G.R. No.
135813            October 25, 2001 commission per thousand paid daily to [petitioner]
FERNANDO SANTOS, petitioner,
vs.
SPOUSES ARSENIO and NIEVES REYES, respondents.
PANGANIBAN, J.:
As a general rule, the factual findings of the Court of Appeals
affirming those of the trial court are binding on the Supreme
Court. However, there are several exceptions to this principle.
In the present case, we find occasion to apply both the rule and
one of the exceptions.
The Case
Before us is a Petition for Review on Certiorari assailing the
November 28, 1997 Decision,1 as well as the August 17, 1998
and the October 9, 1998 Resolutions,2 issued by the Court of
Appeals (CA) in CA-GR CV No. 34742. The Assailed Decision
disposed as follows:
"WHEREFORE, the decision appealed from is
AFFIRMED save as for the counterclaim which is
hereby DISMISSED. Costs against [petitioner]."3
Resolving respondent's Motion for Reconsideration,
the August 17, 1998 Resolution ruled as follows:
"WHEREFORE, [respondents'] motion for
reconsideration is GRANTED. Accordingly, the court's
decision dated November 28, 1997 is hereby
MODIFIED in that the decision appealed from is
AFFIRMED in toto, with costs against [petitioner]."4
The October 9, 1998 Resolution denied "for lack of merit"
petitioner's Motion for Reconsideration of the August 17, 1998
Resolution.5
The Facts
The events that led to this case are summarized by the CA as
follows:
"Sometime in June, 1986, [Petitioner] Fernando
Santos and [Respondent] Nieves Reyes were
introduced to each other by one Meliton Zabat
regarding a lending business venture proposed by
Nieves. It was verbally agreed that [petitioner would]
act as financier while [Nieves] and Zabat [would] take
charge of solicitation of members and collection of
loan payments. The venture was launched on June
13, 1986, with the understanding that [petitioner]
would receive 70% of the profits while x x x Nieves
and Zabat would earn 15% each.
"In July, 1986, x x x Nieves introduced Cesar Gragera
to [petitioner]. Gragera, as chairman of the Monte
Maria Development Corporation6 (Monte Maria, for
brevity), sought short-term loans for members of the
corporation. [Petitioner] and Gragera executed an
agreement providing funds for Monte Maria's
members. Under the agreement, Monte Maria,
represented by Gragera, was entitled to P1.31
(Exh. 'A')x x x . Nieves kept the books as
representative of [petitioner] while [Respondent]
Arsenio, husband of Nieves, acted as credit
investigator.
"On August 6, 1986, [petitioner], x x x [Nieves] and
Zabat executed the 'Article of Agreement' which
formalized their earlier verbal arrangement.
"[Petitioner] and [Nieves] later discovered that their
partner Zabat engaged in the same lending business
in competition with their partnership[.] Zabat was
thereby expelled from the partnership. The operations
with Monte Maria continued.
"On June 5, 1987, [petitioner] filed a complaint for
recovery of sum of money and damages. [Petitioner]
charged [respondents], allegedly in their capacities as
employees of [petitioner], with having misappropriated
funds intended for Gragera for the period July 8, 1986
up to March 31, 1987. Upon Gragera's complaint that
his commissions were inadequately remitted,
[petitioner] entrusted P200,000.00 to x x x Nieves to
be given to Gragerax x x . Nieves allegedly failed to
account for the amount. [Petitioner] asserted that after
examination of the records, he found that of the total
amount of P4,623,201.90 entrusted to [respondents],
only P3,068,133.20 was remitted to Gragera, thereby
leaving the balance of P1,555,065.70 unaccounted
for.
"In their answer, [respondents] asserted that they
were partners and not mere employees of [petitioner].
The complaint, they alleged, was filed to preempt and
prevent them from claiming their rightful share to the
profits of the partnership.
"x x x Arsenio alleged that he was enticed by
[petitioner] to take the place of Zabat after [petitioner]
learned of Zabat's activities. Arsenio resigned from his
job at the Asian Development Bank to join the
partnership.
