partnership cases.docxbbh

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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 109248 July 3, 1995

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners,

vs.

HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L.

MISA,respondents.

VITUG, J.:

The instant petition seeks a review of the decision rendered by the Court of Appeals, dated 26February 1993, in CA-G.R. SP No. 24638 and No. 24648 affirming in toto that of the Securities and

Exchange Commission ("SEC") in SEC AC 254.

The antecedents of the controversy, summarized by respondent Commission and quoted at length bythe appellate court in its decision, are hereunder restated.

The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in theMercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange

Commission on 4 August 1948. The SEC records show that there were several subsequent

amendments to the articles of partnership on 18 September 1958, to change the firm

[name] to ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DELROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA;

on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 11 March 1977to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA; on 19December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated

themselves together, as senior partners with respondents-appellees Gregorio F. Ortega,

Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.

On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating:

I am withdrawing and retiring from the firm of Bito, Misa and Lozada

effective at the end of this month.

"I trust that the accountants will be instructed to make the proper

liquidation of my participation in the firm."

On the same day, petitioner-appellant wrote respondents-appellees another letter sta

"Further to my letter to you today, I would like to have a meeting wof you with regard to the mechanics of liquidation, and more particu

my interest in the two floors of this building. I would like to have thi

resolved soon because it has to do with my own plans."

On 19 February 1988, petitioner-appellant wrote respondents-appellees another lette

stating:

"The partnership has ceased to be mutually satisfactory because of t

working conditions of our employees including the assistant attorne

my efforts to ameliorate the below subsistence level of the pay scale

employees have been thwarted by the other partners. Not only have

refused to give meaningful increases to the employees, even attorn

dressed down publicly in a loud voice in a manner that deprived the

their self-respect. The result of such policies is the formation of the including the assistant attorneys."

On 30 June 1988, petitioner filed with this Commission's Securities Investigation and CDepartment (SICD) a petition for dissolution and liquidation of partnership, docketed

Case No. 3384 praying that the Commission:

"1. Decree the formal dissolution and order the immediate liquidatio(the partnership of) Bito, Misa & Lozada;

"2. Order the respondents to deliver or pay for petitioner's share in partnership assets plus the profits, rent or interest attributable to th

of his right in the assets of the dissolved partnership;

"3. Enjoin respondents from using the firm name of Bito, Misa & Lozany of their correspondence, checks and pleadings and to pay petitio

damages for the use thereof despite the dissolution of the partnersh

the amount of at least P50,000.00;


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"4. Order respondents jointly and severally to pay petitioner attorney's

fees and expense of litigation in such amounts as maybe proven during thetrial and which the Commission may deem just and equitable under the

premises but in no case less than ten (10%) per cent of the value of the

shares of petitioner or P100,000.00;

"5. Order the respondents to pay petitioner moral damages with the

amount of P500,000.00 and exemplary damages in the amount of

P200,000.00.

"Petitioner likewise prayed for such other and further reliefs that the

Commission may deem just and equitable under the premises."

On 13 July 1988, respondents-appellees filed their opposition to the petition.

On 13 July 1988, petitioner filed his Reply to the Opposition.

On 31 March 1989, the hearing officer rendered a decision ruling that:

"[P]etitioner's withdrawal from the law firm Bito, Misa & Lozada did not

dissolve the said law partnership. Accordingly, the petitioner and

respondents are hereby enjoined to abide by the provisions of the

Agreement relative to the matter governing the liquidation of the shares of

any retiring or withdrawing partner in the partnership interest."1

On appeal, the SEC en banc reversed the decision of the Hearing Officer and held that the withdrawal

of Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission

ruled that, being a partnership at will, the law firm could be dissolved by any partner at anytime, such

as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced

to continue in the partnership against his will. In its decision, dated 17 January 1990, the SEC held:

WHEREFORE, premises considered the appealed order of 31 March 1989 is hereby

REVERSED insofar as it concludes that the partnership of Bito, Misa & Lozada has not beendissolved. The case is hereby REMANDED to the Hearing Officer for determination of the

respective rights and obligations of the parties.2

The parties sought a reconsideration of the above decision. Attorney Misa, in addition, asked for anappointment of a receiver to take over the assets of the dissolved partnership and to take charge of

the winding up of its affairs. On 4 April 1991, respondent SEC issued an order denying

reconsideration, as well as rejecting the petition for receivership, and reiterating the remand of the

case to the Hearing Officer.

The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and

G.R. SP No. 24648).

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney M

Lozada both died on, respectively, 05 September 1991 and 21 December 1991. The death of th

partners, as well as the admission of new partners, in the law firm prompted Attorney Misa to his application for receivership (in CA G.R. SP No. 24648). He expressed concern over the need

preserve and care for the partnership assets. The other partners opposed the prayer.

The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIR

toto the SEC decision and order appealed from. In fine, the appellate court held, per its decisio

February 1993, (a) that Atty. Misa's withdrawal from the partnership had changed the relation

parties and inevitably caused the dissolution of the partnership; (b) that such withdrawal was n

bad faith; (c) that the liquidation should be to the extent of Attorney Misa's interest or particip

in the partnership which could be computed and paid in the manner stipulated in the partnersh

agreement; (d) that the case should be remanded to the SEC Hearing Officer for the correspondetermination of the value of Attorney Misa's share in the partnership assets; and (e) that the

appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate t

the partnership assets were in any such danger of being lost, removed or materially impaired.

In this petition for review under Rule 45 of the Rules of Court, petitioners confine themselves t

following issues:

1. Whether or not the Court of Appeals has erred in holding that the partnership of Bi

Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will;

2. Whether or not the Court of Appeals has erred in holding that the withdrawal of prrespondent dissolved the partnership regardless of his good or bad faith; and

3. Whether or not the Court of Appeals has erred in holding that private respondent'sdemand for the dissolution of the partnership so that he can get a physical partition o

partnership was not made in bad faith;

to which matters we shall, accordingly, likewise limit ourselves.

A partnership that does not fix its term is a partnership at will. That the law firm "Bito, Misa &Lozada," and now "Bito, Lozada, Ortega and Castillo," is indeed such a partnership need not be

unduly belabored. We quote, with approval, like did the appellate court, the findings and disqu

of respondent SEC on this matter; viz:


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The partnership agreement (amended articles of 19 August 1948) does not provide for a

specified period or undertaking. The "DURATION" clause simply states:

"5. DURATION. The partnership shall continue so long as mutually

satisfactory and upon the death or legal incapacity of one of the partners,

shall be continued by the surviving partners."

The hearing officer however opined that the partnership is one for a specific undertaking

and hence not a partnership at will, citing paragraph 2 of the Amended Articles of

Partnership (19 August 1948):

"2. Purpose. The purpose for which the partnership is formed, is to act as

legal adviser and representative of any individual, firm and corporationengaged in commercial, industrial or other lawful businesses and

occupations; to counsel and advise such persons and entities with respect

to their legal and other affairs; and to appear for and represent their

principals and client in all courts of justice and government departments

and offices in the Philippines, and elsewhere when legally authorized to do

so."

The "purpose" of the partnership is not the specific undertaking referred to in the law.

