G.R. No.

97212, June 30, 1993

BENJAMIN YU, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and
JADE MOUNTAIN PRODUCTS COMPANY LIMITED, WILLY CO, RHODORA D. BENDAL,
LEA BENDAL, CHIU SHIAN JENG and CHEN HO-FU, respondents.
FELICIANO, J.:
Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership with the firm
name of "Jade Mountain Products Company Limited" ("Jade Mountain"). The
partnership was originally organized on 28 June 1984 with Lea Bendal and Rhodora
Bendal as general partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens
of the Republic of China (Taiwan), as limited partners. The partnership business
consisted of exploiting a marble deposit found on land owned by the Sps. Ricardo
and Guillerma Cruz, situated in Bulacan Province, under a Memorandum Agreement
dated 26 June 1984 with the Cruz spouses.
1
The partnership had its main office in
Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as
Assistant General Manager with a monthly salary of P4,000.00. According to
petitioner Yu, however, he actually received only half of his stipulated monthly salary,
since he had accepted the promise of the partners that the balance would be paid
when the firm shall have secured additional operating funds from abroad. Benjamin
Yu actually managed the operations and finances of the business; he had overall
supervision of the workers at the marble quarry in Bulacan and took charge of the
preparation of papers relating to the exportation of the firm's products.
Sometime in 1988, without the knowledge of Benjamin Yu, the general partners Lea
Bendal and Rhodora Bendal sold and transferred their interests in the partnership to
private respondent Willy Co and to one Emmanuel Zapanta. Mr. Yu Chang, a limited
partner, also sold and transferred his interest in the partnership to Willy Co. Between
Mr. Emmanuel Zapanta and himself, private respondent Willy Co acquired the great
bulk of the partnership interest. The partnership now constituted solely by Willy Co
and Emmanuel Zapanta continued to use the old firm name of Jade Mountain,
though they moved the firm's main office from Makati to Mandaluyong,
Metropolitan Manila. A Supplement to the Memorandum Agreement relating to the
operation of the marble quarry was entered into with the Cruz spouses in February of
1988.
2
The actual operations of the business enterprise continued as before. All the
employees of the partnership continued working in the business, all, save petitioner
Benjamin Yu as it turned out.
On 16 November 1987, having learned of the transfer of the firm's main office from
Makati to Mandaluyong, petitioner Benjamin Yu reported to the Mandaluyong office
for work and there met private respondent Willy Co for the first time. Petitioner was
informed by Willy Co that the latter had bought the business from the original
partners and that it was for him to decide whether or not he was responsible for the
obligations of the old partnership, including petitioner's unpaid salaries. Petitioner
was in fact not allowed to work anymore in the Jade Mountain business enterprise.
His unpaid salaries remained unpaid.
3

On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal and recovery
of unpaid salaries accruing from November 1984 to October 1988, moral and
exemplary damages and attorney's fees, against Jade Mountain, Mr. Willy Co and the
other private respondents. The partnership and Willy Co denied petitioner's charges,
contending in the main that Benjamin Yu was never hired as an employee by the
present or new partnership.
4

In due time, Labor Arbiter Nieves Vivar-De Castro rendered a decision holding that
petitioner had been illegally dismissed. The Labor Arbiter decreed his reinstatement
and awarded him his claim for unpaid salaries, backwages and attorney's fees.
5

On appeal, the National Labor Relations Commission ("NLRC") reversed the decision
of the Labor Arbiter and dismissed petitioner's complaint in a Resolution dated 29
November 1990. The NLRC held that a new partnership consisting of Mr. Willy Co and
Mr. Emmanuel Zapanta had bought the Jade Mountain business, that the new
partnership had not retained petitioner Yu in his original position as Assistant General
Manager, and that there was no law requiring the new partnership to absorb the
employees of the old partnership. Benjamin Yu, therefore, had not been illegally
dismissed by the new partnership which had simply declined to retain him in his
former managerial position or any other position. Finally, the NLRC held that
Benjamin Yu's claim for unpaid wages should be asserted against the original
members of the preceding partnership, but these though impleaded had, apparently,
not been served with summons in the proceedings before the Labor Arbiter.
6

Petitioner Benjamin Yu is now before the Court on a Petition for Certiorari, asking us
to set aside and annul the Resolution of the NLRC as a product of grave abuse of
discretion amounting to lack or excess of jurisdiction.
The basic contention of petitioner is that the NLRC has overlooked the principle that
a partnership has a juridical personality separate and distinct from that of each of its
members. Such independent legal personality subsists, petitioner claims,
notwithstanding changes in the identities of the partners. Consequently, the
employment contract between Benjamin Yu and the partnership Jade Mountain
could not have been affected by changes in the latter's membership.
7

Two (2) main issues are thus posed for our consideration in the case at bar: (1)
whether the partnership which had hired petitioner Yu as Assistant General Manager
had been extinguished and replaced by a new partnerships composed of Willy Co and
Emmanuel Zapanta; and (2) if indeed a new partnership had come into existence,
whether petitioner Yu could nonetheless assert his rights under his employment
contract as against the new partnership.
In respect of the first issue, we agree with the result reached by the NLRC, that is,
that the legal effect of the changes in the membership of the partnership was the
dissolution of the old partnership which had hired petitioner in 1984 and the
emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.
The applicable law in this connection of which the NLRC seemed quite unaware
is found in the Civil Code provisions relating to partnerships. Article 1828 of the Civil
Code provides as follows:
Art. 1828. The dissolution of a partnership is the change i n
the relation of the partners caused by any partner ceasing to
be associated in the carrying on as distinguished from the
winding up of the business. (Emphasis supplied)
Article 1830 of the same Code must also be noted:
Art. 1830. Dissolution is caused:
(1) without violation of the agreement between the
partners;
xxx xxx xxx
(b) by the express will of any partner, who must act in good
faith, when no definite term or particular undertaking is
specified;
xxx xxx xxx
(2) in contravention of the agreement between the partners,
where the circumstances do not permit a dissolution under
any other provision of this article, by the express will of any
partner at any time;
xxx xxx xxx (Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests
(amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel
Zapanta. The record does not show what happened to the remaining 18% of the
original partnership interest. The acquisition of 82% of the partnership interest by
new partners, coupled with the retirement or withdrawal of the partners who had
originally owned such 82% interest, was enough to constitute a new partnership.
The occurrence of events which precipitate the legal consequence of dissolution of a
partnership do not, however, automatically result in the termination of the legal
personality of the old partnership. Article 1829 of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but
continues until the winding up of partnership affairs is
completed.
In the ordinary course of events, the legal personality of the expiring partnership
persists for the limited purpose of winding up and closing of the affairs of the
partnership. In the case at bar, it is important to underscore the fact that the
business of the old partnership was simply continued by the new
partners, without the old partnership undergoing the procedures relating to
dissolution and winding up of its business affairs. In other words, the new
partnership simply took over the business enterprise owned by the preceeding
partnership, and continued using the old name of Jade Mountain Products Company
Limited, without winding up the business affairs of the old partnership, paying off its
debts, liquidating and distributing its net assets, and then re-assembling the said
assets or most of them and opening a new business enterprise. There were, no
doubt, powerful tax considerations which underlay such an informal approach to
business on the part of the retiring and the incoming partners. It is not, however,
necessary to inquire into such matters.
What is important for present purposes is that, under the above described
situation, not only the retiring partners (Rhodora Bendal, et al.) but also the new
partnership itself which continued the business of the old, dissolved, one, are liable for
the debts of the preceding partnership. In Singson, et al. v. Isabela Saw Mill, et al,
8
the
Court held that under facts very similar to those in the case at bar, a withdrawing
partner remains liable to a third party creditor of the old partnership.
9
The liability of
the new partnership, upon the other hand, in the set of circumstances obtaining in
the case at bar, is established in Article 1840 of the Civil Code which reads as follows:
Art. 1840. In the following cases creditors of the dissolved
partnership are also creditors of the person or partnership
continuing the business:
(1) When any new partner is admitted into an existing
partnership, or when any partner retires and assigns (or the
representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to
one or more of the partners and one or more third
persons, if the business is continued without liquidation of the
partnership affairs;
(2) When all but one partner retire and assign (or the
representative of a deceased partner assigns) their rights in
partnership property to the remaining partner,
who continues the business without liquidation of partnership
affairs, either alone or with others;
(3) When any Partner retires or dies and the business of the
dissolved partnership is continued as set forth in Nos. 1 and 2
of this Article, with the consent of the retired partners or the
representative of the deceased partner, but without any
assignment of his right in partnership property;
(4) When all the partners or their representatives assign their
rights in partnership property to one or more third
persons who promise to pay the debts and who continue the
business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and
remaining partners continue the businessunder the provisions
of article 1837, second paragraph, No. 2, either alone or with
others, and without liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining
partners continue the business either alone or with others
without liquidation of the partnership affairs;
The liability of a third person becoming a partner in the
partnership continuing the business, under this article, to the
creditors of the dissolved partnership shall be satisfied out
of the partnership property only, unless there is a stipulation
to the contrary.
When the business of a partnership after dissolution is
continued under any conditions set forth in this article the
creditors of the retiring or deceased partner or the
representative of the deceased partner, have a prior right to
any claim of the retired partner or the representative of the
deceased partner against the person or partnership
continuing the business on account of the retired or
deceased partner's interest in the dissolved partnership or
on account of any consideration promised for such interest
or for his right in partnership property.
Nothing in this article shall be held to modify any right of
creditors to set assignment on the ground of fraud.
xxx xxx xxx
(Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the
new Jade Mountain which continued the business of the old one without liquidation
of the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner
Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-visany
claim of any retired or previous partner insofar as such retired partner's interest in
the dissolved partnership is concerned. It is not necessary for the Court to determine
under which one or mare of the above six (6) paragraphs, the case at bar would fall,
if only because the facts on record are not detailed with sufficient precision to permit
such determination. It is, however, clear to the Court that under Article 1840 above,
Benjamin Yu is entitled to enforce his claim for unpaid salaries, as well as other claims
relating to his employment with the previous partnership, against the new Jade
Mountain.
It is at the same time also evident to the Court that the new partnership was entitled
to appoint and hire a new general or assistant general manager to run the affairs of
the business enterprise take over. An assistant general manager belongs to the most
senior ranks of management and a new partnership is entitled to appoint a top
manager of its own choice and confidence. The non-retention of Benjamin Yu as
Assistant General Manager did not therefore constitute unlawful termination, or
termination without just or authorized cause. We think that the precise authorized
cause for termination in the case at bar was redundancy.
10
The new partnership had
its own new General Manager, apparently Mr. Willy Co, the principal new owner
himself, who personally ran the business of Jade Mountain. Benjamin Yu's old
position as Assistant General Manager thus became superfluous or redundant.
11
It
follows that petitioner Benjamin Yu is entitled to separation pay at the rate of one
month's pay for each year of service that he had rendered to the old partnership, a
fraction of at least six (6) months being considered as a whole year.
While the new Jade Mountain was entitled to decline to retain petitioner Benjamin Yu
in its employ, we consider that Benjamin Yu was very shabbily treated by the new
partnership. The old partnership certainly benefitted from the services of Benjamin
Yu who, as noted, previously ran the whole marble quarrying, processing and
exporting enterprise. His work constituted value-added to the business itself and
therefore, the new partnership similarly benefitted from the labors of Benjamin Yu. It
is worthy of note that the new partnership did not try to suggest that there was any
cause consisting of some blameworthy act or omission on the part of Mr. Yu which
compelled the new partnership to terminate his services. Nonetheless, the new Jade
Mountain did not notify him of the change in ownership of the business, the
relocation of the main office of Jade Mountain from Makati to Mandaluyong and the
assumption by Mr. Willy Co of control of operations. The treatment (including the
refusal to honor his claim for unpaid wages) accorded to Assistant General Manager
Benjamin Yu was so summary and cavalier as to amount to arbitrary, bad faith
treatment, for which the new Jade Mountain may legitimately be required to
respond by paying moral damages. This Court, exercising its discretion and in view of
all the circumstances of this case, believes that an indemnity for moral damages in
the amount of P20,000.00 is proper and reasonable.
In addition, we consider that petitioner Benjamin Yu is entitled to interest at the legal
rate of six percent (6%) per annum on the amount of unpaid wages, and of his
separation pay, computed from the date of promulgation of the award of the Labor
Arbiter. Finally, because the new Jade Mountain compelled Benjamin Yu to resort to
litigation to protect his rights in the premises, he is entitled to attorney's fees in the
amount of ten percent (10%) of the total amount due from private respondent Jade
Mountain.
WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED DUE
COURSE, the Comment filed by private respondents is treated as their Answer to the
Petition for Certiorari, and the Decision of the NLRC dated 29 November 1990 is
hereby NULLIFIED and SET ASIDE. A new Decision is hereby ENTERED requiring
private respondent Jade Mountain Products Company Limited to pay to petitioner
Benjamin Yu the following amounts:
(a) for unpaid wages which, as
found by the Labor Arbiter, shall be
computed at the rate of P2,000.00
per month multiplied by thirty-six
(36) months (November 1984 to
December 1987) in the total amount
of P72,000.00;
(b) separation pay computed at the
rate of P4,000.00 monthly pay
multiplied by three (3) years of
service or a total of P12,000.00;
(c) indemnity for moral damages in
the amount of P20,000.00;
(d) six percent (6%) per annum legal
interest computed on items (a) and
(b) above, commencing on 26
December 1989 and until fully paid;
and
(e) ten percent (10%) attorney's fees
on the total amount due from
private respondent Jade Mountain.
Costs against private respondents. SO ORDERED.
[G.R. No. 30616 : December 10, 1990.] 192 SCRA 110
EUFRACIO D. ROJAS, Plaintiff-Appellant, vs. CONSTANCIO B. MAGLANA, Defendant-
Appellee.
D E C I S I O N
PARAS, J.:
This is a direct appeal to this Court from a decision ** of the then Court of First
Instance of Davao, Seventh Judicial District, Branch III, in Civil Case No. 3518,
dismissing appellant's complaint.
As found by the trial court, the antecedent facts of the case are as follows:
On January 14, 1955, Maglana and Rojas executed their Articles of Co-Partnership
(Exhibit "A") called Eastcoast Development Enterprises (EDE) with only the two of
them as partners. The partnership EDE with an indefinite term of existence was duly
registered on January 21, 1955 with the Securities and Exchange Commission.
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." (Rollo, p. 114).
A duly registered Articles of Co-Partnership was filed together with an application for
a timber concession covering the area located at Cateel and Baganga, Davao with the
Bureau of Forestry which was approved and Timber License No. 35-56 was duly
issued and became the basis of subsequent renewals made for and in behalf of the
duly registered partnership EDE.
Under the said Articles of Co-Partnership, appellee Maglana shall manage the
business affairs of the partnership, including marketing and handling of cash and is
authorized to sign all papers and instruments relating to the partnership, while
appellant 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.
During the period from January 14, 1955 to April 30, 1956, there was no operation of
said partnership (Record on Appeal [R.A.] p. 946).
Because of the difficulties encountered, Rojas and Maglana decided to avail of the
services of Pahamotang as industrial partner.
On March 4, 1956, Maglana, Rojas and Agustin Pahamotang executed their Articles of
Co-Partnership (Exhibit "B" and Exhibit "C") under the firm name EASTCOAST
DEVELOPMENT ENTERPRISES (EDE). 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.
The partnership formed by Maglana, Pahamotang and Rojas started operation on
May 1, 1956, and was able to ship logs and realize profits. An income was derived
from the proceeds of the logs in the sum of P643,633.07 (Decision, R.A. 919).
