G.R. No.

172690 March 3, 2010

HEIRS OF JOSE LIM, represented by ELENITO
LIM, Petitioners,
vs.
JULIET VILLA LIM, Respon

Business Organization Partnership, Agency, Trust Partner

Periodic Accounting Profit Sharing
In 1980, the heirs of Jose Lim alleged that Jose Lim entered into
a partnership agreement with Jimmy Yu and Norberto Uy. The
three contributed P50,000.00 each and used the funds to
purchase a truck to start their trucking business. A year later
however, Jose Lim died. The eldest son of Jose Lim, Elfledo Lim,
took over the trucking business and under his management,
the trucking business prospered. Elfledo was able to but real
properties in his name. From one truck, he increased it to 9
trucks, all trucks were in his name however. He also acquired
other motor vehicles in his name.
In 1993, Norberto Uy was killed. In 1995, Elfledo Lim died of a
heart attack. Elfledos wife, Juliet Lim, took over the properties
but she intimated to Jimmy and the heirs of Norberto that she
could not go on with the business. So the properties in the
partnership were divided among them.
Now the other heirs of Jose Lim, represented by Elenito Lim,
required Juliet to do an accounting of all income, profits, and
properties from the estate of Elfledo Lim as they claimed that
they are co-owners thereof. Juliet refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired his
properties from the partnership that Jose Lim formed with
Norberto and Jimmy. In court, Jimmy Yu testified that Jose Lim
was the partner and not Elfledo Lim. The heirs testified that
Elfledo was merely the driver of Jose Lim.
ISSUE: Who is the partner between Jose Lim and Elfledo Lim?
HELD: It is Elfledo Lim based on the evidence presented
regardless of Jimmy Yus testimony in court that Jose Lim was
the partner. If Jose Lim was the partner, then the partnership
would have been dissolved upon his death (in fact, though the
SC did not say so, I believe it should have been dissolved upon
Norbertos death in 1993). A partnership is dissolved upon the
death of the partner. Further, no evidence was presented as to
the articles of partnership or contract of partnership between
Jose, Norberto and Jimmy. Unfortunately, there is none in this
case, because the alleged partnership was never formally
organized.
But at any rate, the Supreme Court noted that based on the
functions performed by Elfledo, he is the actual partner.
The following circumstances tend to prove that Elfledo was
himself the partner of Jimmy and Norberto:
1.) Cresencia testified that Jose gave Elfledo P50,000.00, 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 heirs of Jose, the alleged partner, demanded
periodic accounting from Elfledo during his lifetime. As
repeatedly stressed in the case of 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 Juliet formed part of the estate of
Jose, having been derived from Joses alleged partnership with
Jimmy and Norberto.
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 Elfredos 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.

G.R. No. 127405 October 4, 2000

MARJORIE TOCAO and WILLIAM T. BELO, petitioners,
vs.
COURT OF APPEALS and NENITA A. ANAY, respondents.

Business Organization Partnership, Agency, Trust

Dissolution of the Partnership
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:
1 10% share of annual net profits
2 6% overriding commission for weekly sales
3 30% of sales Anay will make herself
4 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 under Tocao. The joint venture
agreement was not reduced to writing because Anay trusted
Belos assurances.
The venture succeeded under Anays 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 a partnership.
HELD: Yes, even though it was not reduced to writing, for a
partnership can be instituted in any form. The fact that it was
registered as a sole proprietorship is of no moment for such
registration was only for the companys trade name.
Anay was not even an employee because when they ventured
into the agreement, they explicitly agreed to profit sharing this
is even though Anay was receiving commissions because this is
only incidental to her efforts as a head marketer.
The Supreme Court also noted that a partner who is excluded
wrongfully from a partnership is an innocent partner. Hence,
the guilty partner must give him his due upon the dissolution of
the partnership as well as damages or share in the profits
realized from the appropriation of the partnership business
and goodwill. An innocent partner thus possesses pecuniary
interest in every existing contract that was incomplete and in
the trade name of the co-partnership and assets at the time he
was wrongfully expelled.
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.
Tocaos unilateral exclusion of Anay from the partnership is
shown by her memo to the Cubao office plainly stating that
Anay 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.

