Rojas v.
Maglana It is also provided in the artices that all profits
Facts:
Maglana and Rojas executed their Articles
Partnership called Eastcoast Development
(EDE). It was a partnership with an indefinite term of
existence. Maglana shall manage the business affairs while
Rojas shall be the logging superintendant and shall manage
the logging operation. They shall share in all profits and
loss equally. Due to difficulties encountered they decided
to avail of the sources of Pahamatong as industrial
partners. They again executed their Articles of Co-
Partnership under EDE. The term is 30 years. After
sometime Pamahatong sold his interest to Maglana and
Rojas including equipment contributed. After withdrawal
of Pamahatong, Maglana and Rojas continued
partnership. After 3 months, Rojas entered into
management contract with another logging enterprise. He
left and abandoned the partnership. He even withdrew his
equipment from the partnership and was transferred to
CMS. He never told Maglana that he will not be able to
comply with the promised contributions and he will not
work as logging superintendent. Maglana then told Rojas
that the latter share will just be 20% of the net
profits. Rojas took funds from the partnership more than
his contribution. Thus, Maglana notified Rojas that he
dissolved the partnership.
Issue: What is the nature of the partnership and legal
relationship of Maglana and Rojas after
retired from the second partnership
Ruling:
It was not the intention of the partners to dissolve the
first partnership, upon the constitution of the second
one, which they unmistakably called
agreement. Otherwise stated even during the existence
of the second partnership, all business transactions were
carried out under the duly registered articles. No rights
and obligations accrued in the name of the second
partnership except in favor of Pahamatong which was
fully paid by the duly registered partnership.
ROJAS v MAGLANA
FACTS:
Jan. 14, 1955 - Maglana and Rojas executed
their Articles of Co-Partnership called Eastcoast
Development Enterprises with only 2 of them as
partners with an indefinite term of existence and
was duly registered with the SEC.
Under the said Articles, Maglana shall manage the
business affairs of the partnership while Rojas
shall be the logging superintendent and shall
manage the logging operations of the partnership.
and losses of the partnership shall be divided and
of Co- shared between them.
Enterprises There was no operation for a year and because of
this difficulty, Rojas and Maglana decided to avail
of the services of Pahamotang as industrial
partner.
March 4, 1956 - Maglana, Rojas and Pahamotang
executed their Articles of Co-Partnership under
the firm name Eastcoast Development
Enterprises.
The only difference is the purpose of the 2nd
partnership is to hold and secure renewal of
timber license instead of to secure the license as
the in the 1st partnership and the term of the 2nd
a partnership is fixed to 30 years.
The partnership started and was able to ship logs
and realize profits.
Oct. 1956 - the 3 executed a document entitled
"Conditional Sale of Interest in the Partnership,
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 the 2 shall become owners of al
equipment contributed by Pahamotang and EDE,
name given to the 2nd partnership be dissolved.
After withdrawal of Pahamotang, the partnership
Pahamatong 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
another logging enterprise, CMS Estate, Inc. He
left and abandoned the partnership. He withdrew
additional his equipment from the partnership for use in
the newly acquired area. The Equipment were his
supposed contributions to the 1st 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 also to
perform his obligation as logging superintendent.
2 weeks after, Rojas told Maglana that he will
not contribute and work as logging
superintendent. So, Maglana told him that his
share will just be 20% of the net profits. Such
was the sharing from 1957-1959 without
complaint.
Meanwhile, Rojas took funds from the
partnership more than his contribution. Thus, in
a letter, Maglana notified Rojas that he dissolved
the partnership.
ISSUE:
The nature of the partnership and legal relationship of cause its dissolution by expressly withdrawing
Maglana and Rojas after Pahamotang retired from the even before the expiration of the period, with or
2nd partnership without justifiable cause. Of course, if the cause
is not justified or no cause was given, the
RULING: withdrawing partner is liable for damages but in
According to the trial court, the partnership was a de no case can he be compelled to remain in the
facto partnership and at will (no period fixed). firm. With his withdrawal, the number of
Rojas: EDE evidenced by the 1st articles of co-partnership members is decreased, hence, the dissolution. And
has not been novated, superseded or dissolved by the in whatever way he may view the situation, the
unregistered 2nd articles of co-partnership, so the 1st conclusion is inevitable that Rojas and Maglana
articles should govern the relations between him and shall be guided in the liquidation of the
Maglana. That the letter of Maglana did not legally partnership by the provisions of its duly
dissolve the registered partnership between them. So, registered Articles of Co-Partnership that is, all
Rojas is entitled to sharing profits stipulated in the profits and losses of the partnership shall be
registered Articles. divided "share and share alike" between the
It was not the intention of the partners to partners.