Otherwise, all partnerships, which necessarily must have a purpose, would all be considered

as partnerships for a definite undertaking. There would therefore be no need to provide forarticles on partnership at will as none would so exist. Apparently what the law contemplates,

is a specific undertaking or "project" which has a definite or definable period of completion.3

The birth and life of a partnership at will is predicated on the mutual desire and consent of thepartners. The right to choose with whom a person wishes to associate himself is the very foundation

and essence of that partnership. Its continued existence is, in turn, dependent on the constancy of

that mutual resolve, along with each partner's capability to give it, and the absence of a cause for

dissolution provided by the law itself. Verily, any one of the partners may, at his sole pleasure, dictate

a dissolution of the partnership at will. He must, however, act in good faith, not that the attendance

of bad faith can prevent the dissolution of the partnership4

but that it can result in a liability for

damages.5

In passing, neither would the presence of a period for its specific duration or the statement of aparticular purpose for its creation prevent the dissolution of any partnership by an act or will of apartner.

6Among partners,

7mutual agency arises and the doctrine of delectus personae allows them

to have the power, although not necessarily theright, to dissolve the partnership. An unjustified

dissolution by the partner can subject him to a possible action for damages.

The dissolution of a partnership is the change in the relation of the parties caused by any partn

ceasing to be associated in the carrying on, as might be distinguished from the winding up of, tbusiness.

8Upon its dissolution, the partnership continues and its legal personality is retained u

the complete winding up of its business culminating in its termination.9

The liquidation of the assets of the partnership following its dissolution is governed by variousprovisions of the Civil Code;

10however, an agreement of the partners, like any other contract,

binding among them and normally takes precedence to the extent applicable over the Code's g

provisions. We here take note of paragraph 8 of the "Amendment to Articles of Partnership" re

thusly:

. . . In the event of the death or retirement of any partner, his interest in the partnersh

shall be liquidated and paid in accordance with the existing agreements and his partne

participation shall revert to the Senior Partners for allocation as the Senior Partners m

determine; provided, however, that with respect to the two (2) floors of office condom

which the partnership is now acquiring, consisting of the 5th and the 6th floors of the Building, 140 Alfaro Street, Salcedo Village, Makati, Metro Manila, their true value at t

time of such death or retirement shall be determined by two (2) independent appraise

one to be appointed (by the partnership and the other by the) retiring partner or the h

a deceased partner, as the case may be. In the event of any disagreement between th

appraisers a third appraiser will be appointed by them whose decision shall be final. T

share of the retiring or deceased partner in the aforementioned two (2) floor office

condominium shall be determined upon the basis of the valuation above mentioned wshall be paid monthly within the first ten (10) days of every month in installments of n

than P20,000.00 for the Senior Partners, P10,000.00 in the case of two (2) existing Jun

Partners and P5,000.00 in the case of the new Junior Partner.11

The term "retirement" must have been used in the articles, as we so hold, in a generic sense to

the dissociation by a partner, inclusive of resignation or withdrawal, from the partnership that

thereby dissolves it.

On the third and final issue, we accord due respect to the appellate court and respondent

Commission on their common factual finding, i.e., that Attorney Misa did not act in bad faith. P

respondents viewed his withdrawal to have been spurred by "interpersonal conflict" among thpartners. It would not be right, we agree, to let any of the partners remain in the partnership u

such an atmosphere of animosity; certainly, not against their will.

12

Indeed, for as long as the rfor withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the pu

of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characte

the act. Bad faith, in the context here used, is no different from its normal concept of a conscio

intentional design to do a wrongful act for a dishonest purpose or moral obliquity.

WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.


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SO ORDERED.

Feliciano, Romero, Melo and Francisco, JJ., concur.

[G.R. No. 135813. October 25, 2001]

FERNANDO SANTOS, petitioner, vs. Spouses ARSENIO and NIEVES REYES, respondents.

D E C I S I O N

PANGANIBAN, 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 apply both the rule and one of the exceptions.

The Case

Before us is a Petition for Review on Certiorari assailing the November 28, 1997 Decision ,[1]

as

well as the August 17, 1998 and the October 9, 1998 Resolutions ,[2]

issued by the Court of Appeals

(CA) in CA-GR CV No. 34742. The Assailed Decision disposed as follows:

WHEREFORE, the decision appealed from is AFFIRMED save as for the counterclaim which is herebyDISMISSED. Costs against *petitioner+.

[3]

Resolving respondents Motion for Reconsideration, the August 17, 1998 Resolution ruled asfollows:

WHEREFORE, *respondents+ motion for reconsideration is GRANTED. Accordingly, the courtsdecision dated November 28, 1997 is hereby MODIFIED in that the decision appealed from is

AFFIRMED in toto, with costs against *petitioner+.[4]

The October 9, 1998 Resolution denied for lack of merit petitioners Motion forReconsideration of the August 17, 1998 Resolution.

[5]

The Facts

The events that led to this case are summarized by the CA as follows:

Sometime in June, 1986, *Petitioner+ F ernando Santos and *Respondent+ Nieves Reyes wereintroduced to each other by one Meliton Zabat regarding a lending business venture proposed

Nieves. It was verbally agreed that [petitioner would] act as financier while [Nieves] and Zabat[would] take charge of solicitation of members and collection of loan payments. The venture w

launched on June 13, 1986, with the understanding that [petitioner] would receive 70% of the while x x x Nieves and Zabat would earn 15% each.

In July, 1986, x x x Nieves introduced Cesar Gragera to *petitioner+. Gragera, as chairman of tMonte Maria Development Corporation[6](Monte Maria, for brevity), sought short-term loans

members of the corporation. [Petitioner] and Gragera executed an agreement providing funds

Monte Marias members. Under the agreement, Monte Maria, represented by Gragera, was ento P1.31 commission per thousand paid daily to *petitioner+ (Exh. A). x x x Nieves kept the borepresentative of [petitioner] while [Respondent] Arsenio, husband of Nieves, acted as creditinvestigator.

On August 6, 1986, *petitioner+, x x x *Nieves+ and Zabat executed the Article of Agreement wformalized their earlier verbal arrangement.

*Petitioner+ and *Nieves+ later discovered that their partner Zabat engaged in the same lendinbusiness in competition with their partnership[.] Zabat was thereby expelled from thepartnership. The operations with Monte Maria continued.

On June 5, 1987, *petitioner+ filed a complaint for recovery of sum of money anddamages. [Petitioner] charged [respondents], allegedly in their capacities as employees of[petitioner], with having misappropriated funds intended for Gragera for the period July 8, 198

March 31, 1987. Upon Grageras complaint that his commissions were inadequately remitted,[petitioner] entrusted P200,000.00 to x x x Nieves to be given to Gragera. x x x Nieves alleged

failed to account for the amount. [Petitioner] asserted that after examination of the records, h

found that of the total amount of P4,623,201.90 entrusted to [respondents], onlyP3,068,133.2

remitted to Gragera, thereby leaving the balance of P1,555,065.70 unaccounted for.

In their answer, *respondents+ asserted that they were partners and not mere employees of[petitioner]. The complaint, they alleged, was filed to preempt and prevent them from claimin

rightful share to the profits of the partnership.
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x x x Arsenio alleged that he was enticed by *petitioner+ to t ake the place of Zabat after *petitioner+learned of Zabats activities. Arsenio resigned from his job at the Asian Development Bank to join thepartnership.

