Partnership

Partnership as Primarily a Contractual Relationship It must be noted however that this partnership was subject to a suspensive condition which is
the execution of a written agreement regarding the distribution of profits, character of
FERNANDEZ VS. DELA ROSA partnership, etc. But since the defendant actually purchased the cascoes, it would seem that
the partnership already existed. And as furthermore provided by the Civil Code, a written
Facts: On the part of plaintiff Fernandez, he claims that he entered into a verbal agreement agreement was not necessary in order to give efficacy to the verbal agreement of the
with defendant De la Rosa to form a partnership for the purchase of cascoes with the partnership because the contributions of the partners to the partnership were not in the form
undertaking that the defendant will buy the cascoes and that each partner will furnish such of immovables.
amount as he could, while the profits will be divided proportionately. Plaintiff furnished P300
for casco No. 1515 and P825 for casco No. 2089, both of which were placed under the name of b) W/N the partnership was terminated when the defendant returned the P1,125 to plaintiff.
the defendant only. In April 1900, the parties undertook to draw up articles of their partnership No.
for the purpose of embodying it in an authentic document. The agreement however did not
materialize because defendant proposed articles which were materially different from their Held:
verbal agreement, and he was also unwilling to include casco No. 2089 in the partnership.
b) During trial, the court was able to prove that plaintiff actually furnished some amount for
Because the cascoes were under the management of the defendant, the plaintiff demanded an
the repair of the cascoes and that it was presumed that a profit has been obtained by the
accounting over it to which the defendant refused claiming that no partnership existed
defendant prior to the return of the money. With these, the return of the
between them.
P1,125 fell short of the amount which the plaintiff has actually contributed to the partnership.
De la Rosa, on the other hand, admits that he desired to form a partnership with the plaintiff
For these reasons, the acceptance by the plaintiff of the amount returned by the defendant did
but denies that any agreement was ever consummated. Moreover, he denied receiving any
not have the effect of terminating the legal existence of the partnership by converting it into a
money furnished by plaintiff for casco No. 1515, but claims that he merely borrowed the P300
societas leonina.
on his individual account from the bakery business in which plaintiff was a copartner. And as
for the P825 furnished by the plaintiff, the defendant claims that it was actually for casco No.
The court also proved that there was no intention on the part of the plaintiff, in accepting the
1515 and not for casco No. 2089. He also added that the repairs made on the two cascoes
money, to relinquish his rights as a partner. On the contrary he notified defendant that he
were exclusively borne by him, and that he returned a sum of P1,125 to plaintiff with an
waived none of his rights in the partnership. Also the lack of recognition on the part of the
express reservation on his part of all his rights as a partner.
defendant of the plaintiff’s right in the partnership property and in the profits does not give
the former the right to force a dissolution upon the later upon the terms which the plaintiff is
Issue: a) W/N a partnership existed between the parties. Yes.
unwilling to accept. A partnership therefore existed between the two and cascoes No. 1515
a) The essential points upon which the minds of the parties must meet in a contract of and 2089 are partnership properties.
partnership are 1) mutual contribution and 2) joint interest in the profits.
WOODHOUSE VS HALILI
The fact that the defendant received money furnished by the plaintiff for the purpose of using
it to purchase the cascoes establishes the first element of the partnership, mutual contribution G.R. No. L-4811 July 31, 1953
to a common stock. For the second element, the fact that the formation of partnership had
FACTS: On November 29, 1947, the Woodhouse entered in a written agreement with\, the
been a subject of negotiation between them, even before the purchase of the first casco, and
most important that they shall organize a partnership for the bottling and distribution of
that both parties intended to purchase the cascoes in common satisfies the requirement that
Mision soft drinks and that Woodhouse was to secure the Mission Soft Drinks franchise for and
there should be an intention on the part of both parties to share the profits. With these, a
in behalf of the proposed partnership and receive 30 per cent of the net profits of the
complete and perfect contract of partnership was entered into by the parties.
business.

