G.R. No. L-66653 June 19, 1986 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

BURROUGHS LIMITED AND THE COURT OF TAX APPEALS, respondents. Sycip, Salazar, Feliciano & Hernandez Law Office for private respondent.

PARAS, J.: Petition for certiorari to review and set aside the Decision dated June 27, 1983 of respondent Court of Tax Appeals in its C.T.A. Case No. 3204, entitled "Burroughs Limited vs. Commissioner of Internal Revenue" which ordered petitioner Commissioner of Internal Revenue to grant in favor of private respondent Burroughs Limited, tax credit in the sum of P172,058.90, representing erroneously overpaid branch profit remittance tax. Burroughs Limited is a foreign corporation authorized to engage in trade or business in the Philippines through a branch office located at De la Rosa corner Esteban Streets, Legaspi Village, Makati, Metro Manila. Sometime in March 1979, said branch office applied with the Central Bank for authority to remit to its parent company abroad, branch profit amounting to P7,647,058.00. Thus, on March 14, 1979, it paid the 15% branch profit remittance tax, pursuant to Sec. 24 (b) (2) (ii) and remitted to its head office the amount of P6,499,999.30 computed as follows: Amount applied for remittance................................ P7,647,058.00 Deduct: 15% branch profit remittance tax ..............................................1,147,058.70 Net amount actually remitted.................................. P6,499,999.30 Claiming that the 15% profit remittance tax should have been computed on the basis of the amount actually remitted (P6,499,999.30) and not on the amount before profit remittance tax (P7,647,058.00), private respondent filed on December 24, 1980, a written claim for the refund or tax credit of the amount of P172,058.90 representing alleged overpaid branch profit remittance tax, computed as follows: Profits actually remitted .........................................P6,499,999.30 Remittance tax rate .......................................................15% Branch profit remittance taxdue thereon ......................................................P 974,999.89 Branch profit remittance

tax paid .............................................................Pl,147,058.70 Less: Branch profit remittance tax as above computed................................................. 974,999.89 Total amount refundable........................................... P172,058.81 On February 24, 1981, private respondent filed with respondent court, a petition for review, docketed as C.T.A. Case No. 3204 for the recovery of the above-mentioned amount of P172,058.81. On June 27, 1983, respondent court rendered its Decision, the dispositive portion of which reads ACCORDINGLY, respondent Commission of Internal Revenue is hereby ordered to grant a tax credit in favor of petitioner Burroughs Limited the amount of P 172,058.90. Without pronouncement as to costs. SO ORDERED. Unable to obtain a reconsideration from the aforesaid decision, petitioner filed the instant petition before this Court with the prayers as herein earlier stated upon the sole issue of whether the tax base upon which the 15% branch profit remittance tax shall be imposed under the provisions of section 24(b) of the Tax Code, as amended, is the amount applied for remittance on the profit actually remitted after deducting the 15% profit remittance tax. Stated differently is private respondent Burroughs Limited legally entitled to a refund of the aforementioned amount of P172,058.90. We rule in the affirmative. The pertinent provision of the National Revenue Code is Sec. 24 (b) (2) (ii) which states: Sec. 24. Rates of tax on corporations.... (b) Tax on foreign corporations. ... (2) (ii) Tax on branch profits remittances. Any profit remitted abroad by a branch to its head office shall be subject to a tax of fifteen per cent (15 %) ... In a Bureau of Internal Revenue ruling dated January 21, 1980 by then Acting Commissioner of Internal Revenue Hon. Efren I. Plana the aforequoted provision had been interpreted to mean that "the tax base upon which the 15% branch profit remittance tax ... shall be imposed...(is) the profit actually remitted abroad and not on the total branch profits out of which the remittance is to be made. " The said ruling is hereinbelow quoted as follows: In reply to your letter of November 3, 1978, relative to your query as to the tax base upon which the 15% branch profits remittance tax provided for under Section 24 (b) (2) of the 1977 Tax Code shall be imposed, please be advised that the 15% branch profit tax shall be imposed on the branch profits actually remitted abroad and not on the total branch profits out of which the remittance is to be made. Please be guided accordingly.

Applying, therefore, the aforequoted ruling, the claim of private respondent that it made an overpayment in the amount of P172,058.90 which is the difference between the remittance tax actually paid of Pl,147,058.70 and the remittance tax that should have been paid of P974,999,89, computed as follows Profits actually remitted......................................... P6,499,999.30 Remittance tax rate.............................................................. 15% Remittance tax due................................................... P974,999.89 is well-taken. As correctly held by respondent Court in its assailed decisionRespondent concedes at least that in his ruling dated January 21, 1980 he held that under Section 24 (b) (2) of the Tax Code the 15% branch profit remittance tax shall be imposed on the profit actually remitted abroad and not on the total branch profit out of which the remittance is to be made. Based on such ruling petitioner should have paid only the amount of P974,999.89 in remittance tax computed by taking the 15% of the profits of P6,499,999.89 in remittance tax actually remitted to its head office in the United States, instead of Pl,147,058.70, on its net profits of P7,647,058.00. Undoubtedly, petitioner has overpaid its branch profit remittance tax in the amount of P172,058.90. Petitioner contends that respondent is no longer entitled to a refund because Memorandum Circular No. 8-82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of January 21, 1980. The said memorandum circular states Considering that the 15% branch profit remittance tax is imposed and collected at source, necessarily the tax base should be the amount actually applied for by the branch with the Central Bank of the Philippines as profit to be remitted abroad. Petitioner's aforesaid contention is without merit. What is applicable in the case at bar is still the Revenue Ruling of January 21, 1980 because private respondent Burroughs Limited paid the branch profit remittance tax in question on March 14, 1979. Memorandum Circular No. 8-82 dated March 17, 1982 cannot be given retroactive effect in the light of Section 327 of the National Internal Revenue Code which providesSec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shag not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayer except in the following cases (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based, or (c) where the taxpayer acted in bad faith. (ABS-CBN Broadcasting Corp. v. CTA, 108 SCRA 151-152) The prejudice that would result to private respondent Burroughs Limited by a retroactive application of Memorandum Circular No. 8-82 is beyond question for it would be deprived of the substantial

amount of P172,058.90. And, insofar as the enumerated exceptions are concerned, admittedly, Burroughs Limited does not fall under any of them. WHEREFORE, the assailed decision of respondent Court of Tax Appeals is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

G.R. No. L-25532

February 28, 1969

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R. Rosete and Special Attorneys B. Gatdula, Jr. and T. Temprosa Jr. for petitioner. A. S. Monzon, Gutierrez, Farrales and Ong for respondents. REYES, J.B.L., J.: A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed on 30 September 1947 by herein respondent William J. Suter as the general partner, and Julia Spirig and Gustav Carlson, as the limited partners. The partners contributed, respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. On 1 October 1947, the limited partnership was registered with the Securities and Exchange Commission. The firm engaged, among other activities, in the importation, marketing, distribution and operation of automatic phonographs, radios, television sets and amusement machines, their parts and accessories. It had an office and held itself out as a limited partnership, handling and carrying merchandise, using invoices, bills and letterheads bearing its trade-name, maintaining its own books of accounts and bank accounts, and had a quota allocation with the Central Bank. In 1948, however, general partner Suter and limited partner Spirig got married and, thereafter, on 18 December 1948, limited partner Carlson sold his share in the partnership to Suter and his wife. The sale was duly recorded with the Securities and Exchange Commission on 20 December 1948. The limited partnership had been filing its income tax returns as a corporation, without objection by the herein petitioner, Commissioner of Internal Revenue, until in 1959 when the latter, in an assessment, consolidated the income of the firm and the individual incomes of the partnersspouses Suter and Spirig resulting in a determination of a deficiency income tax against respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955. Respondent Suter protested the assessment, and requested its cancellation and withdrawal, as not in accordance with law, but his request was denied. Unable to secure a reconsideration, he appealed to the Court of Tax Appeals, which court, after trial, rendered a decision, on 11 November 1965, reversing that of the Commissioner of Internal Revenue. The present case is a petition for review, filed by the Commissioner of Internal Revenue, of the tax court's aforesaid decision. It raises these issues: (a) Whether or not the corporate personality of the William J. Suter "Morcoin" Co., Ltd. should be disregarded for income tax purposes, considering that respondent William J. Suter and his wife, Julia Spirig Suter actually formed a single taxable unit; and (b) Whether or not the partnership was dissolved after the marriage of the partners, respondent William J. Suter and Julia Spirig Suter and the subsequent sale to them by the remaining

