Short answer. It dissolves, but it does not vanish. Article 1830 lists the death of any partner among the causes of dissolution. Dissolution is a change in the partners' relationship rather than the end of the business, and the partnership continues until the winding up of its affairs is finished.
What the law says
By the death of any partner
Civil Code, Article 1830 — Causes of Dissolution. Read the full provision →
Dissolution is not closure
Among the causes Article 1830 lists is dissolution By the death of any partner, and it operates by itself, without anyone applying for it. But the word means less than it sounds. Article 1828 defines dissolution as the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business, as distinguished from the winding up, and Article 1829 states that on dissolution the partnership is not terminated but continues until the winding up of partnership affairs is completed. Contracts already running still have to be finished and creditors still have to be paid.
What the survivors may still do
Authority narrows sharply. Under Article 1832, except so far as necessary to wind up partnership affairs or to complete transactions begun but not then finished, dissolution terminates the authority of any partner to act for the partnership. Article 1833 then allocates the risk of ignorance: where dissolution is caused by the death of a partner, each partner remains liable to his co-partners for his share of any liability created by a partner acting for the partnership, unless that partner had knowledge or notice of the death. Telling everyone, promptly and in writing, is therefore not a courtesy.
Where the estate stands
The heirs inherit the value of the deceased's interest, not his place at the table, because a partnership is entered into with particular people. Article 1806 lets the legal representative of a deceased partner demand true and full information of all things affecting the partnership, which is the tool for finding out what that interest is worth. Article 1835 sets the other side of the ledger: the individual property of a deceased partner is liable for all obligations of the partnership incurred while he was a partner, subject to the prior payment of his separate debts.
If the survivors carry on the business
Many firms simply continue trading, and Article 1841 anticipates it. Where a partner dies and the business is continued without any settlement of accounts, the legal representative may have the value of his interest at the date of dissolution ascertained, and receive as an ordinary creditor an amount equal to that value with interest, or, at his option, the profits attributable to the use of his right in the property of the dissolved partnership. Fixing the date of death, and a valuation as at that date, is therefore the first practical step for both sides.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Luzviminda J. Villareal, et al. vs. Donaldo Efren C. Ramirez, et al, G.R. No. 144214, July 14, 2003 — read the decision on LawPhil →
Related provisions
- Civil Code, Article 1830 — Causes of Dissolution
- Civil Code, Article 1829 — Partnership Continues Until Wound Up
- Civil Code, Article 1835 — Existing Liability Survives Dissolution
- Civil Code, Article 1841 — Retiring/Deceased Partner's Interest When Business Continues