ROJAS v.

MAGLANA
Dec. 10, 1990 | Paras, J. | Direct Appeal | Dissolution & Winding Up

PETITIONER: Eufracio Rojas

RESPONDENT: Constancio Maglana

SUMMARY: Rojas and Maglana entered into a partnership (EDE) for the purpose of securing a timber license and engaging in
logging through an Articles of Partnership duly registered w/ the SEC. The sharing of losses and profits was on a share and share
alike basis. When the partnership suffered difficulties, they engaged the services of Pahamotang as industrial partner. The 3 executed
their Articles of Partnership but was unregistered. Pahamotang later withdrew from the partnership, and Maglana and Rojas continued
the partnership without the benefit of any written agreement or reconstitution of their written Articles of Partnership. Later, Rojas
entered into a management contract w/ CMS (another logging enterprise and told Maglana of his inability to comply w/ his obligations
as a partner. When Rojas took funds more than his contribution, Maglana dissolved the partnership. Rojas filed an action before the
CFI vs Maglana for the recovery of properties, accounting, receivership and damages. CFI held that Rojas is not entitled to any share
in the profits since from 1960 to the date of dissolution, Feb. 23, 1961, his share was on the basis of his actual contribution and he was
indebted to the partnership. It was of the view that the 2nd partnership superseded the 1st, so that when the 2nd partnership was
dissolved there was no written contract of co-partnership; there was no reconstitution as provided for in the Maglana, Rojas and
Pahamotang partnership contract. Hence, the partnership which was carried on by Rojas and Maglana after the dissolution of the 2nd
partnership was a de facto partnership and at will. SC held that the 2nd unregistered partnership did not dissolve the 1 st one w/c was
registered, and the 1st Articles w/c was duly registered governed Rojas and Maglanas relations after Pahamotangs withdrawal.

DOCTRINE: Under Article 1830 (2) CC, 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 in no case can he be compelled to remain in the firm. With his withdrawal,
the number of members is decreased, hence, the dissolution.

