AGENCY 12 G.R. No.

172690 March 3, 2010

HEIRS OF JOSE LIM, represented by ELENITO LIM, Petitioners,

vs.
JULIET VILLA LIM, Respondent.

FACTS:
A complaint for partition, accounting and damages was filed by the Petitioner Heirs of Jose Lim
against the Respondent Juliet Villa Lim, widow of the Elfedo Lim, who was the eldest son of
Jose and Cresencia Lim. The Petitioners alleged that the deceased Jose Lim and his friends,
Jimmy Yu and Norberto Uy, formed a partnership in 1980 to engage in the trucking business
with an initial contribution of ₱ 50,000.00 each. Also in the same year, Jose gave his eldest son,
Elfedo, ₱ 50,000.00 as the latter’s capital in the said partnership. Upon Jose’s death, the heirs
and partners agreed to continue the business under the Management of Elfedo. Further, the
shares of the partnership profits and income formed part of the estate of Jose, held in trust by
Elfedo. The Petitioners’ gave Elfedo the authority to use, purchase, and acquire properties using
the said funds. Thus, he was never a partner thereof, but merely supervised and managed the
trucking business of the partners.

On the other hand, the Respondent claimed that Elfedo was a partner, stating that Jose gave
him ₱ 50,000.00 as his capital to the partnership. He managed the trucking business, which
flourished through his effort. Further, the partnership was able to engage in other business
ventures and acquire real properties. Thus, he was a partner separate and distinct from Jose,
especially after the latter died. His assets arising from the now-ceased partnership must not be
subject of the complaint.

The Regional Trial Court (RTC) rendered its decision in favor of the Petitioners. Aggrieved, the
Respondent appealed to the Court of Appeals (CA). On appeal, the CA reversed the RTC
decision. Hence, this Petition.

ISSUE:
Whether or not Elfedo was a partner of the partnership formed by Jose and his friends

RULING:
YES.

A partnership exists when two or more persons agree to place their money, effects, labor, and
skill in lawful commerce or business, with the understanding that there shall be a proportionate
sharing of the profits and losses among them. A contract of partnership is defined by the Civil
Code as one where 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.

Undoubtedly, the best evidence would have been the contract of partnership or the
articles of partnership. Unfortunately, there is none in this case, because the alleged
partnership was never formally organized. Nonetheless, we are asked to determine who
between Jose and Elfledo was the "partner" in the trucking business.
A careful review of the records persuades us to affirm the CA decision. The evidence
presented by petitioners falls short of the quantum of proof required to establish that: (1) Jose
was the partner and not Elfledo; and (2) all the properties acquired by Elfledo and respondent
form part of the estate of Jose, having been derived from the alleged partnership.

Applying the legal provision to the facts of this case, the following circumstances tend to
prove that Elfledo was himself the partner of Jimmy and Norberto: 1) Cresencia
testified that Jose gave Elfledo ₱50,000.00, as share in the partnership, on a date that coincided
with the payment of the initial capital in the partnership; (2) Elfledo ran the affairs of the
partnership, wielding absolute control, power and authority, without any intervention or
opposition whatsoever from any of petitioners herein; (3) all of the properties, particularly the
nine trucks of the partnership, were registered in the name of Elfledo; (4) Jimmy testified that
Elfledo did not receive wages or salaries from the partnership, indicating that what he actually
received were shares of the profits of the business; and (5) none of the petitioners, as heirs of
Jose, the alleged partner, demanded periodic accounting from Elfledo during his lifetime. As
repeatedly stressed in Heirs of Tan Eng Kee, a demand for periodic accounting is evidence of a
partnership.

Furthermore, petitioners failed to adduce any evidence to show that the real and personal
properties acquired and registered in the names of Elfledo and respondent formed part of the
estate of Jose, having been derived from Jose's alleged partnership with Jimmy and Norberto.
They failed to refute respondent's claim that Elfledo and respondent engaged in other
businesses. Edison even admitted that Elfledo also sold Interwood lumber as a sideline. 19
Petitioners could not offer any credible evidence other than their bare assertions. Thus, we
apply the basic rule of evidence that between documentary and oral evidence, the former
carries more weight.

