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[SUBJECT] | [TOPIC] 1

[Digest maker]

Eufracio Rojas v Constancio Maglana


[GR NO. l-30616] | [10 Dec 1990] | [Paras, J.]

SUMMARY OF FACTS
Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast
Development Enterprises with only the two of them as partners. Its purpose was to
apply or secure timber licenses and concessions over public/private forest lands and
to operate, develop and promote such concessions. It had an indefinite term of
existence and was duly registered with the SEC. They soon filed an application for a
timber concession with the Bureau of Forestry which was approved. However, for
more than a year, there was no operation of the partnership so they availed of the
services of Pahamotang as industrial partner. They then executed another Articles of
Co-partnership under the same firm name (but all caps). Except for the slight
difference in the purpose and its term being fixed to 30 years, everything else is the
same. When it started its operation, the partnership was able to ship logs and realize
profits. A few months later, Pahamotang, Maglana and Rojas executed a
CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP, EASTCOAST DEVELOPMENT
ENTERPRISE, where they agreed that Maglana and Rojas shall purchase the interest,
share and participation in the partnership of Pahamotang and that after payment of
the sum to him including the loan secured in favor of the partnership, Maglana and
Rojas shall become the owners of all equipment contributed by Pahamotang and the
EASTCOAST DEVELOPMENT ENTERPRISES be dissolved.
After Pahamotangs withdrawal, the partnership was continued by Maglana and Rojas
without the benefit of any written agreement or reconstitution of their written Articles
of Partnership. Soon, Rojas entered into a management contract with another logging
enterprise and abandoned the partnership. He withdrew his equipment, his supposed
contributions to the first partnership and transferred them to the other logging
enterprise. Maglana then wrote Rojas, reminding him of his obligation to contribute to
the partnership and to perform his duties as logging superintended. Rojas told
Maglana that he will not be able to comply with the contributions and will cease
working as logging superintendent. Because of this, Maglana told Rojas that his share
will just be 20% of the net profits. However, Rojas took funds from the partnership
more than his contribution thus, Maglana notified Rojas that he dissolved the
partnership. Rojas then filed an action before the CFI against Maglana for the recovery.
The trial court held, among others that there is no evidence that the properties were
acquired by the partnership and should not belong to the partnership and that the
letter effectively dissolved the partnership.

FACTS
(January 14, 1955) Maglana and Rojas executed their Articles of Co-Partnership
called Eastcoast Development Enterprises (EDE) with only the two of them as
partners. It had an indefinite term of existence and was duly registered with the
SEC.
One of the partnerships purposes was to apply or secure timber and/or minor
forests products licenses and concessions over public and/or private forest lands
and to operate, develop and promote such forests rights and concessions.
A duly-registered Articles of Co-Partnership was filed together with an
application for a timber concession covering the area with the Bureau of
Forestry which was approved and a timber license number was duly issued and
became the basis of subsequent renewals made for and in behalf of the duly
registered partnership EDE.
Under the Articles of Co-partnership, Maglana shall manage the business affairs
of the partnership, including marketing and handling of cash and is authorized
to sign all papers and instruments relating to the partnership, while appellant
Rojas shall be the logging superintendent and shall manage the logging
operations of the partnership. It also provided that all profits and losses shall be
divided share and share alike between the partners.
For more than a year (Jan 14, 1955 to April 30, 1956), there was no operation of
the partnership. Soon, Rojas and Maglana availed of the services of Pahamotang
as industrial partner.
The three of them executed their Articles of Co-Partnership under the same firm
name (EASTCOAST DEVELOPMENT ENTERPRISES (EDE).
Aside from the slight difference in the purpose (now to hold and secure
renewal of timber license), and the fixed term of 30 years, everything is
the same.
This new partnership started operation on May 1, 1956 and was able to ship
logs and realize profits in the sum of Php643,633.
They executed a CONDITIONAL SALE OF INTEREST IN THE PARTNERHSIP,
EASTCOAST DEVELOPMENT ENTERPRISE, agreeing among themselves that
Maglana and Rojas shall purchase the interest, share and participation in the
partnership of Pahamotang.
It was also agreed that after payment of Php31,501 to Pahamotang
including the amount of loan secured by him in favor of the
partnership, the two shall become owners of all equipment contributed
by Pahamotang and the EDE be dissolved.
Pahamotang was duly paid and no other rights and obligations accrued in the
name of the second partnership.
After Pahamotangs withdrawal, the partnership was continued by Maglana and
Rojas without the benefit of any written agreement or reconstitution of their
written Articles of Partnership.
Rojas entered into a management contract with CMS Estate Inc, another logging
enterprise and thereafter abandoned the partnership. He withdrew his
equipment from the partnership which were his supposed contributions to the
first partnership and was transferred to CMS Estate by way of chattel mortgage.
Maglana wrote Rojas, reminding him of his obligation to contribute to the capital
investments of the partnership, and to perform his duties as logging
superintendent.
Rojas told Maglana that he will not be able to comply with the contributions and
will cease working as logging superintendent. Because of this, Maglana told
Rojas that his share will just be 20% of the net profits.
However, Rojas took funds from the partnership more than his contribution thus,
Maglana notified Rojas that he dissolved the partnership.
Rojas then filed an action before the CFI against Maglana for the recovery of
properties, accounting, receivership and damages. His subsequent petition for
appointment of a receiver was denied.
[SUBJECT] | [TOPIC] 3
[Digest maker]