1955-Apr. 30, 1956. Due to difficulties, the partnership

FACTS:
1. Jan. 14, 1955: Constancio Maglana and Eufracio Rojas
executed Articles of Co-Partnership called Eastcoast Devt
Enterprises (EDE) with only them as partners. EDE was duly
registered (Jan. 21, 1955) w/ the SEC with an indefinite term
of existence and one of its 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.
2. A duly registered Articles of Co-Partnership was filed
together with an application for a timber concession. Bureau
of Forestry approved said application and issued Timber
License and became the basis of subsequent renewals made
for and in behalf of EDE.
3. Under said 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 Rojas
shall be the logging superintendent and shall manage the
logging operations of the partnership. It is also provided in the
said articles of co-partnership that all profits and losses of the
partnership shall be divided share and share alike between the
partners.
4. There was no operation of the partnership from Jan. 14,
decided to avail Agustin Pahamotangs services as industrial
partner.
5. Mar. 4, 1956: the three executed their Articles of Co-
Partnership under the firm name Eastcoast Devt Enterprises
(EDE). Everything else was the same aside from the slight
difference in the purpose (to hold and secure renewal of
timber license instead of to secure the license as in the 1st
partnership) and the term is fixed to 30 years. Said Articles
b/w the 3 was unregistered.
6. The partnership formed by the three started operation on
May 1, 1956, and was able to ship logs and realize profits.
7. Oct. 25, 1956: the three executed a Conditional Sale of
Interest in EDE. They agreed among themselves that Maglana
and Rojas shall purchase Pahamotangs interest, share and
participation in the partnership assessed at Php 31,501.12. It
was also agreed that after payment of to Pahamotang including
the amount of loan secured by Pahamotang in favor of the
partnership, Maglana and Rojas shall become the owners of all
equipment contributed by Pahamotang and EDE be dissolved.
Pahamotang was paid in full on Aug. 31, 1957.
8. After Pahamotangs withdrawal, Maglana and Rojas
continued the partnership without the benefit of any written
agreement or reconstitution of their written Articles of
Partnership.
9. Jan. 28, 1957: Rojas entered into a management contract
with another logging enterprise, CMS Estate, Inc. He left and
abandoned the partnership. On Feb. 4, 1957, Rojas withdrew
his equipment from the partnership for use in the newly
acquired area, then transferred them to CMS through a chattel
mortgage
10. Mar. 17, 1957: Maglana reminded Rojas of his obligation
to contribute (in cash or equipment) to the partnerships
capital investments as well as his obligation to perform his
duties as logging superintendent. Two weeks later, Rojas told
Maglana that he will not be able to comply with said
obligations.
11. Maglana then told Rojas that the latter's share will just be
20% of the net profits w/c was the sharing from 1957-1959
without complaint or dispute. Meanwhile, Rojas took funds
from the partnership more than his contribution. Thus,
Maglana notified Rojas through letter (dated Feb. 23, 1961)
that he dissolved the partnership.
12. Rojas filed an action before the CFI vs Maglana for the
recovery of properties, accounting, receivership and damages.
Commissioners were appointed upon Rojas motion
13. CFI:Rojas is not entitled to any share in the profits since
from 1960 to the date of dissolution, Feb. 23, 1961, his share
was on the basis of his actual contribution and he was indebted
to the partnership. CFI was of the view that the 2nd partnership
superseded the 1st, so that when the 2nd partnership was
dissolved there was no written contract of co-partnership;
there was no reconstitution as provided for in the Maglana,
Rojas and Pahamotang partnership contract. Hence, the
partnership which was carried on by Rojas and Maglana after
the dissolution of the 2nd partnership was a de facto
partnership and at will. It was considered as a partnership at
will because there was no term, express or implied; no period
was fixed, expressly or impliedly.
Rojas, on the other hand, insists that the 1st partnership
registered in 1955 under the firm name EDE has not been
novated, superseded and/or dissolved by the unregistered
articles of co-partnership among Rojas, Maglana and
Pahamotang in 1956 and accordingly, the terms and
stipulations of said registered Articles should govern the
relations between him and Maglana. Hence, Maglanas letter
dated Feb. 23, 1961, did not legally dissolve the registered
partnership between them, being in contravention of the
partnership agreement agreed upon and stipulated in their
Articles of Co-Partnership. Upon Pahamotangs withdrawal
from the unregistered partnership, the legally constituted
partnership EDE continues to govern the relations between
them.
ISSUE/S: WoN the 2nd partnership (Rojas, Maglana and
Pahamotang) dissolved the first (Rojas and Maglana) - NO
WoN Maglana can unilaterally dissolve the partnership - YES
RULING: CFI decision modified in the sense that the duly
registered partnership of EDE 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.
RATIO:
1. It was not the intention of the partners to dissolve the 1 st
partnership, upon the constitution of the 2nd one, which they
unmistakably called an "Additional Agreement". Except for
the fact that they took in one industrial partner (Pahamotang);
gave him an equal share in the profits and fixed the term of the
second partnership to 30 years, everything else was the same
(adopted the same name, pursued same purposes and the Rojas
and Maglanas capital contributions as stipulated in both
partnerships call for the same amounts. Also, all subsequent
renewals of the Timber License were secured in favor of the
First Partnership, the original licensee. To all intents and
purposes therefore, the First Articles of Partnership were only
amended, in the form of Supplementary Articles of Co-
Partnership which was never registered.
2. No rights and obligations accrued in the name of the 2nd
partnership except in favor of Pahamotang which was fully
paid by the duly registered partnership.
3. The 2nd partnership was dissolved by common consent. Said
dissolution did not affect the 1st partnership which continued
to exist. Significantly, Maglana and Rojas agreed to purchase
Pahamotangs interest, share and participation in the second
partnership of and thereafter, the two became owners of
equipment contributed by Pahamotang.
4. Even more convincing is the fact that Maglana reminded
Rojas of the latters obligations to contribute and perform his
duties as logging superintendent. This reminder can only refer
to the provisions of the duly registered Articles of Co-
Partnership. As earlier stated, Rojas replied that he will not be
able to comply with said obligations. By such statements, it is
obvious that Roxas understood what Maglana was referring to
and left no room for doubt that both considered themselves
governed by the articles of the duly registered partnership.
5. Under the circumstances, the relationship of Rojas and
Maglana after Pahamotangs withdrawal can neither be
considered as de facto partnership, nor a partnership at will,
for there is a duly registered existing partnership.
6. Maglana can unilaterally dissolve the partnership. As there
are only two parties when Maglana notified Rojas of the
dissolution, it is in effect a notice of withdrawal. Under Article
1830 (2) CC, 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 in no case can
he be compelled to remain in the firm. With his withdrawal,
the number of members is decreased, hence, the dissolution.

7. On the basis of the Commissioners' Report, the

corresponding contribution of the partners from 1956-1961:
Rojas who should have contributed Php l58,158, contributed
only Php 18, 750 while Maglana who should have contributed
Php 160,984, contributed Php 267,541.44. 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 (Article 1786, CC) and for
interests and damages from the time he should have complied
with his obligation (Article 1788, CC). Being a contract of
partnership, each partner must share in the profits and losses
of the venture.

8. As reported, Rojas is not entitled to any profits. In

Commissioners reports approved by the trial court, they
showed that on 50-50% basis, Rojas will be liable in the
amount of Php l31,166.00; on 80-20%, he will be liable for
Php 40,092.96 and finally on the basis of actual capital
contribution, he will be liable for Php 52,040.3l.

9. Maglana is not in bad faith nor he is liable for damages for

such withdrawal. Remember that after Pahamotangs
withdrawal, Rojas entered into a management contract with
CMS Estate, Inc., a company engaged in the same business as
the partnership. He withdrew his equipment, refused to
contribute either in cash or in equipment to the capital
investment and to perform his duties as logging
superintendent, as stipulated in their partnership agreement.
Records also show that Rojas not only abandoned the
partnership but also took funds in an amount more than his
contribution.