Najim v De Mesa September 21, 1987| Limited Partnership Digester: Anna Mickaella Lingat SUMMARY: Levi De Mesa, Khalid Najim, and James Greenberg are partners of the limited partnership International Skill Development Co. Ltd, engaged in the business of labor recruitment and placement for overseas employment. De Mesa is a general partner, while Najim and Greenberg are limited partners. Najim wrote De Mesa a letter of formal notice of his withdrawal from their partnership on the alleged ground of repeated failure of De Mesa to account for his management of the partnership. Najim also caused the publication in a newspaper and sent notice to their clients of the dissoluation of the partnership. Najim then filed a Petition for Dissolution with injunction enjoining De Mesa and Greenberg from continuing with the business. SEC held that the withdrawal of limited partner Najim did not dissolve the partnership. NCC only provides that the withdrawal of a general partner, not a limited partner, operates the dissolution of the partnership (Art 1860). The Articles of Partnership also provides for the non-dissolution and continuation of the business. Najim also failed to prove his allegations, while De Mesa was able to show that Najim has actively participated in the business. Najim acted in bad faith in publishing in newspaper and notifying the clients of the dissolution of the partnership prior to his filing of the petition for dissolution with the SEC. DOCTRINE: The withdrawal of a general partner, not a limited partner, in a limited partnership, that operates the dissolution of the partnership. The dissolution can even be prevented, if the business of the partnership is continued by the remaining general partners. There is no provision in NCC which provides that a withdrawal or retirement of a limited partner/s shall dissolve a limited partnership. However, there is a provision which states that “the retirement, death, insolvency, insanity, or civil interdiction of a general partner dissolves the partnership, unless the business is continued by the remaining parties: (1) under a right so to do stated in the certificate; or (2) With the consent of all members, Art 1860.
FACTS: Levi de Mesa registered a business name under the style International Skill Development Co. Ltd. (Philippines).
De Mesa, together with Khalid Najim and James Greenberg, formed and organized a limited partnership known as the International Skill Develoment Co. Ltd. using De Mesa’s tradename for the purpose of establishing a local and development firm. o Term of partnership: 10 years from the execution of agreement o Capital of partnership: P150,000 Levi De Mesa – P112,500 Khalid Najim – P18,750 James Greenberg – P18,750 o De Mesa is the general partner, while Najim and Greenberg are the limited partners. o Articles of Partnership was duly registered with SEC o The partnership is engaged in the business of labor recruitment and placement for overseas employment and has subsisting contracts with foreign clients duly approved and accredited by POEA and DOLE. Najim wrote De Mesa a letter of formal notice of his withdrawal from their partnership on the alleged ground of repeated failure of De Mesa to account for his management of the partnership. De Mesa replied and denied the accusation against him. Najim issued notice to the public through a newspaper advertisement that the partnership has been dissolved. He also sent letters to client informing them of the alleged dissolution. Najim filed a Petition for Dissolution with a prayer for injunction enjoining De Mesa and Greenberg from continuing with the partnership business. De Mesa filed a petition with SEC for the continuation of the partnership. He also sent a letter to SEC informing it of the withdrawal of Najim as a partner.
RULING: Petition for dissolution with injuction is dismissed for lack or merit. Najim is perpetually enjoined from causing publication and making representations about the dissolution of the partnership. Whether the withdrawal of limited partner Najim dissolved the partnership? - NO Limited Partnerships are governed by provisions of the NCC, Chapter 4, Arts. 1843 to 1866 and the related Rules and Regulations of the SEC.
There is no provision in NCC which provides that a withdrawal or retirement of a limited partner/s shall dissolve a limited partnership. However, there is a provision which states that “the retirement, death, insolvency, insanity, or civil interdiction of a general partner dissolves the partnership, unless the business is continued by the remaining parties: (1) under a right so to do stated in the certificate; or (2) With the consent of all members, Art 1860. Therefore, the withdrawal of a general partner, not a limited partner, in a limited partnership, that operates the dissolution of the partnership. The dissolution can even be prevented, if the business of the partnership is continued by the remaining general partners.
As applied in this case: The withdrawal of Najim, who is a limited partner, did not dissolve the partnership, especially do that the remaining partners De Mesa and Greenberg choose to continue the partnership. The non-dissolution and continuation of the partnership by the remaining partners: De Mesa and Greenberg is, also buttressed and authorized by the Articles of Partnership of International Skill Development Co. Ltd. under Article 9, which states: o "ARTICLE 9. That if during the term of the partnership, any of the partners shall die, the partnership shall continue among the surviving partners, unless one of the latter expressly requests for dissolution in which case the Articles shall be amended accordingly."
Whether an Amendment to the Articles of Partnership for continuation of the business operations of the said limited partnership be allowed to be registered? - YES The intention of the remaining partners, De Mesa and Greenberg, to continue with the limited partnership must be allowed by amending the Articles of Partnership. The amendment certificate to be filed with the SEC may either be for the continuation of the said partnership by the remaining partners or the addition of another limited partner or general partner, with the consent of the original partners, De Mesa and Greenberg (Art 1849 and 1850) Najim failed to substantiate his claim that De Mesa failed to properly account for the management of the partnership. On the other hand, De Mesa explained in his testimony that he has furnished Najim with copies of the quarterly financial statements of the partnership, and that Najim actively participated in the management of the partnership and was even a signatory to the checks that were issued in the course of its operations. Najim acted in bad faith considering he fact that he caused the publication in the newspaper of notices on the alleged dissolution and notice to the clients prior to his filing of complaint for dissolution. His publication that his withdrawal from the partnership has automatically dissolved the partnership, causing tremendous damages to business operations and transactions particularly abroad is unwarranted.