dissolve the 1st partnership, upon the
constitution of the 2nd one, which they
unmistakably called an "Additional Agreement". Idos v. CA G.R. NO. 110782, September 25, 1998,
Except for the fact that they took in one Quisumbing, J.
industrial partner; gave him equal share in profits Facts:
and fixed the term of the 2nd partnership,
everything else was the same. Thus, they In 1985, Eddie Alarilla and Irma Idos formed a
adopted the same name, same purposes and partnership which they decided to terminate after a year.
capital contributions of Rojas and Maglana call for To pay Alarillas share of the asset, Idos issued 4 post
the same amount. The timber license renewals dated checks. Alarilla was able to encash the first, second
were secured in favor the 1st partnership. and fourth checks but the third was dishonored for
The 1st Articles, therefore, were only amended, insufficiency of funds. He demanded payment but Idos
in the form of Supplementary Articles of Co- failed to pay. She claimed that the checks were issued as
Partnership which was never registered. No rights assurance of Alarillas share in the assets of the
and obligations accrued in the name of the 2nd partnership and that it was supposed to be deposited
partnership except in favor of Pahamotang which until the stocks were sold. He filed an information for
was fully paid by the duly registered partnership. violation of BP blg. 22 against Idos in which she was
On the other hand, there is no dispute found guilty by the trial court.
that the second partnership was dissolved
by common consent. Said dissolution did not Issue: Did the court confused and merged into one the
affect the first partnership which continued to legal concepts of dissolution, liquidation and termination
exist. of a partnership?
By their acts (Maglana reminding Rojas of his
contribution and Rojas replying that he will not Ruling: The partners agreement to terminate the
be able to comply), both considered themselves partnership did not automatically dissolved the
governed by the articles of the duly registered partnership. They were in the process of winding-up when
partnership. the check in question was issued. The best evidenceof the
Under the circumstances, the relationship of Rojas existence of the partnership, which was not yet
and Maglana after the withdrawal of Pahamotang terminated were the unsold goods and uncollected
can neither be considered as a De Facto receivables which were presented to the trial court.
Partnership, nor a Partnership at Will, for as Article 1829 of the Civil Code provides that on
stressed, there is an existing partnership, duly dissolution the partnership is not terminated but
registered. continues until the winding-up of partnership affairs is
As to the question of WON Maglana can completed. Since the partnership has not been
unilaterally dissolve the partnership, the answer terminated, Idos and Alarilla remained co-partners. The
is YES. check was issued by petitioner to respondent as would a
As there are only two parties when Maglana partner to another and not as a payment by debtor to
notified Rojas that he dissolved the partnership, creditor. Thus, absent the first element of the
it is in effect a notice of withdrawal. complained offense, the act is not punishable by the
Under Article 1830, par. 2 of the Civil Code, statute.
even if there is a specified term, one partner can
IRMA IDOS ,vs.COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES
Facts:
Irma Idos, petitioner, formed a short-lived partnership
with Eddie Alarilla, respondent, for a leather tanning
business. Upon the business liquidation, it had receivables
and stocks worth !,"##,###. $or the share of Alarilla,
Idos issued four post-dated checks of which onl% three
out of four checks were encashed. &his impelled Alarilla
to file for a ' (( case against Idos when the latter
refused to pa% the value of the check after the former
has demanded for it. )n her defense, Idos claimed that
the check served onl% as an *assurance+ of Alarillas share
in the partnership and that it was not supposed to be
deposited until the stocks have been sold. &his was
refuted b% Alarilla and subsequentl% Idos was convicted
b% the trial court of the offense charged. &he A partnership at will. The birth and life of a partnership at
affirmed the decision of the trial court.
Issue:
WON Idos violated BP 22
Held:
/o. )ne of the elements of the offense penali0ed under
' (( is *the making, drawing and issuance of an% check
to appl% for an% account or for value.+ In this case Idos
showed enough evidence that the check was to be funded
from receivables to be collected and goods to be sold b%
the partnership. $irst, onl% one of the fours check were
not encashed and second, even Alarilla himself admitted
that there was no consideration for the issuance of the
check. 1ence the check in question was not issued for an%
debt of or an% account due and pa%able b% the
petitioner. 2oreover, Idos and Alarilla were still in the
*winding up+ of the affairs of the partnership hen the
check was issued as evidenced b% the fact that the% still
had to sell the goods on hand and collect the receivables
from debtors. As provided b% the ivil ode3 winding-up
is the process of settling business affairs after dissolution,
i.e. collecting of assets previousl% demandable4
termination is the point in time after all the partnership
affairs have been wound up. &hus, since that partnership
has not been terminated, the petitioner and private
complainant remained as co-partners. &he check was thus
issued b% the
Ortega vs. CA
FACTS: On December 19, 1980, respondent Misa
associated himself together, as senior partner with
petitioners Ortega, del Castillo, Jr., and Bacorro, as
junior partners. On Feb. 17, 1988, respondent Misa
wrote a letter stating that he is withdrawing and retiring
from the firm and asking for a meeting with the
petitioners to discuss the mechanics of the liquidation.
