Mendiola versus CA FACTS: Private respondent Pacific Forest Resources, Phils., Inc.

(Pacfor) , a corporation organized and existing under the laws of California, USA, entered into a "Side Agreement on Representative Office known as Pacific Forest Resources ( Pacfor Phils.), Inc." with petitioner Arsenio T. Mendiola. The Side Agreement outlines the business relationship of the parties with regard to the Philippine operations of Pacfor. Private respondent will establish a Pacfor representative office in the Philippines, to be known as Pacfor Phils, and petitioner Mendiola will be its President. The SEC granted the application of private respondent Pacfor for a license to transact business in the Philippines under the name of Pacfor or Pacfor Phils. In its application, private respondent Pacfor proposed to establish its representative office in the Philippines with the purpose of monitoring and coordinating the market activities for paper products. It also designated petitioner as its resident agent in the Philippines, authorized to accept summons and processes in all legal proceedings, and all notices affecting the corporation. In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils. However, private respondent Pacfor, replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely PacforUSA's representative office and not an entity separate and distinct from Pacfor-USA. Then on, petitioner claimed that he was all along made to believe that he was in a joint venture with them. He alleged he would have been better off remaining as an independent agent or representative of Pacfor-USA as ATM Marketing Corp. ISSUE: Whether or not there is a partnership or co-partnership between the parties that exist. RULING: The Court held that 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. In the case at bar, 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. William Gleason, private respondent 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. It was 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.