Cases - Rights and Obligation of Partnerships and Partners
Cases - Rights and Obligation of Partnerships and Partners
Cases - Rights and Obligation of Partnerships and Partners
That on June 3, 1966, the [petitioner] wrote a letter In her Memorandum, petitioner raises the following issues for
petitioning the Register of Deeds of Cebu to transfer Lot 903- our consideration:
A-6 to his name on the ground that Lot 903-A-6 is a portion
of Lot 903-A; that on April 6, 1967, the [respondent] I. On question of law, the Court of Appeals failed to consider
requested the Register of Deeds to annotate an affidavit of facts of substance and significance which, if considered, will
adverse claim against the [petitioners] TCT RT-6999 (T- show that the preponderance of evidence is in favor of the
21108) which covers Lot 903-A; that on June 3, 1967, the petitioner.
Register of Deeds issued TCT 35275 covering Lot 903-A-6 in
the name of the [petitioner] but carrying the earlier II. On question of law, the Court of Appeals failed to
annotation of adverse claim; that in 1969, the [petitioner] appreciate the proposition that, contrary to the position taken
tore down the wire fence which the [respondent] constructed by the trial court, no constructive or implied trust exists
on Lot 903-A-6 which compelled the latter to institute the between the parties, and neither is the action one for
instant complaint dated August 20, 1970 on September 19, reconveyance based upon a constructive or implied trust.
1970.
III. On question of law, the Court of Appeals erred in not
On December 5, 1970, the answer with counterclaim dated finding that even where implied trust is admitted to exist the
December 3, 1970 of [petitioner] Miguel Cuenco was filed respondents action for relief is barred by laches and
where he alleged that he was the absolute owner of Lot 903- prescription.
A-6; that this lot was a portion of Lot 903-A which in turn was
part of Lot 903 which was the subject matter of litigation; IV. On question of law, the trial court and the appellate court
that he was alone in defending the cases involving Lot 903 erred in expunging from the records the testimony of Miguel
without the participation of his brother Mariano Cuenco; that Cuenco.[8]
he donated five (5) of the six (6) portions of Lot 903-A to the
five (5) children of his brother Mariano out of gratitude for This Courts Ruling
the love and care they exhibited to him (Miguel) during the
time of his long sickness; that he did not give or donate any The Petition has no merit.
portion of the lot to the [respondent] because she never
visited him nor took care of him during his long sickness; that Second Issue:
he became critically ill on February 11, 1946 and was confined
at the Singians Clinic in Manila and then transferred to Cebu Implied Trust
where he nearly died in 1946; that his wife Fara Remia
Ledesma Cuenco had an operation on January 1951 and was Petitioner then contends that no constructive or implied trust
confined at the University of Santo Tomas Hospital and John exists between the parties.
Hopkins Hospital in the United States; that two of his children
died at the University of Santo Tomas Hospital in 1951 and A trust is a legal relationship between one having an equitable
1952; and that his wife was blind for many months due to ownership in a property and another having legal title to
malignant hypertension but [respondent] never remembered it.[15]
her nor did she commiserate with him and his wife in their
long period of sorrow. Trust relations between parties may either be express or
implied.[16] Express trusts are created by the direct and
[Petitioner] Miguel Cuenco took the witness stand as early as positive acts of the parties, indicated through some writing,
September 13, 1974. His self-conducted direct examination deed, will, or words evidencing an intention to create a
lasted until 1985, the last one on November 22, 1985. trust.[17] On the other hand, implied trusts are those that,
Unfortunately, he died[5] before he was able to submit without being express, are deducible from the nature of the
himself for cross-examination and so his testimony had to be transaction as matters of intent[;] or which are superinduced
stricken off the record. His only surviving daughter, Marietta on the transaction by operation of law as a matter of equity,
Cuyegkeng, stood as the substitute [petitioner] in this case. independently of the particular intention of the parties.
She testified that she purchased Lot 903-A-6 (the property Implied trusts may either be resulting or constructive trusts,
subject matter of this case) from her late father sometime in both coming into being by operation of law.[18]
1990 and constructed a house thereon in the same year; that
she became aware of this case because her late father used Resulting trusts are presumed to have been contemplated by
to commute to Cebu City to attend to this case; and that Lot the parties and are based on the equitable doctrine that
903-A-6 is in her name per Transfer Certificate of Title valuable consideration, not legal title, determines the
#113781 of the Registry of Deeds for Cebu.[6] equitable title or interest.[19] These trusts arise from the
nature of or the circumstances involved in a transaction,[20]
Ruling of the Court of Appeals whereby legal title becomes vested in one person, who is
obligated in equity to hold that title for the benefit of another.
The CA found respondents action not barred by res judicata,
because there was no identity of causes of action between the Constructive trusts are created by the construction of equity
Petition for cancellation of adverse claim in L.R.C. Records in order to satisfy the demands of justice and prevent unjust
5988 and the Complaint for specific performance to resolve enrichment. They arise contrary to intention against one who,
the issue of ownership in Civil Case No. R-11891. by fraud, duress or abuse of confidence, obtains or holds the
legal right to property which he ought not, in equity and good
The appellate court further found no reason to disturb the conscience, to hold.[21]
findings of the trial court that respondent has the legal right
of ownership over lot 903-A-6. The CA ruled that the subject A review of the records shows that indeed there is an implied
land is part of the attorneys fees of Don Mariano Cuenco, trust between the parties.
predecessor-in-interest of [Respondent] Concepcion Cuenco
vda. de Manguerra and [petitioner] merely holds such Although Lot 903-A was titled in Miguels name, the
property in trust for [her], his title there[to] notwithstanding. circumstances surrounding the acquisition and the
subsequent partial dispositions of this property eloquently
Finally, the CA held that the right of action of respondent has speak of the intent that the equitable or beneficial ownership
not yet prescribed as she was in possession of the lot in of the property should belong to Mariano and his heirs.
dispute and the prescriptive period to file the case
commences to run only from the time she acquired First, Lot 903-A was one half of the one-hectare portion of Lot
knowledge of an adverse claim over [her] possession. 903 given as attorneys fees by a client of the law firm of
Partners Miguel and Mariano Cuenco. It constituted the latters
2
share in the attorneys fees and thus equitably belonged to OBLIGATIONS OF PARTNERSHIPS & PARTNER TO 3RD
him, as correctly found by the CA. That Lot 903-A had been PARTY
titled in the name of Miguel gave rise to an implied trust
between him and Mariano, specifically, the former holds the FT-G.R. No. L-39780 November 11, 1985
property in trust for the latter. In the present case, it is of no
moment that the implied trust arose from the circumstance - ELMO MUÑASQUE, petitioner, vs.
