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G.R. No.

172690 March 3, 2010

Before this Court is a Petition for Review on Certiorari
under Rule 45 of the Rules of Civil
Procedure, assailing the Court of Appeals (CA) Decision
dated June 29, 2005, which reversed and set
aside the decision
of the Regional Trial Court (RTC) of Lucena City, dated April 12, 2004
The facts of the case are as follows:
Petitioners are the heirs of the late Jose Lim (Jose), namely: Jose's widow Cresencia Palad
(Cresencia); and their children Elenito, Evelia, Imelda, Edelyna and Edison, all surnamed Lim (petitioners),
represented by Elenito Lim (Elenito). They filed a Complaint
for Partition, Accounting and
Damages against respondent Juliet Villa Lim (respondent), widow of the late Elfledo Lim (Elfledo), who
was the eldest son of Jose and Cresencia.
Petitioners alleged that Jose was the liaison officer of Interwood Sawmill in Cagsiay,
Mauban, Quezon. Sometime in 1980, Jose, together with his friends Jimmy Yu (Jimmy) and Norberto Uy
(Norberto), formed a partnership to engage in the trucking business. Initially, with a contribution
of P50,000.00 each, they purchased a truck to be used in the hauling and transport of lumber of the
sawmill. Jose managed the operations of this trucking business until his death on August 15,
1981. Thereafter, Jose's heirs, including Elfledo, and partners agreed to continue the business under the
management of Elfledo. The shares in the partnership profits and income that formed part of the estate
of Jose were held in trust by Elfledo, with petitioners' authority for Elfledo to use, purchase or acquire
properties using said funds.
Petitioners also alleged that, at that time, Elfledo was a fresh commerce graduate serving as
his fathers driver in the trucking business. He was never a partner or an investor in the business and
merely supervised the purchase of additional trucks using the income from the trucking business of the
partners. By the time the partnership ceased, it had nine trucks, which were all registered in Elfledo's
name. Petitioners asseverated that it was also through Elfledos management of the partnership that he
was able to purchase numerous real properties by using the profits derived therefrom, all of which were
registered in his name and that of respondent. In addition to the nine trucks, Elfledo also acquired five
other motor vehicles.
On May 18, 1995, Elfledo died, leaving respondent as his sole surviving heir. Petitioners
claimed that respondent took over the administration of the aforementioned properties, which
belonged to the estate of Jose, without their consent and approval. Claiming that they are co-owners of
the properties, petitioners required respondent to submit an accounting of all income, profits and
rentals received from the estate of Elfledo, and to surrender the administration thereof. Respondent
refused; thus, the filing of this case.

Respondent traversed petitioners' allegations and claimed that Elfledo was himself a partner
of Norberto and Jimmy. Respondent also claimed that per testimony of Cresencia, sometime in 1980,
Jose gave Elfledo P50,000.00 as the latter's capital in an informal partnership with Jimmy and Norberto.
When Elfledo and respondent got married in 1981, the partnership only had one truck; but through the
efforts of Elfledo, the business flourished. Other than this trucking business, Elfledo, together with
respondent, engaged in other business ventures. Thus, they were able to buy real properties and to put
up their own car assembly and repair business. When Norberto was ambushed and killed on July 16,
1993, the trucking business started to falter. When Elfledo died on May 18, 1995 due to a heart attack,
respondent talked to Jimmy and to the heirs of Norberto, as she could no longer run the business.
Jimmy suggested that three out of the nine trucks be given to him as his share, while the other three
trucks be given to the heirs of Norberto. However, Norberto's wife, Paquita Uy, was not interested in the
vehicles. Thus, she sold the same to respondent, who paid for them in installments.
Respondent also alleged that when Jose died in 1981, he left no known assets, and the
partnership with Jimmy and Norberto ceased upon his demise. Respondent also stressed that Jose left
no properties that Elfledo could have held in trust. Respondent maintained that all the properties
involved in this case were purchased and acquired through her and her husbands joint efforts and hard
work, and without any participation or contribution from petitioners or from Jose. Respondent
submitted that these are conjugal partnership properties; and thus, she had the right to refuse to render
an accounting for the income or profits of their own business.
Trial on the merits ensued. On April 12, 2004, the RTC rendered its decision in favor of
petitioners, thus:
WHEREFORE, premises considered, judgment is hereby rendered:
1) Ordering the partition of the above-mentioned properties equally
between the plaintiffs and heirs of Jose Lim and the defendant Juliet Villa-Lim;
2) Ordering the defendant to submit an accounting of all incomes, profits
and rentals received by her from said properties.
Aggrieved, respondent appealed to the CA.
On June 29, 2005, the CA reversed and set aside the RTC's decision, dismissing petitioners'
complaint for lack of merit. Undaunted, petitioners filed their Motion for Reconsideration,
which the
CA, however, denied in its Resolution
dated May 8, 2006.
Hence, this Petition, raising the sole question, viz.:

In essence, petitioners argue that according to the testimony of Jimmy, the sole surviving partner,
Elfledo was not a partner; and that he and Norberto entered into a partnership with Jose. Thus, the CA
erred in not giving that testimony greater weight than that of Cresencia, who was merely the spouse of
Jose and not a party to the partnership.

Respondent counters that the issue raised by petitioners is not proper in a petition for review
on certiorari under Rule 45 of the Rules of Civil Procedure, as it would entail the review, evaluation,
calibration, and re-weighing of the factual findings of the CA. Moreover, respondent invokes the
rationale of the CA decision that, in light of the admissions of Cresencia andEdison and the testimony of
respondent, the testimony of Jimmy was effectively refuted; accordingly, the CA's reversal of the RTC's
findings was fully justified.

