740 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals

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.
Appeals; Evidence; Findings of facts of the Court of Appeals will not be disturbed on appeal if
such are supported by the evidence.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, does not include review of factual issues.

Same; Same; Exceptions.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

_______________
*
SECOND DIVISION.

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VOL. 341, OCTOBER 3, 2000 741

Heirs of Tan Eng Kee vs. Court of Appeals

grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the
Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible; (4)
when there is grave abuse of discretion in the appreciation of facts; (5) when the appellate court,
in making its findings, goes beyond the issues of the case, and such findings are contrary to the
admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is
premised on a misapprehension of facts; (7) when the Court of Appeals fails to notice certain
relevant facts which, if properly considered, will justify a different conclusion; (8) when the
findings of fact are themselves conflicting; (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.
Partnerships; Words and Phrases; 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 intended to divide the profits among themselves.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: x x x 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. 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 be
formally reduced into writing, since statute allows the oral constitution of a partnership, save in
two instances: (1) when immovable property or real rights are contributed, and (2) when the
partnership has a capital of three thousand pesos or more. In both cases, a public instrument is
required. An inventory to be signed by the parties and attached to the public instrument is also
indispensable to the validity of the partnership whenever immovable property is contributed to
the partnership.

Same; Same; Joint Ventures; Partnership and Joint Venture, Distinguished.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 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

742

742 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals

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.

Same; Same; Same; Same; A joint venture may be likened to a particular partnership; The legal
concept of a joint venture is of common law origin and has no precise legal definition, but it has
been generally understood to mean an organization formed for some temporary purpose.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 Wares Manufacturing Corporation, et al., we
expressed the view that a joint venture may be likened to a particular partnership, thus: The legal
concept of a joint venture is of common law origin. It has no precise legal definition, but it has
been generally understood to mean an organization formed for some temporary purpose. (Gates
v. Megargel, 266 Fed. 811 [1920]) It is hardly distinguishable from the partnership, since their
elements are similarcommunity 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, 395 111. 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. Bolaos, 95 Phil. 906 [1954]) (Campos and Lopez-Campos Comments, Notes and
Selected Cases, Corporation Code 1981).

743

VOL. 341, OCTOBER 3, 2000 743

Heirs of Tan Eng Kee vs. Court of Appeals

Same; Co-Ownership; A co-ownership or co-possession is not an indicium of the existence of a

partnership.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 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 Lay, however, denied knowledge of this meeting or of the conversation between Peralta
and his brother. 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 copossession (specifically here, of the G.I. sheets) is not an indicium of
the existence of a partnership.

Same; The essence of a partnership is that the partners share in the profits and losses; A demand
for periodic accounting is evidence of a partnership.Besides, it is indeed odd, if not unnatural,
that despite the forty years the partnership was allegedly in existence, Tan Eng Kee never asked
for an accounting. The essence of a partnership is that the partners share in the profits and losses.
Each has the right to demand an accounting as long as the partnership exists. We have allowed a
scenario wherein [i]f excellent relations exist among the partners at the start of the business and
all the partners are more interested in seeing the firm grow rather than get immediate returns, a
deferment of sharing in the profits is perfectly plausible. But in the situation in the case at bar,
the deferment, if any, had gone on too long to be plausible. A person is presumed to take
ordinary care of his concerns, x x x 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.
Same; 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.In the instant case, we find private respondents
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 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

744

744 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals

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.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Lauro D. Gacayan for petitioner.

Soo, Gutierrez, Leogardo & Lee collaborating counsel for petitioner.

Francisco S. Reyes Law Office for private respondents.

DE LEON, JR., J .:

In this petition for review on certiorari, petitioners pray for the reversal of the Decision1 dated
March 13, 1996 of the former Fifth Division2 of the Court of Appeals in CA-G.R. CV No.
47937, the dispositive portion of which states:

THE FOREGOING CONSIDERED, the appealed decision is hereby set aside, and the complaint
dismissed.

The facts are:

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 decedents brother TAN ENG LAY on

_______________
1
Rollo, pp. 129-147.
2
Justice Bernardo LL. Salas, ponente, with Justices Pedro A. Ramirez and Ma. Alicia Austria-
Martinez, concurring.