partner, Gustav Carlson, of his participation of P2,000.00 in the partnership for a nominal amount of P1.00. The theory of the petitioner, Commissioner of Internal Revenue, is that the marriage of Suter and Spirig and their subsequent acquisition of the interests of remaining partner Carlson in the partnership dissolved the limited partnership, and if they did not, the fiction of juridical personality of the partnership should be disregarded for income tax purposes because the spouses have exclusive ownership and control of the business; consequently the income tax return of respondent Suter for the years in question should have included his and his wife's individual incomes and that of the limited partnership, in accordance with Section 45 (d) of the National Internal Revenue Code, which provides as follows: (d) Husband and wife. In the case of married persons, whether citizens, residents or non-residents, only one consolidated return for the taxable year shall be filed by either spouse to cover the income of both spouses; .... In refutation of the foregoing, respondent Suter maintains, as the Court of Tax Appeals held, that his marriage with limited partner Spirig and their acquisition of Carlson's interests in the partnership in 1948 is not a ground for dissolution of the partnership, either in the Code of Commerce or in the New Civil Code, and that since its juridical personality had not been affected and since, as a limited partnership, as contra distinguished from a duly registered general partnership, it is taxable on its income similarly with corporations, Suter was not bound to include in his individual return the income of the limited partnership. We find the Commissioner's appeal unmeritorious. The thesis that the limited partnership, William J. Suter "Morcoin" Co., Ltd., has been dissolved by operation of law because of the marriage of the only general partner, William J. Suter to the originally limited partner, Julia Spirig one year after the partnership was organized is rested by the appellant upon the opinion of now Senator Tolentino in Commentaries and Jurisprudence on Commercial Laws of the Philippines, Vol. 1, 4th Ed., page 58, that reads as follows: A husband and a wife may not enter into a contract of general copartnership, because under the Civil Code, which applies in the absence of express provision in the Code of Commerce, persons prohibited from making donations to each other are prohibited from entering into universal partnerships. (2 Echaverri 196) It follows that the marriage of partners necessarily brings about the dissolution of a pre-existing partnership. (1 Guy de Montella 58) The petitioner-appellant has evidently failed to observe the fact that William J. Suter "Morcoin" Co., Ltd. wasnot a universal partnership, but a particular one. As appears from Articles 1674 and 1675 of the Spanish Civil Code, of 1889 (which was the law in force when the subject firm was organized in 1947), a universal partnership requires either that the object of the association be all the present property of the partners, as contributed by them to the common fund, or else "all that the partners may acquire by their industry or work during the existence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the contributions of the partners were fixed sums of money, P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one of them was an industrial partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses were forbidden to enter by Article 1677 of the Civil Code of 1889. The former Chief Justice of the Spanish Supreme Court, D. Jose Casan, in his Derecho Civil, 7th Edition, 1952, Volume 4, page 546, footnote 1, says with regard to the prohibition contained in the aforesaid Article 1677:

Los conyuges, segun esto, no pueden celebrar entre si el contrato de sociedad universal, pero o podran constituir sociedad particular? Aunque el punto ha sido muy debatido, nos inclinamos a la tesis permisiva de los contratos de sociedad particular entre esposos, ya que ningun precepto de nuestro Codigo los prohibe, y hay que estar a la norma general segun la que toda persona es capaz para contratar mientras no sea declarado incapaz por la ley. La jurisprudencia de la Direccion de los Registros fue favorable a esta misma tesis en su resolution de 3 de febrero de 1936, mas parece cambiar de rumbo en la de 9 de marzo de 1943. Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of the causes provided for that purpose either by the Spanish Civil Code or the Code of Commerce. The appellant's view, that by the marriage of both partners the company became a single proprietorship, is equally erroneous. The capital contributions of partners William J. Suter and Julia Spirig were separately owned and contributed by them before their marriage; and after they were joined in wedlock, such contributions remained their respective separate property under the Spanish Civil Code (Article 1396): The following shall be the exclusive property of each spouse: (a) That which is brought to the marriage as his or her own; .... Thus, the individual interest of each consort in William J. Suter "Morcoin" Co., Ltd. did not become common property of both after their marriage in 1948. It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical personality of its own, distinct and separate from that of its partners (unlike American and English law that does not recognize such separate juridical personality), the bypassing of the existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding clear statutory mandates and basic principles of our law. The limited partnership's separate individuality makes it impossible to equate its income with that of the component members. True, section 24 of the Internal Revenue Code merges registered general co-partnerships (compaias colectivas) with the personality of the individual partners for income tax purposes. But this rule is exceptional in its disregard of a cardinal tenet of our partnership laws, and can not be extended by mere implication to limited partnerships. The rulings cited by the petitioner (Collector of Internal Revenue vs. University of the Visayas, L-13554, Resolution of 30 October 1964, and Koppel [Phil.], Inc. vs. Yatco, 77 Phil. 504) as authority for disregarding the fiction of legal personality of the corporations involved therein are not applicable to the present case. In the cited cases, the corporations were already subject to tax when the fiction of their corporate personality was pierced; in the present case, to do so would exempt the limited partnership from income taxation but would throw the tax burden upon the partners-spouses in their individual capacities. The corporations, in the cases cited, merely served as business conduits or alter egos of the stockholders, a factor that justified a disregard of their corporate personalities for tax purposes. This is not true in the present case. Here, the limited partnership is not a mere business conduit of the partner-spouses; it was organized for legitimate business purposes; it conducted its own dealings with its customers prior to appellee's marriage, and had been filing its own income tax returns as such independent entity. The change in its membership, brought about by the marriage of the partners and their subsequent acquisition of all interest therein, is no ground for withdrawing the partnership from the coverage of Section 24 of the tax code, requiring it to pay income tax. As far as the records show, the partners did not enter into matrimony and thereafter buy

