Republic vs Pasig Rizal

REPUBLIC OF THE PHILIPPINES VS. PASIG RIZAL CO., INC.
[ G.R. No. 213207. February 15, 2022 ] EN BANC

Petitioner: Republic of the Philippines

Respondent: Pasig Rizal Co., Inc.

Ponente: Justice Caguioa

Nature: Petition for review on certiorari filed under Rule 45 against the decision of the CA First Division and Special First Division

Keywords: substantial requirements for registration, RA 11573, Section 7, Public Domain, Public Dominion, Patrimonial Property

Facts: Sometime in 1958, Manuel Dee Ham (Manuel) caused the survey of the Subject Property under Plan Psu-169919. The plan was subsequently approved by the Director of Lands, and the Subject Property was declared in Manuel's name for tax purposes.

Manuel died in 1961. Consequently, the Subject Property was inherited by his surviving wife Esperanza Gerona (Esperanza), and their children, who, in turn, collectively transferred their beneficial ownership over the Subject Property to the Dee Ham family corporation, PRCI. Thereafter, PRCI began paying the real property taxes due in its name.

On November 6, 2009, Esperanza executed an Affidavit to formalize the transfer.

In 2010, Esperanza, as President of PRCI, filed before the RTC an application for original registration of title over the Subject Property, for and on behalf of the latter. There, Esperanza asserted that PRCI is the owner of the Subject Property and all improvements found thereon, and that PRCI and its predecessors in interest have been in open, continuous, exclusive, and notorious possession of the Subject Property for more than fifty (50) years. Esperanza also averred that the Subject Property has neither been encumbered, nor has it been adversely possessed or claimed by any other party.

No opposition was entered against the application after due notice and publication. Thus, an order of general default was entered against the whole world, with the exception of the Republic of the Philippines (Republic).

PRCI presented the following evidence:

a) Approved Survey Plan, Technical Description and Surveyor's Certification of [the Subject Property] showing its area and boundaries;

 

b) Tax Declarations and Tax Receipts proving that since 1956, [the Subject Property] was already declared for tax purposes and the corresponding realty taxes were paid; 

c) Affidavit of Esperanza Gerona establishing the transfer of ownership and possession of the subject realty to [PRCI]; 

d) Certification of the Regional Technical Director of Forest Management Service of the Department of Environment and Natural Resources (DENR) proving that the subject lot is within the alienable and disposable land of public domain, as verified under Project No. 21 of Pasig pursuant to [Land Classification] Map 639 which was approved on [March 11, 1927 and] per ocular inspection on the ground on [September 12, 2011; and 

e) Affidavit of Bernarda Lu, a friend and neighbor of the Dee Ham family, attesting to [PRCI's] ownership of the [Subject Property] and its uninterrupted possession as well as the payment of land taxes thereon.

RTC: Confirmed and affirmed title of PRCI

OSG, (as Republic): Assailed the RTC before the CA via Appeal (Rule 41)

CA: Assailed decision dismissing the Appeal brought by the OSG and held that the evidence presented by PRCI sufficiently established that subject property is alienable and disposable.

Republic: Filed an MR

CA: Denied the MR

Republic: Filed present case and asserts that lands of the public domain become patrimonial only when there is an express government manifestation that the property is no longer retained for public service or the development of national wealth.

Issue: 

Whether PRCI has established that the Subject Property forms part of the alienable and disposable agricultural land of the public domain in accordance with the requirements set by prevailing law.

Held:

PRCI and its predecessors in interest, has been in open, continuous, exclusive, and notorious possession and occupation of the Subject Property since 1956. PRCI application stood unopposed before the RTC when presented evidence to prove that the Subject Property forms part of the alienable and disposable agricultural land of the public domain. Under the new parameters set by Sec. 7 RA 11573, these certifications are not acceptable proof of the required land classification status. Nevertheless, in the interest of substantial justice, bearing in mind the curative nature of RA 11573, and recognizing the long period of possession by PRCI, the Court deems it proper to remand the case to the CA for the reception of evidence on the Subject Property’s land classification status in accordance with Section 7 of RA 11573.

Ruling: 

Petition for review on certiorari by Republic - DENIED in part.

SC also AFFIRMED decision of CA insofar as it holds that Pasig Rizal Co., Inc., by itself and through its predecessors in interest, has been in open, continuous, exclusive, and notorious possession and occupation of the Subject Property since 1956.

The case is REMANDED to the Court of Appeals for reception of evidence on the Subject Property's land classification status based on the parameters set forth in Section 7 of Republic Act No. 11573. Thereafter, the Court of Appeals is directed to resolve the present case in accordance with this Decision with due and deliberate dispatch.

