Hrs. of Tan Eng Kee v.

CA, 341 SCRA 740 Facts: Tan Eng Kee (Kee) and Tan Eng Lay (Lay) are brothers. After the death of Kee, his common-law spouse and children (Heirs), filed a suit against Lay for accounting, liquidation and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay. Petitioners amended their complaint impleading private respondent herein BENGUET LUMBER COMPANY, as represented by Lay. They alleged that after WW II, Kee and Lay, pooled their resources and industry together, and 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. Issues: Was there a partnership between Kee and Lay? Are the petitioner heirs entitled to accounting of the partnership assets? Ruling: No, there was no partnership. The SC affirmed the CAs ruling that Benguet Lumber was in the form of a sole proprietorship. The best evidence to determine if partnership existed would have been the contract of partnership itself, or the articles of partnership but there is none The Court then determined whether a partnership existed based purely on circumstantial evidence. The evidence presented by petitioners falls short of the quantum of proof required to establish a partnership. Firstly, there is no evidence that Kee contributed his resources to a common fund for the purpose of establishing a partnership. Unfortunately for petitioners, 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 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 quality of their testimonies is to be considered. None of petitioners' witnesses could suitably account for the beginnings of Benguet Lumber Company. Tan Eng Lay consistently testified that he had his business and his brother had his, that it was only later on that his said brother, Tan Eng Kee, came to work for him. Be that as it may, co-

ownership or co-possession (specifically here, of the G.I. sheets) is not an indicium of the existence of a partnership. Secondly, it is indeed odd, if not unnatural, that despite the forty years the partnership was allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership is that the partners share in the profits and losses. Each has the right to demand an accounting as long as the partnership exists. 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 his brother, Tang Eng Lay.

Thirdly, Lay presented payrolls as evidence that Kee was a mere employee of the business. Article 1769 of the Civil Code provides: In determining whether a partnership exists, these rules shall apply: (1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third persons; (2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property; (3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property which the returns are derived; (4) The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: (a) As a debt by installment or otherwise; (b) As wages of an employee or rent to a landlord; (c) As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profits of the business; (e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.

In the light of the aforequoted legal provision, we conclude that Tan Eng Kee was only an employee, not a partner. Even if the payrolls as evidence were discarded, petitioners would still be back to square one, so to speak, 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. Finally, petitioners claim the alleged 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. 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 circumstances when taken together are not persuasive indicia of a partnership. They only tend to show that Tan Eng Kee was involved in the operations of Benguet Lumber, but in what capacity is unclear. We cannot discount the likelihood that as a member of the family, he occupied a niche above the rank-and-file employees. He would have enjoyed liberties otherwise unavailable were he not kin, such as his residence in the Benguet Lumber Company compound. He would have moral, if not actual, superiority over his fellow employees, thereby entitling him to exercise powers of supervision. It may even be that among his duties is to place orders with suppliers. Again, the circumstances proffered by petitioners do not provide a logical nexus to the conclusion desired; these are not inconsistent with the powers and duties of a manager, even in a business organized and run as informally as Benguet Lumber Company. There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of. Hence, the petition must fail.

In other words, no partnership because 1. No common funds 2. No asking for accounting 3. No shares or talks of how much Kee was to get from the partnership profits 4. Supervising, determing price at which stocks were to be sold, placing order to supplies, and living in the company compound does not make one a partner as in the case at bar, Kee was the brother so it is was a privilege for him to be given special treatment than regular rank and file employees. Nevertheless, he remains one.