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G.R. No.

159333 July 31, 2006


ARSENIO T. MENDIOLA, petitioner,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PACIFIC FOREST
RESOURCES, PHILS., INC. and/or CELLMARK AB, respondents.
PUNO, J .:

Facts:
Petitioner Mendiola (ATM) entered into a Side Agreement with Pacfor (USA) who will set up a
representative office in the Philippines. They named said office as Pacfor Phils in which
petitioner is president. In the agreement, petitioners base salary and the companys overhead
expenditures shall be borne by the representative office and shall be funded by Pacfor/ATM
being equally owned on 50-50 equity by ATM and Pacfor-USA.

The Side Agreement was later amended through a Revised Operating and Profit Sharing
Agreement where petitioners salary was increased. However, both agreements show that the
operational expenses will be borne by the representative office and funded by all parties as
equal partners, while the profits and commissions will be shared among them.

Years later, petitioner wrote Pacfors VP for Asia seeking confirmation of his 50% equity of
Pacfor Phils to which Pacfors President replied that petitioner is not a part-owner, his office
being just a representative office, a theoretical company with the purpose of dividing the
income 50-50. He even stressed that the petitioner knew of this arrangement from beginning,
having been the one to propose to them the setting up of a representative office, instead of a
branch office, to save on taxes.

Issue:
Whether or not a partnership or co-ownership exists between the parties.

Held:
Petitioner is an employee of Pacfor and no partnership or co-ownership exists between the
parties.
In a partnership, the members become co-owners of what is contributed to the firm capital and
of all property that may be acquired thereby and through the efforts of the members. The
property or stock of the partnership forms a community of goods, a common fund, in which each
party has a proprietary interest. In fact, the New Civil Code regards a partner as a co-owner of
specific partnership property. Each partner possesses a joint interest in the whole of partnership
property. If the relation does not have this feature, it is not one of partnership.
This essential element, the community of interest, or co-ownership of, or joint interest in
partnership property is absent in the relations between petitioner and private respondent Pacfor.
Petitioner is not a part-owner of Pacfor Phils. Pacfor's President established this fact when he
said that Pacfor Phils. is simply a "theoretical company" for the purpose of dividing the income
50-50. He stressed that petitioner knew of this arrangement from the very start, having been the
one to propose to private respondent Pacfor the setting up of a representative office, and "not a
branch office" in the Philippines to save on taxes. Thus, the parties in this case, merely shared
profits. This alone does not make a partnership.
Besides, a corporation cannot become a member of a partnership in the absence of express
authorization by statute or charter. This doctrine is based on the following considerations: (1)
that the mutual agency between the partners, whereby the corporation would be bound by the
acts of persons who are not its duly appointed and authorized agents and officers, would be
inconsistent with the policy of the law that the corporation shall manage its own affairs
separately and exclusively; and, (2) that such an arrangement would improperly allow corporate
property to become subject to risks not contemplated by the stockholders when they originally
invested in the corporation. No such authorization has been proved in the case at bar.