G.R. No. L-25532 February 28, 1969COMMISSIONER 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 partners-spouses 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 ofgeneralcopartnership, 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 intouniversalpartnerships. (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 universalpartnership, but aparticular 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), auniversalpartnership requires either that the object of the association beall the present propertyof the partners, as contributed by them to the common fund, or else "allthat the partners may acquire by theirindustry or workduring 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 thembeforetheir 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 theexclusiveproperty 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 alreadysubjectto tax when the fiction of their corporate personality was pierced; in the present case, to do so wouldexemptthe 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 oralter egosof 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 ofcompaias colectivasthat 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).lawphi1.ntBut 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.1Appellant 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 partnershipvis-a-visthe 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, 1979PETITION 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.R E S O L U T I O NMELENCIO-HERRERA,J.:+.wph!1Two 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:t.hqwThe use by the person or partnership continuing the business of the partnership name, orthe 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.12. 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;2the 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."33. 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:t.hqw... 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. ...44. 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.55. No local custom prohibits the continued use of a deceased partner's name in a professional firm's name;6there 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.76. 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.8The 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 argumentsas 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:t.hqwAfter 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:t.hqwArt. 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 thebusinessusing 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 acommercialpartnership with a good will to protect rather than of aprofessionalpartnership, 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.9t.hqwAs a general rule, upon the dissolution of acommercial partnershipthe 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,t.hqw... 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 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.10t.hqwA 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."11Thus, it has been stated that "the use of a nom de plume, assumed or trade name in law practice is improper.12The 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 xxxPrimary 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.14It is limited to persons of good moral character with special qualifications duly ascertained and certified.15The right does not only presuppose in its possessor integrity, legal standing and attainment, but also the exercise of a special privilege,highly personaland partaking of the nature of a public trust."16D. 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 33does not consider as unethicalthe continued use of the name of a deceased or former partner in the firm name of a law partnership when such a practice ispermissible by local custombut the Canon warns that care should be taken that no imposition or deception is practiced through this use.It must be conceded that in the Philippines, no local custompermits or allowsthe 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.t.hqwThe continued use of a firm name after the death of one or more of the partners designated byit 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 partnerwho 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 ofMendelsohn 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 namebecause the practice was sanctioned by customand did not offend any statutory provision or legislative policy and was adopted by agreement of the parties. The Court stated therein:t.hqwThe practice sought to be proscribedhas the sanction of customand 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 xxxNeither 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.18Not 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.19Courts take no judicial notice of custom. A custom must be proved as a fact, according to the rules of evidence.20A local custom as a source of right cannot be considered by a court of justice unless such custom is properly established by competent evidence like any other fact.21We 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.22When 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.23Custom which are contrary to law, public order or public policy shall not be countenanced.24The practice of law is intimately and peculiarly related to the administration of justice and should not be considered like an ordinary "money-making trade."t.hqw... 