Fernando Santos vs Spouses Arsenio and Nieves Reyes

Facts:

This is a petition for review on certiorari assailing CA decision which affirmed the RTC decision. Santos and Nieves Reyes verbally agreed that Santos would act as financier while Nieves and Meliton Zabat would act as solicitors for membership and collectors of loan payment. 70% of the profits would go to Santos while Nieves and Zabat would get 15% each. 

It was a lending venture business.

Nieves introduced Gragera of Monte Maria Corp, who obtained short term loans for the partnership in consideration of commissions. In 1986, Nieves and Zabat executed an agreement which formalized their earlier verbal agreement. But, Santis and Nieves later discovered that Zabat engaged in the same lending business. Hence, Zabat was expelled from the partnership. On June 1987, Santos filed a complaint for recovery of sum of money and damages against the respondents, alleging them as employees who misappropriated the funds. Respondents assert they were partners and not mere employees. Santos claimed that after discovery of Zabat's activities, he ceased infusing funds thereby extinguishing the partnership. 

Issue:

Whether or not the parties' relationship was one of partnership or of employer-employee

Held:

Yes they were partners. 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.

Indeed, the partnership was established to engage in a money-lending business, despite the fact that it was formalized only after the Memorandum of Agreement had been signed by petitioner and Gragera.