- a share in the attorneys fees -- that does not categorically COURT OF APPEALS,CELESTINO GALAN TROPICAL
fall under Articles 1448 to 1456 of the Civil Code. The cases COMMERCIAL COMPANY and RAMON PONS,
of implied trust enumerated therein does not exclude others respondents.
established by the general law of trust.[22]
GUTTIERREZ, JR., J.:
Second, from the time it was titled in his name in 1938,[23]
Lot 903-A remained undivided and untouched[24] by Miguel. In this petition for certiorari, the petitioner seeks to annul and
Only on February 3, 1947, did Lourdes Cuenco,[25] upon the set added the decision of the Court of Appeals affirming the
instruction of Mariano, have it surveyed and subdivided into existence of a partnership between petitioner and one of the
six almost equal portions -- 903-A-1 to 903-A-6. Each portion respondents, Celestino Galan and holding both of them liable
was specifically allocated to each of the six children of to the two intervenors which extended credit to their
Mariano with his first wife.[26] partnership. The petitioner wants to be excluded from the
liabilities of the partnership.
Third, Miguel readily surrendered his Certificate of Title[27]
and interposed no objection[28] to the subdivision and the Petitioner Elmo Muñasque filed a complaint for payment of
allocation of the property to Marianos six children, including sum of money and damages against respondents Celestino
Concepcion. Galan, Tropical Commercial, Co., Inc. (Tropical) and Ramon
Pons, alleging that the petitioner entered into a contract with
Fourth, Marianos children, including Concepcion,[29] were respondent Tropical through its Cebu Branch Manager Pons
the ones who shouldered the expenses incurred for the for remodelling a portion of its building without exchanging
subdivision of the property. or expecting any consideration from Galan although the latter
was casually named as partner in the contract; that by virtue
of his having introduced the petitioner to the employing
Fifth, after the subdivision of the property, Marianos children
company (Tropical). Galan would receive some kind of
-- including Concepcion[30] -- took possession of their
compensation in the form of some percentages or
respective portions thereof. commission; that Tropical, under the terms of the contract,
agreed to give petitioner the amount of P7,000.00 soon after
Sixth, the legal titles to five portions of the property were the construction began and thereafter, the amount of
transferred via a gratuitous deed of conveyance to Marianos P6,000.00 every fifteen (15) days during the construction to
five children, following the allocations specified in the make a total sum of P25,000.00; that on January 9, 1967,
subdivision plan prepared for Lourdes Cuenco.[31] Tropical and/or Pons delivered a check for P7,000.00 not to
the plaintiff but to a stranger to the contract, Galan, who
With respect to Lot 903-A-6 in particular, the existence of succeeded in getting petitioner's indorsement on the same
Concepcions equitable ownership thereof is bolstered, not check persuading the latter that the same be deposited in a
just by the above circumstances, but also by the fact that joint account; that on January 26, 1967 when the second
check for P6,000.00 was due, petitioner refused to indorse
respondent fenced the portion allocated to her and planted
said cheek presented to him by Galan but through later
trees thereon.[32]
manipulations, respondent Pons succeeded in changing the
payee's name from Elmo Muñasque to Galan and Associates,
More significantly, she also paid real property taxes on Lot thus enabling Galan to cash the same at the Cebu Branch of
903-A-6 yearly, from 1956 until 1969[33] -- the year when the Philippine Commercial and Industrial Bank (PCIB) placing
she was dispossessed of the property. Although tax the petitioner in great financial difficulty in his construction
declarations or realty tax payments of property are not business and subjecting him to demands of creditors to pay'
conclusive evidence of ownership, nevertheless, they are for construction materials, the payment of which should have
good indicia of possession in the concept of owner, for no one been made from the P13,000.00 received by Galan; that
in his right mind would be paying taxes for a property that is petitioner undertook the construction at his own expense
not in his actual or at least constructive possession.[34] Such completing it prior to the March 16, 1967 deadline;that
realty tax payments constitute proof that the holder has a because of the unauthorized disbursement by respondents
claim of title over the property. Tropical and Pons of the sum of P13,000.00 to Galan
petitioner demanded that said amount be paid to him by
respondents under the terms of the written contract between
Tellingly, Miguel started paying real property taxes on Lot
the petitioner and respondent company.
903-A-6 only on April 4, 1964,[35] after the death of
Mariano.[36] This fact shows that it was only in that year that
he was emboldened to claim the property as his own and to The respondents answered the complaint by denying some
stop recognizing Marianos, and subsequently Concepcions, and admitting some of the material averments and setting up
counterclaims.
ownership rights over it. It was only by then that the one who
could have easily refuted his claim had already been silenced
by death. Such a situation cannot be permitted to arise, as During the pre-trial conference, the petitioners and
will be explained below. respondents agreed that the issues to be resolved are:
WHEREFORE, the Petition is DENIED, and the assailed (1) Whether or not there existed a partners between
Decision AFFIRMED. Costs against petitioner. Celestino Galan and Elmo Muñasque; and
3
(1) ordering plaintiff Muñasque and defendant Galan business was issued by the mayor of Cebu City. This enabled
to pay jointly and severally the intervenors Cebu and Galan to encash the second check.
Southern Hardware Company and Blue Diamond
Glass Palace the amount of P6,229.34 and
Meanwhile, as alleged by the petitioner, the construction
P2,213.51, respectively;
continued through his sole efforts. He stated that he borrowed
some P12,000.00 from his friend, Mr. Espina and although
(2) absolving the defendants Tropical Commercial the expenses had reached the amount of P29,000.00 because
Company and Ramon Pons from any liability, of the failure of Galan to pay what was partly due the laborers
and partly due for the materials, the construction work was
finished ahead of schedule with the total expenditure reaching
No damages awarded whatsoever.
P34,000.00.
(3) ordering plaintiff and defendant Galan to pay In this petition the legal questions raised by the petitioner are
P500.00 representing attorney's fees jointly and as follows: (1) Whether or not the appellate court erred in
severally to Intervenor Cebu Southern Hardware holding that a partnership existed between petitioner and
Company: respondent Galan. (2) Assuming that there was such a
partnership, whether or not the court erred in not finding
Galan guilty of malversing the P13,000.00 covered by the first
(4) absolving the defendants Tropical Commercial and second checks and therefore, accountable to the
Company and Ramon Pons from any liability, petitioner for the said amount; and (3) Whether or not the
court committed grave abuse of discretion in holding that the
No damages awarded whatsoever. payment made by Tropical through its manager Pons to Galan
was "good payment, "
The check was withheld from the petitioner. Since Galan Likewise, when Muñasque received the first payment of
informed the Cebu branch of Tropical that there was Tropical in the amount of P7,000.00 with a check made out
a"misunderstanding" between him and petitioner, respondent in his name, he indorsed the check in favor of Galan.