the interests of the remaining partner with the premeditated scheme or design to use the partnership as a business conduit to dodge the tax laws. Regularity, not otherwise, is presumed. As the limited partnership under consideration is taxable on its income, to require that income to be included in the individual tax return of respondent Suter is to overstretch the letter and intent of the law. In fact, it would even conflict with what it specifically provides in its Section 24: for the appellant Commissioner's stand results in equal treatment, tax wise, of a general copartnership (compaia colectiva) and a limited partnership, when the code plainly differentiates the two. Thus, the code taxes the latter on its income, but not the former, because it is in the case of compaias colectivas that the members, and not the firm, are taxable in their individual capacities for any dividend or share of the profit derived from the duly registered general partnership (Section 26, N.I.R.C.; Araas, Anno. & Juris. on the N.I.R.C., As Amended, Vol. 1, pp. 88-89).
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But it is argued that the income of the limited partnership is actually or constructively the income of the spouses and forms part of the conjugal partnership of gains. This is not wholly correct. As pointed out in Agapito vs. Molo 50 Phil. 779, and People's Bank vs. Register of Deeds of Manila, 60 Phil. 167, the fruits of the wife's parapherna become conjugal only when no longer needed to defray the expenses for the administration and preservation of the paraphernal capital of the wife. Then again, the appellant's argument erroneously confines itself to the question of the legal personality of the limited partnership, which is not essential to the income taxability of the partnership since the law taxes the income of even joint accounts that have no personality of their own. 1 Appellant is, likewise, mistaken in that it assumes that the conjugal partnership of gains is a taxable unit, which it is not. What is taxable is the "income of both spouses" (Section 45 [d] in their individual capacities. Though the amount of income (income of the conjugal partnership vis-a-vis the joint income of husband and wife) may be the same for a given taxable year, their consequences would be different, as their contributions in the business partnership are not the same. The difference in tax rates between the income of the limited partnership being consolidated with, and when split from the income of the spouses, is not a justification for requiring consolidation; the revenue code, as it presently stands, does not authorize it, and even bars it by requiring the limited partnership to pay tax on its own income. FOR THE FOREGOING REASONS, the decision under review is hereby affirmed. No costs.

July 30, 1979 PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "SYCIP, SALAZAR, FELICIANO, HERNANDEZ & CASTILLO." LUCIANO E. SALAZAR, FLORENTINO P. FELICIANO, BENILDO G. HERNANDEZ. GREGORIO R. CASTILLO. ALBERTO P. SAN JUAN, JUAN C. REYES. JR., ANDRES G. GATMAITAN, JUSTINO H. CACANINDIN, NOEL A. LAMAN, ETHELWOLDO E. FERNANDEZ, ANGELITO C. IMPERIO, EDUARDO R. CENIZA, TRISTAN A. CATINDIG, ANCHETA K. TAN, and ALICE V. PESIGAN, petitioners. IN THE MATTER OF THE PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME "OZAETA, ROMULO, DE LEON, MABANTA & REYES." RICARDO J. ROMULO, BENJAMIN M. DE LEON, ROMAN MABANTA, JR., JOSE MA, REYES, JESUS S. J. SAYOC, EDUARDO DE LOS ANGELES, and JOSE F. BUENAVENTURA, petitioners. RESOLUTION MELENCIO-HERRERA, J.:
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Two separate Petitions were filed before this Court 1) by the surviving partners of Atty. Alexander Sycip, who died on May 5, 1975, and 2) by the surviving partners of Atty. Herminio Ozaeta, who died on February 14, 1976, praying that they be allowed to continue using, in the names of their firms, the names of partners who had passed away. In the Court's Resolution of September 2, 1976, both Petitions were ordered consolidated. Petitioners base their petitions on the following arguments: 1. Under the law, a partnership is not prohibited from continuing its business under a firm name which includes the name of a deceased partner; in fact, Article 1840 of the Civil Code explicitly sanctions the practice when it provides in the last paragraph that:
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The use by the person or partnership continuing the business of the partnership name, or the name of a deceased partner as part thereof, shall not of itself make the individual property of the deceased partner liable for any debts contracted by such person or partnership. 1

2. In regulating other professions, such as accountancy and engineering, the legislature has authorized the adoption of firm names without any restriction as to the use, in such firm name, of the name of a deceased partner; 2 the legislative authorization given to those engaged in the practice of accountancy a profession requiring the same degree of trust and confidence in respect of clients as that implicit in the relationship of attorney and client to acquire and use a trade name, strongly indicates that there is no fundamental policy that is offended by the continued use by a firm of professionals of a firm name which includes the name of a deceased partner, at least where such firm name has acquired the characteristics of a "trade name." 3 3. The Canons of Professional Ethics are not transgressed by the continued use of the name of a deceased partner in the firm name of a law partnership because Canon 33 of the Canons of Professional Ethics adopted by the American Bar Association declares that:
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... The continued use of the name of a deceased or former partner when permissible by local custom, is not unethical but care should be taken that no imposition or deception is practiced through this use. ... 4

4. There is no possibility of imposition or deception because the deaths of their respective deceased partners were well-publicized in all newspapers of general circulation for several days; the stationeries now being used by them carry new letterheads indicating the years when their respective deceased partners were connected with the firm; petitioners will notify all leading national and international law directories of the fact of their respective deceased partners' deaths. 5 5. No local custom prohibits the continued use of a deceased partner's name in a professional firm's name; 6 there is no custom or usage in the Philippines, or at least in the Greater Manila Area, which recognizes that the name of a law firm necessarily Identifies the individual members of the firm. 7 6. The continued use of a deceased partner's name in the firm name of law partnerships has been consistently allowed by U.S. Courts and is an accepted practice in the legal profession of most countries in the world. 8 The question involved in these Petitions first came under consideration by this Court in 1953 when a law firm in Cebu (the Deen case) continued its practice of including in its firm name that of a deceased partner, C.D. Johnston. The matter was resolved with this Court advising the firm to desist from including in their firm designation the name of C. D. Johnston, who has long been dead." The same issue was raised before this Court in 1958 as an incident in G. R. No. L-11964, entitled Register of Deeds of Manila vs. China Banking Corporation. The law firm of Perkins & Ponce Enrile moved to intervene asamicus curiae. Before acting thereon, the Court, in a Resolution of April 15, 1957, stated that it "would like to be informed why the name of Perkins is still being used although Atty. E. A. Perkins is already dead." In a Manifestation dated May 21, 1957, the law firm of Perkins and Ponce Enrile, raising substantially the same arguments as those now being raised by petitioners, prayed that the continued use of the firm name "Perkins & Ponce Enrile" be held proper. On June 16, 1958, this Court resolved:
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After carefully considering the reasons given by Attorneys Alfonso Ponce Enrile and Associates for their continued use of the name of the deceased E. G. Perkins, the Court found no reason to depart from the policy it adopted in June 1953 when it required Attorneys Alfred P. Deen and Eddy A. Deen of Cebu City to desist from including in their firm designation, the name of C. D. Johnston, deceased. The Court believes that, in view of the personal and confidential nature of the relations between attorney and client, and the high standards demanded in the canons of professional ethics, no practice should be allowed which even in a remote degree could give rise to the possibility of deception. Said attorneys are accordingly advised to drop the name "PERKINS" from their firm name. Petitioners herein now seek a re-examination of the policy thus far enunciated by the Court. The Court finds no sufficient reason to depart from the rulings thus laid down. A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and Reyes" are partnerships, the use in their partnership names of the names of deceased partners will run counter to Article 1815 of the Civil Code which provides:
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Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability, of a partner. It is clearly tacit in the above provision that names in a firm name of a partnership must either be those of living partners and. in the case of non-partners, should be living persons who can be subjected to liability. In fact, Article 1825 of the Civil Code prohibits a third person from including his name in the firm name under pain of assuming the liability of a partner. The heirs of a deceased partner in a law firm cannot be held liable as the old members to the creditors of a firm particularly where they are non-lawyers. Thus, Canon 34 of the Canons of Professional Ethics "prohibits an agreement for the payment to the widow and heirs of a deceased lawyer of a percentage, either gross or net, of the fees received from the future business of the deceased lawyer's clients, both because the recipients of such division are not lawyers and because such payments will not represent service or responsibility on the part of the recipient. " Accordingly, neither the widow nor the heirs can be held liable for transactions entered into after the death of their lawyer-predecessor. There being no benefits accruing, there ran be no corresponding liability. Prescinding the law, there could be practical objections to allowing the use by law firms of the names of deceased partners. The public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. An able lawyer without connections will have to make a name for himself starting from scratch. Another able lawyer, who can join an old firm, can initially ride on that old firm's reputation established by deceased partners. B. In regards to the last paragraph of Article 1840 of the Civil Code cited by petitioners, supra, the first factor to consider is that it is within Chapter 3 of Title IX of the Code entitled "Dissolution and Winding Up." The Article primarily deals with the exemption from liability in cases of a dissolved partnership, of the individual property of the deceased partner for debts contracted by the person or partnership which continues the business using the partnership name or the name of the deceased partner as part thereof. What the law contemplates therein is a hold-over situation preparatory to formal reorganization. Secondly, Article 1840 treats more of a commercial partnership with a good will to protect rather than of aprofessional partnership, with no saleable good will but whose reputation depends on the personal qualifications of its individual members. Thus, it has been held that a saleable goodwill can exist only in a commercial partnership and cannot arise in a professional partnership consisting of lawyers. 9
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As a general rule, upon the dissolution of a commercial partnership the succeeding partners or parties have the right to carry on the business under the old name, in the absence of a stipulation forbidding it, (s)ince the name of a commercial partnership is a partnership asset inseparable from the good will of the firm. ... (60 Am Jur 2d, s 204, p. 115) (Emphasis supplied) On the other hand,
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... a professional partnership the reputation of which depends or; the individual skill of the members, such as partnerships of attorneys or physicians, has no good win to be distributed as a firm asset on its dissolution, however intrinsically valuable such skill and reputation may be, especially where there is no provision in the partnership

