Note: De Facto, Article 1786, Article 1830 (dissolution)
Eufracio Rojas, plaintiff- appellant
vs.
Constancio Maglana, defendant- appellee.
Facts:
Maglana and Rojas executed Articles of Co-Partnership called
Eastcoast Development Enterprises (EDE) with two of them as
partners for the purpose of applying and securing timber
licenses and to operate, develop and promote such forests’
rights and concessions. Their profits and losses shall be
divided share and share alike between the partners. The
partnership EDE was duly registered with the Securities
and Exchange Commission (SEC).
Maglana managed the business affairs while Rojas managed
the logging operations. However, due to difficulties
encountered, they availed the services of Pahamotang as
industrial partner. Thereafter, they executed their own Articles
of Co-Partnership under the same firm name. Aside from the
slight difference in the purpose of the second partnership
which is to hold and secure renewal of timber license instead
of to secure the license as in the fixed partnership and the
term of the second partnership is fixed to thirty (30) years,
everything is the same.
After some time, the two bought the interest of Pahamotang
and the two returned to being the sole partners and continued
the partnership without any written agreement or
reconstitution of written Articles of Partnership.
Thereafter, Rojas entered into a management contract with
another logging enterprise in the name of CMS. He withdrew
his equipment from EDE which was his supposed contributions
to the first partnership.
Maglana wrote Rojas reminding him of his contributions to the
capital investments and to perform his duties as logging
superintended. However, Rojas informed Maglana that he
will not be able to comply with the contribution and he will
no longer work as superintendent. Thus, Maglana told Rojas
that the latter’s share will just be 20% of the net profits.
However, Rojas took funds more than his contribution.
Thus, Maglana, in a letter, notified Rojas that he dissolved the
partnership.
Thereafter, Rojas filed an action for the recovery of properties,
accounting, receivership and damages.
The RTC ruled that:
1.) The nature of the partnership after the dissolution of the
second partnership is one of a de facto and a partnership
at will. It is in view that the second partnership
superseded the first, so that when the second partnership
dissolved, there was no written contract there was no
reconstitution as provided for in the Maglana, Rojas and
Pahamotang partnership contract.
2.) Neither parties is entitled to damages.
3.) The letter of Maglana dissolved the partnership.
4.) The RTC ordered Rojas to pay or turn over to the
partnership the profits he received form the CMS estate.
Plaintiff Rojas then filed an instant appeal to the SC.
Plaintiff argued that the first partnership between him and
Maglana had not been dissolved by the unregistered second
partnership. Thus, the terms and stipulation in the first
partnership which provides that profits and losses shall be
divided share and share alike between the partners, must
apply.
Issues
1.) Whether or not the nature of partnership was de facto
and at will.
2.) Whether or not Rojas is entitled to profits of the
partnership.
3.) Whether or not Maglana can unilaterally dissolve the
partnership.
4.) Whether or not Rojas is entitled to damages for the
unilateral dissolution.
Held:
1.) Negative. The first partnership was not dissolved.
The Court held that it was not the intention of the
partners to dissolve the first partnership upon the
constitution of the second one. The acceptance of
another industrial partner is not sufficient to hold the
view that the first partnership on that basis that: a)
They adopted the same name; b) They adopted the
same purpose and the same capital contributions of
Rojas and Maglana; c) The timber licenses
subsequently procured were in favor of the first
partnership; d) the First Articles of Partnership were
only amended in the form of Supplementary Articles
of Co-Partnership and was never registered. The new
partnership was virtually the same as the old one.
Nevertheless, the second partnership was indeed
dissolved by common consent. However, such
dissolution did not affect the first which continued to
exist, which is supported by the fact that the two were
still reminding and negotiating with each other in the
fulfillment of the duly registered Articles of Co-
Partnership. Thus, there can be no De Facto
Partnership nor a Partnership at Will for there is still
an existing partnership which is duly registered.
2.) Negative
On the basis of the Commissioner’s Report, Rojas
failed to satisfy his contribution in the partnership.
It is a settled rule that pursuant to Article 1786, 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 and
for interest and damages . Given this, as reported in
the Commissioners’’ Report, Rojas is not entitled to
any profits.
Note: De Facto, Article 1786, Article 1830 (dissolution)

3.) Affirmative. Maglana can unilaterally dissolve the

partnership
Under Article 1830 (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. Such partner, however, is liable for damages if
the cause is not justified, but in no case can be
compelled to remain in the firm.

3. Negative. Maglana is not liable for damages

because of such withdrawal since there are justifiable
causes for the same.
a. It can be recalled that after the withdrawal of
Pahamatong, Rojas entered into a management
contract with another logging nterprise, the CMS
Estate.Inc., a company engaged in the same
business as the partnership.
b. Rojas also withdrew his equipment and 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.
c. Also, the records shows that he not only
abandoned the partnership but also took funds
morethat his contribution.

Given this, MAglano cannot be said to be in bad faith

nor can be liable for damages.