G.R. No. 135813 - Santos vs. Spouses Reyes

In June 1986, petitioner Fernando Santos and respondent Nieves Reyes were introduced by Meliton Zabat in connection with a money-lending business venture.
Under the initial verbal agreement, Santos was to serve as the financier while Reyes and Zabat handled solicitation of borrowers and collection of loan payments.
The profit-sharing arrangement was set at 70% for Santos and 15% each for Reyes and Zabat.

In July 1986, Nieves Reyes introduced Cesar Gragera to Santos.
Gragera, acting in his capacity as chairman of the Monte Maria Development Corporation, sought short-term loans for the members of the corporation.
An agreement was executed between Santos and Gragera whereby Gragera was to receive a commission of P1.31 per thousand paid daily, and the partnership’s daily operations were documented through cashflow reports (with Reyes in charge of bookkeeping).

On August 6, 1986, the “Articles of Agreement” were signed by Santos, Reyes, and Zabat, thereby formalizing their earlier verbal arrangement.
It was later discovered that Zabat had engaged in competing lending activities, resulting in his expulsion from the partnership.
Following Zabat’s expulsion, respondent Arsenio Reyes (spouse of Nieves Reyes) was brought into the business, assuming roles such as credit investigation.

On June 5, 1987, Santos filed a complaint for the recovery of money and damages, alleging that respondents—alleged to act in capacities as his employees—misappropriated funds meant for paying Gragera’s commission.
Santos claimed that from the total amount of P4,623,201.90 entrusted, only P3,068,133.20 was remitted to Gragera, leaving a discrepancy of P1,555,065.70 unaccounted for.
Respondents countered that they were not mere employees but partners in the venture, and that the complaint was intended to preempt their rightful claim to a share in the profits.

The respondents were partners, not just employees.
Gragera was only a commission agent, not a partner.
Santos did not successfully prove that he entrusted money to Reyes.
Consequently, the respondents’ counterclaim for their share in the profits and for damages was granted.

The Court of Appeals affirmed the trial court’s factual findings regarding the nature of the business relationship and dismissed Santos’ counterclaim for misappropriation, while subsequently modifying the decision upon reconsideration motions.
Issues related to the proper accounting of partnership profits were also raised, particularly concerning the exclusion of business expenses from the computations.

Whether the relationship between Santos and the respondents (Nieves and Arsenio Reyes) was that of a partnership or a mere employer-employee setup.
Whether the evidence established that the respondents contributed industry and services in a manner consistent with a joint venture.

Whether respondent Nieves misappropriated the funds intended for remitting Gragera’s commission.
Whether the disputed amounts—specifically, a claimed amount of P200,000 and the discrepancy between the recorded and remitted commissions—can be substantiated based on the documentary evidence.

Whether an accurate accounting of the partnership’s profits was conducted, particularly in light of expenses that were allegedly omitted from the computation of “total income.”
Whether the profit shares as computed by the trial court (and subsequently adopted by the CA) represent the true net income after deducting business-related expenses.