Doctrine:

Land classification under the 1987 Constitution and the Civil Code

The Regalian doctrine has long been recognized as the foundation of the State's property regime and has been consistently adopted under the 1935, 1973, and 1987 Constitutions. In essence, the Regalian doctrine espouses that lands not appearing to be clearly under private ownership are generally presumed to form part of the public domain belonging to the State.

However, this general rule admits of a single exception: native title to land. Claims of private ownership pursuant to native title are presumed to have been held even before the Spanish conquest. Thus, lands subject of native titles are deemed excluded from the mass of lands forming part of the public domain.

Public Domain under the constitution - pertain to all lands owned or held by the state in a public or private capacity.

Public Dominon - pertains to those which are intended for public use, public service, or the development of national wealth, and excludes patrimonial property (held by the State in its private capacity to attain economic ends).

ATAP - Agency, Trust, and Partnership: Atty. Ranada Syllabus notes - WEEK 1 & 2

I.                     PARTNERSHIP

Week No. 1

A. General Provisions (Article 1767 – 1783)

1. What is a contract of partnership? (Art. 1767)

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession. (1665a)

SANTOS VS. SPS. REYES, 368 SCRA 261

https://juristprudent.blogspot.com/2018/10/santos-vs-sps-reyes-368-scra-261.html

2. Determining factors in the existence of partnership (Art. 1769)

Art. 1769. In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third persons;

(2) Co-ownership or co-possession does not of itself establish a partnership, whether such-co-owners or co-possessors do or do not share any profits made by the use of the property;

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived;

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. (n)

HEIRS OF TAN ENG KEE VS. CA, 341 SCRA 740

                (citing Evangelista vs Collector of Internal Revenuw, 54 O.G. 996

https://juristprudent.blogspot.com/2018/10/heirs-of-tan-eng-kee-vs-ca-341-scra-740.html

NEGADO VS. MAKABENTA, 54 O.G. 4082

Castro, J.

https://juristprudent.blogspot.com/2018/10/negado-vs-makabenta-54-og-4082.html

YULO VS. YANG CHIACO SENG, L-12541, AUG. 28, 1959

LABRADOR, J.:

3. Distinction between partnership and private corporation

FLETCHER, Cyc. Corp., Sec. 20

4. Formalities required by law for the organization/constitution of partnership (Art. 1771, 1772, 1773, 1843)

Art. 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. (1667a)

Art. 1772. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission.

Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. (n)

Art. 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument. (1668a)

Art. 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one more limited partners. The limited partners as such shall not be bound by the obligations of the partnership.

SEC Memorandum Circular 14, Series of 2017

Consolidated Guidelines and Procedures on the Use of Corporate and Partnership Names

SEC Memorandum Circular No. 9, Series of 2018

Amendment of the Guidelines and Procedures on the Use if Corporate and Partnership Names

    SEC Memorandum Circular No. 6, Series of 2016

    Omnibus Guidelines on Principal Office Addressm Address of each Incorporator, Director, Trustee or Partner

    http://www.sec.gov.ph/sec-memorandum-circular-no-06-9/

    Executive Order No. 184

    Tenth Foreign Investment Negative List

Week No. 2

5. Different kinds of partnership

Art. 1776. As to its object, a partnership is either universal or particular.

As regards the liability of the partners, a partnership may be general or limited. (1671a)

                   a.)     As to object (Art, 1777, 1778, 1780, 1783)

i.                     Universal Partnership

Art. 1777. A universal partnership may refer to all the present property or to all the profits. (1672)

Art. 1780. A universal partnership of profits comprises all that the partners may acquire by their industry or work during the existence of the partnership.

Movable or immovable property which each of the partners may possess at the time of the celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the partnership. (1675)

2 kinds of universal partnership:

1.       Universal partnership or one which refers to ALL THE PRESENT PROPERTY OR TO ALL PROFITS (1777)

2.       Universal partnership of profits defined in ART. 1780.

Art. 1778. A partnership of all present property is that in which the partners contribute all the property which actually belongs to them to a common fund, with the intention of dividing the same among themselves, as well as all the profits which they may acquire therewith. (1673)

ii.                   Particular Partnership

Art. 1783. A particular partnership has for its object determinate things, their use or fruits, or specific undertaking, or the exercise of a profession or vocation. (1678)

           
                     b.)     As to liability of the partners

i.                     General Partnership

General Partnership or one consisting of general partners who are liable pro rata and subsidiarily (Art. 1816) and sometimes SOLIDARILY (Arts. 1822 – 1824) with their separate property for partnership debts; or

ii.                   Limited Partnership

Limited Partnership or one formed by two or more persons having as members one or more general partners and one or more limited partners, the latter not being personally liable for the obligations of the partnership. (Art. 1843)

6. Different kinds of partners

a.)     Industrial Partner – or one who contributes only his industry or personal service (Arts. 1789, 1767)

Art. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in either case. (n)

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession. (1665a)

b.)     Capitalist Partners – or one who contributes money or property to the common fund (see Art. 1767)

Art. 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.

