Ortega vs CA

G.R. No. 109248

July 3, 1995
Facts:
•The law firm of Ross, Lawrence, Selph & Carrascoso was duly registered in the
Mercantile Registry and reconstituted with the Securities and Exchange
Commission.
•Through the years, there were several amendments to the Articles of
Partnership and firm name. The firm name was last changed into Bito,
Misa & Lozada.
•Petitioner Ortega, a junior partner, withdrew from the firm because of
unfair treatment to employees.
•Petitioner filed with the SEC a petition for dissolution and liquidation of
partnership.
•The hearing officer rendered a decision ruling that petitioner's withdrawal
from the law firm did not dissolve the said partnership. SEC en banc
reversed the decision of the hearing officer and held that the withdrawal
of private respondent Atty. Misa had dissolved the partnership of Bito,
Misa & Lozada. Being a partnership at will, the law firm could be dissolved
by any partner at anytime, such as by his withdrawal, regardless of good
faith or bad faith, since no partner can be forced to continue in the
partnership against his will.
•Atty. Misa asked for an appointment of a receiver to take over the assets
of the dissolved partnership and to take charge of the winding up of its
affairs.
•Respondent SEC denied the MR, rejected the petition for receivership, and
remanded the case to the hearing officer.
•During the pendency of the case with the CA, Atty. Bito and Atty. Lozada
both passed away. The death of the two partners, as well as the admission
of new partners, in the law firm prompted Atty. Misa to renew his
application for receivership expressing concern over the need to preserve
and care for the partnership assets.
•The CA affirmed the SEC decision. CA further ruled that Atty. Misa's
withdrawal from the partnership had changed the relation of the parties
and caused the dissolution of the partnership; that such withdrawal was
not in bad faith; that the liquidation should be to the extent of Atty. Misa's
interest or participation in the partnership which could be computed and
paid in the manner stipulated in the partnership agreement; The case
should be remanded to the SEC Hearing Officer for the corresponding
determination of the value of Attorney Misa's share in the partnership
assets; that the appointment of a receiver was unnecessary as no sufficient
proof had been shown to indicate that the partnership assets
were in any such danger of being lost, removed or materially impaired.

Issues:
Whether the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega &
Castillo) is a partnership at will? YES.
Whether the withdrawal of private respondent dissolved the partnership
regardless of his good or bad faith? YES.
Whether the private respondent's demand for the dissolution of the
partnership so that he can get a physical partition of partnership was made
in bad faith? NO.

Held:
The law firm Bito, Misa & Lozada, now Bito, Lozada, Ortega and Castillo, is a
partnership at will, which is a partnership that does not fix its term.
•The partnership agreement does not provide for a specified period or
undertaking. The Duration clause states that the partnership shall
continue so long as mutually satisfactory and upon the death or legal
incapacity of one of the partners, shall be continued by the surviving
partners.
•The Purpose clause in the Articles of Partnership is not the specific undertaking
contemplated by law. Otherwise, all partnerships, which
necessarily must have a purpose, would all be considered as
partnerships for a definite undertaking. There would therefore be no
need to provide for articles on partnership at will as none would so
exist. What the law contemplates, is a specific undertaking or "project"
which has a definite or definable period of completion.
The withdrawal of private respondent dissolved the partnership regardless of his good
or bad faith
•Any one of the partners may, at his sole pleasure, dictate a dissolution
of the partnership at will. The attendance of bad faith cannot prevent
the dissolution of the partnership, however, it can result in a liability for
damages.
•The right to choose with whom a person wishes to associate himself is
the very foundation and essence of that partnership. The birth and life
of a partnership at will is predicated on the mutual desire and consent
of the partners.
•Its continued existence is dependent on the constancy of that mutual
resolve, along with each partner's capability to give it, and the absence
of a cause for dissolution provided by the law itself.
The doctrine of delectus personae allows them to have the power, although
not necessarily the right, to dissolve the partnership.
•In passing, neither would the presence of a period for its specific
duration or the statement of a particular purpose for its creation
prevent the dissolution of any partnership by an act or will of a partner.
•Among partners, mutual agency arises.
•An unjustified dissolution by the partner can subject him to a possible
action for damages.
Upon its dissolution, the partnership continues and its legal personality is
retained until the complete winding up of its business culminating in its
termination.
•The liquidation of the assets of the partnership following its dissolution
is governed by the provisions of the Civil Code; however, an agreement
of the partners, like any other contract, is binding among them and
normally takes precedence to the extent applicable over the Code's
general provisions.
•The Articles of Partnership speaks of “death or retirement.” The term
"retirement" was interpreted by the court, in a generic sense, to mean
the dissociation by a partner, inclusive of resignation or withdrawal,
from the partnership that thereby dissolves it.
Private respondent's demand for the dissolution so that he can get a physical partition of
partnership was not made in bad faith.
•It would not be right to let any of the partners remain in the partnership
under an atmosphere of animosity or interpersonal
conflict; certainly, not against their will.
•Bad faith cannot be said to characterize the withdrawal for as long as
the reason of a partner is not contrary to the dictates of justice and
fairness, nor for the purpose of unduly visiting harm and damage upon
the partnership.
•Bad faith, in the context here used, is no different from its normal
concept of a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity.
G.R. No. L-13680 April 27, 1960MAURO LOZANA,
plaintiff-appellee,-versus-
SERAFIN DEPAKAKIBO,
defendant-appellant.
LABRADOR, J

