Case Summary (G.R. No. 126881)
Key Dates
– September 13, 1984: Death of Tan Eng Kee.
– February 19, 1990: Original complaint filed for accounting, liquidation, and winding up of alleged partnership.
– March 18, 1991: Amended complaint impleads Benguet Lumber Company, Inc.
– April 12, 1995: RTC judgment declaring a joint adventure/partnership and ordering accounting and receiver.
– March 13, 1996: CA decision reversing RTC judgment and dismissing complaint.
– October 11, 1996: CA denial of petitioners’ motion for reconsideration.
– October 3, 2000: Supreme Court decision.
Applicable Law
– 1987 Philippine Constitution (decision dated 2000).
– Civil Code: Articles 1767 (definition of partnership), 1769 (rules for determining partnership), 1771–1773 (formalities for immovable contributions and capital ≥ ₱3,000), 1783 (particular partnership).
– Rules of Court, Rule 45 (appeal by certiorari), Rule 131, Sec. 3(d) (presumption of care).
– Rules on Evidence, Rule 133, Sec. 1 (preponderance of evidence).
Background and Procedural History
After Tan Eng Kee’s death, his common-law spouse and children sued his brother, Tan Eng Lay, and later the corporation he formed, Benguet Lumber Company, Inc., claiming that Tan Eng Kee had co-owned and co-managed “Benguet Lumber” as a partnership (or joint adventure) since World War II. They sought an accounting and liquidation of the alleged partnership. The RTC, finding sufficient evidence of a joint adventure akin to a particular partnership, declared their rights to share in the assets, ordered an accounting, and appointed a receiver.
Court of Appeals Decision
The CA reversed the RTC, holding that no partnership existed. It stressed the absence of essential formalities—no firm account, no partnership certificate, no written agreement on profit‐loss sharing or duration, and no SEC-recorded public instrument despite capital exceeding ₱3,000. The CA also relied on payroll records showing Tan Eng Kee as an employee, and opined that testimonial evidence of co-management was insufficient to prove partnership.
Issues on Appeal
Petitioners alleged the CA erred by:
- Ignoring partnership indicators for lack of firm formalities (account, letterheads, certificate, profit-loss agreement, fixed duration).
- Relying on Tan Eng Lay’s uncorroborated testimony that the enterprise was a sole proprietorship and that Tan Eng Kee was merely an employee.
- Discounting evidence of joint management, family residence on the compound, shared decision-making on prices and orders.
- Emphasizing lack of witnesses on the date of partnership formation.
- Citing Article 1772 formalities merely because capital exceeded ₱3,000 and immovable property was involved.
Jurisdiction and Standard of Review
Under Rule 45, the Supreme Court may review only questions of law. Factual findings of the CA are binding unless: contradictory; based on speculation; manifestly mistaken or absurd; predicated on grave abuse of discretion; contrary to the case issues or admissions; premised on misapprehension or ignorance of relevant facts; conflicting within themselves; or made without evidentiary citation. Here, RTC and CA reached conflicting factual conclusions, warranting review of whether facts supported reversal.
Legal Principles on Partnership and Joint Adventure
A partnership requires (1) two or more persons bound to contribute money, property, or industry to a common fund, and (2) intention to divide profits. No writing is needed unless immovable property is contributed or capital exceeds ₱3,000, in which case a public instrument and inventory are mandatory. A joint adventure shares similar elements—community of interest, profit-loss sharing, mutual control—but is often for a single transaction. Under Philippine law, a joint adventure is akin to a particular partnership but still governed by partnership rules.
Supreme Court’s Analysis
– No formal partnership agreement or articles were presented.
– The deceased Tan
Case Syllabus (G.R. No. 126881)
Facts of the Case
- Tan Eng Kee died on September 13, 1984, leaving a common-law spouse, Matilde Abubo, and six children (Teresita, Nena, Clarita, Carlos, Corazon, Elpidio).
- Petitioners alleged that after World War II, Tan Eng Kee and his brother, Tan Eng Lay, pooled resources and industry to form a business called “Benguet Lumber,” engaged in selling lumber, hardware, and construction supplies.
- The business reportedly prospered under joint management until 1981, when respondents purportedly converted the partnership into a corporation (“Benguet Lumber Company”) to exclude Tan Eng Kee’s heirs from profit participation.
- Petitioners claimed that this incorporation was a ruse to deprive their father’s estate of its rightful share in the enterprise’s assets and profits.
Procedural History
- February 19, 1990: Petitioners filed Civil Case No. 1983-R in the Regional Trial Court (RTC) of Baguio City, Branch 7, for accounting, liquidation, and winding up of the alleged partnership.
- March 18, 1991: Amended complaint impleading Benguet Lumber Company, admitted by the RTC on May 3, 1991.
- April 12, 1995: RTC rendered judgment declaring Benguet Lumber a joint adventure/particular partnership, entitling the heirs to an accounting, appointment of a receiver, and recognition of descendants’ rights; counterclaims were dismissed.
- March 13, 1996: Court of Appeals (CA), Fifth Division, reversed the RTC decision and dismissed the complaint.
- October 11, 1996: CA denied petitioners’ motion for reconsideration.
- Petitioners filed a petition for review on certiorari under Rule 45, raising only questions of law before the Supreme Court.
Issues Presented
- Whether Tan Eng Kee and Tan Eng Lay entered into a partnership (or joint adventure) requiring dissolution, liquidation, and accounting.
- Whether the CA committed errors in (a) demanding formal proof of partnership elements (firm account, letterheads, certificate of partnership, profit-loss agreement, duration); (b) relying solely on Tan Eng Lay’s testimony; and (c) disregarding circumstantial evidence of co-management and family residence in the corporate compound.
- Whether payrolls (Exhibits 4–4