Partnership Cases Week 1

7/25/2019 Partnership Cases Week 1

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G.R. No. 135813 October 25, 2001

FERNANDO SANTOS,petitioner,

vs.

SPOUSES ARSENIO and NIEES RE!ES,respondents.

PANGANI"AN, J.#

As a general rule, the factual findings of the Court of Appeals affirming those of the trial court are binding on the

Supreme Court. However, there are several exceptions to this principle. In the present case, we find occasion to applyboth the rule and one of the exceptions.

The Case

Before us is a etition for !eview on Certiorari assailing the "ovember #$, %&&' (ecision,%as well as the August %',

%&&$ and the )ctober &, %&&$ !esolutions,#issued by the Court of Appeals *CA+ in CA-! C "o. /0'0#. 1he

Assailed (ecision disposed as follows2

34H5!56)!5, the decision appealed from is A66I!75( save as for the counterclaim which is hereby

(IS7ISS5(. Costs against 8petitioner9.3/

!esolving respondent:s 7otion for !econsideration, the August %', %&&$ !esolution ruled as follows2

34H5!56)!5, 8respondents:9 motion for reconsideration is -!A"15(. Accordingly, the court:s decision

dated "ovember #$, %&&' is hereby 7)(I6I5( in that the decision appealed from is A66I!75( in toto,with costs against 8petitioner9.30

1he )ctober &, %&&$ !esolution denied 3for lac; of merit3 petitioner:s 7otion for !econsideration of the August %',

%&&$ !esolution.une, %&$?, 8etitioner9 6ernando Santos and 8!espondent9 "ieves !eyes were introduced to

each other by one 7eliton @abat regarding a lending business venture proposed by "ieves. It was verbally

agreed that 8petitioner would9 act as financier while 8"ieves9 and @abat 8would9 ta;e charge of solicitation of

members and collection of loan payments. 1he venture was launched on >une %/, %&$?, with the

understanding that 8petitioner9 would receive ' of the profits while x x x "ieves and @abat would earn

%uly, %&$?, x x x "ieves introduced Cesar -ragera to 8petitioner9. -ragera, as chairman of the 7onte

7aria (evelopment Corporation?*7onte 7aria, for brevity+, sought shortterm loans for members of the

corporation. 8etitioner9 and -ragera executed an agreement providing funds for 7onte 7aria:s members.

nder the agreement, 7onte 7aria, represented by -ragera, was entitled to %./% commission per thousand

paid daily to 8petitioner9 *5xh. :A:+x x x . "ieves ;ept the boo;s as representative of 8petitioner9 while

8!espondent9 Arsenio, husband of "ieves, acted as credit investigator.

3)n August ?, %&$?, 8petitioner9, x x x 8"ieves9 and @abat executed the :Article of Agreement: which

formali=ed their earlier verbal arrangement.

38etitioner9 and 8"ieves9 later discovered that their partner @abat engaged in the same lending business in

competition with their partnership8.9 @abat was thereby expelled from the partnership. 1he operations with

7onte 7aria continued.

3)n >une


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complaint, they alleged, was filed to preempt and prevent them from claiming their rightful share to the

profits of the partnership.

3x x x Arsenio alleged that he was enticed by 8petitioner9 to ta;e the place of @abat after 8petitioner9 learned

of @abat:s activities. Arsenio resigned from his Eob at the Asian (evelopment Ban; to Eoin the partnership.

36or her part, x x x "ieves claimed that she participated in the business as a partner, as the lending activity

with 7onte 7aria originated from her initiative. 5xcept for the limited period of >uly $, %&$? through August

#, %&$?, she did not handle sums intended for -ragera. Collections were turned over to -ragera because heguaranteed % payment of all sums loaned by 7onte 7aria. 5ntries she made on wor;sheets were based

on this assumptive % collection of all loans. 1he loan releases were made less -ragera:s agreed

commission. Because of this arrangement, she neither received payments from borrowers nor remitted any

amount to -ragera. Her Eob was merely to ma;e wor;sheets *5xhs. :%uly #?, %&$& is

(IS7ISS5(.