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.25In 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.G.R. No. L-4811 July 31, 1953CHARLES F. WOODHOUSE,plaintiff-appellant,vs.FORTUNATO F. HALILI,defendant-appellant.Taada, Pelaez & Teehankee for defendant and appellant.Gibbs, Gibbs, Chuidian & Quasha for plaintiff and appellant.LABRADOR,J.:On November 29, 1947, the plaintiff entered on a written agreement, Exhibit A, with the defendant, the most important provisions of which are (1) that they shall organize a partnership for the bottling and distribution of Mision soft drinks, plaintiff to act as industrial partner or manager, and the defendant as a capitalist, furnishing the capital necessary therefor; (2) that the defendant was to decide matters of general policy regarding the business, while the plaintiff was to attend to the operation and development of the bottling plant; (3) that the plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of the proposed partnership; and (4) that the plaintiff was to receive 30 per cent of the net profits of the business. The above agreement was arrived at after various conferences and consultations by and between them, with the assistance of their respective attorneys. Prior to entering into this agreement, plaintiff had informed the Mission Dry Corporation of Los Angeles, California, U.S.A., manufacturers of the bases and ingridients of the beverages bearing its name, that he had interested a prominent financier (defendant herein) in the business, who was willing to invest half a million dollars in the bottling and distribution of the said beverages, and requested, in order that he may close the deal with him, that the right to bottle and distribute be granted him for a limited time under the condition that it will finally be transferred to the corporation (Exhibit H). Pursuant for this request, plaintiff was given "a thirty-days" option on exclusive bottling and distribution rights for the Philippines" (Exhibit J). Formal negotiations between plaintiff and defendant began at a meeting on November 27, 1947, at the Manila Hotel, with their lawyers attending. Before this meeting plaintiff's lawyer had prepared the draft of the agreement, Exhibit II or OO, but this was not satisfactory because a partnership, instead of a corporation, was desired. Defendant's lawyer prepared after the meeting his own draft, Exhibit HH. This last draft appears to be the main basis of the agreement, Exhibit A.The contract was finally signed by plaintiff on December 3, 1947. Plaintiff did not like to go to the United States without the agreement being not first signed. On that day plaintiff and defendant went to the United States, and on December 10, 1947, a franchise agreement (Exhibit V) was entered into the Mission Dry Corporation and Fortunato F. Halili and/or Charles F. Woodhouse, granted defendant the exclusive right, license, and authority to produce, bottle, distribute, and sell Mision beverages in the Philippines. The plaintiff and the defendant thereafter returned to the Philippines. Plaintiff reported for duty in January, 1948, but operations were not begun until the first week of February, 1948. In January plaintiff was given as advance, on account of profits, the sum of P2,000, besides the use of a car; in February, 1948, also P2,000, and in March only P1,000. The car was withdrawn from plaintiff on March 9, 1948.When the bottling plant was already on operation, plaintiff demanded of defendant that the partnership papers be executed. At first defendant executed himself, saying there was no hurry. Then he promised to do so after the sales of the product had been increased to P50,000. As nothing definite was forthcoming, after this condition was attained, and as defendant refused to give further allowances to plaintiff, the latter caused his attorneys to take up the matter with the defendant with a view to a possible settlement. as none could be arrived at, the present action was instituted.In his complaint plaintiff asks for the execution of the contract of partnership, an accounting of the profits, and a share thereof of 30 per cent, as well as damages in the amount of P200,000. In his answer defendant alleges by way of defense (1) that defendant's consent to the agreement, Exhibit A, was secured by the representation of plaintiff that he was the owner, or was about to become owner of an exclusive bottling franchise, which representation was false, and plaintiff did not secure the franchise, but was given to defendant himself; (2) that defendant did not fail to carry out his undertakings, but that it was plaintiff who failed; (3) that plaintiff agreed to contribute the exclusive franchise to the partnership, but plaintiff failed to do so. He also presented a counter-claim for P200,000 as damages. On these issues the parties went to trial, and thereafter the Court of First Instance rendered judgment ordering defendant to render an accounting of the profits of the bottling and distribution business, subject of the action, and to pay plaintiff 15 percent thereof. it held that the execution of the contract of partnership could not be enforced upon the parties, but it also held that the defense of fraud was not proved. Against this judgment both parties have appealed.The most important question of fact to be determined is whether defendant had falsely represented that he had an exclusive franchise to bottle Mission beverages, and whether this false representation or fraud, if it existed, annuls the agreement to form the partnership. The trial court found that it is improbable that defendant was never shown the letter, Exhibit J, granting plaintiff had; that the drafts of the contract prior to the final one can not be considered for the purpose of determining the issue, as they are presumed to have been already integrated into the final agreement; that fraud is never presumed and must be proved; that the parties were represented by attorneys, and that if any party thereto got the worse part of the bargain, this fact alone would not invalidate the agreement. On this appeal the defendant, as appellant, insists that plaintiff did represent to the defendant that he had an exclusive franchise, when as a matter of fact, at the time of its execution, he no longer had it as the same had expired, and that, therefore, the consent of the defendant to the contract was vitiated by fraud and it is, consequently, null and void.Our study of the record and a consideration of all the surrounding circumstances lead us to believe that defendant's contention is not without merit. Plaintiff's attorney, Mr. Laurea, testified that Woodhouse presented himself as being the exclusive grantee of a franchise, thus:A. I don't recall any discussion about that matter. I took along with me the file of the office with regards to this matter. I notice from the first draft of the document which I prepared which calls for the organization of a corporation, that the manager, that is, Mr. Woodhouse, is represented as being the exclusive grantee of a franchise from the Mission Dry Corporation. . . . (t.s.n., p.518)As a matter of fact, the first draft that Mr. Laurea prepared, which was made before the Manila Hotel conference on November 27th, expressly states that plaintiff had the exclusive franchise. Thus, the first paragraph states:Whereas, the manager is the exclusive grantee of a franchise from the Mission Dry Corporation San Francisco, California, for the bottling of Mission products and their sale to the public throughout the Philippines; . . . .3. The manager, upon the organization of the said corporation, shall forthwith transfer to the said corporation his exclusive right to bottle Mission products and to sell them throughout the Philippines. . . . .