CASE DIGEST: Tocao v. Court of Appeals

 

Tocao vs. Court of Appeals

G.R. No. 127405. October 4, 2000.

 

FACTS:

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 further that Anay would be entitled to: (1) 10% of the annual net profits of the business; (2) overriding commission of 6% of the overall weekly production; (3) 30% of the sales she would make; and (4) 2% for her demonstration services. The agreement was not reduced to writing on the strength of Belo’s assurances that he was sincere, dependable and honest when it came to financial commitments.

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 Tocao’s name.

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, 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 offices.

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.

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 a complaint for sum of money with damages against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati.

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.

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 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 Tocao’s 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.

Petitioners’ appeal to the CA was dismissed, hence this petition.

ISSUE:

Whether or not a partnership existed between Tocao, Belo and Anay

RULING:

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 thereto. 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.

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 company’s cookware products; it was through the same efforts that the business was propelled to financial success. 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.

The business venture operated under Geminesse Enterprise did not result in an employer-employee relationship between  petitioners and private respondent. First, Anay had a voice in the management of the affairs of the cookware distributorship and second, Tocao admitted that Anay, like her, received only commissions and transportation and representation allowances and not a fixed salary. If Anay was an employee, it is difficult to believe that they receive the same income. 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, Anay had the right to demand for a formal accounting of the business and to receive her share in the net profit.

Also, the fact that they operated under the name of Geminesse Enterprise, a sole proprietorship, is of no moment. Said  business name was used only for practical reasons - it was utilized as the common name for petitioner Tocao’s various  business activities, which included the distributorship of cookware.

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.

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 the power, although not necessarily the right to dissolve the partnership.

Petitioners Tocao’s 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.

In this case, the winding up of partnership affairs has not yet been undertaken by the partnership.

Thus the Court ruled…

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.