[SEC-SICD * CASE NO. 2526. September 21, 1987.] KHALID J. NAJIM, complainant, vs. LEVI DE MESA, respondent.

[SEC-SICD * CASE NO. 2532. September 21, 1987.] INTERNATIONAL SKILL DEVELOPMENT CO., LTD., ET AL., petitioners, vs. KHALID J. NAJIM, respondent.

DECISION

This refers to the Petition For Dissolution of Partnership with Injunction (SEC Case No. 2526) filed by Khalid J. Najim, against Levi De Mesa dated October 3, 1983 and the Petition for Continuation of Partnership and Damages with prayer for the issuance of preliminary injunction (SEC Case No. 2532) filed by Levi de Mesa against Khalid J. Najim, dated October 10, 1983. The parties being the same and the issues raised being inextricably related, both cases were consolidated on October 18, 1983.

On October 24, 1984, the Commission issued a Writ of Preliminary Injunction in SEC Case No. 2532, against respondent Khalid J. Najim enjoining him from making further publications of "Notices to the Public" and from representing to actual and prospective clients, both overseas and local, of dissolution of International Skill Development Co. Ltd.; until further orders from this Commission.

On January 15, 1985, the Commission, for failure on the part of petitioner Khalid J. Najim and his counsel to appear in the preliminary conference hearing, despite due notice dismissed SEC Case No. 2526, and upon Motion, declared respondent Khalid J. Najim in default and allowed petitioners International Skill Development, et al., to present their evidence ex-parte in SEC Case No. 2532.

The following pertinent facts appear to be undisputed.

On June 24, 1981, Levi de Mesa registered a business name under the style International Skill Development Co. Ltd. (Philippines). On July 16, 1981, Levi de Mesa together with Khalid J. Najim and James Greenberg formed and organized a limited partnership known as the International Skill Development Co. Ltd. using De Mesa's tradename for the purpose of establishing a local and development firm providing for any and/or services allied thereto, including but not limited to training schools with principal office located at Makati, Metro Manila. The term for which this partnership is to exist shall be ten (10) years from the execution of their agreement. The capital of the said partnership is One Hundred Fifty Thousand (P150,000.00) Pesos, Philippine Currency, contributed by the partners as follows: 1. Levi De Mesa (Filipino) 2. Khalid J. Najim (Lebanese) 3. James Greenberg (American) TOTAL P150,000.00 18,750.00 18,750.00 P112,500.00

Levi de Mesa is the general partner while Khalid Najim and James Greenberg are the limited partners. The Articles of Partnership of the said International Skill Development Co. Ltd. was duly registered with the Securities and Exchange Commission on July 31, 1981 (Exh. A). The said partnership engaged in the business of labor recruitment and placement for overseas employment and has subsisting contracts with foreign clients duly approved and accredited by the Philippine Overseas Employment Administration of the Department of Labor and Employment.

On June 22, 1983, Khalid J. Najim wrote Levi de Mesa a letter giving formal notice of his withdrawal from their partnership on the alleged ground of the repeated failure of the latter to account for his management of the partnership (Exh. C). Through a letter dated August 2, 1983, De Mesa replied to Najim and denied the accusation against him. On August 2, 1983, Najim issued notices to the public through a newspaper advertisement that the partnership International Skill Development Co. Ltd. has been dissolved. He followed this up with another publication of similar import on September 29, 1983. He also sent letters dated August 17, 1983 to the clients of the partnership informing them of the alleged dissolution. On October 4, 1983, Najim filed a Petition for Dissolution with this

Office with a prayer for injunction enjoining De Mesa and Greenberg from continuing with the partnership business. Thereafter, De Mesa filed a petition with this Commission for the continuation of the partnership. He also sent a letter to the Securities and Exchange Commission informing it of the withdrawal of Najim as a partner.

The issues to be resolved in this case are the following:

1. 2.