Tropical changed the name of the payee in the second check Respondent Tropical therefore, had every right to presume
from Muñasque to "Galan and Associates" which was the duly that the petitioner and Galan were true partners. If they were
registered name of the partnership between Galan and not partners as petitioner claims, then he has only himself to
petitioner and under which name a permit to do construction blame for making the relationship appear otherwise, not only
to Tropical but to their other creditors as well. The payments
made to the partnership were, therefore, valid payments.
4
In the case of Singsong v. Isabela Sawmill (88 SCRA 643),we contracts executed inconnection with partnership business is
ruled: only pro rata under Art. 1816, of the Civil Code.
Although it may be presumed that Margarita G. While it is true that under Article 1816 of the Civil Code,"All
Saldajeno had acted in good faith, the appellees also partners, including industrial ones, shall be liable prorate with
acted in good faith in extending credit to the all their property and after all the partnership assets have
partnership. Where one of two innocent persons been exhausted, for the contracts which may be entered into
must suffer, that person who gave occasion for the the name and fm the account cd the partnership, under its
damages to be caused must bear the consequences. signature and by a person authorized to act for the partner-
ship. ...". this provision should be construed together with
Article 1824 which provides that: "All partners are liable
No error was committed by the appellate court in holding that
solidarily with the partnership for everything chargeable to
the payment made by Tropical to Galan was a good payment
the partnership under Articles 1822 and 1823." In short, while
which binds both Galan and the petitioner. Since the two were
the liability of the partners are merely joint in transactions
partners when the debts were incurred, they, are also both
entered into by the partnership, a third person who
liable to third persons who extended credit to their
transacted with said partnership can hold the partners
partnership. In the case of George Litton v. Hill and Ceron, et
solidarily liable for the whole obligation if the case of the third
al, (67 Phil. 513, 514), we ruled:
person falls under Articles 1822 or 1823.
Tropical agreed to give petitioner the amount of P7,000.00 The individual defendants shall also pay the costs.
soon after the construction began and thereafter the amount
of P6,000.00 every fifteen (15) days during the construction On April 22, 1961, the defendant company, a general
to make a total sum of P25,000.00. partnership duly registered under the laws of the Philippines,
On January 9, 1967, Tropical and/or Pons delivered a check purchased from the plaintiff a motor vehicle on the
for P7,000.00 not to the plaintiff but to a stranger to the installment basis and for this purpose executed a promissory
contract, Galan, who succeeded in getting petitioner's note for P9,440.00, payable in twelve (12) equal monthly
indorsement on the same check persuading the latter that the installments of P786.63, the first installment payable on or
same be deposited in a joint account. before May 22, 1961 and the subsequent installments on the
22nd day of every month thereafter, until fully paid, with the
On January 26, 1967, when the second check for P6,000.00 condition that failure to pay any of said installments as they
was due, petitioner refused to indorse said check presented fall due would render the whole unpaid balance immediately
to him by Galan but through later manipulations, respondent due and demandable.
Pons succeeded in changing the payee's name to Galan and
Associates, thus enabling Galan to cash the same at the Cebu
Having failed to receive the installment due on July 22, 1961,
Branch of the Philippine Commercial and Industrial Bank
the plaintiff sued the defendant company for the unpaid
(PCIB) placing the petitioner in great financial difficulty in his
balance amounting to P7,119.07. Benjamin C. Daco, Daniel
construction business and subjecting him to demands of
A. Guizona, Noel C. Sim, Romulo B. Lumauig, and Augusto
creditors to pay for construction materials, the payment of
Palisoc were included as co-defendants in their capacity as
which should have been made from the P13,000.00 received
general partners of the defendant company.
by Galan.
ISSUE:
When the case was called for hearing, the defendants and
Whether there was a breach of trust when Tropical disbursed their counsels failed to appear notwithstanding the notices
the money to Galan instead of Muñasque sent to them. Consequently, the trial court authorized the
plaintiff to present its evidence ex-parte 3 , after which the
HELD: trial court rendered the decision appealed from.
No, there was no breach of trust when Tropical disbursed the The defendants Benjamin C. Daco and Noel C. Sim moved to
money to Galan instead of Muñasque. reconsider the decision claiming that since there are five (5)
general partners, the joint and subsidiary liability of each
The Supreme Court held that there is nothing in the records partner should not exceed one-fifth ( 1/ 5 ) of the obligations
to indicate that the partnership organized by the two men was of the defendant company. But the trial court denied the said
not a genuine one. A falling out or misunderstanding between motion notwithstanding the conformity of the plaintiff to limit
the partners does not convert the partnership into a sham the liability of the defendants Daco and Sim to only one-fifth
organization. ( 1/ 5 ) of the obligations of the defendant company. 4 Hence,
this appeal.
In the case at bar the respondent Tropical had every reason
to believe that a partnership existed between the petitioner
The only issue for resolution is whether or not the dismissal
and Galan and no fault or error can be imputed against it for
of the complaint to favor one of the general partners of a
making payments to "Galan and Associates" and delivering
partnership increases the joint and subsidiary liability of each
the same to Galan because as far as it was concerned, Galan
of the remaining partners for the obligations of the
was a true partner with real authority to transact on behalf of
partnership.
the partnership with which it was dealing.
WHEREFORE, the appealed decision as thus clarified is hereby 1. That plaintiff is entitled to the writ of preliminary
AFFIRMED, without pronouncement as to costs. attachment issued by this Court on September 20, 1990;
DIGEST-Island Sales vs United Pioneers General 2. That defendants are jointly liable to plaintiff for the
Construction Company et al following amounts, subject to the modifications as hereinafter
made by reason of the special and unique facts and
circumstances and the proceedings that transpired during the
Business Organization – Partnership, Agency, Trust – Liability trial of this case;
of Partners – Pro-rata – Condonation
United Pioneers lost the civil case and the trial court rendered
judgment ordering United Pioneers to pay the outstanding ii. Accrued interest for P27,904.02 on Invoice No. 14413 for
balance plus interest and costs. It further decreed that the P146,868.00 dated February 13, 1990;
remaining 4 co-defendants shall pay Island Sales in case
United Pioneers’ property will not be enough to satisfy its iii. Accrued interest of P12,920.00 on Invoice No. 14426 for
indebtedness to Island Sales. P68,000.00 dated February 19, 1990;
ISSUE: What is the extent of the liability of the partners c. P50,000.00 as and for attorney’s fees, plus P8,500.00
considering that one partner was removed as a co-defendant representing P500.00 per appearance in court;
on motion of Island Sales?
