7/28/2017 G.R. No. 126881 | Heirs of Tan Eng Kee v.

Court of Appeals

SECOND DIVISION

[G.R. No. 126881. October 3, 2000.]

HEIRS OF TAN ENG KEE, petitioners, vs. COURT OF

APPEALS and BENGUET LUMBER COMPANY,
represented by its President TAN ENG LAY, respondents.

Soo Gutierrez Leogardo & Lee for petitioners.

Francisco S. Reyes Law Office for private respondents.

SYNOPSIS

Petitioners, Heirs of Tan Eng Kee, filed a complaint for accounting of

partnership assets, dissolution and the equal division of the net assets of
Benguet Lumber, later incorporated as "Benguet Lumber Company" which
was allegedly a partnership entered into and managed by their father, Tan
Eng Kee, and Tan Eng Lay. Tan Eng Lay, however, countered that he had
his business and his brother (Tan Eng Kee) had his, and that it was only
later on that Tan Eng Kee came to work for him as an employee.
The court a quo declared that Tan Eng Kee and Tan Eng Lay were joint
adventurers and/or partners and ruled that petitioners-heirs of the
deceased Tan Eng Kee, had a right to share in the company's assets. The
CA, however, ruled that there was no partnership since Benguet Lumber
was a sole proprietorship, and that Tan Eng Kee was only an employee
thereof.
While as a rule, the Supreme Court cannot entertain inquiries relative to
the correctness of the assessment of the evidence by the court a quo, the
Supreme Court examined the record to determine if the reversal was
justified.
The Supreme Court concluded that Tan Eng Kee was only an employee,
not a partner, because: Tan Eng Lay directly controverted testimonies of
petitioners' witnesses that Tan Eng Kee contributed resources to a
common fund to establish a partnership; despite the forty years the
partnership was allegedly in existence, Tan Eng Kee never asked for an
accounting; payrolls show that Tan Eng Kee was an ordinary employee of
Benguet Lumber who received wages; petitioners failed to show how much
share in the profits of the company, if any, their father Tan Eng Kee,
received for any particular period.

SYLLABUS
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1. REMEDIAL LAW; CIVIL PROCEDURE; APPEAL UNDER RULE 45;

RULE WHEN FACTUAL FINDINGS OF THE COURT OF APPEALS AND
THE COURT A QUO ARE CONFLICTING. — As can be seen, the
appellate court disputed and differed from the trial court which had
adjudged that TAN ENG KEE and TAN ENG LAY had allegedly entered
into a joint venture. In this connection, we have held that whether a
partnership exists is a factual matter; consequently, since the appeal is
brought to us under Rule 45, we cannot entertain inquiries relative to the
correctness of the assessment of the evidence by the court a quo.
Inasmuch as the Court of Appeals and the trial court had reached
conflicting conclusions, perforce we must examine the record to determine
if the reversal was justified.
2. CIVIL LAW; CIVIL CODE; SPECIAL CONTRACTS; PARTNERSHIP;
PROOF REQUIRED TO ESTABLISH A PARTNERSHIP. — In order to
constitute a partnership, it must be established that (1) two or more
persons bound themselves to contribute money, property, or industry to a
common fund, and (2) they intend to divide the profits among themselves.
The agreement need not be formally reduced into writing, since statute
allows the oral constitution of a partnership, save in two instances: (1)
when immovable property or real rights are contributed, and (2) when the
partnership has a capital of three thousand pesos or more. In both cases, a
public instrument is required. An inventory to be signed by the parties and
attached to the public instrument is also indispensable to the validity of the
partnership whenever immovable property is contributed to the partnership.
TEcHCA

3. ID.; ID.; ID.; ID.; ID.; CIRCUMSTANCES INDICATING TAN ENG

KEE WAS AN EMPLOYEE, NOT A PARTNER IN CASE AT BAR. —
Unfortunately for petitioners, Tan Eng Kee has passed away. Only he,
aside from Tan Eng Lay, could have expounded on the precise nature of
the business relationship between them. In the absence of evidence, we
cannot accept as an established fact that Tan Eng Kee allegedly
contributed his resources to a common fund for the purpose of establishing
a partnership. The testimonies to that effect of petitioners' witnesses is
directly controverted by Tan Eng Lay. . . . Besides, it is indeed odd, if not
unnatural, that despite the forty years the partnership was allegedly in
existence, 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. . . .
Exhibits "4" to "4-U" . . . shows that Tan Eng Kee received sums as wages
of an employee. . . . Even if the payrolls as evidence were discarded,
petitioners would still be back to square one, so to speak, since they did
not present and offer evidence that would show that Tan Eng Kee received
amounts of money allegedly representing his share in the profits of the
enterprise.

