Dead Law Partners

The bad habit of some big law firms of using the prominent names of their deceased
partners, for law firm marketing purposes, was ended by the Philippine Supreme Court
in the old case of PETITION FOR AUTHORITY TO CONTINUE USE OF THE FIRM NAME,
etc., et. al., En Banc, July 30, 1979, where the Court advised the petitioners to drop
the names "SYCIP" and "OZAETA" from their respective firm names, i.e., "Sycip, Salazar,
Feliciano, Hernandez and Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and Reyes".
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. We
should note the important pronouncements of the Court in the said case. Art. 1815 of
the Civil Code (partnership) provides that 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. 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. " 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. In regards to the last paragraph of Article
1840 of the Civil Code cited by petitioners, the same does not apply in the instant case.
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. Article 1840 treats more of a
commercial partnership with a good will to protect rather than of a professional
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. 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, since 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). On the other hand, a professional partnership

the reputation of which depends on 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 agreement relating to good
will as an asset. 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. A partnership for the practice of law is not a partnership formed for the
purpose of carrying on trade or business or of holding property." Thus, it has been stated
that "the use of a nom de plume, assumed or trade name in law practice is improper.
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. 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. It is limited to persons of good moral character with
special qualifications duly ascertained and certified. 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." 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. 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. 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. 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."

G.R. No. 97212 June 30, 1993 BENJAMIN YU, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and JADE MOUNTAIN PRODUCTS COMPANY LIMITED,
WILLY CO, RHODORA D. BENDAL, LEA BENDAL, CHIU SHIAN JENG and CHEN
HO-FU, respondents.

Petitioner Benjamin Yu was formerly the Assistant General Manager of the marble
quarrying and export business operated by a registered partnership with the firm name
of "Jade Mountain Products Company Limited" ("Jade Mountain"). The partnership was
originally organized on 28 June 1984 with Lea Bendal and Rhodora Bendal as general
partners and Chin Shian Jeng, Chen Ho-Fu and Yu Chang, all citizens of the Republic
of China (Taiwan), as limited partners. The partnership business consisted of exploiting
a marble deposit found on land owned by the Sps. Ricardo and Guillerma Cruz, situated
in Bulacan Province, under a Memorandum Agreement dated 26 June 1984 with the
Cruz spouses. 1 The partnership had its main office in Makati, Metropolitan Manila.
Benjamin Yu was hired by virtue of a Partnership Resolution dated 14 March 1985, as
Assistant General Manager with a monthly salary of P4,000.00. According to petitioner
Yu, however, he actually received only half of his stipulated monthly salary, since he
had accepted the promise of the partners that the balance would be paid when the firm
shall have secured additional operating funds from abroad. Benjamin Yu actually
managed the operations and finances of the business; he had overall supervision of the
workers at the marble quarry in Bulacan and took charge of the preparation of papers
relating to the exportation of the firm's products. Sometime in 1988, without the
knowledge of Benjamin Yu, the general partners Lea Bendal and Rhodora Bendal sold
and transferred their interests in the partnership to private respondent Willy Co and to
one Emmanuel Zapanta. Mr. Yu Chang, a limited partner, also sold and transferred his
interest in the partnership to Willy Co. Between Mr. Emmanuel Zapanta and himself,
private respondent Willy Co acquired the great bulk of the partnership interest. The
partnership now constituted solely by Willy Co and Emmanuel Zapanta continued to
use the old firm name of Jade Mountain, though they moved the firm's main office from
Makati to Mandaluyong, Metropolitan Manila. A Supplement to the Memorandum
Agreement relating to the operation of the marble quarry was entered into with the Cruz
spouses in February of 1988. 2 The actual operations of the business enterprise
continued as before. All the employees of the partnership continued working in the
business, all, save petitioner Benjamin Yu as it turned out. On 16 November 1987,
having learned of the transfer of the firm's main office from Makati to Mandaluyong,
petitioner Benjamin Yu reported to the Mandaluyong office for work and there met
private respondent Willy Co for the first time. Petitioner was informed by Willy Co that
the latter had bought the business from the original partners and that it was for him to
decide whether or not he was responsible for the obligations of the old partnership,
including petitioner's unpaid salaries. Petitioner was in fact not allowed to work
anymore in the Jade Mountain business enterprise. His unpaid salaries remained
unpaid. 3 On 21 December 1988. Benjamin Yu filed a complaint for illegal dismissal
and recovery of unpaid salaries accruing from November 1984 to October 1988, moral
and exemplary damages and attorney's fees, against Jade Mountain, Mr. Willy Co and
the other private respondents. The partnership and Willy Co denied petitioner's charges,
contending in the main that Benjamin Yu was never hired as an employee by the present
or new partnership. 4 In due time, Labor Arbiter Nieves Vivar-De Castro rendered a
decision holding that petitioner had been illegally dismissed. The Labor Arbiter decreed
his reinstatement and awarded him his claim for unpaid salaries, backwages and
attorney's fees. 5 On appeal, the National Labor Relations Commission ("NLRC")
reversed the decision of the Labor Arbiter and dismissed petitioner's complaint in a