7
From the foregoing, it would appear therefore that whatever excess will be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio
judgment the plaintiff may be entitled to in this case will have Chua; 1/3 Peter Yao;
to be satisfied from the amount of P900,000.00 as this
amount replaced the attached nets and floats. Considering,
c) If the proceeds of the sale the vessels will be less than
however, that the total judgment obligation as computed
P5,750,000.00 whatever the deficiency shall be shouldered
above would amount to only P840,216.92, it would be
and paid to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3
inequitable, unfair and unjust to award the excess to the
Antonio Chua; 1/3 Peter Yao. 11
defendants who are not entitled to damages and who did not
put up a single centavo to raise the amount of P900,000.00
aside from the fact that they are not the owners of the nets The trial court noted that the Compromise Agreement was
and floats. For this reason, the defendants are hereby silent as to the nature of their obligations, but that joint
relieved from any and all liabilities arising from the monetary liability could be presumed from the equal distribution of the
judgment obligation enumerated above and for plaintiff to profit and loss. 21
retain possession and ownership of the nets and floats and
for the reimbursement of the P900,000.00 deposited by it Lim appealed to the Court of Appeals (CA) which, as already
with the Clerk of Court. stated, affirmed the RTC.
SO ORDERED. 3
Ruling of the Court of Appeals
The Facts In affirming the trial court, the CA held that petitioner was a
partner of Chua and Yao in a fishing business and may thus
On behalf of “Ocean Quest Fishing Corporation,” Antonio be held liable as a such for the fishing nets and floats
Chua and Peter Yao entered into a Contract dated February purchased by and for the use of the partnership. The
7, 1990, for the purchase of fishing nets of various sizes from appellate court ruled:
the Philippine Fishing Gear Industries, Inc. (herein
respondent). They claimed that they were engaged in a The evidence establishes that all the defendants including
business venture with Petitioner Lim Tong Lim, who however herein appellant Lim Tong Lim undertook a partnership for a
was not a signatory to the agreement. The total price of the specific undertaking, that is for commercial fishing . . . .
nets amounted to P532,045. Four hundred pieces of floats Obviously, the ultimate undertaking of the defendants was to
worth P68,000 were also sold to the Corporation. 4 divide the profits among themselves which is what a
partnership essentially is . . . . By a contract of partnership,
The buyers, however, failed to pay for the fishing nets and two or more persons bind themselves to contribute money,
the floats; hence, private respondents filed a collection suit property or industry to a common fund with the intention of
against Chua, Yao and Petitioner Lim Tong Lim with a prayer dividing the profits among themselves (Article 1767, New
for a writ of preliminary attachment. The suit was brought Civil Code). 13
against the three in their capacities as general partners, on
the allegation that “Ocean Quest Fishing Corporation” was a Hence, petitioner brought this recourse before this Court. 14
nonexistent corporation as shown by a Certification from the
Securities and Exchange Commission. 5 On September 20,
1990, the lower court issued a Writ of Preliminary The Issues
Attachment, which the sheriff enforced by attaching the
fishing nets on board F/B Lourdes which was then docked at In his Petition and Memorandum, Lim asks this Court to
the Fisheries Port, Navotas, Metro Manila. reverse the assailed Decision on the following grounds:
(2) That after convening for a few times, Lim, Chua, and Yao Petitioner argues that the appellate court’s sole basis for
verbally agreed to acquire two fishing boats, the FB assuming the existence of a partnership was the Compromise
Lourdes and the FB Nelson for the sum of P3.35 million; Agreement. He also claims that the settlement was entered
into only to end the dispute among them, but not to
adjudicate their preexisting rights and obligations. His
(3) That they borrowed P3.25 million from Jesus Lim, brother
arguments are baseless. The Agreement was but an
of Petitioner Lim Tong Lim, to finance the venture.
embodiment of the relationship extant among the parties
prior to its execution.
(4) That they bought the boats from CMF Fishing Corporation,
which executed a Deed of Sale over these two (2) boats in
A proper adjudication of claimants’ rights mandates that
favor of Petitioner Lim Tong Lim only to serve as security for
courts must review and thoroughly appraise all relevant facts.
the loan extended by Jesus Lim;
Both lower courts have done so and have found, correctly, a
preexisting partnership among the parties. In implying that
(5) That Lim, Chua and Yao agreed that the refurbishing, re- the lower courts have decided on the basis of one piece of
equipping, repairing, dry docking and other expenses for the document alone, petitioner fails to appreciate that the CA and
boats would be shouldered by Chua and Yao; the RTC delved into the history of the document and explored
all the possible consequential combinations in harmony with
(6) That because of the “unavailability of funds,” Jesus Lim law, logic and fairness. Verily, the two lower courts’ factual
again extended a loan to the partnership in the amount of P1 findings mentioned above nullified petitioner’s argument that
million secured by a check, because of which, Yao and Chua the existence of a partnership was based only on the
entrusted the ownership papers of two other boats, Chua’s FB Compromise Agreement.
Lady Anne Mel and Yao’s FB Tracy to Lim Tong Lim.
Petitioner Was a Partner, Not a Lessor
(7) That in pursuance of the business agreement, Peter Yao
and Antonio Chua bought nets from Respondent Philippine We are not convinced by petitioner’s argument that he was
Fishing Gear, in behalf of “Ocean Quest Fishing Corporation,” merely the lessor of the boats to Chua and Yao, not a partner
their purported business name. in the fishing venture. His argument allegedly finds support
in the Contract of Lease and the registration papers showing
(8) That subsequently, Civil Case No. 1492-MN was filed in that he was the owner of the boats, including F/B
the Malabon RTC, Branch 72 by Antonio Chua and Peter Yao Lourdes where the nets were found.
against Lim Tong Lim for (a) declaration of nullity of
commercial documents; (b) reformation of contracts; (c) His allegation defies logic. In effect, he would like this Court
declaration of ownership of fishing boats; (4) injunction; and to believe that he consented to the sale of his own boats to
(e) damages. pay a debt of Chua and Yao, with the excess of the proceeds
to be divided among the three of them. No lessor would do
(9) That the case was amicably settled through a Compromise what petitioner did. Indeed, his consent to the sale proved
Agreement executed between the parties-litigants the terms that there was a preexisting partnership among all three.
of which are already enumerated above.
