Ortigas & Company Limited Partnership

November 16, 1984 Ortigas & Company Limited Partnership Ground Floor, Ortigas Building Ortigas Avenue, Pasig Metro Manila Gentlemen: This refers to your letter dated November 12, 1984, requesting the confirmation of this Commission that withdrawal or retirement of a general or limited partner in Ortigas & Company Limited Partnership will not result in the dissolution of the partnership and that it will continue under the same Articles of Partnership subject to the amendments brought about by the said retirement or withdrawal. It appears therein that Ortigas & Company Limited Partnership was organized in 1931 as a limited partnership by shares (sociedad comanditaria por acciones) under the provisions of Article 145 to 150, inclusive, and Article 160 of the Code of Commerce. Notwithstanding the several amendments to its articles of partnership after the date of effectivity of the New Civil Code on August 30, 1950 * , Ortigas & Company Limited Partnership did not convert itself into a partnership under the Chapter on Partnership of the New Civil Code. Thus, by express provision of the New Civil Code, "a limited partnership formed under the law prior to the effectivity of this Code . . . shall continue to be governed by the provisions of the old law." (Article 1867, paragraph 2); provided, however, that in matters which are governed by the Code of Commerce, its deficiency shall be supplied by the provisions of the New Civil Code (Article 18, NCC). In this connection, it is your opinion that the retirement or withdrawal of a general or limited partner will not result in the dissolution of the partnership in view of the reasons advanced in your letter. In reply, the following comments are given: 1. It is clearly manifested in the amended articles of partnership of Ortigas & Company Limited Partnership that the interest or share of both the general and limited partners is transferable. Article 1306 of the New Civil Code provides that "the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy". 2. Articles V and XIII of the amended articles of partnership of the firm contain specific provisions as far as the liquidation of the company is concerned. Furthermore, Articles 221, 222 and 224 of the Code of Commerce which primarily govern the dissolution of partnership established under said Code do not show that retirement or withdrawal of a partner is a cause for the dissolution of the firm. prcd 3. Under foreign jurisprudence, "any change in the membership or personnel of a partnership, either by the retirement of a partner or by the admission of new member into the partnership, produces, technically an immediate dissolution of the existing partnership relation and the formation of a new one, although common business usage speaks of the admission of a partner to a firm and regards the firm as subsisting so long as the course of its business is not materially interrupted". (40 Am. Jur. par. 197, p. 267 citing Fritz v. Commissioners of Internal Revenue, (CGA 5th) 76F (2s) 460, cited in SEC letter to Atty. Lumibaw, dated June 29, 1960 ). Much necessarily depends upon the contract of transfer and it is frequently said that a sale of partnership effects by one partner to another is simply evidence tending to show a dissolution and is not ipso facto a dissolution. "In other words, the effects to be given such a sale or assignment is primarily a question of intention". (40 Am. Jur., sec. 244, p. 299). Article 1371 of the New Civil Code provides: "In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered." The legal intention deducible from the acts of the parties controls in determining the existence of a partnership (Jo Chung Cang v. Pac. Com. Co., 45; 158). 4. The Commission, had on several occasions, recorded the amended articles of partnership of Ortigas & Company Limited Partnership where one of the partners thereof withdrew or transferred his share or interest in the partnership in favor of another. prcd The Commission, therefore, confirms your opinion as aforestated. Very truly yours, (SGD.) MANUEL G. ABELLO Chairman * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .