G.R. No. 135813, 25 October 2001

FACTS:

Sometime in June, 1986, Petitioner Fernando Santos and Respondent Nieves Reyes were introduced to each other by one Meliton Zabat regarding a lending business venture proposed by 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 was launched on June 13, 1986, with the understanding that petitioner would receive 70% of the profits while Nieves and Zabat would earn 15% each.

In July, 1986, Nieves introduced Cesar Gragera to petitioner. Gragera, as chairman of the Monte Maria Development Corporation Monte Maria, for brevity, sought short-term loans for members of the corporation. Petitioner and Gragera executed an agreement providing funds for Monte Maria’s members.

On August 6, 1986, petitioner Nieves and Zabat executed the ‘Article of Agreement’ which formalized their earlier verbal arrangement. Petitioner and Nieves later discovered that their partner Zabat engaged in the same lending business in competition with their partnership. Zabat was thereby expelled from the partnership. The operations with Monte Maria continued.

On June 5, 1987, petitioner filed a complaint for recovery of sum of money and damages. Petitioner charged [respondents], allegedly in their capacities as employees of [petitioner], with having misappropriated funds intended for Gragera for the period July 8, 1986 up to March 31, 1987. Nieves allegedly failed to account for the amount. 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 claiming their rightful share to the profits of the partnership.

For her part, Nieves claimed that she participated in the business as a partner, as the lending activity with Monte Maria originated from her initiative. Petitioner on the other hand insisted that [respondents] were his mere employees and not partners with respect to the agreement with Gragera. He claimed that after he discovered Zabat’s activities, 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. RTC held that respondents were partners, not mere employees, of petitioner.

ISSUE:

Whether there was a partnership established.

RULING:

Yes. Respondents were industrial partners of petitioner. Nieves herself provided the initiative in the lending activities with Monte Maria. In consonance with the agreement between appellant, Nieves and Zabat (later replaced by Arsenio), [respondents] contributed industry to the common fund with the intention of sharing in the profits of the partnership. [Respondents] provided services without which the partnership would not have [had] the wherewithal to carry on the purpose for which it was organized and as such [were] considered industrial partners.

While concededly, the partnership between [petitioner,] Nieves and Zabat was technically dissolved by 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 Arsenio to 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.

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. The “Articles of Agreement” stipulated that the signatories shall share the profits of the business in a 70-15-15 manner, with petitioner getting the lion’s share. This stipulation clearly proved the establishment of a partnership.

*Case Digest by Paul Jason G. Acasio, JD-IV, Andres Bonifacio Law School, SY 2019-2020