745

VOL. 341, OCTOBER 3, 2000 745

Heirs of Tan Eng Kee vs. Court of Appeals

February 19, 1990. The complaint,3 docketed as Civil Case No. 1983-R in the Regional Trial
Court of Baguio City was for accounting, liquidation and winding up of the alleged partnership
formed after World War II between Tan Eng Kee and Tan Eng Lay. On March 18, 1991, the
petitioners filed an amended complaint4 impleading private respondent herein BENGUET
LUMBER COMPANY, as represented by Tan Eng Lay. The amended complaint was admitted
by the trial court in its Order dated May 3, 1991.5

The amended complaint principally alleged that after the second World War, Tan Eng Kee and
Tan Eng Lay, pooling their resources and industry together, entered into a partnership engaged in
the business of selling lumber and hardware and construction supplies. They named their
enterprise Benguet Lumber which they jointly managed until Tan Eng Kees 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 judgment6 on April 12, 1995,
to wit:

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

1. a) Declaring that Benguet Lumber is a joint venture which is akin to a particular

partnership;
2. 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
_______________
3
Records, pp. 1-4.
4
Records, pp. 123-126.
5
Records, p. 130.
6
Records, pp. 632-647.

746

746 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals

1. its and/or losses of the business venture or particular partnership;

2. 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;
3. 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.
4. 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;
5. 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.
6. g) Denying the award of damages to the plaintiffs for lack of proof except the expenses in
filing the instant case.
7. 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
reconsideration7 was denied by the Court of Appeals in a Resolution8 dated 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
_______________
7
Rollo, pp. 148-149.
8
Rollo, p. 173.

747

VOL. 341, OCTOBER 3, 2000 747

Heirs of Tan Eng Kee vs. Court of Appeals

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 judgment9 dismissing the
cases for insufficiency of evidence.

In their assignment of errors, petitioners claim that:

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:
 1. a. THAT THE FAMILIES OF TAN ENG KEE AND TAN ENG LAY WERE ALL
LIVING AT THE BENGUET LUMBER COMPOUND;

_______________
9
Rollo, pp. 412-419.

748

748 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals

1. b. THAT BOTH TAN ENG LAY AND TAN ENG KEE WERE COMMANDING THE
EMPLOYEES OF BENGUET LUMBER;
2. c. THAT BOTH TAN ENG KEE AND TAN ENG LAY WERE SUPERVISING THE
EMPLOYEES THEREIN;
3. d. THAT TAN ENG KEE AND TAN ENG LAY WERE THE ONES DETERMINING
THE PRICES OF STOCKS TO BE SOLD TO THE PUBLIC; AND
4. 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).

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO

PARTNERSHIP BETWEEN THE LATE TAN ENG KEE AND HIS BROTHER TAN ENG
LAY BECAUSE THE PRESENT CAPITAL OR ASSETS OF BENGUET LUMBER IS
DEFINITELY MORE THAN P3,000.00 AND AS SUCH THE EXECUTION OF A PUBLIC
INSTRUMENT CREATING A PARTNERSHIP SHOULD HAVE BEEN MADE AND NO
SUCH PUBLIC INSTRUMENT ESTABLISHED BY THE APPELLEES (PAGE 17,
DECISION).

As a premise, we reiterate the oft-repeated rule that findings of facts of the Court of Appeals will
not be disturbed on appeal if such are supported by the evidence.10 Our jurisdiction, it must be
emphasized, does not include review of factual issues. Thus:

_______________
10
Brusas v. Court of Appeals, 313 SCRA 176, 188 (1999); Guerrero v. Court of Appeals, 285
SCRA 670, 678 (1998); Atillo III v. Court of Appeals 266 SCRA 596, 605-606 (1997); Mallari
v. Court of Appeals, 265 SCRA 456, 461 (1996).