For her part, x x x Nieves claimed that she participated in the business as a partner, as the lendingactivity with Monte Maria originated from her initiative. Except for the limited period of July 8, 1986through August 20, 1986, she did not handle sums intended for Gragera. Collections were turned

over to Gragera because he guaranteed 100% payment of all sums loaned by Monte Maria. Entries

she made on worksheets were based on this assumptive 100% collection of all loans. The loan

releases were made less Grageras agreed commission. Because of this arrangement, she neitherreceived payments from borrowers nor remitted any amount to Gragera. Her job was merely to

make worksheets (Exhs. 15 to 15-DDDDDDDDDD) to convey to *pet itioner] how much he wouldearn if all the sums guaranteed by Gragera were collected.

*Petitioner+ on the other hand insisted that *respondents+ were his mere employees and notpartners with respect to the agreement with Gragera. He claimed that after he discovered Zabatsactivities, he ceased infusing funds, thereby causing the extinguishment of the partnership. The

agreement with Gragera was a distinct partnership [from] that of [respondent] and

Zabat. [Petitioner] asserted that [respondents] were hired as salaried employees with respect to the

partnership between [petitioner] and Gragera.

*Petitioner+ further asserted that in Nieves capacity as bookkeeper, she received a ll payments from

which Nieves deducted Grageras commission. The commission would then be remitted toGragera. She likewise determined loan releases.

During the pre-trial, the parties narrowed the issues to the following points: whether [respondents]were employees or partners of [petitioner], whether [petitioner] entrusted money to [respondents]

for delivery to Gragera, whether the P1,555,068.70 claimed under the complaint was actually

remitted to Gragera and whether [respondents] were entitled to their counterclaim for share in the

profits.[7]

Ruling of the Trial Court

In its August 13, 1991 Decision, the trial court held that respondents were partners, not mereemployees, of petitioner. It further ruled that Gragera was only a commission agent of petitioner,

not his partner. Petitioner moreover failed to prove that he had entrusted any money toNieves. Thus, respondents counterclaim for their share in the partnership and for damages wasgranted. The trial court disposed as follows:

39. WHEREFORE, the Court hereby renders judgment as follows:

39.1. THE SECOND AMENDED COMPLAINT dated July 26, 1989 is DISMISSED.

39.2. The [Petitioner] FERNANDO J. SANTOS is ordered to pay the [Respondent] NIEVES REYES, the following:

39.2.1. P3,064,428.00 -

The 15 percent share

of the [respondent]NIEVES S. REYES in the

profits of her joint

venture with the[petitioner].

39.2.2. Six (6) percent of -

As damages

from P3,064,428.00

August 3, 1987 untiltheP3,064,428.00 is

fully paid.

39.2.3. P50,000.00 - As moral damages

39.2.4. P10,000.00 - As exemplary damages

39.3. The [petitioner] FERNANDO J. SANTOS is ordered to pay the [responden

ARSENIO REYES, the following:

39.3.1. P2,899,739.50 -

The balance of the 15

percent share of the

[respondent] ARSENIO

REYES in the profits

of his joint venturewith the [petitioner].

39.3.2. Six (6) percent of -

As damages

from P2,899,739.50August 3, 1987 until

theP2,899,739.50 isfully paid.

39.3.3. P25,000.00 - As moral damages

39.3.4. P10,000.00 - As exemplary damages

39.4. The [petitioner] FERNANDO J. SANTOS is ordered to pay the [respondents]:
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39.4.1. P50,000.00 - As attorneys fees; and

39.4.2 The cost of the suit.[8]

Ruling of the Court of Appeals

On appeal, the Decision of the trial court was upheld, and the counterclaim of respondents was

dismissed. Upon the latters Motion for Reconsideration, however, the trial courts Decision wasreinstated in toto. Subsequently, petitioners own Motion for Reconsideration was denied in the CAResolution of October 9, 1998.

The CA ruled that the following circumstances indicated the existence of a partnership among

the parties: (1) it was Nieves who broached to petitioner the idea of starting a money-lending

business and introduced him to Gragera; (2) Arsenio received dividends or profit-shares coveringthe period July 15 to August 7, 1986 (Exh. 6); and (3) the partnership contract was executed afterthe Agreement with Gragera and petitioner and thus showed the parties intention to consider it as atransaction of the partnership. In their common venture, petitioner invested capital while

respondents contributed industry or services, with the intention of sharing in the profits of the

business.

The CA disbelieved petitioners claim that Nieves had misappropriated a total ofP200,000 whichwas supposed to be delivered to Gragera to cover unpaid commissions. It was his task to collect the

amounts due, while hers was merely to prepare the daily cash flow reports (Exhs. 15 -15DDDDDDDDDD) to keep track of his collections.

Hence, this Petition.[9]

Issue

Petitioner asks this Court to rule on the following issues:[10]

Whether or not Respondent Court of Appeals acted with grave abuse of discretion tantamount toexcess or lack of jurisdiction in:

1. Holding that private respondents were partners/joint venturers and not employees ofSantos in connection with the agreement between Santos and Monte Maria/Gragera;

2. Affirming the findings of the trial court that the phrase Received by on documentssigned by Nieves Reyes signified receipt of copies of the documents and not of the

sums shown thereon;

3. Affirming that the signature of Nieves Reyes on Exhibit E was a forgery;

4. Finding that Exhibit H *did+ not establish receipt by Nieves Reyes of P200,000.00 fdelivery to Gragera;

5. Affirming the dismissal of Santos *Second+ Amended Complaint;

6. Affirming the decision of the trial court, upholding private respondents counterclaim;

7. Denying Santos motion for reconsideration dated September 11, 1998.

Succinctly put, the following were the issues raised by petitioner: (1) whether the relationship was one of partnership or of employer-employee; (2) whether Nieves misappro

the sums of money allegedly entrusted to her for delivery to Gragera as his commissions;

whether respondents were entitled to the partnership profits as determined by the trial court.

The Courts Ruling

The Petition is partly meritorious.

First Issue:

Business Relationship

Petitioner maintains that he employed the services of respondent spouses in the money-

venture with Gragera, with Nieves as bookkeeper and Arsenio as credit investigator. That

introduced Gragera to Santos did not make her a partner. She was only a witness to the Agrbetween the two. Separate from the partnership between petitioner and Gragera was that

existed among petitioner, Nieves and Zabat, a partnership that was dissolved when Zab

expelled.

On the other hand, both the CA and the trial court rejected petitioners contentions anthat the business relationship was one of partnership. We quote from the CA Decision, as follo

*Respondents+ were industrial partners of *petitioner+. x x x Nieves herself provided the initiathe lending activities with Monte Maria. In consonance with the agreement between appellan

Nieves and Zabat (later replaced by Arsenio), [respondents] contributed industry to the commo

with the intention of sharing in the profits of the partnership. [Respondents] provided service

without which the partnership would not have [had] the wherewithal to carry on the purpose f
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which it was organized and as such [were] considered industrial partners (Evangelista v. Abad Santos,

51 SCRA 416 [1973]).

While concededly, the partnership between *petitioner,+ Nieves and Zabat was technically dissolvedby the expulsion of Zabat therefrom, the remaining partners simply continued the business of the

partnership without undergoing the procedure relative to dissolution. Instead, they invited Arsenioto participate as a partner in their operations. There was therefore, no intent to dissolve the earlier

partnership. The partnership between [petitioner,] Nieves and Arsenio simply took over and

continued the business of the former partnership with Zabat, one of the incidents of which was the

lending operations with Monte Maria.

x x x x x x x x x

Gragera and *petitioner+ were not partners. The money-lending activities undertaken with MonteMaria was done in pursuit of the business for which the partnership between [petitioner], Nieves and

Zabat (later Arsenio) was organized. Gragera who represented Monte Maria was merely paid

commissions in exchange for the collection of loans. The commissions were fixed on gross returns,

regardless of the expenses incurred in the operation of the business. The sharing of gross returns

does not in itself establish a partnership.[11]

We agree with both courts on this point. By the contract of partnership, 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.[12]The Articles of Agreement stipulated that the signatoriesshall share the profits of the business in a 70-15-15 manner, with petitioner getting the lionsshare.