Verily, as found by the lower courts, petitioner entered into a
From the factual findings of both lower courts, it is clear that business agreement with Chua and Yao, in which debts were
Chua, Yao and Lim had decided to engage in a fishing undertaken in order to finance the acquisition and the
business, which they started by buying boats worth P3.35 upgrading of the vessels which would be used in their fishing
million, financed by a loan secured from Jesus Lim who was business. The sale of the boats, as well as the division among
petitioner’s brother. In their Compromise Agreement, they the three of the balance remaining after the payment of their
subsequently revealed their intention to pay the loan with the loans, proves beyond cavil that F/B Lourdes, though
proceeds of the sale of the boats, and to divide equally among registered in his name, was not his own property but an asset
them the excess or loss. These boats, the purchase and the of the partnership. It is not uncommon to register the
repair of which were financed with borrowed money, fell properties acquired from a loan in the name of the person the
under the term “common fund” under Article 1767. The lender trusts, who in this case is the petitioner himself. After
contribution to such fund need not be cash or fixed assets; it all, he is the brother of the creditor, Jesus Lim.
could be an intangible like credit or industry. That the parties
agreed that any loss or profit from the sale and operation of We stress that it is unreasonable — indeed, it is absurd — for
petitioner to sell his property to pay a debt he did not incur,
9
if the relationship among the three of them was merely that benefited by it, knowing it to be without valid existence, are
of lessor-lessee, instead of partners. held liable as general partners.
Corporation by Estoppel Technically, it is true that petitioner did not directly act on
behalf of the corporation. However, having reaped the
benefits of the contract entered into by persons with whom
Petitioner argues that under the doctrine of corporation by
he previously had an existing relationship, he is deemed to
estoppel, liability can be imputed only to Chua and Yao, and
be part of said association and is covered by the scope of the
not to him. Again, we disagree.
doctrine of corporation by estoppel. We reiterate the ruling of
the Court in Alonso v. Villamor: 19
Sec. 21 of the Corporation Code of the Philippines provides:
A litigation is not a game of technicalities in which one, more
Sec. 21. Corporation by estoppel. — All persons who assume deeply schooled and skilled in the subtle art of movement and
to act as a corporation knowing it to be without authority to position, entraps and destroys the other. It is, rather, a
do so shall be liable as general partners for all debts, liabilities contest in which each contending party fully and fairly lays
and damages incurred or arising as a result thereof: Provided before the court the facts in issue and then, brushing aside
however, That when any such ostensible corporation is sued as wholly trivial and indecisive all imperfections of form and
on any transaction entered by it as a corporation or on any technicalities of procedure, asks that justice be done upon the
tort committed by it as such, it shall not be allowed to use as merits. Lawsuits, unlike duels, are not to be won by a rapier’s
a defense its lack of corporate personality. thrust. Technicality, when it deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy,
One who assumes an obligation to an ostensible corporation deserves scant consideration from courts. There should be no
as such, cannot resist performance thereof on the ground that vested rights in technicalities.
there was in fact no corporation.
Third Issue: Validity of Attachment
Thus, even if the ostensible corporate entity is proven to be
legally nonexistent, a party may be estopped from denying Finally, petitioner claims that the Writ of Attachment was
its corporate existence. “The reason behind this doctrine is improperly issued against the nets. We agree with the Court
obvious — an unincorporated association has no personality of Appeals that this issue is now moot and academic. As
and would be incompetent to act and appropriate for itself the previously discussed, F/B Lourdes was an asset of the
power and attributes of a corporation as provided by law; it partnership and that it was placed in the name of petitioner,
cannot create agents or confer authority on another to act in only to assure payment of the debt he and his partners owed.
its behalf; thus, those who act or purport to act as its The nets and the floats were specifically manufactured and
representatives or agents do so without authority and at their tailor-made according to their own design, and were bought
own risk. And as it is an elementary principle of law that a and used in the fishing venture they agreed upon. Hence, the
person who acts as an agent without authority or without a issuance of the Writ to assure the payment of the price
principal is himself regarded as the principal, possessed of all stipulated in the invoices is proper. Besides, by specific
the right and subject to all the liabilities of a principal, a agreement, ownership of the nets remained with Respondent
person acting or purporting to act on behalf of a corporation Philippine Fishing Gear, until full payment thereof.
which has no valid existence assumes such privileges and
obligations and becomes personally liable for contracts
WHEREFORE, the Petition is DENIED and the assailed Decision
entered into or for other acts performed as such agent. 17
AFFIRMED. Costs against petitioner.
The private respondents, Eugenio Lim, et al., borrowed at bar. It states that ‘where the title to real property is in the
from petitioner Santiago Syjuco, Inc., the sum of names of all the partners, a conveyance executed by the
P800,000.00. The loan was given on the security of a first entire partners pass all their rights in such property.
mortgage on property registered in the names of said Consequently, those members' acts, declarations and
borrowers as owners in common under Transfer Certificates omissions cannot be deemed to be simply the individual acts
of Title Numbered 75413 and 75415 of the Registry of Deeds of said members, but in fact and in law, those of the
of Manila. Thereafter, additional loans on the same security partnership. Finally, the Supreme Court emphasizes that the
were obtained by the private respondents from Syjuco, so right of the private respondents to assert the existence of the
that as of May 8, 1967, the aggregate of the loans stood at partnership could have been stressed at the time they
P2,460,000.00, exclusive of interest, and the security had instituted their first action, considering that the actions
been augmented by bringing into the mortgage other involved property supposedly belonging to it, and therefore,
property, also registered as owned pro indiviso by the private the partnership was the real party in interest. What was done
respondents under two titles: TCT Nos. 75416 and 75418 of by them was to split their cause of action in violation of the
the Manila Registry. well-known rule that only one suit may be instituted for a
single cause of action.
The private respondents failed to pay it despite demands
therefore; that Syjuco consequently caused extra-judicial
proceedings for the foreclosure of the mortgage to be
commenced by the Sheriff of Manila; and that the latter FT-G.R. No. 126881 October 3, 2000
d) Declaring that all the rights and obligations of Tan a. THAT THE FAMILIES OF TAN ENG KEE AND
Eng Kee as joint adventurer and/or as partner in a TAN ENG LAY WERE ALL LIVING AT THE
particular partnership have descended to the BENGUET LUMBER COMPOUND;
plaintiffs who are his legal heirs.
b. THAT BOTH TAN ENG LAY AND TAN ENG
e) Ordering the defendant Tan Eng Lay and/or the KEE WERE COMMANDING THE EMPLOYEES
President and/or General Manager of Benguet OF BENGUET LUMBER;
Lumber Company Inc. to render an accounting of all
the assets of Benguet Lumber Company, Inc. so the
c. THAT BOTH TAN ENG KEE AND TAN ENG
plaintiffs know their proper share in the business;
LAY WERE SUPERVISING THE EMPLOYEES
THEREIN;
f) Ordering the appointment of a receiver to
preserve and/or administer the assets of Benguet
d. THAT TAN ENG KEE AND TAN ENG LAY
Lumber Company, Inc. until such time that said
WERE THE ONES DETERMINING THE PRICES
corporation is finally liquidated are directed to
OF STOCKS TO BE SOLD TO THE PUBLIC;
submit the name of any person they want to be
AND
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. e. THAT TAN ENG LAY AND TAN ENG KEE
WERE THE ONES MAKING ORDERS TO THE
SUPPLIERS (PAGE 18, DECISION).
g) Denying the award of damages to the plaintiffs for
lack of proof except the expenses in filing the instant
case. IV THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THERE WAS NO PARTNERSHIP JUST
BECAUSE THE CHILDREN OF THE LATE TAN ENG
h) Dismissing the counter-claim of the defendant for
KEE: ELPIDIO TAN AND VERONICA CHOI,
lack of merit.
