B2022 REPORTS ANNOTATED
Ortega v CA
I. Recit-ready summary
The law firm of ‘BITO, MISA, & LOZADA’ was duly formed and
registered with the SEC. One of their partners, Atty. Misa, wrote several
letters expressing his wish to retire and withdraw from the firm, requesting
the liquidation of their participation. However, the hearing officer rendered
a decision ruling that the petitioner’s withdrawal from the law firm didn’t
dissolve the law partnership. On appeal, SEC en banc reversed the ruling
and held that the withdrawal of Misa had dissolved the partnership.
The main issues of the case are: (1) WON the partnership is at will (YES, a
partnership at will doesn’t fix its terms, such is the case at hand), (2) WON
the withdrawal of Misa dissolved the partnership regardless of good faith or
bad faith (YES, one must act in good faith in dissolving a partnership even
if the attendance of bad faith doesn’t prevent the dissolution, it can result in
liability for damages), (3) WON Misa’s demand for the dissolution of the
partnership so he can get a physical partition of the partnership is made in
bad faith. (NO, Misa didn’t act in bad faith. SC holds that it wouldn’t be
right to expect a partner to remain in a partnership under an atmosphere of
animosity; nor against their will.)
II. Facts of the case goodcoffeesmile
‘ROSS, LAWRENCE, SELPH, and CARRASCOSO’ is a law firm
registered with the SEC. The SEC records show that they had amendments
to their Articles of Partnership to change their name to ‘ROSS, SELPH, and
CARRASCOSO,’ then to ‘ROSS, SELPH, SALCEDO, DEL ROSARIO,
BITO & MISA,’ then to ‘SALCEDO, DEL ROSARIO, BITO, MISA, &
LOZADA,’ then to ‘DEL ROSARIO, BITO, MISO & LOZADA,’ and
finally, ‘BITO, MISA, & LOZADA’ Finally, Bito and Lozada associated
themselves together as senior partners with Ortega, Del Castillo, Bacorro as
junior partners.
On Feb 1988, Atty. Misa wrote to the partners, saying that he is
withdrawing and retiring from the firm. He wished to have the proper
liquidation of their participation in the firm. On the same day, Misa wrote
another letter, asking for a meeting regarding the liquidation, and the claim
of ownership over two floors of the building. Two days later, he sent
another letter, expressing that the partnership has ceased to be mutually
G.R. NO 109248
ARTICLE; TOPIC OF CASE: Partnership, Assignment of share does not make assignee a partner
July 3, 1995
Ortega v CA
satisfactory of the working conditions of. their employees including the
assistant attorneys. He expressed his disapproval of the below subsistence
level of their employee’s pay scale thwarted by the other partners. He also
mentioned that the emplyees and even attorneys are dressed down publicly.
Petitioner then filed a petition for the dissolution and liquidation of
partnership with the Securities Investigation and Clearing Department. The
hearing officer rendered a decision ruling that the petitioner’s withdrawal
from the law firm didn’t dissolve the law partnership. On appeal, SEC en
banc reversed the ruling and held that the withdrawal of Misa had dissolved
the partnership. They held that being a persnhip at will, the law firm could
be dissolved by any partner, at anytijme, regardless of good faith or bad
faith since no partner can be forced to continue in a partnership against his
will. SEC en banc remanded the case back to the hearing officer.
The case was eventually brought up to the CA. During its pendency,
Bito and Lozada died. Eventually, the CA affirmed the decision of the SEC:
that Misa’s withdrawal changed the relation of the parties, dissolved their
partnership, that there was no bad faith; that the liquidation should be to the
extent of MIsa’s participation and that the case should be remanded back to
SEC to determine the value.
III. Issue/s
1. WON the partnership is a partnership at will. YES
2. WON the withdrawal of the Misa dissolved the partnership
regardless of good or bad faith. YES
3. WON Misa’s demand for the dissolution of the partnership so he
can get a physical partition of the partnership is made in bad faith.
NO.
IV. Ratio/Legal Basis
Partnership is at will
A partnership at will is one that doesn’t fix its terms.
Here, the law firm’s partnership agreement doesn’t provide for a specified
period or undertaking. The “Duration” clause simply states that “the
partnership shall continue so long as mutually satisfactory and upon the
PONENTE: Vitug, J.
DIGEST MAKER: Alec.
 B2022 REPORTS ANNOTATED
Ortega v CA
death or legal incapacity of one of the partners, shall be continued by the
surviving partners.
Contrary to the hearing officer’s position that the undertaking is
specified in the Purpose clause in paragraph 2 of the Amended Articles of
partnership (see notes for the clause), SC held that the “purpose” of the
partnership is not a specific undertaking referred to in the law. Otherwise,
all partnerships, which must necessarily have a purpose, would be
considered a partnership for a definite undertaking. If this were the case,
there wouldn’t even be a need to provide for articles on partnership at will
as none would so exist. What the law contemplates is a specific
undertaking or project which has a definite or definable period of
completion.
Good faith or bad faith
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. Its continued existence is dependent on the mutual
resolve of the partners and their capability of giving it. Thus, one of the
partners may at his sole pleasure dictate the dissolution of the partnership.
He must act in good faith. Even if the attendance of bad faith doesn’t
prevent the dissolution, it can result in liability for damages. Delectus
personae allows them to have the power (not the right) to dissolve the
partnership. Thus, if done in bad faith, he may be liable for damages.
Dissolution of partnership
The dissolution of a partnership is the change in the relation of the parties,
caused by any partner ceasing to be associated in the partnership. This is
different from the mere winding up of a business. Upon dissolution, the
partnership continues and its legal personality is retained until the complete
winding up of the business.
Here, the court holds that the term “retirement” in the Articles of
Partnership must have been used in a generic sense to mean the dissociation
by a partner, inclusive of resignation and withdrawal from the partnership.
Misa didn’t act in bad faith
SC holds that it wouldn’t be right to expect a partner to remain in a
partnership under an atmosphere of animosity; nor against their will. As
long as the reason for withdrawal of a partner is not contrary to justice and
G.R. NO 109248
ARTICLE; TOPIC OF CASE: Partnership, Assignment of share does not make assignee a partner
July 3, 1995
Ortega v CA
fairness, nor for harmful and damaging reasons, bad faith can’t be said to
characterize the act of Misa of withdrawing from the partnership due to
“interpersonal conflict.” Bad faith under partnership is a conscious and
intentional design to do a wrongful act for a dishonest purpose or moral
obliquity. Such is not the cases here.
V. Disposition
WHEREFORE, the appealed decision is AFFIRMED. No
pronouncement of costs. SO ORDERED.
VI. Notes
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 of 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."
PONENTE: Vitug, J.
DIGEST MAKER: Alec.