J.S. Zulueta & Co.

September 5, 1988 J.S. Zulueta & Co. M-Floor, Padilla Bldg. Emerald Avenue Ortigas Commercial Center Pasig, Metro Manila Attention : Mr . E . A . Fernandez Gentlemen : This refers to your letter, dated August 8, 1988, requesting the opinion of this Commission on the queries posed therein. It appears therein that J.S. Zulueta & Co. is a professional partnership organized to engage in the general practice of public accounting. The partnership is composed of the following partners, namely: Jesus S. Zulueta, Henry B. Dy-Liacco and Eliseo A. Fernandez. Mr. Zulueta, the principal and managing partner of the firm, died on October 8, 1986, and the two (2) surviving partners opted to continue the partnership under the recorded firm name. In view of the foregoing, our clarification is sought on the following issues: 1. Whether or not the surviving partners can legally continue using the firm name J.S. Zulueta & Co. a partnership name which carries the name of a deceased partner. 2. If the present firm name can be legally used by the surviving partner, what are the legal applications, if any, by the use thereof, and for how long can such partnership name be used? 3. If the present partnership would either merge or consolidate with another accounting firm, can the new partnership (as a result of the merger or consolidation) carry the name "Zulueta" in its firm name? In connection with your first and second queries, the provisions of Article 11 of the articles of partnership of the firm are squarely in point: "ARTICLE 11. Firm Name . Section 1. The partnership shall be conducted under the name of J.S. Zulueta & Co. The firm name may be changed at any time by the unanimous consent of the partners but unless by unanimous consent of the partners, the name shall not be changed on account of the death or retirement of any partner. . . . SECTION 2. It is expressly stipulated and agreed that, in the event of death or any partner, the surviving partners shall have the exclusive right to the use of the name J.S. Zulueta & Co." A partnership is a consensual contract and is created by the voluntary agreement of the partners. "Where the firm name, or the name of a partner included in the firm name, is made the subject of contract between the partners, the contract will control the use of the partnership name upon dissolution of the partnership." (60 Am. Jur. 2d, sec. 204). In the present instance, considering that the articles of partnership of J.S Zulueta & Co. carries certain provisions allowing the use of the partnership name in the event of death of any one of the partners, the surviving partners cannot be restrained from conducting the professional partnership under the old name. In regard to the interest of the deceased partner in the partnership, the surviving partners are treated in equity as trustees of the representatives of the deceased partner. It is the duty of the surviving partners to render an account of the performance of their trust to the personal representatives of the deceased partner, and to pay over to them the share of the deceased member in the surplus of the firm property (60 Am. Jur., 2d, sec. 257). This rule finds considerable recognition in Articles 1807, 1809, 1841 and 1842 of the New Civil Code which provide that the right to an accounting shall accrue to any partner or his legal representative as against the surviving partners continuing the business. Quoted hereunder is the pertinent provision of the Code of Professional Ethics for certified public accountants promulgated by the Board of Accounting and approved by the Professional Regulation Commission, to wit: "SECTION 22. . . . A partner surviving the death or withdrawal of all other partners may continue to practice under the partnership name for two years after becoming a sole practitioner ." (emphasis supplied). By implication, when there are two or more surviving partners, said remaining partners may opt to practice under the old firm name. The limitation imposed under the above quoted Section 22 of the Code of Professional Ethics for CPA only finds application where the death of one of the partners results in the remaining partner becoming a sole practitioner. By analogy, Rule 3.02 of the Code of Professional Responsibility, promulgated by the Supreme Court on June 21, 1988 , ordained that "The continued use of the name of a deceased partner is permissible provided that the firm indicates in all its communications that the said partner is deceased." Thus, the surviving partners may legally continue using the firm name J.S. Zulueta & Co., a partnership which carries the name of the deceased partner, and said firm name may be appropriated until changed by the mutual assent of the surviving partners. This ruling obtains unless Section 22 of the Code of Professional Ethics for CPAs declares otherwise. On the effect of the use of the name of a deceased partner as part of the partnership name, Article 1840 of the Civil Code is emphatic: "The use by the person or partnership continuing the business of the partnership name, or the name of a deceased partner as part thereof, shall not of itself make the individual property of the deceased partner liable for any debts contracted by such person or partnership." It has been frequently articulated that a professional partnership the reputation of which depends on the individual skill of the members, such as partnerships of attorneys or physicians, has no goodwill to be distributed as a firm assets on its dissolution, however intrinsically valuable such skill and reputation may be. (60 AM. Jur., 2d, sec. 203). In the event therefore of a merger or consolidation, the surviving or consolidated partnership acquires no right to use the partnership name, J.S. Zulueta & Co. The right to the specific partnership property such as the firm name of the professional partnership is personal to the original members of the partnership. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Chairman