(Exhibit II; emphasis ours)The trial court did not consider this draft on the principle of integration of jural acts. We find that the principle invoked is inapplicable, since the purpose of considering the prior draft is not to vary, alter, or modify the agreement, but to discover the intent of the parties thereto and the circumstances surrounding the execution of the contract. The issue of fact is: Did plaintiff represent to defendant that he had an exclusive franchise? Certainly, his acts or statements prior to the agreement are essential and relevant to the determination of said issue. The act or statement of the plaintiff was not sought to be introduced to change or alter the terms of the agreement, but to prove how he induced the defendant to enter into it to prove the representations or inducements, or fraud, with which or by which he secured the other party's consent thereto. These are expressly excluded from the parol evidence rule. (Bough and Bough vs. Cantiveros and Hanopol, 40 Phil., 209; port Banga Lumber Co.vs. Export & Import Lumber Co., 26 Phil., 602; III Moran 221,1952 rev. ed.) Fraud and false representation are an incident to the creation of a jural act, not to its integration, and are not governed by the rules on integration. Were parties prohibited from proving said representations or inducements, on the ground that the agreement had already been entered into, it would be impossible to prove misrepresentation or fraud. Furthermore, the parol evidence rule expressly allows the evidence to be introduced when the validity of an instrument is put in issue by the pleadings (section 22, par. (a), Rule 123, Rules of Court),as in this case.That plaintiff did make the representation can also be easily gleaned from his own letters and his own testimony. In his letter to Mission Dry Corporation, Exhibit H, he said:.. . . He told me to come back to him when I was able to speak with authority so that we could come to terms as far as he and I were concerned. That is the reason why the cable was sent. Without this authority, I am in a poor bargaining position. . .I would propose that you grant me the exclusive bottling and distributing rights for a limited period of time, during which I may consummate my plants. . . .By virtue of this letter the option on exclusive bottling was given to the plaintiff on October 14, 1947. (See Exhibit J.) If this option for an exclusive franchise was intended by plaintiff as an instrument with which to bargain with defendant and close the deal with him, he must have used his said option for the above-indicated purpose, especially as it appears that he was able to secure, through its use, what he wanted.Plaintiff's own version of the preliminary conversation he had with defendant is to the effect that when plaintiff called on the latter, the latter answered, "Well, come back to me when you have the authority to operate. I am definitely interested in the bottling business." (t. s. n., pp. 60-61.) When after the elections of 1949 plaintiff went to see the defendant (and at that time he had already the option), he must have exultantly told defendant that he had the authority already. It is improbable and incredible for him to have disclosed the fact that he hadonly an optionto the exclusive franchise, which was to last thirty days only, and still more improbable for him to have disclosed that, at the time of the signing of the formal agreement,his option had already expired. Had he done so, he would have destroyed all his bargaining power and authority, and in all probability lost the deal itself.The trial court reasoned, and the plaintiff on this appeal argues, that plaintiff only undertook in the agreement "to secure the Mission Dry franchise for and in behalf of the proposed partnership." The existence of this provision in the final agreement does not militate against plaintiff having represented that he had the exclusive franchise; it rather strengthens belief that he did actually make the representation. How could plaintiff assure defendant that he would get the franchise for the latter if he had not actually obtained it for himself? Defendant would not have gone into the business unless the franchise was raised in his name, or at least in the name of the partnership. Plaintiff assured defendant he could get the franchise. Thus, in the draft prepared by defendant's attorney, Exhibit HH, the above provision is inserted, with the difference that instead of securing the franchise for the defendant, plaintiff was to secure it for the partnership. To show that the insertion of the above provision does not eliminate the probability of plaintiff representing himself as the exclusive grantee of the franchise, the final agreement contains in its third paragraph the following:. . . and the manager is ready and willing to allow the capitalists to use the exclusive franchise . . .and in paragraph 11 it also expressly states:1. In the event of the dissolution or termination of the partnership, . . . the franchise from Mission Dry Corporation shall be reassigned to themanager.These statements confirm the conclusion that defendant believed, or was made to believe, that plaintiff was the grantee of an exclusive franchise. Thus it is that it was also agreed upon that the franchise was to be