ALS 2008 Partnership

ATENEO CENTRAL BAR OPERATIONS 2008
Civil Law
SUMMER REVIEWER
ILAW ON PARTNERSHIP 2. Separate juridical personality (Art. 1768)

3. Delectus personae
CHAPTER 1: GENERAL PROVISIONS 4. Mutual Agency (Art. 1803)
5. Personal liability of partners for partnership
PARTNERSHIP - a contract wherein two or more debts
persons bind themselves to contribute money,
property, or industry to a common fund, with the
FORM OF PARTNERSHIP CONTRACT
intention of dividing the profits among themselves.
(see Art. 1767, CC) GR: No special form is required for the validity of a
contract. (Art. 1356)
General Professional Partnership (Art.1767, CHAPTER 2: OBLIGATIONS OF PARTNERS

¶2): Two or more persons may also form a
partnership for the exercise of a profession. Art. 1784. A partnership begins from the moment
of the execution of the contract, unless it is
ELEMENTS OF A PARTNERSHIP: otherwise stipulated.
There shall be a partnership whenever:
1. There is a meeting of the minds;
2. To form a common fund; • Atty. Villareal: This is not entirely
3. With intention that profits (and losses) will be accurate. It is better to say that its legal life
divided among the contracting parties. begins from the moment of the perfection
of the contract amongst the parties,
ESSENTIAL FEATURES: UNLESS OTHERWISE STIPULATED (e.g. the
1. There must be a VALID CONTRACT. parties can agree that the partnership is
2. The parties must have LEGAL CAPACITY deemed to commence legal existence on a
later date)
to enter into the contract.
3. There must be a mutual contribution of Exceptions:
money, property, or industry to a 1. Where immovable property/real rights
COMMON FUND.
are contributed (Art. 1771)
4. There must be a LAWFUL OBJECT. a. Public instrument is necessary
5. The purpose or primary purpose must be to b. Inventory of the property
obtain PROFITS and DIVIDE the same contributed must be made, signed
among the parties. by the parties and attached to the
public instrument otherwise it is
VOID
• It is also required that the articles
of partnership must NOT be kept SECRET 2. When the contract falls under the
among the members; otherwise, the association coverage of the Statute of Frauds (Art.
shall have no legal personality and shall be 1409)
governed by the provisions on CO-OWNERSHIP 3. Where capital is P3,000 or more, in
(Art. 1775). money or property (Art. 1772)
• "kept secret and aamong
QuickTime™ the a. Public instrument is necessary
members" = TIFF secrecy directed
(Uncompressed) decompressor
not
are needed to see this picture. to third b. Must be registered with SEC
persons but to some of the partners
• this does not mean that there NOTE:
could be no contractual relations amongst • Generally, partnerships may be
the parties; there is only no partnership or CONSTITUTED IN ANY FORM (Art. 1771);
association with distinct legal personality thus, even if there is no compliance with
Art. 1772, ¶ 1 (contracts of partnership
CHARACTERISTICS: having capital of Php3,000 or more in
1. Essentially contractual in nature (Art. money or property shall appear in a public
1767, 1784) instrument registered with the SEC), the
—Adviser: Dean Cynthia Roxas-Del Castillo, Atty. Eugenio Villareal; Heads: Joy Stephanie Tajan, John
Paul Lim; Understudies: Charmaine Haw, Kristi Fe Mari Lu; Subject Head: Rimo Rico; Pledgees: Kris
Buenaventura, Kit Singson—
Civil Law Summer Reviewer
objective of which is notice to the public,
particularly those interested in dealing with Ortega v. CA G.R. No. 109248, July 3, 1995
the partnership, there may be a validly
existing partnership, save in cases where Doctrine of Delectus Personae:
immovables are contributed where public The birth and life of a partnership at will is
instrument and inventory necessary. predicated on the mutual desire and consent of the
partners. The right to choose with whom a person
• failure to comply with public wishes to associate himself is the very foundation
instrument/registration and essence of that partnership.
requirement shall not affect liability
of partnership and of partners to • Plural form is delectus
3rd persons (Art. 1772, ¶ 2) personarum; this doctrine, however does not
apply to a limited partner who merely
Torres v. CA 320 SCRA 428 (1999) contributes his interest and is not barred from
engaging in competitive business or from
A “void” partnership under Article 1773, in relation transacting business with the partnership as if
to Article 1771, may still be considered a he were a stranger (Art. 1866, in relation to
partnership de facto or by estoppel vis-à-vis third Arts. 1789, 1808, and 1854).
persons; and may be considered by the courts as
an ordinary contract (though not exactly an “Art. MEANING of MUTUAL AGENCY
1767” partnership) from which rights and (According to Dean Villanueva)
obligations may legally stem.
• In the absence of contractual
stipulation, all partners shall be considered
• SEC Opinion, 1 June 1960: For agents and whatever any one of them may do
purposes of convenience in dealing with alone shall bind the partnership (Arts.
government offices and financial 1803(1), 1818)
institutions, registration of partnership
• Partners can dispose of partnership
having a capital of less than Php 3,000 is
property even when in partnership name (Art.
recommended.
1819)
SEPARATE JURIDICAL PERSONALITY • An admission or representation
made by any partner concerning partnership
Art. 1768. The partnership has a juridical affairs is evidence against the partnership (Art.
personality separate and distinct form that of 1820)
each of the partners, even in case of failure to • Notice to any partner of any matter
comply with the requirements of Article 1772, relating to partnership affairs is notice to the
first paragraph. partnership (Art. 1821)
As a JURIDICAL PERSON, a partnership may: • Wrongful act or omission of any

1. acquire and possess property of all kinds; partner acting for partnership affairs makes the
2. incur obligations; and partnership liable (Art. 1822)
3. bring civil or criminal actions, in conformity • Partnership bound to make good
with the laws and regulations of their losses for acts or misapplications of partners
organization. (See Art. 46) (Art. 1823)
DELECTUS PERSONAE -QuickTime™

The selection or choice of UNLIMITED LIABILITY
and a
the person. TIFF (Uncompressed) decompressor (According to Dean Villanueva)
are needed to see this picture.
Implications: (Dean Villanueva)

