Spouses ARSENIO and NIEVES REYES, PLAINTIFF’S ARGUMENTS:
Petitioner maintains that he employed the services of respondent
FACTS: In June 1986, Fernando Santos and Nieves Reyes were introduced spouses in the money-lending venture with Gragera, with Nieves as to each other by Meliton Zabat regarding a lending business venture bookkeeper and Arsenio as credit investigator. That Nieves introduced proposed by Nieves. Fernando Santos (70%), Nieves Reyes (15%), and Gragera to Santos did not make her a partner. She was only a witness to the Melton Zabat (15%) orally instituted a partnership with them as partners. It Agreement between the two. Separate from the partnership between was agreed that Santos shall be financier and that Nieves and Zabat shall petitioner and Gragera was that which existed among petitioner, Nieves and contribute their industry by taking charge of solicitation of members and Zabat, a partnership that was dissolved when Zabat was expelled. collection of loan payments. Their venture was launched on June 13, 1986, with the agreement that Santos would receive 70% of the profits while Nieves and Zabat would earn 15% each. DEFENDANT’S ARGUMENTS: Later, in July 1986, Nieves introduced Cesar Gragera to Santos. In their answer, the defendants asserted that they were partners and Gragera was the chairman of Monte Maria Development Corporation. not mere employees of petitioner. The complaint, they alleged, was filed to Gragera sought short-term loans for members of the corporation. It was preempt and prevent them from claiming their rightful share to the profits of agreed that the partnership shall provide loans to the employees of Gragera’s the partnership. Arsenio alleged that he was enticed by the petitioner to take corporation and Gragera shall earn commission from loan payments. the place of Zabat after petitioner learned of Zabat's activities. Arsenio In August 1986, the three partners put into writing their verbal resigned from his job at the Asian Development Bank to join the partnership. agreement to form the partnership. As earlier agreed, Santos shall finance Nieves claimed that she participated in the business as a partner, as the and Nieves shall do the daily cash flow more particularly from their dealings lending activity with Monte Maria originated from her initiative. with Gragera, Zabat on the other hand shall be a loan investigator. But then later, Nieves and Santos found out that Zabat was engaged in another lending business which competes with their partnership hence Zabat was DECISIONS OF -- expelled. • LOWER COURT: The Trial court held that respondents were The two continued with the partnership and they took with them partners, and not merely employees of the petitioner. It ruled that Gragera Nieves’ husband, Arsenio, who became their loan investigator. Later, Santos was only a commission agent of petitioner, not his partner. accused the spouses of not remitting Gragera’s commissions to the latter. He sued them for collection of sum of money. The spouses countered that Santos • CA: The CA upheld the decision of the lower court. The CA ruled merely filed the complaint because he did not want the spouses to get their that the following circumstances indicated the existence of a partnership shares in the profits. Santos argued that the spouses, insofar as the dealing among the parties (1) it was Nieves who broached to petitioner the idea of with Gragera is concerned, are merely his employees. Santos alleged that starting a money-lending business and introduced him to Gragera (2) there is a distinct partnership between him and Gragera which is separate Arsenio received dividends or profit-shares covering the period of July 15 to from the partnership formed between him, Zabat and Nieves. August 7, 1986 (3) the partnership contract was executed after the Agreement with Gragera and petitioner and thus showed the parties’ intention to consider it as a transaction of the partnership. In their common venture, petitioner invested capital while respondents contributed industry or FIRST ISSUE: BUSINESS RELATIONSHIP services with the intention of sharing in the profits of the business. Yes, the court upheld the decisions of the Trial Court and CA that • The defendants were industrial partners of the petitioner. Nieves there was a partnership created between Santos and Spouses Reyes. By the herself provided the initiative in the lending activities with Monte Maria. In contract of partnership, two or more persons bind themselves to contribute consonance with the agreement between appellant, Nieves and Zabat (later money, property or industry to a common fund, with the intention of replaced by Arsenio), they contributed industry to the common fund with dividing the profits among themselves. The "Articles of Agreement" the intention of sharing in the profits of the partnership. The spouses stipulated that the signatories shall share the profits of the business in a 70- provided services without which the partnership would not have [had] the 15-15 manner, with petitioner getting the lion's share. This stipulation wherewithal to carry on the purpose for which it was organized and as such clearly proved the establishment of a partnership. [were] considered industrial partners the partnership between Santos, Nieves and Zabat was technically dissolved by the expulsion of Zabat Though it is true that the original partnership between Zabat, Santos