ON Jan. 6, 1993, petitioner Pedro D. Dusol (Pedro) started working as the caretaker of the Ralco Beach then operated by the parents of respondent Emmarck A. Lazo (Emmarck). As caretaker, he would clean, watch and secure the beach area, cottages, rest house, store and other properties in the resort. He also entertained guests and occupants of the cottages. He was paid P100 per week which was later increased to P239 in 2001. Sometime in 1995, he was also asked to work in the fishpond business owned by the parents of Emmarck. He was compensated based on the income to be derived from the harvests. The arrangement lasted only for about seven months. It was discontinued because the business was not profitable.

In 2001, Pedro married petitioner Maricel M. Dusol (Maricel), and on Jan. 28, 2007, Maricel was employed by Emmarck to manage the store in the resort. She was paid P1,000 a month and entitled to 15 percent commission on the rentals collected from the cottages and rest house. Sometime in July 2008, Emmarck notified Pedro and Maricel that he will be leasing out Ralco Beach because the business was not profitable. Thus, their services are no longer needed. Consequently, Pedro and Maricel filed a complaint for illegal dismissal, underpayment, damages and attorney’s fees against Emmarck.

Emmarck denied the employment relationship with Pedro and Maricel and asserted that they were industrial partners. He explained that, in 1993, Pedro became an industrial partner of his mother in the fishpond, entitled to 1/3 of the total harvest made, and received a weekly allowance of P230. Emmarck merely adopted this arrangement with Pedro when he took over the business. Similarly, Maricel was taken in as an industrial partner to manage the store inside the beach property and was entitled to a P1,000 monthly allowance and 50 percent commission on the rent of the resort facilities. She was also allowed to sell anything in the store with the profits solely belonging to her.

Does this defense of Emmarck prosper?

Ruling: No.

There is a partnership if two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. A particular partnership may have for its object a particular undertaking. The existence of a partnership is established when it is shown that: (1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and (2) they intend to divide the profits among themselves. Generally, it is not required that the agreement be in writing or in a public instrument. However, when immovable properties or real rights are contributed to the partnership, it is required that an inventory of the real properties or rights contributed be prepared and signed by the parties, and attached to the public instrument, otherwise, the agreement is void.

Undoubtedly, the best evidence to prove the existence of a partnership is the contract or articles of partnership. Nevertheless, in its absence, its existence can be established by circumstantial evidence. Under Article 1769 of the Civil Code, “the receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment as wages of an employee or rent to a landlord.” In addition, “the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.”

Here, it is undisputed that Pedro and Maricel rendered their services in Ralco Beach and received compensation sourced from rentals and sales of the resort. Moreover, Emmarck’s allegation that Pedro was his industrial partner in the fishpond business is inconsequential because Pedro’s complaint and claims were for his services rendered in the beach resort. Even if it is true, being an industrial partner of the fishpond business is immaterial to Pedro’s status as an employee in Ralco Beach. Thus, the crux of controversy is the nature by which Pedro and Maricel rendered their services and the capacity by which they received their compensation.

Based on record, there is no proof that a partnership existed between Pedro or Maricel, and Emmarck in relation to the beach resort. No documentary evidence was submitted by Emmarck to even suggest a partnership. Emmarck relied solely on his own statements that Pedro and Maricel did not receive wages, but merely allowances and commission from the profits of their partnership. However, it is beyond dispute that receipt by a person of share in the profits of a business does not by itself establish the existence of a partnership, if the amounts are received as wages of an employee. Neither does the sharing of gross returns establish partnership, most especially, in light of the absence of any other evidence to establish the existence of the partnership. (Pedro D. Dusol and Maricel M. Dusol vs. Emmarck A. Lazo, as owner of Ralco Beach, G.R. 200555, Jan. 20, 2021).