• All partners are liable pro rata with
all their properties and after partnership assets
• The assignment
QuickTime™ and ofa a partner of his
TIFF (Uncompressed) decompressor have been exhausted, for all partnership debts
share doesarenot make
needed to see thisassignee
picture. a partner (Art. 1816)
(Art. 1804 and 1813)
• Any stipulation against personal
• The existence of the partnership is liability of partners for partnership debts is
closely tied-up to the particular contractual void , except as among them (Art. 1817)
relationship of the partners (see instances
of dissolution of the partnership upon
• All partners are liable solidarily with
the partnership for everything chargeable to the
change of contractual relationship.)
Page 158 of 297
partnership when caused by the wrongful act or shares (Art. 1826)
omission of any partner acting in the ordinary • Partnership creditors are preferred
course of business of the partnership or with to those of each of the partners as regards the
authority from the other partners and for partnership property (Art. 1827)
partner's act or misapplication of properties
(Art. 1824) • Upon dissolution of the partnership,
the partners shall contribute the amounts
• A newly admitted partner into an necessary to satisfy the partnership liabilities
existing partnership is liable for all the (Art. 1839(4), (7))
obligations of the partnership arising before his
admission but out of partnership property
PARTNERSHIP DISTINGUISHED FROM CO-OWNERSHIP AND CORPORATION
CO-OWNERSHIP
BASIS PARTNERSHIP CORP
Creation Created by a contract, by Created by law Created by law

mere agreement of the
parties
Juridical personality Has a juridical personality None Has a juridical personality
separate and distinct from separate and distinct from
that of each partner that of each stockholder
Purpose Realization of profits Common enjoyment of a Depends on AOI

thing or right
Duration/ Term of No limitation 10 years maximum 50 years maximum,

existence extendible to not more
than 50 years in any one
instance
Disposal/ Partner may not dispose of Co-owner may freely do Stockholder has a right to
Transferability of his individual interest unless so transfer shares without
interest agreed upon by all partners prior consent of other
stockholders
Power to act with 3rd In absence of stipulation to Co-owner cannot Management is vested
persons contrary, a partner may bind represent the co- with the Board of
partnership (each partner is ownership Directors
agent of partnership)
Effect of death Death of partner results in Death of co-owner does Death of stockholder does
dissolution of partnership not necessarily dissolve not dissolve corporation
co-ownership
QuickTime™ and a
TIFF (Uncompressed) decompressor
Dissolution May be dissolved at any time
are needed to see this picture. May be dissolved anytime Can only be dissolved
by the will of any or all of the by the will of any or all of with the consent of the
partners the co-owners state
QuickTime™ and a
# of incor-porators Minimum of 2 persons Minimum of 2 persons Minimum of 5