Lozana entered into a partnership with Depakakibo wherein they established a capital
of P30,000, Lozana furnishing 60%and Depakakibo, 40%, for the purpose of
maintaining, operating and distributing electric light and power in the Municipality of
Dumangas, under a franchise issued to Mrs. Piadosa Buenaflor. However, the franchise
or certificate of public necessity and convenience in favor of Buenaflor was cancelled
and revoked by the Public Service Commission on May 15, 1955. But the decision of
the Public Service Commission was appealed to SC and a temporary certificate
of public convenience was issued in the name of Olimpia D. Decolongon. Evidently
because of the cancellation of the franchise in the name of Buenaflor, Lozana sold
a generator to Decolongon in 1955. Depakakibo, on the other hand, sold one Crossly
Diesel Engine, to the spouses Felix Jimenea and Felina Harder in 1956.
Lozana brought an action against Serafin, alleging that he is the owner of the Generator
Buda (Diesel), valued at P8,000and 70 wooden posts with the wires connecting the
generator to the different houses supplied by electric current in the municipality, and
that he is entitled to the possession thereof, but that Serafin has wrongfully detained
them as a consequence of which Lozana suffered damages. He prayed that said
properties be delivered back to him. Judge Pelayo issued an order in said case
authorizing the sheriff to take possession of the generator and 70 wooden posts, upon
plaintiff's filing of a bond in favor of the defendant (for subsequent delivery to
the plaintiff).
Serafin denied that the generator and the equipment mentioned in the complaint belong
to the plaintiff and alleging that the same had been contributed by the plaintiff to the
partnership entered into between them in the same manner that defendant had
contributed equipments also, and therefore that he is not unlawfully detaining them.
Defendant alleged that under the partnership agreement the parties were to contribute
equipments, plaintiff contributing the generator and the defendant, the wires for the
purpose of installing the main and delivery lines; that the plaintiff sold his contribution to
the partnership, in violation of the terms of their agreement.
The judge entered a decision declaring plaintiff owner of the equipment and entitled to
the possession thereof, with costs against defendant. It is against this judgment that the
defendant has appealed.
Issue:
W/N Lozana violated the partnership agreement.
Held:
Yes.
Ratio:
As it appears that the plaintiff and the defendant entered into the contract of partnership,
plaintiff contributing the amount of P18,000, and as it is not stated therein that there has
been a liquidation of the partnership assets at the time plaintiff sold the Buda Diesel
Engine on October 15, 1955, and since the court below had found that the plaintiff had
actually contributed one engine and 70 posts to the partnership, it necessarily follows
that the Buda diesel engine contributed by the plaintiff had become the property of the
partnership. As properties of the partnership, the same could not be disposed of by the
party contributing the same without the consent or approval of the partnership or of the
other partner.
The lower court declared that the contract of partnership was null and void, because by
the contract of partnership, the parties thereto have become dummies of the owner of
the franchise. The Anti-Dummy law has not been violated as parties plaintiff and
defendant are not aliens but Filipinos.
Upon examining the contract of partnership, especially the provision thereon
wherein the parties agreed to maintain, operate and distribute electric light and
power under the franchise belonging to Mrs. Buenaflor, we do not find the

agreement to be illegal, or contrary to law and public policy such as to make the
contract of partnership, null and void ab initio. The agreement could have
been submitted to the Public Service Commission if the rules of the latter require them
to be so presented. But the fact of furnishing the current to the holder of the franchise
alone, without the previous approval of the Public Service Commission, does not per se
make the contract of partnership null and void from the beginning and render the
partnership entered into by the parties for the purpose also void and non-existent.
Under the circumstances, therefore, the court erred in declaring that the contract was
illegal from the beginning and that parties to the partnership are not bound therefor,
such that the contribution of the plaintiff to the partnership did not pass to it as its
property. It also follows that the claim of the defendant in his counterclaim that the
partnership be dissolved and its assets liquidated is the proper remedy, not for each
contributing partner to claim back what he had contributed
MAXIMILIANO SANCHO,
vs.
SEVERIANO LIZARRAGA