[13]This stipulation clearly proved the establishment of a partnership.

We find no cogent reason to disagree with the lower courts that the partnership continued

lending money to the members of the Monte Maria Community Development Group, Inc., whichlater on changed its business name to Private Association for Community Development, Inc.

(PACDI). Nieves was not merely petitioners employee. She discharged her bookkeeping duties inaccordance with paragraphs 2 and 3 of the Agreement, which states as follows:

2. That the SECOND PARTY and THIRD PARTY shall handle the solicitation and screening ofprospective borrowers, and shall x x x each be responsible in handling the collection of the loan

payments of the borrowers that they each solicited.

3. That the bookkeeping and daily balancing of account of the business operation shall behandled by the SECOND PARTY.[14]

The Second Party named in the Agreement was none other than Nieves Reyes. On the otherhand, Arsenios duties as credit investigator are subsumed under the phrase screening ofprospective borrowers. Because of this Agreement and the disbursement of monthly allowances

and profit shares or dividends (Exh. 6) to Arsenio, we uphold the factual finding of boththat he replaced Zabat in the partnership.

Indeed, the partnership was established to engage in a money-lending business, despite t

that it was formalized only after the Memorandum of Agreement had been signed by petition

Gragera. Contrary to petitioners contention, there is no evidence to show that a different bventure is referred to in this Agreement, which was executed on August 6, 1986, or about aafter the Memorandum had been signed by petitioner and Gragera on July 14, 1986. The Agr

itself attests to this fact:

WHEREAS, the parties have decided to formalize the terms of their business relationship in orthat their respective interests may be properly defined and established for their mutual benefi

understanding.[15]

Second Issue:

No Proof of Misappropriation of Grageras Unpaid Commission

Petitioner faults the CA finding that Nieves did not misappropriate money intend

Grageras commission. According to him, Gragera remitted his daily collection to Nieves.

shown by Exhibit B (the Schedule of Daily Payments), which bears her signature under thereceived by. For the period July 1986 to March 1987, Gragera should have earned commission of P4,282,429.30. However, only P3,068,133.20 was received by him. Thus, pe

infers that she misappropriated the difference of P1,214,296.10, which represented the commissions. Exhibit H is an untitled tabulation which, according to him, shows that Gragealso entitled to a commission of P200,000, an amount that was never delivered by Nieves .

[16]

On this point, the CA ruled that Exhibits B, F, E and H did not show that Nieves refor delivery to Gragera any amount from which theP1,214,296.10 unpaid commission was su

to come, and that such exhibits were insufficient proof that she had embezzled P200,000. S

CA:

The presentation of Exhibit D vaguely denominated as members ledger does not clearly esthat Nieves received amounts from Monte Marias members. The document does not clearly swhat amounts the entries thereon represent. More importantly, Nieves made the entries for t

limited period of January 11, 1987 to February 17, 1987 only while the rest were made by Gragown staff.

Neither can we give probative value to Exhibit E which allegedly shows acknowledgment of tremittance of commissions to Verona Gonzales. The document is a private one and its due exe
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and authenticity have not been duly proved as required in [S]ection 20, Rule 132 of the Rules of Court

which states:

Sec. 20. Proof of Private Document Before any private document offered as authentic is receivedin evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

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

The court a quo even ruled that the signature thereon was a forgery, as it found that:

x x x. But NIEVES denied that Exh. E-1 is her signature; she claimed that it is a forgery. The initialstroke of Exh. E-1 starts from up and goes downward. The initial stroke of the genuine signatures of

NIEVES (Exhs. A-3, B-1, F-1, among others) starts from below and goes upward. This difference in the

start of the initial stroke of the signatures Exhs. E-1 and of the genuine signatures lends credence to

Nieves claim that the signature Exh. E -1 is a forgery.

x x x x x x x x x

Nieves testimony that the schedules of daily payment (Exhs. B and F) were based on thepredetermined 100% collection as guaranteed by Gragera is credible and clearly in accord with the

evidence. A perusal of Exhs. B and F as well as Exhs. 15 to 15-DDDDDDDDDD reveal that theentries were indeed based on the 100% assumptive collection guaranteed by Gragera. Thus, the total

amount recorded on Exh. B is exactly the number of borrowers multiplied by the projectedcollection of P150.00 per borrower. This holds true for Exh. F.

Corollarily, Nieves explanation that the documents were pro forma and that she signed them not tosignify that she collected the amounts but that she received the documents themselves is more

believable than *petitioners+ assertion that she actually handled the amounts.

Contrary to *petitioners+ assertion, Exhibit H does not unequivocally establish that x x x Nievesreceived P200,000.00 as commission for Gragera. As correctly stated by the court a quo, the

document showed a liquidation of P240,000.00 and not P200,000.00.

Accordingly, we find Nieves testimony that after August 20, 1986, all collections were made byGragera believable and worthy of credence. Since Gragera guaranteed a daily 100% payment of the

loans, he took charge of the collections. As *petitioners+ representative, Nieves merely prepared thedaily cash flow reports (Exh. 15 to 15 DDDDDDDDDD) to enable *petitioner+ to keep track of

Grageras operations. Gragera on the other hand devised the schedule of daily payment (Exhsand F) to record the projected gross daily collections.

As aptly observed by the court a quo:

26.1. As between the versions of SANTOS and NIEVES on how the commissions of GRAGERA *wpaid to him[,] that of NIEVES is more logical and practical and therefore, more believable. SANversion would have given rise to this improbable situation: GRAGERA would collect the daily

amortizations and then give t hem to NIEVES; NIEVES would get GRAGERAs commissions from

amortizations and then give such commission to GRAGERA.[17]

These findings are in harmony with the trial courts ruling, which we quote below:

21. Exh. H does not prove that SANTOS gave to NIEVES and the latter received P200,000.00 fodelivery to GRAGERA. Exh. H shows under its sixth column ADDITIONAL CASH that the additiocash was P240,000.00. If Exh. H were the liquidation of the P200,000.00 as alleged by SANTOShis claim is not true. This is so because it is a liquidation of the sum of P240,000.00.

21.1. SANTOS claimed that he learned of NIEVES failure to give the P200,000.00 to GRAGERAhe received the latters letter complaining of its delayed release. Assuming as true SANTOS clathat he gave P200,000.00 to GRAGERA, there is no competent evidence that NIEVES did not giv

GRAGERA. The only proof that NIEVES did not give it is the letter. But SANTOS did not even pr

the letter in evidence. He did not explain why he did not.

21.2. The evidence shows that all money transactions of the money-lending business of SANTOwere covered by petty cash vouchers. It is therefore strange why SANTOS did not present anyvoucher or receipt covering the P200,000.00.

[18]

In sum, the lower courts found it unbelievable that Nieves had embezzled P1,555,068.7

the partnership. She did not remit P1,214,296.10 to Gragera, because he had deduccommissions before remitting his collections. Exhibits B and F are merely computations oGragera should collect for the day; they do not show that Nieves received the amounts

therein. Neither is there sufficient proof that she misappropriated P 200,000, because Exhdoes not indicate that such amount was received by her; in fact, it shows a different figure.