incorporators
Page 159 of 297
Commencement of From the moment of None From date of issuance of
juridical personality execution of contract of certificate of incorporation
partnership by the SEC
QuickTime™ and a
QuickTime™ and a
Page 160 of 297
partnership (Art. 1830 (5),(6),(7))
Heirs of Tan Eng Kee v. CA, G.R. No. 126881, • Petition by partner will dissolve the
October 3, 2000 partnership when a partner has been declared
Particular partnership distinguished from joint insane; or the partner has become incapable of
venture performing his part of the partnership contract;
A particular partnership is distinguished from a partner has been found guilty of such conduct
joint venture, to wit: as tends to affect prejudicially the partnership
1) a joint venture (an American concept similar business; partner willfully or persistently
to our joint account) is a sort of informal commits a breach of partnership agreement;
partnership, with no firm name and no legal the partnership business can only be carried at
personality. In a joint account, the participating a loss; other equitable reasons (Art. 1831)
merchants can transact business under their own
name, and can be individually liable therefore; and NOTE:
2) usually, but not necessarily a joint venture is • SEC Opinion, 28 April 1995: The
limited to a single transaction, although the death of a partner, as a general rule,
business of pursuing to a successful termination dissolves the partnership by operation of
may continue for a number of years; a partnership law, except if the articles of partnership
generally relates to a continuing business of various stipulate for the continuance of the
transactions of a certain kind. partnership relations upon the death of
any of the partners.
It would seem that under Philippine law, a joint • SEC Opinion, 5 August 1997: If
venture is a FORM of PARTNERSHIP, specifically the remaining partners of the dissolved
a particular partnership which has for its object partnership intended for all legal intents
specific undertaking. and purposes, to continue the partnership
business even after the death of a partner,
Aurbach v. Sanitary Wares 180 SCRA 130 there is continuity of personality of the
(1989) partnership as there exists a "partnership
The Supreme Court has, however, recognized a at will."
distinction between these two business forms and
has held that although a corporation cannot enter
into a partnership, it may, however, engage in a RULES TO DETERMINE EXISTENCE OF
joint venture with others. PARTNERSHIP
GR: Persons who are NOT partners as between
themselves, CANNOT be partners as to third
WEAKNESSES OF A PARTNERSHIP persons. (Art. 1769(1))
(Dean Villanueva)
• Partners are co-owners of the Exception: Partnership by Estoppel under Art.
partnership properties and enjoy personal 1825
possession (Art. 1811)
OTHER RULES TO DETERMINE WHETHER A
• Partners may individually dispose of PARTNERSHIP EXISTS: (Art. 1769)
real property of the partnership even when in 1. Co-ownership or co-possession does not of
partnership name (Art. 1819) itself establish a partnership
• Dissolution of the partnership can 2. The sharing of gross returns does not of
come about by the change in the relationship of itself establish a partnership, whether or
the partners, such asQuickTime™
when a andpartner
a chooses not the persons sharing them have a joint
to cease being part of tothe
are needed partnership
see this picture. (Arts. or common right or interest in any property
1828, 1830(1)(b)) from which the returns are derived;
• Expulsion of partner
QuickTime™ and a dissolves the 3. The receipt by a person of a share of the
partnership (Art. 1830(1)(d))
are needed to see this picture. profits of a business is prima facie
evidence that he is a partner in the
• Dissolved by the loss of the thing
business, UNLESS such were received in
promised to be contributed to the partnership
payment:
(Art. 1830(4))
a. As debt by installments or
• Death, insolvency, or civil otherwise;
interdiction of a partner dissolves the b. As wages or rent;
Page 161 of 297
c. As annuity; 1. Persons who are prohibited from giving
d. As interest on loan; each other any donation or advantage
e. As consideration for sale of goodwill cannot enter into a universal
of business/other property by partnership. (Art. 1782)
installments 2. Persons suffering from civil
interdiction.
Art. 1770. A partnership must have a lawful object 3. Persons who cannot give consent to a
or purpose, and must be established for the contract:
common benefit or interest of the partners. a. Minors
When an unlawful partnership is dissolved by a b. insane persons
judicial decree, the profits shall be confiscated in c. deaf-mutes who do not know how
favor of the State, without prejudice to the to write
provisions of the Penal Code governing the
confiscation of the instruments and effects of a
crime.
• De Leon: There is no prohibition
for partnerships to be partners, BUT THIS IS
DOUBTFUL AND IMPRACTICAL on account of
EFFECTS OF AN UNLAWFUL PARTNERSHIP:
Art. 1768 (that a partnership has a juridical
1. The contract is void ab initio and the personality separate from that of each of the
partnership never existed in the eyes of the partners) and of the essential attribute called
law. (Art. 1409(1)) delectus personae.
2. The profits shall be confiscated in favor of
the government. (Art. 1770) MAY CORPORATIONS ENTER INTO
PARTNERSHIP?
3. The instruments or tools and proceeds of
the crime shall also be forfeited in favor of Philippine Corporate Law (2001) by Dean
the government. (Art. 1770, Art. 45-RPC) Villanueva (p. 902) citing various SEC Opinions:
• Corporations may enter into
4. The contributions of the partners shall not partnership agreements on the following
be confiscated unless they fall under no. 3. conditions:
(See Arts. 1411 and 1412) 1. Authority to enter into a partnership
relation is expressly conferred by
NOTE: Judicial decree is not necessary to dissolve the charter or the articles of
an unlawful partnership. incorporation (AoI), and the nature
of the business venture to be
NOTE: That there is no legally constituted undertaken by the partnership is in
partnership DOES NOT mean that there are line with the business authorized by
no contractual or legal relations among the the charter or AoI.
parties. 2. If it is a foreign corporation, it must
obtain a license to transact business
EFFECT OF PARTIAL ILLEGALITY: in the country in accordance with
1. Where a part of the business of a the Corporation Code of the
partnership is legal and a part illegal, an Philippines.
account of that which is legal may be had.
2. Where, without the knowledge or NOTE: How tax law treats the matter:
participation of the partners, the firm's • Notion of partnership no matter
profits in a lawful QuickTime™
businessand have
a been how created or organized: a pool of insurance
increased by are wrongful acts,
needed to see the innocent
this picture. companies was considered a partnership under
partners are not precluded as against the applicable tax law (Afisco v. CA, G.R. No.
guilty partners from recovering their share 112675, January 25, 1999)
QuickTime™ and a
of the profits. (De Leon,
TIFF (Uncompressed) p. 65)
decompressor
are needed to see this picture. • Without prejudice to the formation