therefrom, the remaining partners simply continued the business of the and Nieves was terminated when Zabat was expelled, the said partnership partnership without undergoing the procedure relative to dissolution. was however considered continued when Nieves and Santos continued Instead, they invited Arsenio to participate as a partner in their operations. engaging as usual in the lending business even getting Nieves’ husband, There was therefore, no intent to dissolve the earlier partnership. The who resigned from the Asian Development Bank, to be their loan partnership between Santos, Nieves and Arsenio simply took over and investigator – who, in effect, substituted Zabat. There is no separate continued the business of the former partnership with Zabat, one of the partnership between Santos and Gragera. The latter being merely a incidents of which was the lending operations with Monte Maria. commission agent of the partnership. This is even though the partnership was formalized shortly after Gragera met with Santos. • Gragera and Santos were not partners. The money-lending activities undertaken with Monte Maria was done in pursuit of the business for which the partnership between [petitioner], Nieves and Zabat (later Arsenio) was SECOND ISSUE: ACCOUNTING OF PARTNERSHIP organized. Gragera who represented Monte Maria was merely paid commissions in exchange for the collection of loans. The commissions were HOWEVER, the order of the Court of Appeals directing Santos to fixed on gross returns, regardless of the expenses incurred in the operation of give the spouses their shares in the profit is premature. The accounting made the business. The sharing of gross returns does not in itself establish a by the trial court is based on the “total income” of the partnership. Such total partnership. income calculated by the trial court did not consider the expenses sustained by the partnership. All expenses incurred by the money-lending enterprise of the parties must first be deducted from the “total income” in order to arrive at the “net profit” of the partnership. The share of each one of them should ISSUE/S: Whether or not the Santos and Spouses Reyes are partners be based on this “net profit” and not from the “gross income” or “total Whether or not the Spouses Reyes has a share in the partnership income”. profits being Industrial partners. For the purpose of determining the profit that should go to an industrial partner (who shares in the profits but is not liable for the losses), the gross income from all the transactions carried on by the firm must be added together, and from this sum must be subtracted the expenses or the losses sustained in the business. Only in the difference representing the net of partnership, no agreement as to profits and losses, and no time fixed for profits does the industrial partner share. But if, on the contrary, the losses the duration of the partnership. There was even no attempt to submit an exceed the income, the industrial partner does not share in the losses. 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. Also, the trial court determined that Tan EngKee and Tan Eng Lay had entered HEIRS OF TAN ENG KEE vs.CA 341 SCRA 740, into a joint venture, which it said is akin to a particular partnership. A FACTS: particular partnership is distinguished from a joint adventure, to wit:(a) A joint adventure (an American concept similar to our joint accounts) is a sort After the second World War, Tan EngKee and Tan Eng Lay, pooling of informal partnership, with no firm name and no legal personality. In a their resources and industry together, entered into a partnership engaged in joint account, the participating merchants can transact business under their the business of selling lumber and hardware and construction supplies. They own name, and can be individually liable therefor. (b) Usually, but not named their enterprise "Benguet Lumber" which they jointly managed until necessarily a joint adventure is limited to a SINGLE TRANSACTION, Tan EngKee's death. Petitioners herein averred that the business prospered although the business of pursuing to a successful termination maycontinue due to the hard work and thrift of the alleged partners. However, they for a number of years; a partnership generally relates to a continuing claimed that in 1981, Tan Eng Lay and his children caused the conversion of business of various transactions of a certain kind. A joint venture the partnership "Benguet Lumber" into a corporation called "Benguet "presupposes generally a parity of standing between the joint co-ventures or Lumber Company." The incorporation was purportedly a ruse to deprive partners, in which each party has an equal proprietary interest in the capital Tan EngKee and his heirs of their rightful participation in the profits of the or property contributed, and where each party exercises equal rights in the business. Petitioners prayed for accounting of the partnership assets, and the conduct of the business. The evidence presented by petitioners falls short of dissolution, winding up and liquidation thereof, and the equal division of the quantum of proof required to establish a partnership. In the absence of the net assets of Benguet Lumber. The RTC ruled in favor of petitioners, evidence, we cannot accept as an established fact that Tan EngKee allegedly declaring that Benguet Lumber is a joint venture which is akin to a particular