SANTOS VS. SPS. REYES, 368 SCRA 261

SANTOS VS. SPS. REYES, 368 SCRA 261

PANGANIBAN, J.:

G.R. No. 135813. October 25, 2001

Parties:

Petitioner: FERNANDO SANTOS,

Respondents: Spouses ARSENIO and NIEVES REYES

Nature: PETITION for review on certiorari of a decision of the Court of Appeals

Keyword: Partnership, Loaning Business,

Summary: Santos and Nieves were introduced by Zabat regarding a lending business venture. It was agreed verbally that Santos was the financier while Nieves and Zabat would cover solicitation of members and collection of loan payments. Subsequently, Nieves introduced Santos to Gragera resulting to a business deal with Monte Maria Development Corp. On Aug 1986, Santos, Nieves, and Zabat executed the ‘Article of Agreement’ which formalized their earlier verbal agreement. Later on, Santos and Nieves discovered that Zabat was engaged in the same lending business in competition with their venture thus resulting to the latter’s expulsion from the partnership. On June 1987, Santos filed a complaint against Nieves for recovery of sum of money and damages. He charged Nieves of allegedly misappropriating funds intended to Gragera in their capacity as ‘employees’ of Santos. In their answer, Nieves asserted they were partners and alleged that the complaint was filed to prevent them from claiming their rightful share to the profits of the partnership. Santos contended that Nieves were his employess due to the fact that he ceased infusing funds upon discovering Zabat’s activities thus extinguishing the partnership.

RTC: Held that respondents were PARTNERS, not mere employees, of petitioner. It further ruled that Gragera was only a commission agent of petitioner, not his partner.

CA: Upheld the decision of the RTC. Counterclaim was dismissed.

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 Santos would] act as financier while [respondent 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 Santos] would receive 70% of the profits while [respondent Nieves] and Zabat would earn 15% each,

“In July, 1986, Nieves introduced Cesar Gragera to [petitioner Santos]. Gragera, as chairman of the Monte Maria Development Corporation⁶ (Monte Maria, for brevity), sought short-term loans for members of the corporation. [Petitioner Santos] and Gragera executed an agreement providing funds for Monte Maria’s members. Under the agreement, Monte Maria, represented by Gragera, was entitled to P1.31 commission per thousand paid daily to [petitioner Santos]. Nieves kept the books as representative of [petitioner Santos] while [Respondent] Arsenio, husband of Nieves, acted as credit investigator.

“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. Upon Gragera s complaint that his commissions were inadequately remitted, [petitioner] entrusted P200,000.00 to Nieves to be given to Gragera.  Nieves allegedly failed to account for the amount. [Petitioner] asserted that after examination of the records, he found that of the total amount of P4,623,201.90 entrusted to [respondents], only P3,068,133.20 was 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 claiming their rightful share to the profits of the partnership.

“Arsenic alleged that he was enticed by [petitioner] to take the place of Zabat after [petitioner] learned of Zabat’s activities. Arsenio resigned from his job at the Asian Development Bank to join 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. Except for the limited period of July 8, 1986 through 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 Gragera’s agreed commission. Because of this arrangement, she neither received payments from borrowers nor remitted any amount to Gragera. Her job was merely to make worksheets to convey to [petitioner] how much he would earn if all the sums guaranteed by Gragera were collected.

“[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. It further ruled that Gragera was only a commission agent of petitioner, not his partner.

CA: Upheld the decision of the RTC. Counterclaim was dismissed.

Issue: Whether or not the respondents were employees or partners of the petitioner.

Held: Respondents were partners of the petitioner.

Ratio:

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 signatories shall share the profits of the business in a 70–15–15 manner, with petitioner getting the lion’s share.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., which later on changed its business name to Private Association for Community Development, Inc. (PACDI). Nieves was not merely petitioner’s employee. She discharged her bookkeeping duties in accordance with paragraphs 2 and 3 of the Agreement.

 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 both courts that he replaced Zabat in the partnership.

Indeed, the partnership was established to engage in a moneylending business, despite the fact that it was formalized only after the Memorandum of Agreement had been signed by petitioner and Gragera. 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 6, 1986, or about a month after the Memorandum had been signed by petitioner and Gragera on July 14, 1986.

The Agreement itself attests to this fact:

“WHEREAS, the parties have decided to formalize the terms of their business relationship in order that their respective interests may be properly defined and established for their mutual benefit and understanding,”¹⁵

Ruling: WHEREFORE, the Petition is partly GRANTED. The assailed November 28, 1997 Decision is AFFIRMED, but the challenged Resolutions dated August 17, 1998 and October 9, 1998 are REVERSED and SET ASIDE. No costs.

SO ORDERED.