of a joint venture (J.M. Tuazon v. Bolanos,
WHO MAY BE PARTNERS 95 Phil. 106 (1954); Aurbach v. Sanitary
Wares Manufacturing, 180 SCRA 130
GR: Any person capacitated to contract may enter (1989)).
into a contract of partnership.
Exceptions:
WHAT MAY BE CONTRIBUTED
Page 162 of 297
• must be in equal shares unless of share in the profits; hence, as
otherwise stipulated (Art. 1790). generally, partners are not entitled
to charge each other (Marsh’s
1. Money – failure to contribute promised money Appeal, 69 Pa. St. 30).
makes the promissory-partner liable - “Every partner is bound to
not only for the amount promised, but work to the extent of his ability for
also for interest due and damages the benefit of the whole, without
arising from the time the former regard to the services of his co-
should have complied with his or her partners, and without comparison
undertaking (Art. 1786, ¶ 1) (upon of value; for services to the firm
perfection of contract, unless contrary cannot, from their very nature, be
stipulation) estimated and equalized by
- if there is fraud or misrepresentation, compensation of differences.”
action for rescission may be filed and (Beatty v. Wray, 7 Harris 519).
the party entitled to rescind, without - BUT: a partner who has
prejudice to any other right, has the
agreed to render special service to
right to:
the partnership, for the
a. lien on, or right of retention performance of which he is
over, the surplus of partnership qualified, and which is one of the
property after satisfying inducements for the other
partnership liabilities to third members to enter the partnership,
persons (for any sum paid by the was found liable civilly to account
injured partner for the purchase for the value of such service upon
of an interest in the partnership a finding that he wrongfully
and for any capital or advances refused to perform such service.
contributed by the latter) - BUT THEN AGAIN, specific
b. stand in place of creditors of performance not available due to
the partnership for any payments constitutional prohibition vs.
made by the injured partner in involuntary servitude
respect of partnership liabilities,
after all liabilities to third persons Since Art. 1786 expressly declares him a
have been satisfied debtor, does this bar a criminal prosecution
c. indemnity by the guilty for say, estafa, on account of the
partner against all partnership constitutional prohibition vs. non-payment of
debts and liabilities (Art. 1838); debt?
relate to Art. 1831: with or Atty. Villareal: Not if your legal theory is grounded
without fraud or on criminal liability, since any civil aspect thereof is
misrepresentation, injured partner merely incidental.
may seek judicial dissolution
2. Property – may include intangible or NOTE: A limited partner is not allowed to contribute
services, only “cash or other property” (Art.
incorporeal, e.g. credit (Lim
1845); otherwise, he is considered an
Tong Lim v. Phil. Fishing
“industrial and general partner” and thus,
Gear, 316 SCRA 728 (1999)).
not exempted from personal liability.
- Art. 1786, ¶¶ 1 and 2
applies: liable for fruits from
the QuickTime™ and a
time property should have WHEN IMMOVABLES OR REAL RIGHTS
been delivered without need of CONTRIBUTED
demand; also include obligation Art. 1773. A contract of partnership is void,
to QuickTime™
preserve and a the promised whenever immovable property is contributed
property
are with
needed to see the diligence of a
this picture.
thereto, if an inventory of said property is not
good father of a family pending made, signed by the parties, and attached to
delivery. the public instrument.
3. Industry – may concur with any or both of the
first two or in the absence of any GR: Failure to comply with the requirement of
one or both of them; manual appearance in public instrument and SEC
and/or intellectual in consideration Registration will not affect the liability of the
Page 163 of 297
partnership and the members thereof to third Partnerships void under Art.1773, in relation Art.
persons. (Art. 1772, ¶ 2) 1771 may still be considered either de facto or
estoppel partnerships vis-à-vis third persons; may
Exception: When IMMOVABLE PROPERTY/ even be treated as an ordinary contract from which
REAL RIGHTS are contributed, rights and obligations may validly arise, although
not exactly a partnership under the Civil Code.
*public instrument + inventory* Failure to prepare an inventory of the immovable
made and signed by the parties and attached to property contributed, in spite of article 1773
the public instrument (Arts. 1771 and 1773) declaring the partnership void would not render the
is required for the benefit of third persons. partnership void when:
a. NO THIRD PARTY INVOLVED (since Art.
EFFECT OF ABSENCE OF REQUIREMENTS 1773 was intended for the protection of 3rd
UNDER ARTICLES 1771 AND 1773 parties;
CONDITION b. Partners have MADE A CLAIM ON THE
OF PARTNERSHIP AGREEMENT.
PARTNERSHIP
BAUTISTA, E. DE LEON
WHERE REAL CLASSIFICATIONS OF PARTNERSHIP
PROPERTY IS
CONTRIBUTED AS TO EXTENT OF ITS SUBJECT MATTER
No public 1. UNIVERSAL PARTNERSHIP
Instrument, No VOID VOID a. UNIVERSAL PARTNERSHIP OF ALL
Inventory PRESENT PROPERTY - comprises
the following:
With Public i. Property which belonged to
Instrument, No VOID VOID each of the partners at the
Inventory time of the constitution of
VALID the partnership
ii. Profits which they may
but either party acquire from all property
may compel contributed
execution of b. UNIVERSAL PARTNERSHIP OF
public PROFITS - comprises all that the
instrument so partners may acquire by their
it may be industry or work during the
No Public registered in existence of the partnership
Instrument, the registry of VOID
NOTE: Persons who are prohibited from giving
With Inventory property; donations or advantage to each other
nonetheless, cannot enter into a universal partnership.
partnership (Art. 1782)
agreement
may be 2. PARTICULAR PARTNERSHIP—has for its
enforced (cf. objects:
Arts. 1356 to a. Determinate things
1358) b. Their use or fruits
c. Specific undertaking
With Public
QuickTime™ and a d. Exercise of profession or vocation
Instrument, VALID
TIFF (Uncompressed) decompressor VALID
With Inventory
AS TO LIABILITY OF PARTNERS
(Source: Bar Review Notes for Partnership Law
QuickTime™ and a
by Atty. Villareal)TIFF (Uncompressed) decompressor 1. GENERAL PARTNERSHIP—consists of
general partners who are liable pro rata
• Atty. Villareal: The safer view is De Leon’s and subsidiarily and sometimes
due to his simplified view of statute. solidarily with their separate property
for partnership debts.
NOTE: 2. LIMITED PARTNERSHIP—one formed by
Torres v. CA 320 SCRA 428 (1999) 2 or more persons having as members
Page 164 of 297
one or more general partners and one 8. CONTINUING PARTNER—one who
or more limited partners, the latter not continues the business of a partnership
being personally liable for the after it has been dissolved by reason of
obligations of the partnership the admission of a new partner,
retirement, death or expulsion of one of
AS TO DURATION the partners
1. PARTNERSHIP AT WILL—one in which no 9. SURVIVING PARTNER—one who
fixed term is specified and is not formed remains after a partnership has been