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agreement relating to good will as an asset. ... (ibid, s 203, p. 115) (Emphasis supplied) C. A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. For one thing, the law on accountancy specifically allows the use of a trade name in connection with the practice of accountancy. 10
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A partnership for the practice of law is not a legal entity. It is a mere relationship or association for a particular purpose. ... It is not a partnership formed for the purpose of carrying on trade or business or of holding property." 11 Thus, it has been stated that "the use of a nom de plume, assumed or trade name in law practice is improper. 12

The usual reason given for different standards of conduct being applicable to the practice of law from those pertaining to business is that the law is a profession. Dean Pound, in his recently published contribution to the Survey of the Legal Profession, (The Lawyer from Antiquity to Modern Times, p. 5) defines a profession as "a group of men pursuing a learned art as a common calling in the spirit of public service, no less a public service because it may incidentally be a means of livelihood." xxx xxx xxx Primary characteristics which distinguish the legal profession from business are: 1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the highest eminence without making much money. 2. A relation as an "officer of court" to the administration of justice involving thorough sincerity, integrity, and reliability. 3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current business methods of advertising and encroachment on their practice, or dealing directly with their clients. 13

"The right to practice law is not a natural or constitutional right but is in the nature of a privilege or franchise. 14 It is limited to persons of good moral character with special qualifications duly ascertained and certified. 15 The right does not only presuppose in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege, highly personal and partaking of the nature of a public trust." 16 D. Petitioners cited Canon 33 of the Canons of Professional Ethics of the American Bar Association" in support of their petitions. It is true that Canon 33 does not consider as unethical the continued use of the name of a deceased or former partner in the firm name of a law partnership when such a practice is permissible by local custom but the Canon warns that care should be taken that no imposition or deception is practiced through this use.

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It must be conceded that in the Philippines, no local custom permits or allows the continued use of a deceased or former partner's name in the firm names of law partnerships. Firm names, under our custom, Identify the more active and/or more senior members or partners of the law firm. A glimpse at the history of the firms of petitioners and of other law firms in this country would show how their firm names have evolved and changed from time to time as the composition of the partnership changed.
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The continued use of a firm name after the death of one or more of the partners designated by it is proper only where sustained by local custom and not where by custom this purports to Identify the active members. ... There would seem to be a question, under the working of the Canon, as to the propriety of adding the name of a new partner and at the same time retaining that of a deceased partner who was never a partner with the new one. (H.S. Drinker, op. cit., supra, at pp. 207208) (Emphasis supplied). The possibility of deception upon the public, real or consequential, where the name of a deceased partner continues to be used cannot be ruled out. A person in search of legal counsel might be guided by the familiar ring of a distinguished name appearing in a firm title. E. Petitioners argue that U.S. Courts have consistently allowed the continued use of a deceased partner's name in the firm name of law partnerships. But that is so because it is sanctioned by custom. In the case of Mendelsohn v. Equitable Life Assurance Society (33 N.Y.S. 2d 733) which petitioners Salazar, et al. quoted in their memorandum, the New York Supreme Court sustained the use of the firm name Alexander & Green even if none of the present ten partners of the firm bears either name because the practice was sanctioned by custom and did not offend any statutory provision or legislative policy and was adopted by agreement of the parties. The Court stated therein:
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The practice sought to be proscribed has the sanction of custom and offends no statutory provision or legislative policy. Canon 33 of the Canons of Professional Ethics of both the American Bar Association and the New York State Bar Association provides in part as follows: "The continued use of the name of a deceased or former partner, when permissible by local custom is not unethical, but care should be taken that no imposition or deception is practiced through this use." There is no question as to local custom. Many firms in the city use the names of deceased members with the approval of other attorneys, bar associations and the courts. The Appellate Division of the First Department has considered the matter and reached The conclusion that such practice should not be prohibited. (Emphasis supplied) xxx xxx xxx
Neither the Partnership Law nor the Penal Law prohibits the practice in question. The use of the firm name herein is also sustainable by reason of agreement between the partners. 18

Not so in this jurisdiction where there is no local custom that sanctions the practice. Custom has been defined as a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory. 19 Courts take no judicial notice of custom. A custom must be proved as a fact, according to the rules of evidence. 20 A local custom as a source of right cannot be considered by a court of justice unless such custom is properly established by competent 13

evidence like any other fact. 21 We find such proof of the existence of a local custom, and of the elements requisite to constitute the same, wanting herein. Merely because something is done as a matter of practice does not mean that Courts can rely on the same for purposes of adjudication as a juridical custom. Juridical custom must be differentiated from social custom. The former can supplement statutory law or be applied in the absence of such statute. Not so with the latter. Moreover, judicial decisions applying or interpreting the laws form part of the legal system. 22 When the Supreme Court in the Deen and Perkins cases issued its Resolutions directing lawyers to desist from including the names of deceased partners in their firm designation, it laid down a legal rule against which no custom or practice to the contrary, even if proven, can prevail. This is not to speak of our civil law which clearly ordains that a partnership is dissolved by the death of any partner. 23 Custom which are contrary to law, public order or public policy shall not be countenanced. 24 The practice of law is intimately and peculiarly related to the administration of justice and should not be considered like an ordinary "money-making trade."
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... It is of the essence of a profession that it is practiced in a spirit of public service. A trade ... aims primarily at personal gain; a profession at the exercise of powers beneficial to mankind. If, as in the era of wide free opportunity, we think of free competitive self assertion as the highest good, lawyer and grocer and farmer may seem to be freely competing with their fellows in their calling in order each to acquire as much of the world's good as he may within the allowed him by law. But the member of a profession does not regard himself as in competition with his professional brethren. He is not bartering his services as is the artisan nor exchanging the products of his skill and learning as the farmer sells wheat or corn. There should be no such thing as a lawyers' or physicians' strike. The best service of the professional man is often rendered for no equivalent or for a trifling equivalent and it is his pride to do what he does in a way worthy of his profession even if done with no expectation of reward, This spirit of public service in which the profession of law is and ought to be exercised is a prerequisite of sound administration of justice according to law. The other two elements of a profession, namely, organization and pursuit of a learned art have their justification in that they secure and maintain that spirit. 25