"For her part, x x x Nieves claimed that she
participated in the business as a partner, as the
lending activity with Monte Maria originated from her
initiative. Except for the limited period of July 8, 1986
through August 20, 1986, she did not handle sums
intended for Gragera. Collections were turned over to
Gragera because he guaranteed 100% payment of all
sums loaned by Monte Maria. Entries she made on
worksheets were based on this assumptive 100%
collection of all loans. The loan releases were made
less Gragera's agreed commission. Because of this
arrangement, she neither received payments from
borrowers nor remitted any amount to Gragera. Her
job was merely to make worksheets (Exhs. '15' to '15-
DDDDDDDDDD') to convey to [petitioner] how much
he would earn if all the sums guaranteed by Gragera
were collected.
"[Petitioner] on the other hand insisted that
[respondents] were his mere employees and not
partners with respect to the agreement with Gragera.
He claimed that after he discovered Zabat's activities,
he ceased infusing funds, thereby causing the
 extinguishment of the partnership. The agreement
with Gragera was a distinct partnership [from] that of
[respondent] and Zabat. [Petitioner] asserted that
[respondents] were hired as salaried employees with
respect to the partnership between [petitioner] and
Gragera.
On appeal, the Decision of the trial court was upheld, and the
counterclaim of respondents was dismissed. Upon the latter's
Motion for Reconsideration, however, the trial court's Decision
was reinstated in toto. Subsequently, petitioner's own Motion
for Reconsideration was denied in the CA Resolution of
October 9, 1998.

"[Petitioner] further asserted that in Nieves' capacity
as bookkeeper, she received all payments from which
Nieves deducted Gragera's commission. The
commission would then be remitted to Gragera. She
likewise determined loan releases.
"During the pre-trial, the parties narrowed the issues
to the following points: whether [respondents] were
employees or partners of [petitioner], whether
[petitioner] entrusted money to [respondents] for
delivery to Gragera, whether the P1,555,068.70
claimed under the complaint was actually remitted to
Gragera and whether [respondents] were entitled to
their counterclaim for share in the profits."7
Ruling of the Trial Court
In its August 13, 1991 Decision, the trial court held that
respondents were partners, not mere employees, of petitioner.
It further ruled that Gragera was only a commission agent of
petitioner, not his partner. Petitioner moreover failed to prove
that he had entrusted any money to Nieves. Thus,
respondents' counterclaim for their share in the partnership
and for damages was granted. The trial court disposed as
follows:
The CA ruled that the following circumstances indicated the
existence of a partnership among the parties: (1) it was Nieves
who broached to petitioner the idea of starting a money-lending
business and introduced him to Gragera; (2) Arsenio received
"dividends" or "profit-shares" covering the period July 15 to
August 7, 1986 (Exh. "6"); and (3) the partnership contract was
executed after the Agreement with Gragera and petitioner and
thus showed the parties' intention to consider it as a
transaction of the partnership. In their common venture,
petitioner invested capital while respondents contributed
industry or services, with the intention of sharing in the profits
of the business.
The CA disbelieved petitioner's claim that Nieves had
misappropriated a total of P200,000 which was supposed to be
delivered to Gragera to cover unpaid commissions. It was his
task to collect the amounts due, while hers was merely to
prepare the daily cash flow reports (Exhs. "15-
15DDDDDDDDDD") to keep track of his collections.
Hence, this Petition.9
Issue
Petitioner asks this Court to rule on the following issues:10

"39. WHEREFORE, the Court hereby renders judgment as follows:"Whether or not Respondent Court of Appeals acted
39.1. THE SECOND AMENDED COMPLAINT dated July 26, 1989 with grave abuse of discretion tantamount to excess
is DISMISSED.
or lack of jurisdiction in:
39.2. The [Petitioner] FERNANDO J. SANTOS is ordered to pay the [Respondent]
NIEVES S. REYES, the following:
1. Holding that private respondents were partners/joint
39.2.1. P3,064,428.00 - The 15 percent share of the [respondent]venturers NIEVES
and notS. employees of Santos in connection
REYES in the profits of her joint venture with
with the
the[petitioner].
agreement between Santos and Monte
39.2.2. Six(6) percent of - As damages from August 3, 1987 untilMaria/Gragera;
the P3,064,428.00
P3,064,428.00 is fully paid.