FACTS:
The plaintiff brought an action for the rescission of the partnership contract between
himself and the defendant and the reimbursement of his investment worth 50,000php
with interest at 12 per cent per annum form October 15, 1920, with costs, and any other
just and equitable remedy against said defendant. The defendant denies generally and
specifically all the allegations of the complaint and asked for the dissolution of the
partnership, and the payment to him as its manager and administrator P500 monthly
from October 15, 1920 until the final dissolution with interest.

The CFI found that the defendant had not contributed all the capital he had bound
himself to invest hence it demanded that the defendant liquidate the partnership,
declared it dissolved on account of the expiration of the period for which it was
constituted, and ordered the defendant, as managing partner, to proceed without delay
to liquidate it, submitting to the court the result of the liquidation together with the
accounts and vouchers within the period of thirty days from receipt of notice of said
judgment. The plaintiff appealed from said decision praying for the rescission of the
partnership contract between him and the defendant in accordance with Art. 1124.

ISSUE: WON Plaintiff violated the partnership and is indebted to the same

Ratio:
SC ruled that Owing to the defendant's failure to pay to the partnership the whole
amount which he bound himself to pay, he became indebted to it for the remainder, with
interest and any damages occasioned thereby, but the plaintiff did not thereby acquire
the right to demand rescission of the partnership contract according to Article 1124 of
the Code. This article cannot be applied to the case in question, because it refers to the
resolution of obligations in general, whereas article 1681 and 1682 specifically refer to
the contract of partnership in particular. And itis a well-known principle that special
provisions prevail over general provisions.
Counsel for the appellee, says that the appeal is premature. The point is based on the
contention that inasmuch as the liquidation ordered by the trial court, and the
consequent accounts, have not been made and submitted, the case cannot be deemed
terminated in said court and its ruling is not yet appealable.
This contention is well founded. Until the accounts have been rendered as ordered by
the trial court, and until they have been either approved or disapproved, the litigation
involved in this action cannot be considered as completely decided.
Pabalan owned two lots, a rural real estate devoted to agricultural purposes and an
urban lot. In his desire to put the two lots to productive use, he agreed to enter into a
regular mercantile partnership with Walter Fitton. The agreement stipulates that they
form a partnership known by the name of AM Pabalan and Company with a capital
stock at 9K that Pabalan would contribute 3K in cash while Fitton would contribute 6K in
real property& that Pabalan would sell his two lots to Fitton for 6k that Pabalan would
receive 3k of the purchase price while the remaining will be his contribution to the
capital& and that Fitton would contribute the said two lots as his agreed capital
contribution. Pabalan received 3K of the purchase price. When Fitton died, he failed to
pay into the partnership funds the remaining 3K owing to the failure of Fitton to comply
with his obligation, the properties in question had been entirely unproductive, resulting
in losses and damages to Pabalan. Plaintiff prayed for the rescission of the double
contract (partnership and sale-) entered into. Defendant Velez is the administrator of
Fitton’s estate.
Issue:
Held: It was duly proved at the trial of this case, that the partner Walter A. Fitton failed to
observe the stipulations of the two aforesaid contracts; that he did not pay any part of
the price of the sale of the two parcels of land which he had purchased from his partner,
Antonio M. Pabalan, and, consequently, did not turn into the company funds, as capital
of the said Pabalan, the sum of which the said price consisted; it is therefore
unquestionable that he did not comply with his two principal obligations, assumed in the
said double contract wherein he expressly agreed that the said P3,000, a part of the
price of the two pieces of land that he purchased from Pabalan, would be by him turned
into the fund of the general partnership which they had formed, as capital of the partner
Pabalan.

In case one of the parties to a contract does not fulfill his obligation as stipulated
therein, the other contracting party, by the provisions of the above-quoted article 1124
of the Civil Code, is entitled to demand the rescission of the contract, as such
obligations are mutual, and the court must order the rescission demanded. The partner,
Walter A. Fitton, came within such a case, since he failed to pay any part of the price of
the two properties which he had acquired and did not turn into the company fund, as
capital of the vendor partner, the sum representing such sale, and therefore justice
requires the dissolution of the aforementioned company and the rescission of the said
sale, in conformity with the finding contained in the judgment appealed from the prayer
rightfully and lawfully made by the partner who did not violate his obligations as set forth
in the said contract

Pero patay na ang defaulting party so wala na din.