transferred to the name of the partnership, and that, upon its dissolution or termination, the same shall be reassigned to the plaintiff.Again, the immediate reaction of defendant, when in California he learned that plaintiff did not have the exclusive franchise, was to reduce, as he himself testified, plaintiff's participation in the net profits to one half of that agreed upon. He could not have had such a feeling had not plaintiff actually made him believe that he (plaintiff) was the exclusive grantee of the franchise.The learned trial judge reasons in his decision that the assistance of counsel in the making of the contract made fraud improbable. Not necessarily, because the alleged representation took place before the conferences were had, in other words, plaintiff had already represented to defendant, and the latter had already believed in, the existence of plaintiff's exclusive franchise before the formal negotiations, and they were assisted by their lawyers only when said formal negotiations actually took place. Furthermore, plaintiff's attorney testified that plaintiff had said that he had the exclusive franchise; and defendant's lawyer testified that plaintiff explained to him, upon being asked for the franchise, that he had left the papers evidencing it.(t.s.n., p. 266.)We conclude from all the foregoing that plaintiff did actually represent to defendant that he was the holder of the exclusive franchise. The defendant was made to believe, and he actually believed, that plaintiff had the exclusive franchise. Defendant would not perhaps have gone to California and incurred expenses for the trip, unless he believed that plaintiff did have that exclusive privilege, and that the latter would be able to get the same from the Mission Dry Corporation itself. Plaintiff knew what defendant believed about his (plaintiff's) exclusive franchise, as he induced him to that belief, and he may not be allowed to deny that defendant was induced by that belief. (IX Wigmore, sec. 2423; Sec. 65, Rule 123, Rules of Court.)We now come to the legal aspect of the false representation. Does it amount to a fraud that would vitiate the contract? It must be noted that fraud is manifested in illimitable number of degrees or gradations, from the innocent praises of a salesman about the excellence of his wares to those malicious machinations and representations that the law punishes as a crime. In consequence, article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud, which may be a ground for the annulment of a contract, and the incidental deceit, which only renders the party who employs it liable for damages. This Court had held that in order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo causante), inducement to the making of the contract. (Article 1270, Spanish Civil Code; Hill vs. Veloso, 31 Phil. 160.) The record abounds with circumstances indicative that the fact that the principal consideration, the main cause that induced defendant to enter into the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and distribute for the defendant or for the partnership. The original draft prepared by defendant's counsel was to the effect that plaintiff obligated himself to secure a franchise for the defendant. Correction appears in this same original draft, but the change is made not as to the said obligation but as to the grantee. In the corrected draft the word "capitalist"(grantee) is changed to "partnership." The contract in its final form retains the substituted term "partnership." The defendant was, therefore, led to the belief that plaintiff had the exclusive franchise, but that the same was to be secured for or transferred to the partnership. The plaintiff no longer had the exclusive franchise, or the option thereto, at the time the contract was perfected. But while he had already lost his option thereto (when the contract was entered into), the principal obligation that he assumed or undertook was to secure said franchise for the partnership, as the bottler and distributor for the Mission Dry Corporation. We declare, therefore, that if he was guilty of a false representation, this was not the causal consideration, or the principal inducement, that led plaintiff to enter into the partnership agreement.But, on the other hand, this supposed ownership of an exclusive franchise was actually the consideration or price plaintiff gave in exchange for the share of 30 percent granted him in the net profits of the partnership business. Defendant agreed to give plaintiff 30 per cent share in the net profits because he was transferring his exclusive franchise to the partnership. Thus, in the draft prepared by plaintiff's lawyer, Exhibit II, the following provision exists:3. That the MANAGER, upon the organization of the said corporation, shall forthwithtransferto the said corporationhis exclusiveright to bottle Mission products and to sell them throughout the Philippines.As a consideration for such transfer, the CAPITALIST shall transfer to the Manager fully paid non assessable shares ofthe said corporation . . . twenty-five per centum of the capital stock of the said corporation. (Par. 3, Exhibit II; emphasis ours.)Plaintiff had never been a bottler or a chemist; he never had experience in the production or distribution of beverages. As a matter of fact, when the bottling plant being built, all that he suggested was about the toilet facilities for the laborers.We conclude from the above that while the representation that plaintiff had the exclusive franchise did not vitiate defendant's consent to the contract, it was used by plaintiff to get from defendant a share of 30 per cent of the net profits; in other words, by pretending that he had the exclusive franchise and promising to transfer it to defendant, he obtained the consent of the latter to give him (plaintiff) a big slice in the net profits. This is thedolo incidentedefined in article 1270 of the Spanish Civil Code, because it was used to get the other party's consent to a big share in the profits, an incidental matter in the agreement.El dolo incidental no es el que puede producirse en el cumplimiento del contrato sino que significa