We resolve first the procedural matter regarding the propriety of the instant Petition.
Verily, the evaluation and calibration of the evidence necessarily involves consideration of factual
issues an exercise that is not appropriate for a petition for review on certiorariunder Rule 45. This rule
provides that the parties may raise only questions of law, because the Supreme Court is not a trier of
facts. Generally, we are not duty-bound to analyze again and weigh the evidence introduced in and
considered by the tribunals below.
When supported by substantial evidence, the findings of fact of
the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the case
falls under any of the following recognized exceptions:
(1) When the conclusion is a finding grounded entirely on speculation,
surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the
issues of the case and the same is contrary to the admissions of both appellant
and appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are conclusions without citation of
specific evidence on which they are based;
(9) When the facts set forth in the petition as well as in the petitioners'
main and reply briefs are not disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on
the supposed absence of evidence and contradicted by the evidence on

We note, however, that the findings of fact of the RTC are contrary to those of the CA. Thus, our
review of such findings is warranted.
On the merits of the case, we find that the instant Petition is bereft of merit
A partnership exists when two or more persons agree to place their money, effects, labor, and skill
in lawful commerce or business, with the understanding that there shall be a proportionate sharing of
the profits and losses among them. A contract of partnership is defined by the Civil Code as one where
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.

Undoubtedly, the best evidence would have been the contract of partnership or the articles of
partnership. Unfortunately, there is none in this case, because the alleged partnership was never
formally organized. Nonetheless, we are asked to determine who between Jose and Elfledo was the
partner in the trucking business.
A careful review of the records persuades us to affirm the CA decision. The evidence presented by
petitioners falls short of the quantum of proof required to establish that: (1) Jose was the partner and
not Elfledo; and (2) all the properties acquired by Elfledo and respondent form part of the estate of Jose,
having been derived from the alleged partnership.
Petitioners heavily rely on Jimmy's testimony. But that testimony is just one piece of evidence
against respondent. It must be considered and weighed along with petitioners' other evidence vis--vis
respondent's contrary evidence. In civil cases, the party having the burden of proof must establish his
case by a preponderance of evidence. "Preponderance of evidence" is the weight, credit, and value of
the aggregate evidence on either side and is usually considered synonymous with the term "greater
weight of the evidence" or "greater weight of the credible evidence." "Preponderance of evidence" is a
phrase that, in the last analysis, means probability of the truth. It is evidence that is more convincing to
the court as worthy of belief than that which is offered in opposition thereto.
Rule 133, Section 1 of
the Rules of Court provides the guidelines in determining preponderance of evidence, thus:
SECTION I. Preponderance of evidence, how determined. In civil cases, the
party having burden of proof must establish his case by a preponderance of
evidence. In determining where the preponderance or superior weight of
evidence on the issues involved lies, the court may consider all the facts and
circumstances of the case, the witnesses' manner of testifying, their intelligence,
their means and opportunity of knowing the facts to which they are testifying, the
nature of the facts to which they testify, the probability or improbability of their
testimony, their interest or want of interest, and also their personal credibility so
far as the same may legitimately appear upon the trial. The court may also
consider the number of witnesses, though the preponderance is not necessarily
with the greater number.
At this juncture, our ruling in Heirs of Tan Eng Kee v. Court of Appeals
is enlightening. Therein, we
cited Article 1769 of the Civil Code, which provides:
Art. 1769. In determining whether a partnership exists, these rules shall

(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 co-owners 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 from which the returns are derived;
(4) The receipt by a person of a share of the profits of a business is a 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 installments 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
(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.

Applying the legal provision to the facts of this case, the following circumstances tend to prove that
Elfledo was himself the partner of Jimmy and Norberto: 1) Cresencia testified that Jose gave
Elfledo P50,000.00, as share in the partnership, on a date that coincided with the payment of the initial
capital in the partnership;
(2) Elfledo ran the affairs of the partnership, wielding absolute
control, power and authority, without any intervention or opposition whatsoever from any of
petitioners herein;
(3) all of the properties, particularly the nine trucks of the partnership, were
registered in the name of Elfledo; (4) Jimmy testified that Elfledo did not receive wages or salaries from
the partnership, indicating that what he actually received were shares of the profits of the
and (5) none of the petitioners, as heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime. As repeatedly stressed in Heirs of Tan Eng Kee,
a demand
for periodic accounting is evidence of a partnership.
Furthermore, petitioners failed to adduce any evidence to show that the real and personal
properties acquired and registered in the names of Elfledo and respondent formed part of the estate of
Jose, having been derived from Jose's alleged partnership with Jimmy and Norberto. They failed to refute
respondent's claim that Elfledo and respondent engaged in other businesses. Edison even admitted that
Elfledo also sold Interwood lumber as a sideline.
Petitioners could not offer any credible evidence
other than their bare assertions. Thus, we apply the basic rule of evidence that between documentary
and oral evidence, the former carries more weight.

Finally, we agree with the judicious findings of the CA, to wit:
The above testimonies prove that Elfledo was not just a hired help but one
of the partners in the trucking business, active and visible in the running of its
affairs from day one until this ceased operations upon his demise. The extent of
his control, administration and management of the partnership and its business,
the fact that its properties were placed in his name, and that he was not paid
salary or other compensation by the partners, are indicative of the fact that Elfledo
was a partner and a controlling one at that. It is apparent that the other partners
only contributed in the initial capital but had no say thereafter on how the
business was ran. Evidently it was through Elfredos efforts and hard work that the
partnership was able to acquire more trucks and otherwise prosper. Even the
appellant participated in the affairs of the partnership by acting as the bookkeeper
sans salary.
It is notable too that Jose Lim died when the partnership was barely a year
old, and the partnership and its business not only continued but also
flourished. If it were true that it was Jose Lim and not Elfledo
who was the partner, then upon his death the partnership should have
been dissolved and its assets liquidated. On the contrary, these were not done
but instead its operation continued under the helm of Elfledo and without any
participation from the heirs of Jose Lim.
Whatever properties appellant and her husband had acquired, this was
through their own concerted efforts and hard work. Elfledo did not limit himself
to the business of their partnership but engaged in other lines of businesses as
In sum, we find no cogent reason to disturb the findings and the ruling of the CA as they are amply
supported by the law and by the evidence on record
WHEREFORE, the instant Petition is DENIED. The assailed Court of Appeals Decision dated June 29,
2005 is AFFIRMED. Costs against petitioners.

