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FERNANDO SANTOS, Petitioner, v. Spouses ARSENIO and NIEVES REYES, Respondents.
Facts:
In June 1986, Fernando Santos, Nieves Reyes and Melton Zabat orally agreed to form a
partnership a lending business. Santos contributed 70% (as financier) while Reyes and Zabat
shared 30% (as industrial partners). Later, Reyes introduced Cesar Gragera whom they would
provide loans to Grageras corporation particularly its employees. In return Gragera shall have a
commission based on the loan payments. The partners decided on August 1986 to have a written
agreement but they found out that Zabat engaged in a competitor venture thus expelled him. The
two had Arsenio Reyes (husband of Nieves) replaced Zabat.
However, Santos accused the Spouses of not remitting the loans payments. He argued that the
couple were only his employees and there was a special arrangement between him and Gragera.
The trial court and the Court of Appeals ruled against Santos.
Issue:
Whether or not there was a partnership formed between Santos and the Spouses Reyes?
Held:
YES. The original partnership with Zabat continued even after the expulsion of the latter from
the partnership because there was no intent to dissolve the (partnership) relationship.
Also, the Supreme Court emphasized that for 40 years, Tan Eng Kee never asked for an
accounting. The essence of a partnership is that the partners share in the profits and losses. Each
has the right to demand an accounting as long as the partnership exists. Even if it can be
speculated that a scenario wherein if excellent relations exist among the partners at the start of
the business and all the partners are more interested in seeing the firm grow rather than get
immediate returns, a deferment of sharing in the profits is perfectly plausible. But in the
situation in the case at bar, the deferment, if any, had gone on too long to be plausible. A person
is presumed to take ordinary care of his concerns. A demand for periodic accounting is evidence
of a partnership which Kee never did.
The Supreme Court also noted:
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by Article 1825, persons who are not partners as to each other are not
partners as to third persons;
(2) Co-ownership or co-possession does not of itself establish a partnership, whether such coowners or co-possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property which the returns
are derived;
(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he
is a partner in the business, but no such inference shall be drawn if such profits were received in
payment:
(a) As a debt by installment or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of a business or other property by installments
or otherwise.
Case Digest: Filomeno Negado, Narciso Rocha, and Juan Guirindola vs Gonzalo
Makabenta
54 OG 4082
28 February 1958
Facts:
Plaintiffs filed a suit against the defendant for the recovery of possession and management of
Liberty Theater located in Leyte and for an accounting of all money and property pertaining
thereto.
The plaintiffs allege that the theater is owned and operated by a partnership known as Hemarogui
Company composed of the plaintiffs and defendant. Conversely, the defendant alleges that he is
the sole and exclusive owner of the theater while the plaintiffs are merely creditor.
The trial court held that no partnership exists and the oral and material evidence (books,
accounts, and papers) presented by the plaintiffs are incompetent to establish existence of the
partnership.
Issue:
Whether or not a partnership exists among Negado, Rocha, Guirindola and Makabenta
Decision:
There exists a partnership. In determining whether or not a particular transaction constitutes
partnership, the intention as disclosed by the entire transaction, and as gathered from the facts
and from the language employed by the parties as well as their conduct. A partnership may be
created without any definite intention to create it, the intention of the parties being inferred from
their conduct and dealings with each other. For the purpose of showing the existence of a
partnership, books, papers, accounts and similar writings are admissible as evidence provided
that the party against whom they are offered is shown to have authorized or ratified them.
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