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G.R. No. 172690 – 614 SCRA 141 – Civil Law – Partnership – 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 buy 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. Elfledo’s 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 Yu’s 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 Norberto’s 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 Jose’s 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 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.