In fine, petitioners' desire to preserve the Identity of their firms in the eyes of the public must bow to legal and ethical impediment. ACCORDINGLY, the petitions filed herein are denied and petitioners advised to drop the names "SYCIP" and "OZAETA" from their respective firm names. Those names may, however, be included in the listing of individuals who have been partners in their firms indicating the years during which they served as such. SO ORDERED. Teehankee, Concepcion, Jr., Santos, Fernandez, Guerrero and De Castro, JJ., concur Fernando, C.J. and Abad Santos, J., took no part.

Separate Opinions

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FERNANDO, C.J., concurring: The petitions are denied, as there are only four votes for granting them, seven of the Justices being of the contrary view, as explained in the plurality opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that the undersigned did not participate in the disposition of these petitions, as the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started with the partnership of Quisumbing, Sycip, and Quisumbing, the senior partner, the late Ramon Quisumbing, being the father-in-law of the undersigned, and the most junior partner then, Norberto J. Quisumbing, being his brother- in-law. For the record, the undersigned wishes to invite the attention of all concerned, and not only of petitioners, to the last sentence of the opinion of Justice Ameurfina Melencio-Herrera: 'Those names [Sycip and Ozaeta] may, however, be included in the listing of individuals wtes AQUINO, J., dissenting: I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano, Hernandez & Castillo, in their petition of June 10, 1975, prayed for authority to continue the use of that firm name, notwithstanding the death of Attorney Alexander Sycip on May 5, 1975 (May he rest in peace). He was the founder of the firm which was originally known as the Sycip Law Office. On the other hand, the seven surviving partners of the law firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their petition of August 13, 1976, prayed that they be allowed to continue using the said firm name notwithstanding the death of two partners, former Justice Roman Ozaeta and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively. They alleged that the said law firm was a continuation of the Ozaeta Law Office which was established in 1957 by Justice Ozaeta and his son and that, as to the said law firm, the name Ozaeta has acquired an institutional and secondary connotation. Article 1840 of the Civil Code, which speaks of the use by the partnership of the name of a deceased partner as part of the partnership name, is cited to justify the petitions. Also invoked is the canon that the continued use by a law firm of the name of a deceased partner, "when permissible by local custom, is not unethical" as long as "no imposition or deception is practised through this use" (Canon 33 of the Canons of Legal Ethics). I am of the opinion that the petition may be granted with the condition that it be indicated in the letterheads of the two firms (as the case may be) that Alexander Sycip, former Justice Ozaeta and Herminio Ozaeta are dead or the period when they served as partners should be stated therein. Obviously, the purpose of the two firms in continuing the use of the names of their deceased founders is to retain the clients who had customarily sought the legal services of Attorneys Sycip and Ozaeta and to benefit from the goodwill attached to the names of those respected and esteemed law practitioners. That is a legitimate motivation. The retention of their names is not illegal per se. That practice was followed before the war by the law firm of James Ross. Notwithstanding the death of Judge Ross the founder of the law firm of Ross, Lawrence, Selph and Carrascoso, his name was retained in the firm name with an indication of the year when he died. No one complained that the retention of the name of Judge Ross in the firm name was illegal or unethical.

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Separate Opinions

FERNANDO, C.J., concurring: The petitions are denied, as there are only four votes for granting them, seven of the Justices being of the contrary view, as explained in the plurality opinion of Justice Ameurfina Melencio-Herrera. It is out of delicadeza that the undersigned did not participate in the disposition of these petitions, as the law office of Sycip, Salazar, Feliciano, Hernandez and Castillo started with the partnership of Quisumbing, Sycip, and Quisumbing, the senior partner, the late Ramon Quisumbing, being the father-in-law of the undersigned, and the most junior partner then, Norberto J. Quisumbing, being his brother- in-law. For the record, the undersigned wishes to invite the attention of all concerned, and not only of petitioners, to the last sentence of the opinion of Justice Ameurfina Melencio-Herrera: 'Those names [Sycip and Ozaeta] may, however, be included in the listing of individuals wtes AQUINO, J., dissenting: I dissent. The fourteen members of the law firm, Sycip, Salazar, Feliciano, Hernandez & Castillo, in their petition of June 10, 1975, prayed for authority to continue the use of that firm name, notwithstanding the death of Attorney Alexander Sycip on May 5, 1975 (May he rest in peace). He was the founder of the firm which was originally known as the Sycip Law Office. On the other hand, the seven surviving partners of the law firm, Ozaeta, Romulo, De Leon, Mabanta & Reyes, in their petition of August 13, 1976, prayed that they be allowed to continue using the said firm name notwithstanding the death of two partners, former Justice Roman Ozaeta and his son, Herminio, on May 1, 1972 and February 14, 1976, respectively. They alleged that the said law firm was a continuation of the Ozaeta Law Office which was established in 1957 by Justice Ozaeta and his son and that, as to the said law firm, the name Ozaeta has acquired an institutional and secondary connotation. Article 1840 of the Civil Code, which speaks of the use by the partnership of the name of a deceased partner as part of the partnership name, is cited to justify the petitions. Also invoked is the canon that the continued use by a law firm of the name of a deceased partner, "when permissible by local custom, is not unethical" as long as "no imposition or deception is practised through this use" (Canon 33 of the Canons of Legal Ethics). I am of the opinion that the petition may be granted with the condition that it be indicated in the letterheads of the two firms (as the case may be) that Alexander Sycip, former Justice Ozaeta and Herminio Ozaeta are dead or the period when they served as partners should be stated therein. Obviously, the purpose of the two firms in continuing the use of the names of their deceased founders is to retain the clients who had customarily sought the legal services of Attorneys Sycip and Ozaeta and to benefit from the goodwill attached to the names of those respected and esteemed law practitioners. That is a legitimate motivation. The retention of their names is not illegal per se. That practice was followed before the war by the law firm of James Ross. Notwithstanding the death of Judge Ross the founder of the law firm of Ross, Lawrence, Selph and Carrascoso, his name was retained in the firm name with an indication

