Civil Law-law on Partnership

7/28/2019 Civil Law-law on Partnership

1/15

QuickTime and a

TIFF (Uncompressed) decompressorare needed to see this picture.

ATENEO CENTRAL BAR OPERATIONS2007

Civil LawSUMMER REVIEWER

Adviser:Dean Cynthia Roxas-Del Castillo; Heads: Joy Marie Ponsaran, Eleanor Mateo; Understudies:Joy StephanieTajan, John Paul Lim;Subject Head: Thea Marie J imenez; Pledgees: Naealla Rose Bainto, Sandra May Maclang

CHAPTER 1: GENERAL PROVISIONS

(General Professional Partnership,Art.17672)Two or more persons may also form a partnership

for the exercise of a profession.

ELEMENTS OF A PARTNERSHIP:There shall be a partnership whenever:

1. There is a meeting of the minds;2. To form a common fund;3. With intention that profits (and losses) will be

divided among the contracting parties.

ESSENTIAL FEATURES:1. There must be a VALID CONTRACT.2. The parties must have LEGAL CAPACITY to

enter into the contract.3. There must be a mutual contribution of

money, property, or industry to a COMMONFUND.

4. There must be a LAWFUL OBJECT.5. The purpose or primary purpose must be to

obtain PROFITS and DIVIDE the sameamong the parties.

It is also required that the articles of partnershipmust NOT be kept SECRET among themembers; otherwise, the association shall haveno legal personality and shall be governed by theprovisions on CO-OWNERSHIP (Art. 1775).

"kept secret among the members" = secrecydirected not to third persons but to some of thepartners

CHARACTERISTICS:

1. Essentially contractual in nature (Art. 1767,1784)

2. Separate juridical personality (Art. 1768)3. Delectus personae4. Mutual Agency (Art. 1803)5. Personal liability of partners for partnership

debtsFORM OF PARTNERSHIP CONTRACT

GENERAL RULE: No special form is required for thevalidity of a contract. (Art. 1356)

CHAPTER 2: OBLIGATIONS OF PARTNERS

PARTNERSHIP -a contract wherein two or morepersons bind themselves to contribute money,property, or industry to a common fund, withthe intention of dividing the profits amongthemselves. (seeArt. 1767, CC)

Art. 1784. A partnership begins from the momentof the execution of the contract, unless it isotherwise stipulated.

EXCEPTIONS:1. Where immovable property/real rights are

contributed (Art. 1771)a. Public instrument is necessaryb. Inventory of the property contributed

must be made, signed by theparties and attached to the publicinstrument otherwise it is VOID

2. When the contract falls under thecoverage of the Statute of Frauds (Art.1409)

3. Where capital is P3,000 or more, in moneyor property (Art. 1772)

a. Public instrument is necessaryb. Must be registered with SEC

NOTE:

SEC Opinion, 1 June 1960: For purposes ofconvenience in dealing with governmentoffices and financial institutions, registrationof partnership having a capital of less than

Php 3,000is recommended.

SEPARATE JURIDICAL PERSONALITY

Art. 1768. The partnership has a juridicalpersonality separate and distinct form that ofeach of the partners, even in case of failure tocomply with the requirements of A rticle 1772,first paragraph.

As a J URIDICAL PERSON, a partnership may:1. acquire and possess property of all kinds;2. incur obligations; and

3. bring civil or criminal actions,in conformity with the laws and regulations of theirorganization. (SeeArt. 46)

PRINCIPLE OF DELECTUS PERSONARUM

DELECTUS PERSONAEThe selection or choice ofthe person.

Implications: (Dean Villanueva)


2/15

QuickTimTIFF (Uncompressed)

e and adecompressor

Civil Law Summer Reviewer

ATENEOCENTRAL BAR OPERATIONS2007

Page 158 of 297

are needed to see this picture.

The assignment of a partner of his sharedoes not make assignee a partner (Art.1804 and 1813)

The existence of the partnership is closelytied-up to the particular contractual

relationship of the partners (see instances ofdissolution of the partnership upon change ofcontractual relationship.)

Ortega v. CA, G.R. No. 109248, July 3, 1995

Doctrine of Delectus Personae:The birth and life of a partnership at will is

predicated on the mutual desire and consent of thepartners. The right to choose with whom a personwishes to associate himself is the very foundationand essence of that partnership.

MEANING of MUTUAL AGENCY

(According to Dean Villanueva) In the absence of contractual stipulation, all

partners shall be considered agents andwhatever any one of them may do alone shallbind the partnership (Art. 1803[1], 1818)

Partners can dispose of partnership propertyeven when in partnership name (Art. 1819)

An admission or representation made by anypartner concerning partnership affairs is evidenceagainst the partnership (Art. 1820)

Notice to any partner of any matter relating topartnership affairs is notice to the partnership(Art. 1821)

Wrongful act or omission of any partner acting forpartnership affairs makes the partnership liable(Art. 1822)

Partnership bound to make good losses for actsor misapplications of partners (Art. 1823)

UNLIMITED LIABILITY(According to Dean Villanueva)

All partners are liable pro rata with all theirproperties and after partnership assets havebeen exhausted, for all partnership debts (Art.1816)

Any stipulation against personal liability of

partners for partnership debts is void , except asamong them (Art. 1817)

All partners are liable solidarily with thepartnership for everything chargeable to thepartnership when caused by the wrongful act oromission of any partner acting in the ordinarycourse of business of the partnership or withauthority from the other partners and for partner'sact or misapplication of properties (Art. 1824)

A newly admitted partner into an existingpartnership is liable for all the obligations of thepartnership arising before his admission but outof partnership property shares (Art. 1826)

