Case Summary (G.R. No. 109248)
Petitioner
Gregorio F. Ortega, Tomas O. del Castillo, Jr., and Benjamin T. Bacorro, as junior partners in the firm formerly known as Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo).
Respondents
• Securities and Exchange Commission (SEC) Hearing Officer and en banc.
• Hon. Court of Appeals.
• Atty. Joaquin L. Misa, withdrawing partner.
Key Dates
• 4 January 1937 – Original firm registered.
• 19 August 1948 – Amended articles establishing duration “so long as mutually satisfactory.”
• 17–19 February 1988 – Misa’s written notices of withdrawal and demands for liquidation mechanics.
• 30 June 1988 – SEC petition for dissolution and liquidation filed (SEC Case No. 3384).
• 31 March 1989 – SEC Hearing Officer rules no dissolution on withdrawal.
• 17 January 1990 – SEC en banc reverses, holds partnership dissolved by withdrawal.
• 26 February 1993 – Court of Appeals affirms SEC decision in toto.
• 3 July 1995 – Decision by the Supreme Court.
Applicable Law
• 1987 Philippine Constitution (granting SEC authority over corporate and partnership registrations).
• Civil Code (Arts. 1828–1830, 1837; Art. 19 on bad faith).
• Partnership agreement (Amended Articles of 19 August 1948).
Antecedent Partnership History
The firm underwent successive name changes reflecting entry and withdrawal of partners. The 1948 amended articles provided for continuation “so long as mutually satisfactory” and for liquidation upon death or retirement, including a special appraisal and installment scheme for the two-floor condominium asset.
Withdrawal and Petition for Dissolution
On 17 February 1988, Atty. Misa notified his retirement effective month-end and sought a meeting to arrange liquidation, particularly concerning the two-floor condominium. On 19 February he cited untenable working conditions and employee unrest. On 30 June 1988 he filed with the SEC a petition for formal dissolution, liquidation of assets, payment of his share, injunction against use of the firm name, attorney’s fees, and damages.
SEC Ruling and Reconsideration
The SEC Hearing Officer (31 March 1989) held that withdrawal did not dissolve the firm and ordered adherence to liquidation provisions of the partnership agreement. On appeal, the en banc SEC (17 January 1990) reversed, ruling that as a partnership at will any partner’s withdrawal effects dissolution, remanding to determine rights and obligations. Reconsideration was denied (4 April 1991), and receiver petition was rejected.
Court of Appeals Judgment
The CA affirmed the SEC in toto (26 February 1993), holding that:
- The firm is a partnership at will;
- Misa’s withdrawal, irrespective of motive, dissolved the partnership;
- Liquidation must conform to the partnership agreement’s valuation and payment scheme; and
- No receiver was necessary absent proof of threatened dissipation of assets.
Issues on Review
- Whether the firm is a partnership at will.
- Whether withdrawal by Misa dissolved the partnership regardless of good or bad faith.
- Whether Misa’s demand for physical partition was made in good faith.
Partnership at Will and Right to Dissolve
A partnership without a fixed term is one at will. The “Duration” clause merely contemplates continuation so long as partners agree; the “Purpose” clause is not a limited-term undertaking. Under Civil Code Art. 1830(2), any partner may dissolve a partnership at will by ceasing association, although bad f
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Facts and Antecedents
- The law firm of Ross, Lawrence, Selph & Carrascoso was registered in the Mercantile Registry on January 4, 1937 and reconstituted with the SEC on August 4, 1948.
- Subsequent amendments to the articles of partnership changed the firm’s name multiple times (1958, 1965, April 1972, December 1972, March 1977, June 1977) until “Bito, Misa & Lozada.”
- On December 19, 1980, Jesus B. Bito and Mariano M. Lozada associated as senior partners with Ortega, Del Castillo, Jr., and Bacorro as junior partners.
Withdrawal and Correspondence of Attorney Misa
- February 17, 1988: Misa wrote he was “withdrawing and retiring from the firm of Bito, Misa & Lozada” effective month-end and requested liquidation of his participation.
- Same day: Misa requested a meeting regarding mechanics of liquidation, especially his interest in two floors of office condominium.
- February 19, 1988: Misa alleged partnership ceased to be mutually satisfactory due to working conditions and employees’ pay, leading to union formation.
Petition for Dissolution and Liquidation Before the SEC
- June 30, 1988: Misa filed SEC Case No. 3384 praying for:
• Formal dissolution and immediate liquidation of the partnership
• Payment for petitioner’s share plus profits, rent or interest
• Injunction against use of firm name and damages of at least ₱50,000
• Attorney’s fees of not less than 10% of petitioner’s share or ₱100,000
• Moral damages of ₱500,000 and exemplary damages of ₱200,000
• Other reliefs deemed just and equitable - July 13, 1988: Respondents filed opposition; Misa filed reply on same day.
SEC Hearing Officer Decision
- March 31, 1989: Ruling that Misa’s withdrawal did not dissolve the partnership and parties must abide by their agreement on liquidation mechanics.
SEC En Banc Ruling
- January 17, 1990: Reversed the Hearing Officer, holding that as a partnership at will, withdrawal by any partner—good