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of the year when he died. No one complained that the retention of the name of Judge Ross in the firm name was illegal or unethical.
#Footnotes
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1 See Memorandum of Salazar, et al., p. 5: see also Petition of Romulo, et al., p. 3. 2 Citing Sec, 16-A, Public Act No. 3105, as amended by Commonwealth Act No. 342; Sec. 39, Commonwealth Act No. 294; Sec. 23, Republic Act No. 318; Sec. 39, Republic Act No. 184. 3 Memorandum of Salazar, et al., pp. 7-8. 4 Memorandum of Salazar, et al., pp. 8-10; Petition of Romulo, et al., pp. 3- 4. 5 Memorandum of Salazar, et al., p. 13; Petition of Romulo, et al., p. 4. 6 Petition of Romulo, et al., p. 4. 7 Memorandum of Salazar, et al., p. 11. 8 Memorandum of Salazar, et al., pp. 6-7 and pp. 16-18; Petition of Romulo. et al., p, 5. 9 Seddal vs. Keating, 8 App. Div. 2d 44, 185 NYS 2d 630, affd 7 NY 2d 846, 196 NYS 2d 986, 164 NE 2d 860. 10 Section 16-A, Commonwealth Act No. 342. 11 In re Crawford's Estate, 184 NE 2d 779, 783. 12 H.S. Drinker, Legal Ethics (1953), p. 206; see also Canon 33, par. 2, Canons of Professional Ethics. 13 H.S, Drinker, Legal Ethics (1953) pp. 4-5. 14 7 C.J.S. 708. 15 Am Jur 270. 16 In re Lavine, 41 P2d 161, all cited in Martin, Legal and Judicial Ethics, Fifth Ed., p. 8. 17 Canons 1 to 32 which were adopted by the American Bar Association in 1908 were also adopted by the Philippine Bar Association in 1917. The American Bar Association adopted Canons 33 to 45 in 1928, Canon 46 in 1933 and Canon 47 in 1937. On April 20, 1946, when Canons 33 to 47 where already in effect, the Revised Constitution of the Philippine Bar Association was approved and it provided that the Association "adopts and makes its own the Code of Ethics of the American Bar Association." (Martin, Legal and Judicial Ethics, Fifth Ed. p, 341).

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18 33 N.Y.S. 2d 733, 734. 19 JBL Reyes & RC Puno, Outline of Philippine Civil Law. Fourth Ed., Vol. I, p. 7 20 Article 12, Civil Code. 21 Patriarca vs. Orate, 7 Phil. 390, 395 (1907). 22 Art. 8, Civil Code 23 Art. 1830, Civil Code. 24 Art. 11, Civil Code. 25 Roscoe Pound, The Lawyer From Antiquity To Modern Times, (1953), pp. 9-10.

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G.R. No. 109248 July 3, 1995 GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO, JR., and BENJAMIN T. BACORRO, petitioners, vs. HON. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and JOAQUIN L. MISA,respondents.

VITUG, J.: The instant petition seeks a review of the decision rendered by the Court of Appeals, dated 26 February 1993, in CA-G.R. SP No. 24638 and No. 24648 affirming in toto that of the Securities and Exchange Commission ("SEC") in SEC AC 254. The antecedents of the controversy, summarized by respondent Commission and quoted at length by the appellate court in its decision, are hereunder restated. 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 on 18 September 1958, to change the firm [name] to ROSS, SELPH and CARRASCOSO; on 6 July 1965 . . . to ROSS, SELPH, SALCEDO, DEL ROSARIO, BITO & MISA; on 18 April 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 4 December 1972 to SALCEDO, DEL ROSARIO, BITO, MISA & LOZADA; on 11 March 1977 to DEL ROSARIO, BITO, MISA & LOZADA; on 7 June 1977 to BITO, MISA & LOZADA; on 19 December 1980, [Joaquin L. Misa] appellees Jesus B. Bito and Mariano M. Lozada associated themselves together, as senior partners with respondentsappellees Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin Bacorro, as junior partners. On February 17, 1988, petitioner-appellant wrote the respondents-appellees a letter stating: I am withdrawing and retiring from the firm of Bito, Misa and Lozada, effective at the end of this month. "I trust that the accountants will be instructed to make the proper liquidation of my participation in the firm." On the same day, petitioner-appellant wrote respondents-appellees another letter stating: "Further to my letter to you today, I would like to have a meeting with all of you with regard to the mechanics of liquidation, and more particularly, my interest in the two floors of this building. I would like to have this resolved soon because it has to do with my own plans." On 19 February 1988, petitioner-appellant wrote respondents-appellees another letter stating:

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"The partnership has ceased to be mutually satisfactory because of the working conditions of our employees including the assistant attorneys. All my efforts to ameliorate the below subsistence level of the pay scale of our employees have been thwarted by the other partners. Not only have they refused to give meaningful increases to the employees, even attorneys, are dressed down publicly in a loud voice in a manner that deprived them of their self-respect. The result of such policies is the formation of the union, including the assistant attorneys." On 30 June 1988, petitioner filed with this Commission's Securities Investigation and Clearing Department (SICD) a petition for dissolution and liquidation of partnership, docketed as SEC Case No. 3384 praying that the Commission: "1. Decree the formal dissolution and order the immediate liquidation of (the partnership of) Bito, Misa & Lozada; "2. Order the respondents to deliver or pay for petitioner's share in the partnership assets plus the profits, rent or interest attributable to the use of his right in the assets of the dissolved partnership; "3. Enjoin respondents from using the firm name of Bito, Misa & Lozada in any of their correspondence, checks and pleadings and to pay petitioners damages for the use thereof despite the dissolution of the partnership in the amount of at least P50,000.00; "4. Order respondents jointly and severally to pay petitioner attorney's fees and expense of litigation in such amounts as maybe proven during the trial and which the Commission may deem just and equitable under the premises but in no case less than ten (10%) per cent of the value of the shares of petitioner or P100,000.00; "5. Order the respondents to pay petitioner moral damages with the amount of P500,000.00 and exemplary damages in the amount of P200,000.00. "Petitioner likewise prayed for such other and further reliefs that the Commission may deem just and equitable under the premises." On 13 July 1988, respondents-appellees filed their opposition to the petition. On 13 July 1988, petitioner filed his Reply to the Opposition. On 31 March 1989, the hearing officer rendered a decision ruling that: "[P]etitioner'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." 1 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

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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. In its decision, dated 17 January 1990, the SEC held:
WHEREFORE, premises considered the appealed order of 31 March 1989 is hereby REVERSED insofar as it concludes that the partnership of Bito, Misa & Lozada has not been dissolved. The case is hereby REMANDED to the Hearing Officer for determination of the respective rights and obligations of the parties. 2

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. On 4 April 1991, 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. The parties filed with the appellate court separate appeals (docketed CA-G.R. SP No. 24638 and CA-G.R. SP No. 24648). 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. The Court of Appeals, finding no reversible error on the part of respondent Commission, AFFIRMED in toto the SEC decision and order appealed from. In fine, the appellate court held, per its decision of 26 February 1993, (a) that Atty. Misa's withdrawal from the partnership had changed the relation of the parties and inevitably caused the dissolution of the partnership; (b) that such withdrawal was not in bad faith; (c) that the liquidation should be to the extent of Attorney Misa's interest or participation in the partnership which could be computed and paid in the manner stipulated in the partnership agreement; (d) that the case should be remanded to the SEC Hearing Officer for the corresponding determination of the value of Attorney Misa's share in the partnership assets; and (e) that the appointment of a receiver was unnecessary as no sufficient proof had been shown to indicate that the partnership assets were in any such danger of being lost, removed or materially impaired. In this petition for review under Rule 45 of the Rules of Court, petitioners confine themselves to the following issues: 1. Whether or not the Court of Appeals has erred in holding that the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo) is a partnership at will; 2. 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; and 3. Whether or not the Court of Appeals has erred in holding that private respondent's demand for the dissolution of the partnership so that he can get a physical partition of partnership was not made in bad faith; to which matters we shall, accordingly, likewise limit ourselves.

