Heirs of Tan Eng Kee vs.

CA

- Following the death of Tan Eng Kee, the petitioners in this case filed suit against the decedent’s
brother, Tan Eng Lay. The complaint was for accounting, liquidation and winding up of the
alleged partnership formed between Tan Eng Kee and Tan Eng Lay.
- The petitioners alleged that
o Tan Eng Kee and Tan Eng Lay, pooled their resources together to engage in the business
of selling lumber, hardware and construction supplies
o … They named their enterprise "Benguet Lumber"
- Tan Eng Lay contested that Tan Eng Kee was merely an employee and that Benguet Lumber was
his sole proprietorship. Thus, the heirs averred that there was an oral formation of a partnership
on the basis that:
o Tan Eng Kee commanded and supervised the employees along with Tan Eng Lay;
o Tan Eng Kee also determined the price at which the stocks were sold;
o Tan Eng Kee also placed orders to the suppliers; and
o Both partners’ families lived together in the same compound.
- Tan Eng Lay, in his defense, argued that an employee can also perform any of the
aforementioned tasks.
- RTC: held that Benguet Lumber is a joint venture and that Tan Eng Kee and Tan Eng Lay were
partners.
- CA: reversed the judgment and denied petitioner’s MFR.

ISSUE: W/N Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.

HELD: No. 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 the partnership. The intention to join in the
business venture for the purpose of obtaining profits thereafter to be divided, must be established. The court
cannot see the elements of a partnership from the testimonial evidence of the appellees.

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. 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.

Furthermore, if there was indeed a partnership between the siblings, it is odd that Tan Eng Kee never
asked for an accounting throughout the existence of their 40-year partnership. 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. Hence, a demand for periodic accounting is evidence of a
partnership.

With respect to the payrolls purporting to show that Tan Eng Kee was an ordinary employee of Benguet
Lumber, Art. 1769(4)(b) provides that 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 as wages of an employee … In the light of the aforequoted legal
provision, we conclude that Tan Eng Kee was only an employee, not a partner.