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Heirs of Tan Eng Kee v. CA

[G.R. No. 126881] | [October 3, 2000] | [DE LEON, JR., J]

Petitioners: HEIRS OF TAN ENG KEE

Respondents: COURT OF APPEALS and BENGUET LUMBER COMPANY, represented by its President TAN
ENG LAY

Doctrine: The existence of a partnership may be disputed by an interested party. The issue as to whether a
partnership exists is a factual matter to be decided on the basis of all circumstances. No single factor usually is
controlling. 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. (De Leon, p. 30)

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CASE SUMMARY

Trigger word/s: partnership vs joint venture vs sole proprietorship

FACTS: Petitioner Heirs of Tan Eng Kee filed a complaint for the accounting, liquidation and winding up of the
supposed partnership named Benguet Lumber formed between brothers Tan Eng Kee and Tan Eng Lay. They
alleged that Benguet Lumber was converted into a corporation named Benguet Lumber Company (respondent)
to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. The RTC
granted the complaint and ruled that Benguet Lumber is a joint venture which is akin to a particular partnership.
The CA reversed the RTC ruling and rendered the assailed decision that there was no partnership and that
Tan Eng Kee was a mere employee of the Benguet Lumber Company.
HELD: The CA decision was affirmed. Tan Eng Kee and Tan Eng Lay were not partners in Benguet Lumber.
Tan Eng Kee was only an employee of Benguet Lumber Company. There being no partnership, it follows that
there is no dissolution, winding up or liquidation to speak of.
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FACTS

 1984 – Tan Eng Kee died

 1990 – Petitioner Heirs (decedent’s common law spouse Matilde Abubo and their six children) filed a
complaint against decedent’s brother Tan Eng Lay for the accounting, liquidation and winding up of the
alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay.
 1991 – Petitioners impleaded Respondent Benguet Lumber Company
 The complaint alleged:
o After World War II, 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.
o They named their enterprise "Benguet Lumber" which they jointly managed until Tan Eng Kee's
death.
o The business prospered due to the hard work and thrift of the alleged partners.
o However, 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.
o 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.
 CASE TRAIL

[RTC] granted the complaint

 Benguet Lumber is a joint venture which is akin to a particular partnership
 Tan Eng Kee and Tan Eng Lay are joint adventurers and/or partners
[CA] reversed the RTC judgment
 There was NO PARTNERSHIP. 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
 Benguet Lumber was a PROPRIETORSHIP and Tan Eng Lay is the owner (based on a Certification
and a Termination Notice listing Lay as the proprietor)
 Tan Eng Kee was merely an employee of the Benguet Lumber (based on his SSS coverage and
Payrolls listing Kee as employee)
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ISSUES & HELD

1. Whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber – NO.
SC:
 Whether a partnership exists is a factual matter. Still, SC examined the record since the CA and RTC
reached conflicting conclusions.
 Contract of partnership
o Definition: “ . . . 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”
o Requisites:
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
o GR: Contract does not need to be in writing
XPNs: Must be in a public instrument: 1) when immovable property or real rights are
contributed,
and (2) when the partnership has a capital of three thousand pesos or more
 Partnership (in general) vs. Particular partnership vs. Joint venture
Partnership Joint venture
 generally relates to a  usually limited to a SINGLE TRANSACTION, and is
continuing business of various thus of a temporary nature
transactions of a certain kind  "presupposes generally a parity of standing
between the joint co-ventures or partners, in which
Particular partnership each party has an equal proprietary interest in the
 a kind of partnership that has for capital or property contributed, and where each
its object determinate things, party exercises equal rights in the conduct of the
their use or fruits, or a specific business
undertaking, or the exercise of  a form of informal partnership, with no firm name
a profession or vocation (Art. and no legal personality (Participants can transact
1782, NCC) business under their own name, and can be
 Corporations cannot enter into a
 partnership contract individually liable therefor)
 Corporations may engage in a joint venture with
others

 ICAB: The evidence presented by petitioners falls short of the quantum of proof required to
establish a partnership.
o Best evidence of partnership: Contract or Articles of Partnership (none ICAB)
o Testimonial evidence presented by petitioners was directly controverted by Tan Eng Lay:
 Peralta (petitioners’ witness): Tan Eng Kee asked him to accompany him to get 80
pieces of GI sheets supposedly owned by the brothers Lay and Kee
 Tan Eng Lay: Co-ownership or co-possession (specifically here, of the G.I. sheets) is not
an indicium of the existence of a partnership
o A demand for periodic accounting is evidence of a partnership. During his lifetime, Tan Eng Kee
appeared never to have made any such demand for accounting from Tang Eng Lay
 It is odd 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
 While a deferment in sharing of profits is plausible if excellent relations exist among the
partners at the start of the business and all the partners are more interested in seeing
the firm grow rather than get immediate returns, ICAB, the deferment, had gone on
too long to be plausible. A person is presumed to take ordinary care of his concerns.
2. Whether Tan Eng Kee was a mere employee of Benguet Lumber – YES
[Petitioners]: Tan Eng Kee was a partner. Both Tan Eng Lay and Tan Eng Kee:
a. commanded and supervised the employees;
b. determined the price at which the stocks were to be sold;
c. placed orders to the suppliers of the Benguet Lumber Company.
d. of their families lived at the Benguet Lumber Company compound, a privilege not extended to its
ordinary employees.
[Respondent]: Tan Eng Kee was a mere employee.
a. even a mere supervisor in a company, factory or store gives orders and directions to his subordinates
b. 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 can do this
c. 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
d. Tan Eng Kee is the brother of Tan Eng Lay. Naturally, close personal relations existed between them.
Hence, the privileges (as to the living arrangement) not afforded to other employees
[SC]: Tan Eng Kee was only an employee
 Art. 1769, NCC:
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.
 ICAB:
o Payrolls 1listing Tan Eng Kee as an employee presented by Respondents were admitted as
evidence and showed that Tan Eng Kee received sums as wages of an employee
o Even if the payrolls were discarded, petition would still be denied since petitioners 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.
o Re petitioners’ argument that Tan Eng Kee was a partner based on the circumstances - NO
 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.
 ICAB: 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

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RULING: Petition denied (in favor of Respondents).

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.
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1
Note: Petitioners alleged that these were fake based on the discrepancy in the signatures of Tan Eng Kee. Hence, they
filed a separate criminal case against Tan Eng Lay and his wife & children for the use of allegedly falsified documents.
This was dismissed for insufficiency of evidence.