On October 25, 1956, Pahamotang, Maglana and Rojas executed a document entitled
"CONDITIONAL SALE OF INTEREST IN THE PARTNERSHIP, EASTCOAST
DEVELOPMENT ENTERPRISE" (Exhibits "C" and "D") agreeing among themselves
that Maglana and Rojas shall purchase the interest, share and participation in the
Partnership of Pahamotang assessed in the amount of P31,501.12. It was also agreed
in the said instrument that after payment of the sum of P31,501.12 to Pahamotang
including the amount of loan secured by Pahamotang in favor of the partnership, the
two (Maglana and Rojas) shall become the owners of all equipment contributed by
Pahamotang and the EASTCOAST DEVELOPMENT ENTERPRISES, the name also given
to the second partnership, be dissolved. Pahamotang was paid in fun on August 31,
1957. No other rights and obligations accrued in the name of the second partnership
(R.A. 921).
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 (Decision, R.A. 948).
On January 28, 1957, Rojas entered into a management contract with another logging
enterprise, the CMS Estate, Inc. He left and abandoned the partnership (Decision,
R.A. 947).
On February 4, 1957, Rojas withdrew his equipment from the partnership for use in
the newly acquired area (Decision, R.A. 948).
The equipment withdrawn were his supposed contributions to the first partnership
and was transferred to CMS Estate, Inc. by way of chattel mortgage (Decision, R.A. p.
948).
On March 17, 1957, Maglana 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.
Two weeks after March 17, 1957, Rojas 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. Such was the sharing from 1957 to 1959 without complaint or dispute
(Decision, R.A. 949).: nad
Meanwhile, Rojas took funds from the partnership more than his contribution. Thus,
in a letter dated February 21, 1961 (Exhibit "10") Maglana notified Rojas that he
dissolved the partnership (R.A. 949).
On April 7, 1961, Rojas filed an action before the Court of First Instance of Davao
against Maglana for the recovery of properties, accounting, receivership and
damages, docketed as Civil Case No. 3518 (Record on Appeal, pp. 1-26).
Rojas' petition for appointment of a receiver was denied (R.A. 894).
Upon motion of Rojas on May 23, 1961, Judge Romero appointed commissioners to
examine the long and voluminous accounts of the Eastcoast Development
Enterprises (Ibid., pp. 894-895).
The motion to dismiss the complaint filed by Maglana on June 21, 1961 (Ibid., pp. 102-
114) was denied by Judge Romero for want of merit (Ibid., p. 125). Judge Romero also
required the inclusion of the entire year 1961 in the report to be submitted by the
commissioners (Ibid., pp. 138-143). Accordingly, the commissioners started examining
the records and supporting papers of the partnership as well as the information
furnished them by the parties, which were compiled in three (3) volumes.
On May 11, 1964, Maglana filed his motion for leave of court to amend his answer
with counterclaim, attaching thereto the amended answer (Ibid., pp. 26-336), which
was granted on May 22, 1964 (Ibid., p. 336).
On May 27, 1964, Judge M.G. Reyes approved the submitted Commissioners' Report
(Ibid., p. 337).
On June 29, 1965, Rojas filed his motion for reconsideration of the order dated May
27, 1964 approving the report of the commissioners which was opposed by the
appellee.
On September 19, 1964, appellant's motion for reconsideration was denied (Ibid., pp.
446-451).
A mandatory pre-trial was conducted on September 8 and 9, 1964 and the following
issues were agreed upon to be submitted to the trial court:
(a) The nature of partnership and the legal relations of Maglana and
Rojas after the dissolution of the second partnership;
(b) Their sharing basis: whether in proportion to their contribution or
share and share alike;
(c) The ownership of properties bought by Maglana in his wife's name;
(d) The damages suffered and who should be liable for them; and
(e) The legal effect of the letter dated February 23, 1961 of Maglana
dissolving the partnership (Decision, R.A. pp. 895-896).- nad
After trial, the lower court rendered its decision on March 11, 1968, the dispositive
portion of which reads as follows:
"WHEREFORE, the above facts and issues duly considered, judgment is
hereby rendered by the Court declaring that:
"1. The nature of the partnership and the legal relations of Maglana and
Rojas after Pahamotang retired from the second partnership, that is,
after August 31, 1957, when Pahamotang was finally paid his share the
partnership of the defendant and the plaintiff is one of a de facto and at
will;
"2. Whether the sharing of partnership profits should be on the basis of
computation, that is the ratio and proportion of their respective
contributions, or on the basis of share and share alike this covered by
actual contributions of the plaintiff and the defendant and by their verbal
agreement; that the sharing of profits and losses is on the basis of actual
contributions; that from 1957 to 1959, the sharing is on the basis of 80%
for the defendant and 20% for the plaintiff of the profits, but from 1960
to the date of dissolution, February 23, 1961, the plaintiff's share will be
on the basis of his actual contribution and, considering his indebtedness
to the partnership, the plaintiff is not entitled to any share in the profits
of the said partnership;
"3. As to whether the properties which were bought by the defendant
and placed in his or in his wife's name were acquired with partnership
funds or with funds of the defendant and the Court declares that
there is no evidence that these properties were acquired by the
partnership funds, and therefore the same should not belong to the
partnership;
"4. As to whether damages were suffered and, if so, how much, and who
caused them and who should be liable for them the Court declares
that neither parties is entitled to damages, for as already stated above it
is not a wise policy to place a price on the right of a person to litigate
and/or to come to Court for the assertion of the rights they believe they
are entitled to;
"5. As to what is the legal effect of the letter of defendant to the plaintiff
dated February 23, 1961; did it dissolve the partnership or not the
Court declares that the letter of the defendant to the plaintiff dated
February 23, 1961, in effect dissolved the partnership;
"6. Further, the Court relative to the canteen, which sells foodstuffs,
supplies, and other merchandise to the laborers and employees of the
Eastcoast Development Enterprises, the COURT DECLARES THE SAME
AS NOT BELONGING TO THE PARTNERSHIP;
"7. That the alleged sale of forest concession Exhibit 9-B, executed by
Pablo Angeles David is VALID AND BINDING UPON THE PARTIES AND
SHOULD BE CONSIDERED AS PART OF MAGLANA'S CONTRIBUTION TO
THE PARTNERSHIP;
"8. Further, the Court orders and directs plaintiff Rojas to pay or turn
over to the partnership the amount of P69,000.00 the profits he
received from the CMS Estate, Inc. operated by him;
"9. The claim that plaintiff Rojas should be ordered to pay the further
sum of P85,000.00 which according to him he is still entitled to receive
from the CMS Estate, Inc. is hereby denied considering that it has not yet
been actually received, and further the receipt is merely based upon an
expectancy and/or still speculative;
"10. The Court also directs and orders plaintiff Rojas to pay the sum of
P62,988.19 his personal account to the partnership;
"11. The Court also credits the defendant the amount of P85,000.00 the
amount he should have received as logging superintendent, and which
was not paid to him, and this should be considered as part of Maglana's
contribution likewise to the partnership; and
"12. The complaint is hereby dismissed with costs against the plaintiff.: rd
"SO ORDERED." Decision, Record on Appeal, pp. 985-989).
Rojas interposed the instant appeal.
The main issue in this case is the nature of the partnership and legal relationship of
the Maglana-Rojas after Pahamotang retired from the second partnership.
The lower court is of the view that the second partnership superseded the first, so
that when the second partnership was dissolved there was no written contract of co-
partnership; there was no reconstitution as provided for in the Maglana, Rojas and
Pahamotang partnership contract. Hence, the partnership which was carried on by
Rojas and Maglana after the dissolution of the second partnership was a de facto
partnership and at will. It was considered as a partnership at will because there was
no term, express or implied; no period was fixed, expressly or impliedly (Decision,
R.A. pp. 962-963).
On the other hand, Rojas insists that the registered partnership under the firm name
of Eastcoast Development Enterprises (EDE) evidenced by the Articles of Co-
Partnership dated January 14, 1955 (Exhibit "A") has not been novated, superseded
and/or dissolved by the unregistered articles of co-partnership among appellant
Rojas, appellee Maglana and Agustin Pahamotang, dated March 4, 1956 (Exhibit "C")
and accordingly, the terms and stipulations of said registered Articles of Co-
Partnership (Exhibit "A") should govern the relations between him and Maglana.
Upon withdrawal of Agustin Pahamotang from the unregistered partnership (Exhibit
"C"), the legally constituted partnership EDE (Exhibit "A") continues to govern the
relations between them and it was legal error to consider a de facto partnership
between said two partners or a partnership at will. Hence, the letter of appellee
Maglana dated February 23, 1961, did not legally dissolve the registered partnership
between them, being in contravention of the partnership agreement agreed upon
and stipulated in their Articles of Co-Partnership (Exhibit "A"). Rather, appellant is
entitled to the rights enumerated in Article 1837 of the Civil Code and to the sharing
profits between them of "share and share alike" as stipulated in the registered
Articles of Co-Partnership (Exhibit "A").
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" (Exhibit "9-B") (Brief for Defendant-
Appellee, pp. 24-25). Except for the fact that they took in one industrial partner; gave
him an equal share in the profits and fixed the term of the second partnership to
thirty (30) years, everything else was the same. Thus, they adopted the same name,
EASTCOAST DEVELOPMENT ENTERPRISES, they pursued the same purposes and the
capital contributions of Rojas and Maglana as stipulated in both partnerships call for
the same amounts. Just as important is the fact that all subsequent renewals of
Timber License No. 35-36 were secured in favor of the First Partnership, the original
licensee. To all intents and purposes therefore, the First Articles of Partnership were
only amended, in the form of Supplementary Articles of Co-Partnership (Exhibit "C")
which was never registered (Brief for Plaintiff-Appellant, p. 5). 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 (Decision, R.A. pp. 950-957). 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 (Decision, R.A., pp. 919-921).
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. Significantly, Maglana and Rojas agreed to purchase the interest,
share and participation in the second partnership of Pahamotang and that thereafter,
the two (Maglana and Rojas) became the owners of equipment contributed by
Pahamotang. Even more convincing, is the fact that Maglana on March 17, 1957,
wrote Rojas, reminding the latter of his obligation to contribute either in cash or in
equipment, to the capital investment of the partnership as well as his obligation to
perform his duties as logging superintendent. This reminder cannot refer to any
other but to the provisions of the duly registered Articles of Co-Partnership. As earlier
stated, Rojas replied that he will not be able to comply with the promised
contributions and he will not work as logging superintendent. By such statements, it
is obvious that Roxas understood what Maglana was referring to and left no room
for doubt that both considered themselves governed by the articles of the duly
registered partnership.
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.
As to the question of whether or not Maglana can unilaterally dissolve the
partnership in the case at bar, the answer is in the affirmative.
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.
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.
On the basis of the Commissioners' Report, the corresponding contribution of the
partners from 1956-1961 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).
Thus, as reported in the Commissioners' Report, Rojas is not entitled to any profits. In
their voluminous reports which was approved by the trial court, they showed that on
50-50% basis, Rojas will be liable in the amount of P131,166.00; on 80-20%, he will be
liable for P40,092.96 and finally on the basis of actual capital contribution, he will be
liable for P52,040.31.
Consequently, except as to the legal relationship of the partners after the withdrawal
of Pahamotang which is unquestionably a continuation of the duly registered
partnership and the sharing of profits and losses which should be on the basis of
share and share alike as provided for in the duly registered Articles of Co-Partnership,
no plausible reason could be found to disturb the findings and conclusions of the trial
court.: nad
As to whether Maglana is liable for damages because of such 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 (Decision, R.A., p. 949).
In the given situation Maglana cannot be said to be in bad faith nor can he be liable
for damages.
PREMISES CONSIDERED, the assailed decision of the Court of First Instance of Davao,
Branch III, is hereby MODIFIED in the sense that the duly registered partnership of
Eastcoast Development Enterprises continued to exist until liquidated and that the
sharing basis of the partners should be on share and share alike as provided for in its
Articles of Partnership, in accordance with the computation of the commissioners.
We also hereby AFFIRM the decision of the trial court in all other respects.: nad
SO ORDERED.


