ROGELIO P. MENDIOLA vs.

COURT OF APPEALS and PNB

G.R. No. 122807. July 5, 1996
HERMOSISIMA, 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, petitioner’s base salary and the company’s
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 petitioner’s 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 Pacfor’s VP for Asia seeking confirmation of his 50% equity of
Pacfor Phils to which Pacfor’s 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.