Two or more persons may also form a partnership for the exercise of a profession. (1665a)

c.)      General Partner – or one whose liability to third persons extends to his separate property; he may be either a capitalist or industrial partner. (see Art. 1843, 1816). He is also known as a REAL PARTNER

Art. 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership.

Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. (n)

d.)     Limited Partner – or one whose liability to third persons is limited to his capital contribution. (see Art. 1843) He is also known as “SPECIAL PARTNER”. The term “general partner” and “limited partner” have relevance only in LIMITED PARTNERSHIP.

Art. 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership.

e.)     Managing Partner – or one who manages the affairs or business of the partnership; he may be appointed either in the articles of partnership or after the constitution of the partnership (See Art. 1800) He is also known as GENERAL or REAL partner;

Art. 1800. The partner who has been appointed manager in the articles of partnership may execute all acts of administration despite the opposition of his partners, unless he should act in bad faith; and his power is irrevocable without just or lawful cause. The vote of the partners representing the controlling interest shall be necessary for such revocation of power.

f.)      Silent Partner – or one who does NOT take any active part in the business although he may be known to be a partner. (Ibid.) Thus, he need not be a secret partner. If he withdraws from the partnership, he must give notice to those persons, who do business with the firm to escape liability in the future;

g.)     Ostensible Partner – or one who takes ACTIVE PART and known to the public as a partner in the business (See Art. 1834, par. 2), whether or not he has an actual interest in the firm. Thus, he may be an actual partner or a nominal partner. If he is not actually a partner, he is subject to liability by the doctrine estoppel. (Art. 1825)

Art. 1825. When a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to anyone, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such persons to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made:

(1) When a partnership liability results, he is liable as though he were an actual member of the partnership;

(2) When no partnership liability results, he is liable pro rata with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately.

When a person has been thus represented to be a partner in an existing partnership, or with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. When all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation. (n)

h.)     Secret Partner – or one who takes active part in the business but is not known to be a partner by outside parties nor held out as a partner by the other partners (Ibid.), although he participates in the profits and losses of the partnership. He is an ACTUAL partner. He is also an ACTIVE partner in the sense that he participates in the management of the partnership affairs.

i.)       Partner by Estoppel – or one who is not really a partner, not being a party to a partnership agreement, but is liable as a partner for the protection of innocent third persons. (See Art 1825) He is one who represented as being in fact a partner, but who is not so as between the partners themselves. He is also known as PARTNER BY IMPLICATION OR NOMINAL PARTNER.

The term QUASI-PARTNER is sometimes used. (68 C.J.S. 405)

-----------------------------------------

Reviewer Made by: Liz Lorenzo

Sy vs. Court of Appeals, GR. No. 94285, August 31, 1999

Parties:

Petitioners - Jesus Sy, Jaime Sy, Estate Of Jose Sy, Estate Of Vicente Sy, Heir Of Marciano Sy Represented By Justina Vda. De Sy And Willie Sy

Respondents - The Court Of Appeals, Intestate Estate Of Sy Yong Hu, Sec. Hearing Officer Felipe Tongco, Securities And Exchange Commission

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

Summary:  Sy Yong Hu & Sons is a partnership between Sy Yong Hu and his sons. Their shares as reflected in the Amended articles of partnership are as follows:  Sy Yong Hu (31k), Jose Sy (205k), Jayme Sy (112k), Marciano Sy (143k), Willie Sy (85k), Vicente Sy (85k), and Jesus Sy (88k), with Jose Sy as managing partner. The partnership was registered with SEC on March 29, 1962. In 1978, 1979, & 1987, Partners Sy Yong Hu and Jose Sy, Vicent Sy, &Marciano Sy died respectively. At present, the partnership has valuable assets in the business district of Bacolod.

In Sept 1977, during the lifetime of all the partners, Keng Sian brought an action against the partnership claiming she is entitled of ½ of the properties and the fruits bec she was the common law wife of Sy Yong Hu which the latter denied.