749

VOL. 341, OCTOBER 3, 2000 749

Heirs of Tan Eng Kee vs. Court of Appeals

Filing of petition with Supreme Court.A party desiring to appeal by certiorari from a judgment
or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court
or other courts whenever authorized by law, may file with the Supreme Court a verified petition
for review on certiorari. The petition shall raise only questions of law which must be distinctly
set forth.11 [italics supplied]

Admitted exceptions have been recognized, though, and when present, may compel us to analyze
the evidentiary basis on which the lower court rendered judgment. Review of factual issues is
therefore warranted:

1. (1) when the factual findings of the Court of Appeals and the trial court are contradictory;
2. (2) when the findings are grounded entirely on speculation, surmises, or conjectures;
3. (3) when the inference made by the Court of Appeals from its findings of fact is
manifestly mistaken, absurd, or impossible;
4. (4) when there is grave abuse of discretion in the appreciation of facts;
5. (5) when the appellate court, in making its findings, goes beyond the issues of the case,
and such findings are contrary to the admissions of both appellant and appellee;
6. (6) when the judgment of the Court of Appeals is premised on a misapprehension of
facts;
7. (7) when the Court of Appeals fails to notice certain relevant facts which, if properly
considered, will justify a different conclusion;
8. (8) when the findings of fact are themselves conflicting;
9. (9) when the findings of fact are conclusions without citation of the specific evidence on
which they are based; and
10. (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

_______________
11
1997 RULES OF CIVIL PROCEDURE, Rule 45, Sec. 1.
12
Fuentes v. Court of Appeals, 268 SCRA 703, 708-709 (1997).

750

750 SUPREME COURT REPORTS ANNOTATED

 Heirs of Tan Eng Kee vs. Court of Appeals

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 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 postwar 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
Kees 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 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 Kees 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 codefendant 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 incor-

751

VOL. 341, OCTOBER 3, 2000 751

 Heirs of Tan Eng Kee vs. Court of Appeals

poration). 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 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 latters 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

752

752 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals
the partnership. The intention to join in the business venture for the purpose of obtaining profits
thereafter to be divided, must be established. We cannot see these elements from the testimonial
evidence of the appellees.

As can be seen, the appellate court disputed and differed from the trial court which had adjudged
that TAN ENG KEE and TAN ENG LAY had allegedly entered into a joint venture. In this
connection, we have held that whether a partnership exists is a factual matter; consequently,
since the appeal is brought to us under Rule 45, we cannot entertain inquiries relative to the
correctness of the assessment of the evidence by the court a quo.13 Inasmuch as the Court of
Appeals and the trial court had reached conflicting conclusions, perforce we must examine the
record to determine if the reversal was justified.

The primordial issue here is whether Tan Eng Kee and Tan Eng Lay were partners in Benguet
Lumber. A contract of partnership is defined by law as one where:

x x x two or more persons bind themselves to contribute money, property, or industry to a

common fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession.14

Thus, in order to constitute a partnership, it must be established that (1) two or more persons
bound themselves to contribute money, property, or industry to a common fund, and (2) they
intend to divide the profits among themselves.15 The agreement need not be formally reduced
into writing, since statute allows the oral constitution of a partnership, save in two instances: (1)
when immovable property or real rights are contributed,16 and (2) when the partnership has a
capital of three thousand pesos or more.17 In both

_______________
13
Cf. Alicbusan v. Court of Appeals, 269 SCRA 336, 340-341 (1997)
14
CIVIL CODE, Art. 1767.
15
Yulo v. Yang Chiao Seng, 106 Phil. 110, 116 (1959).
16
CIVIL CODE, Art. 1771.
17
CIVIL CODE, Art. 1772.

753

VOL. 341, OCTOBER 3, 2000 753

Heirs of Tan Eng Kee vs. Court of Appeals
cases, a public instrument is required.18 An inventory to be signed by the parties and attached to
the public instrument is also indispensable to the validity of the partnership whenever immovable
property is contributed to the partnership.19

The trial court determined that Tan Eng Kee and Tan Eng Lay had entered into a joint venture,
which it said is akin to a particular partnership.20 A particular partnership is distinguished from a
joint adventure, to wit:

1. (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.
2. (b) Usually, but not necessarily a joint adventure is limited to a SINGLE
TRANSACTION, although the business of pursuing to a successful termination may
continue for a number of years; a partnership generally relates to a continuing business of
various transactions of a certain kind.21

A joint venture presupposes generally a parity of standing between the joint co-ventures or
partners, in which each party has an equal proprietary interest in the capital or property
contributed, and where each party exercises equal rights in the conduct of the business.22
Nonetheless, in Aurbach, et al. v. Sanitary Wares Manufacturing Corporation, et al.23 we
expressed the view that a joint venture may be likened to a particular partnership, thus:

_______________
18
Note, however, Article 1768 of the Civil Code which provides: The partnership has a
juridical personality separate and distinct from that of each of the partners, even in case of failure
to comply with the requirements of Article 1772, first paragraph.
19
CIVIL CODE, Art. 1773.
20
A particular partnership has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation. (CIVIL CODE, Art. 1783)
21
V.E. PARAS, CIVIL CODE OF THE PHILIPPINES ANNOTATED 546 (13th ed., 1995).
22
Sevilla v. Court of Appeals, 160 SCRA 171, 181 (1988).
23
180 SCRA 130, 146-147 (1989).

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Heirs of Tan Eng Kee vs. Court of Appeals
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 similarcommunity 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, 395 111. 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. Bolaos, 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.

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Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from Tan Eng Lay,
could have expounded on the precise nature of the business relationship between them. In the
absence of evidence, we cannot accept as an established fact that Tan Eng Kee allegedly
contributed his resources to a common fund for the purpose of establishing a partnership. The
testimonies to that effect of petitioners witnesses is directly controverted by Tan Eng Lay. It
should be noted that it is not with the number of witnesses wherein preponderance lies;24 the
quality of their testimonies is to be considered. None of petitioners witnesses could suitably
account for the beginnings of Benguet Lumber Company, except perhaps for Dionisio Peralta
whose deceased wife was related to Matilde Abubo.25 He stated that when he met Tan Eng Kee
after the liberation, the latter asked the former to accompany him to get 80 pieces of G.I. sheets
supposedly owned by both brothers.26 Tan Eng Lay, however, denied knowledge of this meeting
or of the conversation between Peralta and his brother.27 Tan Eng Lay consistently testified that
he had his business and his brother had his, that it was only later on that his said brother, Tan
Eng Kee, came to work for him. Be that as it may, co-ownership or co-possession (specifically
here, of the G.I. sheets) is not an indicium of the existence of a partnership.28

Besides, it is indeed odd, if not unnatural, that despite the forty years the partnership was
allegedly in existence, Tan Eng Kee never asked for an accounting. The essence of a partnership
is that the partners share in the profits and losses.29 Each has the right to demand an accounting
as long as the partnership exists.30 We have allowed a scenario wherein [i]f excellent relations
exist among the partners at the start of the business and all the partners are more

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24
REVISED RULES ON EVIDENCE, Rule 133, Sec. 1.
25
TSN, June 23, 1990, p. 9.
26
TSN, January 28, 1993, p. 85.
27
TSN, July 1, 1993, p. 13; TSN, July 8, 1993, p. 4.
28
Navarro v. Court of Appeals, 222 SCRA 675, 679 (1993); CIVIL CODE, Art. 1769.
29
Moran v. Court of Appeals, 133 SCRA 88, 95 (1984).
30
Fue Lung v. Intermediate Appellate Court, 169 SCRA 746, 755 (1989).

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Heirs of Tan Eng Kee vs. Court of Appeals

interested in seeing the firm grow rather than get immediate returns, a deferment of sharing in
the profits is perfectly plausible.31 But in the situation in the case at bar, the deferment, if any,
had gone on too long to be plausible. A person is presumed to take ordinary care of his
concerns.32 As we explained in another case:

In the first place, plaintiff did not furnish the supposed P20,000.00 capital. In the second place,
she did not furnish any help or intervention in the management of the theatre. In the third place,
it does not appear that she has even demanded from defendant any accounting of the expenses
and earnings of the business. Were she really a partner, her first concern should have been to
find out how the business was progressing, whether the expenses were legitimate, whether the
earnings were correct, etc. She was absolutely silent with respect to any of the acts that a
partner should have done; all that she did was to receive her share of P3,000.00 a month, which
cannot be interpreted in any manner than a payment for the use of the premises which she had
leased from the owners. Clearly, plaintiff had always acted in accordance with the original letter
of defendant of June 17, 1945 (Exh. A), which shows that both parties considered this offer as
the real contract between them.33 [italics supplied]

A demand for periodic accounting is evidence of a partnership.34 During his lifetime, Tan Eng
Kee appeared never to have made any such demand for accounting from his brother, Tang Eng
Lay.