Partnership creditors are preferred to those of

each of the partners as regards the partnershipproperty (Ar t. 1827) Upon dissolution of the partnership, the partners

hall contribute the amounts necessary to satisfythe partnership liabilities (Art. 1839[4], [7])

PARTNERSHIP DISTINGUISHED FROM CO-OWNERSHIP AND CORPORATION

PARTNERSHIP

CO-OWNERS

HIP

CORP

Creation Created by acontract, by

mereagreement ofthe parties

Created bylaw

Created bylaw

Juridicalpersonality

Has ajuridical

personalityseparate anddistinct fromthat of each

partner

None Has ajuridical

personalityseparate

and distinctfrom that of

eachstockholder

Purpose Realization ofprofits

Commonenjoyment

of a thingor right

Dependson AOI

Duration/Term ofexistence

No limitation 10 yearsmaximum

50 yearsmaximum,extendibleto not more

than 50years inany oneinstance

Disposal/Transfer

ability ofinterest

Partner maynot dispose

of his

individualinterestunless

agreed uponby all

partners

Co-ownermay freely

do so

Stockholder has aright to

transfershareswithoutprior

consent ofother

stockholders

Power toact with3

rd

In absence ofstipulation tocontrary, a

Co-ownercannot

represent

Management is vested

with the


3/15

QuickTime and aTIFF (Uncompressed) decompressor




Page 159 of 297

persons partner maybind

partnership(each partner

is agent of

partnership)

the co-ownership

Board ofDirectors

Effect ofdeath

Death ofpartner

results indissolution ofpartnership

Death ofco-ownerdoes not

necessarilydissolve

co-ownership

Death ofstockholderdoes notdissolve

corporation

Dissolution

May bedissolved atany time by

the will of anyor all of the

partners

May bedissolved

anytime bythe will of

any or all ofthe co-owners

Can onlybe

dissolvedwith the

consent ofthe state

# ofincor-porators

Minimum of 2persons

Minimum of2 persons

Minimum of5

incorporators

Commencementof

juridicalpersonality

From themoment of

execution ofcontract ofpartnership

None From dateof issuance

ofcertificate

ofincorporation by the

SEC

Heirs of Tan Eng Kee v. CA, G.R. No. 126881,.October 3, 2000

Particular partnership distinguished from jointventure

A particular partnership is distinguished from jointventure, to wit:

1) a joint venture (an American concept similar toour joint account) is a sort of informal partnership,with no firm name and no legal personality. In a jointaccount, the participating merchants can transactbusiness under their own name, and can be

individually liable therefore; and2) usually, but not necessarily a joint venture islimited to a single transaction, although the businessof pursuing to a successful termination may continuefor a number of years; a partnership generally relatesto a continuing business of various transactions of acertain kind.

It would seem that under Philippine law, a jointventure is a FORM of PARTNERSHIP, specifically a

particular partnership which has for its object specificundertaking.

Aurbach v. Sanitary Wares,180 SCRA 130 (1989)The Supreme Court has, however, recognized a

distinction between these two business forms andhas held that although a corporation cannot enter intoa partnership, it may, however, engage in a jointventure with others.

WEAKNESSES OF A PARTNERSHIP(Dean Villanueva)

Partners are co-owners of the partnershipproperties and enjoy personal possession (Art.1811)

Partners may individually dispose of real propertyof the partnership even when in partnershipname (Art. 1819)

Dissolution of the partnership can come about bythe change in the relationship of the partners,such as when a partner chosses to cease beingpart of the partnership (Art. 1828, 1830[1]b)

Expulsion of partner dissolves the partnership(Art. 1830[1]d)

Dissolved by the loss of the thing promised to becontributed to the partnership (Art. 1830[4])

Death, insolvency, or civil interdiction of a partnerdissolves the partnership (Art. 1830 [5],[6],[7])

Petition by partner will dissolve the partnershipwhen a partner has been declared insane; or thepartner has become incapable of performing hispart of the partnership contract; a partner hasbeen found guilty of such conduct as tends toaffect prejudicially the partnership business;partner willfully or persistently commits a breachof partnership agreement; the partnershipbusiness can only be carried at a loss; otherequitable reasons (Art. 1831)

NOTE:

SEC Opinion, 28 Apri l 1995: The death of apartner, as a general rule, dissolves thepartnership by operation of law, except if thearticles of partnership stipulate for thecontinuance of the partnership relations upon

the death of any of the partners. SEC Opinion, 5 August 1997: If the

remaining partners of the dissolvedpartnership intended for all legal intents andpurposes, to continue the partnershipbusiness even after the death of a partner,there is continuity of personality of thepartnership as there exists a "partnership atwill."


4/15





Page 160 of 297

RULES TO DETERMINE EXISTENCE OFPARTNERSHIP

GENERAL RULE: Persons who are NOT partnersas between themselves, CANNOT be partners asto third persons. (Art. 1769(1))

EXCEPTION:Partnership by Estoppel underArticle 1825

OTHER RULES TO DETERMINE WHETHER APARTNERSHIP EXISTS: (SeeArt. 1769)

1. Co-ownership or co-possession does not ofitself establish a partnership

2. The sharing of gross returns does not of itselfestablish a partnership, whether or not thepersons sharing them have a joint orcommon right or interest in any property fromwhich the returns are derived;

3. The receipt by a person of a share of the

profits of a business is prima facie evidencethat he is a partner in the business, UNLESSsuch were received in payment:

a. As debt by installments or otherwise;b. As wages or rent;c. As annuity;d. As interest on loan;e. As consideration for sale of goodwill

of business/other property byinstallments

Art. 1770. A partnership must have a lawful objector purpose, and must be established for the

common benefit or interest of the partners.When an unlawful partnership is

dissolved by a judicial decree, the profitsshall be confiscated in favor of the State,without prejudice to the provisions of thePenal Code governing the confiscation of theinstruments and effects of a crime.