39.2.3. P50,000.00 - As moral damages 2. Affirming the findings of the trial court that the
phrase 'Received by' on documents signed by Nieves
39.2.4. P10,000.00 - As exemplary damages Reyes signified receipt of copies of the documents
39.3. The [petitioner] FERNANDO J. SANTOS is ordered to pay andthenot[respondent]
of the sums shown thereon;
ARSENIO REYES, the following:
39.3.1. P2,899,739.50 - The balance of the 15 percent share 3. of Affirming that the signature of Nieves Reyes on
the [respondent]
ARSENIO REYES in the profits of his joint venture witha the
Exhibit 'E' was forgery;
[petitioner].
39.3.2. Six(6) percent of - As damages from August 3, 1987 until4.the Finding that Exhibit 'H' [did] not establish receipt by
P2,899,739.50
P2,899,739.50 is fully paid. Nieves Reyes of P200,000.00 for delivery to Gragera;

39.3.3. P25,000.00 - As moral damages

5 Affirming the dismissal of Santos' [Second]
39.3.4. P10,000.00 - As exemplary damages Amended Complaint;
39.4. The [petitioner] FERNANDO J. SANTOS is ordered to pay
the [respondents]: 6. Affirming the decision of the trial court, upholding
39.4.1. P50,000.00 - As attorney's fees; and private respondents' counterclaim;

39.4.2. The cost of the suit."8

7. Denying Santos' motion for reconsideration dated
September 11, 1998."
Ruling of the Court of Appeals
Succinctly put, the following were the issues raised by
petitioner: (1) whether the parties' relationship was one of
partnership or of employer employee; (2) whether Nieves
misappropriated the sums of money allegedly entrusted to her
for delivery to Gragera as his commissions; and (3) whether
respondents were entitled to the partnership profits as
determined by the trial court.
The Court's Ruling
The Petition is partly meritorious.
First Issue:
Business Relationship
Petitioner maintains that he employed the services of
respondent spouses in the money-lending venture with
Gragera, with Nieves as bookkeeper and Arsenio as credit
investigator. That Nieves introduced Gragera to Santos did not
make her a partner. She was only a witness to the Agreement
between the two. Separate from the partnership between
petitioner and Gragera was that which existed among
petitioner, Nieves and Zabat, a partnership that was dissolved
when Zabat was expelled.
On the other hand, both the CA and the trial court rejected
petitioner's contentions and ruled that the business relationship
was one of partnership. We quote from the CA Decision, as
follows:
"[Respondents] were industrial partners of
[petitioner]x x x . Nieves herself provided the initiative
in the lending activities with Monte Maria. In
consonance with the agreement between appellant,
Nieves and Zabat (later replaced by Arsenio),
[respondents] contributed industry to the common
fund with the intention of sharing in the profits of the
partnership. [Respondents] provided services without
which the partnership would not have [had] the
wherewithal to carry on the purpose for which it was
organized and as such [were] considered industrial
partners (Evangelista v. Abad Santos, 51 SCRA 416
[1973]).
"While concededly, the partnership between
[petitioner,] Nieves and Zabat was technically
dissolved by the expulsion of Zabat therefrom, the
remaining partners simply continued the business of
the partnership without undergoing the procedure
relative to dissolution. Instead, they invited Arsenio to
participate as a partner in their operations. There was
therefore, no intent to dissolve the earlier partnership.
The partnership between [petitioner,] Nieves and
Arsenio simply took over and continued the business
of the former partnership with Zabat, one of the
incidents of which was the lending operations with
Monte Maria.
xxx           xxx           xxx
"Gragera and [petitioner] were not partners. The
money-lending activities undertaken with Monte Maria
was done in pursuit of the business for which the
partnership between [petitioner], Nieves and Zabat
(later Arsenio) was organized. Gragera who
represented Monte Maria was merely paid
commissions in exchange for the collection of loans.
The commissions were fixed on gross returns,
regardless of the expenses incurred in the operation
of the business. The sharing of gross returns does not
in itself establish a partnership."11
We agree with both courts on this point. By the contract of
partnership, 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.12 The
"Articles of Agreement" stipulated that the signatories shall
share the profits of the business in a 70-15-15 manner, with
petitioner getting the lion's share.13 This stipulation clearly
proved the establishment of a partnership.