G.R. No. 148187 April 16, 2008
This is a petition for review on certiorari of the June 30, 2000 Decision
of the Court of Appeals in
CA-G.R. SP No. 49385, which affirmed the Decision
of the Court of Tax Appeals in C.T.A. Case No. 5200.
Also assailed is the April 3, 2001 Resolution
denying the motion for reconsideration.
The facts of the case are as follows:
On April 16, 1971, petitioner Philex Mining Corporation (Philex Mining), entered into an
with Baguio Gold Mining Company (Baguio Gold) for the former to manage and operate
the latters mining claim, known as the Sto. Nino mine, located in Atok and
Tublay, Benguet Province. The parties agreement was denominated as Power of Attorney and
provided for the following terms:
4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall
make available to the MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS
(P11,000,000.00), in such amounts as from time to time may be required by the
MANAGERS within the said 3-year period, for use in the MANAGEMENT of the
STO. NINO MINE. The said ELEVEN MILLION PESOS (P11,000,000.00) shall be
deemed, for internal audit purposes, as the owners account in the Sto. Nino
PROJECT. Any part of any income of the PRINCIPAL from the STO. NINO MINE,
which is left with the Sto. Nino PROJECT, shall be added to such owners account.
5. Whenever the MANAGERS shall deem it necessary and convenient in
connection with the MANAGEMENT of the STO. NINO MINE, they may transfer
their own funds or property to the Sto. Nino PROJECT, in accordance with the
following arrangements:
(a) The properties shall be appraised and, together with the cash, shall
be carried by the Sto. Nino PROJECT as a special fund to be known as the
MANAGERS account.
(b) The total of the MANAGERS account shall not exceed
P11,000,000.00, except with prior approval of the PRINCIPAL; provided, however,
that if the compensation of the MANAGERS as herein provided cannot be paid in
cash from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to
the MANAGERS account.
(c) The cash and property shall not thereafter be withdrawn from the
Sto. Nino PROJECT until termination of this Agency.
(d) The MANAGERS account shall not accrue interest. Since it is the
desire of the PRINCIPAL to extend to the MANAGERS the benefit of subsequent
appreciation of property, upon a projected termination of this Agency, the ratio
which the MANAGERS account has to the owners account will be determined,
and the corresponding proportion of the entire assets of the STO. NINO MINE,
excluding the claims, shall be transferred to the MANAGERS, except that such
transferred assets shall not include mine development, roads, buildings, and
similar property which will be valueless, or of slight value, to the MANAGERS.
The MANAGERS can, on the other hand, require at their option that property
originally transferred by them to the Sto. Nino PROJECT be re-transferred to them.
Until such assets are transferred to the MANAGERS, this Agency shall remain
x x x x
12. The compensation of the MANAGER shall be fifty per cent (50%) of the net
profit of the Sto. Nino PROJECT before income tax. It is understood that the
MANAGERS shall pay income tax on their compensation, while the PRINCIPAL shall
pay income tax on the net profit of the Sto. Nino PROJECT after deduction
therefrom of the MANAGERS compensation.
x x x x
16. The PRINCIPAL has current pecuniary obligation in favor of the MANAGERS
and, in the future, may incur other obligations in favor of the MANAGERS. This
Power of Attorney has been executed as security for the payment and satisfaction
of all such obligations of the PRINCIPAL in favor of the MANAGERS and as a means
to fulfill the same. Therefore, this Agency shall be irrevocable while any obligation
of the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the
MANAGERS account. After all obligations of the PRINCIPAL in favor of the
MANAGERS have been paid and satisfied in full, this Agency shall be revocable by
the PRINCIPAL upon 36-month notice to the MANAGERS.
17. Notwithstanding any agreement or understanding between the PRINCIPAL
and the MANAGERS to the contrary, the MANAGERS may withdraw from this
Agency by giving 6-month notice to the PRINCIPAL. The MANAGERS shall not in
any manner be held liable to the PRINCIPAL by reason alone of such withdrawal.
Paragraph 5(d) hereof shall be operative in case of the MANAGERS withdrawal.
x x x x

In the course of managing and operating the project, Philex Mining made advances of cash and
property in accordance with paragraph 5 of the agreement. However, the mine suffered continuing
losses over the years which resulted to petitioners withdrawal as manager of the mine on January 28,
1982 and in the eventual cessation of mine operations on February 20, 1982.