contributed his resources to a common fund for the purpose of establishing a partnership. The Court of Appeals rendered the assailed decision reversing partnership. Besides, it is indeed odd, if not unnatural, that despite the forty the judgment of the trial court. years the partnership was allegedly in existence, Tan EngKee never asked for an accounting. ISSUE: The essence of a partnership is that the partners share in the profits Whether the deceased Tan EngKee and Tan Eng Lay are joint and losses .Each has the right to demand an accounting as long as the adventurers and/or partners in a business venture and/or particular partnership exists. A demand for periodic accounting is evidence of a partnership called Benguet Lumber and as such should share in the profits partnership. During his lifetime, Tan EngKee appeared never to have made and/or losses of the business venture or particular partnership any such demand for accounting from his brother, Tang Eng Lay. We conclude that Tan EngKee was only an employee, not a partner since they did not present and offer evidence that would show that Tan EngKee RULING: received amounts of money allegedly representing his share in the profits of the enterprise. There being no partnership, it follows that there is no There was no partnership whatsoever. Except for a firm name, there dissolution, winding up or liquidation to speak of. was no firm account, no firm letterheads submitted as evidence, no certificate Cruz, Manila, the principal conditions of the offer being (1) Yang guarantees Yulo a monthly participation of P3,000 (2) partnership shall be for a period of Filomeno Negado, Narciso Rocha, and Juan Guirindola vs Gonzalo 2 years and 6 months with the condition that if the land is expropriated, Makabenta 54 OG 4082 28 February 1958 rendered impracticable for business, owner constructs a permanent building, Facts: Plaintiffs filed a suit against the defendant for the recovery of then Yulo’s right to lease and partnership even if period agreed upon has not possession and management of Liberty Theater located in Leyte and for an yet expired; (3) Yulo is authorized to personally conduct business in the accounting of all money and property pertaining thereto. lobby of the building; and (4) after Dec 31, 1947, all improvements placed by partnership shall belong to Yulo but if partnership is terminated before lapse The plaintiffs allege that the theater is owned and operated by a of 1 and ½ years, Yang shall have right to remove improvements. Parties partnership known as Hemarogui Company composed of the plaintiffs and established, “Yang and Co. Ltd.”, to exist from July 1, 1945 – Dec 31, 1947. defendant. Conversely, the defendant alleges that he is the sole and exclusive owner of the theater while the plaintiffs are merely creditor. In June 1946, they executed a supplementary agreement extending the partnership for 3 years beginning Jan 1, 1948 to Dec 31, 1950. The trial court held that no partnership exists and the oral and material evidence (books, accounts, and papers) presented by the plaintiffs The land on which the theater was constructed was leased by Yulo from are incompetent to establish existence of the partnership. owners, Emilia Carrion and Maria Carrion Santa Marina for an indefinite period but that after 1 year, such lease may be cancelled by either party upon 90-day notice. In Apr 1949, the owners notified Yulo of their desire to cancel the lease contract come July. Yulo and husband brought a civil action to Issue: Whether or not a partnership exists among Negado, Rocha, declare the lease for a indefinite period. Owners brought their own civil Guirindola and Makabenta action for ejectment upon Yulo and Yang.
Issue: Was the agreement a contract a lease or a partnership?
Decision: There exists a partnership. In determining whether or not a Ruling: No. The agreement was a sublease not a partnership. The following particular transaction constitutes partnership, the intention as disclosed by are the requisites of partnership: (1) two or more persons who bind the entire transaction, and as gathered from the facts and from the language themselves to contribute money, property or industry to a common fund; (2) employed by the parties as well as their conduct. A partnership may be the intention on the part of the partners to divide the profits among created without any definite intention to create it, the intention of the parties themselves (Article 1761, CC). being inferred from their conduct and dealings with each other. For the purpose of showing the existence of a partnership, books, papers, accounts Plaintiff did not furnish the supposed P20,000 capital nor did she furnish any and similar writings are admissible as evidence provided that the party help or intervention in the management of the theatre. Neither has she against whom they are offered is shown to have authorized or ratified them. demanded from defendant any accounting of the expenses and earnings of the business. She was absolutely silent with respect to any of the acts that a partner should have done; all she did was to receive her share of P3,000 a YULO V. YANG CHIAO SENG month which cannot be interpreted in any manner than a payment for the use of premises which she had leased from the owners. Facts: Yang Chiao Seng proposed to form a partnership with Rosario Yulo to run and operate a theatre on the premises occupied by Cine Oro, Plaza Sta.