aqui, el que concurriendoen el consentimiento, o precediendolo, no influyo para arrancar porsi solo el consentimiento ni en la totalidad de la obligacion, sinoen algun extremo o accidente de esta, dando lugar tan solo a una accion para reclamar indemnizacion de perjuicios. (8 Manresa 602.)Having arrived at the conclusion that the agreement may not be declared null and void, the question that next comes before us is, May the agreement be carried out or executed? We find no merit in the claim of plaintiff that the partnership was already afait accomplifrom the time of the operation of the plant, as it is evident from the very language of the agreement that the parties intended that the execution of the agreement to form a partnership was to be carried out at a later date. They expressly agreed thatthey shall form a partnership. (Par. No. 1, Exhibit A.) As a matter of fact, from the time that the franchise from the Mission Dry Corporation was obtained in California, plaintiff himself had been demanding that defendant comply with the agreement. And plaintiff's present action seeks the enforcement of this agreement. Plaintiff's claim, therefore, is both inconsistent with their intention and incompatible with his own conduct and suit.As the trial court correctly concluded, the defendant may not be compelled against his will to carry out the agreement nor execute the partnership papers. Under the Spanish Civil Code, the defendant has an obligationto do, not to give. The law recognizes the individual's freedom or liberty to do an act he has promised to do, or not to do it, as he pleases. It falls within what Spanish commentators calla very personalact (acto personalismo), of which courts may not compel compliance, as it is considered an act of violence to do so.Efectos de las obligaciones consistentes en hechos personalismo.Tratamos de la ejecucion de las obligaciones de hacer en el solocaso de su incumplimiento por parte del deudor, ya sean los hechos personalisimos, ya se hallen en la facultad de un tercero; porque el complimiento espontaneo de las mismas esta regido por los preceptos relativos al pago, y en nada les afectan las disposiciones del art. 1.098.Esto supuesto, la primera dificultad del asunto consiste en resolver si el deudor puede ser precisado a realizar el hecho y porque medios.Se tiene por corriente entre los autores, y se traslada generalmente sin observacion el principio romanonemo potest precise cogi ad factum. Nadie puede ser obligado violentamente a haceruna cosa. Los que perciben la posibilidad de la destruccion deeste principio, aaden que, aun cuando se pudiera obligar al deudor, no deberia hacerse, porque esto constituiria una violencia, y noes la violenciamodo propio de cumplir las obligaciones (Bigot, Rolland, etc.). El maestro Antonio Gomez opinaba lo mismo cuandodecia que obligar por la violencia seria infrigir la libertad eimponer una especie de esclavitud.x x x x x x x x xEn efecto; las obligaciones contractuales no se acomodan biencon el empleo de la fuerza fisica, no ya precisamente porque seconstituya de este modo una especie de esclavitud, segun el dichode Antonio Gomez, sino porque se supone que el acreedor tuvo encuenta el caracter personalisimo del hecho ofrecido, y calculo sobre laposibilidad de que por alguna razon no se realizase. Repugna,ademas, a la conciencia social el empleo de la fuerza publica, mediante coaccion sobre las personas, en las relaciones puramente particulares; porque la evolucion de las ideas ha ido poniendo masde relieve cada dia el respeto a la personalidad humana, y nose admite bien la violencia sobre el individuo la cual tiene caracter visiblemente penal, sino por motivos que interesen a la colectividad de ciudadanos. Es, pues, posible y licita esta violencia cuando setrata de las obligaciones que hemos llamadoex lege, que afectanal orden social y a la entidad de Estado, y aparecen impuestas sinconsideracion a las conveniencias particulares, y sin que por estemotivo puedan tampoco ser modificadas; pero no debe serlo cuandola obligacion reviste un interes puramente particular, como sucedeen las contractuales, y cuando, por consecuencia, paraceria salirseel Estado de su esfera propia, entrado a dirimir, con apoyo dela fuerza colectiva, las diferencias producidas entre los ciudadanos. (19 Scaevola 428, 431-432.)The last question for us to decide is that of damages,damages that plaintiff is entitled to receive because of defendant's refusal to form the partnership, and damages that defendant is also entitled to collect because of the falsity of plaintiff's representation. (Article 1101, Spanish Civil Code.) Under article 1106 of the Spanish Civil Code the measure of damages is the actual loss suffered and the profits reasonably expected to be received, embraced in the termsdao emergenteandlucro cesante. Plaintiff is entitled under the terms of the agreement to 30 per cent of the net profits of the business. Against this amount of damages, we must set off the damage defendant suffered by plaintiff's misrepresentation that he had obtained a very high percentage of share in the profits. We can do no better than follow the appraisal that the parties themselves had adopted.When defendant learned in Los Angeles that plaintiff did not have the exclusive franchise which he pretended he had and which he had agreed to transfer to the partnership, his spontaneous reaction was to reduce plaintiff's share form 30 per cent to 15 per cent only, to which reduction defendant appears to have readily given his assent. It was under this understanding, which amounts to a virtual modification of the contract, that the bottling plant was established and plaintiff worked as Manager for the first three months. If the contract may not be considered modified as to plaintiff's share in the profits, by the decision of defendant to reduce the same to one-half and the assent thereto of plaintiff, then we may consider the said amount as a fair estimate of the damages plaintiff is entitled to under the principle enunciated in the case ofVaradero de Manila vs. Insular Lumber Co., 46 Phil. 176. Defendant's decision to reduce plaintiff's share and plaintiff's consent thereto amount to an admission on the part of each of the reasonableness of this amount as plaintiff's share. This same amount was fixed by the trial court. The agreement contains the stipulation that upon the termination of the partnership, defendant was to convey the franchise back to plaintiff (Par. 11, Exhibit A). The judgment of the trial court does not fix the period within which these damages shall be paid to plaintiff. In view of paragraph 11 of Exhibit A, we declare that plaintiff's share of 15 per cent of the net profits shall continue to be paid while defendant uses the franchise from the Mission Dry Corporation.G.R. No. 109248 July 3, 1995GREGORIO 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 affirmingin totothat 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 respondents-appellees 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:"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."1On appeal, the SECen bancreversed the decision of the Hearing Officer and held that the withdrawal of Attorney Joaquin L. Misa had dissolved the partnership of "Bito, Misa & Lozada." The Commission ruled that, being a partnership at will, the law firm could be dissolved by any partner at anytime, such as by his withdrawal therefrom, regardless of good faith or bad faith, since no partner can be forced to continue in the partnership against his will. 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.2The 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, AFFIRMEDin totothe 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; and3. 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.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.3The 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 partnership4but that it can result in a liability for damages.5In 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.6Among partners,7mutual agency arises and the doctrine ofdelectus personaeallows them to have thepower, 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.8Upon its dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business culminating in its termination.9The liquidation of the assets of the partnership following its dissolution is governed by various provisions of the Civil Code;10however, an agreement of the partners, like any other contract, is binding among them and normally takes precedence to the extent applicable over the Code's general provisions. 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.11The 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 faithcannot 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.[G.R. No. 127405.October 4, 2000]MARJORIE TOCAO and WILLIAM T. BELO,petitioners, vs. COURT OF APPEALS and NENITA A. ANAY,respondents.D E C I S I O NYNARES-SANTIAGO,J.:This is a petition for review of the Decision of the Court of Appeals in CA-G.R. CV No. 41616,[1]affirming the Decision of the Regional Trial Court of Makati, Branch 140, in Civil Case No. 88-509.[2]Fresh from her stint as marketing adviser of Technolux in Bangkok, Thailand,private respondent Nenita A. Anay met petitioner William T. Belo, then the vice-president for operations of Ultra Clean Water Purifier, through her former employer in Bangkok.Belo introduced Anay to petitioner Marjorie Tocao, who conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchen cookwares.Belo volunteered to finance the joint venture and assigned to Anay the job of marketing the product considering her experience and established relationship with West Bend Company, a manufacturer of kitchen wares in Wisconsin, U.S.A.Under the joint venture, Belo acted as capitalist, Tocao as president and general manager, and Anay as head of the marketing department and later, vice-president for sales.Anay organized the administrative staff and sales force while Tocao hired and fired employees, determined commissions and/or salaries of the employees, and assigned them to different branches. The parties agreed that Belos name should not appear in any documents relating to their transactions with West Bend Company.Instead, they agreed to use Anays name in securing distributorship of cookware from that company.The parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the business; (2) overriding commission of six percent (6%) of the overall weekly production; (3) thirty percent (30%) of the sales she would make; and (4) two percent (2%) for her demonstration services. The agreement was not reduced to writing on the strength of Belos assurances that he was sincere, dependable and honest when it came to financial commitments.Anay having secured the distributorship of cookware products from the West Bend Company and organized the administrative staff and the sales force, the cookware business took off successfully.They operated under the name of Geminesse Enterprise, a sole proprietorship registered in Marjorie Tocaos name, with office at 712 Rufino Building, Ayala Avenue, Makati City.Belo made good his monetary commitments to Anay. Thereafter, Roger Muencheberg of West Bend Company invited Anay to the distributor/dealer meeting in West Bend, Wisconsin, U.S.A., from July 19 to 21, 1987 and to the southwestern regional convention in Pismo Beach, California, U.S.A., from July 25-26, 1987.Anay accepted the invitation with the consent of Marjorie Tocao who, as president and general manager of Geminesse Enterprise, even wrote a letter to the Visa Section of the U.S. Embassy in Manila on July 13, 1987. A portion of the letter reads:Ms. Nenita D. Anay (sic), who has been patronizing and supporting West Bend Co. for twenty (20) years now, acquired the distributorship of Royal Queen cookware for Geminesse Enterprise, is the Vice President Sales Marketing anda business partner of our company, will attend in response to the invitation. (Italics supplied.)