On June 30, 1988, petitioner filed a petition to the
Commision's Securities Investigation and Clearing
Department for the formal dissolution and liquidation of
the partnership. On March 31, 1989, the hearing officer
rendered a decision ruling that the withdrawal of the
petitioner has not dissolved the partnership. On appeal,
the SEC en banc reversed the decision and was affirmed
by the Court of Appeals. Hence, this petition.
ISSUE: Whether or not the Court of Appeals has erred in
holding that the partnership is a partnership at will and
whether or not the Court of Appeals has erred in holding
that the withdrawal of private respondent dissolved the
partnership regardless of his good or bad faith
HELD: No. The SC upheld the ruling of the CA regarding
the nature of the partnership. The SC further stated
that a partnership that does not fix its term is a
will is predicated on the mutual desire and consent of
the partners. The right to choose with whom a person
wishes to associate himself is the very foundation and
essence of that partnership. Its continued existence is, in
turn, 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. Verily, any one of the partners may, at
his sole pleasure, dictate a dissolution of the partnership
at will. He must, however, act in good faith, not that
the attendance of bad faith can prevent the dissolution
of the partnership but that it can result in a liability for
damages.
Uy vs. Puzon
Puzon entered into a contract with the Republic of the
Philippines for the construction of a road and 5 bridges.
However, Puzon found difficulty in accomplishing both
projects, so he established a partnership with Uy as sub-
contractor of the projects for financial assistance and the
profits shall be divided equally between them; the
resulting partnership is UP Construction Company.
The partners agreed to contribute P50, 000 each as
capital. However, Puzon failed to pay but promised to
contribute his share as soon as his application of loan
with the PNB shall be approved. Uy gave Puzon advance
contribution of his share in partnership for Puzon top
pay his obligations with PNB.
Uy was entrusted with the management of the project
since Puzon is busy with his other projects; whatever
expense Uy may incur shall be considered part of his
contribution. Upon approval of Puzons loan with the
PNB, he gave Uy P60, 000 for reimbursement of Uys
contribution and Puzons contribution to the partnership
capital. To guarantee the payment of the loan, Puzon
assigned to PNB all payments to be received on account
of the contracts with the Bureau of Public Highways for
the construction; this was done without the knowledge
and consent of Uy.
Financial demands of the project increased, thus, Uy
called on Puzon to place his capital contribution; Puzon
failed to do so. Uy thereafter sent letters of demand to
which Puzon replied that hes not capable of putting
additional capital. Puzon wrote UP Construction Company
terminating their subcontract agreement.
Uy was then not allowed in the office of UP Construction
Company and his authority to deal with BPH was
revoked. Hence, he instituted an action against Puzon
seeking the dissolution of the partnership and payment of
damages for the violation of the latter of the terms of
their partnership agreement.
RTC found that Puzon failed to contribute his share in
the capital of the partnership and caused the failure of
partnership to realize expected profits. The court ordered
the dissolution of the partnership and Puzon to pay Uy a
certain sum. Franco Puzon substituted Bartolome Puzon
on the appeal of the case before the Supreme Court.
ISSUE/S: W/N the amount of money ordered by the
trial court for the failure to contribute his share in the
capital of the partnership is proper.
RULING: The award of P200,000.00 as his share in the
unrealized profits of the partnership is proper. Under
Article 2200 of the Civil Code, indemnification for
damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee
failed to obtain. In other words lucrum cessans is also a
basis for indemnification. There is no doubt Uy failed to
make profits because of Puzon's breach of contract. The
partnership showed some profits even though the profit
and loss statement showed net loss; it may be due to
error in accounting.
Had the appellant not been remiss in his obligations as
partner and as prime contractor of the construction
projects in question as he was bound to perform pursuant
to the partnership and subcontract agreements, and
considering the fact that the total contract amount of
these two projects is P2,327,335.76, it is reasonable to
expect that the partnership would have earned much
more than the P334,255.61 We have hereinabove
indicated. The award, therefore, made by the trial court
of the amount of P200,000.00, as compensatory
damages, is not speculative, but based on reasonable
estimate.
As cited in Moran vs. CA:
The rule is, 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
(Art. 1786, Civil Code) and for interests and
damages from the time he should have complied
with his obligation (Art. 1788, Civil Code). Thus
in Uy v. Puzon (79 SCRA 598), which
interpreted Art. 2200 of the Civil Code of the
Philippines, we allowed a total of P200,000.00
compensatory damages in favor of the appellee
because the appellant therein was remiss in his
obligations as a partner and as prime contractor
of the construction projects in question. This
case was decided on a particular set of facts. We
awarded compensatory damages in the Uy case
because there was a finding that the constructing
business is a profitable one and that the UP
construction company derived some profits from
its contractors in the construction of roads and
bridges despite its deficient capital. Besides,
there was evidence to show that the partnership
made some profits during the periods from July
2, 1956 to December 31, 1957 and from
January 1, 1958 up to September 30, 1959.
The profits on two government contracts worth
P2,327,335.76 were not speculative. In the
instant case, there is no evidence whatsoever
that the partnership between the petitioner and
the private respondent would have been a
profitable venture. In fact, it was a failure
doomed from the start. There is therefore no
basis for the award of speculative damages in
favor of the private respondent.
Furthermore, in the Uy case, only Puzon failed
to give his full contribution while Uy contributed
much more than what was expected of him.
Uy Vs. Puzon
Facts:
Bartolome Puzon had two contracts with the
government for the construction of roads and
bridges. (Bureau of Public Highways)
He sought the financial assistance of William Uy,
so he proposed that they create a partnership
which would be the sub-contractor of the
projects.
They also agreed that the profits will be divided
among themselves.
William Uy agreed to the formation of the
partnership "U.P. Construction Company". They
agreed to contribute P50,000 each. (Note:
P40,000 was advanced by William Uy while
Puzon was waiting for the approval of his
P150,000 PNB Loan. Upon release of the loan,
 he promised to reimburse William Uy of the
P40,000; pay his share of P50,000 and loan
P60,000 to the partnership).
Loan was approved by November 1956. Note: At
the end of 1957, Uy contributed a total of
P115,
The partnership agreement was signed in 1957
(January 18) although the work for the projects
began as early as 1956 (October 1).
Since Puzon was busy with other projects, Uy
was the one who managed the partnership.
In order to guarantee the PNB Loan, Puzon,
without the knowledge of Uy, assigned the
payments to the payments to be received from
the projects to PNB.
Due to the financial demands of the projects, Uy
demanded that Puzon comply with his obligation
to place his capital contribution in the company.
However, Puzon failed to comply even after
formal demand letters were sent to him.
Thereafter, Puzon (as the primary contractor of
the projects) wrote terminated the subcontract
agreement with the partnership to which he is
also a partner. (November 27, 1957)
Thereafter, Uy was not allowed to hold office in
the UP Construction Company and his authority
to negotiate with the Bureau was revoked by
Puzon.
Uy clamied that Puzon had violated the terms of
their partnership agreement. He sought for the
dissolution of the partnership with damages.
The lower court ruled in favor of Uy.
Issue: WON Puzon failed to comply with his obligation of
paying the capital contribution to the company. YES
Ruling: YES
According to the court, there was failure on the part of
Puzon to contribute capital to the partnership. When his
load with PNB was approved, he only gave P60,000 to
Uy; P40,000 was for reimbursement to the payments
made by Uy and the other P20,000 was for the capital
contribution. Thereafter, Puzon never made additional
contribution.
Also, it was found by the SC that Puzon misapplied
partnership funds by assigning all payments for the
projects to PNB.
Such assignment was prejudicial to the partnership since
the partnership only received a small share from the
total payments made by the Bureau of Public Highways.
As a result, the partnership was unable to discharge its
obligations.
Here, the Court ordered Puzon to reimburse whatever
amount Uy had invested in or spent for the partnership
on account of construction projects. The amount
P200,000 as compensatory damages was also awarded in
favor of Uy.
RULING:
Had the appellant not been remiss in his obligations as
partner and as prime contractor of the construction
projects in question as he was bound to perform pursuant
to the partnership and subcontract agreements, and
considering the fact that the total contract amount of
these two projects is P2,327,335.76, it is reasonable to
expect that the partnership would have earned much
more than the P334,255.61 We have hereinabove
indicated. The award, therefore, made by the trial court
of the amount of P200,000.00, as compensatory
damages, is not speculative, but based on reasonable
estimate.