Resolution dated 29 November 1990. The NLRC held that a new partnership consisting
of Mr. Willy Co and Mr. Emmanuel Zapanta had bought the Jade Mountain business,
that the new partnership had not retained petitioner Yu in his original position as
Assistant General Manager, and that there was no law requiring the new partnership to
absorb the employees of the old partnership. Benjamin Yu, therefore, had not been
illegally dismissed by the new partnership which had simply declined to retain him in
his former managerial position or any other position. Finally, the NLRC held that
Benjamin Yu's claim for unpaid wages should be asserted against the original members
of the preceding partnership, but these though impleaded had, apparently, not been
served with summons in the proceedings before the Labor Arbiter. 6 Petitioner Benjamin
Yu is now before the Court on a Petition for Certiorari, asking us to set aside and annul
the Resolution of the NLRC as a product of grave abuse of discretion amounting to lack
or excess of jurisdiction. The basic contention of petitioner is that the NLRC has
overlooked the principle that a partnership has a juridical personality separate and
distinct from that of each of its members. Such independent legal personality subsists,
petitioner claims, notwithstanding changes in the identities of the partners.
Consequently, the employment contract between Benjamin Yu and the partnership Jade
Mountain could not have been affected by changes in the latter's membership. 7 Two
(2) main issues are thus posed for our consideration in the case at bar: (1) whether the
partnership which had hired petitioner Yu as Assistant General Manager had been
extinguished and replaced by a new partnerships composed of Willy Co and Emmanuel
Zapanta; and (2) if indeed a new partnership had come into existence, whether petitioner
Yu could nonetheless assert his rights under his employment contract as against the
new partnership. In respect of the first issue, we agree with the result reached by the
NLRC, that is, that the legal effect of the changes in the membership of the partnership
was the dissolution of the old partnership which had hired petitioner in 1984 and the
emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987. The
applicable law in this connection of which the NLRC seemed quite unaware is
found in the Civil Code provisions relating to partnerships. Article 1828 of the Civil Code
provides as follows: Art. 1828. The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be associated in the carrying
on as distinguished from the winding up of the business. (Emphasis supplied) Article
1830 of the same Code must also be noted: Art. 1830. Dissolution is caused: (1) without
violation of the agreement between the partners; xxx xxx xxx (b) by the express will of
any partner, who must act in good faith, when no definite term or particular undertaking
is specified; xxx xxx xxx (2) in contravention of the agreement between the partners,
where the circumstances do not permit a dissolution under any other provision of this
article, by the express will of any partner at any time; xxx xxx xxx (Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests
(amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel
Zapanta. The record does not show what happened to the remaining 18% of the original
partnership interest. The acquisition of 82% of the partnership interest by new partners,
coupled with the retirement or withdrawal of the partners who had originally owned
such 82% interest, was enough to constitute a new partnership. The occurrence of
events which precipitate the legal consequence of dissolution of a partnership do not,
however, automatically result in the termination of the legal personality of the old