DECISION

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DE LEON, JR., J : p

In this petition for review on certiorari, petitioners pray for the reversal of
the Decision 1 dated March 13, 1996 of the former Fifth Division 2 of the
Court of Appeals in CA-G.R. CV No. 47937, the dispositive portion of which
states:
THE FOREGOING CONSIDERED, the appealed decision is
hereby set aside, and the complaint dismissed.
The facts are: THacES

Following the death of Tan Eng Kee on September 13, 1984, Matilde
Abubo, the common-law spouse of the decedent, joined by their children
Teresita, Nena, Clarita, Carlos, Corazon and Elpidio, collectively known as
herein petitioners HEIRS OF TAN ENG KEE, filed suit against the
decedent's brother TAN ENG LAY on February 19, 1990. The complaint, 3
docketed as Civil Case No. 1983-R in the Regional Trial Court of Baguio
City was for accounting, liquidation and winding up of the alleged
partnership formed after World War II between Tan Eng Kee and Tan Eng
Lay. On March 18, 1991, the petitioners filed an amended complaint 4
impleading private respondent herein BENGUET LUMBER COMPANY, as
represented by Tan Eng Lay. The amended complaint was admitted by the
trial court in its Order dated May 3, 1991. 5
The amended complaint principally alleged that after the second World
War, Tan Eng Kee and Tan Eng Lay, pooling their resources and industry
together, entered into a partnership engaged in the business of selling
lumber and hardware and construction supplies. They named their
enterprise "Benguet Lumber" which they jointly managed until Tan Eng
Kee's death. Petitioners herein averred that the business prospered due to
the hard work and thrift of the alleged partners. However, they claimed that
in 1981, Tan Eng Lay and his children caused the conversion of the
partnership "Benguet Lumber" into a corporation called "Benguet Lumber
Company." The incorporation was purportedly a ruse to deprive Tan Eng
Kee and his heirs of their rightful participation in the profits of the business.
Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the
net assets of Benguet Lumber.
After trial, Regional Trial Court of Baguio City, Branch 7 rendered judgment
6 on April 12, 1995, to wit:

WHEREFORE, in view of all the foregoing, judgment is hereby

rendered:
a) Declaring that Benguet Lumber is a joint venture which is
akin to a particular partnership;
b) Declaring that the deceased Tan Eng Kee and Tan Eng Lay
are joint adventurers and/or partners in a business venture and/or
particular partnership called Benguet Lumber and as such should

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share in the profits and/or losses of the business venture or

particular partnership;
c) Declaring that the assets of Benguet Lumber are the same
assets turned over to Benguet Lumber Co. Inc. and as such the
heirs or legal representatives of the deceased Tan Eng Kee have
a legal right to share in said assets;
d) Declaring that all the rights and obligations of Tan Eng Kee
as joint adventurer and/or as partner in a particular partnership
have descended to the plaintiffs who are his legal heirs.
e) Ordering the defendant Tan Eng Lay and/or the President
and/or General Manager of Benguet Lumber Company Inc. to
render an accounting of all the assets of Benguet Lumber
Company, Inc. so the plaintiffs know their proper share in the
business;
f) Ordering the appointment of a receiver to preserve and/or
administer the assets of Benguet Lumber Company, Inc. until
such time that said corporation is finally liquidated are directed to
submit the name of any person they want to be appointed as
receiver failing in which this Court will appoint the Branch Clerk of
Court or another one who is qualified to act as such.
g) Denying the award of damages to the plaintiffs for lack of
proof except the expenses in filing the instant case.
h) Dismissing the counter-claim of the defendant for lack of
merit.
SO ORDERED.
Private respondent sought relief before the Court of Appeals which, on
March 13, 1996, rendered the assailed decision reversing the judgment of
the trial court. Petitioners' motion for reconsideration 7 was denied by the
Court of Appeals in a Resolution 8 dated October 11, 1996.
Hence, the present petition. HTCESI