WHEREFORE, finding no error in the decision appealed
from, the said decision is hereby affirmed with costs
against the appellant, it being understood that the
liability mentioned herein shall be home by the estate of
the deceased Bartolome Puzon, represented in this
instance by the administrator thereof, Franco Puzon.
DOMINGO BEARNEZA, plaintiff-appelle,
vs.
BALBINO DEQUILLA, defendant-appellant.
Facts:
- In the year 1903, Balbino Dequilla, the herein
defendant, and Perpetua Bearneza formed a
partnership for the purpose of exploiting a fish
pond with Perpetua obligating herself to
contribute to the payment of the expenses of
the business, which obligation she made good, and
both agreeing to divide the profits between
themselves, which they had been doing until the
death of the said Perpetua in the year 1912
- The deceased left a will in one of the clauses of
which she appointed Domingo Bearnez, the herein
plaintiff, as her heir to succeed to all her rights
and interests in the fish pond in question
- Domingo Bearnez then instituted an action to
recover a part of the fish pond belonging to the
decedent, including of the profits received by
the defendant from the years 1913-1919
- The defendant alleges that "the formation of the
supposed partnership between the plaintiff and
the defendant for the exploitation of the
aforesaid fish pond was not carried into effect,
on account of the plaintiff having refused to
defray the expenses of reconstruction and
exploitation of said fish pond." and further
 averred that the right of the plaintiff had
already prescribed
- Judgment was then rendered declaring the
plaintiff owner of one-half of the fish pond but
without may awarding him any damages
- From this judgment the defendant appeals
Issue/Held:
- W/N the plaintiff has any right to maintain an
action for recovery of the said one-half of the
fish pond / NONE
Ratio:
- The partnership formed was a particular
partnership, it having had for its subject-matter
a specified thing, the exploitation of the
aforementioned fish pond
- Although, as the trial court says in its decision,
the defendant, in his letters to Perpetua or her
husband, makes reference to the fish pond, calling
it "our," or "your fish pond," this reference
cannot be held to include the land on which the
said fish pond was built
- It has not been proven that Bearneza
participated in the ownership of the said land
o Therefore, the land on which the fish
pond was constructed did not constitute
part of the subject-matter of the
partnership
- This partnership was dissolved by the death of
Perpetua Bearneza
o Neither can it be maintained that the
partnership continued to exist after the
death of Perpetua, inasmuch as it does
not appear that any stipulation to that
effect has ever been made by her and
the defendant
- The partnership having been dissolved by the
death of Perpetua Bearneza, its subsequent legal
status was that of a partnership in liquidation,
and the only rights inherited by her
testamentary heir, the herein plaintiff, were
those resulting from the said liquidation in favor
of the deceased partner, and nothing more
- Before this liquidation is made, which up to the
present has not been effected, it is impossible to
determine what rights or interests, if any, the
deceased had, the partnership bond having been
dissolved
- There is no sufficient ground for holding that a
community of property existed between the
plaintiff and the defendant, it not being known
whether the deceased still had any interest in
the partnership property which could have been
transmitted by will to the plaintiff
- Furthermore, it cannot be said that the
partnership continued between the plaintiff and
the defendant. It is true that the latter's act in
requiring the heirs of Perpetua to contribute to
the payment of the expenses of exploitation of
the aforesaid fishing industry was an attempt to
continue the partnership, but it is also true that
neither the said heirs collectively, nor the
plaintiff individually, took any action in response
to that requirement, nor made any promise to
that effect, and therefore no new contract of
partnership existed
- The decision is hereby REVERSED
Eugenia Lichauco vs Faustino Lichauco
33 Phil 350 Business Organization Partnership,
Agency, Trust Dissolution
In 1901, F. Lichauco Hermanos partnership was formed. It
was provided, among others, in the partnership
agreement that Faustino Lichauco will be the managing
partner; and that the firm cannot be dissolved except
upon the 2/3 vote of all the partners. In 1904, the
firm wasnt performing well and was unprofitable and so
its machineries were dismantled. In 1905, Eugenia and
one other partner demanded Faustino to make an
accounting of the firms assets but Faustino refused to
do so. Belatedly in 1912, Eugenia et al filed a civil suit
against Faustino to compel the latter to perform ac
accounting. Faustino, in his defense, argued that the firm
was not dissolved pursuant to the partnership agreement
there being no 2/3 vote from all the members (Faustino
et al are only 1/5 of the firm).