Benjamin Yu v. National Labor Relations Commission & Jade Mountain ProductsCo.
Ltd., Willy Co, Rhodora Bendal, Lea Bendal, Chiu Shian Jeng and Chen Ho-Fu G.R.
No. 97212 June 30, 1993
Feliciano, J.
Facts:
Yu ex-Assistant General Manager of the marble quarrying and export business
operated by a registered partnership called Jade Mountain Products Co. Ltd.
Partnership was originally organized with Bendals as general partners and Chin Shian
Jeng, Chen Ho-Fu and Yu Chang as limited partners; partnership business consisted of
exploiting a marble deposit in Bulacan

Yu, as Assi st ant Gener al Manager , had a mont hl y sal ar y of 4000. Yu,
however , act ual l y r e c e i v e d o n l y h a l f o f h i s
s t i p u l a t e d s a l a r y , s i n c e h e h a d a c c e p t e d t h e
p r o mi s e o f t h e par t ner s that the bal ance woul d be pai d when
the f i r m shal l have secur ed addi t i onal oper ati ng f unds f r om abr oad.
Yu act ual l y managed t he oper ati ons and f i nances of t he business; he
had overall supervision of the workers at the marble quarry in Bulacan and took
charge of the preparation of papers relating to the exportation of the firms
products.