As a side-bar to the proceedings, petitioners filed Criminal Case No. 78856

against Tan Eng Lay and Wilborn Tan for the use of allegedly falsified
documents in a judicial proceeding. Petitioners complained that Exhibits "4"
to "4-U" offered by the defendants before the trial court, consisting of
payrolls indicating that Tan Eng Kee was a mere employee of Benguet
Lumber, were fake, based on the discrepancy in the signatures of Tan Eng
Kee. They also filed Criminal Cases Nos. 78857-78870 against Gloria,
Julia, Juliano, Willie, Wilfredo, Jean, Mary and Willy, all surnamed Tan, for
alleged falsification of commercial documents by a private individual. On
March 20, 1999, the Municipal Trial Court of Baguio City, Branch 1,
wherein the charges were filed, rendered judgment 9 dismissing the cases
for insufficiency of evidence.

In their assignment of errors, petitioners claim that:

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I
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE
TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE:
(A) THERE WAS NO FIRM ACCOUNT; (B) THERE WAS NO
FIRM LETTERHEADS SUBMITTED AS EVIDENCE; (C) THERE
WAS NO CERTIFICATE OF PARTNERSHIP; (D) THERE WAS
NO AGREEMENT AS TO PROFITS AND LOSSES; AND (E)
THERE WAS NO TIME FIXED FOR THE DURATION OF THE
PARTNERSHIP (PAGE 13, DECISION).
II
THE HONORABLE COURT OF APPEALS ERRED IN RELYING
SOLELY ON THE SELF-SERVING TESTIMONY OF
RESPONDENT TAN ENG LAY THAT BENGUET LUMBER WAS
A SOLE PROPRIETORSHIP AND THAT TAN ENG KEE WAS
ONLY AN EMPLOYEE THEREOF.
III
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THE FOLLOWING FACTS WHICH WERE DULY
SUPPORTED BY EVIDENCE OF BOTH PARTIES DO NOT
SUPPORT THE EXISTENCE OF A PARTNERSHIP JUST
BECAUSE THERE WAS NO ARTICLES OF PARTNERSHIP
DULY RECORDED BEFORE THE SECURITIES AND
EXCHANGE COMMISSION:
a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG
LAY WERE ALL LIVING AT THE BENGUET LUMBER
COMPOUND;
b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE
COMMANDING THE EMPLOYEES OF BENGUET
LUMBER;
c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE
SUPERVISING THE EMPLOYEES THEREIN;
d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE
ONES DETERMINING THE PRICES OF STOCKS TO BE
SOLD TO THE PUBLIC; AND
e. THAT TAN ENG LAY AND TAN ENG KEE WERE THE
ONES MAKING ORDERS TO THE SUPPLIERS (PAGE
18, DECISION).
IV
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THERE WAS NO PARTNERSHIP JUST BECAUSE THE
CHILDREN OF THE LATE TAN ENG KEE: ELPIDIO TAN AND
VERONICA CHOI, TOGETHER WITH THEIR WITNESS
BEATRIZ TANDOC, ADMITTED THAT THEY DO NOT KNOW