Finally, we agree with the judicious findings of the CA, to wit:

The above testimonies prove that Elfledo was not just a hired help but one of the partners in
the trucking business, active and visible in the running of its affairs from day one until this
ceased operations upon his demise. The extent of his control, administration and management
of the partnership and its business, the fact that its properties were placed in his name, and
that he was not paid salary or other compensation by the partners, are indicative of the fact
that Elfledo was a partner and a controlling one at that. It is apparent that the other partners
only contributed in the initial capital but had no say thereafter on how the business was ran.
Evidently it was through Elfredo’s efforts and hard work that the partnership was able to
acquire more trucks and otherwise prosper. Even the appellant participated in the affairs of the
partnership by acting as the bookkeeper sans salary.

It is notable too that Jose Lim died when the partnership was barely a year old, and the
partnership and its business not only continued but also flourished. If it were true that it was
Jose Lim and not Elfledo who was the partner, then upon his death the partnership should have
been dissolved and its assets liquidated. On the contrary, these were not done but instead its
operation continued under the helm of Elfledo and without any participation from the heirs of
Jose Lim.
AGENCY 13 G.R. No. 127405 October 4, 2000

MARJORIE TOCAO and WILLIAM T. BELO, petitioners,

vs.
COURT OF APPEALS and NENITA A. ANAY, respondents.

FACTS:
William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The three agreed to form
a joint venture for the sale of cooking wares. Belo was to contribute P2.5 million; Tocao also
contributed some cash and she shall also act as president and general manager; and Anay shall
be in charge of marketing. Belo and Tocao specifically asked Anay because of her experience
and connections as a marketer. They agreed further that Anay shall receive the following:

• 10% share of annual net profits

• 6% overriding commission for weekly sales
• 30% of sales Anay will make herself
• 2% share for her demo services

They operated under the name Geminesse Enterprise, this name was however registered as a
sole proprietorship with the Bureau of Domestic Trade and under Tocao. The joint venture
agreement was not reduced to writing because Anay trusted Belo’s assurances. The venture
succeeded under Anay’s marketing prowess. But then the relationship between Anay and Tocao
soured. One day, Tocao advised one of the branch managers that Anay was no longer a part of
the company. Anay then demanded that the company be audited and her shares be given to
her.

ISSUE:
Whether or not there is partnership

RULING:
YES.

To be considered a juridical personality, a partnership must fulfill these requisites:

(1) two or more persons bind themselves to contribute money, property or industry to a
common fund; and (2) intention on the part of the partners to divide the profits among
themselves. It may be constituted in any form; a public instrument is necessary only
where immovable property or real rights are contributed thereto. This implies that
since a contract of partnership is consensual, an oral contract of partnership is as good as a
written one. Where no immovable property or real rights are involved, what matters is that the
parties have complied with the requisites of a partnership. The fact that there appears to be no
record in the Securities and Exchange Commission of a public instrument embodying the
partnership agreement pursuant to Article 1772 of the Civil Code17 did not cause the
nullification of the partnership. The pertinent provision of the Civil Code on the matter states:

Art. 1768. 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.
By the set-up of the business, third persons were made to believe that a partnership had indeed
been forged between petitioners and private respondents. Thus, the communication dated June
4, 1986 of Missy Jagler of West Bend Company to Roger Muencheberg of the same company
states:

"Marge Tocao is president of Geminesse Enterprises. Geminesse will finance the operations.
Marge does not have cookware experience. Nita Anay has started to gather former managers,
Lina Torda and Dory Vista. She has also gathered former demonstrators, Betty Bantilan, Eloisa
Lamela, Menchu Javier. They will continue to gather other key people and build up the
organization. All they need is the finance and the products to sell."

On the other hand, petitioner Belo’s denial that he financed the partnership rings hollow in the
face of the established fact that he presided over meetings regarding matters affecting the
operation of the business. Moreover, his having authorized in writing on October 7, 1987, on a
stationery of his own business firm, Wilcon Builders Supply, that private respondent should
receive thirty-seven (37%) of the proceeds of her personal sales, could not be interpreted
otherwise than that he had a proprietary interest in the business. His claim that he was merely
a guarantor is belied by that personal act of proprietorship in the business. Moreover, if he was
indeed a guarantor of future debts of petitioner Tocao under Article 2053 of the Civil Code, he
should have presented documentary evidence therefor. While Article 2055 of the Civil Code
simply provides that guaranty must be "express," Article 1403, the Statute of Frauds, requires
that "a special promise to answer for the debt, default or miscarriage of another" be in writing.

