GR 126881; (October, 2000) (Digest)
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
Following the death of Tan Eng Kee in 1984, his heirs filed a complaint against his brother, Tan Eng Lay, for accounting, liquidation, and winding up of an alleged partnership formed after World War II. The heirs claimed that Tan Eng Kee and Tan Eng Lay pooled their resources and industry to manage a business named “Benguet Lumber,” engaged in selling lumber and hardware. They alleged the business prospered as a partnership until 1981, when Tan Eng Lay and his children incorporated it as Benguet Lumber Company, allegedly to deprive Tan Eng Kee’s heirs of their rightful share. The Regional Trial Court ruled in favor of the heirs, declaring the existence of a joint venture or particular partnership.
The Court of Appeals reversed the trial court’s decision, dismissing the complaint. The appellate court found no sufficient evidence to prove the existence of a partnership. It noted the absence of formal indicia of a partnership, such as articles of partnership, firm accounting, or an agreement on profit-sharing. The CA gave credence to Tan Eng Lay’s testimony that Benguet Lumber was his sole proprietorship and that Tan Eng Kee was merely an employee. The heirs’ motion for reconsideration was denied, prompting this petition.
ISSUE
Whether the Court of Appeals erred in ruling that no partnership existed between Tan Eng Kee and Tan Eng Lay.
RULING
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The legal logic rests on the statutory requirements and evidence for proving a partnership’s existence. Under the Civil Code, a partnership is created by contract, requiring a mutual agreement to contribute money, property, or industry to a common fund with the intention of dividing profits. The burden of proof lies with the party alleging the partnership.
The Court found that the petitioners failed to discharge this burden with clear and convincing evidence. The alleged indicia of partnership cited by petitioners—such as both families living on the compound, both brothers supervising employees, determining prices, and placing orders—are not inconsistent with a manager-employee relationship in a sole proprietorship. The absence of critical evidence, like written articles of partnership, a firm account, or an agreement on profit-sharing, was fatal to their claim. The positive testimony of Tan Eng Lay, corroborated by payrolls indicating Tan Eng Kee was a paid employee, supported the finding of a sole proprietorship. Since no partnership was proven, the claims for accounting, dissolution, and liquidation necessarily fail.