EFFECTS OF AN UNLAWFUL PARTNERSHIP:1. The contract is void ab initio and the

partnership never existed in the eyes of thelaw. (Art. 1409[1] )

2. The profits shall be confiscated in favor of the

government. (Art. 1770)3. The instruments or tools and proceeds of thecrime shall also be forfeited in favor of thegovernment. (Art. 1770,Art. 45-RPC)

4. The contributions of the partners shall not beconfiscated unless they fall under no. 3. (See

Arts. 1411 and 1412)

NOTE: J udicial decree is not necessary to dissolvean unlawful partnership.

EFFECT OF PARTIAL ILLEGALITY:1. Where a part of the business of a partnership

is legal and a part illegal, an account of thatwhich is legal may be had.

2. Where, without the knowledge or

participation of the partners, the firm's profitsin a lawful business have been increased bywrongful acts, the innocent partners are notprecluded as against the guilty partners fromrecovering their share of the profits. (DeLeon, p. 65)

WHO MAY BE PARTNERS

GENERAL RULE: Any person capacitated tocontract may enter into a contract of partnership.

EXCEPTIONS:1. Persons who are prohib ited from giving

each other any donation or advantagecannot enter into a universal partnership.(Art. 1782)

2. Persons suffering from civil interdiction.3. Persons who cannot give consent to a

contract:a. Minorsb. insane personsc. deaf-mutes who do not know how to

write

MAY CORPORATIONS ENTER INTO

PARTNERSHIP?Philippine Corporate Law (2001) by DeanVillanueva (p. 902) citing various SEC Opinions:

Corporations may enter into partnershipagreements on the following conditions:

1. Authority to enter into a partnershiprelation is expressly conferred by thecharter or the articles ofincorporation (AoI), and the nature ofthe business venture to beundertaken by the partnership is inline with the business authorized bythe charter or AoI.

2. If it is a foreign corporation, it mustobtain a license to transact businessin the country in accordance with theCorporation Code of the Philippines.

WHEN IMMOVABLES OR REAL RIGHTSCONTRIBUTED


5/15





Page 161 of 297

Art. 1773. A contract of partnership is void,whenever immovable property is contributedthereto, if an inventory of said property is notmade, signed by the parties, and attached tothe public instrument.

GENERAL RULE: Failure to comply with therequirement of appearance in public instrumentand SEC Registration will not affect the liability ofthe partnership and the members thereof to thirdpersons. (Art. 1772 2)

EXCEPTION: When IMMOVABLE PROPERTY/REAL RIGHTS are contributed,

*public instrument + inventory*made and signed by the parties and attached tothe public instrument (Arts. 1771 and 1773) isrequired for the benefit of third persons.

EFFECT OF ABSENCE OF REQUIREMENTS

UNDER ARTICLES 1771 AND 1773CONDITION OFPARTNERSHIPWHERE REALPROPERTY ISCONTRIBUTED

BAUTISTA,E. DE LEON

No publicInstrument, No

InventoryVOID VOID

With PublicInstrument, No

InventoryVOID VOID

No PublicInstrument, With

Inventory

VALID

but either partymay compelexecution of

public instrumentso it may be

registered in theregistry ofproperty;

nonetheless,partnership

agreement maybe enforced (cf.

Ar ts . 1356 to1358)

VOID

With PublicInstrument, With

InventoryVALID VALID

(Source: Bar Review Notes for Partnership Law byAtty. Villareal)

NOTE:

Torres v. CA, 320 SCRA 428 (1999)

Partnerships void under Art.1773, inrelation Art. 1771 may still be consideredeither de facto or estoppel partnerships vis--vis third persons; may even be treated asan ordinary contract from which rights and

obligations may validly arise, although notexactly a partnership under the Civil Code.

Failure to prepare an inventory of theimmovable property contributed, in spite ofarticle 1773 declaring the partnership voidwould not render the partnership void when:

a. NO THIRD PARTY INVOLVED(since Art. 1773 was intended for theprotection of 3rd parties;

b. Partners have MADE A CLAIM ONTHE PARTNERSHIP AGREEMENT.

CLASSIFICATIONS OF PARTNERSHIP

AS TO EXTENT OF ITS SUBJECT MATTER

1. UNIVERSAL PARTNERSHIPa. UNIVERSAL PARTNERSHIP OF

ALL PRESENT PROPERTY -comprises the following:

i. Property which belonged toeach of the partners at thetime of the constitution of thepartnership

ii. Profits which they mayacquire from all property

contributedb. UNIVERSAL PARTNERSHIP OF

PROFITS - comprises all that thepartners may acquire by theirindustry or work during the existenceof the partnership

NOTE: Persons who are prohibited from givingdonations or advantage to each other cannot enterinto a universal partnership. (Art. 1782)

2. PARTICULAR PARTNERSHIPhas for itsobjects:a. Determinate things

b. Their use or fruitsc. Specific undertakingd. Exercise of profession or vocation

AS TO LIABILITY OF PARTNERS

1. GENERAL PARTNERSHIPconsists ofgeneral partners who are liable pro rataand subsidiarily and sometimes solidarilywith their separate property forpartnership debts.