Thereafter, on September 27, 1982, the parties executed a Compromise with Dation in
wherein Baguio Gold admitted an indebtedness to petitioner in the amount of
P179,394,000.00 and agreed to pay the same in three segments by first assigning Baguio Golds tangible
assets to petitioner, transferring to the latter Baguio Golds equitable title in its Philodrill assets and
finally settling the remaining liability through properties that Baguio Gold may acquire in the future.
On December 31, 1982, the parties executed an Amendment to Compromise with Dation in
where the parties determined that Baguio Golds indebtedness to petitioner actually
amounted to P259,137,245.00, which sum included liabilities of Baguio Gold to other creditors that
petitioner had assumed as guarantor. These liabilities pertained to long-term loans amounting to
US$11,000,000.00 contracted by Baguio Gold from the Bank of America NT & SA and Citibank N.A. This
time, Baguio Gold undertook to pay petitioner in two segments by first assigning its tangible assets for
P127,838,051.00 and then transferring its equitable title in its Philodrill assets for P16,302,426.00. The
parties then ascertained that Baguio Gold had a remaining outstanding indebtedness to petitioner in the
amount of P114,996,768.00.
Subsequently, petitioner wrote off in its 1982 books of account the remaining outstanding
indebtedness of Baguio Gold by charging P112,136,000.00 to allowances and reserves that were set up in
1981 and P2,860,768.00 to the 1982 operations.
In its 1982 annual income tax return, petitioner deducted from its gross income the amount of
P112,136,000.00 as loss on settlement of receivables from Baguio Gold against reserves and
However, the Bureau of Internal Revenue (BIR) disallowed the amount as deduction for
bad debt and assessed petitioner a deficiency income tax of P62,811,161.39.
Petitioner protested before the BIR arguing that the deduction must be allowed since all requisites
for a bad debt deduction were satisfied, to wit: (a) there was a valid and existing debt; (b) the debt was
ascertained to be worthless; and (c) it was charged off within the taxable year when it was determined
to be worthless.
Petitioner emphasized that the debt arose out of a valid management contract it entered into with
Baguio Gold. The bad debt deduction represented advances made by petitioner which, pursuant to the
management contract, formed part of Baguio Golds pecuniary obligations to petitioner. It also
included payments made by petitioner as guarantor of Baguio Golds long-term loans which legally
entitled petitioner to be subrogated to the rights of the original creditor.
Petitioner also asserted that due to Baguio Golds irreversible losses, it became evident that it
would not be able to recover the advances and payments it had made in behalf of Baguio Gold. For a
debt to be considered worthless, petitioner claimed that it was neither required to institute a judicial
action for collection against the debtor nor to sell or dispose of collateral assets in satisfaction of the
debt. It is enough that a taxpayer exerted diligent efforts to enforce collection and exhausted all
reasonable means to collect.
On October 28, 1994, the BIR denied petitioners protest for lack of legal and factual basis. It
held that the alleged debt was not ascertained to be worthless since Baguio Gold remained existing and
had not filed a petition for bankruptcy; and that the deduction did not consist of a valid and subsisting
debt considering that, under the management contract, petitioner was to be paid fifty percent (50%) of
the projects net profit.

Petitioner appealed before the Court of Tax Appeals (CTA) which rendered judgment, as
WHEREFORE, in view of the foregoing, the instant Petition for Review is
hereby DENIED for lack of merit. The assessment in question, viz: FAS-1-82-88-
003067 for deficiency income tax in the amount of P62,811,161.39 is hereby
ACCORDINGLY, petitioner Philex Mining Corporation is hereby
ORDERED to PAY respondent Commissioner of Internal Revenue the amount of
P62,811,161.39, plus, 20% delinquency interest due computed from February 10,
1995, which is the date after the 20-day grace period given by the respondent
within which petitioner has to pay the deficiency amount x x x up to actual date of

The CTA rejected petitioners assertion that the advances it made for the Sto. Nino mine were
in the nature of a loan. It instead characterized the advances as petitioners investment in a partnership
with Baguio Gold for the development and exploitation of the Sto. Nino mine. The CTA held that the
Power of Attorney executed by petitioner and Baguio Gold was actually a partnership
agreement. Since the advanced amount partook of the nature of an investment, it could not be
deducted as a bad debt from petitioners gross income.
The CTA likewise held that the amount paid by petitioner for the long-term loan obligations of
Baguio Gold could not be allowed as a bad debt deduction. At the time the payments were made,
Baguio Gold was not in default since its loans were not yet due and demandable. What petitioner did
was to pre-pay the loans as evidenced by the notice sent by Bank of America showing that it was merely
demanding payment of the installment and interests due. Moreover, Citibank imposed and collected a
pre-termination penalty for the pre-payment.
The Court of Appeals affirmed the decision of the CTA.
Hence, upon denial of its motion
for reconsideration,
petitioner took this recourse under Rule 45 of the Rules of Court, alleging that:
The Court of Appeals erred in construing that the advances made by Philex in the
management of the Sto. Nino Mine pursuant to the Power of Attorney partook of
the nature of an investment rather than a loan.
The Court of Appeals erred in ruling that the 50%-50% sharing in the net profits of
the Sto. Nino Mine indicates that Philex is a partner of Baguio Gold in the
development of the Sto. Nino Mine notwithstanding the clear absence of any
intent on the part of Philex and Baguio Gold to form a partnership.
The Court of Appeals erred in relying only on the Power of Attorney and in
completely disregarding the Compromise Agreement and the Amended
Compromise Agreement when it construed the nature of the advances made by
The Court of Appeals erred in refusing to delve upon the issue of the propriety of
the bad debts write-off.

Petitioner insists that in determining the nature of its business relationship with Baguio Gold,
we should not only rely on the Power of Attorney, but also on the subsequent Compromise with
Dation in Payment and Amended Compromise with Dation in Payment that the parties executed in
1982. These documents, allegedly evinced the parties intent to treat the advances and payments as a
loan and establish a creditor-debtor relationship between them.
The petition lacks merit.
The lower courts correctly held that the Power of Attorney is the instrument that is material
in determining the true nature of the business relationship between petitioner and Baguio Gold. Before
resort may be had to the two compromise agreements, the parties contractual intent must first be
discovered from the expressed language of the primary contract under which the parties business
relations were founded. It should be noted that the compromise agreements were mere collateral
documents executed by the parties pursuant to the termination of their business relationship created
under the Power of Attorney. On the other hand, it is the latter which established the juridical relation
of the parties and defined the parameters of their dealings with one another.
The execution of the two compromise agreements can hardly be considered as a subsequent
or contemporaneous act that is reflective of the parties true intent. The compromise agreements were
executed eleven years after the Power of Attorney and merely laid out a plan or procedure by which
petitioner could recover the advances and payments it made under the Power of Attorney. The parties
entered into the compromise agreements as a consequence of the dissolution of their business
relationship. It did not define that relationship or indicate its real character.
An examination of the Power of Attorney reveals that a partnership or joint venture was
indeed intended by the parties. Under a 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.
While a corporation, like petitioner, cannot generally enter into a contract of
partnership unless authorized by law or its charter, it has been held that it may enter into a joint venture
which is akin to a particular partnership:
The legal concept of a joint venture is of common law origin. It has no
precise legal definition, but it has been generally understood to mean an
organization formed for some temporary purpose. x x x It is in fact hardly
distinguishable from the partnership, since their elements are similar community
of interest in the business, sharing of profits and losses, and a mutual right of
control. x x x The main distinction cited by most opinions in common law
jurisdictions is that the partnership contemplates a general business with some
degree of continuity, while the joint venture is formed for the execution of a single
transaction, and is thus of a temporary nature. x x x This observation is not entirely
accurate in this jurisdiction, since under the Civil Code, a partnership may be
particular or universal, and a particular partnership may have for its object a
specific undertaking. x x x It would seem therefore that under Philippine law, a
joint venture is a form of partnership and should be governed by the law of
partnerships. The Supreme Court has however recognized a distinction between
these two business forms, and has held that although a corporation cannot enter
into a partnership contract, it may however engage in a joint venture with others.
x x x (Citations omitted)