for a particular undertaking or venture dissolved by death of any partner
which may be terminated anytime by 10. SUBPARTNER—one who is not a
mutual agreement member of the partnership who
2. PARTNERSHIP WITH A FIXED TERM— contracts with a partner with reference
to the latter's share in the partnership
the term for which the partnership is to
exist is fixed or agreed upon or one 11. OSTENSIBLE—one who takes active
formed for a particular undertaking part and known to the public as partner
in the business
AS TO LEGALITY OF EXISTENCE 12. SECRET—one who takes active part in
the business but is not known to be a
1. DE JURE PARTNERSHIP—one which has
partner by outside parties
complied with all the legal
13. SILENT—one who does not take any
requirements for its establishment
active part in the business although he
2. DE FACTO—one which has failed to comply
may be known to be a partner
with all the legal requirements for its
14. DORMANT—one who does not take
establishment
active part in the business and is not
AS TO PURPOSE known or held out as a partner
1. COMMERCIAL OR TRADING
PARTNERSHIP—one formed for the OBLIGATIONS OF THE PARTNERS TO ONE
transaction of business ANOTHER
2. PROFESSIONAL OR NON TRADING
A) OBLIGATIONS OF THE PARTNERS AMONG
PARTNERSHIP—one formed for the
THEMSELVES
exercise of a profession
1. PROMISED CONTRIBUTION
Obligations with respect to contribution of
KINDS OF PARTNERS:
property:
1. CAPITALIST—one who contributes
a. to contribute at the beginning of the
money or property to the common fund
partnership or at the stipulated time
2. INDUSTRIAL—one who contributes the money, property or industry
only his industry or personal service which he may have promised to
3. GENERAL—one whose liability to 3rd contribute (Art. 1786)
persons extends to his separate b. To answer for eviction in case the
property partnership is deprived of the
4. LIMITED—one whose liability to 3rd determinate property contributed
persons is QuickTime™
limited andto a his capital (Art. 1786)
contributionare needed to see this picture. c. To answer to the partnership for the
5. MANAGING—one who manages the fruits of the property the
affairs or business
QuickTime™ ofandthe
a partnership
contribution of which he delayed,
6. TIFF (Uncompressed) decompressor
LIQUIDATING—one who takes charge
from the date they should have
been contributed up to the time of
of the winding up of partnership affairs
actual delivery (Art. 1786)
upon dissolution
7. PARTNERS BY ESTOPPEL—one who is
d. To preserve said property with the
diligence of a good father of a
not really a partner but is liable as a
family pending delivery to
partner for the protection of innocent 3rd
partnership (Art. 1163)
persons
Page 165 of 297
e. To indemnify partnership for any business of the partnership, take
damage caused to it by the any profit clandestinely;
retention of the same or by the
delay in its contribution (Arts. d. he cannot obtain for himself that he
1788, 1170) should have obtained for the
partnership (e.g. business
EFFECT OF FAILURE TO CONTRIBUTE opportunity)
PROPERTY PROMISED:
e. he cannot carry on another business
1. Partners becomes ipso jure a debtor of the in competition with the partnership;
partnership even in the absence of any
demand (See Art. 1169[1]) f. he cannot avail himself of
2. Remedy of the other partner is not knowledge or information which
rescission but specific performance with may be properly regarded as the
damages from defaulting partner (Art. property of the partnership;
1788)
PROHIBITION AGAINST ENGAGING IN
Obligations with respect to contribution of
COMPETITIVE BUSINESS
money and money converted to personal
use: INDUSTRIAL PARTNER CAPITALIST
a. To contribute on the date fixed PARTNER
the amount he has undertaken to - cannot engage in - cannot engage in
contribute to the partnership business (w/n same line business (with same
of business with the kind of business with
b. To reimburse any amount he partnership) unless the partnership) for
may have taken from the partnership expressly his own account,
partnership coffers and converted to permits him to do so. unless there is a
his own use stipulation to the
(Art. 1789) contrary.
c. To pay for the agreed or legal ( Art. 1808)
interest, if he fails to pay his
contribution on time or in case he
takes any amount from the CONSEQUENCES IF AN INDUSTRIAL PARTNER
ENGAGES IN ANY BUSINESS: (Art. 1789)
common fund and converts it to his
own use 1. he can be excluded from the partnership; or
2. the capitalist partners can avail of the
d. To indemnify the partnership benefit he obtained from the business, or
3. the capitalist partners have the right to file
for the damages caused to it by
delay in the contribution or an action for damages against the industrial
partner, in either case.
conversion of any sum for his
personal benefits
CONSEQUENCES IF THE CAPITALIST PARTNER
(See Art. 1788)
ENGAGES IN A BUSINESS (which competes with
the business of the partnership):
2. FIDUCIARY DUTY
A partnership is a fiduciary relation—one 1. he may be required to bring to the common
entered into and to be maintained on the basis of fund the profits he derived from the other
trust and confidence. With that,andaa partner must
QuickTime™
business; (Art. 1808)
observe the utmost goodto see faith, fairness, and
are needed this picture. 2. he shall personally bear the losses; (Art.
integrity in his dealings with the others: 1808)
a. he cannot directly or indirectly use 3. he may be ousted form the partnership,
QuickTime™ and a
partnership
TIFF (Uncompressed)assets
decompressor for his own especially if there was a warning.
benefit;
Obligations with respect to contribution
b. he cannot carry on a business of the to partnership capital:
partnership for his private
a. Partners must contribute equal
advantage;
shares to the capital of the
partnership unless there is
c. he cannot, in conducting the
Page 166 of 297
stipulation to contrary (Art. 1790) collected their shares
b. Partners (capitalist) must contribute c. The partnership debtor has become
additional capital in case of insolvent
imminent loss to the business of the
partnership and there is no BEARING THE RISK OF LOSS OF THINGS
stipulation otherwise; refusal to do CONTRIBUTED (Art. 1795)
so shall create an obligation on his
part to sell his interest to the other Specific and determinate things Risk is borne by
partners (Art. 1790) which are not fungible where only partner
the use is contributed
Requisites: Specific and determinate things Risk is borne by
a. There is an imminent loss of the the ownership of which is partnership
business of the partnership transferred to the partnership
b. The majority of the capitalist Fungible things (consumable) Risk is borne by
partners are of the opinion that an partnership
additional contribution to the Things contributed to be sold Risk is borne by
common fund would save the partnership
business Things brought and appraised in Risk is borne by
c. The capitalist partner refuses the inventory partnership
deliberately to contribute (not due Specific and determinate things Risk is borne by
to financial inability) which are not fungible where only partner
d. There is no agreement to the the use is contributed
contrary
Obligation of managing partners who RULES FOR DISTRIBUTION OF PROFITS AND

