TANG ENG KEE vs CA Also, the business definitely amounted to more P3,000.
00 hence if there was
a partnership, it should have been made in a public instrument.
Business Organization – Partnership, Agency, Trust – Periodic Accounting
– Profit Sharing But the business was started after the war (1945) prior to the publication of
the New Civil Code in 1950?
Benguet Lumber has been around even before World War II but during the
war, its stocks were confiscated by the Japanese. After the war, the brothers Even so, nothing prevented the parties from complying with this requirement.
Tan Eng Lay and Tan Eng Kee pooled their resources in order to revive the
Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never
business. In 1981, Tan Eng Lay caused the conversion of Benguet Lumber
asked for an accounting. The essence of a partnership is that the partners share
into a corporation called Benguet Lumber and Hardware Company, with him
in the profits and losses. Each has the right to demand an accounting as long
and his family as the incorporators. In 1983, Tan Eng Kee died. Thereafter,
as the partnership exists. Even if it can be speculated that a scenario wherein
the heirs of Tan Eng Kee demanded for an accounting and the liquidation of
“if excellent relations exist among the partners at the start of the business and
the partnership.
all the partners are more interested in seeing the firm grow rather than get
Tan Eng Lay denied that there was a partnership between him and his brother. immediate returns, a deferment of sharing in the profits is perfectly
He said that Tan Eng Kee was merely an employee of Benguet Lumber. He plausible.” But in the situation in the case at bar, the deferment, if any, had
showed evidence consisting of Tan Eng Kee’s payroll; his SSS as an gone on too long to be plausible. A person is presumed to take ordinary care
employee and Benguet Lumber being the employee. As a result of the of his concerns. A demand for periodic accounting is evidence of a
presentation of said evidence, the heirs of Tan Eng Kee filed a criminal case partnership which Kee never did.
against Tan Eng Lay for allegedly fabricating those evidence. Said criminal
The Supreme Court also noted:
case was however dismissed for lack of evidence.
In determining whether a partnership exists, these rules shall apply:
ISSUE: Whether or not Tan Eng Kee is a partner.
(1) Except as provided by Article 1825, persons who are not partners as to
HELD: No. There was no certificate of partnership between the brothers. The
each other are not partners as to third persons;
heirs were not able to show what was the agreement between the brothers as
to the sharing of profits. All they presented were circumstantial evidence (2) Co-ownership or co-possession does not of itself establish a partnership,
which in no way proved partnership. whether such co-owners or co-possessors do or do not share any profits made
by the use of the property;
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, (3) The sharing of gross returns does not of itself establish a partnership,
no certificate of partnership, no agreement as to profits and losses, and no whether or not the persons sharing them have a joint or common right or
time fixed for the duration of the partnership. There was even no attempt to interest in any property which the returns are derived;
submit an accounting corresponding to the period after the war until Kee’s
(4) The receipt by a person of a share of the profits of a business is prima
death in 1984. It had no business book, no written account nor any
facie evidence that he is a partner in the business, but no such inference shall
memorandum for that matter and no license mentioning the existence of a
be drawn if such profits were received in payment:
partnership.
(a) As a debt by installment or otherwise;
In fact, Tan Eng Lay was able to show evidence that Benguet Lumber is a
sole proprietorship. He registered the same as such in 1954; that Kee was just (b) As wages of an employee or rent to a landlord;
an employee based on the latter’s payroll and SSS coverage, and other records (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
indicating Tan Eng Lay as the proprietor.
profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other
property by installments or otherwise.