Perusal of the agreement denominated as the Power of Attorney indicates that the parties
had intended to create a partnership and establish a common fund for the purpose. They also had a
joint interest in the profits of the business as shown by a 50-50 sharing in the income of the mine.
Under the Power of Attorney, petitioner and Baguio Gold undertook to contribute money,
property and industry to the common fund known as the Sto. Nio mine.
In this regard, we note that
there is a substantive equivalence in the respective contributions of the parties to the development and
operation of the mine. Pursuant to paragraphs 4 and 5 of the agreement, petitioner and Baguio Gold
were to contribute equally to the joint venture assets under their respective accounts. Baguio Gold
would contribute P11M under its owners account plus any of its income that is left in the project, in
addition to its actual mining claim. Meanwhile, petitioners contribution would consist of its expertise in
the management and operation of mines, as well as the managers account which is comprised
of P11M in funds and property and petitioners compensation as manager that cannot be paid in
However, petitioner asserts that it could not have entered into a partnership agreement with
Baguio Gold because it did not bind itself to contribute money or property to the project; that under
paragraph 5 of the agreement, it was only optional for petitioner to transfer funds or property to the Sto.
Nio project (w)henever the MANAGERS shall deem it necessary and convenient in connection with the

The wording of the parties agreement as to petitioners contribution to the common fund
does not detract from the fact that petitioner transferred its funds and property to the project as
specified in paragraph 5, thus rendering effective the other stipulations of the contract, particularly
paragraph 5(c) which prohibits petitioner from withdrawing the advances until termination of the
parties business relations. As can be seen, petitioner became bound by its contributions once the
transfers were made. The contributions acquired an obligatory nature as soon as petitioner had chosen
to exercise its option under paragraph 5.
There is no merit to petitioners claim that the prohibition in paragraph 5(c) against
withdrawal of advances should not be taken as an indication that it had entered into a partnership with
Baguio Gold; that the stipulation only showed that what the parties entered into was actually a contract
of agency coupled with an interest which is not revocable at will and not a partnership.
In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by
the principal due to an interest of a third party that depends upon it, or the mutual interest of both
principal and agent.
In this case, the non-revocation or non-withdrawal under paragraph 5(c) applies
to the advances made by petitioner who is supposedly the agent and not the principal under the
contract. Thus, it cannot be inferred from the stipulation that the parties relation under the agreement
is one of agency coupled with an interest and not a partnership.
Neither can paragraph 16 of the agreement be taken as an indication that the relationship of
the parties was one of agency and not a partnership. Although the said provision states that this Agency
shall be irrevocable while any obligation of the PRINCIPAL in favor of the MANAGERS is outstanding,
inclusive of the MANAGERS account, it does not necessarily follow that the parties entered into an
agency contract coupled with an interest that cannot be withdrawn by Baguio Gold.
It should be stressed that the main object of the Power of Attorney was not to confer a
power in favor of petitioner to contract with third persons on behalf of Baguio Gold but to create a
business relationship between petitioner and Baguio Gold, in which the former was to manage and
operate the latters mine through the parties mutual contribution of material resources and
industry. The essence of an agency, even one that is coupled with interest, is the agents ability
to represent his principal and bring about business relations between the latter and third
Where representation for and in behalf of the principal is merely incidental or necessary for
the proper discharge of ones paramount undertaking under a contract, the latter may not necessarily be
a contract of agency, but some other agreement depending on the ultimate undertaking of the

