GREGORIO ORTEGA, TOMAS DEL CASTILLO, JR., and BENJAMIN BACORRO VS. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN MISA

G.R. No. 109248 July 3, 1995

FACTS

The law firm of ROSS, LAWRENCE, SELPH and CARRASCOSO was duly registered in the Mercantile Registry and reconstituted with the Securities and Exchange Commission. The SEC records show that there were several subsequent amendments to the articles of partnership. Petitioner-appellant wrote the respondents-appellees a letter stating his withdrawal and retirement from the firm and another subsequent letter pertaining to the mechanics of liquidation. A few months later, petitioner filed with this Commission's Securities Investigation and Clearing Department a petition for dissolution and liquidation of partnership but respondents-appellees filed their opposition to the petition.

On 31 March 1989, the hearing officer rendered a decision ruling that petitioner's withdrawal from the law firm Bito, Misa & Lozada did not dissolve the said law partnership. On appeal, the SEC en banc 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. The parties sought a reconsideration of the above decision. Attorney Misa, in addition, asked for an appointment of a receiver to take over the assets of the dissolved partnership and to take charge of the winding up of its affairs. However, respondent SEC issued an order denying reconsideration, as well as rejecting the petition for receivership, and reiterating the remand of the case to the Hearing Officer.

During the pendency of the case with the Court of Appeals, Attorney Jesus Bito and Attorney Mariano Lozada both died. 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. He expressed concern over the need to preserve and care for the partnership assets. The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC decision and order appealed from.

ISSUE

1.       Whether the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will.

2.       Whether the withdrawal of private respondent dissolved the partnership regardless of his good or bad faith.

RULING

1.       Yes. 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. 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 dissolution of the partnership at will.

2.        Yes. 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. 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. Paragraph 8 of the "Amendment to Articles of Partnership" reading thusly, “... In the event of the death or retirement of any partner, his interest in the partnership shall be liquidated and paid in accordance with the existing agreements and his partnership participation shall revert to the Senior Partners for allocation as the Senior Partners may determine.” The term "retirement" must have been used in the articles, as we so hold, in a generic sense to mean the dissociation by a partner, inclusive of resignation or withdrawal, from the partnership.