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WHEN THE ESTABLISHMENT KNOWN IN BAGUIO CITY AS

BENGUET LUMBER WAS STARTED AS A PARTNERSHIP
(PAGE 16-17, DECISION).
V
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT THERE WAS NO PARTNERSHIP BETWEEN THE LATE
TAN ENG KEE AND HIS BROTHER TAN ENG LAY BECAUSE
THE PRESENT CAPITAL OR ASSETS OF BENGUET LUMBER
IS DEFINITELY MORE THAN P3,000.00 AND AS SUCH THE
EXECUTION OF A PUBLIC INSTRUMENT CREATING A
PARTNERSHIP SHOULD HAVE BEEN MADE AND NO SUCH
PUBLIC INSTRUMENT ESTABLISHED BY THE APPELLEES
(PAGE 17, DECISION).
As a premise, we reiterate the oft-repeated rule that findings of facts of the
Court of Appeals will not be disturbed on appeal if such are supported by
the evidence. 10 Our jurisdiction, it must be emphasized, does not include
review of factual issues. Thus:
Filing of petition with Supreme Court. — A party desiring to appeal
by certiorari from a judgment or final order or resolution of the
Court of Appeals, the Sandiganbayan, the Regional Trial Court or
other courts whenever authorized by law, may file with the
Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly
set forth. 11 [italics supplied]
Admitted exceptions have been recognized, though, and when present,
may compel us to analyze the evidentiary basis on which the lower court
rendered judgment. Review of factual issues is therefore warranted:
(1) when the factual findings of the Court of Appeals and the
trial court are contradictory;
(2) when the findings are grounded entirely on speculation,
surmises, or conjectures;
(3) when the inference made by the Court of Appeals from its
findings of fact is manifestly mistaken, absurd, or impossible;
(4) when there is grave abuse of discretion in the appreciation
of facts;
(5) when the appellate court, in making its findings, goes
beyond the issues of the case, and such findings are contrary to
the admissions of both appellant and appellee;
(6) when the judgment of the Court of Appeals is premised on
a misapprehension of facts;
(7) when the Court of Appeals fails to notice certain relevant
facts which, if properly considered, will justify a different
conclusion;
(8) when the findings of fact are themselves conflicting;

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(9) when the findings of fact are conclusions without citation

of the specific evidence on which they are based; and
(10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence but such findings are
contradicted by the evidence on record. 12

In reversing the trial court, the Court of Appeals ruled, to wit:

We note that the Court a quo over extended the issue because
while the plaintiffs mentioned only the existence of a partnership,
the Court in turn went beyond that by justifying the existence of a
joint venture.
When mention is made of a joint venture, it would presuppose
parity of standing between the parties, equal proprietary interest
and the exercise by the parties equally of the conduct of the
business, thus:
xxx xxx xxx
We have the admission that the father of the plaintiffs was not a
partner of the Benguet Lumber before the war. The appellees
however argued that (Rollo, p. 104; Brief, p. 6) this is because
during the war, the entire stocks of the pre-war Benguet Lumber
were confiscated if not burned by the Japanese. After the war,
because of the absence of capital to start a lumber and hardware
business, Lay and Kee pooled the proceeds of their individual
businesses earned from buying and selling military supplies, so
that the common fund would be enough to form a partnership,
both in the lumber and hardware business. That Lay and Kee
actually established the Benguet Lumber in Baguio City, was even
testified to by witnesses. Because of the pooling of resources, the
post-war Benguet Lumber was eventually established. That the
father of the plaintiffs and Lay were partners, is obvious from the
fact that: (1) they conducted the affairs of the business during
Kee's lifetime, jointly, (2) they were the ones giving orders to the
employees, (3) they were the ones preparing orders from the
suppliers, (4) their families stayed together at the Benguet Lumber
compound, and (5) all their children were employed in the
business in different capacities.
xxx xxx xxx
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 Kee's death in
1984. It had no business book, no written account nor any
memorandum for that matter and no license mentioning the
existence of a partnership [citation omitted].

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Also, the exhibits support the establishment of only a