Whether or not the withdrawal of limited partner Khalid J. Najim dissolved the International Skill Development Co. Ltd.; Whether or not an Amendment to the Articles of partnership for continuation of the business operations of the said limited partnership be allowed to be registered.

Before tackling these issues, it should be noted that because subject partnership is a limited partnership the provisions of the New Civil Code of the Philippines, Chapter 4, on Limited Partnership, particularly Articles 1843 to 1866 thereof, and the related Rules and Regulations of the Securities and Exchange Commission should be observed:

On the first issue, under Chapter 4 on Limited Partnership on the Law on Partnership of the New Civil Code of the Philippines, there is no provision which provides that a withdrawal or retirement of a limited partner/s shall dissolve a limited partnership. There is, however, a provision under the said law, 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, Law on Partnership, New Civil Code of the Philippines)

It is, 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.

The withdrawal, therefore, of Khalid J. Najim, who is a limited partner, did not dissolve the International Skill Development Co. Ltd., especially so that the remaining partners Levi de Mesa and James Greenberg choose to continue the partnership.

The non-dissolution and continuation of the partnership by the remaining partners: Levi de Mesa and James Greenberg is, also buttressed and authorized by the Articles of Partnership of International Skill Development Co. Ltd. under Article 9, which states: "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."

On the second issue of whether or not an Amendment of the Articles of Partnership for' the continuation of the business operation of the said limited partnership be allowed to be registered, the Commission resolves to answer this question in the affirmative. The intention of the remaining partners, general partner Levi de Mesa and limited partner James L. Greenberg to continue the limited partnership must be allowed by amending the Articles of Partnership of International Skill Development Co. Ltd. The amendment certificate to be filed with this Commission 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, however, of the original partners, Levi de Mesa and James L. Greenberg (Arts. 1849 and 1850, Law on Partnership, New Civil Code of the Philippines). It appears that Najim withdrew from the partnership allegedly due to the failure of De Mesa to properly account for the management of the partnership. Najim, however, failed to substantiate his claim. As a matter of fact, he was declared in default and he failed to appear in the hearing that was conducted. On the other hand, De Mesa explained in his testimony that he furnished Najim with copies of the quarterly financial statements of the partnership. He further explained 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. Thus, he was very much aware of the partnership affairs. There is no basis for the claim

that De Mesa failed to make proper accounting. Clearly, therefore, Najim acted in bad faith. This is specially so, if we consider the fact that Najim caused to be published in the newspapers notices to the public (Exhs. 1 and 3) on the alleged dissolution of International Skill Development Co. Ltd. Even prior to the filing of his complaint for dissolution, he also sent telex and letter (Exhs. K and L) to clients notifying them of the alleged dissolution. Najim's publication that his withdrawal from the partnership has automatically dissolved the said partnership, causing tremendous damages to business operations and transactions particularly abroad is unwarranted.

WHEREFORE, premises considered judgment is hereby rendered as follows: 1. That the petition for dissolution with injunction (SEC Case No. 2526) is, as it is hereby DISMISSED for lack of merit.

Accordingly Khalid J. Najim is perpetually enjoined from causing publications and making representations about the dissolution of International Skill Development Co., Ltd.

2. That the petitioners in SEC Case No. 2532 (Levi de Mesa and James L. Greenberg) are hereby authorized to continue the partnership known as International Development Co., Ltd. by filing an Amended Articles of Partnership thereto with the Commission.

FURTHER, the partnership is hereby directed to return or give to Khalid Najim whatever remaining interest, if there are still any, he has in the partnership, after proper accounting and liquidation of the partnership's assets, profits, obligations, indebtedness and Najim's contribution as limited partner at the time of his withdrawal of the partnership.

Let copy of this decision be furnished the Corporate and Legal Department for its information and guidance.

SO ORDERED.

(SGD.) JUANITO B. ALMOSA, JR. Hearing Officer

C o p y r i g h t 2 0 0 2 C D T e c h n o l o g i e s A s i a, I n c.