Maglana filed a motion to dismiss the complaint but was denied for want of
merit. He filed his motion for leave of court to amend his answer with
counterclaim which was granted.
The trial court, in its decision, held that the partnership is one of a de facto and
at will after Pahamotang retired from the second partnership; that there is no
evidence that the properties were acquired by the partnership and should not
belong to the partnership; that the letter effectively dissolved the partnership;
that the alleged sale of forest concession is valid and binding upon the parties
and should be considered as part of Maglanas contribution to the partnership

ISSUE
1. WON the first partnership subsists YES
2. WON Maglana can unilaterally dissolve the partnership YES
3. WON Maglana is liable for damages NO

RATIO
1. WON the first partnership subsists YES
a. Rojas insists that the registered partnership has not been novated,
superseded and/or dissolved by the unregistered articles of co-partnership
of the 3 and accordingly, the terms and stipulations of the registered
Articles of Co-partnership should govern the relations between him and
Maglana. It continues to govern the relationship when Pahamotang
withdrew. Maglanas letter did not legally dissolve the registered
partnership because it would be in contravention of the partnership
agreement agreed upon and stipulated in their Articles of Co-partnership.
b. It was evident that that it was not the intention of the partners to dissolve
the first partnership, upon the constitution of the second one, which they
called an Additional Agreement. They adopted the same name, same
purposes and the capital contributions call for the same amounts. All
subsequent renewals of the Timber License were secured in favor of the
First Partnership, the original licensee. It was merely amended, in the form
of Supplementary Articles of Co-partnership which was not registered.
c. The second partnership was dissolved by common consent but it did not
affect the first partnership which continued to exist. Rojas and Maglana
purchased the interest, share and participation in the second partnership
and became the owners of equipment contributed by Pahamotang.
Maglana even reminded Rojas of his obligation. Rojas replied that he will
not be able to comply with the promised contributions and he will not
work as logging superintendent. This left no room for doubt that they are
governed by the articles of the registered partnership.

2. WON Maglana can unilaterally dissolve the partnership YES


a. Since there are only two parties when Maglana notified Rojas that he
dissolved the partnership, it is in effect a notice of withdrawal.
b. Under Article 1830, para 2., 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. If the cause is
not justified or no cause was given the withdrawing partner is liable for
damages but is not compelled to remain in the firm. With his withdrawal,
the number of members decreased = dissolution.
c. Rojas and Maglana shall be guided in the liquidation of the partnership by
the provisions of its registered Articles of Co-Partnership: all profits and
losses shall be divided share and share alike.
d. It is a settled rule that when a partner, who has undertaken to contribute
a sum of money, fails to do so, he becomes a debtor of the partnership for
whatever he may have promised to contribute and for interests and
damages from the time he should have complied with his obligation. Thus,
Rojas is not entitled to any profits (he contributed Php18,750 instead of
Php158,158).

3. WON Maglana is liable for damages NO


a. After the withdrawal of Pahamotang, Rojas entered into a management
contract with another logging enterprise. He withdrew his equipment,
refused to contribute whether in cash or capital. Rojas not only abandoned
the partnership, but also took funds in an amount more than his
contribution. Maglana cannot be said to be in bad faith, nor can he be
liable for damages.

DECISION
CFI decision modified, EDE continued to exist until liquidated and
sharing basis of the partners should be on share and share alike.