General partners Bendals sold and transferred their interests in the partnership to Co
and Emmanuel Zapanta. Par t ner shi p was consti t uted sol el y by Co and
Zapant a; i t conti nued t o use t he ol d f i r m name of Jade Mountain. Yu
dismissed by the new partners.

Issues:
1 . WO N t h e
p a r t n e r s h i p wh i c h h a d h i r e d Y u a s A s s t . G e n . Ma n a g e r h a
d b e e n extinguished and replaced by a new partnership composed of Co and
Zapanta;
2. if indeed a new partnership had come into existence, WON Yu could nonetheless
assert his rights under his employment contract with the old partnership as against
the new partnership

Held:
1. Yes. Changes in the membership of the partnership resulted in the dissolution
of the old partnership which had hired Yu and the emergence of a new partnership
composed of Co and Zapanta.

Legalbases:

A r t . 1 8 2 8 . T h e d i s s o l u t i o n o f a p a r t n e r s h i p
i s t h e c h a n g e i n t h e r e l a t i o n o f
t h e p a r t n e r s c a u s e d b y a n y p a r t n e r c e a s i n g t o b e
a s s o c i a t e d i n t h e c a r r y i n g o n a s distinguished from the
winding up of the business.

Art. 1830. Dissolution is caused:(1) without violation of the agreement between the
partners;(b) by the express will of any partner, who must act in good faith, when no
definite term or particular undertaking is specified;(2) in contravention of the
agreement between the partners, where the circumstances do not permit a
dissolution under any other provision of this article, by the express will of any partner
at any time;

N o wi n d i n g u p o f a f f a i r s i n t h i s c a s e a s c o n t e mp l a t e d
i n A r t . 1 8 2 9 : o n d i s s o l u t i o n t h e partnership is not terminated, but
continues until the winding up of partnership affairs is completed.
Th e n e w p a r t n e r s h i p s i m p l y t o o k o v e r t h e b u s i n e
s s e n t e r p r i s e o w n e d b y t h e o l d
p a r t n e r s h i p , a n d c o n t i n u e d u s i n g t h e o l d n a me o f J a d e M
o u n t a i n P r o d u c t s C o mp a n y Limited, without winding up the business
affairs of the old partnership, paying off its debts, liquidating and distributing its net
assets, and then re-assembling the said assets or most of them and opening a new
business enterprise.