/&.#. 1he 8etitioner9 65!"A"() >. SA"1)S is ordered to pay the

8!espondent9 "I55S S. !5G5S, the following2

/&.#.%. /,?0,0#$. 1he %< percent share of the 8respondent9 "I55S S.

!5G5S in the profits of her Eoint venture with the

8petitioner9.

/&.#.#. Six*?+ percent of

/,?0,0#$.

As damages from August /, %&$' until the

/,?0,0#$. is fully paid.

/&.#./.


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/&./. 1he 8petitioner9 65!"A"() >. SA"1)S is ordered to pay the 8respondent9

A!S5"I) !5G5S, the following2

/&./.%. #,$&&,'/&.


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< Affirming the dismissal of Santos: 8Second9 Amended Complaint

?. Affirming the decision of the trial court, upholding private respondents: counterclaim

'. (enying Santos: motion for reconsideration dated September %%, %&&$.3

Succinctly put, the following were the issues raised by petitioner2 *%+ whether the parties: relationship was one of

partnership or of employer employee *#+ whether "ieves misappropriated the sums of money allegedly entrusted to

her for delivery to -ragera as his commissions and */+ whether respondents were entitled to the partnership profits as

determined by the trial court.

The Court's Ruling

1he etition is partly meritorious.

First Issue:

Business Relationship

etitioner maintains that he employed the services of respondent spouses in the moneylending venture with -ragera,

with "ieves as boo;;eeper and Arsenio as credit investigator. 1hat "ieves introduced -ragera to Santos did not ma;e

her a partner. She was only a witness to the Agreement between the two. Separate from the partnership between

petitioner and -ragera was that which existed among petitioner, "ieves and @abat, a partnership that was dissolved

when @abat was expelled.

)n the other hand, both the CA and the trial court reEected petitioner:s contentions and ruled that the businessrelationship was one of partnership. 4e Duote from the CA (ecision, as follows2

38!espondents9 were industrial partners of 8petitioner9x x x . "ieves herself provided the initiative in the

lending activities with 7onte 7aria. In consonance with the agreement between appellant, "ieves and @abat

*later replaced by Arsenio+, 8respondents9 contributed industry to the common fund with the intention of

sharing in the profits of the partnership. 8!espondents9 provided services without which the partnership

would not have 8had9 the wherewithal to carry on the purpose for which it was organi=ed and as such 8were9

considered industrial partners *5vangelista v. Abad Santos,


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3/. 1hat the boo;;eeping and daily balancing of account of the business operation shall be handled by the

S5C)"( A!1G.3%0

1he 3Second arty3 named in the Agreement was none other than "ieves !eyes. )n the other hand, Arsenio:s duties

as credit investigator are subsumed under the phrase 3screening of prospective borrowers.3 Because of this Agreement

and the disbursement of monthly 3allowances3 and 3profit shares3 or 3dividends3 *5xh. 3?3+ to Arsenio, we uphold the

factual finding of both courts that he replaced @abat in the partnership.

Indeed, the partnership was established to engage in a moneylending business, despite the fact that it was formali=edonly after the 7emorandum of Agreement had been signed by petitioner and -ragera. Contrary to petitioner:s

contention, there is no evidence to show that a different business venture is referred to in this Agreement, which was

executed on August ?, %&$?, or about a month after the 7emorandum had been signed by petitioner and -ragera on

>uly %0, %&$?. 1he Agreement itself attests to this fact2

34H5!5AS, the parties have decided to formali=e the terms of their business relationship in order that their

respective interests may be properly defined and established for their mutual benefit and understanding.3%anuary %%,

%&$' to 6ebruary %', %&$' only while the rest were made by -ragera:s own staff.

3"either can we give probative value to 5xhibit :5: which allegedly shows ac;nowledgment of the remittanceof commissions to erona -on=ales. 1he document is a private one and its due execution and authenticity

have not been duly proved as reDuired in 8S9ection #, !ule %/# of the !ules of Court which states2

:S5C1I)" #.Proof of Pri"ate #ocu!entJ Before any private document offered as authentic is

received in evidence, its due execution and authenticity must be proved either2

*a+ By anyone who saw the document executed or written or

*b+ By evidence of the genuineness of the signature or handwriting of the ma;er.

