Rojas vs Maglana, G.R. No. 30616, December 10, 1990

Rojas vs Maglana, G.R. No. 30616, December 10, 1990

NATURE: Direct appeal from the decision of the CFI of Davao

Summary: In  Jan 1955, Maglana & Rojas executed their Articles of Co-Partnership called Eastcoast Development Enterprises (EDE) with only the two of them as partners. The partnership EDE which was registered with SEC had an indefinite term of existence.  One of the purposes of the partnership was to apply/secure timber/minor forest products licenses and concession over public or private forest lands and to operate, develop, and promote such forests rights and concessions. A duly registered article of co-partnership was filed together with an application for timber concession covering certain areas in Davao with the Bureau of Forestry. It was then approved and a timber license was issued. Under their article of co-partnership, appellee Maglana  was tasked to manage, market, handle cash, and be the authorized signatory for the partnership. Appellant Rojas, on the other hand, is the logging superintended tasked to manage logging operations of the partnership. It also stated in the articles that all profits & losses shall be divided share and share alike between partners. During Jan 14 1955 – Apr 30 1956, there was no operation of the said partnership. Due to difficulties, Rojas and Maglana decided to avail the services of Pahamatong as industrial partner. On March 1956, the 3 executed their articles of co-partnership under the firm name EDE. Everything was the same except for the purpose which was to hold and secure renewal of timber license and the term was fixed for 30 years.

The new partnership was able to ship logs and acquire profits and was able to get a proceed of 643,633.07. On Oct 23, 1956, The 3 executed a document, “Conditional Sale of interest in the partnership EDE” agreeing among themselves that Maglana and Rojas shall purchase the interest, share, participation in the partnership of pahamoting in the assessed value of 31,501.12. It was also agreed that after payment of the sum to Pahamotang including the loan secured by the latter in favor of the partnership, the two original partners shall become owners of all equipment contributed by Pahamatong and that the name of the second partnership be dissolved upon fulfillment of the condition. After the withdrawal of Pahamotang, the partnership was continued by the original partners without any written agreement or reconstitution of their written articles of partnership.

Problem arose when Rojas abandoned the partnership due to joining with another logging enterprise, and withdrew his equipment from the partnership. Maglana reminded Rojas of his obligation in their partnership but Rojas said he wouldn’t comply. He then took funds from the partnership more than his contribution. Thus, Maglana notified Rojas that he dissolved the partnership. Rojas then filed for recovery of properties, accounting, receivership, and damages against Maglana.

Issue:

1.       WON the nature of partnership of Maglana and Rojas after dissolution of the second partnership is de facto and at will.

2.       WON the sharing of partnership profits should be on the basis of contribution or ratio/proportion of their respective contributions.

Held:

1.       No. 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. The dissolution of the second partnership does not affect the first partnership which continued to exist. The fact that Maglana wrote Rojas for the fulfillment of his obligation in the partnership and Rojas subsequent reply further stressed that both considered themselves governed by the articles of the duly registered partnership. Hence, as there are only two parties when Maglana notified Rojas that he dissolved the partnership, it is in effect a notice of withdrawal.

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.

2.       YES. On the basis of the Commissioners' Report, the corresponding contribution of the partners from 19561961 are as follows: Eufracio Rojas who should have contributed P158,158.00, contributed only P18,750.00 while Maglana who should have contributed P160,984.00, contributed P267,541.44 (Decision, R.A. p. 976). 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) (Moran, Jr. v. Court of Appeals, 133 SCRA 94 [1984]). Being a contract of partnership, each partner must share in the profits and losses of the venture. That is the essence of a partnership (Ibid., p. 95).

Ortega, et al. vs. CA, et al., 245 SCRA 529

Ortega, et al. vs. CA, et al., 245 SCRA 529

VITUG, J.: G.R. No. 109248. July 3, 1995.

Parties:

GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners

HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA, respondents.

Nature: PETITION for review on certiorari of a decision of the Court of Appeals.

Keyword: law firm, partner, partnership at will, 

Facts: The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry on 4 January 1937 and reconstituted with the Securities and Exchange Commission on 4 August 1948. The SEC records show that there were several subsequent amendments to the articles of partnership:

-       18 September 1958 - ROSS, SELPH and CARRASCOSO

-       6 July 1965 - ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO & MISA

-       18 April 1972 - SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA

-       4 December 1972 - SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA

-       11 March 1977 - DEL ROSARIO, BITO, MISA & LOZADA

-       7 June 1977 - BITO, MISA & LOZADA

-       19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondents-appellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners.

On February 17, 1988, petitioner-appellant wrote a letter to the respondents-appellees stating that he was withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of the month. He also trust the accountants to do a proper liquidation based on his participation in the firm. On the same day, petitioner-appellant brought up that he wanted to have a meeting regarding the mechanics of liquidation, more particularly, the two floors of the firm’s building because he had plans for it.