proprietorship. The certification dated March 4, 1971, Exhibit "2",
mentioned co-defendant Lay as the only registered owner of the
Benguet Lumber and Hardware. His application for registration,
effective 1954, in fact mentioned that his business started in 1945
until 1985 (thereafter, the incorporation). The deceased, Kee, on
the other hand, was merely an employee of the Benguet Lumber
Company, on the basis of his SSS coverage effective 1958,
Exhibit "3". In the Payrolls, Exhibits "4" to "4-U", inclusive, for the
years 1982 to 1983, Kee was similarly listed only as an employee;
precisely, he was on the payroll listing. In the Termination Notice,
Exhibit "5", Lay was mentioned also as the proprietor.
xxx xxx xxx
We would like to refer to Arts. 771 and 772, NCC, that a partner
[sic] may be constituted in any form, but when an immovable is
constituted, the execution of a public instrument becomes
necessary. This is equally true if the capitalization exceeds
P3,000.00, in which case a public instrument is also necessary,
and which is to be recorded with the Securities and Exchange
Commission. In this case at bar, we can easily assume that the
business establishment, which from the language of the
appellees, prospered (pars. 5 & 9, Complaint), definitely exceeded
P3,000.00, in addition to the accumulation of real properties and
to the fact that it is now a compound. The execution of a public
instrument, on the other hand, was never established by the
appellees.
And then in 1981, the business was incorporated and the
incorporators were only Lay and the members of his family. There
is no proof either that the capital assets of the partnership,
assuming them to be in existence, were maliciously assigned or
transferred by Lay, supposedly to the corporation and since then
have been treated as a part of the latter's capital assets, contrary
to the allegations in pars. 6, 7 and 8 of the complaint.
These are not evidences supporting the existence of a
partnership:
1) That Kee was living in a bunk house just across the lumber
store, and then in a room in the bunk house in Trinidad, but within
the compound of the lumber establishment, as testified to by
Tandoc; 2) that both Lay and Kee were seated on a table and
were "commanding people" as testified to by the son, Elpidio Tan;
3) that both were supervising the laborers, as testified to by
Victoria Choi; and 4) that Dionisio Peralta was supposedly being
told by Kee that the proceeds of the 80 pieces of the G.I. sheets
were added to the business. DTaSIc

Partnership presupposes the following elements [citation omitted]:

1) a contract, either oral or written. However, if it involves real
property or where the capital is P3,000.00 or more, the execution
of a contract is necessary; 2) the capacity of the parties to
execute the contract; 3) money property or industry contribution;
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4) community of funds and interest, mentioning equality of the

partners or one having a proportionate share in the benefits; and
5) intention to divide the profits, being the true test of the
partnership. The intention to join in the business venture for the
purpose of obtaining profits thereafter to be divided, must be
established. We cannot see these elements from the testimonial
evidence of the appellees.
As can be seen, the appellate court disputed and differed from the trial
court which had adjudged that TAN ENG KEE and TAN ENG LAY had
allegedly entered into a joint venture. In this connection, we have held that
whether a partnership exists is a factual matter; consequently, since the
appeal is brought to us under Rule 45, we cannot entertain inquiries
relative to the correctness of the assessment of the evidence by the court a
quo. 13 Inasmuch as the Court of Appeals and the trial court had reached
conflicting conclusions, perforce we must examine the record to determine
if the reversal was justified.

The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were
partners in Benguet Lumber. A contract of partnership is defined by law as
one where:
. . . two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of
dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise
of a profession. 14

Thus, in order to constitute a partnership, it must be established that (1)

two or more persons bound themselves to contribute money, property, or
industry to a common fund, and (2) they intend to divide the profits among
themselves. 15 The agreement need not be formally reduced into writing,
since statute allows the oral constitution of a partnership, save in two
instances: (1) when immovable property or real rights are contributed, 16
and (2) when the partnership has a capital of three thousand pesos or
more. 17 In both cases, a public instrument is required. 18 An inventory to
be signed by the parties and attached to the public instrument is also
indispensable to the validity of the partnership whenever immovable
property is contributed to the partnership. 19
The trial court determined that Tan Eng Kee and Tan Eng Lay had entered
into a joint venture, which it said is akin to a particular partnership. 20 A
particular partnership is distinguished from a joint adventure, to wit:
(a) A joint adventure (an American concept similar to our joint
accounts) is a sort of informal partnership, with no firm
name and no legal personality. In a joint account, the
participating merchants can transact business under their
own name, and can be individually liable therefor.

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(b) Usually, but not necessarily a joint adventure is limited to a