ISSUE: Whether or not Eugenia et al can demand an
accounting.
HELD: Yes. The firm was already dissolved in 1904 when
its machineries were dismantled this was a sign that
the firm abandoned and concluded the purpose for it was
formed (rice cleaning business). Upon said dissolution, it
was the duty of Faustino to liquidate the assets and
inform his partners. The provision which requires a 2/3
votes of all the partners to dissolve the firm cannot be
given effect because the same denied the right of a less
number of partners to effect the dissolution especially
where the firm has already sustained huge losses. It
would be absurd and unreasonable to hold that such an
association could never be dissolved and liquidated without
the consent and agreement of two-thirds of its partners,
notwithstanding that it had lost all its capital, or had
become bankrupt, or that the enterprise for which it had
been organized had been concluded or utterly abandoned.
TESTATE ESTATE OF LAZARO MOTA, deceased, ET AL.,
plaintiffs-appellants,
vs. SALVADOR SERRA, defendant-appellee.
FACTS:
Ps and D entered into a contract of partnership for the
construction & exploitation of a railroad line from the
"San Isidro" and "Palma" centrals to the place known as
"Nandong."
The original capital stipulated was P150,000.
It was covenanted that the parties should pay this amount
in equal parts & the plaintiffs were entrusted w/ the
administration of the partnership.
However, the agreed capital of P150,000 did not prove
sufficient since the expenses reached P 226, 092
So D entered into a contract of sale with Venancio
Concepcion, Phil. C. Whitaker, and Eusebio R.
Luzuriaga, whereby he sold to the latter the estate and
central known as "Palma" with its running business, all the
improvements, machineries & buildings.
Before delivery of the haciendato the purchasers, de
Luzuriaga renounced all his rights under the contract of
Messrs. Concepcion & Whitaker.
This gave rise to the fact that Concepcion, Whitaker &
Def executed another deed of absolute sale of the said
"Palma" Estate for the amount of P1,695,961.90, of
which the vendor received at the time of executing the
deed the amount of P945,861.90, & the balance was
payable by installments in the form and manner stipulated
in the contract.
The purchasers guaranteed the unpaid balance of the
purchase price by a first & special mortgage in favor of
the vendor upon the hacienda & the central with all the
improvements, buildings, machineries, and appurtenances
then existing on the said hacienda.
Messrs. Phil. C. Whitaker and Venancio Concepcion, in
Clause 6 of the deed, expressed awareness of contract of
partnership and their willingness to subrogate themselves
into the obligations therefor.
Thereafter, Concepcion & Whitaker also bought from Mota
et al. the of the railroad line and they agreed that the
partnership "Palma" and "San Isidro," formed between
Serra & Mota et al, should be totally cancelled and of no
force and effect whatever.
The price of this sale was P237,722.15, excluding any
amount which the D might be owing to the Ps.
Of the purchase price of of the railroad, Concepcion
&Whitaker paid the sum of P47,544.43 only.
So it results that the "Hacienda Palma," with the entire
railroad (the subject-matter of the contract
partnership between Ps and D) became the property of
Whitaker & Concepcion.
However, Whitaker & Concepcion failed to pay to the D a
part of the purchase price (P750,000), so
vendor/defendant, foreclosed the mortgage upon the said
hacienda, which was adjudicated to him at the public sale
held by the sheriff for the amount of P500,000, and D
put in possession thereof, including what was planted at
the time, together with all the improvements made by
Whitaker &Concepcion.
Since D, Whitaker & Concepcion failed to pay 1/2 of the
amount (P113,046.46) expended by the Ps upon the
construction of the railroad line,the plaintiffs instituted
the present action praying:
(1) That the deed of February 1, 1919 (contract of
partnership), be declared valid and binding;
(2) that the defendant be sentenced to pay plaintiffs the
aforesaid sum of P113,046.46, with the stipulated
de interest at 10 per cent per annum beginning June 4,
1920, until full payment thereof, with the costs of the
present action.
Defendant pointed out that he is now relieved from the
obligation because of the novation of the contract by
the substitution of the debtor with the conformity of
the creditors;
TRIAL COURT ->ruled in favor of the defendant
The court a quo in its decision held that there was a
novation of the contract by the substitution of the
debtor, and therefore absolved the defendant from the
complaint with costs against the plaintiffs. With regard
to the prayer that the said contract be declared valid
and binding, the court held that there was no way of
reviving the contract which the parties themselves in
interest had spontaneously and voluntarily extinguished.
Hence, this petition for review.
