately evident from the settled rule that
documents acknowledged before notaries public are public
documents which are admissible in evidence without necessity of
preliminary proof as to their authenticity and due execution.16
It cannot be gainsaid that, as a public document, the Deed of
Assignment Biondo executed in favor of Eden not only enjoys a
presumption of regularity17 but is also considered prima facie
evidence of the facts therein stated.18 A party assailing the
authenticity and due execution of a notarized document is,
consequently, required to present evidence that is clear,
convincing and more than merely preponderant.19 In view of the
Spouses Realubit’s failure to discharge this onus, we find that
both the RTC and the CA correctly upheld the authenticity and
validity of said Deed of Assignment upon the combined strength
of the above-discussed disputable presumptions and the
testimonies elicited from Eden20 and Notary Public Rolando
Diaz.21 As for the Spouses’ Realubit’s bare assertion that
Biondo’s signature on the same document appears to be forged,
suffice it to say that, like fraud,22 forgery is never presumed and
must likewise be proved by clear and convincing evidence by the
party alleging the same.23 Aside from not being borne out by a
comparison of Biondo’s signatures on the Joint Venture
Agreement24 and the Deed of Assignment,25 said forgery is,
moreover debunked by Biondo’s duly authenticated certification
dated 17 November 1998, confirming the transfer of his interest
in the business in favor of Eden.26
Generally understood to mean an organization formed for some
temporary purpose, a joint venture is likened to a particular
partnership or one which "has for its object determinate things,
their use or fruits, or a specific undertaking, or the exercise of a
profession or vocation."27 The rule is settled that joint ventures
are governed by the law on partnerships28 which are, in turn,
based on mutual agency or delectus personae.29 Insofar as a
partner’s conveyance of the entirety of his interest in the
partnership is concerned, Article 1813 of the Civil Code provides
as follows:
Art. 1813. A conveyance by a partner of his whole interest in the
partnership does not itself dissolve the partnership, or, as against
the other partners in the absence of agreement, entitle the
assignee, during the continuance of the partnership, to interfere
in the management or administration of the partnership business
or affairs, or to require any information or account of partnership
transactions, or to inspect the partnership books; but it merely
entitles the assignee to receive in accordance with his contracts
the profits to which the assigning partners would otherwise be
entitled. However, in case of fraud in the management of the
partnership, the assignee may avail himself of the usual
remedies.
In the case of a dissolution of the partnership, the assignee is
entitled to receive his assignor’s interest and may require an
account from the date only of the last account agreed to by all
the partners.
From the foregoing provision, it is evident that "(t)he transfer by a
partner of his partnership interest does not make the assignee of
such interest a partner of the firm, nor entitle the assignee to
interfere in the management of the partnership business or to
receive anything except the assignee’s profits. The assignment WHEREFORE, the petition is DENIED for lack of merit and the
does not purport to transfer an interest in the partnership, but assailed CA Decision dated 30 April 2007 is, accordingly,
only a future contingent right to a portion of the ultimate residue AFFIRMED in toto.
as the assignor may become entitled to receive by virtue of his
proportionate interest in the capital."30 Since a partner’s interest
SO ORDERED.
in the partnership includes his share in the profits,31 we find that
the CA committed no reversible error in ruling that the Spouses
Jaso are entitled to Biondo’s share in the profits, despite JOSE PORTUGAL PEREZ
Juanita’s lack of consent to the assignment of said Frenchman’s Associate Justice
interest in the joint venture. Although Eden did not, moreover,
become a partner as a consequence of the assignment and/or
WE CONCUR:
acquire the right to require an accounting of the partnership
business, the CA correctly granted her prayer for dissolution of
the joint venture conformably with the right granted to the PRESBITERO J. VELASCO, JR.*
purchaser of a partner’s interest under Article 1831 of the Civil Associate Justice
Code.32 1âwphi1
ROBERTO A. ABAD***
Considering that they involve questions of fact, neither are we ARTURO D. BRION**
Associate Justice
inclined to hospitably entertain the Spouses Realubit’s insistence Associate Justice
Acting Chairperson
on the supposed fact that Josefina’s joint venture with Biondo
had already been dissolved and that the ice manufacturing
business at 66-C Cenacle Drive, Sanville Subdivision, Project 6, MARIA LOURDES P. A. SERENO
Quezon City was merely a continuation of the same business Associate Justice
they previously operated under a single proprietorship. It is well-
entrenched doctrine that questions of fact are not proper subjects
of appeal by certiorari under Rule 45 of the Rules of Court as this ATTESTATION
mode of appeal is confined to questions of law.33 Upon the
principle that this Court is not a trier of facts, we are not duty I attest that the conclusions in the above Decision were reached
bound to examine the evidence introduced by the parties below in consultation before the case was assigned to the writer of the
to determine if the trial and the appellate courts correctly opinion of the Court’s Division.
assessed and evaluated the evidence on record.34 Absent
showing that the factual findings complained of are devoid of
ARTURO D. BRION
support by the evidence on record or the assailed judgment is
Associate Justice
based on misapprehension of facts, the Court will limit itself to
Acting Chairperson, Second Division
reviewing only errors of law.35
Based on the evidence on record, moreover, both the RTC36 and CERTIFICATION
the CA37 ruled out the dissolution of the joint venture and
concluded that the ice manufacturing business at the aforesaid Pursuant to Section 13, Article VIII of the Constitution, and the
address was the same one established by Juanita and Biondo. Division Chairperson’s Attestation, it is hereby certified that the
As a rule, findings of fact of the CA are binding and conclusive conclusions in the above Decision were reached in consultation
upon this Court,38 and will not be reviewed or disturbed on before the case was assigned to the writer of the opinion of the
appeal39 unless the case falls under any of the following Court’s Division.
recognized exceptions: (1) when the conclusion is a finding
grounded entirely on speculation, surmises and conjectures; (2)
RENATO C. CORONA
when the inference made is manifestly mistaken, absurd or
Chief Justice
impossible; (3) where there is a grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when the CA, in
making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners' main
and reply briefs are not disputed by the respondents; and, (10)
when the findings of fact of the CA are premised on the
supposed absence of evidence and contradicted by the evidence
on record.40 Unfortunately for the Spouses Realubit’s cause, not
one of the foregoing exceptions applies to the case.