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

​FACTS:
Private respondent Pacific Forest Resources, Phils., Inc. (Pacfor) is a corporation organized and existing under the laws of California, USA. It is a subsidiary of Cellulose Marketing International, a corporation duly organized under the laws of Sweden, with principal office in Gothenburg, Sweden. Private respondent Pacfor entered into a "Side Agreement on Representative Office known as Pacific Forest Resources (Phils.), Inc." with petitioner Arsenio T. Mendiola (ATM), effective May 1, 1995, "assuming that Pacfor-Phils. is already approved by the Securities and Exchange Commission [SEC] on the said date." 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 ATM will be its President. Petitioner's base salary and the overhead expenditures of the company shall be borne by the representative office and funded by Pacfor/ATM, since Pacfor Phils. is equally owned on a 50-50 equity by ATM and Pacfor-usa. On July 14, 1995, 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 March 1997, the Side Agreement was amended through a "Revised Operating and Profit Sharing Agreement for the Representative Office Known as Pacific Forest Resources (Philippines)," where the salary of petitioner was increased to $78,000 per annum. 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. In July 2000, petitioner wrote Kevin Daley, Vice President for Asia of Pacfor, seeking confirmation of his 50% equity of Pacfor Phils. Private respondent Pacfor, through William Gleason, its President, replied that petitioner is not a part-owner of Pacfor Phils. because the latter is merely Pacfor-USA's representative office and not an entity separate and distinct from Pacfor-USA. "It's simply a 'theoretical company' with the purpose of dividing the income 50-50." Petitioner presumably knew of this arrangement from the 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. 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. Had he known that no joint venture existed, he would not have allowed Pacfor to take the profitable business of his own company, ATM Marketing Corp.

Petitioner argues that he is an industrial partner of the partnership he formed with private respondent Pacfor, and also an employee of the partnership. Petitioner insists that an industrial partner may at the same time be an employee of the partnership, provided there is such an agreement, which, in this case, is the "Side Agreement" and the "Revised Operating and Profit Sharing Agreement." The Court of Appeals denied the appeal of petitioner, holding that "the legal basis of the complaint is not employment but perhaps partnership, co-ownership, or independent contractorship." Hence, the Labor Code cannot apply.

ISSUE:
Whether a partnership or co-ownership exists between the parties.

HELD:
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.36 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.39 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. 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. Be that as it may, we hold that on the basis of the evidence, an employer-employee relationship is present in the case at bar. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. The most important element is the employer's control of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.