6/15





Page 162 of 297

2. LIMITED PARTNERSHIPone formed by 2or more persons having as members oneor more general partners and one ormore limited partners, the latter not beingpersonally liable for the obligations of the

partnership

AS TO DURATION

1. PARTNERSHIP AT WILLone in which notime is specified and is not formed for aparticular undertaking or venture whichmay be terminated anytime by mutualagreement

2. PARTNERSHIP WITH A FIXED TERMtheterm for which the partnership is to existis fixed or agreed upon or one formed fora particular undertaking

AS TO LEGALITY OF EXISTENCE

1. DE JURE PARTNERSHIPone which hascomplied with all the legal requirementsfor its establishment

2. DE FACTOone which has failed to complywith all the legal requirements for itsestablishment

AS TO PURPOSE

1. COMMERCIAL OR TRADINGPARTNERSHIPone formed for the

transaction of business2. PROFESSIONAL OR NON TRADINGPARTNERSHIPone formed for theexercise of a profession

KINDS OF PARTNERS:1. CAPITALISTone who contributes money

or property to the common fund2. INDUSTRIALone who contributes only his

industry or personal service3. GENERALone whose liability to 3rd

persons extends to his separate property4. LIMITEDone whose liability to 3rd persons

is limited to his capital contribution5. MANAGINGone who manages the affairs

or business of the partnership6. LIQUIDATINGone who takes charge of the

winding up of partnership affairs upondissolution

7. PARTNERS BY ESTOPPELone who isnot really a partner but is liable as apartner for the protection of innocent 3rdpersons

8. CONTINUING PARTNERone whocontinues the business of a partnershipafter it has been dissolved by reason ofthe admission of a new partner,retirement, death or expulsion of one of

the partners9. SURVIVING PARTNERone who remainsafter a partnership has been dissolved bydeath of any partner

10. SUBPARTNERone who is not a memberof the partnership who contracts with apartner with reference to the latter'sshare in the partnership

11. OSTENSIBLEone who takes active partand known to the public as partner in thebusiness

12. SECRETone who takes active part in thebusiness but is not known to be a partnerby outside parties

13. SILENTone who does not take any activepart in the business although he may beknown to be a partner

14. DORMANTone who does not take activepart in the business and is not known orheld out as a partner

OBLIGATIONS OF THE PARTNERS TO ONEANOTHER

A) OBLIGATIONS OF THE PARTNERS AMONGTHEMSELVES

1. PROMISED CONTRIBUTIONObligations with respect to contribution ofproperty:

a. to contribute at the beginning of thepartnership or at the stipulated timethe money, property or industrywhich he may have promised tocontribute (Art. 1786)

b. To answer for eviction in case thepartnership is deprived of thedeterminate property contributed(Art. 1786)

c. To answer to the partnership for the

fruits of the property the contributionof which he delayed, from the datethey should have been contributedup to the time of actual delivery (Art.1786)

d. To preserve said property with thediligence of a good father of a familypending delivery to partnership (Art.1163)

e. To indemnify partnership for anydamage caused to it by the retention


7/15





Page 163 of 297

of the same or by the delay in itscontribution (Arts. 1788, 1170)

EFFECT OF FAILURE TO CONTRIBUTEPROPERTY PROMISED:

1. Partners becomes ipso jure a debtor of thepartnership even in the absence of anydemand (SeeArt. 1169[1])

2. Remedy of the other partner is not rescissionbut specific performance with damages fromdefaulting partner (Art. 1788)

Obligations with respect to contribution ofmoney and money converted to personaluse:

a. To contribute on the date fixed theamount he has undertaken tocontribute to the partnership

b. To reimburse any amount he mayhave taken from the partnershipcoffers and converted to his own use

c. To pay for the agreed or legalinterest, if he fails to pay hiscontribution on time or in case hetakes any amount from the commonfund and converts it to his own use

d. To indemnify the partnership for thedamages caused to it by delay in thecontribution or conversion of anysum for his personal benefits

(SeeArt. 1788)

2. FIDUCIARY DUTYA partnership is a fiduciary relationone entered

into and to be maintained on the basis of trust andconfidence. With that, a partner must observe theutmost good faith, fairness, and integrity in hisdealings with the others:

a. he cannot directly or indirectly usepartnership assets for his ownbenefit;

b. he cannot carry on a business of thepartnership for his private advantage;

c. he cannot, in conducting thebusiness of the partnership, take any

profit clandestinely;d. he cannot obtain for himself that heshould have obtained for thepartnership (e.g. businessopportunity)

e. he cannot carry on another businessin competition with the partnership;

f. he cannot avail himself of knowledgeor information which may be properlyregarded as the property of thepartnership;

PROHIBITION AGAINST ENGAGING INCOMPETITIVE BUSINESS

INDUSTRIAL PARTNER CAPITALISTPARTNER

--cannot engage in

business (w/n same line ofbusiness with the

partnership) unlesspartnership expresslypermits him to do so.

(Art. 1789)

--cannot engage in

business (with samekind of business withthe partnership) forhis own account,unless there is astipulation to the

contrary.(Ar t. 1808)

CONSEQUENCES IF AN INDUSTRIAL PARTNERENGAGES IN ANY BUSINESS: (Art. 1789)

1. he can be excluded from the partnership; or2. the capitalist partners can avail of the benefit

he obtained from the business, or3. the capitalist partners have the right to file an

action for damages against the industrialpartner, in either case.

CONSEQUENCES IF THE CAPITALIST PARTNERENGAGES IN A BUSINESS (which competes withthe business of the partnership):

1. he may be required to bring to the commonfund the profits he derived from the otherbusiness; (Art. 1808)

2. he shall personally bear the losses; (Ar t.1808)

3. he may be ousted form the partnership,especially if there was a warning.