We find no cogent reason to disagree with the lower courts that
the partnership continued lending money to the members of
the Monte Maria Community Development Group, Inc., which
later on changed its business name to Private Association for
Community Development, Inc. (PACDI). Nieves was not merely
petitioner's employee. She discharged her bookkeeping duties
in accordance with paragraphs 2 and 3 of the Agreement,
which states as follows:
"2. That the SECOND PARTY and THIRD PARTY
shall handle the solicitation and screening of
prospective borrowers, and shall x x x each be
responsible in handling the collection of the loan
payments of the borrowers that they each solicited.
"3. That the bookkeeping and daily balancing of
account of the business operation shall be handled by
the SECOND PARTY."14
The "Second Party" named in the Agreement was none other
than Nieves Reyes. On the other hand, Arsenio's duties as
credit investigator are subsumed under the phrase "screening
of prospective borrowers." Because of this Agreement and the
disbursement of monthly "allowances" and "profit shares" or
"dividends" (Exh. "6") to Arsenio, we uphold the factual finding
of both courts that he replaced Zabat in the partnership.
Indeed, the partnership was established to engage in a money-
lending business, despite the fact that it was formalized only
after the Memorandum of Agreement had been signed by
petitioner and Gragera. Contrary to petitioner's contention,
there is no evidence to show that a different business venture
is referred to in this Agreement, which was executed on August
6, 1986, or about a month after the Memorandum had been
signed by petitioner and Gragera on July 14, 1986. The
Agreement itself attests to this fact:
"WHEREAS, the parties have decided to formalize the
terms of their business relationship in order that their
respective interests may be properly defined and
established for their mutual benefit and
understanding."15
Second Issue:
No Proof of Misappropriation of Gragera's Unpaid Commission
Petitioner faults the CA finding that Nieves did not
misappropriate money intended for Gragera's commission.
According to him, Gragera remitted his daily collection to
Nieves. This is shown by Exhibit "B." (the "Schedule of Daily
Payments"), which bears her signature under the words
"received by." For the period July 1986 to March 1987,
Gragera should have earned a total commission of
P4,282,429.30. However, only P3,068,133.20 was received by
him. Thus, petitioner infers that she misappropriated the
difference of P1,214,296.10, which represented the unpaid
commissions. Exhibit "H." is an untitled tabulation which,
according to him, shows that Gragera was also entitled to a
commission of P200,000, an amount that was never delivered
by Nieves.16
On this point, the CA ruled that Exhibits "B," "F," "E" and "H"
did not show that Nieves received for delivery to Gragera any
amount from which the P1,214,296.10 unpaid commission was
supposed to come, and that such exhibits were insufficient
proof that she had embezzled P200,000. Said the CA:
"The presentation of Exhibit "D" vaguely denominated
as 'members ledger' does not clearly establish that
Nieves received amounts from Monte Maria's
members. The document does not clearly state what
amounts the entries thereon represent. More
importantly, Nieves made the entries for the limited
period of January 11, 1987 to February 17, 1987 only
while the rest were made by Gragera's own staff.
"Neither can we give probative value to Exhibit 'E'
which allegedly shows acknowledgment of the
remittance of commissions to Verona Gonzales. The
document is a private one and its due execution and
authenticity have not been duly proved as required in
[S]ection 20, Rule 132 of the Rules of Court which
states:
'SECTION 20. Proof of Private Document —
Before any private document offered as
authentic is received in evidence, its due
execution and authenticity must be proved
either:
(a) By anyone who saw the
document executed or written; or
(b) By evidence of the genuineness
of the signature or handwriting of
the maker.
'Any other private document need only be
identified as that which it is claimed to be.'
"The court a quo even ruled that the signature thereon
was a forgery, as it found that:
'x x x . But NIEVES denied that Exh. E-1 is
her signature; she claimed that it is a forgery.
The initial stroke of Exh. E-1 starts from up
and goes downward. The initial stroke of the
genuine signatures of NIEVES (Exhs. A-3, B-
1, F-1, among others) starts from below and
goes upward. This difference in the start of
the initial stroke of the signatures Exhs. E-1
and of the genuine signatures lends
credence to Nieves' claim that the signature
Exh. E-1 is a forgery.'
xxx           xxx           xxx
"Nieves' testimony that the schedules of daily
payment (Exhs. 'B' and 'F') were based on the
predetermined 100% collection as guaranteed by
Gragera is credible and clearly in accord with the
evidence. A perusal of Exhs. "B" and "F" as well as
Exhs. '15' to 15-DDDDDDDDDD' reveal that the
entries were indeed based on the 100% assumptive
collection guaranteed by Gragera. Thus, the total
amount recorded on Exh. 'B' is exactly the number of
borrowers multiplied by the projected collection of
P150.00 per borrower. This holds true for Exh. 'F.'