TOGETHER WITH THEIR WITNESS BEATRIZ
TANDOC, ADMITTED THAT THEY DO NOT KNOW
SO ORDERED. WHEN THE ESTABLISHMENT KNOWN IN BAGUIO
CITY AS BENGUET LUMBER WAS STARTED AS A
Private respondent sought relief before the Court of Appeals PARTNERSHIP (PAGE 16-17, DECISION).
which, on March 13, 1996, rendered the assailed decision
reversing the judgment of the trial court. Petitioners' motion V THE HONORABLE COURT OF APPEALS ERRED IN
for reconsideration7 was denied by the Court of Appeals in a HOLDING THAT THERE WAS NO PARTNERSHIP
Resolution8 dated October 11, 1996. BETWEEN THE LATE TAN ENG KEE AND HIS
BROTHER TAN ENG LAY BECAUSE THE PRESENT
Hence, the present petition. CAPITAL OR ASSETS OF BENGUET LUMBER IS
DEFINITELY MORE THAN P3,000.00 AND AS SUCH
THE EXECUTION OF A PUBLIC INSTRUMENT
12
CREATING A PARTNERSHIP SHOULD HAVE BEEN before the war. The appellees however argued that
MADE AND NO SUCH PUBLIC INSTRUMENT (Rollo, p. 104; Brief, p. 6) this is because during the
ESTABLISHED BY THE APPELLEES (PAGE 17, war, the entire stocks of the pre-war Benguet
DECISION). 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
As a premise, we reiterate the oft-repeated rule that findings
and Kee pooled the proceeds of their individual
of facts of the Court of Appeals will not be disturbed on appeal
businesses earned from buying and selling military
if such are supported by the evidence.10 Our jurisdiction, it
supplies, so that the common fund would be enough
must be emphasized, does not include review of factual
to form a partnership, both in the lumber and
issues. Thus:
hardware business. That Lay and Kee actually
established the Benguet Lumber in Baguio City, was
Filing of petition with Supreme Court. — A party even testified to by witnesses. Because of the
desiring to appeal by certiorari from a judgment or pooling of resources, the post-war Benguet Lumber
final order or resolution of the Court of Appeals, the was eventually established. That the father of the
Sandiganbayan, the Regional Trial Court or other plaintiffs and Lay were partners, is obvious from the
courts whenever authorized by law, may file with the fact that: (1) they conducted the affairs of the
Supreme Court a verified petition for review on business during Kee's lifetime, jointly, (2) they were
certiorari. The petition shall raise only questions of the ones giving orders to the employees, (3) they
law which must be distinctly set forth.11 [emphasis were the ones preparing orders from the suppliers,
supplied] (4) their families stayed together at the Benguet
Lumber compound, and (5) all their children were
Admitted exceptions have been recognized, though, and employed in the business in different capacities.
when present, may compel us to analyze the evidentiary basis
on which the lower court rendered judgment. Review of xxx xxx xxx
factual issues is therefore warranted:
It is obvious that there was no partnership
(1) when the factual findings of the Court of Appeals whatsoever. Except for a firm name, there was no
and the trial court are contradictory; firm account, no firm letterheads submitted as
evidence, no certificate of partnership, no
(2) when the findings are grounded entirely on agreement as to profits and losses, and no time fixed
speculation, surmises, or conjectures; 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.
(3) when the inference made by the Court of Appeals It had no business book, no written account nor any
from its findings of fact is manifestly mistaken, memorandum for that matter and no license
absurd, or impossible; mentioning the existence of a partnership [citation
omitted].
(4) when there is grave abuse of discretion in the
appreciation of facts; Also, the exhibits support the establishment of only
a proprietorship. The certification dated March 4,
(5) when the appellate court, in making its findings, 1971, Exhibit "2", mentioned co-defendant Lay as
goes beyond the issues of the case, and such the only registered owner of the Benguet Lumber
findings are contrary to the admissions of both and Hardware. His application for registration,
appellant and appellee; effective 1954, in fact mentioned that his business
started in 1945 until 1985 (thereafter, the
incorporation). The deceased, Kee, on the other
(6) when the judgment of the Court of Appeals is hand, was merely an employee of the Benguet
premised on a misapprehension of facts; Lumber Company, on the basis of his SSS coverage
effective 1958, Exhibit "3". In the Payrolls, Exhibits
(7) when the Court of Appeals fails to notice certain "4" to "4-U", inclusive, for the years 1982 to 1983,
relevant facts which, if properly considered, will Kee was similarly listed only as an employee;
justify a different conclusion; precisely, he was on the payroll listing. In the
Termination Notice, Exhibit "5", Lay was mentioned
also as the proprietor.
(8) when the findings of fact are themselves
conflicting;
xxx xxx xxx
(9) when the findings of fact are conclusions without
citation of the specific evidence on which they are We would like to refer to Arts. 771 and 772, NCC,
based; and 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
(10) when the findings of fact of the Court of Appeals
equally true if the capitalization exceeds P3,000.00,
are premised on the absence of evidence but such
in which case a public instrument is also necessary,
findings are contradicted by the evidence on
and which is to be recorded with the Securities and
record.12
Exchange Commission. In this case at bar, we can
easily assume that the business establishment,
In reversing the trial court, the Court of Appeals ruled, to wit: which from the language of the appellees, prospered
(pars. 5 & 9, Complaint), definitely exceeded
We note that the Court a quo over extended the P3,000.00, in addition to the accumulation of real
issue because while the plaintiffs mentioned only the properties and to the fact that it is now a compound.
existence of a partnership, the Court in turn went The execution of a public instrument, on the other
beyond that by justifying the existence of a joint hand, was never established by the appellees.
venture.
And then in 1981, the business was incorporated and
When mention is made of a joint venture, it would the incorporators were only Lay and the members of
presuppose parity of standing between the parties, his family. There is no proof either that the capital
equal proprietary interest and the exercise by the assets of the partnership, assuming them to be in
parties equally of the conduct of the business, thus: 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
xxx xxx xxx assets, contrary to the allegations in pars. 6, 7 and
8 of the complaint.