Obligations with respect to contribution topartnership capital:

a. Partners must contribute equalshares to the capital of thepartnership unless there is stipulationto contrary (Art. 1790)

b. Partners (capitalist) must contributeadditional capital In case of imminentloss to the business of thepartnership and there is nostipulation otherwise; refusal to do soshall create an obligation on his partto sell his interest to the otherpartners (Art. 1790)

Requisites:a. There is an imminent loss of the

business of the partnershipb. The majority of the capitalist partners

are of the opinion that an additionalcontribution to the common fundwould save the business


8/15

QuickTimeTIFF (Uncompressed) d

are needed to see th

and aecompressoris picture.



Page 164 of 297

c. The capitalist partner refusesdeliberately to contribute (not due tofinancial inability)

d. There is no agreement to thecontrary

Obligation of managing partners whocollects debt from person who also owed thepartnership (Art. 1792)

a. Apply sum collected to 2 credits inproportion to their amounts

b. If he received it for the account ofpartnership, the whole sum shall beapplied to partnership credit

Requisites:a. There exists at least 2 debts, one

where the collecting partner iscreditor and the other, where thepartnership is the creditor

b. Both debts are demandablec. The partner who collects is

authorized to manage and actuallymanages the partnership

Obligation of partner who receives share ofpartnership credit

a. Obliged to bring to the partnershipcapital what he has received eventhough he may have given receipt forhis share only (Art. 1793)

Requisites:a. A partner has received in whole or in

part, his share of the partnership

creditb. The other partners have not

collected their sharesc. The partnership debtor has become

insolvent

BEARING THE RISK OF LOSS OF THINGSCONTRIBUTED (Art. 1795)

Specific and determinate thingswhich are not fungible where onlythe use is contributed

Risk is borne bypartner

Specific and determinate thingsthe ownership of which istransferred to the partnership

Risk is borne bypartnership

Fungible things (consumable) Risk is borne bypartnership

Things contributed to be sold Risk is borne bypartnership

Things brought and appraised inthe inventory

Risk is borne bypartnership

Specific and determinate thingswhich are not fungible where onlythe use is contributed

Risk is borne bypartner

RULES FOR DISTRIBUTION OF PROFITS ANDLOSSES (SeeArt. 1797)

PROFITS LOSSES

Withagreement According toagreement According toagreementWithoutagreement

1. Share ofcapitalistpartner is inproportion to hiscapitalcontribution

2. Share ofindustrialpartner is notfixed - as maybe just andequitable underthecircumstances

1. If sharing ofprofits isstipulated -apply tosharing oflosses

2. If no profitsharingstipulated -losses shallbe borneaccording tocapitalcontribution

3. Purelyindustrialpartner notliable forlosses

Art. 1799. A stipulation which excludes one ormore partners from any share in the profitsand losses is void.

NOTE: Stipulation exempting a partner from lossesshould be allowed. If a person can make a gift toanother, there is no sound reason why a personcannot also agree to bear all the losses. Of course,as far as THIRD PERSONS are concerned, any suchstipulation may be properly declared void.(De Leon, pp. 124-125, citing Espiritu and Sibal)

RIGHTS AND OBLIGATIONS WITH RESPECT TOMANAGEMENT

Partner isappointedmanager in the

articles ofpartnership

Power ofmanagingpartner is

irrevocablewithoutjust/lawfulcause;Revocable onlywhen in badfaith

Vote ofpartnersrepresenting

controllinginterestnecessary torevoke power

Partner isappointedmanager afterconstitution of

Power isrevocable anytime for anycause


9/15





Page 165 of 297

partnership

2 or more personsentrusted withmanagement ofpartnership

withoutspecification ofduties/stipulationthat each shall notact w/o the other'sconsent

Each mayexecute all actsofadministration

In case ofopposition,decision ofmajority shall

prevail; Incase of tie,decision ofpartnersowningcontrollinginterest shallprevail

Stipulated thatnone of themanagingpartners shall actw/o the consent ofothers

Concurrence ofall necessary forthe validity ofacts

Absence ordisability ofany onecannot beallegedunless thereis imminentdanger ofgrave orirreparableinjury topartnership

Manner ofmanagement notagreed upon

1. All partnersare agentsof thepartnership

2. Unanimousconsentrequired for

alteration ofimmovableproperty

If refusal ofpartner ismanifestlyprejudicial tointerest ofpartnership,court's

interventionmay besought

Other rights and obligations of partners:1. Right to associate another person with him in

his share without consent of other partners(subpartnership)

2. Right to inspect and copy partnership booksat any reasonable hour

3. Right to a formal account as to partnershipaffairs (even during existence of partnership):

a. If he is wrongfully excluded from

partnership business or possessionof its property by his copartners

b. If right exists under the terms of anyagreement

c. As provided by art 1807d. Whenever other circumstances

render it just and reasonable4. Duty to render on demand true and full

information affecting partnership to anypartner or legal representative of any

deceased partner or of any partner underlegal disability

5. Duty to account to the partnership asfiduciary

B) PROPERTY RIGHTS OF A PARTNER1. His rights in specific partnership property2. His interest in the partnership3. His right to participate in the management

(Art. 1810)

NATURE OF PARTNER'S RIGHT IN SPECIFICPARTNERSHIP PROPERTYa partnerhas an equal right to possession which isnot assignable and such right is limited tothe share of what remains after partnershipdebts have been paid