Petitioner has utterly failed to demonstrate why a review of these factual findwarranted. Well-entrenched is the basic rule that factual findings of the Court of Appeals af

those of the trial court are binding and conclusive on the Supreme Court .[19]

Although th

exceptions to this rule, petitioner has not satisfactorily shown that any of them is applicable

issue.
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Third Issue:

Accounting of Partnership

Petitioner refuses any liability for respondents claims on the profits of the partnership. Hemaintains that both business propositions were flops, as his investments were consumed andeaten up by the commissions orchestrated to be due Gragera a situation that could not havebeen rendered possible without complicity between Nieves and Grager a.

Respondent spouses, on the other hand, postulate that petitioner instituted the action below to

avoid payment of the demands of Nieves, because sometime in March 1987, she signified topetitioner that it was about time to get her share of the profits which had already accumulated to

some P3 million. Respondents add that while the partnership has not declared dividends orliquidated its earnings, the profits are already reflected on paper. To prove the counterclaim of

Nieves, the spouses show that from June 13, 1986 up to April 19, 1987, the profit totaled P20,429,520

(Exhs. 10 et seq. and 15 et seq.). Based on that income, her 15 percent share under the jointventure amounts to P3,064,428 (Exh. 10-I-3); and Arsenios, P2,026,000 minus the P30,000 whichwas already advanced to him (Petty Cash Vouchers, Exhs. 6, 6 -A to 6-B).

The CA originally held that respondents counterclaim was premature, pending an accounting ofthe partnership. However, in its assailed Resolution of August 17, 1998, it turned volteface. Affirming the trial courts ruling on the counterclaim, it held as follows:

We earlier ruled that there is still need for an accounting of the profits and losses of the partnershipbefore we can rule with certainty as to the respective shares of the partners. Upon a further review

of the records of this case, however, there appears to be sufficient basis to determine the amount of

shares of the parties and damages incurred by [respondents]. The fact is that the court a quo already

made such a determination [in its] decision dated August 13, 1991 on the basis of the facts on

record.[20]

The trial courts ruling alluded to above is quoted below:

27. The defendants counterclaim for the payment of their share in the profits of their jointventure with SANTOS is supported by the evidence.

27.1. NIEVES testified that: Her claim to a share in the profits is based on the agreement (Exhs.5, 5-A and 5-B). The profits are shown in the working papers (Exhs. 10 to 10-I, inclusive) which she

prepared. Exhs. 10 to 10-I (inclusive) were based on the daily cash flow reports of which Exh. 3 is asample. The originals of the daily cash flow reports (Exhs. 3 and 15 to 15 -D (10) were given to

SANTOS. The joint venture had a net profit of P20,429,520.00 (Exh. 10-I-1), from its operations from

June 13, 1986 to April 19, 1987 (Exh. 1-I-4). She had a share of P3,064,428.00 (Exh. 10-I-3) and

ARSENIO, about P2,926,000.00, in the profits.

27.1.1 SANTOS never denied NIEVES testimony that the money-lending business he was ein netted a profit and that the originals of the daily case flow reports were furnished to him. S

however alleged that the money-lending operation of his joint venture with NIEVES and ZABATresulted in a loss of about half a million pesos to him. But such loss, even if true, does not neg

NIEVES claim that overall, the joint venture among them SANTOS, NIEVES and ARSENIO neprofit. There is no reason for the Court to doubt the veracity of [the testimony of] NIEVES.

27.2 The P26,260.50 which ARSENIO received as part of his share in the profits (Exhs. 6, 66-B) should be deducted from his total share.[21]

After a close examination of respondents exhibits, we find reason to disagree wCA. Exhibit 10-I[22]shows that the partnership earned a total income of P20,429,520 period June 13, 1986 until April 19, 1987. This entry is derived from the sum of the amount

the following column headings: 2-Day Advance Collection, Service Fee, NotariaApplication Fee, Net Interest Income and Interest Income on Investment. Such represent the collections of the money-lending business or its gross income.

The total income shown on Exhibit 10-I did not consider the expenses sustained partnership. For instance, it did not factor in the gross loan releases representing the loaned to clients. Since the business is money-lending, such releases are comparable w

inventory or supplies in other business enterprises.

Noticeably missing from the computation of the total income is the deduction of the allowance disbursed to respondents. Exhibits I et seq. and J et seq.

[23]show that Arsenio r

allowances from July 19, 1986 to March 27, 1987 in the aggregate amount of P25,500; and

from July 12, 1986 to March 27, 1987 in the total amount of P25,600. These allowances are dfrom the profit already received by Arsenio. They represent expenses that should have

deducted from the business profits. The point is that all expenses incurred by the money-

enterprise of the parties must first be deducted from the total income in order to arrive at tprofit of the partnership. The share of each one of them should be based on this net profnot from the gross income or total income reflected in Exhibit 10-I, which the twoinvariably referred to as cash flow sheets.

Similarly, Exhibits 15 et seq.,[24]which are the Daily Cashflow Reports, do not ref

business expenses incurred by the parties, because they show only the dailycollections. Contrary to the rulings of both the trial and the appellate courts, respondents edo not reflect the complete financial condition of the money-lending business. The lower

obviously labored over a mistaken notion that Exhibit 10-I-1 represented the net profitsby the partnership.
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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 bythe 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 profits does the industrial

partner share. But if, on the contrary, the losses exceed the income, the industrial partner does not

share in the losses.[25]

When the judgment of the CA is premised on a misapprehension of facts or a failure to notice

certain relevant facts that would otherwise justify a different conclusion, as in this particular issue, a

review of its factual findings may be conducted, as an exception to the general rule applied to the

first two issues.[26]

The trial court has the advantage of observing the witnesses while they are testifying, an

opportunity not available to appellate courts. Thus, its assessment of the credibility of witnesses and

their testimonies are accorded great weight, even finality, when supported by substantial evidence;

more so when such assessment is affirmed by the CA. But when the issue involves the evaluation of

exhibits or documents that are attached to the case records, as in the third issue, the rule may be

relaxed. Under that situation, this Court has a similar opportunity to inspect, examine and evaluate

those records, independently of the lower courts. Hence, we deem the award of the partnershipshare, as computed by the trial court and adopted by the CA, to be incomplete and not binding on

this Court.

WHEREFORE, the Petition is partly GRANTED. The assailed November 28, 19 97 Decisionis AFFIRMED, but the challenged Resolution s dated August 17, 1998 an d October 9, 1998

are REVERSED and SET ASIDE. No costs.

SO ORDERED.

Melo, (Chairman), and Sandoval-Gutierrez, JJ., concur.Vitug, J., on official leave.

FIRST DIVISION

[G.R. No. 127405. S eptember 20, 2001]

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

R E S O L U T I O N

YNARES-SANTIAGO, J.:

The inherent powers of a Court to amend and control its processes and orders so as t

them conformable to law and justice includes the right to reverse itself, especially when in its opinion it has committed an error or mistake in judgment, and that to adhere to its decis

cause injustice to a party litigant.[1]

On November 14, 2001, petitioners Marjorie Tocao and William T. Belo filed a Mot

Reconsideration of our Decision dated October 4, 2000. They maintain that there was no partbettween petitioner Belo, on the one hand, and respondent Nenita A. Anay, on the other ha

that the latter being merely an employee of petitioner Tocao.