ISSUE:
W/N Defendant is exempt from his obligation from the
partnership on the ground that the partnership was
dissolved?
Ruling:
The dissolution of a firm does not relieve any of
its members from liability for existing obligations,
although it does save them from new obligations to
which they have not expressly or impliedly assented,
and any of them may be discharged from old
obligations by novation or other form of release. A
partnership continues, even after dissolution, for the
purpose of winding up its affairs. At the termination
of the object for which it was created the
of partnership is extinguished, pending the winding up
of some incidents and obligations of the partnership,
but in such case, the partnership will be reputed as
existing until the juridical relations arising out of the
contract are dissolved. A partnership cannot be
the
 considered as extinguished until all the obligations
pertaining to it are fulfilled.
Singsong v. Isabela Sawmill
Singsong v. Isabela Sawmill G.R. No. L-27343, February
28, 1979, Fernandez, J.
Facts: In 1951, defendants entered into a contract of
partnership under the firm name Isabela Sawmill. In
1956 the plaintiff sold to the partnership a motor truck
and two tractors. The partnership was not able to pay
their whole balance even after demand was made. One of
the partners withdrew from the partnership but instead
of terminating the said partnership it was continued by
the two remaining partners under the same firm name.
Plaintiffs also seek the annulment of the assignment of
right with chattel mortgage entered into by the
withdrawing partner and the remaining partners. The
appellants contend that the chattel mortgage may no
longer be nullified because it had been judicially approved
and said chattel mortgage had been judicially foreclosed.
Issue: Whether the withdrawal of one of the partners
dissolved the partnership.
Ruling: It does not appear that the withdrawal of the
partner was not published in the newspapers. The
appellees and the public in general had a right to expect
that whatever, credit they extended to the remaining
partners could be enforced against the properties of the
partnership. The withdrawing partner cannot be relieved
from her liability to the creditor of the partnership due
to her own fault by not insisting on the liquidation of
the partnership. Though she had acted in good faith, the
appellees also acted in good faith in extending credit to
the partnership. Where one of two innocent persons
must suffer, that person who gave occasion for the
damages to be caused must bear the consequences.
Technically, the partnership was dissolved by the
withdrawal of one of the partners. Through her acts of
entering into a memorandum with the remaining partners
misled the creditors that they were doing business with
the partnership. Hence, from the order of the lower
court ordering the withdrawing partner to pay the
plaintiffs, she is thus entitled for reimbursement from
the remaining partners.
Singson vs. Isabela Sawmill
Facts: Isabela Sawmill was formed by partners Saldajeno,
Lon and Timoteo. Withdraw from the partnership and
after dissolution, L and T continued the business still
under the name Isabela Sawmill. The partnership
indebted to various creditors and that Sheriff sold the
assets of Isabela Sawmill to S and was subsequently sold
to a separate company.
Issue: Whether or not Isabela Sawmill ceased to be a
partnership and that creditors could no longer demand
payment.
Ruling: On dissolution, the partnership is not terminated
but continues until the winding up of the business. It
does not appear that the withdrawal of S from the
partnership was published in the newspapers. The Apelles
and the public had a right to expect the public had a
right to expect that whatever credit they extended to L
& T doing business. In the name of the partnership could
be enforced against the partnership of said partnership.
The judicial foreclosure of the chattel mortgage executed
in the favor of S did not relieve her from liability to the
creditors of the partnership.
It may be presumed S acted in good faith, the
Apelles also acted in good faith in extending credit to
they partnership. Where one of the two innocent persons
must suffer, that persons must suffer, that person who
gave occasion for the damages to be caused must bear
the consequences.
Primelink Properties and Development Corporation vs Ma.
Clarita Lazatin-Magat
In 1994, Primelink Properties and the Lazatin siblings
entered into a joint venture agreement whereby the
Lazatins shall contribute a huge parcel of land and
Primelink shall develop the same into a subdivision. For 4
years however, Primelink failed to develop the said land.
So in 1998, the Lazatins filed a complaint to rescind the
joint venture agreement with prayer for preliminary
injunction. In said case, Primelink was declared in default
or failing to file an answer and for asking multiple
motions for extension. The trial court eventually ruled in
favor of the Lazatins and it ordered Primelink to return
the possession of said land to the Lazatins as well as
some improvements which Primelink had so far over the
property without the Lazatins paying for said
improvements. This decision was affirmed by the Court of
Appeals. Primelink is now assailing the order; that turning
over improvements to the Lazatins without
reimbursement is unjust; that the Lazatins did not ask
the properties to be placed under their possession but
they merely asked for rescission.
