G.R. No.

135813

October 25, 2001

FERNANDO SANTOS, petitioner, vs. SPOUSES ARSENIO and NIEVES REYES, respondents. FACTS: On June 13, 1986, a lending business venture was launched by Fernando Santos (petitioner), Nieves Reyes (respondent) and Meliton Zabat with the agreement that Santos will be the financer and will receive the lions share of 70% of the profit. The rest will receive 15% each. Thereafter, Zabat was replaced by the husband of Reyes because it was discovered that the latter was engaged in the same lending business in competition with their partnership. On June 5, 1987, Zabat filed a complaint for the recovery of sum of money from the spouses Reyes claiming that the latter misappropriated funds as employees. The spouses Reyes answered that they are not mere employees but partners of the petitioner. The trial court ruled in favor of Spouses Reyes and was affirmed by the Court of Appeals. ISSUES: 1. Whether or not there was a partnership established to engage in a money-lending business. 2. Whether or not the CA is correct in granting the spouses Reyescounterclaim for their share in partnership and for damages. HELD: As to the first ISSUE, there is an establishment of a partnership. Under the contract of partnership, two or more persons bind themselves to contribute money, property and industry to a common fund, with the intention of dividing the profit among themselves. The stipulation between the petitioner and the respondents spouses clearly shows that there is a partnership wherein the Articles of Agreement, there are signatories that they shall share the profits of the business in 70-15-15 manner, with petitioner getting the lions share. As to the second ISSUE, the SC found a reason to disagree with CA. exhibit 10-I showed that the partnership earned a total income of P20,429,520 for the period of June 13, 1986 until April 19, 1987. It did not consider the expenses sustained by the partnership. All expenses incurred by the moneylending enterprise of the parties must first be deducted from the total income in order to arrive at the net profit. The respondents exhibits did not reflect the complete financial condition of the money-lending business.