"Corollarily, Nieves' explanation that the documents
were pro forma and that she signed them not to
signify that she collected the amounts but that she
received the documents themselves is more
believable than [petitioner's] assertion that she
actually handled the amounts.
"Contrary to [petitioner's] assertion, Exhibit 'H' does
not unequivocally establish that x x x Nieves received
P200,000.00 as commission for Gragera. As correctly
stated by the court a quo, the document showed a
liquidation of P240.000 00 and not P200,000.00.
"Accordingly, we find Nieves' testimony that after
August 20, 1986, all collections were made by
Gragera believable and worthy of credence. Since
Gragera guaranteed a daily 100% payment of the
loans, he took charge of the collections. As
[petitioner's] representative,
Nieves merely prepared the daily cash flow reports
(Exh. '15' to '15 DDDDDDDDDD') to enable
[petitioner] to keep track of Gragera's operations.
Gragera on the other hand devised the schedule of
daily payment (Exhs. 'B' and 'F') to record the
projected gross daily collections.
"As aptly observed by the court a quo:
'26.1. As between the versions of SANTOS
and NIEVES on how the commissions of
GRAGERA [were] paid to him[,] that of
NIEVES is more logical and practical and
therefore, more believable. SANTOS' version
would have given rise to this improbable
situation: GRAGERA would collect the daily
amortizations and then give them to
NIEVES; NIEVES would get GRAGERA's
commissions from the amortizations and
then give such commission to GRAGERA."'17
These findings are in harmony with the trial court's
ruling, which we quote below:
"21. Exh. H does not prove that SANTOS gave to
NIEVES and the latter received P200,000.00 for
delivery to GRAGERA. Exh. H shows under its sixth
column 'ADDITIONAL CASH' that the additional cash
was P240,000.00. If Exh. H were the liquidation of the
P200,000.00 as alleged by SANTOS, then his claim is
not true. This is so because it is a liquidation of the
sum of P240,000.00.
 "21.1. SANTOS claimed that he learned of NIEVES'
failure to give the P200,000.00 to GRAGERA when he
received the latter's letter complaining of its delayed
release. Assuming as true SANTOS' claim that he
gave P200,000.00 to GRAGERA, there is no
competent evidence that NIEVES did not give it to
GRAGERA. The only proof that NIEVES did not give it
is the letter. But SANTOS did not even present the
letter in evidence. He did not explain why he did not.
"21.2. The evidence shows that all money
transactions of the money-lending business of
SANTOS were covered by petty cash vouchers. It is
therefore strange why SANTOS did not present any
voucher or receipt covering the P200,000.00."18
In sum, the lower courts found it unbelievable that Nieves had
embezzled P1,555,068.70 from the partnership. She did not
remit P1,214,296.10 to Gragera, because he had deducted his
commissions before remitting his collections. Exhibits "B" and
"F" are merely computations of what Gragera should collect for
the day; they do not show that Nieves received the amounts
stated therein. Neither is there sufficient proof that she
misappropriated P200,000, because Exhibit "H." does not
indicate that such amount was received by her; in fact, it shows
a different figure.
Petitioner has utterly failed to demonstrate why a review of
these factual findings is warranted. Well-entrenched is the
basic rule that factual findings of the Court of Appeals affirming
those of the trial court are binding and conclusive on the
Supreme Court.19 Although there are exceptions to this rule,
petitioner has not satisfactorily shown that any of them is
applicable to this issue.
Third Issue:
Accounting of Partnership
Petitioner refuses any liability for respondents' claims on the
profits of the partnership. He maintains that "both business
propositions were flops," as his investments were "consumed
and eaten up by the commissions orchestrated to be due
Gragera" — a situation that "could not have been rendered
possible without complicity between Nieves and Gragera."