collects debt from person who also owed LOSSES (See Art. 1797)
the partnership (Art. 1792) PROFITS LOSSES
a. Apply sum collected to 2 credits in
proportion to their amounts With According to According to
b. If he received it for the account of agreement agreement
partnership, the whole sum shall be Without 1. Share of 1. If sharing of
applied to partnership credit agreement capitalist profits is
partner is in stipulated -
Requisites: proportion to apply to
a. There exists at least 2 debts, one his capital sharing of
where the collecting partner is contribution losses
creditor and the other, where the 2. Share of 2. If no profit
partnership is the creditor industrial sharing
partner is not stipulated -
b. Both debts are demandable fixed - as may losses shall
be just and be borne
c. The partner who collects is equitable according to
authorized to manage and actually under the capital
manages the partnership circumstances contribution
3. Purely
Obligation of partner who receives share industrial
of partnership creditQuickTime™ and a partner not
a. Obliged to bring
are needed topicture.
to see this the partnership liable for
capital what he has received even losses
though QuickTime™
he mayand have
a given receipt
for hisneeded
share only (Art. 1793)
are to see this picture. Art. 1799. A stipulation which excludes one or
more partners from any share in the profits and
Requisites: losses is void.
a. A partner has received in whole or
in part, his share of the partnership NOTE: Stipulation exempting a partner from losses
credit should be allowed. If a person can make a
b. The other partners have not gift to another, there is no sound reason why
Page 167 of 297
a person cannot also agree to bear all the immovable sought
losses. Of course, as far as THIRD PERSONS property
are concerned, any such stipulation may be
properly declared void. Other rights and obligations of partners:
(De Leon, pp. 124-125, citing Espiritu and 1. Right to associate another person with him
Sibal) in his share without consent of other
partners (subpartnership)
RIGHTS AND OBLIGATIONS WITH RESPECT TO 2. Right to inspect and copy partnership books
MANAGEMENT at any reasonable hour
3. Right to a formal account as to partnership
Partner is Power of Vote of
affairs (even during existence of
appointed managing partners
partnership):
manager in the partner is representing
a. If he is wrongfully excluded from
articles of irrevocable controlling
partnership business or possession
partnership without interest
of its property by his copartners
just/lawful necessary to
b. If right exists under the terms of
cause; revoke power
any agreement
Revocable only
when in bad c. As provided by art. 1807
faith d. Whenever other circumstances
Partner is Power is render it just and reasonable
appointed revocable any 4. Duty to render on demand true and full
manager after time for any information affecting partnership to any
constitution of cause partner or legal representative of any
partnership deceased partner or of any partner under
2 or more Each may In case of legal disability
persons entrusted execute all acts opposition, 5. Duty to account to the partnership as
with management of decision of fiduciary
of partnership administration majority
without shall prevail; B) PROPERTY RIGHTS OF A PARTNER
specification of In case of 1. His rights in specific partnership
duties/stipulation tie, decision property
that each shall of partners 2. His interest in the partnership
not act w/o the owning
3. His right to participate in the
other's consent controlling
interest shall management
prevail (Art. 1810)
Stipulated that Concurrence of Absence or
none of the all necessary disability of NATURE OF PARTNER'S RIGHT IN
SPECIFIC PARTNERSHIP PROPERTY—
managing for the validity any one
partners shall act of acts cannot be a partner has an equal right to possession
which is not assignable and such right is
w/o the consent alleged
of others unless there limited to the share of what remains after
partnership debts have been paid
is imminent
danger of
NATURE OF PARTNER'S RIGHT IN THE
grave or
irreparable PARTNERSHIP—a share in the profits
QuickTime™ and a and surplus
TIFF (Uncompressed) decompressorinjury to
partnership
C) OBLIGATION OF PARTNERS WITH
Manner of 1. All partners If refusal of
REGARD
management notTIFF (Uncompressed)
are agents
QuickTime™ and a partner is
decompressor
TO THIRD PERSONS
agreed upon oftothe
are needed see this picture. manifestly
1. Every partnership shall operate under a
partnership prejudicial to
firm name. Persons who include their
2. Unanimous interest of
names in the partnership name even if
consent partnership,
they are not members shall be liable as a
required for court's
partner
alteration intervention
2. All partners shall be liable for contractual
of may be
Page 168 of 297
obligations of the partnership with their 3. Assign
property, after all partnership assets have partnership
been exhausted: property in
a. Pro rata trust for
b. Subsidiary creditors
3. Admission or representation made by any 4. Dispose
partner concerning partnership affairs of good-will
within scope of his authority is evidence of business
against the partnership 5. Do an
4. Notice to partner of any matter relating to act w/c
partnership affairs operates as notice to would make
partnership, except in case of fraud: it
a. Knowledge, of partner acting in impossible
the particular matter, acquired to carry on
while a partner ordinary
b. Knowledge of the partner acting business of
in the particular matter then partnership
present to his mind 6. Confess
c. Knowledge of any other partner a
who reasonably could and judgement
should have communicated it to 7. Enter
the acting partner into
5. Partners and the partnership are compromise
solidary liable to 3rd persons for the concerning
partner's tort or breach of trust a
6. Liability of incoming partner is partnership
limited to: claim or
a. His share in the partnership liability
property for existing obligations 8. Submit
b. His separate property for partnership
subsequent obligations claim or
7. Creditors of partnership preferred in liability to
partnership property & may attach arbitration
partner's share in partnership assets 9. Renounc
8. Every partner is an agent of the e claim of
partnership partnership
Acts in Partnership not liable to 3rd
POWER OF PARTNER AS AGENT OF contravention of persons having actual or
PARTNERSHIP a restriction on presumptive knowledge of the
authority restrictions
Acts for carrying Every partner is an agent and
on in the usual may execute acts with binding
EFFECTS OF CONVEYANCE OF REAL
way the business effect even if he has no
PROPERTY BELONGING TO PARTNERSHIP
of the authority
partnership Except: when 3rd person has Title in partnership name, Conveyance passes
knowledge of lack of authority Conveyance in partnership title but partnership
1. Act w/c Does not andbind
QuickTime™ a partnership name can recover if:
is notTIFFare
(Uncompressed) decompressor
unless authorized
needed to see this picture. by other 1. Conveyance was
apparently partners not in the usual
for the way of business,
QuickTime™ and a
carrying TIFF
of (Uncompressed) decompressor or
business in 2. Buyer had
the usual knowledge of
way lack of authority
2. Acts of Title in partnership name, Conveyance does
strict Conveyance in partner's not pass title but
dominion or name only equitable
ownership:
Page 169 of 297
interest, unless: existing partnership
1. Conveyance was consents to
not in the usual representation
way of business, No existing Person who represented
or partnership & not all himself liable & those who
2. Buyer had represented made/consented to
knowledge of lack of consented; representation separately
authority None of partners in liable
Title in name of 1/ more Conveyance passes existing partnership
partners, Conveyance in title but partnership consented
name if partner/partners in can recover if:
whose name title stands 1. Conveyance was ASSIGNMENT OF INTEREST IN PARTNERSHIP
not in the usual Assignment is subject to three (3) conditions:
way of business, 1. made in good faith
or 2. for fair consideration
2. Buyer had 3. after a fair and complete disclosure of all
knowledge of important information as to its value
lack of authority
Title in name of 1/more/all Conveyance will RIGHTS OF AN ASSIGNEE:
partners or 3rd person in only pass equitable 1. Get whatever assignor-partner would have
trust for partnership, interest obtained
Conveyance executed in 2. Avail usual remedies in case of fraud in the
partnership name if in management
name of partners 3. Ask for annulment of contract of
Title in name of all Conveyance will assignment if he was induced to join
partners, Conveyance in pass title through any of the vices of consent
name of all partners 4. Demand an accounting (only in case of
dissolution)
PARTNER BY ESTOPPEL—by words or conduct, he D) RESPONSIBILITY OF PARTNERSHIP TO
does any of the ff.: PARTNERS
1. Directly represents himself to anyone as a 1. To refund the amounts disbursed by partner
partner in an existing partnership or in a in behalf of the partnership + corresponding
non-existing partnership interest from the time the expenses are
2. Indirectly represents himself by consenting made (loans and advances made by a
to another representing him as a partner in partner to the partnership aside from capital
an existing partnership or in a non existing contribution)