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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 partnership 4 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 theright, 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 however, an agreement of the partners, like any other contract, is

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binding among them and normally takes precedence to the extent applicable over the Code's general provisions. We here take note of 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; provided, however, that with respect to the two (2) floors of office condominium which the partnership is now acquiring, consisting of the 5th and the 6th floors of the Alpap Building, 140 Alfaro Street, Salcedo Village, Makati, Metro Manila, their true value at the time of such death or retirement shall be determined by two (2) independent appraisers, one to be appointed (by the partnership and the other by the) retiring partner or the heirs of a deceased partner, as the case may be. In the event of any disagreement between the said appraisers a third appraiser will be appointed by them whose decision shall be final. The share of the retiring or deceased partner in the aforementioned two (2) floor office condominium shall be determined upon the basis of the valuation above mentioned which shall be paid monthly within the first ten (10) days of every month in installments of not less than P20,000.00 for the Senior Partners, P10,000.00 in the case of two (2) existing Junior Partners and P5,000.00 in the case of the new Junior Partner. 11

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 that thereby dissolves it. 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. 12Indeed, 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. WHEREFORE, the decision appealed from is AFFIRMED. No pronouncement on costs. SO ORDERED. Feliciano, Romero, Melo and Francisco, JJ., concur.

Footnotes 1 Rollo, pp. 53-56. 2 Rollo, p. 122. 3 Rollo, pp. 119-120. 4 Art. 1830 (1) (b), Civil Code. 5 See Art. 19, Civil Code.

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6 Art. 1830 (2), Civil Code; see also Rojas vs. Maglana, 192 SCRA 110. 7 As general, as distinguished from limited partners. 8 Art. 1828, Civil Code. 9 Art. 1829, Civil Code. 10 For instance, Art. 1837 of the Civil Code provides: "Art. 1837. When dissolution is caused in any way, except in contravention of the partnership agreement, each partner, as against his co-partners and all persons claiming through them in respect of their interests in the partnership, unless otherwise agreed, may have the partnership property applied to discharge its liabilities, and the surplus applied to pay in cash the net amount owning to the respective partners. But if dissolution is caused by expulsion of a partner, bona fide under the partnership agreement and if the expelled partner is discharged from all partnership liabilities, either by payment or agreement under the second paragraph of article 1835, he shall receive in cash only the net amount due him from the partnership." 11 Rollo, pp. 69-70. 12 Rojas v. Maglana, supra.

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G.R. No. L-49982 April 27, 1988 ELIGIO ESTANISLAO, JR., petitioner, vs. THE HONORABLE COURT OF APPEALS, REMEDIOS ESTANISLAO, EMILIO and LEOCADIO SANTIAGO,respondents. Agustin O. Benitez for petitioner. Benjamin C. Yatco for private respondents.

GANCAYCO, J.: By this petition for certiorari the Court is asked to determine if a partnership exists between members of the same family arising from their joint ownership of certain properties. Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the corner of Annapolis and Aurora Blvd., QuezonCity which were then being leased to the Shell Company of the Philippines Limited (SHELL). They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial investment of P 15,000.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots owned in common by them. A joint affidavit was executed by them on April 11, 1966 which was prepared byAtty. Democrito Angeles 1 They agreed to help their brother, petitioner herein, by allowing him to operate and manage the gasoline service station of the family. They negotiated with SHELL. For practical purposes and in order not to run counter to the company's policy of appointing only one dealer, it was agreed that petitioner would apply for the dealership. Respondent Remedios helped in managing the bussiness with petitioner from May 3, 1966 up to February 16, 1967. On May 26, 1966, the parties herein entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated that the P 15,000.00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners." 2 For sometime, the petitioner submitted financial statements regarding the operation of the business to private respondents, but therafter petitioner failed to render subsequent accounting. Hence through Atty. Angeles, a demand was made on petitioner to render an accounting of the profits. The financial report of December 31, 1968 shows that the business was able to make a profit of P 87,293.79 and that by the year ending 1969, a profit of P 150,000.00 was realized. 3 Thus, on August 25, 1970 private respondents filed a complaint in the Court of First Instance of Rizal against petitioner praying among others that the latter be ordered: 1. to execute a public document embodying all the provisions of the partnership agreement entered into between plaintiffs and defendant as provided in Article 1771 of the New Civil Code;

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2. to render a formal accounting of the business operation covering the period from May 6, 1966 up to December 21, 1968 and from January 1, 1969 up to the time the order is issued and that the same be subject to proper audit; 3. to pay the plaintiffs their lawful shares and participation in the net profits of the business in an amount of no less than P l50,000.00 with interest at the rate of 1% per month from date of demand until full payment thereof for the entire duration of the business; and 4. to pay the plaintiffs the amount of P 10,000.00 as attorney's fees and costs of the suit (pp. 13-14 Record on Appeal.) After trial on the merits, on October 15, 1975, Hon. Lino Anover who was then the temporary presiding judge of Branch IV of the trial court, rendered judgment dismissing the complaint and counterclaim and ordering private respondents to pay petitioner P 3,000.00 attorney's fee and costs. Private respondent filed a motion for reconsideration of the decision. On December 10, 1975, Hon. Ricardo Tensuan who was the newly appointed presiding judge of the same branch, set aside the aforesaid derision and rendered another decision in favor of said respondents. The dispositive part thereof reads as follows: WHEREFORE, the Decision of this Court dated October 14, 1975 is hereby reconsidered and a new judgment is hereby rendered in favor of the plaintiffs and as against the defendant: (1) Ordering the defendant to execute a public instrument embodying all the provisions of the partnership agreement entered into between plaintiffs and defendant as provided for in Article 1771, Civil Code of the Philippines; (2) Ordering the defendant to render a formal accounting of the business operation from April 1969 up to the time this order is issued, the same to be subject to examination and audit by the plaintiff, (3) Ordering the defendant to pay plaintiffs their lawful shares and participation in the net profits of the business in the amount of P 150,000.00, with interest thereon at the rate of One (1%) Per Cent per month from date of demand until full payment thereof; (4) Ordering the defendant to pay the plaintiffs the sum of P 5,000.00 by way of attorney's fees of plaintiffs' counsel; as well as the costs of suit. (pp. 161-162. Record on Appeal). Petitioner then interposed an appeal to the Court of Appeals enumerating seven (7) errors allegedly committed by the trial court. In due course, a decision was rendered by the Court of Appeals on November 28,1978 affirming in toto the decision of the lower court with costs against petitioner. * A motion for reconsideration of said decision filed by petitioner was denied on January 30, 1979. Not satisfied therewith, the petitioner now comes to this court by way of this petition for certiorari alleging that the respondent court erred: 1. In interpreting the legal import of the Joint Affidavit (Exh. 'A') vis-a-vis the Additional Cash Pledge Agreement (Exhs. "B-2","6", and "L"); and