On 19 February 1988, petitioner-appellant wrote respondents-appellees another letter stating that the partnership ceased to be mutually satisfactory despite his effort to ameliorate the level of pay scale of their employees due to disagreements with the other partners.

On 30 June 1988, petitioner filed with this Commission’s Securities Investigation and Clearing Department (SICD) a petition for dissolution and liquidation of partnership.

SEC: held that Petitioner’s withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership. Accordingly, the petitioner and respondents are hereby enjoined to abide by the provisions of the Agreement relative to the matter governing the liquidation of the shares of any retiring or withdrawing partner in the partnership interest.

SEC En Banc (On Appeal): Reversed the decision of the Hearing Officer and held that the withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of “Bito, Misa & Lozada.” The Commission ruled that, being a partnership at will, the law firm could be dissolved by any partner at anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in the partnership against his will. Issue:

The parties filed with the appellate court separate appeals.

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died on, respectively, 05 September 1991 and 21 December 1991. The death of the two partners, as well as the admission of new partners, in the law firm prompted Attorney Misa to renew his application for receivership (in CA-G.R. SP No. 24648). He expressed concern over the need to preserve and care for the partnership assets. The other partners opposed the prayer.

CA: Affirmed the decision of SEC.

Issue:

1.Whether or not the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will;

2.Whether or not the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith;

Held:

1. Yes. The partnership agreement of the firm provides that ”[t]he partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners.”

2. Yes. Any one of the partners may, at his sole pleasure, dictate a dissolution of thepartnership at will (e.g. by way of withdrawal of a partner). He must, however, act in goodfaith, not that the attendance of bad faith can prevent the dissolution of the partnership butthat it can result in a liability for damages

Ratio:

A partnership that does not fix its term is a partnership at will. That the law firm “Bito, Misa & Lozada,” and now “Bito, Lozada, Ortega and Castillo,” is indeed such a partnership need not be unduly belabored. We quote, with approval, like did the appellate court, the findings and disquisition of respondent SEC on this matter; viz:

“The partnership agreement (amended articles of 19 August 1948) does not provide for a specified period or undertaking. The ‘DURATION’ clause simply states:

“ ‘5. DURATION. The partnership shall continue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners.’

“The hearing officer however opined that the partnership is one for a specific undertaking and hence not a partnership at will, citing paragraph 2 of the Amended Articles of Partnership (19 August 1948):

“‘2. Purpose. The purpose for which the partnership is formed, is to act as legal adviser and representative of any individual, firm and corporation engaged in commercial, industrial or other lawful businesses and occupations; to counsel and advise such persons and entities with respect to their legal and other affairs; and to appear for and represent their principals and client in all courts of justice and government departments and offices in the Philippines, and elsewhere when legally authorized to do so.’

“The ‘purpose’ of the partnership is not the specific undertaking referred to in the law. Otherwise, all partnerships, which necessarily must have a purpose, would all be considered as partnerships for a definite undertaking. There would therefore be no need to provide for articles on partnership at will as none would so exist. Apparently what the law contemplates, is a specific undertaking or ‘project’ which has a definite or definable period of completion.”³

The birth and life of a partnership at 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 partnership⁴ but that it can result in a liability for damages.⁵

In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner.⁶ Among partners,⁷ mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages.

The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up of, the business.⁸ Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination.⁹

The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code;¹⁰

Ruling: WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs.

SO ORDERED.

Same Same:

Same; Same; The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners.—The birth and life of a partnership at 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.

Same; Same; Neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner.—In passing, neither would the presence of a period for its specific duration or the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act or will of a partner. Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right, to dissolve the partnership. An unjustified dissolution by the partner can subject him to a possible action for damages.

Same; Same; Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination.—The dissolution of a partnership is the change in the relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up of, the business. Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination.

Same; Same; The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code.—The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code; however, an agreement of the partners, like any other contract, is binding among them and normally takes precedence to the extent applicable over the Code’s general provisions.

Same; Same; It would not be right to let any of the partners remain in the partnership under such an atmosphere of animosity.—On the third and final issue, we accord due respect to the appellate court and respondent Commission on their common factual finding, i.e., that Attorney Misa did not act in bad faith. Public respondents viewed his withdrawal to have been spurred by “interpersonal conflict” among the partners. It would not be right, we agree, to let any of the partners remain in the partnership under such an atmosphere of animosity; certainly, not against their will. Indeed, for as long as the reason for withdrawal of a partner is not contrary to the dictates of justice and fairness, nor for the purpose of unduly visiting harm and damage upon the partnership, bad faith cannot be said to characterize the act. Bad faith, in the context here used, is no different from its normal concept of a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.