G.R. No. L-59956 October 31, 1984ISABELO MORAN, JR.,
petitioner, vs.
THE HON. COURT OF APPEALS and MARIANO E. PECSON,
respondents.
GUTIERREZ, JR.,J.: Only 2k posters were printed, but
each was sold for P5
Facts :
On February 22, 1971 Pecson and Moran entered into an agreement whereby both
would contribute P15,000 each for the purpose of printing 95,000 posters (featuring the
delegates to the 1971 Constitutional Convention), with Moran actually supervising the
work; that Pecson would receive a commission of P1,000 a month starting on April 15,
1971 up to December 15, 1971; that on December 15, 1971, a liquidation of the
accounts in the distribution and printing of the95,000 posters would be made, that
Pecson gave Moran P10,000 for which the latter issued a receipt; that only a few
posters were printed; that on or about May 28, 1971, Moran executed in favor of Pecson
a promissory note in the amount of P20,000 payable in two equal installments (P10,000
payable on or before June 15, 1971 and P10,000 payable on or before June 30, 1971),
the whole sum becoming due upon default in the payment of the first installment on the
date due, complete with the costs of collection
Pecson filed an action for the recovery of a sum of money (1) on the alleged partnership
agreement, the return of his contribution of P10,000.00, payment of his share in the
profits that the partnership would have earned, and, payment of unpaid commission; (2)
on the alleged promissory note, payment of the sum of P20,000.00; and, (3) moral and
exemplary damages and attorney's fees.
After the trial, the CFI held that Moran return to plaintiff Pecson the sum of P17,000.00,
with interest at the legal rate.
From this decision, both parties appealed to the respondent Court of Appeals. The latter
likewise rendered a decision against the petitioner ordering him to pay Pecson:
(a) Forty-seven thousand five hundred (P47,500) (the amount
that could have accrued to Pecson undertheir agreement);
(b) Eight thousand (P8,000), (the commission for eight months);
(c) Seven thousand (P7,000) (as a return of Pecson's investment
for the Veteran's Project);
(d) Legal interes

ISSUE: WON the CA is correct

HELD: No. The award of 45.7k for unrealized profit is speculative. There is no evidence
that the partnership would have been a profitable venture, since the delay with the
COMELEC announcement of delegates, profit is highly unlikely. There is no basis for
the award of speculative damages in favor of Pecson. Plus, there is a mutual breach in
the case. Pecson only gave 10k instead of 15k while Moran gave nothing at al.
As for the 8k monthly commission, this is without basis. Wala naman kita e so san
kukunin to inspite of loss in the venture. Pecson is Not entitled to the 8k commission.
As to the 7k award as return for Pecson’s investment, the CA erred again. Though the
venture failed it did took off the ground as evidenced by the 2k posters printed. Hence
return of investment is not proper in this case.

Article 1797 of the Civil Code provides:

The losses and profits shall be distributed in conformity with the agreement. If only the
share of each partner in the profits has been agreed upon, the share of each in the
losses shall be in the same proportion.”

(basahin ng mabilis na lang)

Being a contract of partnership, each partner must share in the profits and losses of the
venture. That is the essence of a partnership. And even with an assurance made by one
of the partners that they would earn a huge amount of profits, in the absence of fraud,
the other partner cannot claim a right to recover the highly speculative profits. It is a rare
business venture guaranteed to give 100% profits. In this case, on an investment of
P15,000.00, the respondent was supposed to earn a guaranteed P1,000.00 a month for
eight months and around P142,500.00 on 95,000 posters costing P2.00 each but 2,000
of which were sold at P5.00 each.
It does not follow however that the private respondent is not entitled to recover any
amount from the petitioner. The records show that the private respondent gave
P10,000.00 to the petitioner. The latter used this amount for the printing of 2,000
posters at a cost of P2.00 per poster or a total printing cost of P4,000.00. The records
further show that the2,000 copies were sold at P5.00 each. The gross income therefore
was P10,000.00. Deducting the printing costs of P4,000.00 from the gross income of
P10,000.00 and with no evidence on the cost of distribution, the net profits amount to
only P6,000.00. This net profit of P6,000.00 should be divided between the petitioner
and the private respondent. And since only P4,000.00 was undesirable by the petitioner
in printing the 2,000 copies, the remaining P6,000.00 should therefore be returned to
the private respondent
Moran must however return the unused 6k to Pecson’s contribution to the
partnership plus 3k representing Pecson’s profit share in the sale of posters.
Computation of 3k profit share is as follows (10k profit form the sale of the 2k
posters) -minus (4k expense in printing) = (6k profit) 6 divided by 2= 3k