Read full text here.

NOTE: Motion for Reconsideration filed by Tocao and Belo

decided by the SC on September 20, 2001.
Belo is not a partner. Anay was not able to prove that Belo in
fact received profits from the company. Belo merely acted as a
guarantor. His participation in the business meetings was not
as a partner but as a guarantor. He in fact had only limited
partnership. Tocao also testified that Belo received nothing
from the profits. The Supreme Court also noted that the
partnership was yet to be registered in the Securities and
Exchange Commission. As such, it was understandable that
Belo, who was after all petitioner Tocaos good friend and
confidante, would occasionally participate in the affairs of the
business, although never in a formal or official capacity.

G.R. No. 126881, 2000 October 3

HEIRS OF TAN ENG KEE, petitioners,
vs.
COURT OF APPEALS and BENGUET LUMBER COMPANY,
represented by its President TAN ENG LAY, responden

Business Organization Partnership, Agency, Trust Periodic

Accounting Profit Sharing
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 Tan Eng Lay and Tan Eng Kee pooled
their resources in order to revive the business. In 1981, Tan Eng
Lay caused the conversion of Benguet Lumber into a
corporation called Benguet Lumber and Hardware Company,
with him and his family as the incorporators. In 1983, Tan Eng
Kee died. Thereafter, the heirs of Tan Eng Kee demanded for an
accounting and the liquidation of the partnership.
Tan Eng Lay denied that there was a partnership between him
and his brother. He said that Tan Eng Kee was merely an
employee of Benguet Lumber. He showed evidence consisting
of Tan Eng Kees payroll; his SSS as an employee and Benguet
Lumber being the employee. As a result of the presentation of
said evidence, the heirs of Tan Eng Kee filed a criminal case
against Tan Eng Lay for allegedly fabricating those evidence.
Said criminal case was however dismissed for lack of evidence.
ISSUE: Whether or not Tan Eng Kee is a partner.
HELD: No. There was no certificate of partnership between the
brothers. The 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 which in no way
proved partnership.
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, no certificate of partnership, no
agreement as to profits and losses, and no time fixed for the
duration of the partnership. There was even no attempt to
submit an accounting corresponding to the period after the war
until Kees death in 1984. It had no business book, no written
account nor any memorandum for that matter and no license
mentioning the existence of a partnership.
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 an employee based on the latters
payroll and SSS coverage, and other records indicating Tan Eng
Lay as the proprietor.
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.
But the business was started after the war (1945) prior to the
publication of the New Civil Code in 1950?
Even so, nothing prevented the parties from complying with
this requirement.
Also, the Supreme Court emphasized that for 40 years, 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. Even if it can be speculated that 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 which Kee never did.
The Supreme Court also noted:
In determining whether a partnership exists, these rules shall
apply:
(1) Except as provided by Article 1825, persons who are not
partners as to each other are not partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a
partnership, whether such co-owners or co-possessors do or do
not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a
partnership, whether or not the persons sharing them have a
joint or common right or interest in any property which the
returns are derived;
(4) The receipt by a person of a share of the profits of a
business is 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:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(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 profits of the business;
(e) As the consideration for the sale of a goodwill of a business
or other property by installments or otherwise.
42 HEIRS OF TAN ENG KEE V. CA GR 126881, OCTOBER 3, 2000

In order to constitute a partnership, it must be established that two or more persons bound themselves
to contribute money, property, or industry to a common fund, and they intended to divide the profits
among themselves.

Joint venture

Particular partnership

Sort of informal

It has legal personality.

partnership. It has no firm name or legal personality.

Usually limited to a single transaction though it may continue for a number of years

Generally relates to a continuing business of various transactions of a certain kind.