Respondent spouses, on the other hand, postulate that
petitioner instituted the action below to avoid payment of the
demands of Nieves, because sometime in March 1987, she
"signified to petitioner that it was about time to get her share of
the profits which had already accumulated to some P3 million."
Respondents add that while the partnership has not declared
dividends or liquidated its earnings, the profits are already
reflected on paper. To prove the counterclaim of Nieves, the
spouses show that from June 13, 1986 up to April 19, 1987,
the profit totaled P20,429,520 (Exhs. "10" et seq. and "15" et
seq.). Based on that income, her 15 percent share under the
joint venture amounts to P3,064,428 (Exh. "10-I-3"); and
Arsenio's, P2,026,000 minus the P30,000 which was already
advanced to him (Petty Cash Vouchers, Exhs. "6, 6-A to 6-B").
The CA originally held that respondents' counterclaim was
premature, pending an accounting of the partnership. However,
in its assailed Resolution of August 17, 1998, it turned volte
face. Affirming the trial court's ruling on the counterclaim, it
held as follows:
"We earlier ruled that there is still need for an
accounting of the profits and losses of the partnership
before we can rule with certainty as to the respective
shares of the partners. Upon a further review of the
records of this case, however, there appears to be
sufficient basis to determine the amount of shares of
the parties and damages incurred by [respondents].
The fact is that the court a quo already made such a
determination [in its] decision dated August 13, 1991
on the basis of the facts on record."20
The trial court's ruling alluded to above is quoted below:
"27. The defendants' counterclaim for the payment of
their share in the profits of their joint venture with
SANTOS is supported by the evidence.
"27.1. NIEVES testified that: Her claim to a share in
the profits is based on the agreement (Exhs. 5, 5-A
and 5-B). The profits are shown in the working papers
(Exhs. 10 to 10-I, inclusive) which she prepared.
Exhs. 10 to 10-I (inclusive) were based on the daily
cash flow reports of which Exh. 3 is a sample. The
originals of the daily cash flow reports (Exhs. 3 and 15
to 15-D(10) were given to SANTOS. The joint venture
had a net profit of P20,429,520.00 (Exh. 10-I-1), from
its operations from June 13, 1986 to April 19, 1987
(Exh. 1-I-4). She had a share of P3,064,428.00 (Exh.
10-I-3) and ARSENIO, about P2,926,000.00, in the
profits.
"27.1.1 SANTOS never denied NIEVES' testimony
that the money-lending business he was engaged in
netted a profit and that the originals of the daily case
flow reports were furnished to him. SANTOS however
alleged that the money-lending operation of his joint
venture with NIEVES and ZABAT resulted in a loss of
about half a million pesos to him. But such loss, even
if true, does not negate NIEVES' claim that overall,
the joint venture among them — SANTOS, NIEVES
and ARSENIO — netted a profit. There is no reason
for the Court to doubt the veracity of [the testimony of]
NIEVES.
"27.2 The P26,260.50 which ARSENIO received as
part of his share in the profits (Exhs. 6, 6-A and 6-B)
should be deducted from his total share."21
After a close examination of respondents' exhibits, we find
reason to disagree with the CA. Exhibit "10-I"22 shows that the
partnership earned a "total income" of P20,429,520 for the
period June 13, 1986 until April 19, 1987. This entry is derived
from the sum of the amounts under the following column
headings: "2-Day Advance Collection," "Service Fee," "Notarial
Fee," "Application Fee," "Net Interest Income" and "Interest
Income on Investment." Such entries represent the collections
of the money-lending business or its gross income.
The "total income" shown on Exhibit "10-I" did not consider the
expenses sustained by the partnership. For instance, it did not
factor in the "gross loan releases" representing the money
loaned to clients. Since the business is money-lending, such
releases are comparable with the inventory or supplies in other
business enterprises.
Noticeably missing from the computation of the "total income"
is the deduction of the weekly allowance disbursed to
respondents. Exhibits "I" et seq. and "J" et seq.23 show that
Arsenio received allowances from July 19, 1986 to March 27,
1987 in the aggregate amount of P25,500; and Nieves, from
July 12, 1986 to March 27, 1987, in the total amount of
P25,600. These allowances are different from the profit already
received by Arsenio. They represent expenses that should
have been deducted from the business profits. The point is that
all expenses incurred by the money-lending enterprise of the
parties must first be deducted from the "total income" in order
to arrive at the "net profit" of the partnership. The share of each
one of them should be based on this "net profit" and not from
the "gross income" or "total income" reflected in Exhibit "10-I,"
which the two courts invariably referred to as "cash flow"
sheets.