partnership. Article 1829 of the Civil Code states that: [o]n dissolution the partnership
is not terminated, but continues until the winding up of partnership affairs is completed.
In the ordinary course of events, the legal personality of the expiring partnership persists
for the limited purpose of winding up and closing of the affairs of the partnership. In the
case at bar, it is important to underscore the fact that the business of the old
partnership was simply continued by the new partners, without the old partnership
undergoing the procedures relating to dissolution and winding up of its business affairs.
In other words, the new partnership simply took over the business enterprise owned by
the preceeding partnership, and continued using the old name of Jade Mountain
Products Company Limited, without winding up the business affairs of the old
partnership, paying off its debts, liquidating and distributing its net assets, and then
re-assembling the said assets or most of them and opening a new business enterprise.
There were, no doubt, powerful tax considerations which underlay such an informal
approach to business on the part of the retiring and the incoming partners. It is not,
however, necessary to inquire into such matters. What is important for present purposes
is that, under the above described situation, not only the retiring partners (Rhodora
Bendal, et al.) but also the new partnership itself which continued the business of the
old, dissolved, one, are liable for the debts of the preceding partnership. In Singson, et
al. v. Isabela Saw Mill, et al, 8 the Court held that under facts very similar to those in
the case at bar, a withdrawing partner remains liable to a third party creditor of the old
partnership. 9 The liability of the new partnership, upon the other hand, in the set of
circumstances obtaining in the case at bar, is established in Article 1840 of the Civil
Code which reads as follows: Art. 1840. In the following cases creditors of the dissolved
partnership are also creditors of the person or partnership continuing the business: (1)
When any new partner is admitted into an existing partnership, or when any partner
retires and assigns (or the representative of the deceased partner assigns) his rights in
partnership property to two or more of the partners, or to one or more of the partners
and one or more third persons, if the business is continued without liquidation of the
partnership affairs; (2) When all but one partner retire and assign (or the representative
of a deceased partner assigns) their rights in partnership property to the remaining
partner, who continues the business without liquidation of partnership affairs, either
alone or with others; (3) When any Partner retires or dies and the business of the
dissolved partnership is continued as set forth in Nos. 1 and 2 of this Article, with the
consent of the retired partners or the representative of the deceased partner, but without
any assignment of his right in partnership property; (4) When all the partners or their
representatives assign their rights in partnership property to one or more third persons
who promise to pay the debts and who continue the business of the dissolved
partnership; (5) When any partner wrongfully causes a dissolution and remaining
partners continue the business under the provisions of article 1837, second paragraph,
No. 2, either alone or with others, and without liquidation of the partnership affairs; (6)
When a partner is expelled and the remaining partners continue the business either
alone or with others without liquidation of the partnership affairs; The liability of a third
person becoming a partner in the partnership continuing the business, under this
article, to the creditors of the dissolved partnership shall be satisfied out of the
partnership property only, unless there is a stipulation to the contrary. When the
business of a partnership after dissolution is continued under any conditions set forth

in this article the creditors of the retiring or deceased partner or the representative of
the deceased partner, have a prior right to any claim of the retired partner or the
representative of the deceased partner against the person or partnership continuing the
business on account of the retired or deceased partner's interest in the dissolved
partnership or on account of any consideration promised for such interest or for his
right in partnership property. Nothing in this article shall be held to modify any right of
creditors to set assignment on the ground of fraud. xxx xxx xxx (Emphasis supplied)
Under Article 1840 above, creditors of the old Jade Mountain are also creditors of the
new Jade Mountain which continued the business of the old one without liquidation of
the partnership affairs. Indeed, a creditor of the old Jade Mountain, like petitioner
Benjamin Yu in respect of his claim for unpaid wages, is entitled to priority vis-a-vis any
claim of any retired or previous partner insofar as such retired partner's interest in the
dissolved partnership is concerned. It is not necessary for the Court to determine under
which one or mare of the above six (6) paragraphs, the case at bar would fall, if only
because the facts on record are not detailed with sufficient precision to permit such
determination. It is, however, clear to the Court that under Article 1840 above, Benjamin
Yu is entitled to enforce his claim for unpaid salaries, as well as other claims relating to
his employment with the previous partnership, against the new Jade Mountain. It is at
the same time also evident to the Court that the new partnership was entitled to appoint
and hire a new general or assistant general manager to run the affairs of the business
enterprise take over. An assistant general manager belongs to the most senior ranks of
management and a new partnership is entitled to appoint a top manager of its own
choice and confidence. The non-retention of Benjamin Yu as Assistant General Manager
did not therefore constitute unlawful termination, or termination without just or
authorized cause. We think that the precise authorized cause for termination in the case
at bar was redundancy. 10 The new partnership had its own new General Manager,
apparently Mr. Willy Co, the principal new owner himself, who personally ran the
business of Jade Mountain. Benjamin Yu's old position as Assistant General Manager
thus became superfluous or redundant. 11 It follows that petitioner Benjamin Yu is
entitled to separation pay at the rate of one month's pay for each year of service that he
had rendered to the old partnership, a fraction of at least six (6) months being
considered as a whole year. While the new Jade Mountain was entitled to decline to
retain petitioner Benjamin Yu in its employ, we consider that Benjamin Yu was very
shabbily treated by the new partnership. The old partnership certainly benefitted from
the services of Benjamin Yu who, as noted, previously ran the whole marble quarrying,
processing and exporting enterprise. His work constituted value-added to the business
itself and therefore, the new partnership similarly benefitted from the labors of Benjamin
Yu. It is worthy of note that the new partnership did not try to suggest that there was
any cause consisting of some blameworthy act or omission on the part of Mr. Yu which
compelled the new partnership to terminate his services. Nonetheless, the new Jade
Mountain did not notify him of the change in ownership of the business, the relocation
of the main office of Jade Mountain from Makati to Mandaluyong and the assumption
by Mr. Willy Co of control of operations. The treatment (including the refusal to honor
his claim for unpaid wages) accorded to Assistant General Manager Benjamin Yu was
so summary and cavalier as to amount to arbitrary, bad faith treatment, for which the
new Jade Mountain may legitimately be required to respond by paying moral damages.