After a careful review of the evidence presented, we are convinced that, indeed, petitionacted merely as guarantor of Geminesse Enterprise. This was categorically affirmed by respoown witness, Elizabeth Bantilan, during her cross-examination. Furthermore, Bantilan testifie

was Peter Lo who was the companys financier. Thus:

Q You mentioned a while ago the name William Belo. Now, what is the role of Willia

with Geminesse Enterprise?

A William Belo is the friend of Marjorie Tocao and he was the guarantor of the company

Q What do you mean by guarantor?

A He guarantees the stocks that she owes somebody who is Peter Lo and he acts as gufor us. We can borrow money from him.

Q You mentioned a certain Peter Lo. Who is this Peter Lo?

A Peter Lo is based in Singapore.

Q What is the role of Peter Lo in the Geminesse Enterprise?

A He is the one fixing our orders that open the L/C.

Q You mean Peter Lo is the financier?

A Yes, he is the financier.

Q And the defendant William Belo is merely the guarantor of Geminesse Enterpris

correct?

A Yes, sir.[2]

The foregoing was neither refuted nor contradicted by respondents evidence. It shrecalled that the business relationship created between petitioner Tocao and respondent Anan informal partnership, which was not even recorded with the Securities and Ex

Commission. As such, it was understandable that Belo, who was after all petitioner Tocaofriend and confidante, would occasionally participate in the affairs of the business, although n

a formal or official capacity.[3]

Again, respondents witness, Elizabeth Bantilan, confirme
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petitioner Belos presence in Geminesse Enterprises meetings was merely as guarantor of thecompany and to help petitioner Tocao.

[4]

Furthermore, no evidence was presented to show that petitioner Belo participated in the profits

of the business enterprise. Respondent herself professed lack of knowledge that petitioner Belo

received any share in the net income of the partnership.[5]

On the other hand, petitioner Tocao

declared that petitioner Belo was not entitled to any share in the profits of GeminesseEnterprise.

[6]With no participation in the profits, petitioner Belo cannot be deemed a partner since

the essence of a partnership is that the partners share in the profits and losses.[7]

Consequently, inasmuch as petitioner Belo was not a partner in Geminesse Enterprise,respondent had no cause of action against him and her complaint against him should accordingly bedismissed.

As regards the award of damages, petitioners argue that respondent should be deemed in bad

faith for failing to account for stocks of Geminesse Enterprise amounting to P208,250.00 and that,

accordingly, her claim for damages should be barred to that extent. We do not agree. Given the

circumstances surrounding private respondents sudden ouster from the partnership by petitionerTocao, her act of withholding whatever stocks were in her possession and control was justified, if only

to serve as security for her claims against the partnership. However, while we do not agree that the

same renders private respondent in bad faith and should bar her claim for damages, we find that the

said sum of P208,250.00 should be deducted from whatever amount is finally adjudged in her favor

on the basis of the formal account of the partnership affairs to be submitted to the Regional TrialCourt.

WHEREFORE, based on the foregoing, the Motion for Reconsideration of petitioners is

PARTIALLY GRANTED. The Regional Trial Court of Makati is hereby ordered to DISMISS the complaint,

docketed as Civil Case No. 88-509, as against petitioner William T. Belo only. The sum of P208,250.00shall be deducted from whatever amount petitioner Marjorie Tocao shall be held liable to pay

respondent after the formal accounting of the partnership affairs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, and Pardo, JJ., concur.Puno, J., on official leave.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 127405 October 4, 2000

MARJORIE TOCAO and WILLIAM T. BELO, petitioners,

vs.

COURT OF APPEALS and NENITA A. ANAY, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 416

affirming the Decision of the Regional Trial Court of Makati, Branch 140, in Civil Case

509.[ii][2]

Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand, private resp

Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultr

Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner M

Tocao, who conveyed her desire to enter into a joint venture with her for the importation an

distribution of kitchen cookwares. Belo volunteered to finance the joint venture and assigned

the job of marketing the product considering her experience and established relationship wit

Bend Company, a manufacturer of kitchen wares in Wisconsin, U.S.A. Under the joint ventur

acted as capitalist, Tocao as president and general manager, and Anay as head of the ma

department and later, vice-president for sales. Anay organized the administrative staff and sale

while Tocao hired and fired employees, determined commissions and/or salaries of the emp

and assigned them to different branches. The parties agreed that Belos name should not ap

any documents relating to their transactions with West Bend Company. Instead, they agreedAnays name in securing distributorship of cookware from that company. The parties agreed

that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the busin

overriding commission of six percent (6%) of the overall weekly production; (3) thirty percen

of the sales she would make; and (4) two percent (2%) for her demonstration servic

agreement was not reduced to writing on the strength of Belos assurances that he was s

dependable and honest when it came to financial commitments.

Anay having secured the distributorship of cookware products from the West Bend Compa

organized the administrative staff and the sales force, the cookware business took off succe

They operated under the name of Geminesse Enterprise, a sole proprietorship registered in M

Tocaos name, with office at 712 Rufino Building, Ayala Avenue, Makati City. Belo made go

monetary commitments to Anay. Thereafter, Roger Muencheberg of West Bend Company

Anay to the distributor/dealer meeting in West Bend, Wisconsin, U.S.A., from July 19 to 21, 19

to the southwestern regional convention in Pismo Beach, California, U.S.A., from July 25-26

Anay accepted the invitation with the consent of Marjorie Tocao who, as president and
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manager of Geminesse Enterprise, even wrote a letter to the Visa Section of the U.S. Embassy in

Manila on July 13, 1987. A portion of the letter reads:

Ms. Nenita D. Anay (sic), who has been patronizing and supporting West Bend Co. for tw enty (20)

years now, acquired the distributorship of Royal Queen cookware for Geminesse Enterprise, is the

Vice President Sales Marketing and a business partner of our company, will attend in response to the

invitation. (Italics supplied.)[iii][3]

Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving thebusiness on account of the unsatisfactory sales record in the Makati and Cubao offices. On August 31,

1987, she received a plaque of appreciation from the administrative and sales people through

Marjorie Tocao[iv][4] for her excellent job performance. On October 7, 1987, in the presence of Anay,

Belo signed a memo[v][5] entitling her to a thirty-seven percent (37%) commission for her personal

sales up Dec 31/87. Belo explained to her that said commission was apart from her ten percent

(10%) share in the profits. On October 9, 1987, Anay learned that Marjorie Tocao had signed a

letter[vi][6] addressed to the Cubao sales office to the effect that she was no longer the vice-

president of Geminesse Enterprise. The following day, October 10, she received a note from Lina T.

Cruz, marketing manager, that Marjorie Tocao had barred her from holding office and conducting

demonstrations in both Makati and Cubao offices.[vii][7] Anay attempted to contact Belo. She wrote

him twice to demand her overriding commission for the period of January 8, 1988 to February 5, 1988

and the audit of the company to determine her share in the net profits. When her letters were not

answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter. Still, that letter was not

answered.

Anay still received her five percent (5%) overriding commission up to December 1987. The following

year, 1988, she did not receive the same commission although the company netted a gross sales of

P13,300,360.00.

On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with

damages[viii][8] against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati,

Branch 140.In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the

following: (1) P32,00.00 as unpaid overriding commission from January 8, 1988 to February 5, 1988;

(2) P100,000.00 as moral damages, and (3) P100,000.00 as exemplary damages. The plaintiff also

prayed for an audit of the finances of Geminesse Enterprise from the inception of its business

operation until she was illegally dismissed to determine her ten percent (10%) share in t

profits. She further prayed that she be paid the five percent (5%) overriding commission

remaining 150 West Bend cookware sets before her dismissal.