partnership 2. To answer for obligations partner may have
contracted in good faith in the interest of the
partnership business
ELEMENTS TO ESTABLISH LIABILITY AS A 3. To answer for risks in consequence of its
PARTNER ON GROUND OF ESTOPPEL: management
1. Defendant represented himself as
partner/represented by others as such and
not denied/refuted by defendant CHAPTER 3: DISSOLUTION AND WINDING UP
2. Plaintiff relied on such representation
3. Statement of defendant not
QuickTime™ andrefuted
a
DISSOLUTION—change in the relation of the
partners caused by any partner ceasing to be
LIABILITIES IN ESTOPPEL associated in the carrying on of the business;
All partners Partnership
QuickTime™ and a is liable partnership is not terminated but continues
consented to are needed to see this picture. until the winding up of partnership affairs is
representation completed
No existing Person who represented
partnership & all himself & all those who WINDING UP—process of settling the business or
those represented made representation liable partnership affairs after dissolution
consented; pro-rata/jointly
Not all partners of TERMINATION—that point when all partnership
Page 170 of 297
affairs are completely wound up and finally 6. Other circumstances which render
settled. It signifies the end of the partnership dissolution equitable
life.
Upon application by purchaser of partner's interest:
CAUSES OF DISSOLUTION: • After termination of specified
1. Without violation of term/particular undertaking
the agreement between the partners • Anytime if partnership at will when
a. By termination of the definite term/ interest was assigned/charging order issued
particular undertaking specified in the
agreement EFFECTS OF DISSOLUTION
b. By the express will of any partner, who
must act in good faith, when no definite AUTHORITY OF PARTNER TO BIND
term or particular undertaking is PARTNERSHIP
specified
c. By the express will of all the partners GR: Authority of partners to bind partnership is
who have not assigned their interest/ terminated
charged them for their separate debts, Exception:
either before or after the termination of 1. To wind up partnership affairs
any specified term or particular 2. Complete transactions not finished
undertaking
d. By the bona fide expulsion of any QUALIFICATIONS:
partner from the business in accordance 1. With respect to partners—
with power conferred by the agreement a. Authority of partners to bind
2. In contravention of partnership by new contract is
the agreement between the partners, where immediately terminated when
the circumstances do not permit a dissolution is not due to ACT, DEATH or
dissolution under any other provision of this INSOLVENCY (ADI) of a partner (art
article, by the express will of any partner at 1833);
any time b. If due to ADI, partners are liable as if
3. By any event which partnership not dissolved, when the ff.
makes it unlawful for business to be carried concur:
on/for the members to carry it on for the i. If cause is ACT of partner,
partnership acting partner must have
4. Loss of specific knowledge of such dissolution
thing promised by partner before its delivery ii. If cause is DEATH or
5. Death of any INSOLVENCY, acting partner must
partner have knowledge/ notice
6. Insolvency of a 2. With respect to persons not partners (Art.
partner/partnership 1834)—
7. Civil interdiction of a. Partner continues to bind partnership
any partner even after dissolution in ff. cases:
8. Decree of court (1) Transactions in connection to
under art. 1831 winding up partnership
affairs/completing transactions
GROUNDS FOR DISSOLUTION BY DECREE OF unfinished
COURT (Art. 1831) (2) Transactions which would bind
1. Partner declared insaneandin
QuickTime™ a any judicial partnership if not dissolved, when
proceeding orareshown
needed toto
seebe
this of unsound mind
picture. the other party/obligee:
2. Incapacity of partner to perform his part of (a) Situation 1 -
the partnership QuickTime™
contractand a i. Had extended credit to
3. Partner TIFF
guilty of conduct
(Uncompressed) decompressor prejudicial to partnership prior to
business of partnership dissolution &
4. Willful or persistent breach of partnership ii. Had no
agreement or conduct which makes it knowledge/notice of
reasonably impracticable to carry on dissolution, or
partnership with him (b) Situation 2 -
5. Business can only be carried on at a loss i. Did not extend credit to
partnership
Page 171 of 297
ii. Had known partnership RIGHTS OF PARTNER WHERE DISSOLUTION IN
prior to dissolution CONTRAVENTION OF AGREEMENT:
iii. Had no 1. Partner who did not cause dissolution
knowledge/notice of wrongfully:
dissolution/fact of a. Apply partnership property to
dissolution not advertised discharge liabilities of partnership
in a newspaper of general b. Apply surplus, if any to pay in cash
circulation in the place the net amount owed to partners
where partnership is c. Indemnity for damages caused by
regularly carried on partner guilty of wrongful
b. Partner cannot bind the partnership dissolution
anymore after dissolution: d. Continue business in same name
(1) Where dissolution is due to during agreed term
unlawfulness to carry on with e. Posses partnership property if
business (except: winding up of business is continued
partnership affairs) 2. Partner who wrongly caused
(2) Where partner has become dissolution:
insolvent a. If business not continued by others
(3) Where partner unauthorized to wind - apply partnership property to
up partnership affairs, except by discharge liabilities of partnership &
transaction with one who: receive in cash his share of surplus
(a) Situation 1 - less damages caused by his
i. Had extended credit to wrongful dissolution
partnership prior to dissolution b. If business continued by others -
& have the value of his interest at
ii. Had no time of dissolution ascertained and
knowledge/notice of paid in cash/secured by bond & be
dissolution, or released from all existing/future
(b) Situation 2 - partnership liabilities
i. Did not extend credit to
partnership prior to RIGHTS OF INJURED PARTNER WHERE
dissolution PARTNERSHIP CONTRACT IS RESCINDED ON
ii. Had known partnership GROUND OF FRAUD/MISREPRESENTATION BY
prior to dissolution 1 PARTY:
iii. Had no knowledge/notice of 1. Right to lien on surplus of partnership
dissolution/fact of property after satisfying partnership
dissolution not advertised in liabilities
a newspaper of general 2. Right to subrogation in place of
circulation in the place creditors after payment of partnership
where partnership is liabilities
regularly carried on 3. Right of indemnification by guilty
partner against all partnership debts &
B. DISCHARGE OF LIABILITY liabilities
C. SETTLEMENT OF ACCOUNTS BETWEEN
Dissolution does not discharge existing liability of
PARTNERS
partner, except by agreement between:
• Partner and himself ASSETS OF THE PARTNERSHIP:
QuickTime™ and a
• person/partnership continuing the
TIFF (Uncompressed) decompressor 1. Partnership property (including
business goodwill)
• partnership creditors 2. Contributions of the partners
QuickTime™ and a
RIGHTS OF PARTNER WHERE
are needed to DISSOLUTION
see this picture. ORDER OF APPLICATION OF ASSETS:
NOT IN CONTRAVENTION OF AGREEMENT: 1. Partnership creditors
1. Apply partnership property to discharge 2. Partners as creditors
liabilities of partnership 3. Partners as investors—return of
2. Apply surplus, if any to pay in cash the capital contribution
net amount owed to partners
4. Partners as investors—share of
Page 172 of 297
profits if any
CHAPTER 4: LIMITED PARTNERSHIP
D. WHEN BUSINESS OF DISSOLVED
PARTNERSHIP IS CONTINUED: CHARACTERISTICS:
1. Creditors of old partnership are also 1. Formed by compliance with
creditors of the new partnership which statutory requirements
continues the business of the old one w/o 2. One or more general partners
liquidation of the partnership affairs control the business
2. Creditors have an equitable lien on 3. One or more general partners
the consideration paid to the retiring contribute to the capital and share in the
/deceased partner by the purchaser when profits but do not participate in the
retiring/deceased partner sold his interest management of the business and are not
w/o final settlement with creditors personally liable for partnership obligations
3. Rights if retiring/estate of deceased beyond their capital contributions
partner: 4. May ask for the return of their
a. To have the value of his interest capital contributions under conditions
ascertained as of the date of dissolution prescribed by law
b. To receive as ordinary creditor the 5. Partnership debts are paid out of
value of his share in the dissolved common fund and the individual properties
partnership with interest or profits of general partners
attributable to use of his right, at his
option
DIFFERENCES BETWEEN GENERAL AND
LIMITED PARTNER/PARTNERSHIP
PERSONS AUTHORIZED TO WIND UP
1. Partners designated by the GENERAL LIMITED
agreement Personally liable for Liability extends only
2. In absence of agreement, all partnership obligations to his capital
partners who have not wrongfully dissolved contributions
the partnership When manner of mgt. No participation in
3. Legal representative of last not agreed upon, all management
surviving partner general partners have
an equal right in the
NOTE: mgt. of the business
Magdusa v. Albaran 115 Phil. 511 (1962) Contribute cash, Contribute cash or