[3]Anay arrived from the U.S.A. in mid-August 1987, and immediately undertook the task of saving the business on account of the unsatisfactory sales record in the Makati and Cubao offices. On August 31, 1987, she received a plaque of appreciation from the administrative and sales people through Marjorie Tocao[4]for her excellent job performance. On October 7, 1987, in the presence of Anay, Belo signed a memo[5]entitling her to a thirty-seven percent (37%) commission for her personal sales "up Dec 31/87. Belo explained to her that said commission was apart from her ten percent (10%) share in the profits.On October 9, 1987, Anay learned that Marjorie Tocao had signed a letter[6]addressed to the Cubao sales office to the effect that she was no longer the vice-president of Geminesse Enterprise. The following day, October 10, she received a note from Lina T. Cruz, marketing manager, that Marjorie Tocao had barred her from holding office and conducting demonstrations in both Makati and Cubao offices.[7]Anay attempted to contact Belo. She wrote him twice to demand her overriding commission for the period of January 8, 1988 to February 5, 1988 and the audit of the company to determine her share in the net profits. When her letters were not answered, Anay consulted her lawyer, who, in turn, wrote Belo a letter. Still, that letter was not answered.Anay still received her five percent (5%) overriding commission up to December 1987.The following year, 1988, she did not receive the same commission although the company netted a gross sales of P13,300,360.00.On April 5, 1988, Nenita A. Anay filed Civil Case No. 88-509, a complaint for sum of money with damages[8]against Marjorie D. Tocao and William Belo before the Regional Trial Court of Makati, Branch 140.In her complaint, Anay prayed that defendants be ordered to pay her, jointly and severally, the following: (1) P32,00.00 as unpaid overriding commission from January 8, 1988 to February 5, 1988; (2) P100,000.00 as moral damages, and (3) P100,000.00 as exemplary damages. The plaintiff also prayed for an audit of the finances of Geminesse Enterprise from the inception of its business operation until she was illegally dismissed to determine her ten percent (10%) share in the net profits. She further prayed that she be paid the five percent (5%) overriding commission on the remaining 150 West Bend cookware sets before her dismissal.In their answer,[9]Marjorie Tocao and Belo asserted that the alleged agreement with Anay that was neither reduced in writing, nor ratified, was either unenforceable or void or inexistent. As far as Belo was concerned, his only role was to introduce Anay to Marjorie Tocao. There could not have been a partnership because, as Anay herself admitted, Geminesse Enterprise was the sole proprietorship of Marjorie Tocao. Because Anay merely acted as marketing demonstrator of Geminesse Enterprise for an agreed remuneration, and her complaint referred to either her compensation or dismissal, such complaint should have been lodged with the Department of Labor and not with the regular court.Petitioners (defendants therein) further alleged that Anay filed the complaint on account of ill-will and resentment because Marjorie Tocao did not allow her to lord it over in the Geminesse Enterprise.Anay had acted like she owned the enterprise because of her experience and expertise. Hence, petitioners were the ones who suffered actual damages including unreturned and unaccounted stocks of Geminesse Enterprise, and serious anxiety, besmirched reputation in the business world, and various damages not less than P500,000.00. They also alleged that, to vindicate their names, they had to hire counsel for a fee of P23,000.00.At the pre-trial conference, the issues were limited to: (a) whether or not the plaintiff was an employee or partner of Marjorie Tocao and Belo, and (b) whether or not the parties are entitled to damages.[10]In their defense, Belo denied that Anay was supposed to receive a share in the profit of the business.He, however, admitted that the two had agreed that Anay would receive a three to four percent (3-4%) share in the gross sales of the cookware. He denied contributing capital to the business or receiving a share in its profits as he merely served as a guarantor of Marjorie Tocao, who was new in the business. He attended and/or presided over business meetings of the venture in his capacity as a guarantor but he never participated in decision-making. He claimed that he wrote the memo granting the plaintiff thirty-seven percent (37%) commission upon her dismissal from the business venture at the request of Tocao, because Anay had no other income.For her part, Marjorie Tocao denied having entered into an oral partnership agreement with Anay.However, she admitted that Anay was an expert in the cookware business and hence, they agreed to grant her the following commissions: thirty-seven percent (37%) on personal sales; five percent (5%) on gross sales; two percent (2%) on product demonstrations, and two percent (2%) for recruitment of personnel. Marjorie denied that they agreed on a ten percent (10%) commission on the net profits. Marjorie claimed that she got the capital for the business out of the sale of the sewing machines used in her garments business and from Peter Lo, a Singaporean friend-financier who loaned her the funds with interest.Because she treated Anay as her co-equal, Marjorie received the same amounts of commissions as her.However, Anay failed to account for stocks valued at P200,000.00.On April 22, 1993, the trial court rendered a decision the dispositive part of which is as follows:WHEREFORE, in view of the foregoing, judgment is hereby rendered:1.Ordering defendants to submit to the Court a formal account as to the partnership affairs for the years 1987 and 1988 pursuant to Art. 1809 of the Civil Code in order to determine the ten percent (10%) share of plaintiff in the net profits of the cookware business;2.Ordering defendants to pay five percent (5%) overriding commission for the one hundred and fifty (150) cookware sets available for disposition when plaintiff was wrongfully excluded from the partnership by defendants;3.Ordering defendants to pay plaintiff overriding commission on the total production which for the period covering January 8, 1988 to February 5, 1988 amounted to P32,000.00;4.Ordering defendants to pay P100,000.00 as moral damages and P100,000.00 as exemplary damages, and5.Ordering defendants to pay P50,000.00 as