:Any other private document need only be identified as that which it is claimed to be.:

31he court a $uoeven ruled that the signature thereon was a forgery, as it found that2

:x x x . But "I55S denied that 5xh. 5% is her signature she claimed that it is a forgery. 1he initialstro;e of 5xh. 5% starts from up and goes downward. 1he initial stro;e of the genuine signatures of

"I55S *5xhs. A/, B%, 6%, among others+ starts from below and goes upward. 1his difference in

the start of the initial stro;e of the signatures 5xhs. 5% and of the genuine signatures lends credence

to "ieves: claim that the signature 5xh. 5% is a forgery.:

xxx xxx xxx

3"ieves: testimony that the schedules of daily payment *5xhs. :B: and :6:+ were based on the predetermined

% collection as guaranteed by -ragera is credible and clearly in accord with the evidence. A perusal of

5xhs. 3B3 and 363 as well as 5xhs. :%


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the number of borrowers multiplied by the proEected collection of %


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!espondent spouses, on the other hand, postulate that petitioner instituted the action below to avoid payment of the

demands of "ieves, because sometime in 7arch %&$', she 3signified to petitioner that it was about time to get her

share of the profits which had already accumulated to some / million.3 !espondents add that while the partnership

has not declared dividends or liDuidated its earnings, the profits are already reflected on paper. 1o prove the

counterclaim of "ieves, the spouses show that from >une %/, %&$? up to April %&, %&$', the profit totaled #,0#&,3 et seD.#/show that Arsenio received allowances from >uly %&, %&$? to 7arch

#', %&$' in the aggregate amount of #


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incurred by the parties, because they show only the daily cash collections. Contrary to the rulings of both the trial and

the appellate courts, respondents: exhibits do not reflect the co!pletefinancial condition of the moneylending

business. 1he lower courts obviously labored over a mista;en notion that 5xhibit 3 %I%3 represented the 3net

profits3 earned by the partnership.

6or 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. )nly in the difference

representing the net profits does the industrial partner share. But if, on the contrary, the losses exceed the income, theindustrial partner does not share in the losses.#apanese. After the war, because

of the absence of capital to start a lumber and hardware business, Fay and Kee pooled the proceeds of their

individual businesses earned from buying and selling military supplies, so that the common fund would beenough to form a partnership, both in the lumber and hardware business. 1hat Fay and Kee actually

established the Benguet Fumber in Baguio City, was even testified to by witnesses. Because of the pooling of

resources, the postwar Benguet Fumber was eventually established. 1hat the father of the plaintiffs and Fay

were partners, is obvious from the fact that2 *%+ they conducted the affairs of the business during Kee:s

lifetime, Eointly, *#+ they were the ones giving orders to the employees, */+ they were the ones preparing

orders from the suppliers, *0+ their families stayed together at the Benguet Fumber compound, and *


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treated as a part of the latter:s capital assets, contrary to the allegations in pars. ?, ' and $ of the complaint.

These are not e"idencessupporting the existence of a partnership2

%+ 1hat Kee was living in a bun; house Eust across the lumber store, and then in a room in the bun; house in

1rinidad, but within the compound of the lumber establishment, as testified to by 1andoc #+ that both Fay

and Kee were seated on a table and were 3commanding people3 as testified to by the son, 5lpidio 1an /+ that

both were supervising the laborers, as testified to by ictoria Choi and 0+ that (ionisio eralta was

supposedly being told by Kee that the proceeds of the $ pieces of the -.I. sheets were added to the business.artnership presupposes the following elements 8citation omitted92 %+ a contract, either oral or written.

However, if it involves real property or where the capital is /,. or more, the execution of a contract is

necessary #+ the capacity of the parties to execute the contract /+ money property or industry contribution

0+ community of funds and interest, mentioning eDuality of the partners or one having a proportionate share in

the benefits and


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7c(ermott, %'? 6. #d. 0&$, 8%&0&9 Carboneau v. eterson, &< .#d., %0/ 8%&/&9 Buc;ley v. Chadwic;, 0

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Partnership Cases Week 1