NATURE OF PARTNER'S RIGHT IN THEPARTNERSHIPa share in the profits andsurplus

C) OBLIGATION OF PARTNERS WITH REGARDTO THIRD PERSONS1. Every partnership shall operate under a

firm name. Persons who include theirnames in the partnership name even if theyare not members shall be liable as apartner

2. All partners shall be liable for contractualobligations of the partnership with theirproperty, after all partnership assets have

been exhausted:a. Pro ratab. Subsidiary

3. Admission or representation made by anypartner concerning partnership affairswithin scope of his authority is evidenceagainst the partnership

4. Notice to partner of any matter relating topartnership affairs operates as notice topartnership, except in case of fraud:

a. Knowledge, of partner acting inthe particular matter, acquiredwhile a partner

b. Knowledge of the partner actingin the particular matter thenpresent to his mind

c. Knowledge of any other partnerwho reasonably could andshould have communicated it tothe acting partner

5. Partners and the partnership are solidaryliable to 3rd persons for the partner's tort orbreach of trust

6. Liability of incoming partner is limited to:


10/15

QuickTimeTI

and aFF (Uncompressed) decompressor

is picture.



Page 166 of 297

are needed to see th

a. His share in the partnershipproperty for existing obligations

b. His separate property forsubsequent obligations

7. Creditors of partnership preferred in

partnership property & may attach partner'sshare in partnership assets8. Every partner is an agent of the partnership

POWER OF PARTNER AS AGENT OFPARTNERSHIP

Acts for carrying on in theusual way the businessof the partnership

Every partner is anagent and mayexecute acts withbinding effect even ifhe has no authorityExcept: when 3rd

person has knowledgeof lack of authority

1. Act w/c is notapparently for thecarrying of businessin the usual way

2. Acts of strictdominion orownership:

3. Assign partnershipproperty in trust forcreditors

4. Dispose of good-will

of business5. Do an act w/c wouldmake it impossibleto carry on ordinarybusiness ofpartnership

6. Confess ajudgement

7. Enter intocompromiseconcerning apartnership claim orliability

8. Submit partnershipclaim or liability toarbitration

9. Renounce claim ofpartnership

Does not bindpartnership unlessauthorized by otherpartners

Acts in contravention of arestriction on authority

Partnership not liableto 3rd persons havingactual or presumptiveknowledge of therestrictions

EFFECTS OF CONVEYANCE OF REALPROPERTY BELONGING TO PARTNERSHIP

Title in partnership name,Conveyance in partnership

name

Conveyance passestitle but partnership

can recover if:1. Conveyance was

not in the usualway of business,or

2. Buyer hadknowledge oflack of authority

Title in partnership name,Conveyance in partner'sname

Conveyance doesnot pass title but onlyequitable interest,unless:1. Conveyance was


2. Buyer hadknowledge of lack ofauthority

Title in name of 1/ morepartners, Conveyance inname if partner/partners inwhose name title stands

Conveyance passestitle but partnershipcan recover if:1. Conveyance was


2. Buyer hadknowledge oflack of authority

Title in name of 1/more/allpartners or 3rd person intrust for partnership,Conveyance executed inpartnership name if in nameof partners

Conveyance will onlypass equitableinterest

Title in name of all partners,Conveyance in name of allpartners

Conveyance willpass title

PARTNER BY ESTOPPELby words or conduct, hedoes any of the ff.:1. Directly represents himself to anyone as a

partner in an existing partnership or in a non-existing partnership

2. Indirectly represents himself by consenting toanother representing him as a partner in anexisting partnership or in a non existingpartnership


11/15




Page 167 of 297


ELEMENTS TO ESTABLISH LIABILITY AS APARTNER ON GROUND OF ESTOPPEL:

1. Defendant represented himself aspartner/represented by others as such andnot denied/refuted by defendant

2. Plaintiff relied on such representation3. Statement of defendant not refuted

LIABILITIES IN ESTOPPEL

All partnersconsented torepresentation

Partnership is liable

No existingpartnership & allthose representedconsented;Not all partners ofexisting partnership

consents torepresentation

Person who representedhimself & all those whomade representation liablepro-rata/jointly

No existingpartnership & not allrepresentedconsented;None of partners inexisting partnershipconsented

Person who representedhimself liable & those whomade/consented torepresentation separatelyliable

ASSIGNMENT OF INTEREST IN PARTNERSHIPAssignment is subject to three (3) conditions:

1. made in good faith2. for fair consideration3. after a fair and complete disclosure of all

important information as to its value

RIGHTS OF AN ASSIGNEE:1. Get whatever assignor-partner would have

obtained2. Avail usual remedies in case of fraud in the

management3. Ask for annulment of contract of assignment

if he was induced to join through any of thevices of consent

4. Demand an accounting (only in case ofdissolution)

D) RESPONSIBILITY OF PARTNERSHIP TOPARTNERS

1. To refund the amounts disbursed by partnerin behalf of the partnership + correspondinginterest from the time the expenses are made(loans and advances made by a partner to thepartnership aside from capital contribution)

2. To answer for obligations partner may havecontracted in good faith in the interest of thepartnership business

3. To answer for risks in consequence of itsmanagement

CHAPTER 3: DISSOLUTION AND WINDING UP

DISSOLUTIONchange in the relation of thepartners caused by any partner ceasing to beassociated in the carrying on of the business;partnership is not terminated but continues untilthe winding up of partnership affairs is completed

WINDING UPprocess of settling the business orpartnership affairs after dissolution

TERMINATIONthat point when all partnershipaffairs are completely wound up and finallysettled. It signifies the end of the partnership life.