In this case, the totality of the circumstances and the stipulations in the parties agreement
indubitably lead to the conclusion that a partnership was formed between petitioner and Baguio Gold.
First, it does not appear that Baguio Gold was unconditionally obligated to return the
advances made by petitioner under the agreement. Paragraph 5 (d) thereof provides that upon
termination of the parties business relations, the ratio which the MANAGERS account has to the
owners account will be determined, and the corresponding proportion of the entire assets of the STO.
NINO MINE, excluding the claims shall be transferred to petitioner.
As pointed out by the Court of
Tax Appeals, petitioner was merely entitled to a proportionate return of the mines assets upon
dissolution of the parties business relations. There was nothing in the agreement that would require
Baguio Gold to make payments of the advances to petitioner as would be recognized as an item of
obligation or accounts payable for Baguio Gold.
Thus, the tax court correctly concluded that the agreement provided for a distribution of
assets of the Sto. Nio mine upon termination, a provision that is more consistent with a partnership
than a creditor-debtor relationship. It should be pointed out that in a contract of loan, a person who
receives a loan or money or any fungible thing acquires ownership thereof and is bound to pay the
creditor an equal amount of the same kind and quality.
In this case, however, there was no stipulation
for Baguio Gold to actually repay petitioner the cash and property that it had advanced, but only the
return of an amount pegged at a ratio which the managers account had to the owners account.
In this connection, we find no contractual basis for the execution of the two compromise
agreements in which Baguio Gold recognized a debt in favor of petitioner, which supposedly arose from
the termination of their business relations over the Sto. Nino mine. The Power of Attorney clearly
provides that petitioner would only be entitled to the return of a proportionate share of the mine assets
to be computed at a ratio that the managers account had to the owners account. Except to provide a
basis for claiming the advances as a bad debt deduction, there is no reason for Baguio Gold to hold itself
liable to petitioner under the compromise agreements, for any amount over and above the proportion
agreed upon in the Power of Attorney.
Next, the tax court correctly observed that it was unlikely for a business corporation to lend
hundreds of millions of pesos to another corporation with neither security, or collateral, nor a specific
deed evidencing the terms and conditions of such loans. The parties also did not provide a specific
maturity date for the advances to become due and demandable, and the manner of payment was
unclear. All these point to the inevitable conclusion that the advances were not loans but capital
contributions to a partnership.
The strongest indication that petitioner was a partner in the Sto Nio mine is the fact that it
would receive 50% of the net profits as compensation under paragraph 12 of the agreement. The
entirety of the parties contractual stipulations simply leads to no other conclusion than that petitioners
compensation is actually its share in the income of the joint venture.
Article 1769 (4) of the Civil Code explicitly provides that the receipt by a person of a share in
the profits of a business is prima facie evidence that he is a partner in the business. Petitioner asserts,
however, that no such inference can be drawn against it since its share in the profits of the Sto Nio
project was in the nature of compensation or wages of an employee, under the exception provided in
Article 1769 (4) (b).

On this score, the tax court correctly noted that petitioner was not an employee of Baguio
Gold who will be paid wages pursuant to an employer-employee relationship. To begin with,
petitioner was the manager of the project and had put substantial sums into the venture in order to
ensure its viability and profitability. By pegging its compensation to profits, petitioner also stood not to
be remunerated in case the mine had no income. It is hard to believe that petitioner would take the risk
of not being paid at all for its services, if it were truly just an ordinary employee.
Consequently, we find that petitioners compensation under paragraph 12 of the
agreement actually constitutes its share in the net profits of the partnership. Indeed, petitioner would
not be entitled to an equal share in the income of the mine if it were just an employee of Baguio
It is not surprising that petitioner was to receive a 50% share in the net profits, considering that
the Power of Attorney also provided for an almost equal contribution of the parties to the St. Nino
mine. The compensation agreed upon only serves to reinforce the notion that the parties relations
were indeed of partners and not employer-employee.
All told, the lower courts did not err in treating petitioners advances as investments in a
partnership known as the Sto. Nino mine. The advances were not debts of Baguio Gold to petitioner
inasmuch as the latter was under no unconditional obligation to return the same to the former under the
Power of Attorney. As for the amounts that petitioner paid as guarantor to Baguio Golds creditors, we
find no reason to depart from the tax courts factual finding that Baguio Golds debts were not yet due
and demandable at the time that petitioner paid the same. Verily, petitioner pre-paid Baguio Golds
outstanding loans to its bank creditors and this conclusion is supported by the evidence on record.

In sum, petitioner cannot claim the advances as a bad debt deduction from its gross
income. Deductions for income tax purposes partake of the nature of tax exemptions and are strictly
construed against the taxpayer, who must prove by convincing evidence that he is entitled to the
deduction claimed.
In this case, petitioner failed to substantiate its assertion that the advances were
subsisting debts of Baguio Gold that could be deducted from its gross income. Consequently, it could
not claim the advances as a valid bad debt deduction.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 49385
dated June 30, 2000, which affirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 5200
is AFFIRMED. Petitioner Philex Mining Corporation is ORDERED to PAY the deficiency tax on its 1982
income in the amount of P62,811,161.31, with 20% delinquency interest computed from February 10,
1995, which is the due date given for the payment of the deficiency income tax, up to the actual date of

[G.R. No. 127405. October 4, 2000]
ANAY, respondents.
This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No.
affirming the Decision of the Regional Trial Court of Makati, Branch 140, in Civil Case No. 88-

Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand, private respondent
Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra Clean
Water Purifier, through her former employer in Bangkok. Belo introduced Anay to petitioner Marjorie
Tocao, who conveyed her desire to enter into a joint venture with her for the importation and local
distribution of kitchen cookwares. Belo volunteered to finance the joint venture and assigned to Anay
the job of marketing the product considering her experience and established relationship with West
Bend Company, a manufacturer of kitchen wares in Wisconsin, U.S.A. Under the joint venture, Belo acted
as capitalist, Tocao as president and general manager, and Anay as head of the marketing department
and later, vice-president for sales. Anay organized the administrative staff and sales force while Tocao
hired and fired employees, determined commissions and/or salaries of the employees, and assigned
them to different branches. The parties agreed that Belos name should not appear in any documents
relating to their transactions with West Bend Company. Instead, they agreed to use Anays name in
securing distributorship of cookware from that company. The parties agreed further that Anay would be
entitled to: (1) ten percent (10%) of the annual net profits of the business; (2) overriding commission of
six percent (6%) of the overall weekly production; (3) thirty percent (30%) of the sales she would make;
and (4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on
the strength of Belos assurances that he was sincere, dependable and honest when it came to financial
Anay having secured the distributorship of cookware products from the West Bend Company and
organized the administrative staff and the sales force, the cookware business took off successfully.They
operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocaos
name, with office at 712 Rufino Building, Ayala Avenue, Makati City. Belo made good his monetary
commitments to Anay. Thereafter, Roger Muencheberg of West Bend Company invited Anay to the
distributor/dealer meeting in West Bend, Wisconsin, U.S.A., from July 19 to 21, 1987 and to the
southwestern regional convention in Pismo Beach, California, U.S.A., from July 25-26, 1987. Anay
accepted the invitation with the consent of Marjorie Tocao who, as president and general 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 twenty (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.)

Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving
the business 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
for her excellent job performance. On October 7, 1987, in the presence of Anay, Belo
signed a memo
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
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
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
against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch
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 the net profits. She further prayed
that she be paid the five percent (5%) overriding commission on the remaining 150 West Bend
cookware sets before her dismissal.
In their answer,
Marjorie Tocao and Belo asserted that the alleged agreement with Anay that
was neither reduced in writing, nor ratified, was either unenforceable or void or inexistent. As far as
Belo was concerned, his only role was to introduce Anay to Marjorie Tocao. There could not have been a
partnership because, as Anay herself admitted, Geminesse Enterprise was the sole proprietorship of
Marjorie Tocao. Because Anay merely acted as marketing demonstrator of Geminesse Enterprise for an
agreed remuneration, and her complaint referred to either her compensation or dismissal, such
complaint should have been lodged with the Department of Labor and not with the regular court.
Petitioners (defendants therein) further alleged that Anay filed the complaint on account of ill-
will and resentment because Marjorie Tocao did not allow her to lord it over in the Geminesse
Enterprise.Anay had acted like she owned the enterprise because of her experience and expertise.
Hence, petitioners were the ones who suffered actual damages including unreturned and unaccounted
stocks of Geminesse Enterprise, and serious anxiety, besmirched reputation in the business world, and
various damages not less than P500,000.00. They also alleged that, to vindicate 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 was an
employee or partner of Marjorie Tocao and Belo, and (b) whether or not the parties are entitled to

In their defense, Belo denied that Anay was supposed to receive a share in the profit of the
business. He, however, admitted that the two had agreed that Anay would receive a three to four
percent (3-4%) share in the gross sales of the cookware. He denied contributing capital to the business or
receiving a share in its profits as he merely served as a guarantor of Marjorie Tocao, who was new in the
business. He attended and/or presided over business meetings of the venture in his capacity as a
guarantor but he never participated in decision-making. He claimed that he wrote the memo granting
the plaintiff thirty-seven percent (37%) commission upon her dismissal from the business venture at the
request of Tocao, because Anay had no other income.
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 of
commissions 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
2. Ordering defendants to pay five percent (5%) overriding commission for the one hundred
and fifty (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
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.
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 partnership; (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 and the administrative
officer of Geminesse Enterprise from August 21, 1986 until it was absorbed by Royal International, Inc.,
buttressed the fact that a partnership existed between the parties. The letter of Roger Muencheberg of
West Bend Company stating that he awarded the distributorship to Anay and Marjorie Tocao because he
was convinced that with Marjories financial contribution and Anays experience, the combination of the
two would be invaluable to the partnership, also supported that conclusion. Belos claim that he was
merely a guarantor has no basis since there was no written evidence thereof as required by Article
2055 of the Civil Code. Moreover, his acts of attending and/or presiding over meetings of Geminesse
Enterprise plus his issuance of a memo giving Anay 37% commission on personal sales belied this. On the
contrary, it demonstrated his involvement as a partner in the business.
The trial court further held that the payment of commissions did not preclude the existence of the
partnership inasmuch as such practice is often resorted to in business circles as an impetus to bigger
sales volume. It did not matter that the agreement was not in writing because Article 1771 of the Civil
Code provides that a partnership may be constituted in any form. The fact that Geminesse Enterprise
was registered in Marjorie Tocaos name is not determinative of whether or not the business was
managed and operated by a sole proprietor or a partnership. What was registered with 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
innocent partner. Hence, the guilty partner must give him his due upon the dissolution of the
partnership as well as damages or share in the profits realized from the appropriation of the
partnership business and goodwill. An innocent partner thus possesses pecuniary interest in every
existing contract that was incomplete and in the trade name of the co-partnership and assets at the time
he was wrongfully expelled.
Petitioners appeal to the Court of Appeals
was dismissed, but the amount of damages awarded
by the trial court were reduced to P50,000.00 for moral damages and P50,000.00 as exemplary
damages. Their Motion for Reconsideration was denied by the Court of Appeals for lack of
Petitioners Belo and Marjorie Tocao are now before this Court on a petition for review
on certiorari, asserting that there was no business partnership between them and herein private
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.

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.
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.
It may be constituted in any form;
a public instrument is necessary only where immovable property or real rights are contributed
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
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 marketing 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
yet, its only me there then her and then two (2) people, so about four (4). Now, after
that when she recruited already Oscar Abella and Lina Torda-Cruz these two (2) people
were given the designation of marketing managers of which definitely Nita as superior
to them would be the Vice President.

By the set-up of the business, third persons were made to believe that a partnership had indeed been
forged between petitioners and private respondents. Thus, the communication dated June 4, 1986 of
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. Marge does
not have cookware experience. Nita Anay has started to gather former managers, Lina Torda and Dory
Vista. She has also gathered former demonstrators, Betty Bantilan, Eloisa Lamela, Menchu Javier. They
will continue to gather other key people and build up the organization. All they need is the finance and
the products to sell.

On the other hand, petitioner Belos denial that he financed the partnership rings hollow in the
face of the established fact that he presided over meetings regarding matters affecting the operation of
the business. Moreover, his having authorized in writing on October 7, 1987, on a stationery of his own
business firm, Wilcon Builders Supply, that private respondent should receive thirty-seven (37%) of the
proceeds of her personal sales, could not be interpreted otherwise than that he had a proprietary
interest in the business. His claim that he was merely a guarantor is belied by that personal act of
proprietorship in the business. Moreover, if he was indeed a guarantor of future debts of petitioner
Tocao under Article 2053 of the Civil Code,
he should have presented documentary evidence therefor.
While Article 2055 of the Civil Code simply provides that guaranty must be express, Article 1403, the
Statute of Frauds, requires that a special promise to answer for the debt, default or miscarriage of
another be in writing.