This Court, exercising its discretion and in view of all the circumstances of this case,
believes that an indemnity for moral damages in the amount of P20,000.00 is proper
and reasonable. In addition, we consider that petitioner Benjamin Yu is entitled to
interest at the legal rate of six percent (6%) per annum on the amount of unpaid wages,
and of his separation pay, computed from the date of promulgation of the award of the
Labor Arbiter. Finally, because the new Jade Mountain compelled Benjamin Yu to resort
to litigation to protect his rights in the premises, he is entitled to attorney's fees in the
amount of ten percent (10%) of the total amount due from private respondent Jade
Mountain. WHEREFORE, for all the foregoing, the Petition for Certiorari is GRANTED
DUE COURSE, the Comment filed by private respondents is treated as their Answer to
the Petition for Certiorari, and the Decision of the NLRC dated 29 November 1990 is
hereby NULLIFIED and SET ASIDE. A new Decision is hereby ENTERED requiring
private respondent Jade Mountain Products Company Limited to pay to petitioner
Benjamin Yu the following amounts: (a) for unpaid wages which, as found by the Labor
Arbiter, shall be computed at the rate of P2,000.00 per month multiplied by thirty-six
(36) months (November 1984 to December 1987) in the total amount of P72,000.00; (b)
separation pay computed at the rate of P4,000.00 monthly pay multiplied by three (3)
years of service or a total of P12,000.00; (c) indemnity for moral damages in the amount
of P20,000.00; (d) six percent (6%) per annum legal interest computed on items (a) and
(b) above, commencing on 26 December 1989 and until fully paid; and (e) ten percent
(10%) attorney's fees on the total amount due from private respondent Jade Mountain.
Costs against private respondents. SO ORDERED. Bidin, Davide, Jr., Romero and Melo,
JJ., concur. # Footnotes 1 Rollo, pp. 11, 28, 31, 35 and 43. 2 Id., pp. 31, 43 and 68. 3
Id., pp. 36 and 44. 4 Id., pp. 40-41. 5 Id., pp. 36-38. 6 Id., pp. 45-46. 7 Id., pp. 9-10. 8
88 SCRA 623 (1979). 9 88 SCRA 642-643. 10 Art. 283. Closure of establishment and
reduction of personnel. The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this
title, by serving written notice on the workers and the Ministry of Labor and Employment
at least one (1) month before the intended date thereof. In case of termination due to
the installation of labor-saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of retrenchment
to prevent losses or in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half () month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (This provision is identical with that existing in 1987,
except that the provision was numerically designated in 1987 as "Article 284"), Labor
Code. 11 See, in this connection, Wiltshire File Co., Inc. v. National Labor Relations
Commission, et al., 193 SCRA 665 (1991).