The business venture operated under Geminesse Enterprise did not result in an
employer-employee relationship between petitioners and private respondent. While
it is true that the receipt of a percentage of net profits constitutes only prima facie evidence
that the recipient is a partner in the business, the evidence in the case at bar controverts an
employer-employee relationship between the parties. In the first place, private respondent had
a voice in the management of the affairs of the cookware distributorship, including selection of
people who would constitute the administrative staff and the sales force. Secondly, petitioner
Tocao’s admissions militate against an employer-employee relationship. She admitted that, like
her who owned Geminesse Enterprise, private respondent received only commissions and
transportation and representation allowances and not a fixed salary.

If indeed petitioner Tocao was private respondent’s employer, it is difficult to believe that they
shall receive the same income in the business. In a partnership, each partner must share in the
profits and losses of the venture, except that the industrial partner shall not be liable for the
losses. As an industrial partner, private respondent had the right to demand for a formal
accounting of the business and to receive her share in the net profit.

The fact that the cookware distributorship was operated under the name of Geminesse
Enterprise, a sole proprietorship, is of no moment. What was registered with the Bureau of
Domestic Trade on August 19, 1987 was merely the name of that enterprise. While it is true
that in her undated application for renewal of registration of that firm name, petitioner Tocao
indicated that it would be engaged in retail of "kitchenwares, cookwares, utensils, skillet," she
also admitted that the enterprise was only "60% to 70% for the cookware business," while 20%
to 30% of its business activity was devoted to the sale of water sterilizer or purifier. Indubitably
then, the business name Geminesse Enterprise was used only for practical reasons - it was
utilized as the common name for petitioner Tocao’s various business activities, which included
the distributorship of cookware.

Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to
reap for herself and/or for petitioner Belo financial gains resulting from private respondent’s
efforts to make the business venture a success. Thus, as petitioner Tocao became adept in the
business operation, she started to assert herself to the extent that she would even shout at
private respondent in front of other people. Her instruction to Lina Torda Cruz, marketing
manager, not to allow private respondent to hold office in both the Makati and Cubao sales
offices concretely spoke of her perception that private respondent was no longer necessary in
the business operation, and resulted in a falling out between the two. However, a mere falling
out or misunderstanding between partners does not convert the partnership into a sham
organization. The partnership exists until dissolved under the law. Since the partnership
created by petitioners and private respondent has no fixed term and is therefore a partnership
at will predicated on their mutual desire and consent, it may be dissolved by the will of a
partner. Thus:

"x x x. The right to choose with whom a person wishes to associate himself is the very
foundation and essence of that partnership. Its continued existence is, in turn, dependent on
the constancy of that mutual resolve, along with each partner’s capability to give it, and the
absence of cause for dissolution provided by the law itself. Verily, any one of the partners may,
at his sole pleasure, dictate a dissolution of the partnership at will. He must, however, act in
good faith, not that the attendance of bad faith can prevent the dissolution of the partnership
but that it can result in a liability for damages."

An unjustified dissolution by a partner can subject him to action for damages because by the
mutual agency that arises in a partnership, the doctrine of delectus personae allows the
partners to have the power, although not necessarily the right to dissolve the partnership.

In this case, petitioner Tocao’s unilateral exclusion of private respondent from the partnership is
shown by her memo to the Cubao office plainly stating that private respondent was, as of
October 9, 1987, no longer the vice-president for sales of Geminesse Enterprise. By that memo,
petitioner Tocao effected her own withdrawal from the partnership and considered herself as
having ceased to be associated with the partnership in the carrying on of the business.
Nevertheless, the partnership was not terminated thereby; it continues until the winding up of
the business.

The winding up of partnership affairs has not yet been undertaken by the partnership. This is
manifest in petitioners’ claim for stocks that had been entrusted to private respondent in the
pursuit of the partnership business.
AGENCY 14 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.

FACTS:
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. 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, his common-law spouse Matilde and their five children --
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.

ISSUE:
Whether or not Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber

RULING:
NO.

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. It is hardly distinguishable from the partnership, since their elements are
similar — community of interest in the business, sharing of profits and losses, and a mutual
right of control. 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. 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.

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.

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 "if
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.
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.

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 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.

In the instant case, we find private respondent's 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 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.