Civil Law

Marjorie Tocao and William Belo vs Court of Appeals

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G.R. No. 127405 – 342 SCRA 20 – 365 SCRA 463 – Civil Law – Partnership – Dissolution of the Partnership

William Belo introduced Nenita Anay to his girlfriend, Marjorie Tocao. The three agreed to form a joint venture for the sale of cooking wares. Belo was to contribute P2.5 million; Tocao also contributed some cash and she shall also act as president and general manager; and Anay shall be in charge of marketing. Belo and Tocao specifically asked Anay because of her experience and connections as a marketer. They agreed further that Anay shall receive the following:

  1. 10% share of annual net profits
  2. 6% overriding commission for weekly sales
  3. 30% of sales Anay will make herself
  4. 2% share for her demo services

They operated under the name Geminesse Enterprise, this name was however registered as a sole proprietorship with the Bureau of Domestic Trade under Tocao. The joint venture agreement was not reduced to writing because Anay trusted Belo’s assurances.

The venture succeeded under Anay’s marketing prowess.

But then the relationship between Anay and Tocao soured. One day, Tocao advised one of the branch managers that Anay was no longer a part of the company. Anay then demanded that the company be audited and her shares be given to her.

ISSUE: Whether or not there is a partnership.

HELD: Yes, even though it was not reduced to writing, for a partnership can be instituted in any form. The fact that it was registered as a sole proprietorship is of no moment for such registration was only forĀ  the company’s trade name.

Anay was not even an employee because when they ventured into the agreement, they explicitly agreed to profit sharing this is even though Anay was receiving commissions because this is only incidental to her efforts as a head marketer.

The Supreme Court also noted 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.”

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.

Tocao’s unilateral exclusion of Anay from the partnership is shown by her memo to the Cubao office plainly stating that Anay 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.

Read full text here.

NOTE: Motion for Reconsideration filedĀ  by Tocao and Belo decided by the SC on September 20, 2001.

Belo is not a partner. Anay was not able to prove that Belo in fact received profits from the company. Belo merely acted as a guarantor. His participation in the business meetings was not as a partner but as a guarantor. He in fact had only limited partnership. Tocao also testified that Belo received nothing from the profits. The Supreme Court also noted that the partnership was yet to be registered in the Securities and Exchange Commission. As such, it was understandable that Belo, who was after all petitioner Tocao’s good friend and confidante, would occasionally participate in the affairs of the business, although never in a formal or official capacity.

Read Resolution on the Motion for Reconsideration here.

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