2. Yes. The new partnership is liable for the debts of the old partnership.
Legal basis: Art. 1840 (see codal). Yu is entitled to enforce his claim for unpaid
salaries, as well as other claims relating to his employment with the previous
partnership, against the new partnership. But Yu is not entitled to reinstatement.
Reason: new partnership was entitled to appoint and hi r e a new gen. or asst.
gen. manager t o r un the af f ai r s of t he busi ness enter pr i se take over.
An asst. gen. manager belongs to the most senior ranks of management and anew
partnership is entitled to appoint a top manager of its own choice and confidence.
The non-retention of Yu did not constitute unlawful termination.
The new par tner shi p had i t s own new Gener al Manager , Co, the
pr i nci pal new owner hi msel f . Yu s ol d posi ti on thus became superfluous
or redundant. Yu is entitled to separation pay at the rate of one months pay for each
year of service that he had rendered to the old partnership, a fraction of at least
6 months being considered as a whole year.




ROJAS V. MAGLANA

SUMMARY:
Maglana and Rojas executed their articles of co-partnership called EDE. It had an
indefinite term, was registered with the SEC, and had aTimer License. Later, Agustin
Pahamitang became an industrial partner and another articles of co-partnership was
executed. The term of the second co-partnership was fixed to 30 years. After some
time, the three executed a conditional sale of interest in the partnership where
Magalana and Rojas shall purchase the interest, share, and participation of
Pahamotang. It was agreed that, after payment of such including the loan secured by
Pahamotang, the two shall become owners of all equipment contributed by
Pahamotang. The two continued the partnership without any written agreement or
reconstitution of the articles of partnership. Subsequently, Rojas entered into a
contract with CMS Estate. Maglana reminded him of his contribution to the capital
investments and his duties to the partnership. Rojas said he would not be able to
comply. Maglana told Rojas that the latter is only entitled to 20% of the profits, which
was the sharing from 1957-1959 without dispute. Rojas took funds from the
partnership which was more than his share. Maglana notified Rojas that he had
dissolved the partnership. Rojas filed an action against Magallana. The CFI ruled that
the partnership of the two after Pahamotang left was one de facto and at will. The SC
said that it was not, considering that the first partnership was never dissolved. With
regard to the issue of unilateral dissolution, the SC held that Maglana had the power
to do so.

DOCTRINE:
Under Article 1830, par. 2 of the Civil Code, even if there is aspecified term, one
partner can cause its dissolution by expresslywithdrawing 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 becompelled to remain in the firm. With his withdrawal, the number
of members is decreased, hence, the dissolution. And in whatever way he mayview
the situation, the conclusion is inevitable that Rojas and Maglana shallbe guided in
the liquidation of the partnership by the provisions of its dulyregistered Articles of
Co-Partnership; that is, all profits and losses of thepartnership shall be divided "share
and share alike" between the partners.

FACTS:
Maglana and Rojas executed their Articles of Co-partnership called Eastcoast
Development Enterpises(EDE) which had an indefinite term of existence and was
registered with the SEC and had a Timber License. One of the EDEs 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
affairs while Rojas shall be the logging superintendent. All profits and losses shall be
divided share and share alike between them. Later on, the two availed the services of
Agustin Pahamotang as industrial partner and executed another articles of co-
partnership with the latter. The purpose of this second partnership was to hold and
secure renewal of timber license and the term of which was fixed to 30 years. 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. 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. Maglana wrote him regarding his contribution to the capital
investments as well as his duties as logging superintendent. Rojas replied that he will
not be able to comply with both. Maglana then told Rojas that the latters share will
just be 20% of the net profits. 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 dissolved the partnership. Rojas filed
an action against Maglana for the recovery of properties and accounting of the
partnership and damages.

RULING:
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;
2. there is no evidence these properties were acquired by the partnershipfunds
thusitshouldnotbelongtoit;
3. neither is entitled to damages; the letter of Maglana in effect dissolved
the partnership;
4. sale of forest concession is valid and binding and should be considered as
Maglanas contribution;
5. Rojas must pay or turn over to the partnership the profits he received
from CMS and pay his personal account to the partnership