AGENCY & PARTNERSHIP | B2015

CASES

ROJAS V. MAGLANA
December 10, 1990
Paras, C.J.
Raeses, Roberto Miguel

SUMMARY: Maglana and Rojas executed their articles of co-partnership
called EDE. It had an indefinite term, was registered with the SEC, and had a
Timer License. Later, Agustin Pahamitang became an industrial partner and
another articles of co-partnership was executed. The term of the second co-
partnership was fixed to 30 years. After some time, the three executed a
conditional sale of interest in the partnership where Magalana and Rojas shall
purchase the interest, share, and participation of Pahamotang. It was agreed
that, after payment of such including the loan secured by Pahamotang, the
two shall become owners of all equipment contributed by Pahamotang. The
two continued the partnership without any written agreement or
reconstitution of the articles of partnership. Subsequently, Rojas entered into
a contarct with CMS Estate. Maglana reminded him of his contribution to the
capital investments and his duties to the partnership. Rojas said he would not
be able to comply. Maglana told Rojas that the latter is only entitled to 20% of
the profits, which was the sharing from 1957-1959 without dispute. Rojas
took funds from the partnership which was more than his share. Maglana
notified Rojas that he had dissolved the partnership. Rojas filed an action
against Magallana. The CFI ruled that the partnership of the two after
Pahamotang left was one de facto and at will. The SC said that it was not,
considering that the first partnership was never dissolved. With regard to the
issue of unilateral dissolution, the SC held that Maglana had the power to do
so.

DOCTRINE: Under Article 1830, par. 2 of the Civil Code, even if there is a
specified term, one partner can cause its dissolution by expressly
withdrawing even before the expiration of the period, with or without
justifiable cause. Of course, if the cause is not justified or no cause was given,
the withdrawing partner is liable for damages but in no case can he be
compelled to remain in the firm. With his withdrawal, the number of
members is decreased, hence, the dissolution. And in whatever way he may
view the situation, the conclusion is inevitable that Rojas and Maglana shall
be guided in the liquidation of the partnership by the provisions of its duly
registered Articles of Co-Partnership; that is, all profits and losses of the
partnership shall be divided "share and share alike" between the partners.

FACTS: Maglana and Rojas executed their Articles of Co-partnership called
Eastcoast Development Enterpises (EDE) which had an indefinite term of
existence and was registered with the SEC and had a Timber License. One of the
EDEs purposes was to apply or secure timber and/or private forest lands and
to operate, develop and promote such forests rights and concessions. Maglana
shall manage the business affairs while Rojas shall be the logging
superintendent. All profits and losses shall be divided share and share alike
between them.

Later on, the two availed the services of Agustin Pahamotang as industrial
partner and executed another articles of co-partnership with the latter. The
purpose of this second partnership was to hold and secure renewal of timber
license and the term of which was fixed to 30 years.

Still later on, the three executed a conditional sale of interest in the partnership
wherein Maglana and Rojas shall purchase the interest, share and participation
in the partnership of Pahamotang. It was also agreed that after payment of such
including amount of loan secured by Pahamotang in favor of the partnership,
the two shall become owners of all equipment contributed by Pahamotang.
After this, the two continued the partnership without any written agreement or
reconstitution of their articles of partnership.

Subsequently, Rojas entered into a management contract with CMS Estate Inc.
Maglana wrote him regarding his contribution to the capital investments as
well as his duties as logging superintendent. Rojas replied that he will not be
able to comply with both. Maglana then told Rojas that the latters share will
just be 20% of the net profits. Such was the sharing from 1957 to 1959 without
complaint or dispute. Rojas took funds from the partnership more than his
contribution. Maglana notified Rojas that he dissolved the partnership. Rojas
filed an action against Maglana for the recovery of properties and accounting of
the partnership and damages.

CFI RULING:
1. The partnership of Maglana and Rojas after Pahamotang retired is one
of de facto and at will; the sharing of profits and losses is on the basis
of actual contributions;
2. there is no evidence these properties were acquired by the
partnership funds thus it should not belong to it;
3. neither is entitled to damages; the letter of Maglana in effect dissolved
the partnership;
4. sale of forest concession is valid and binding and should be
considered as Maglanas contribution;
5. Rojas must pay or turn over to the partnership the profits he received
from CMS and pay his personal account to the partnership;
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CASES

6. Maglana must be paid 85k which he shouldve received but was not
paid to him and must be considered as his contribution

ACTION AND PRAYER: N/A

ISSUE:
1. WON the partnership carried on after the second partnership was a de
facto partnership and at will.
2. WON Magalana may unilaterally dissolve the partnership.

HELD:
1. No.
2. Yes.

RATIO:
1. There was no intention to dissolve the first partnership upon the
constitution of the second as everything else was the same except for
the fact that they took in an industrial partner: they pursued the same
purposes, the capital contributions call for the same amounts, all
subsequent renewals of Timber License were secured in favor of the
first partnership, all businesses were carried out under the registered
articles. To all intents and purposes therefore, the First Articles of
Partnership were only amended, in the form of Supplementary
Articles of Co-Partnership.

On the other hand, there is no dispute that the second partnership
was dissolved by common consent. Said dissolution did not affect the
first partnership which continued to exist. Significantly, Maglana and
Rojas agreed to purchase the interest, share and participation in the
second partnership of Pahamotang and that thereafter, the two
(Maglana and Rojas) became the owners of equipment contributed by
Pahamotang. Maglana even reminded Rojas of his obligation to
contribute either in cash or in equipment, to the capital investment of
the partnership as well as his obligation to perform his duties as
logging superintendent. This reminder cannot refer to any other but
to the provisions of the duly registered Articles of Co-Partnership.

2. As there are only two parties when Maglana notified Rojas that he
dissolved the partnership, it is in effect a notice of withdrawal.

Under Article 1830, par. 2 of the Civil Code, even if there is a
specified term, one partner can cause its dissolution by expressly
withdrawing even before the expiration of the period, with or
without justifiable cause. Of course, if the cause is not justified or no
cause was given, the withdrawing partner is liable for damages but in
no case can he be compelled to remain in the firm. With his
withdrawal, the number of members is decreased, hence, the
dissolution. And in whatever way he may view the situation, the
conclusion is inevitable that Rojas and Maglana shall be guided in the
liquidation of the partnership by the provisions of its duly registered
Articles of Co-Partnership; that is, all profits and losses of the
partnership shall be divided "share and share alike" between the
partners.

But an accounting must first be made and which in fact was ordered
by the trial court and accomplished by the commissioners appointed
for the purpose.

According to the Commissioners report, Rojas is not entitled to any
profits as he failed to give the amount he had undertaken to
contribute thus, had become a debtor of the partnership. Maglana
cannot be liable for damages as Rojas abandoned the partnership thru
his acts and also took funds in an amount more than his contribution

DISPOSITIVE: PREMISES CONSIDERED, the assailed decision of the Court of
First Instance of Davao, Branch III, is hereby MODIFIED in the sense that the
duly registered partnership of Eastcoast Development Enterprises continued to
exist until liquidated and that the sharing basis of the partners should be on
share and share alike as provided for in its Articles of Partnership, in
accordance with the computation of the commissioners. We also hereby
AFFIRM the decision of the trial court in all other respects.