A partner’s share cannot be returned without first property or industry property only, not
dissolving and liquidating the business for the industry
partnership’s outside creditors have preference Proper party to Not proper party to
over the enterprise’s assets. The firm’s property proceedings by/against proceedings
cannot be diminished to their prejudice. partnership by/against
partnership
Villareal v. Ramirez 406 SCRA 145 Interest not assignable Interest is freely
Due to its separate juridical personality from the w/o consent of other assignable
individual partners, it is thus the partnership – partners
having been the recipient of the capital Name may appear in Name must appear in
contributions – which must refund the equity of firm name firm name
retiring partners. Such duty does not pertain to Prohibition against No prohibition
partners who managed
QuickTime™ and a
the business.
TIFF (Uncompressed) decompressor engaging in business against engaging in
The amount to be refunded, supra, consistent with business
the partnership being a separate and distinct entity, Retirement, death, Does not have same
must necessarilyTIFF
be(Uncompressed)
limited
QuickTime™to what
and a to the firm’s insolvency, insanity of effect; rights
decompressor
total resources. Itare
can only
needed pay
to see this out what it has for
picture. general partner transferred to legal
its total assets. But this is subject to the priority dissolves partnership representative
enjoyed by outside creditors. “After all the (said)
creditors have been paid, whatever is left of the REQUIREMENTS FOR FORMATION OF LIMITED
partnership assets becomes available for the PARTNERSHIP:
payment of partners’ shares. 1. Certificate of articles of the
limited partnership must state the ff.
Page 173 of 297
matters: 5. Admit person as general partner
a. Name of partnership + word 6. Admit person as limited partner -
"ltd." unless authorized in certificate
b. Character of business 7. Continue business with partnership
c. Location of principal place of property on death, retirement, civil
business interdiction, insanity or insolvency of gen
d. Name/place of residence of partner unless authorized in certificate
members
e. Term for partnership is to SPECIFIC RIGHTS OF LIMITED PARTNERS:
exist 1. Right to have partnership books kept at
f. Amount of cash/value of principal place of business
property contributed 2. Right to inspect/copy books at
g. Additional contributions reasonable hour
h. Time agreed upon to return 3. Right to have on demand true and full
contribution of limited partner info of all things affecting partnership
i. Sharing of profits/other 4. Right to have formal account of
compensation partnership affairs whenever circumstances
j. Right of limited partner (if render it just and reasonable
given) to substitute an assignee 5. Right to ask for dissolution and winding
k. Right to admit additional up by decree of court
partners 6. Right to receive share of profits/other
l. Right of limited partners (if compensation by way of income
given) to priority for contributions 7. Right to receive return of contributions
m. Right of remaining gen provided the partnership assets are in
partners (if given) or continue excess of all its liabilities
business in case of death, insanity,
retirement, civil interdiction,
insolvency REQUISITES FOR RETURN OF CONTRIBUTION
n. Right of limited partner (if OF LIMITED PARTNER:
given) to demand/receive 1. All liabilities of partnership have
property/cash in return for been paid/if not yet paid, at least sufficient
contribution to cover them
2. Certificate must be filed with 2. Consent of all members has been
the SEC obtained
3. Certificate is cancelled/amended as
NOTE: To validly form a limited partnership, all that to set forth withdrawal /reduction of
is required is SUBSTANTIAL COMPLIANCE IN contribution
GOOD FAITH with all the requirements under
Art. 1844 (i.e. signing and swearing to a LIABILITIES OF A LIMITED PARTNER
certificate, affixing the word “Limited” to the
partnership name, etc.). If no substantial To the partnership
compliance, then the firm becomes a general 1. for the difference
partnership to third persons (but as amongst between his contribution as actually made
the partners, still limited). and that stated in the certificate as having
been made, and
WHEN GENERAL PARTNER NEEDS 2. for any unpaid
CONSENT/RATIFICATION OF ALL
QuickTime™ and a LIMITED contribution which he agreed in the
PARTNERS: TIFF (Uncompressed) decompressor
are needed to see this picture. certificate to make in the future time
1. Do any act in contravention of the
certificate As a trustee for the partnership
anyQuickTime™ and a
2. Do act which
TIFF (Uncompressed) would make it
decompressor 1.
impossible are
to needed
carrytoonsee this picture.
the ordinary business for the specific property stated in the
of the partnership certificate as contributed by him but which
3. Confess judgment against he had not contributed;
partnership 2.
4. Possess partnership property/assign for the specific property of the partnership
rights in specific partnership property other which had been wrongfully returned to him;
than for partnership purposes and
Page 174 of 297
3. & Light Co., 427 P. d. 366).
Money or other property wrongfully paid or • A limited partner shall not become liable as
conveyed to him on account of his a general partner, unless in addition to the
contribution. exercise of his rights and powers as a limited
one, he takes part in the control (and
DISSOLUTION OF LIMITED PARTNERSHIP management) of the business (Art. 1848;
(Priority in Distribution of Assets): Holzman v. Escamilla, 195 P. d. 833).
1. Those due to creditors, including
limited partners - Actually, a person may be general
2. Those due to limited partners in and limited at the same time provided this
respect of their share in is stated in the certificate. He shall have all
profits/compensation the powers, rights, and restrictions of a
3. Those due to limited partners of general partner; but with respect to his
return of capital contributed capital contribution, his right against the
4. Those due to general partner other other members of the firm would be that of
than capital & profits a limited partner (Art. 1853).
5. Those due to general partner in - A limited partner may also loan
respect to profits money to and transact other business with
6. Those due to general partner for the firm. BUT, he cannot: (1) receive or
return of capital contributed hold as collateral any partnership property;
or (2) receive from a general partner or
AMENDMENT OF CERTIFICATE OF from the firm any payment, conveyance,
PARTNERSHIP release if at that time assets of the firm are
1. In case any of the ten enumerated changes and not sufficient to discharge liabilities to
circumstances in Art. 1864, par. 2 are present. outside creditors; Art. 1854: any violation
2. It must be signed and sworn to by all the would be fraud on such creditors.
members including the new members if some - The remedy of a general partner who
are added; in case of substitution, the assigning suffers from or faces interference from his
limited partner must also sign. limited partners is dissolution (Weil v.
3. The cancellation or amendment must be Diversified Properties, 319 F. Supp
recorded in the SEC. 778).
NOTE:
• Any person who suffers loss by reliance on
false statement in certificate may hold liable for
damages any party to the certificate who knew
the statement to be false at the time the latter
signed the certificate or came to know such
falsity subsequently but within sufficient time
before reliance to enable such party to cancel
or amend the certificate or file the proper
petition for such purpose (under Art. 1865).
(Art. 1847; Walraven v. Ramsay, 55 N.W.d
853).
• A general partner’s DIIC (death,
insolvency, insanity, or civil interdiction)
QuickTime™ and a
dissolves the partnership unless
TIFF (Uncompressed) the business is
decompressor
continued by the surviving general partners
under a right stated in the certificate or with
their common (i.e.QuickTime™
all) consent
and a
(Art. 1860).
Still, even if allowed
are needed tounder the certificate or
see this picture.
consented to by all, there must be an

amendment further to Arts. 1864 and 1865 (cf.
Bautista). Otherwise, limited partners will not
be able to avail of the protection of the law as
regards liability. The partnership will be
considered general (Lowe v. Arizona Power
Page 175 of 297

ALS 2008 Partnership

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ALS 2008 Partnership

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ATENEO CENTRAL BAR OPERATIONS 2008

ILAW ON PARTNERSHIP 2. Separate juridical personality (Art. 1768)

General Professional Partnership (Art.1767, CHAPTER 2: OBLIGATIONS OF PARTNERS

As a JURIDICAL PERSON, a partnership may: • Wrongful act or omission of any

DELECTUS PERSONAE -QuickTime™

Implications: (Dean Villanueva)

Creation Created by a contract, by Created by law Created by law

Purpose Realization of profits Common enjoyment of a Depends on AOI

Duration/ Term of No limitation 10 years maximum 50 years maximum,

# of incor-porators Minimum of 2 persons Minimum of 2 persons Minimum of 5

Obligation of managing partners who RULES FOR DISTRIBUTION OF PROFITS AND

consented to by all, there must be an

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