In their answer,[ix]*9+ Marjorie Tocao and Belo asserted that the alleged agreement with An

was neither reduced in writing, nor ratified, was either unenforceable or void or inexistent.

as Belo was concerned, his only role was to introduce Anay to Marjorie Tocao. There could no

been a partnership because, as Anay herself admitted, Geminesse Enterprise was thproprietorship of Marjorie Tocao. Because Anay merely acted as marketing demonstr

Geminesse Enterprise for an agreed remuneration, and her complaint referred to eith

compensation or dismissal, such complaint should have been lodged with the Department o

and not with the regular court.

Petitioners (defendants therein) further alleged that Anay filed the complaint on account of

and resentment because Marjorie Tocao did not allow her to lord it over in the Gem

Enterprise. Anay had acted like she owned the enterprise because of her experience and ex

Hence, petitioners were the ones who suffered actual damages including unreturne

unaccounted stocks of Geminesse Enterprise, and serious anxiety, besmirched reputation

business world, and various damages not less than P500,000.00. They also alleged that, to vi

their names, they had to hire counsel for a fee of P23,000.00.

At the pre-trial conference, the issues were limited to: (a) whether or not the plaintiff

employee or partner of Marjorie Tocao and Belo, and (b) whether or not the parties are ent

damages.[x][10]

In their defense, Belo denied that Anay was supposed to receive a share in the profit of the bu

He, however, admitted that the two had agreed that Anay would receive a three to four per

4%) share in the gross sales of the cookware. He denied contributing capital to the busin

receiving a share in its profits as he merely served as a guarantor of Marjorie Tocao, who was

the business. He attended and/or presided over business meetings of the venture in his capac

guarantor but he never participated in decision-making. He claimed that he wrote the memo gthe plaintiff thirty-seven percent (37%) commission upon her dismissal from the business ven

the request of Tocao, because Anay had no other income.
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For her part, Marjorie Tocao denied having entered into an oral partnership agreement with Anay.

However, she admitted that Anay was an expert in the cookware business and hence, they agreed to

grant her the following commissions: thirty-seven percent (37%) on personal sales; five percent (5%)

on gross sales; two percent (2%) on product demonstrations, and two percent (2%) for recruitment of

personnel. Marjorie denied that they agreed on a ten percent (10%) commission on the net profits.

Marjorie claimed that she got the capital for the business out of the sale of the sewing machines used

in her garments business and from Peter Lo, a Singaporean friend-financier who loaned her the funds

with interest. Because she treated Anay as her co -equal, Marjorie received the same amounts ofcommissions as her. However, Anay failed to account for stocks valued at P200,000.00.

On April 22, 1993, the trial court rendered a decision the dispositive part of which is as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Ordering defendants to submit to the Court a formal account as to the partnership affairs for

the years 1987 and 1988 pursuant to Art. 1809 of the Civil Code in order to determine the ten

percent (10%) share of plaintiff in the net profits of the cookware business;

2. Ordering defendants to pay five percent (5%) overriding commission for the one hundred andfifty (150) cookware sets available for disposition when plaintiff was wrongfully excluded from the

partnership by defendants;

3. Ordering defendants to pay plaintiff overriding commission on the total production which for

the period covering January 8, 1988 to February 5, 1988 amounted to P32,000.00;

4. Ordering defendants to pay P100,000.00 as moral damages and P100,000.00 as exemplary

damages, and

5. Ordering defendants to pay P50,000.00 as attorneys fees and P20,000.00 as costs of suit.

SO ORDERED.

The trial court held that there was indeed an oral partnership agreement between the plaintiff and

the defendants, based on the following: (a) there was an intention to create a partner ship; (b) a

common fund was established through contributions consisting of money and industry, and (c) there

was a joint interest in the profits. The testimony of Elizabeth Bantilan, Anays cousin a

administrative officer of Geminesse Enterprise from August 21, 1986 until it was absorbed b

International, Inc., buttressed the fact that a partnership existed between the parties. The le

Roger Muencheberg of West Bend Company stating that he awarded the distributorship to An

Marjorie Tocao because he was convinced that with Marjories financial contribution and

experience, the combination of the two would be invaluable to the partnership, also support

conclusion. Belos claim that he was merely a guarantor has no basis since there was no

evidence thereof as required by Article 2055 of the Civil Code. Moreover, his acts of attending

presiding over meetings of Geminesse Enterprise plus his issuance of a memo giving Ana

commission on personal sales belied this. On the contrary, it demonstrated his involveme

partner in the business.

The trial court further held that the payment of commissions did not preclude the existence

partnership inasmuch as such practice is often resorted to in business circles as an impetus to

sales volume. It did not matter that the agreement was not in writing because Article 1771 of t

Code provides that a partnership may be constituted in any form. The fact that Gem

Enterprise was registered in Marjorie Tocaos name is not determinative of whether or n

business was managed and operated by a sole proprietor or a partnership. What was registere

the Bureau of Domestic Trade was merely the business name or style of Geminesse Enterprise

The trial court finally held that a partner who is excluded wrongfully from a partnership is an in

partner. Hence, the guilty partner must give him his due upon the dissolution of the partner

well as damages or share in the profits realized from the appropriation of the partnership b

and goodwill. An innocent partner thus possesses pecuniary interest in every existing contr

was incomplete and in the trade name of the co-partnership and assets at the time he was wro

expelled.

Petitioners appeal to the Court of Appeals[xi][11] was dismissed, but the amount of d

awarded by the trial court were reduced to P50,000.00 for moral damages and P50,000

exemplary damages. Their Motion for Reconsideration was denied by the Court of Appeals for

merit.[xii][12] Petitioners Belo and Marjorie Tocao are now before this Court on a petition for

on certiorari, asserting that there was no business partnership between them and herein
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respondent Nenita A. Anay who is, therefore, not entitled to the damages awarded to her by the

Court of Appeals.

Petitioners Tocao and Belo contend that the Court of Appeals erroneously held that a partnership

existed between them and private respondent Anay because Geminesse Enterprise came into being

exactly a year before the alleged partnership was formed, and that it was very unlikely that

petitioner Belo would invest the sum of P2,500,000.00 with petitioner Tocao contributing nothing,

without any memorandum whatsoever regarding the alleged partnership.[xiii][13]

The issue of whether or not a partnership exists is a factual matter which are within the exclusive

domain of both the trial and appellate courts. This Court cannot set aside factual findings of such

courts absent any showing that there is no evidence to support the conclusion drawn by the court a

quo.[xiv][14] In this case, both the trial court and the Court of Appeals are one in ruling that

petitioners and private respondent established a business partnership. This Court finds no reason to

rule otherwise.

To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or more

persons bind themselves to contribute money, property or industry to a common fund; and (2)

intention on the part of the partners to divide the profits among themselves.[xv][15] It may be

constituted in any form; a public instrument is necessary only where immovable property or real

rights are contributed thereto.[xvi][16] This implies that since a contract of partnership is consensual,an oral contract of partnership is as good as a written one. Where no immovable property or real

rights are involved, what matters is that the parties have complied with the requisites of a

partnership. The fact that there appears to be no record in the Securities and Exchange Commission

of a public instrument embodying the partnership agreement pursuant to Article 1772 of the Civil

Code[xvii][17] did not cause the nullification of the partnership. The pertinent provision of the Civil

Code on the matter states:

Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the

partners, even in case of failure to comply with the requirements of article 1772, first paragraph.

