October 3, 2000
Ponente: De Leon, Jr., J.
FACTS
Following World War II, brothers Tan Eng Kee and Tan Eng Lay pooled their resources together and allegedly entered into a partnership to sell lumber and construction supplies in Baguio City. They named their enterprise "Benguet Lumber" which they jointly managed until Tan Eng Kee's death.
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.
After the death of Tan Eng Kee in 1984, his common-law spouse Matilde and their five children Teresita, Nena, Clarita, Carlos, Corazon and Elpidio -- collectively known as the heirs of Tan Eng Kee -- filed an action against Tan Eng Lay for accounting, liquidation and winding up of the alleged partnership.
RTC RULING: Benguet Lumber was a joint venture akin to a particular partnership. As such, Tan Eng Kee and Tan Eng Lay were joint adventurers and/or partners in a business venture and/or particular partnership called Benguet Lumber, both of whom should share in the profits and/or losses of the business venture or particular partnership
CA RULING: Reversed RTC and ruled there was no partnership between Tan Eng Kee and Tan Eng Lay.
Hence, the instant petition.
RULING
Petition denied. CA ruling affirmed in toto. No partnership between Tan Eng Kee and Tan Eng Lay. There being no partnership, it follows that there is no dissolution, winding up or liquidation to speak of.
Whether Tan Eng Kee and Tan Eng Lay entered into a partnership agreement. – NO.
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.
In the present case, the alleged partnership was never formally organized. Undoubtedly, the best evidence would have been the contract of partnership itself, or the articles of partnership but there was none. As such, the Court had to rely on circumstantial evidence to determine whether a partnership existed.
The heirs of Tan Eng Kee alleged existence of a partnership from this set of circumstances: that Tan Eng Lay and Tan Eng Kee were commanding the employees; that both were supervising the employees; that both were the ones who determined the price at which the stocks were to be sold; and that both placed orders to the suppliers of the Benguet Lumber Company. They also pointed 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.
But the SC affirmed the CA ruling that the abovementioned circumstances fell short of the quantum of proof required to establish a partnership. In fact, the SC found Tan Eng Lay's counterarguments more persuasive. Tan Eng Lay argued that: his brother Tan Eng Kee was a supervisory employee who can give orders, that ordering materials from suppliers for and in behalf of Benguet Lumber was not an indication that Tan Eng Kee was a partner, and that the privilege accorded to Tan Eng Kee and his family to live in the business compound was merely out of the kindness and generosity of Tan Eng Lay towards a blood relative.
In the words of the SC: "[The circumstantial evidence proffered by the heirs] 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."
The SC also found it odd that in the 40+ years of the alleged partnership, Tan Eng Kee never asked for an accounting. A demand for periodic accounting is evidence of a partnership. Tan Eng Kee's deferment [of demand for an accounting], if any, had gone on too long to be plausible. A person is presumed to take ordinary care of his concerns.
Whether Tan Eng Kee was a mere employee and not a partner. – YES.
Payrolls presented by Tan Eng Lay showed that Tan Eng Kee was an ordinary employee of Benguet Lumber. The authenticity of these documents was questioned by the heirs of Tan Eng Kee, to the extent that they filed criminal charges against Tan Eng Lay and his wife and children. All these criminal cases were dismissed for insufficiency of evidence.
Pursuant to Art. 1769 of the CC, the SC concluded that Tan Eng Kee was only an employee, not a partner. Even if the payrolls as evidence were discarded, the heirs of Tan Eng Kee 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.
They also 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. As such, 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.
How is a joint venture different from a partnership?
The main distinction cited by most opinions in common law jurisdiction is that a partnership contemplates a general business with some degree of continuity, while a joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. But under Philippine jurisdiction, this observation is not entirely accurate since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking.
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.
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.• Under Philippine law, a joint venture is a form of partnership and should thus be governed by the law of partnerships.
DOCTRINE
In common law jurisdiction, a partnership contemplates a
general business with some degree of continuity, while a joint venture
is formed for the execution of a single transaction, and is thus of a
temporary nature. But under Philippine law, a joint venture is a form of
partnership and should thus be governed by the law of partnerships.
