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 copartnership 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;

AGENCY & PARTNERSHIP | B2015 CASES 6. Maglana must be paid 85k which he shouldve received but was not paid to him and must be considered as his contribution 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.

ACTION AND PRAYER: N/A ISSUE: 1. 2. HELD: 1. 2. WON the partnership carried on after the second partnership was a de facto partnership and at will. WON Magalana may unilaterally dissolve the partnership. No. 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