SINGLE TRANSACTION, although the business of
pursuing to a successful termination may continue for a
number of years; a partnership generally relates to a
continuing business of various transactions of a certain
kind. 21
A joint venture "presupposes generally a parity of standing between the
joint co-ventures or partners, in which each party has an equal proprietary
interest in the capital or property contributed, and where each party
exercises equal rights in the conduct of the business." 22 Nonetheless, in
Aurbach, et. al. v. Sanitary Wares Manufacturing Corporation, et. al., 23 we
expressed the view that a joint venture may be likened to a particular
partnership, thus:
The legal concept of a joint venture is of common law origin. It has
no precise legal definition, but it has been generally understood to
mean an organization formed for some temporary purpose.
(Gates v. Megargel, 266 Fed. 811 [1920]) It is hardly
distinguishable from the partnership, since their elements are
similar — community of interest in the business, sharing of profits
and losses, and a mutual right of control. (Blackner v. McDermott,
176 F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P.2d., 1043
[1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P.2d. 12 289
P.2d. 242 [1955]). The main distinction cited by most opinions in
common law jurisdiction is that the partnership contemplates a
general business with some degree of continuity, while the joint
venture is formed for the execution of a single transaction, and is
thus of a temporary nature. (Tufts v. Mann. 116 Cal. App. 170, 2 P.
2d. 500 [1931]; Harmon v. Martin, 395 Ill. 595, 71 NE 2d. 74
[1947]; Gates v. Megargel 266 Fed. 811 [1920]). This observation
is not entirely accurate in this jurisdiction, since under the Civil
Code, a partnership may be particular or universal, and a
particular partnership may have for its object a specific
undertaking. (Art. 1783, Civil Code). It would seem therefore that
under Philippine law, a joint venture is a form of partnership and
should thus be governed by the law of partnerships. The Supreme
Court has however recognized a distinction between these two
business forms, and has held that although a corporation cannot
enter into a partnership contract, it may however engage in a joint
venture with others. (At p. 12, Tuazon v. Bolaños, 95 Phil. 906
[1954]) (Campos and Lopez-Campos, Comments, Notes and
Selected Cases, Corporation Code 1981).
Undoubtedly, the best evidence would have been the contract of
partnership itself, or the articles of partnership but there is none. The
alleged partnership, though, was never formally organized. In addition,
petitioners point out that the New Civil Code was not yet in effect when the
partnership was allegedly formed sometime in 1945, although the contrary
may well be argued that nothing prevented the parties from complying with
the provisions of the New Civil Code when it took effect on August 30,
1950. But all that is in the past. The net effect, however, is that we are
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asked to determine whether a partnership existed based purely on

circumstantial evidence. A review of the record persuades us that the Court
of Appeals correctly reversed the decision of the trial court. The evidence
presented by petitioners falls short of the quantum of proof required to
establish a partnership.
Unfortunately for petitioners, Tan Eng Kee has passed away. Only he,
aside from Tan Eng Lay, could have expounded on the precise nature of
the business relationship between them. In the absence of evidence, we
cannot accept as an established fact that Tan Eng Kee allegedly
contributed his resources to a common fund for the purpose of establishing
a partnership. The testimonies to that effect of petitioners' witnesses is
directly controverted by Tan Eng Lay. It should be noted that it is not with
the number of witnesses wherein preponderance lies; 24 the quality of their
testimonies is to be considered. None of petitioners' witnesses could
suitably account for the beginnings of Benguet Lumber Company, except
perhaps for Dionisio Peralta whose deceased wife was related to Matilde
Abubo. 25 He stated that when he met Tan Eng Kee after the liberation, the
latter asked the former to accompany him to get 80 pieces of G.I. sheets
supposedly owned by both brothers. 26 Tan Eng Lay, however, denied
knowledge of this meeting or of the conversation between Peralta and his
brother. 27 Tan Eng Lay consistently testified that he had his business and
his brother had his, that it was only later on that his said brother, Tan Eng
Kee, came to work for him. Be that as it may, co-ownership or co-
possession (specifically here, of the G.I. sheets) is not an indicium of the
existence of a partnership. 28
Besides, it is indeed odd, if not unnatural, that despite the forty years the
partnership was allegedly in existence, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the
profits and losses. 29 Each has the right to demand an accounting as long
as the partnership exists. 30 We have allowed a scenario wherein "[i]f
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." 31 But in the situation in the case at bar, the deferment, if any,
had gone on too long to be plausible. A person is presumed to take
ordinary care of his concerns. 32 As we explained in another case:
In the first place, plaintiff did not furnish the supposed P20,000.00
capital. In the second place, she did not furnish any help or
intervention in the management of the theatre. In the third place, it
does not appear that she has even demanded from defendant any
accounting of the expenses and earnings of the business. Were
she really a partner, her first concern should have been to find out
how the business was progressing, whether the expenses were
legitimate, whether the earnings were correct, etc. She was
absolutely silent with respect to any of the acts that a partner
should have done; all that she did was to receive her share of
P3,000.00 a month, which cannot be interpreted in any manner
than a payment for the use of the premises which she had leased
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from the owners. Clearly, plaintiff had always acted in accordance

with the original letter of defendant of June 17, 1945 (Exh. "A"),
which shows that both parties considered this offer as the real
contract between them. 33 [italics supplied]