ISSUE: Whether or not the improvements made by
Primelink should also be turned over under the possession
of the Lazatins.
HELD: Yes. In the first place, even though the Lazatins
is did specifically pray for possession the same (placing of
improvements under their possession) is incidental in the
relief they prayed for. They are therefore entitled
possession over the parcel of land plus the improvements
made thereon made by Primelink.
In this jurisdiction, joint ventures are governed by the
laws of partnership. Under the laws of partnership, when
a partnership is dissolved, as in this case when the trial
court rescinded the joint venture agreement, the
innocent party has the right to wind up the partnership
affairs.
With the rescission of the JVA on account of
petitioners fraudulent acts, all authority of any partner
to act for the partnership is terminated except so far as
may be necessary to wind up the partnership affairs or
to complete transactions begun but not yet finished. On
dissolution, the partnership is not terminated but
continues until the winding up of partnership affairs is
completed. Winding up means the administration of the
assets of the partnership for the purpose of terminating
the business and discharging the obligations of the
partnership.
It must be stressed, too, that although the Lazatins
acquired possession of the lands and the improvements
thereon, the said lands and improvements remained
partnership property, subject to the rights and
obligations of the parties, inter se, of the creditors and
of third parties and subject to the outcome of the
settlement of the accounts between the parties, absent
any agreement of the parties in their JVA to the
contrary (here no agreement in the JVA as to winding
up). Until the partnership accounts are determined, it
cannot be ascertained how much any of the parties is
entitled to, if at all.
Luzviminda Villareal vs Donaldo Efren Ramirez
In 1984, Villareal, Carmelito Jose and Jesus Jose, formed
a partnership for the purpose of operating a restaurant.
Each contributed P250,000.00. In 1984, Ramirez was
added as a partner after he contributed P250,000.00.
In 1987, Jesus withdrew from the partnership and his
capital share of P250k was returned to him as agreed
upon by the other partners.
Thereafter, the restaurant suffered losses. Without
informing Ramirez, Villareal and Carmelito shut down the
restaurant. They then turned over the restaurant
equipments to Ramirez.
Later, Ramirez sent a letter to Villareal and Carmelito
telling them hes no longer interested in being a partner
and that hes demanding his shares in the partnership.
Villareal and Carmelito ignored the request of Ramirez
hence the latter sued them.
In their defense, Villareal and Carmelito said that the
restaurant equipments served as payment to Ramirez
when they were delivered to them; that Ramirez cannot
ask for share in equity because the restaurant incurred
debts (P240,658.00) and irreversible business losses.
Ramirez argued by saying that the equipments were
merely placed in their house for storage as the two
partners allegedly searched for a better restaurant
location; that he was not aware of any losses or any
indebtedness because he never took part in the
management of the restaurant.
The trial court ruled in favor of Ramirez. The Court of
Appeals affirmed the trial court and it further ordered
Villareal and Carmelito to pay Ramirez P253,114.00. The
computation was done as follows: (Original Partnership
Capital Partnership Debt = Partnership Asset)
Number of partners; hence: (P1,000,000.00
P240,658.00 = P759,342.00) 3 = P253,114.00.
ISSUE: Whether or not the Court of Appeals is correct.
HELD: No. It is impossible that the said P1,000,000.00
original capital did not fluctuate. It could not have
remained stagnant. Further, the Court of Appeals missed
to note that one partner left and his contribution was
returned (Jesus Jose). Generally, in the pursuit of a
partnership business, its capital is either increased by
profits earned or decreased by losses sustained. It does
not remain static and unaffected by the changing
fortunes of the business.
The Supreme Court also noted that Ramirez cannot
demand his equity shares from Villareal and Carmelito
because it should be the partnership the partners and
the partnership has a separate and distinct personality.
In determining Ramirez share in the equity, losses must
be accounted for. He cannot ask for an amount
equivalent to his capital contribution especially in this
case where the partnership incurred debts and losses. At
any rate, Ramirez share is 1/3 of whatever assets the
partnership still has after debts and losses are deducted.
Hence there is a need for a proper proceeding for the
accounting, liquidation, and distribution of the remaining
partnership assets. A share in a partnership can be
returned only after the completion of the latters
dissolution, liquidation and winding up of the business.
On the issue of whether or not the turning over of the
restaurant equipments to Ramirez served as payment of
the latters share, it is wrong for Villarreal and Carmelito
to assert that it served as a payment. Ramirez was
merely made to believe that said equipments are being
stored in his place and not being given to him as
payment.