Petitioners admit that private respondent had the expertise to engage in the business of

distributorship of cookware. Private respondent contributed such expertise to the partnership and

hence, under the law, she was the industrial or managing partner. It was through her reputation with

the West Bend Company that the partnership was able to open the business of distributorship of that

companys cookware products; it was through the same efforts that the business was propelled to

financial success. Petitioner Tocao herself admitted private respondents indispensable role in putting

up the business when, upon being asked if private respondent held the positions of ma

manager and vice-president for sales, she testified thus:

A: No, sir at the start she was the marketing manager because there were no one to sell

only me there then her and then two (2) people, so about four (4). Now, after that wh

recruited already Oscar Abella and Lina Torda-Cruz these two (2) people were given the desi

of marketing managers of which definitely Nita as superior to them would be th

President.[xviii][18]By the set-up of the business, third persons were made to believe that a partnership had indee

forged between petitioners and private respondents. Thus, the communication dated June 4, 1

Missy Jagler of West Bend Company to Roger Muencheberg of the same company states:

Marge Tocao is president of Geminesse Enterprises. Geminesse will finance the operations.

does not have cookware experience. Nita Anay has started to gather former managers, Lina

and Dory Vista. She has also gathered former demonstrators, Betty Bantilan, Eloisa Lamela, M

Javier. They will continue to gather other key people and build up the organization. All they

the finance and the products to sell.[xix][19]

On the other hand, petitioner Belos denial that he financed the partnership rings hollow in th

of the established fact that he presided over meetings regarding matters affecting the opera

the business. Moreover, his having authorized in writing on October 7, 1987, on a stationery

own business firm, Wilcon Builders Supply, that private respondent should receive thirty-seve

of the proceeds of her personal sales, could not be interpreted otherwise than that he

proprietary interest in the business. His claim that he was merely a guarantor is belied

personal act of proprietorship in the business. Moreover, if he was indeed a guarantor of futur

of petitioner Tocao under Article 2053 of the Civil Code,[xx][20] he should have pre

documentary evidence therefor. While Article 2055 of the Civil Code simply provides that g

must be express, Article 1403, the Statute of Frauds, requires that a special promise to ans

the debt, default or miscarriage of another be in writing.[xxi][21]

Petitioner Tocao, a former ramp model,[xxii][22] was also a capitalist in the partnership. She that she herself financed the business. Her and petitioner Belos roles as both capitalists

partnership with private respondent are buttressed by petitioner Tocaos admissions that pe

Belo was her boyfriend and that the partnership was not their only business venture togethe

also established a firm that they called Wiji, the combination of petitioner Belos first
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William, and her nickname, Jiji.[xxiii][23] The special relationship between them dovetails with

petitioner Belos claim that he was a cting in behalf of petitioner Tocao. Significantly, in the early stage

of the business operation, petitioners requested West Bend Company to allow them to utilize their

banking and trading facilities in Singapore in the matter of importation and payment of the

cookware products.[xxiv][24] The inevitable conclusion, therefore, was that petitioners merged their

respective capital and infused the amount into the partnership of distributing cookware with private

respondent as the managing partner.

The business venture operated under Geminesse Enterprise did not result in an employer-employeerelationship between petitioners and private respondent. While it is true that the receipt of a

percentage of net profits constitutes only prima facieevidence that the recipient is a partner in the

business,[xxv][25] the evidence in the case at bar controverts an employer-employee relationship

between the parties. In the first place, private respondent had a voice in the management of the

affairs of the cookware distributorship,[xxvi][26] including selection of people who would constitute

the administrative staff and the sales force. Secondly, petitioner Tocaos admissions militate against

an employer-employee relationship. She admitted that, like her who owned Geminesse

Enterprise,[xxvii][27] private respondent received only commissions and transportation and

representation allowances[xxviii][28] and not a fixed salary.[xxix][29] Petitioner Tocao testified:

Q:

Of course. Now, I am showing to you certain documents already marked as Exhs. X and Y.Please go over this. Exh. Y is denominated `Cubao overrides 8-21-87 with ending August 21, 1987,

will you please go over this and tell the Honorable Court whether you ever came across this

document and know of your own knowledge the amount

A: Yes, sir this is what I am talking about earlier. Thats the one I am telling you earlier a certain

percentage for promotions, advertising, incentive.

Q: I see. Now, this promotion, advertising, incentive, there is a figure here and words which I

quote: Overrides Marjorie Ann Tocao P21,410.50 this means that you have received this amount?

A: Oh yes, sir.

Q: I see. And, by way of amplification this is what you are saying as one representing commission,

representation, advertising and promotion?

A: Yes, sir.

Q: I see. Below your name is the words and figure and I quote Nita D. Anay P21,410.50, w

this?

A: Thats her overriding commission.

Q: Overriding commission, I see. Of course, you are telling this Honorable Court that ther

the same P21,410.50 is merely by coincidence?

A: No, sir, I made it a point that we were equal because the way I look at her kasi, you kn

sense because of her expertise in the business she is vital to my business. So, as part of the inc

offer her the same thing.

Q: So, in short you are saying that this you have shared together, I mean having gotten fr

company P21,140.50 is your way of indicating that you were treating her as an equal?

A: As an equal.

Q: As an equal, I see. You were treating her as an equal?

A: Yes, sir.

Q: I am calling again your attention to Exh. Y Overrides Makati the other one is

A: That is the same thing, sir.

Q: With ending August 21, words and figure Overrides Marjorie Ann Tocao P15,314.

amount there you will acknowledge you have received that?

A: Yes, sir.

Q: Again in concept of commission, representation, promotion, etc.?

A: Yes, sir.

Q: Okey. Below your name is the name of Nita Anay P15,314.25 that is also an indication treceived the same amount?

A: Yes, sir.

Q: And, as in your previous statement it is not by coincidence that these two (2) are the sa
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A: No, sir.

Q: It is again in concept of you treating Miss Anay as your equal?

A: Yes, sir. (Italics supplied.)[xxx][30]

If indeed petitioner Tocao was private respondents employer, it is difficult to believe that they shall

receive the same income in the business. In a partnership, each partner must share in the profits and

losses of the venture, except that the industrial partner shall not be liable for the losses.[xxxi][31] As

an industrial partner, private respondent had the right to demand for a formal accounting of the

business and to receive her share in the net profit.[xxxii][32]

The fact that the cookware distributorship was operated under the name of Geminesse Enterprise, a

sole proprietorship, is of no moment. What was registered with the Bureau of Domestic Trade on

August 19, 1987 was merely the name of that enterprise .[xxxiii][33] While it is true that in her

undated application for renewal of registration of that firm name, petitioner Tocao indicated that it

would be engaged in retail of kitchenwares, cookwares, utensils, skillet,[xxxiv][34] she also

admitted that the enterprise was only 60% to 70% for the cookware business, while 20% to 30% of

its business activity was devoted to the sale of water sterilizer or purifier .[xxxv][35] Indubitably then,

the business name Geminesse Enterprise was used only for practical reasons it was utilized as the

common name for petitioner Tocaos various business activities, which included the distributorship of

cookware.

Petitioners underscore the fact that the Court of Appeals did not return the unaccounted and

unremitted stocks of Geminesse Enterprise amounting to P208,250.00.[xxxvi][36] Obviously a ploy

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