During the pendency of the case, Marciano Sy filed a petition for declaratory relief against Vicente, Jesus, and Jayme, praying he be appointed partner to replace the deceased Jose. In an answer, Vicente, Jesus, Jayme, who claimed to represent the majority interest sought the dissolution of partnership and appointed Vicente as managing partner.

The Hearing Officer, in a decision (Sison Decision) dismissed the petition, and dissolved the partnership. The Sison Decision was affirmed by the SEC En Banc. In the meantime the Regional Trial Court appointed one Alex Ferrer as Special Administrator. Thereafter, Alex Ferrer moved to intervene in the proceedings in for the partition and distribution of the of the partnership assets on behalf of the respondent intestate estate but was denied. The Intestate Estate appealed to the SEC en banc. In its decision, the SEC en banc reiterated that the Abello decision, which upheld the order of dissolution of the partnership, had long become final and executory. No further appeal was taken from said decision. During the continuation of SEC Case, the parties brought to the attention of the Hearing Officer the fact of existence of a Civil Case pending before the RTC. They also agreed that during the pendency of said case, there would be no disposition of partnership assets. Hearing Officer Tongco in an order placed the partnership under a receivership committee. Petitioners appealed to the SEC en banc. In an order (Lopez Order), the SEC en banc affirmed the Tongco order. Then they filed a special civil action for certiorari with the Court of Appeals. The appellate court granted the petition and remanded the case for further execution of the Decisions, ordering partition and distribution of partnership properties. On motion for reconsideration by private respondents, the Court of Appeals reversed its earlier decision and remanded the case to the SEC for the formation of a receivership committee as envisioned in the Tongco Order. Hence the present petition.

 ISSUE: What is there is a difference between winding up and dissolution

HELD: Petitioners fail to recognize the basic distinctions underlying the principles of dissolution, winding up and partition or distribution. 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 its 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. The dissolution of the partnership did not mean that the juridical entity was immediately terminated and that the distribution of the assets to its partners should perfunctorily follow. On the contrary, the dissolution simply effected a change in the relationship among the partners. The partnership, although dissolved, continues to exist until its termination, at which time the winding up of its affairs should have been completed and the net partnership assets are partitioned and distributed to the partners. It ruled that although the Abello Decision was, indeed, final and executory, it did not pose any obstacle to the hearing officer to issue orders not inconsistent therewith because from the time a dissolution is ordered until the actual termination of the partnership.

SAME SAME

Partnerships; Dissolutions; Words and Phrases; 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 its business.—The contentions are untenable. Petitioners fail to recognize the basic distinctions underlying the principles of dissolution, winding up and partition or distribution. 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 its 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 partnership, although dissolved, continues to exist until its termination, at which time the winding up of its affairs should have been completed and the net partnership assets are partitioned and distributed to the partners.—The dissolution of the partnership did not mean that the juridical entity was immediately

terminated and that the distribution of the assets to its partners should perfunctorily follow. On the contrary, the dissolution simply effected a change in the relationship among the partners. The partnership, although dissolved, continues to exist until its termination, at which time the winding up of its affairs should have been completed and the net partnership assets are partitioned and distributed to the partners.

Same; Same; Securities and Exchange Commission; Jurisdiction; From the time a dissolution is ordered until the actual termination of the partnership, the Securities and Exchange Commission retains jurisdiction to adjudicate all incidents relative thereto; Like the appointment of a manager in charge of the winding up of the affairs of the partnership, the appointment of a receiver during the pendency of the dissolution is interlocutory in nature, well within the jurisdiction of the Securities and Exchange Commission.—The error, therefore, ascribed to the Court of Appeals is devoid of any sustainable basis. The Abello Decision though, indeed, final and executory, did not pose any obstacle to the Hearing Officer to issue orders not inconsistent therewith. From the time a dissolution is ordered until the actual termination of the partnership, the SEC retained jurisdiction to adjudicate all incidents relative thereto. Thus, the disputed order placing the partnership under a receivership committee cannot be said to have varied the final order of dissolution. Neither did it suspend the dissolution of the partnership. If at all, it only suspended the partition and distribution of the partnership assets pending disposition of Civil Case No. 903 on the basis of the agreement by the parties and under the circumstances of the case. It bears stressing that, like the appointment of a manager in charge of the winding up of the affairs of the partnership, said appointment of a receiver during the pendency of the dissolution is interlocutory in nature, well within the jurisdiction of the SEC.

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.