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On that day Woodhouse and Halili went to the United States, a franchise agreement was
entered into the Mission Dry Corporation and granted Halili the exclusive right, license, and
authority to produce, bottle, distribute, and sell Mision beverages in the Philippines.
When the bottling plant was already on operation, Woodhouse demanded of Halili that the
partnership papers be executed. In his complaint Woodhouse asks for the execution of the
contract of partnership, an accounting of the profits, and a share thereof of 30 per cent, as well
as damages.
Halili's contends that his consent to the agreement was secured by the representation of
Woodhouse that he was about to become owner of an exclusive bottling franchise, which
representation was false.
The Court of First Instance rendered judgment ordering Halili to render an accounting of the
profits of the bottling and distribution business, subject of the action, and to pay Woodhouse
15 percent thereof.
ISSUE: Whether or not Woodhouse had falsely represented that he had an exclusive franchise
to bottle Mission beverages, and whether this false representation or fraud, if it existed, annuls
the agreement to form the partnership?
HELD: The first draft that Woodhouse’s lawyer, prepared expressly states that Woodhouse had
the exclusive franchise. Woodhouse did actually represent to Halili that he was the holder of
the exclusive franchise and Halili was made to believe, and he actually believed, that
Woodhouse had the exclusive franchise. The main cause that induced Halili to enter into the
partnership agreement with Woodhouse, was the ability of Woodhouse to get the exclusive
franchise to bottle and distribute for the Halili or for the partnership.
While the representation that Woodhouse had the exclusive franchise did not vitiate Halili's
consent to the contract, it was used by Woodhouse to get from Halili a share of 30 per cent of
the net profits. In other words, by pretending that he had the exclusive franchise and
promising to transfer it to Halili, he obtained the consent of the latter to give him a big slice in
the net profits. But when Woodhouse learned about such, he reduced Halili’s share to 15 per
cent.
As to the agreement being executed, Halili may not be compelled against his will to carry out
the agreement nor execute the partnership papers. The law recognizes the individual's
freedom or liberty to do an act he has promised to do, or not to do it, as he pleases.
The Supreme Court ruled that Woodhouse's share of 15 per cent of the net profits shall
continue to be paid while Halili uses the franchise from the Mission Dry Corporation.
EUFRACIO D. ROJAS, Plaintiff-Appellant, vs. CONSTANCIO B. MAGLANA, Defendant-Appellee.
G.R. No. 30616 | December 10, 1990 | PARAS, J.:
FACTS:
Maglana and Rojas executed their Articles of Co-partnership called “Eastcoast
DevelopmentEnterpises” (EDE) which had an indefinite term of existence and was registered
with the SEC and had a Timber License. One of the EDE’s purposes was to apply or secure
timber and/or private forest lands and to operate, develop and promote such forests rights
and concessions. Maglana shall manage the business affairswhile Rojas shall be the logging
superintendent. All profits and losses shall be divided share and share alike between them.
Because of the difficulties encountered, the two availed the services of Agustin Pahamotang as
industrial partner and executed another articles of co-partnership with the latter. 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 first partnership and the
term of the second partnership is fixed to thirty (30) years, everything else is the same.
Still later on, the three executed a conditional sale of interest in the partnership wherein
Maglana and Rojas shall purchase the interest, share and participation in the partnership of
Pahamotang. It was also agreed that after payment of such including amount of loan secured
by Pahamotang in favor of the partnership, the two shall become owners of all equipment
contributed by Pahamotang. [Binili nila yung shares ni Pahamotang para sa kanilang dalawa na
lang ulit partnership] After this, the two continued the partnership without any written
agreement or reconstitution of their articles of partnership.
Subsequently, Rojas entered into a management contract with CMS Estate Inc (engaged in the
same line of business as the partnership) and left/abandoned EDE. Rojas withdrew equipment
which were his supposed contribution to the first partnership and transferred these to CMS
through chattel mortgage. Maglana wrote him regarding hiscontribution to the capital
investments as well as his duties as logging superintendent. Rojas replied that hewill not be
able to comply with both. Maglana then told Rojas that the latter’s share will just be 20% of the
netprofits. Such was the sharing from 1957 to 1959 without complaint or dispute. Rojas took
funds from the partnership more than his contribution. Maglana notified Rojas that he
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dissolved the partnership. Rojas filed an action against Maglana for the recovery of properties industrial partner: they pursued the same purposes, the capital contributions call for
and accounting of the partnership and damages. the same amounts, all subsequent renewals of Timber License were secured in favor
of the first partnership, all businesses were carried out under the registered articles.
CFI RULING: To all intents and purposes therefore, the First Articles of Partnership were only
amended, in the form of Supplementary Articles of Co-Partnership.
1. The partnership of Maglana and Rojas after Pahamotang retired is one of de facto
and at will; the sharing of profits and losses is on the basis of actual contributions; On the other hand, there is no dispute that the second partnership was dissolved by common
consent. Said dissolution did not affect the first partnership which continued to exist.
2. there is no evidence these properties were acquired by the partnership funds thus it
Significantly, Maglana and Rojas agreed to purchase the interest, share and participation in the
should not belong to it;
second partnership of Pahamotang and that thereafter, the two (Maglana and Rojas) became
the owners of equipment contributed by Pahamotang. Maglana even reminded Rojas of his
3. neither is entitled to damages; the letter of Maglana in effect dissolved the
obligation to contribute either in cash or in equipment, to the capital investment of the
partnership;
partnership as well as his obligation to perform his duties as logging superintendent. This
4. sale of forest concession is valid and binding and should be considered as Maglana’s reminder cannot refer to any other but to the provisions of the duly registered Articles of Co-
contribution; Partnership.

5. Rojas must pay or turn over to the partnership the profits he received from CMS and The relationship of Rojas and Maglana after the withdrawal of Pahamotang can neither be
pay his personal account to the partnership; considered as a De Facto Partnership, nor a Partnership at Will, for as stressed, there is an
existing partnership, duly registered.
6. Maglana must be paid 85k which he should’ve received but was not paid to him and
must be considered as his contribution 2. As there are only two parties when Maglana notified Rojas that he dissolved the
partnership, it is in effect a notice of withdrawal.
Rojas insists that the first partnership was not novated/superseded by the second, meaning,
the first still governs as to the sharing of profits. 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
ISSUE: 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
1. WON the partnership carried on after the second partnership was a de facto
shall be guided in the liquidation of the partnership by the provisions of its duly registered
partnership and at will - NO
Articles of Co-Partnership; that is, all profits and losses of the partnership shall be divided
2. WON Magalana may unilaterally dissolve the partnership - YES "share and share alike" between the partners.

But an accounting must first be made and which in fact was ordered by the trial court and
accomplished by the commissioners appointed for the purpose.
RATIO:
According to the Commissioners’ report, Rojas is not entitled to any profits as he failed to give
1. There was no intention to dissolve the first partnership upon the constitution of the the amount he had undertaken to contribute thus, had become a debtor of the partnership.
second as everything else was the same except for the fact that they took in an
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Maglana cannot be liable for damages as Rojas abandoned the partnership thru his acts and
also took funds in an amount more than his contribution

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 partnership at will. 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.