attorneys fees and P20,000.00 as costs of suit.SO ORDERED.The trial court held that there was indeed an oral partnership agreement between the plaintiff and the defendants, based on the following: (a) there was an intention to create a partnership; (b) a common fund was established through contributions consisting of money and industry, and (c) there was a joint interest in the profits. The testimony of Elizabeth Bantilan, Anays cousin and the administrative officer of Geminesse Enterprise from August 21, 1986 until it was absorbed by Royal International, Inc., buttressed the fact that a partnership existed between the parties. The letter of Roger Muencheberg of West Bend Company stating that he awarded the distributorship to Anay and Marjorie Tocao because he was convinced that with Marjories financial contribution and Anays experience, the combination of the two would be invaluable to the partnership, also supported that conclusion. Belos claim that he was merely a guarantor has no basis since there was no written evidence thereof as required by Article 2055 of the Civil Code. Moreover, his acts of attending and/or presiding over meetings of Geminesse Enterprise plus his issuance of a memo giving Anay 37% commission on personal sales belied this. On the contrary, it demonstrated his involvement as a partner in the business.The trial court further held that the payment of commissions did not preclude the existence of the partnership inasmuch as such practice is often resorted to in business circles as an impetus to bigger sales volume. It did not matter that the agreement was not in writing because Article 1771 of the Civil Code provides that a partnership may be constituted in any form. The fact that Geminesse Enterprise was registered in Marjorie Tocaos name is not determinative of whether or not the business was managed and operated by a sole proprietor or a partnership. What was registered with the Bureau of Domestic Trade was merely the business name or style of Geminesse Enterprise.The trial court finally held that a partner who is excluded wrongfully from a partnership is an innocent partner. Hence, the guilty partner must give him his due upon the dissolution of the partnership as well as damages or share in the profits realized from the appropriation of the partnership business and goodwill. An innocent partner thus possesses pecuniary interest in every existing contract that was incomplete and in the trade name of the co-partnership and assets at the time he was wrongfully expelled.Petitioners appeal to the Court of Appeals[11]was dismissed, but the amount of damages awarded by the trial court were reduced to P50,000.00 for moral damages and P50,000.00 as exemplary damages.Their Motion for Reconsideration was denied by the Court of Appeals for lack of merit.[12]Petitioners Belo and Marjorie Tocao are now before this Court on a petition for review oncertiorari, asserting that there was no business partnership between them and herein private respondent Nenita A. Anay who is, therefore, not entitled to the damages awarded to her by the Court of Appeals.Petitioners Tocao and Belo contend that the Court of Appeals erroneously held that a partnership existed between them and private respondent Anay because Geminesse Enterprise came into being exactly a year before the alleged partnership was formed, and that it was very unlikely that petitioner Belo would invest the sum of P2,500,000.00 with petitioner Tocao contributing nothing, without any memorandum whatsoever regarding the alleged partnership.[13]The issue of whether or not a partnership exists is a factual matter which are within the exclusive domain of both the trial and appellate courts. This Court cannot set aside factual findings of such courts absent any showing that there is no evidence to support the conclusion drawn by the courta quo.[14]In this case, both the trial court and the Court of Appeals are one in ruling that petitioners and private respondent established a business partnership. This Court finds no reason to rule otherwise.To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or more persons bind themselves to contribute money, property or industry to a common fund; and (2) intention on the part of the partners to divide the profits among themselves.[15]It may be constituted in any form; a public instrument is necessary only where immovable property or real rights are contributed thereto.[16]This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one. Where no immovable property or real rights are involved, what matters is that the parties have complied with the requisites of a partnership.The fact that there appears to be no record in the Securities and Exchange Commission of a public instrument embodying the partnership agreement pursuant to Article 1772 of the Civil Code[17]did not cause the nullification of the partnership.The pertinent provision of the Civil Code on the matter states:Art. 1768.The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of article 1772, first paragraph.Petitioners admit that private respondent had the expertise to engage in the business of distributorship of cookware. Private respondent contributed such expertise to the partnership and hence, under the law, she was the industrial or managing partner. It was through her reputation with the West Bend Company that the partnership was able to open the business of distributorship of that companys cookware products; it was through the same efforts that the business was propelled to financial success. Petitioner Tocao herself admitted private respondents indispensable role in putting up the business when, upon being asked if private respondent held the positions of marketing manager and vice-president for sales, she testified thus:A:No, sir at the start she was the marketing manager because there were no one to sell yet, its only me there then her and then two (2) people, so about four (4). Now, after that when she recruited already Oscar Abella and Lina Torda-Cruz these two (2) people were given the designation of marketing managers of which definitely Nita as superior to them would be the Vice President.[18]By the