CAUSES OF DISSOLUTION:1. Without violation of the agreement between

the partnersa. By termination of the definite term/

particular undertaking specified in theagreement

b. By the express will of any partner, whomust act in good faith, when no definiteterm or particular undertaking is specified

c. By the express will of all the partners

who have not assigned their interest/charged them for their separate debts,either before or after the termination ofany specified term or particularundertaking

d. By the bona fide expulsion of any partnerfrom the business in accordance withpower conferred by the agreement

2. In contravention of the agreement betweenthe partners, where the circumstances do notpermit a dissolution under any other provisionof this article, by the express will of anypartner at any time

3. By any event which makes it unlawful forbusiness to be carried on/for the members tocarry it on for the partnership

4. Loss of specific thing promised by partnerbefore its delivery

5. Death of any partner6. Insolvency of a partner/partnership7. Civil interdiction of any partner8. Decree of court under art 1831


12/15

QuickTime and a



Page 168 of 297

TIFF (Uncompressed) decompressorare needed to see this picture.

GROUNDS FOR DISSOLUTION BY DECREE OFCOURT (Art. 1831)

1. Partner declared insane in any judicialproceeding or shown to be of unsound mind

2. Incapacity of partner to perform his part of

the partnership contract3. Partner guilty of conduct prejudicial tobusiness of partnership

4. Willful or persistent breach of partnershipagreement or conduct which makes itreasonably impracticable to carry onpartnership with him

5. Business can only be carried on at a loss6. Other circumstances which render

dissolution equitable

Upon application by purchaser of partner's interest: After termination of specified term/particular

undertaking Anytime if partnership at will when interest

was assigned/charging order issued

EFFECTS OF DISSOLUTION

A. AUTHORITY OF PARTNER TO BINDPARTNERSHIP

GENERAL RULE: Authority of partners to bindpartnership is terminated

Exception:1. Wind up partnership affairs

2. Complete transactions not finished

QUALIFICATIONS:1. With respect to partners

a. Authority of partners to bind partnershipby new contract is immediatelyterminated when dissolution is not due toACT, DEATH or INSOLVENCY (ADI) ofa partner (art 1833);

b. If due to ADI, partners are liable as ifpartnership not dissolved, when the ff.concur:i. If cause is ACT of partner, acting

partner must have knowledge ofsuch dissolution

ii. If cause is DEATH or INSOLVENCY,acting partner must have knowledge/notice

2. With respect to persons not partners (Art.1834)

a. Partner continues to bind partnershipeven after dissolution in ff. cases:(1) Transactions in connection to

winding up partnership

affairs/completing transactionsunfinished

(2) Transactions which would bindpartnership if not dissolved, whenthe other party/obligee:

(a) Situation 1 -i. Had extended credit topartnership prior todissolution &

ii. Had noknowledge/notice ofdissolution, or

(b) Situation 2 -i. Did not extend credit to

partnershipii. Had known partnership

prior to dissolutioniii. Had no

knowledge/notice ofdissolution/fact ofdissolution not advertised ina newspaper of generalcirculation in the placewhere partnership isregularly carried on

b. Partner cannot bind the partnershipanymore after dissolution:(1) Where dissolution is due to

unlawfulness to carry on withbusiness (except: winding up ofpartnership affairs)

(2) Where partner has become insolvent

(3) Where partner unauthorized to windup partnership affairs, except bytransaction with one who:(a) Situation 1 -

i. Had extended credit topartnership prior to dissolution&ii. Had no knowledge/notice ofdissolution, or

(b) Situation 2 -i. Did not extend credit to

partnership prior todissolution

ii. Had known partnership priorto dissolutioniii. Had no knowledge/notice of

dissolution/fact of dissolutionnot advertised in anewspaper of generalcirculation in the place wherepartnership is regularlycarried on


13/15





Page 169 of 297

B. DISCHARGE OF LIABILITY

Dissolution does not discharge existing liability ofpartner, except by agreement between:

Partner and himself person/partnership continuing the business partnership creditors

RIGHTS OF PARTNER WHERE DISSOLUTIONNOT IN CONTRAVENTION OF AGREEMENT:

1. Apply partnership property to dischargeliabilities of partnership

2. Apply surplus, if any to pay in cash the netamount owed to partners

RIGHTS OF PARTNER WHERE DISSOLUTION INCONTRAVENTION OF AGREEMENT:

1. Partner who did not cause dissolutionwrongfully:

a. Apply partnership property todischarge liabilities of partnership

b. Apply surplus, if any to pay in cashthe net amount owed to partners

c. Indemnity for damages caused bypartner guilty of wrongful dissolution

d. Continue business in same nameduring agreed term

e. Posses partnership property ifbusiness is continued

2. Partner who wrongly caused dissolution:a. If business not continued by others -

apply partnership property to

discharge liabilities of partnership &receive in cash his share of surplusless damages caused by hiswrongful dissolution

b. If business continued by others -have the value of his interest at timeof dissolution ascertained and paid incash/secured by bond & be releasedfrom all existing/future partnershipliabilities

RIGHTS OF INJURED PARTNER WHEREPARTNERSHIP CONTRACT IS RESCINDED ONGROUND OF FRAUD/MISREPRESENTATION BY 1PARTY:

1. Right to lien on surplus of partnershipproperty after satisfying partnership liabilities

2. Right to subrogation in place of creditorsafter payment of partnership liabilities

3. Right of indemnification by guilty partneragainst all partnership debts & liabilities

C. SETTLEMENT OF ACCOUNTS BETWEENPARTNERS

ASSETS OF THE PARTNERSHIP:

1. Partnership property (including goodwill)2. Contributions of the partners

ORDER OF APPLICATION OF ASSETS:1. Partnership creditors

2. Partners as creditors3. Partners as investorsreturn of capitalcontribution

4. Partners as investorsshare of profits ifany

D. WHEN BUSINESS OF DISSOLVEDPARTNERSHIP IS CONTINUED:

1. Creditors of old partnership are also creditorsof the new partnership which continues thebusiness of the old one w/o liquidation of thepartnership affairs

2. Creditors have an equitable lien on theconsideration paid to the retiring /deceasedpartner by the purchaser whenretiring/deceased partner sold his interestw/o final settlement with creditors

3. Rights if retiring/estate of deceased partner:a. To have the value of his interest

ascertained as of the date of dissolutionb. To receive as ordinary creditor the value

of his share in the dissolved partnershipwith interest or profits attributable to useof his right, at his option

PERSONS AUTHORIZED TO WIND UP1. Partners designated by the agreement

2. In absence of agreement, all partners whohave not wrongfully dissolved the partnership

3. Legal representative of last surviving partner

CHAPTER 4: LIMITED PARTNERSHIP

CHARACTERISTICS:1. Formed by compliance with statutory

requirements2. One or more general partners control the

business3. One or more general partners contribute to

the capital and share in the profits but do notparticipate in the management of thebusiness and are not personally liable forpartnership obligations beyond their capitalcontributions

4. May ask for the return of their capitalcontributions under conditions prescribed bylaw

5. Partnership debts are paid out of commonfund and the individual properties of generalpartners


14/15

QuickTime and aTIFF (Uncompressed) de

are needed to see thiscompressorpicture.



Page 170 of 297

DIFFERENCES BETWEEN GENERAL ANDLIMITED PARTNER/PARTNERSHIP

GENERAL LIMITEDPersonally liable forpartnership obligations

Liability extends onlyto his capital

contributionsWhen manner of mgt. notagreed upon, all genpartners have an equalright in the mgt. of thebusiness

No participation inmanagement

Contribute cash, propertyor industry

Contribute cash orproperty only, notindustry

Proper party toproceedings by/againstpartnership

Not proper party toproceedingsby/against partnership

Interest not assignable

w/o consent of otherpartners

Interest is freely

assignable

Name may appear in firmname

Name must appear infirm name

Prohibition againstengaging in business

No prohibition againstengaging in business

Retirement, death,insolvency, insanity ofgen partner dissolvespartnership

Does not have sameeffect; rightstransferred to legalrepresentative

REQUIREMENTS FOR FORMATION OF LIMITEDPARTNERSHIP:

1. Certificate of articles of the limitedpartnership must state the ff. matters:

a. Name of partnership +word "ltd."b. Character of businessc. Location of principal place of

businessd. Name/place of residence of

memberse. Term for partnership is to existf. Amount of cash/value of property

contributedg. Additional contributionsh. Time agreed upon to return

contribution of limited partneri. Sharing of profits/othercompensation

j. Right of limited partner (if given) tosubstitute an assignee

k. Right to admit additional partnersl. Right of limited partners (if given) to

priority for contributionsm. Right of remaining gen partners (if

given) or continue business in case

of death, insanity, retirement, civilinterdiction, insolvency

n. Right of limited partner (if given) todemand/receive property/cash inreturn for contribution

2. Certificate must be filed with the SEC

WHEN GENERAL PARTNER NEEDSCONSENT/RATIFICATION OF ALL LIMITEDPARTNERS:

1. Do any act in contravention of the certificate2. Do any act which would make it impossible to

carry on the ordinary business of thepartnership

3. Confess judgment against partnership4. Possess partnership property/assign rights in

specific partnership property other than forpartnership purposes

5. Admit person as general partner6. Admit person as limited partner - unless

authorized in certificate7. Continue business with partnership property

on death, retirement, civil interdiction,insanity or insolvency of gen partner unlessauthorized in certificate

SPECIFIC RIGHTS OF LIMITED PARTNERS:1. Right to have partnership books kept at

principal place of business2. Right to inspect/copy books at reasonable

hour3. Right to have on demand true and full info of

all things affecting partnership4. Right to have formal account of partnership

affairs whenever circumstances render it justand reasonable

5. Right to ask for dissolution and winding up bydecree of court

6. Right to receive share of profits/othercompensation by way of income

7. Right to receive return of contributionsprovided the partnership assets are in excessof all its liabilities

REQUISITES FOR RETURN OF CONTRIBUTIONOF LIMITED PARTNER:

1. All liabilities of partnership have been paid/ifnot yet paid, at least sufficient to cover them

2. Consent of all members has been obtained3. Certificate is cancelled/amended as to set

forth withdrawal /reduction of contribution

LIABILITIES OF A LIMITED PARTNER

To the partnership


15/15





Page 171 of 297

1. for the difference between his contribution asactually made and that stated in thecertificate as having been made, and

2. for any unpaid contribution which he agreed inthe certificate to make in the future time

As a trustee for the partnership1. for the specific property stated in the

certificate as contributed by him but which hehad not contributed;

2. for the specific property of the partnershipwhich had been wrongfully returned to him;and

3. Money or other property wrongfully paid orconveyed to him on account of hiscontribution.

DISSOLUTION OF LIMITED PARTNERSHIP(Priority in Distribution of Assets):

1. Those due to creditors, including limitedpartners

2. Those due to limited partners in respect oftheir share in profits/compensation

3. Those due to limited partners of return ofcapital contributed

4. Those due to general partner other thancapital & profits

5. Those due to general partner in respect toprofits

6. Those due to general partner for return ofcapital contributed

Documents

Civil Law-law on Partnership