A demand for periodic accounting is evidence of a partnership. 34 During

his lifetime, Tan Eng Kee appeared never to have made any such
demand for accounting from his brother, Tang Eng Lay.
This brings us to the matter of Exhibits "4" to "4-U" for private respondents,
consisting of payrolls purporting to show that Tan Eng Kee was an ordinary
employee of Benguet Lumber, as it was then called. The authenticity of
these documents was questioned by petitioners, to the extent that they
filed criminal charges against Tan Eng Lay and his wife and children. As
aforesaid, the criminal cases were dismissed for insufficiency of evidence.
Exhibits "4" to "4-U" in fact shows that Tan Eng Kee received sums as
wages of an employee. In connection therewith, Article 1769 of the Civil
Code provides:
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 a 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.
In the light of the aforequoted legal provision, we conclude that Tan Eng
Kee was only an employee, not a partner. Even if the payrolls as evidence
were discarded, petitioners would still be back to square one, so to speak,
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since they did not present and offer evidence that would show that Tan Eng
Kee received amounts of money allegedly representing his share in the
profits of the enterprise. Petitioners failed to show how much their father,
Tan Eng Kee, received, if any, as his share in the profits of Benguet
Lumber Company for any particular period. Hence, they failed to prove that
Tan Eng Kee and Tan Eng Lay intended to divide the profits of the
business between themselves, which is one of the essential features of a
partnership.
Nevertheless, petitioners would still want us to infer or believe the alleged
existence of a partnership from this set of circumstances: that Tan Eng Lay
and Tan Eng Kee were commanding the employees; that both were
supervising the employees; that both were the ones who determined the
price at which the stocks were to be sold; and that both placed orders to
the suppliers of the Benguet Lumber Company. They also point out that the
families of the brothers Tan Eng Kee and Tan Eng Lay lived at the Benguet
Lumber Company compound, a privilege not extended to its ordinary
employees.
However, private respondent counters that: TCacIA

Petitioners seem to have missed the point in asserting that the

above enumerated powers and privileges granted in favor of Tan
Eng Kee, were indicative of his being a partner in Benguet
Lumber for the following reasons:
(i) even a mere supervisor in a company, factory or store
gives orders and directions to his subordinates. So long,
therefore, that an employee's position is higher in rank, it is not
unusual that he orders around those lower in rank.
(ii) even a messenger or other trusted employee, over whom
confidence is reposed by the owner, can order materials from
suppliers for and in behalf of Benguet Lumber. Furthermore, even
a partner does not necessarily have to perform this particular task.
It is, thus, not an indication that Tan Eng Kee was a partner.
(iii) although Tan Eng Kee, together with his family, lived in
the lumber compound and this privilege was not accorded to other
employees, the undisputed fact remains that Tan Eng Kee is the
brother of Tan Eng Lay. Naturally, close personal relations existed
between them. Whatever privileges Tan Eng Lay gave his brother,
and which were not given the other employees, only proves the
kindness and generosity of Tan Eng Lay towards a blood relative.
(iv) and even if it is assumed that Tan Eng Kee was quarreling
with Tan Eng Lay in connection with the pricing of stocks, this
does not adequately prove the existence of a partnership relation
between them. Even highly confidential employees and the
owners of a company sometimes argue with respect to certain
matters which, in no way indicates that they are partners as to
each other. 35

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In the instant case, we find private respondent's arguments to be well-

taken. Where circumstances taken singly may be inadequate to prove the
intent to form a partnership, nevertheless, the collective effect of these
circumstances may be such as to support a finding of the existence of the
parties' intent. 36 Yet, in the case at bench, even the aforesaid
circumstances when taken together are not persuasive indicia of a
partnership. They only tend to show that Tan Eng Kee was involved in the
operations of Benguet Lumber, but in what capacity is unclear. We cannot
discount the likelihood that as a member of the family, he occupied a niche
above the rank-and-file employees. He would have enjoyed liberties
otherwise unavailable were he not kin, such as his residence in the
Benguet Lumber Company compound. He would have moral, if not actual,
superiority over his fellow employees, thereby entitling him to exercise
powers of supervision. It may even be that among his duties is to place
orders with suppliers. Again, the circumstances proffered by petitioners do
not provide a logical nexus to the conclusion desired; these are not
inconsistent with the powers and duties of a manager, even in a business
organized and run as informally as Benguet Lumber Company.
There being no partnership, it follows that there is no dissolution, winding
up or liquidation to speak of. Hence, the petition must fail.
WHEREFORE, the petition is hereby denied, and the appealed decision of
the Court of Appeals is hereby AFFIRMED in toto. No pronouncement as
to costs.
SO ORDERED.
Bellosillo, Mendoza, Quisumbing and Buena, JJ., concur.

Footnotes

1. Rollo, pp. 129-147.

2. Justice Bernardo LL. Salas, ponente, with Justices Pedro A. Ramirez
and Ma. Alicia Austria-Martinez, concurring.
3. Records, pp. 1-4.
4. Records, pp. 123-126.
5. Records, p. 130.
6. Records, pp. 632-647.
7. Rollo, pp. 148-159.
8. Rollo, p. 173.
9. Rollo, pp. 412-419.
10. Brusas v. Court of Appeals, 313 SCRA 176, 188 (1999); Guerrero v.
Court of Appeals, 285 SCRA 670, 678 (1998); Atillo III v. Court of
Appeals, 266 SCRA 596, 605-606 (1997); Mallari v. Court of Appeals,
265 SCRA 456, 461 (1996).
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11. 1997 RULES OF CIVIL PROCEDURES, Rule 45, Sec. 1.

12. Fuentes v. Court of Appeals, 268 SCRA 703, 708-709 (1997).
13. Cf . Alicbusan v. Court of Appeals, 269 SCRA 336, 340-341 (1997).
14. CIVIL CODE, Art. 1767.
15. Yulo v. Yang Chiao Seng, 106 Phil. 110, 116 (1959).
16. CIVIL CODE, Art. 1771.
17. CIVIL CODE, Art. 1772.
18. Note, however, Article 1768 of the Civil Code which provides: "The
partnership has a juridical personality separate and distinct from that of
each of the partners, even in case of failure to comply with the
requirements of Article 1772, first paragraph."
19. CIVIL CODE, Art. 1773.
20. "A particular partnership has for its object determinate things, their use
or fruits, or a specific undertaking, or the exercise of a profession or
vocation." (CIVIL CODE, Art. 1783)
21. V.E. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED 546
(13th ed., 1995).
22. Sevilla v. Court of Appeals, 160 SCRA 171, 181 (1988).
23. 180 SCRA 130, 146-147 (1989).
24. REVISED RULES ON EVIDENCE, Rule 133, Sec. 1.
25. TSN, June 23, 1990, p. 9.
26. TSN, January 28, 1993, p. 85.
27. TSN, July 1, 1993, p. 13; TSN, July 8, 1993, p. 4.
28. Navarro v. Court of Appeals, 222 SCRA 675, 679 (1993); CIVIL CODE,
Art. 1769.
29. Moran v. Court of Appeals, 133 SCRA 88, 95 (1984).
30. Fue Lung v. Intermediate Appellate Court, 169 SCRA 746, 755 (1989).
31. Id., at 754.
32. 1997 RULES OF CIVIL PROCEDURE, Rule 131, Sec. 3, Par. (d).
33. Yulo v. Yang Chiao Seng, 106 Phil. 110, 117 (1959).
34. Estanislao, Jr. vs. Court of Appeals, 160 SCRA 830, 837 (1988).
35. Private Respondent's Memorandum, Rollo, p. 390.
36. Evangelista, et. al. v. Collector of Internal Revenue, et al., 102 Phil.
141, 146 (1957).

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