Hiers of Tan Eng Kee vs CA

G.R. 126881
October 3, 2000

Facts:

Following the death of Tan Eng Kee, Matilde Abubo, the common-law spouse of the decedent,
joined by their children filed suit against the decedent's brother TAN ENG LAY on February 19,
1990. The complaint was for accounting, liquidation and winding up of the alleged partnership
formed after World War II between Tan Eng Kee and Tan Eng Lay.

The complaint principally alleged that after the second World War, Tan Eng Kee and Tan Eng
Lay, pooling their resources and industry together, entered into a partnership engaged in the
business of selling lumber and hardware and construction supplies. They named their enterprise
"Benguet Lumber" which they jointly managed until Tan Eng Kee's death. However, they
claimed that 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. Petitioners prayed for accounting of the partnership assets, and the
dissolution, winding up and liquidation thereof, and the equal division of the net assets of
Benguet Lumber.

The trial court ruled in favour of petitioners declaring that Benguet Lumber is a joint venture
which is akin to a particular partnership but the CA reversed the judgment of the trial court. The
CA held 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
Kee's 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. The exhibits only support the
establishment of a proprietorship. The deceased, Kee, on the other hand, was merely an
employee of the Benguet Lumber Company, on the basis of his SSS coverage.

Issue: Whether Tan Eng Kee and Tan Eng Lay were partners in Benguet Lumber.

Held:

The SC held that there was no partnership. A contract of partnership is defined by law 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.

Thus, in order to constitute a partnership, it must be established that (1) two or more persons
bound themselves to contribute money, property, or industry to a common fund, and (2) they
intend to divide the profits among themselves. The agreement need not be formally reduced into
writing, since statute allows the oral constitution of a partnership, save in two instances: (1)
when immovable property or real rights are contributed, and (2) when the partnership has a
capital of three thousand pesos or more. In both cases, a public instrument is required. An
inventory to be signed by the parties and attached to the public instrument is also indispensable
to the validity of the partnership whenever immovable property is contributed to the partnership.

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. Unfortunately for petitioners, Tan Eng Kee has passed away. Only he, aside from Tan
Eng Lay, could have expounded on the precise nature of the business relationship between
them. In the absence of evidence, we cannot accept as an established fact that Tan Eng Kee
allegedly contributed his resources to a common fund for the purpose of establishing a
partnership. The testimonies to that effect of petitioners' witnesses is directly controverted by
Tan Eng Lay.

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 "[i]f 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." 31 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.

Further, the court held that Tan Eng Kee was only an employee, not a partner since petitioners
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. The circumstances cited of petitioners 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.
Bautista vs Silva
G.R. 157434
September 19, 2006

Facts:

A parcel of land was registered in the names of Spouses Berlina F. Silva and Pedro M. Silva on
August 14, 1980. Thereafter, Pedro M. Silva, for himself and as attorney-in-fact of his wife
Berlina F. Silva, thru a Special Power of Attorney purportedly executed by Berlina F. Silva in his
favor, signed and executed a Deed of Absolute Sale over the said parcel of land in favor of
defendants-spouses Claro Bautista and Nida Bautista. Thereafter, Berlina filed a complaint for
Annulment of Deed of Absolute Sale, Reconveyance and Damages with the RTC against
Spouses Claro and Nida Bautista. The RTC ruled in favor Silva declaring the Deed of Absolute
Sale over the parcel of land null and void. On appeal, the CA affirmed in toto the RTC decision,
hence this petition. The petitioners contended that they should be considered as purchasers in
good faith and for value having relied upon a Special Power of Attorney which appears legal,
valid and genuine on its face.

Issue: WON the petitioners are considered as puchasers in good faith

Held:

No, The court held that to establish his status as a buyer for value in good faith, a person
dealing with land registered in the name of and occupied by the seller need only show that he
relied on the face of the seller's certificate of title. But for a person dealing with land registered in
the name of and occupied by the seller whose capacity to sell is restricted, such as by Articles
166 (Article 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is
under civil interdiction or is confined in a leprosarium, the husband cannot alienate or
encumber any real property of the conjugal partnership without the wife's consent) and 173
(Article 173. The wife may, during the marriage, and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered into
without her consent, when such consent is required, or any act or contract of the husband
which tends to defraud her or impair her interest in the conjugal partnership property. Should
the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may
demand the value of the property fraudulently alienated by the husband) of the Civil Code or
Article 1244 of the Family Code (Article 124. The administration and enjoyment of the conjugal
partnership property shall belong to both spouses jointly. In case of disagreement, the
husband's decision shall prevail, subject to recourse to the court by the wife for a proper
remedy which must be availed of within five years from the date of the contract implementing
such decision), he must show that he inquired into the latter's capacity to sell in order to
establish himself as a buyer for value in good faith. The extent of his inquiry depends on the
proof of capacity of the seller. If the proof of capacity consists of a special power of
attorney duly notarized, mere inspection of the face of such public document already
constitutes sufficient inquiry. If no such special power of attorney is provided or there is one but
there appear flaws in its notarial acknowledgment mere inspection of the document will not
do; the buyer must show that his investigation went beyond the document and into the
circumstances of its execution.

In this case, petitioners knew that Berlina was in Germany at the time they were buying the
property and the SPA relied upon by petitioners has a defective notarial acknowledgment. The
SPA was a mere photocopy. But then said photocopy of the SPA contains no notarial seal. A
notarial seal is a mark, image or impression on a document which would indicate that the notary
public has officially signed it. There being no notarial seal, the signature of the notary public on
the notarial certificate was therefore incomplete. The notarial certificate being deficient, it was as
if the notarial acknowledgment was unsigned. The photocopy of the SPA has no notarial
acknowledgment to speak of. It was a mere private document which petitioners cannot foist as a
banner of good faith.

It was not sufficient evidence of good faith that petitioners merely relied on the photocopy of the
SPA as this turned out to be a mere private document. They should have adduced more
evidence that they looked beyond it. They did not. Instead, they took no precautions at all. They
verified with Atty. Lucero whether the SPA was authentic but then the latter was not the notary
public who prepared the document. Worse, they purposely failed to inquire who was the notary
public who prepared the SPA. Finally, petitioners conducted the transaction in haste. It took
them all but three days or from March 2 to 4, 1988 to enter into the deed of sale,
notwithstanding the restriction on the capacity to sell of Pedro.