Petitioner Tocao, a former ramp model,
was also a capitalist in the partnership. She claimed
that she herself financed the business. Her and petitioner Belos roles as both capitalists to the
partnership with private respondent are buttressed by petitioner Tocaos admissions that petitioner Belo
was her boyfriend and that the partnership was not their only business venture together. They also
established a firm that they called Wiji, the combination of petitioner Belos first name, William, and
her nickname, Jiji.
The special relationship between them dovetails with petitioner Belos claim that he
was acting 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.
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-
employee relationship between petitioners and private respondent. While it is true that the receipt of a
percentage of net profits constitutes only prima facie evidence that the recipient is a partner in the
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,
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,
private respondent
received only commissions and transportation and representation allowances
and not a fixed
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, what is
A: Thats her overriding commission.
Q: Overriding commission, I see. Of course, you are telling this Honorable Court that there being 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 know in a
sense because of her expertise in the business she is vital to my business. So, as part of the
incentive I offer her the same thing.
Q: So, in short you are saying that this you have shared together, I mean having gotten from the
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 P15,314.25 the 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 that she
received the same amount?
A: Yes, sir.
Q: And, as in your previous statement it is not by coincidence that these two (2) are the same?
A: No, sir.
Q: It is again in concept of you treating Miss Anay as your equal?
A: Yes, sir. (Italics supplied.)

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.
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.

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.
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,
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.
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.
Obviously a ploy to offset the
damages awarded to private respondent, that claim, more than anything else, proves the existence of a
partnership between them. In Idos v. Court of Appeals, this Court said:
The best evidence of the existence of the partnership, which was not yet terminated (though in the
winding up stage), were the unsold goods and uncollected receivables, which were presented to the trial
court. Since the partnership has not been terminated, the petitioner and private complainant remained
as co-partners. x x x.

It is not surprising then that, even after private respondent had been unceremoniously booted out of the
partnership in October 1987, she still received her overriding commission until December 1987.
Undoubtedly, petitioner Tocao unilaterally excluded private respondent from the partnership to
reap for herself and/or for petitioner Belo financial gains resulting from private respondents efforts to
make the business venture a success. Thus, as petitioner Tocao became adept in the business operation,
she started to assert herself to the extent that she would even shout at private respondent in front of
other people.
Her instruction to Lina Torda Cruz, marketing manager, not to allow private respondent
to hold office in both the Makati and Cubao sales offices concretely spoke of her perception that private
respondent was no longer necessary in the business operation,
and resulted in a falling out between
the two. However, a mere falling out or misunderstanding between partners does not convert the
partnership into a sham organization.
The partnership exists until dissolved under the law. Since the
partnership created by petitioners and private respondent has no fixed term and is therefore a
partnership at will predicated on their mutual desire and consent, it may be dissolved by the will of a
partner. Thus:
x x x. 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 partners capability to give it, and the absence of 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 partnership but that it can result in a liability for damages.

An unjustified dissolution by a partner can subject him to action for damages because by the mutual
agency that arises in a partnership, the doctrine of delectus personae allows the partners to have
thepower, although not necessarily the right to dissolve the partnership.

In this case, petitioner Tocaos unilateral exclusion of private respondent from the partnership is
shown by her memo to the Cubao office plainly stating that private respondent was, as of October 9,
1987, no longer the vice-president for sales of Geminesse Enterprise.
By that memo, petitioner Tocao
effected her own withdrawal from the partnership and considered herself as having ceased to be
associated with the partnership in the carrying on of the business. Nevertheless, the partnership was not
terminated thereby; it continues until the winding up of the business.

The winding up of partnership affairs has not yet been undertaken by the partnership. This is
manifest in petitioners claim for stocks that had been entrusted to private respondent in the pursuit of
the partnership business.
The determination of the amount of damages commensurate with the factual findings upon which
it is based is primarily the task of the trial court.
The Court of Appeals may modify that amount only
when its factual findings are diametrically opposed to that of the lower court,
or the award is palpably
or scandalously and unreasonably excessive.
However, exemplary damages that are awarded by way
of example or correction for the public good,
should be reduced to P50,000.00, the amount correctly
awarded by the Court of Appeals. Concomitantly, the award of moral damages of P100,000.00 was
excessive and should be likewise reduced to P50,000.00. Similarly, attorneys fees that should be granted
on account of the award of exemplary damages and petitioners evident bad faith in refusing to satisfy
private respondents plainly valid, just and demandable claims,
appear to have been excessively
granted by the trial court and should therefore be reduced to P25,000.00.
WHEREFORE, the instant petition for review on certiorari is DENIED. The partnership among
petitioners and private respondent is ordered dissolved, and the parties are ordered to effect the
winding up and liquidation of the partnership pursuant to the pertinent provisions of the Civil Code. This
case is remanded to the Regional Trial Court for proper proceedings relative to said dissolution. The
appealed decisions of the Regional Trial Court and the Court of Appeals are AFFIRMED with
MODIFICATIONS, as follows ---
1. Petitioners are ordered to submit to the Regional Trial Court a formal account of the partnership
affairs for the years 1987 and 1988, pursuant to Article 1809 of the Civil Code, in order to determine
private respondents ten percent (10%) share in the net profits of the partnership;
2. Petitioners are ordered, jointly and severally, to pay private respondent five percent (5%) overriding
commission for the one hundred and fifty (150) cookware sets available for disposition since the time
private respondent was wrongfully excluded from the partnership by petitioners;
3. Petitioners are ordered, jointly and severally, to pay private respondent overriding commission on the
total production which, for the period covering January 8, 1988 to February 5, 1988, amounted to
4. Petitioners are ordered, jointly and severally, to pay private respondent moral damages in the amount
of P50,000.00, exemplary damages in the amount of P50,000.00 and attorneys fees in the amount of