G.R. No. 30616, 10 December 1990, 192 SCRA 110

FACTS:

Maglana and Rojas executed their Articles of Co-Partnership with only the two of them as partners and registered the same with the SEC. One of the purposes of the duly-registered partnership 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.”

Under the said Articles of Co-Partnership, 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. 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 and there is no definite term of the existence of the partnership.

For some time, there was no operation of said partnership. Because of the difficulties encountered, Rojas and Maglana decided to avail of the services of Pahamotang as industrial partner. Maglana, Rojas and Agustin Pahamotang executed their Articles of Co-Partnership and did not register the same before the SEC. The second partnership realized profits.

Later, Pahamotang, Maglana and Rojas executed a document 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 two (Maglana and Rojas) shall become the owners of all equipment contributed by Pahamotang and the second partnership, be dissolved.

After the withdrawal of Pahamotang, the partnership was continued by Maglana and Rojas without the benefit of any written agreement or reconstitution of their written Articles of Partnership.

Subsequently, Rojas entered into a management contract with another logging enterprise. He left and abandoned the partnership. He withdrew his equipment from the partnership for use in the newly acquired area. The equipment withdrawn were his supposed contributions to the first partnership.

Maglana then wrote Rojas reminding the latter of his obligation to contribute, either in cash or in equipment, to the capital investments of the partnership as well as his obligation to perform his duties as logging superintendent. Rojas then 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’s share will just be 20% of the net profits. Meanwhile, 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, accounting, receivership and damages.
The trial court, rendered judgment against Rojas. Rojas interposed the instant appeal.

ISSUES:

(1) What is the nature of the partnership and legal relationship of the Maglana-Rojas after Pahamotang retired from the second partnership.
(2) Whether or not Maglana can unilaterally dissolve the partnership.
(3) Whether Maglana can be held liable for damages.

RULING:

(1) Under the circumstances, the relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be considered as a De Facto Partnership, nor a Partnership at Will, for as stressed, there is an existing partnership, duly registered.

After a careful study of the records as against the conflicting claims of Rojas and Maglana, it appears evident that it was not the intention of the partners to dissolve the first partnership, upon the constitution of the second one, which they unmistakably called an “Additional Agreement”. 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. Otherwise stated, even during the existence of the second partnership, all business transactions were carried out under the duly registered articles. As found by the trial court, it is an admitted fact that even up to now, there are still subsisting obligations and contracts of the latter. No rights and obligations accrued in the name of the second partnership except in favor of Pahamotang which was fully paid by the duly registered partnership.

(2) YES, Maglana can unilaterally dissolve the partnership.

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.

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 (Article 1786, Civil Code) and for interests and damages from the time he should have complied with his obligation (Article 1788, Civil Code) Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership.

(3) NO, Maglana is not liable for damages for his withdrawal.

It will be recalled that after the withdrawal of Pahamotang, Rojas entered into a management contract with another logging enterprise, the 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. The records also show that Rojas not only abandoned the partnership but also took funds in an amount more than his contribution. In the given situation Maglana cannot be said to be in bad faith nor can he be liable for damages.

*Case digest by Doreena Pauline V. Aranal, JD – 4, Andres Bonifacio College, SY 2019 – 2020