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2. In declaring that a partnership was established by and among the petitioner and the private respondents as regards the ownership and or operation of the gasoline service station business. Petitioner relies heavily on the provisions of the Joint Affidavit of April 11, 1966 (Exhibit A) and the Additional Cash Pledge Agreement of May 20, 1966 (Exhibit 6) which are herein reproduced(a) The joint Affidavit of April 11, 1966, Exhibit A reads: (1) That we are the Lessors of two parcels of land fully describe in Transfer Certificates of Title Nos. 45071 and 71244 of the Register of Deeds of Quezon City, in favor of the LESSEE - SHELL COMPANY OF THE PHILIPPINES LIMITED a corporation duly licensed to do business in the Philippines; (2) That we have requested the said SHELL COMPANY OF THE PHILIPPINE LIMITED advanced rentals in the total amount of FIFTEEN THOUSAND PESOS (P l5,000.00) Philippine Currency, so that we can use the said amount to augment our capital investment in the operation of that gasoline station constructed ,by the said company on our two lots aforesaid by virtue of an outstanding Lease Agreement we have entered into with the said company; (3) That the and SHELL COMPANY OF THE PHILIPPINE LIMITED out of its benevolence and desire to help us in aumenting our capital investment in the operation of the said gasoline station, has agreed to give us the said amount of P 15,000.00, which amount will partake the nature of ADVANCED RENTALS; (4) That we have freely and voluntarily agreed that upon receipt of the said amount of FIFTEEN THOUSAND PESOS (P l6,000.00) from he SHELL COMPANY OF THE PHILIPPINES LIMITED, the said sum as ADVANCED RENTALS to us be applied as monthly rentals for the sai two lots under our Lease Agreement starting on the 25th of May, 1966 until such time that the said of P 15,000.00 be applicable, which time to our estimate and one-half months from May 25, 1966 or until the 10th of October, 1966 more or less; (5) That we have likewise agreed among ourselves that the SHELL COMPANY OF THE PHILIPPINES LIMITED execute an instrument for us to sign embodying our conformity that the said amount that it will generously grant us as requested be applied as ADVANCED RENTALS; and (6) FURTHER AFFIANTS SAYETH NOT., (b) The Additional Cash Pledge Agreement of May 20,1966, Exhibit 6, is as follows: WHEREAS, under the lease Agreement dated 13th November, 1963 (identified as doc. Nos. 491 & 1407, Page Nos. 99 & 66, Book Nos. V & III, Series of 1963 in the Notarial Registers of Notaries Public Rosauro Marquez, and R.D. Liwanag, respectively) executed in favour of SHELL by the herein CO-OWNERS and another Lease Agreement dated 19th March 1964 . . . also executed in favour of SHELL by CO-OWNERS Remedios and MARIA ESTANISLAO for the lease of adjoining portions of two parcels of land at Aurora Blvd./ Annapolis, Quezon City, the CO

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OWNERS RECEIVE a total monthly rental of PESOS THREE THOUSAND THREE HUNDRED EIGHTY TWO AND 29/100 (P 3,382.29), Philippine Currency; WHEREAS, CO-OWNER Eligio Estanislao Jr. is the Dealer of the Shell Station constructed on the leased land, and as Dealer under the Cash Pledge Agreement dated llth May 1966, he deposited to SHELL in cash the amount of PESOS TEN THOUSAND (P 10,000), Philippine Currency, to secure his purchase on credit of Shell petroleum products; . . . WHEREAS, said DEALER, in his desire, to be granted an increased the limit up to P 25,000, has secured the conformity of his CO-OWNERS to waive and assign to SHELL the total monthly rentals due to all of them to accumulate the equivalent amount of P 15,000, commencing 24th May 1966, this P 15,000 shall be treated as additional cash deposit to SHELL under the same terms and conditions of the aforementioned Cash Pledge Agreement dated llth May 1966. NOW, THEREFORE, for and in consideration of the foregoing premises,and the mutual covenants among the CO-OWNERS herein and SHELL, said parties have agreed and hereby agree as follows: l. The CO-OWNERS dohere by waive in favor of DEALER the monthly rentals due to all CO-OWNERS, collectively, under the above describe two Lease Agreements, one dated 13th November 1963 and the other dated 19th March 1964 to enable DEALER to increase his existing cash deposit to SHELL, from P 10,000 to P 25,000, for such purpose, the SHELL CO-OWNERS and DEALER hereby irrevocably assign to SHELL the monthly rental of P 3,382.29 payable to them respectively as they fall due, monthly, commencing 24th May 1966, until such time that the monthly rentals accumulated, shall be equal to P l5,000. 2. The above stated monthly rentals accumulated shall be treated as additional cash deposit by DEALER to SHELL, thereby in increasing his credit limit from P 10,000 to P 25,000. This agreement, therefore, cancels and supersedes the Joint affidavit dated 11 April 1966 executed by the CO-OWNERS. 3. Effective upon the signing of this agreement, SHELL agrees to allow DEALER to purchase from SHELL petroleum products, on credit, up to the amount of P 25,000. 4. This increase in the credit shall also be subject to the same terms and conditions of the above-mentioned Cash Pledge Agreement dated llth May 1966. (Exhs. "B-2," "L," and "6"; emphasis supplied) In the aforesaid Joint Affidavit of April 11, 1966 (Exhibit A), it is clearly stipulated by the parties that the P 15,000.00 advance rental due to them from SHELL shall augment their "capital investment" in the operation of the gasoline station, which advance rentals shall be credited as rentals from May 25, 1966 up to four and one-half months or until 10 October 1966, more or less covering said P 15,000.00. In the subsequent document entitled "Additional Cash Pledge Agreement" above reproduced (Exhibit 6), the private respondents and petitioners assigned to SHELL the monthly rentals due them commencing the 24th of May 1966 until such time that the monthly rentals accumulated equal P 15,000.00 which private respondents agree to be a cash deposit of petitioner in favor of SHELL to increase his credit limit as dealer. As above-stated it provided therein that "This agreement, 28

therefore, cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the COOWNERS." Petitioner contends that because of the said stipulation cancelling and superseding that previous Joint Affidavit, whatever partnership agreement there was in said previous agreement had thereby been abrogated. We find no merit in this argument. Said cancelling provision was necessary for the Joint Affidavit speaks of P 15,000.00 advance rentals starting May 25, 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24, 1966. There is, therefore, a duplication of reference to the P 15,000.00 hence the need to provide in the subsequent document that it "cancels and supersedes" the previous one. True it is that in the latter document, it is silent as to the statement in the Joint Affidavit that the P 15,000.00 represents the "capital investment" of the parties in the gasoline station business and it speaks of petitioner as the sole dealer, but this is as it should be for in the latter document SHELL was a signatory and it would be against its policy if in the agreement it should be stated that the business is a partnership with private respondents and not a sole proprietorship of petitioner. Moreover other evidence in the record shows that there was in fact such partnership agreement between the parties. This is attested by the testimonies of private respondent Remedies Estanislao and Atty. Angeles. Petitioner submitted to private respondents periodic accounting of the business. 4 Petitioner gave a written authority to private respondent Remedies Estanislao, his sister, to examine and audit the books of their "common business' aming negosyo). 5 Respondent Remedios assisted in the running of the business. There is no doubt that the parties hereto formed a partnership when they bound themselves to contribute money to a common fund with the intention of dividing the profits among themselves. 6 The sole dealership by the petitioner and the issuance of all government permits and licenses in the name of petitioner was in compliance with the afore-stated policy of SHELL and the understanding of the parties of having only one dealer of the SHELL products. Further, the findings of facts of the respondent court are conclusive in this proceeding, and its conclusion based on the said facts are in accordancewith the applicable law. WHEREFORE, the judgment appealed from is AFFIRMED in toto with costs against petitioner. This decision is immediately executory and no motion for extension of time to file a motion for reconsideration shag beentertained. SO ORDERED. Narvasa, Cruz and Grio-Aquino, JJ., concur.

Footnotes 1 Exhibit A. 2 Exhibits 6 and 6-A. 3 Exhibit D. * Penned by then Justice Ramon G. Gaviola, Jr., and concurred in by Justices B.S. de la Fuente and Edgardo Paras, Fourth Division, Court of Appeals.

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4 Exhibits D, D-1, D-2, D-3 and D-4. 5 Exhibit E. 6 Article 1767, New Civil Code.

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