Similarly, Exhibits "15" et seq.,24 which are the "Daily Cashflow
Reports," do not reflect the business expenses incurred by the
parties, because they show only the daily cash collections.
Contrary to the rulings of both the trial and the appellate courts,
respondents' exhibits do not reflect the complete financial
condition of the money-lending business. The lower courts
obviously labored over a mistaken notion that Exhibit " 10-I-1"
represented the "net profits" earned by the partnership.
For the purpose of determining the profit that should go to an
industrial partner (who shares in the profits but is not liable for
the losses), the gross income from all the transactions carried
on by the firm must be added together, and from this sum must
be subtracted the expenses or the losses sustained in the
business. Only in the difference representing the net profits
does the industrial partner share. But if, on the contrary, the
losses exceed the income, the industrial partner does not
share in the losses.25
When the judgment of the CA is premised on a
misapprehension of facts or a failure to notice certain relevant
facts that would otherwise justify a different conclusion, as in
this particular issue, a review of its factual findings may be
conducted, as an exception to the general rule applied to the
first two issues.26
The trial court has the advantage of observing the witnesses
while they are testifying, an opportunity not available to
appellate courts. Thus, its assessment of the credibility of
witnesses and their testimonies are accorded great weight,
even finality, when supported by substantial evidence; more so
when such assessment is affirmed by the CA. But when the
issue involves the evaluation of exhibits or documents that are
attached to the case records, as in the third issue, the rule may
be relaxed. Under that situation, this Court has a similar
opportunity to inspect, examine and evaluate those records,
independently of the lower courts. Hence, we deem the award
of the partnership share, as computed by the trial court and
adopted by the CA, to be incomplete and not binding on this
Court.
WHEREFORE, the Petition is partly GRANTED. The assailed
November 28, 1997 Decision is AFFIRMED, but the challenged
Resolutions dated August 17, 1998 and October 9, 1998 are
REVERSED and SET ASIDE. No costs.
SO ORDERED.
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.
DE LEON, JR., J.:
In this petition for review on certiorari, petitioners pray
for the reversal of the Decision dated March 13, 1996
1 
of the former Fifth Division of the Court of Appeals in
2 
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:
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, docketed as Civil Case No. 1983-R in the
3 
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 impleading
4 
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 on April 12, 1995, to wit:
6 
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 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 was
7 
denied by the Court of Appeals in a Resolution dated
8 
October 11, 1996.
Hence, the present petition.
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 dismissing the cases for
9 
insufficiency of evidence.
In their assignment of errors, petitioners claim
that:
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 WHEN THE
ESTABLISHMENT KNOWN IN BAGUIO CITY
AS BENGUET LUMBER WAS STARTED AS
A PARTNERSHIP (PAGE 16-17, DECISION).
V (6) when the judgment of the Court of Appeals
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. Our jurisdiction, it must be emphasized,
10 
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. [emphasis supplied]
11 
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;
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;
(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].
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.
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; 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. Inasmuch as the
13 
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. The agreement need not
15 
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)
16 
when the partnership has a capital of three
thousand pesos or more. In both cases, a
17 
public instrument is required. An inventory to
18 
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. A particular
20 
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.
(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." Nonetheless, in Aurbach, et. al. v. Sanitary
22 
Wares Manufacturing Corporation, et. al., we
23 
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 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; the 24 
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. He stated that when he
25 
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. Tan Eng 26 
Lay, however, denied knowledge of this meeting or of
the conversation between Peralta and his
brother. Tan Eng Lay consistently testified that he
27 
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. Each has the
29 
right to demand an accounting as long as the
partnership exists. We have allowed a scenario
30 
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." But in the
31 
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. As 32 
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 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. [emphasis
33  amount of payment vary with the
supplied]
A demand for periodic accounting is evidence of a
partnership. During his lifetime, Tan Eng Kee
34  a goodwill of a business or other
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
profits of the business;
(e) As the consideration for the sale of
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, 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:
 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.
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.

(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

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. Yet, in the case at bench, even the aforesaid
36 

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