We have the admission that the father of the
plaintiffs was not a partner of the Benguet Lumber
13
These are not evidences supporting the existence of (b) Usually, but not necessarily a joint adventure is
a partnership: limited to a SINGLE TRANSACTION, although the
business of pursuing to a successful termination may
continue for a number of years; a partnership
1) That Kee was living in a bunk house just across
generally relates to a continuing business of various
the lumber store, and then in a room in the bunk
transactions of a certain kind.21
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 A joint venture "presupposes generally a parity of standing
were "commanding people" as testified to by the between the joint co-ventures or partners, in which each
son, Elpidio Tan; 3) that both were supervising the party has an equal proprietary interest in the capital or
laborers, as testified to by Victoria Choi; and 4) that property contributed, and where each party exercises equal
Dionisio Peralta was supposedly being told by Kee rights in the conduct of the business."22 Nonetheless, in
that the proceeds of the 80 pieces of the G.I. sheets Aurbach, et. al. v. Sanitary Wares Manufacturing Corporation,
were added to the business. et. al.,23 we expressed the view that a joint venture may be
likened to a particular partnership, thus:
Partnership presupposes the following elements
[citation omitted]: 1) a contract, either oral or The legal concept of a joint venture is of common
written. However, if it involves real property or law origin. It has no precise legal definition, but it
where the capital is P3,000.00 or more, the has been generally understood to mean an
execution of a contract is necessary; 2) the capacity organization formed for some temporary purpose.
of the parties to execute the contract; 3) money (Gates v. Megargel, 266 Fed. 811 [1920]) It is
property or industry contribution; 4) community of hardly distinguishable from the partnership, since
funds and interest, mentioning equality of the their elements are similar — community of interest
partners or one having a proportionate share in the in the business, sharing of profits and losses, and a
benefits; and 5) intention to divide the profits, being mutual right of control. (Blackner v. McDermott, 176
the true test of the partnership. The intention to join F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P.2d.,
in the business venture for the purpose of obtaining 1043 [1939]; Buckley v. Chadwick, 45 Cal. 2d. 183,
profits thereafter to be divided, must be established. 288 P.2d. 12 289 P.2d. 242 [1955]). The main
We cannot see these elements from the testimonial distinction cited by most opinions in common law
evidence of the appellees. jurisdiction is that the partnership contemplates a
general business with some degree of continuity,
while the joint venture is formed for the execution of
As can be seen, the appellate court disputed and differed from
a single transaction, and is thus of a temporary
the trial court which had adjudged that TAN ENG KEE and TAN
nature. (Tufts v. Mann. 116 Cal. App. 170, 2 P. 2d.
ENG LAY had allegedly entered into a joint venture. In this
500 [1931]; Harmon v. Martin, 395 Ill. 595, 71 NE
connection, we have held that whether a partnership exists is
2d. 74 [1947]; Gates v. Megargel 266 Fed. 811
a factual matter; consequently, since the appeal is brought to
[1920]). This observation is not entirely accurate in
us under Rule 45, we cannot entertain inquiries relative to the
this jurisdiction, since under the Civil Code, a
correctness of the assessment of the evidence by the court a
partnership may be particular or universal, and a
quo.13 Inasmuch as the Court of Appeals and the trial court
particular partnership may have for its object a
had reached conflicting conclusions, perforce we must
specific undertaking. (Art. 1783, Civil Code). It
examine the record to determine if the reversal was justified.
would seem therefore that under Philippine law, a
joint venture is a form of partnership and should
The primordial issue here is whether Tan Eng Kee and Tan thus be governed by the law of partnerships. The
Eng Lay were partners in Benguet Lumber. A contract of Supreme Court has however recognized a distinction
partnership is defined by law as one where: between these two business forms, and has held
that although a corporation cannot enter into a
. . . two or more persons bind themselves to contribute partnership contract, it may however engage in a
money, property, or industry to a common fund, with the joint venture with others. (At p. 12, Tuazon v.
intention of dividing the profits among themselves. Bolaños, 95 Phil. 906 [1954]) (Campos and Lopez-
Campos Comments, Notes and Selected Cases,
Corporation Code 1981).
Two or more persons may also form a partnership
for the exercise of a profession.14
Undoubtedly, the best evidence would have been the contract
of partnership itself, or the articles of partnership but there is
Thus, in order to constitute a partnership, it must be none. The alleged partnership, though, was never formally
established that (1) two or more persons bound organized. In addition, petitioners point out that the New Civil
themselves to contribute money, property, or Code was not yet in effect when the partnership was allegedly
industry to a common fund, and (2) they intend to formed sometime in 1945, although the contrary may well be
divide the profits among themselves.15 The argued that nothing prevented the parties from complying
agreement need not be formally reduced into with the provisions of the New Civil Code when it took effect
writing, since statute allows the oral constitution of on August 30, 1950. But all that is in the past. The net effect,
a partnership, save in two instances: (1) when however, is that we are asked to determine whether a
immovable property or real rights are contributed,16 partnership existed based purely on circumstantial evidence.
and (2) when the partnership has a capital of three A review of the record persuades us that the Court of Appeals
thousand pesos or more.17 In both cases, a public correctly reversed the decision of the trial court. The evidence
instrument is required.18 An inventory to be signed presented by petitioners falls short of the quantum of proof
by the parties and attached to the public instrument required to establish a partnership.
is also indispensable to the validity of the
partnership whenever immovable property is
contributed to the partnership.19 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.
The trial court determined that Tan Eng Kee and Tan Eng Lay In the absence of evidence, we cannot accept as an
had entered into a joint venture, which it said is akin to a established fact that Tan Eng Kee allegedly contributed his
particular partnership.20 A particular partnership is resources to a common fund for the purpose of establishing
distinguished from a joint adventure, to wit: a partnership. The testimonies to that effect of petitioners'
witnesses is directly controverted by Tan Eng Lay. It should
(a) A joint adventure (an American concept similar be noted that it is not with the number of witnesses wherein
to our joint accounts) is a sort of informal preponderance lies;24 the quality of their testimonies is to be
partnership, with no firm name and no legal considered. None of petitioners' witnesses could suitably
personality. In a joint account, the participating account for the beginnings of Benguet Lumber Company,
merchants can transact business under their own except perhaps for Dionisio Peralta whose deceased wife was
name, and can be individually liable therefor. 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
14
knowledge of this meeting or of the conversation between (a) As a debt by installment or otherwise;
Peralta and his brother.27 Tan Eng Lay consistently testified
that he had his business and his brother had his, that it was
(b) As wages of an employee or rent to a
only later on that his said brother, Tan Eng Kee, came to work
landlord;
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 (c) As an annuity to a widow or
representative of a deceased partner;
Besides, it is indeed odd, if not unnatural, that despite the
forty years the partnership was allegedly in existence, Tan (d) As interest on a loan, though the
Eng Kee never asked for an accounting. The essence of a amount of payment vary with the profits of
partnership is that the partners share in the profits and the business;
losses.29 Each has the right to demand an accounting as long
as the partnership exists.30 We have allowed a scenario (e) As the consideration for the sale of a
wherein "[i]f excellent relations exist among the partners at goodwill of a business or other property by
the start of the business and all the partners are more installments or otherwise.