This brings us to the matter of Exhibits 4 to 4-U for private respondents, consisting of
payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet Lumber, as
it was then called. The authenticity of these documents was questioned by petitioners, to the
extent that they filed criminal charges against Tan Eng Lay and his wife and children. As
aforesaid, the criminal cases were dismissed for insufficiency of evidence. Exhibits 4 to 4-U
in fact shows that Tan Eng Kee received sums as wages of an employee. In connection therewith,
Article 1769 of the Civil Code provides:

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31
Id., at 754.
32
1997 RULES OF CIVIL PROCEDURE, Rule 131, Sec. 3, Par. (d).
33
Yulo v. Yang Chiao Seng, 106 Phil. 110, 117 (1959).
34
Estanislao, Jr. v. Court of Appeals, 160 SCRA 830, 837 (1988).

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In determining whether a partnership exists, these rules shall apply:

1. (1) Except as provided by Article 1825, persons who are not partners as to each other are
not partners as to third persons;
2. (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. (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. (4) The receipt by a person of a share of the profits of a business is 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:

1. (a) As a debt by installment or otherwise;

 2. (b) As wages of an employee or rent to a landlord;
3. (c) As an annuity to a widow or representative of a deceased partner;
4. (d) As interest on a loan, though the amount of payment vary with the profits of the
business;
5. (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.

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

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758 SUPREME COURT REPORTS ANNOTATED

Heirs of Tan Eng Kee vs. Court of Appeals

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:

1. (i) even a mere supervisor in a company, factory or store gives orders and directions to
his subordinates. So long, therefore, that an employees position is higher in rank, it is not
unusual that he orders around those lower in rank.
2. (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.
3. (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.
4. (iv) and even if it is assumed that Tan Eng Kee was quarrelling 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 respondents arguments to be well-taken. Where

circumstances taken singly may be inadequate to prove the intent to form a partnership,
nevertheless, the

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35
Private Respondents Memorandum, Rollo, p. 390.

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collective effect of these circumstances may be such as to support a finding of the existence of
the parties intent.36 Yet, in the case at bench, even the aforesaid circumstances when taken
together are not persuasive indicia of a partnership. They only tend to show that Tan Eng Kee
was involved in the operations of Benguet Lumber, but in what capacity is unclear. We cannot
discount the likelihood that as a member of the family, he occupied a niche above the rank-and-
file employees. He would have enjoyed liberties otherwise unavailable were he not kin, such as
his residence in the Benguet Lumber Company compound. He would have moral, if not actual,
superiority over his fellow employees, thereby entitling him to exercise powers of supervision. It
may even be that among his duties is to place orders with suppliers. Again, the circumstances
proffered by petitioners do not provide a logical nexus to the conclusion desired; these are not
inconsistent with the powers and duties of a manager, even in a business organized and run as
informally as Benguet Lumber Company.

There being no partnership, it follows that there is no dissolution, winding up or liquidation to

speak of. Hence, the petition must fail.

WHEREFORE, the petition is hereby denied, and the appealed decision of the Court of Appeals
is hereby AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.

Bellosillo (Chairman), Mendoza, Quisumbing and Buena, JJ ., concur.

Petition denied, judgment affirmed in toto.

Notes.A general professional partnership, unlike an ordinary business partnership, is not itself
an income taxpayer, as the income tax is imposed not on the professional partnership but on the
partners themselves in their individual capacity. (Tan vs. Del Rosario, Jr., 237 SCRA 324
[1994])

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36
Evangelista, et al. v. Collector of Internal Revenue, et al., 102 Phil. 141, 146 (1957).

760

760 SUPREME COURT REPORTS ANNOTATED

Reyes vs. Sisters of Mercy Hospital

Absent a clear showing that a barbershop owner and a barber had intended to pursue a
relationship of industrial partnership, the Court entertains no doubt that the latter was employed
by the former as caretaker-barberundoubtedly, the services performed by a barber is related to,
and in the pursuit of the principal business activity of the former. (Jo vs. National Labor
Relations Commission, 324 SCRA 437 [2000])

o0o