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 In the light of the aforequoted legal provision, we conclude
deferment, if any, had gone on too long to be plausible. A that Tan Eng Kee was only an employee, not a partner. Even
person is presumed to take ordinary care of his concerns.32 if the payrolls as evidence were discarded, petitioners would
As we explained in another case: 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 first place, plaintiff did not furnish the in the profits of the enterprise. Petitioners failed to show how
supposed P20,000.00 capital. In the second place, much their father, Tan Eng Kee, received, if any, as his share
she did not furnish any help or intervention in the in the profits of Benguet Lumber Company for any particular
management of the theatre. In the third place, it period. Hence, they failed to prove that Tan Eng Kee and Tan
does not appear that she has even demanded from Eng Lay intended to divide the profits of the business between
defendant any accounting of the expenses and themselves, which is one of the essential features of a
earnings of the business. Were she really a partner, partnership.
her first concern should have been to find out how
the business was progressing, whether the expenses
were legitimate, whether the earnings were correct, Nevertheless, petitioners would still want us to infer or believe
etc. She was absolutely silent with respect to any of the alleged existence of a partnership from this set of
the acts that a partner should have done; all that circumstances: that Tan Eng Lay and Tan Eng Kee were
she did was to receive her share of P3,000.00 a commanding the employees; that both were supervising the
month, which cannot be interpreted in any manner employees; that both were the ones who determined the
than a payment for the use of the premises which price at which the stocks were to be sold; and that both
she had leased from the owners. Clearly, plaintiff placed orders to the suppliers of the Benguet Lumber
had always acted in accordance with the original Company. They also point out that the families of the brothers
letter of defendant of June 17, 1945 (Exh. "A"), Tan Eng Kee and Tan Eng Lay lived at the Benguet Lumber
which shows that both parties considered this offer Company compound, a privilege not extended to its ordinary
as the real contract between them.33 [emphasis employees.
supplied]
However, private respondent counters that:
A demand for periodic accounting is evidence of a
partnership.34 During his lifetime, Tan Eng Kee appeared Petitioners seem to have missed the point in
never to have made any such demand for accounting from his asserting that the above enumerated powers and
brother, Tang Eng Lay. privileges granted in favor of Tan Eng Kee, were
indicative of his being a partner in Benguet Lumber
This brings us to the matter of Exhibits "4" to "4-U" for private for the following reasons:
respondents, consisting of payrolls purporting to show that
Tan Eng Kee was an ordinary employee of Benguet Lumber, (i) even a mere supervisor in a company, factory or
as it was then called. The authenticity of these documents store gives orders and directions to his subordinates.
was questioned by petitioners, to the extent that they filed So long, therefore, that an employee's position is
criminal charges against Tan Eng Lay and his wife and higher in rank, it is not unusual that he orders
children. As aforesaid, the criminal cases were dismissed for around those lower in rank.
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: (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
In determining whether a partnership exists, these rules shall Benguet Lumber. Furthermore, even a partner does
apply: not necessarily have to perform this particular task.
It is, thus, not an indication that Tan Eng Kee was a
(1) Except as provided by Article 1825, persons who partner.
are not partners as to each other are not partners as
to third persons; (iii) although Tan Eng Kee, together with his family,
lived in the lumber compound and this privilege was
(2) Co-ownership or co-possession does not of itself not accorded to other employees, the undisputed
establish a partnership, whether such co-owners or fact remains that Tan Eng Kee is the brother of Tan
co-possessors do or do not share any profits made Eng Lay. Naturally, close personal relations existed
by the use of the property; between them. Whatever privileges Tan Eng Lay
gave his brother, and which were not given the other
employees, only proves the kindness and generosity
(3) The sharing of gross returns does not of itself of Tan Eng Lay towards a blood relative.
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 (iv) and even if it is assumed that Tan Eng Kee was
derived; 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.
(4) The receipt by a person of a share of the profits Even highly confidential employees and the owners
of a business is a prima facie evidence that he is a of a company sometimes argue with respect to
partner in the business, but no such inference shall certain matters which, in no way indicates that they
be drawn if such profits were received in payment: are partners as to each other.35
15
In the instant case, we find private respondent's arguments TRANSACTION, although the business of pursuing to a
to be well-taken. Where circumstances taken singly may be successful termination maycontinue for a number of years; a
inadequate to prove the intent to form a partnership, partnership generally relates to a continuing business of
nevertheless, the collective effect of these circumstances may various transactions of a certain kind. A joint venture
be such as to support a finding of the existence of the parties' "presupposes generally a parity of standing between the joint
intent.36 Yet, in the case at bench, even the aforesaid co-ventures or partners, in which each party has an equal
circumstances when taken together are not persuasive indicia proprietary interest in the capital or property contributed, and
of a partnership. They only tend to show that Tan Eng Kee where each party exercises equal rights in the conduct of the
was involved in the operations of Benguet Lumber, but in business. The evidence presented by petitioners falls short of
what capacity is unclear. We cannot discount the likelihood the quantum of proof required to establish a partnership. In
that as a member of the family, he occupied a niche above the absence of evidence, we cannot accept as an established
the rank-and-file employees. He would have enjoyed liberties fact that Tan EngKee allegedly contributed his resources to a
otherwise unavailable were he not kin, such as his residence common fund for the purpose of establishing a partnership.
in the Benguet Lumber Company compound. He would have Besides, it is indeed odd, if not unnatural, that despite the
moral, if not actual, superiority over his fellow employees, forty years the partnership was allegedly in existence, Tan
thereby entitling him to exercise powers of supervision. It EngKee never asked for an accounting. The essence of a
may even be that among his duties is to place orders with partnership is that the partners share in the profits and losses
suppliers. Again, the circumstances proffered by petitioners .Each has the right to demand an accounting as long as the
do not provide a logical nexus to the conclusion desired; these partnership exists. A demand for periodic accounting is
are not inconsistent with the powers and duties of a manager, evidence of a partnership. During his lifetime, Tan EngKee
even in a business organized and run as informally as appeared never to have made any such demand for
Benguet Lumber Company. accounting from his brother, Tang Eng Lay. We conclude that
Tan EngKee was only an employee, not a partner since they
did not present and offer evidence that would show that Tan
There being no partnership, it follows that there is no
EngKee received amounts of money allegedly representing
dissolution, winding up or liquidation to speak of. Hence, the
his share in the profits of the enterprise. There being no
petition must fail.
partnership, it follows that there is no dissolution, winding up
or liquidation to speak of.
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. DIGEST-VILLAREAL V. RAMIREZ
Facts: