Partnership Reviewer

Prof. Roberto Dio 2D; Sem. 2, 2009-2010

I.
A.

NATURE; CREATION
Definition; essential features

Kinds of Or ani!ations" (1) Sole proprietorship has a business name; only one individual (2) artnership partnership name; separate personality; 2 or more individuals (!) "orporation "orporate name; separate personality; multiple o#ners (not limited to individuals) ($) %rusts (&) 'sso(iations Re#uisites of a Partnership" (1) %#o or more persons bind themselves to (ontribute money, property or industry to a (ommon )und (even i) there is no a(tual (ontribution as lon* as there is an a*reement to (ontribute). (2) +ntention to divide the pro)its amon* themselves (pro)its and losses) +ndustry #or,, i.e., any a(tivity o) the human body; it a(tually pertains to )uture industry (a) time rendered (b) idea (() servi(e rendered $eatures of a partnership" (-ui.) (1) artnership name (2) /oint interest ("ommon )und) (!) /oint mana*ement and (ontrol ($) 0utual a*en(y (&) 1usiness )or pro)it Purpose" to en*a*e in a (ommer(ial or business transa(tion (there is the element o) habituality) Cause" %he underta,in* to (ontribute O%&e't" 0ust be la#)ul - Unlawful objects: (1) rohibited by la# (2 "); (2) %hose not penal in nature but prohibited by la# (. Creation

(ontributed the land, 2espondent %orres (ontributed his industry and advan(ed the e3penses and (osts. - etitioners (ontend that the (ontra(t is void be(ause there #as no inventory o) the land, (itin* 'rt. 144!. 2atio5 (1) 'rt. 144! #as intended primarily to prote(t third persons. - S" (ited %olentino5 6the e3e(ution o) the publi( instrument #ould be useless i) there is no inventory o) the property (ontributed, be(ause #ithout its desi*nation and des(ription, they (annot be sub:e(t to ins(ription in the 2e*istry o) roperty, and their (ontribution (annot pre:udi(e third persons. %hus, the (ontra(t is de(lared void by the la# #hen no su(h inventory is made.7 - %;< "'S< '% 1'2 D9<S 89% +8=9>=< %;+2D '2%+<S ?;9 0'@ 1< 2</AD+"<D. (2) etitioners (annot in one breath deny the (ontra(t and in another re(o*ni.e it to be able to (laim )rom %orres the B0C o) the value o) the property. - The alleged nullity of the partnership will not prevent courts from considering the JVA an ordinary contract from which the parties rights and obligations to each other may be inferred and enforced. ARBES vs. POL ST CO )*+/+. - %here is no Duestion that %urnuhan olisti(o E "o. is an unla#)ul partnership. - ' partnership must have a la#)ul ob:e(t and must be established )or the (ommon bene)it o) the partners. ?hen the dissolution o) an unla#)ul partnership is de(reed, the pro)its shall be *iven to (haritable institutionsF (1) 's to pro)its5 - %o be able to re(eive the pro)its, the partners to an unla#)ul partnership #ould have to base his a(tion on the (ontra(t #hi(h is =9+D and 898 <G+S%<8%. - +t #ould be immoral and un:ust )or the la# to permit a pro)it )rom an industry prohibited by it. (2) 's to (ontributions5 - Sin(e the (ontra(t is void, there is no reason )or the administrator o) the artnership to retain the (ontribution o) the others without any consideration be(ause there is 89 "98%2'"% )or #hi(h reason he is bound to return it, and he #ho has paid his (ontribution is bound to re(over it. - "ourt applied (on(ept o) un:ust enri(hment (AUTI0TA !on AR"#$ vs. P%&'$T'(% (A$#)" - "ourt should have applied5 Art. *1**. ?hen the nullity pro(eeds )rom the ille*ality o) the (ause or ob:e(t o) the (ontra(t, and the a(t (onstitutes a (riminal o))ense, both parties bein* in pari deli(to, they shall have no a(tion a*ainst ea(h other, and both shall be prose(uted. 0oreover, the provisions o) the enal "ode relative to the disposal o) e))e(ts or instruments o) a (rime ()or)eited in )avor o) the State) shall be appli(able to the thin*s or the pri(e o) the (ontra(t. Art. *1*/. +) the a(t in #hi(h the unla#)ul or )orbidden (ause (onsists does not (onstitute a (riminal o))ense, the )ollo#in* rules shall be observed5 )*. ?hen the )ault is on the part o) both (ontra(tin* parties, neither may re(over #hat he has *iven by virtue o) the (ontra(t, or demand the per)orman(e o) the otherHs underta,in*; - %hus the (ontributions should not have been returned to the (ontributors, but should have been (on)is(ated in )avor o) the State. %he (ontributors must be presumed to have ,no#n the (riminal nature o) the ob:e(t o) the partnership they a*reed to )orm, and should have thus been prose(uted and (onvi(ted )or runnin* a *amblin* :oint. (1autista, p. 19) Notes" 29"<DA2< to establish a '2%8<2S;+ #here immovables are (ontributed5

AGAD vs. MABATO )*+,-. - ' partnership may be (onstituted in any )orm, e3(ept #here immovable property or real ri*hts are (ontributed thereto, in #hi(h (ase a publi( instrument shall be ne(essary ('rt. 1441). - ' (ontra(t o) partnership is void, #henever immovable property is (ontributed thereto, i) inventory o) said property is not made, si*ned by the parties, and atta(hed to the publi( instrument ('rt. 144!). - +n the (ase at bar5 %he partnership #as established to 6 operate a )ishpond7 and not to 6en*a*e in a )ishpond business.7 8either said )ishpond nor a real ri*ht thereto #as contributed to the partnership by any one o) the partners or be(ame part o) the capital thereo), even i) a )ishpond or a real ri*ht thereto (ould be(ome part o) its assets. 'rt. 144! is 89% appli(able. TORRES vs. CA )*+++. -ui(, )a(ts5 artnership entered into )or the purpose o) developin* land into subdivision; but their venture )ailed. etitioner sisters

(1) (2) (!) ($) (&) (B) (4)

urpose "ontribution Division o) ro)its '9 5 have it notari.ed +nventory5 ma,e, si*n and atta(h 2e*ister #ith S<" Deed o) Sale (to trans)er o#nership o) the immovable property )rom the partner #ho ori*inally o#ns it to the partnership).

- %here is no distin(tion in in(ome ta3 liability bet#een a person #ho pra(ti(es his pro)ession alone or individually and one #ho does it throu*h a partnership. - artnerships are either5 (1) ta3able s, or (2) e3empt s. ' *eneral pro)ession )alls under (2). ME!D OLA vs. CA )/22,. - +n a partnership, members be(ome (o-o#ners ((o-possessors) o) #hat is (ontributed to the )irm (apital and o) all the property that may be a(Duired thereby. <a(h partner possesses a :oint interest in #hole partnership property. - +) the relation does not have this )eature, it is not one o) partnership. - +n this (ase, the parties merely shared pro)its. %his alone does not ma,e a partnership. - ' (orporation (annot be(ome a member o) a partnership in the absen(e o) e3press authori.ation by statute or (harter. 2 reasons5 (1) %he mutual a*en(y bet#een the partners, #hereby the (orporation #ould be bound by the a(ts o) persons #ho are not its duly appointed and authori.ed a*ents and o))i(ers, #ould be in(onsistent #ith the poli(y o) the la# that the (orporation shall mana*e its o#n a))airs separately and e3(lusively; (2) Su(h an arran*ement #ould improperly allo# (orporate property to be(ome sub:e(t to ris,s not (ontemplated by the sto(,holders #hen they ori*inally invested in the (orporation. A!GELES vs. Sec. of "ust#ce )/225. - 0ere )ailure to re*ister the (ontra(t o) partnership #ith the S<" does not invalidate a (ontra(t that has the essential reDuisites o) a . %he purpose o) re*istration o) the (ontra(t o) is to *ive noti(e to third persons. 8either does su(h )ailure to re*ister a))e(t the Ks :uridi(al personality. ' may e3ist even i) the partners do not use the #ords 6partner7 or 6partnership7. - $osyo industrial +ndustrial partnership D. 6utual A en'4" artners in a partnership are mutual a*ents and prin(ipals o) ea(h other. E. Distin uish Partnership fro7" $% Co&owne's(#)* Co&)ossess#on - %here is no (o-o#nership in partnership be(ause it is the partnership #hi(h o#ns the property. +% Tenanc, #n co--on* jo#nt tenanc, - /oint tenan(y is (o-possession, and tenan(y in (ommon is (oo#nership. .% "o#nt /entu'es - /oint ventures are *enerally (on(erned #ith an isolated transa(tion or pro:e(t, as opposed to a partnership #hi(h (ontemplates a *eneral business #ith some (ontinuity. 0oreover, a :oint venture does not have a )irm name, there is no mutual a*en(y, and it does not have a separate :uridi(al personality. 1. 3oint Adventures 5. 3oint A''ounts; Cuentas en Pa't#c#)ac#on - ' partnership (onstituted in su(h a manner, the e3isten(e o) #hi(h #as only ,no#n to those #ho had an interest in the same, there bein* no mutual a*reements bet#een the partners, and #ithout a (orporate name indi(atin* to the publi( in some #ay that there #ere other people besides the one #ho ostensibly mana*ed and (ondu(ted the business, is e3a(tly the a((idental partnership o) cuentas en participacion. !"ourns vs. (arman) ,. A en'4

ART. *-** - "ommon )und D9<S 89% <-A'%< %9 (o-o#nership, only (opossession. - %he partnership o#ns the property be(ause it has its o#n :uridi(al personality apart )rom its membersIpartners, thus there is no (oo#nership. - "o-possession is limited to partnership purposes and )or the pursuan(e o) the ordinary business o) the partnership. TOCAO vs. CA )/222. - ' (ontra(t o) . is (onsensual; an oral (ontra(t o) is as *ood as a #ritten one. ?here no immovable property or real ri*hts are involved, #hat matters is that the parties have (omplied #ith the reDuisites o) a partnership. - %he partnership has a :uridi(al personality separate and distin(t )rom that o) ea(h o) the partners, even in (ase o) )ailure to (omply #ith the reDuirements o) 'rt. 1442, )irst para*raph ("apital o) !J and up publi( instrument E re*istered #ith S<"). - %he best eviden(e o) the e3isten(e o) the partnership, #hi(h is not yet terminated (thou*h in the #indin* up sta*e), are the unsold *oods and un(olle(ted re(eivables still in the possession o) %o(ao. (;er ri*ht to possess the *oods o) the partnership proved that she #as a partnerI(o-possessor.) - ' mere )allin* out or misunderstandin* bet#een partners does not (onvert the partnership into a sham or*ani.ation the partnership e3ists until dissolved under the la#. - 'ny one o) the partners may, at his sole pleasure, di(tate a dissolution o) the partnership at #ill, thou*h he must, ho#ever, a(t in *ood )aith, not that the attendan(e o) bad )aith (an prevent the dissolution o) the but that it (an result in a liability )or dama*es. - %he ri*ht to (hoose #ith #hom a person #ishes to asso(iate is the very )oundation and essen(e o) a . +t (ontinued e3isten(e is dependent on the (onstan(y o) that mutual resolve. - Do(trine o) dele(tus personae5 allo#s the partners to have the po#er, not ne(essarily the ri*ht to dissolve the . - %he partnership (ontinues even a)ter dissolution )or the purpose o) #indin* up the business. C. 0eparate 3uridi'al Personalit4

AGU LA vs. CA )*+++. - ' partnership has a :uridi(al personality separate and distin(t )rom that o) ea(h o) the partners it is the partnership, not its o))i(ers or a*ents, #hi(h should be impleaded in any liti*ation involvin* property re*istered in the name o) the . - %he partners (annot be held liable )or the obli*ations o) the unless it is sho#n that the le*al )i(tion o) a di))erent :uridi(al personality is bein* used )or )raudulent, un)air, or ille*al purposes. TA! vs. DEL ROSAR O )*++1. - ' *eneral pro)essional partnership, unli,e an ordinary business partnership (#hi(h is treated as a (orporation )or in(ome ta3 purposes and thus sub:e(t to (orporate in(ome ta3), is not o) itsel) an in(ome ta3 payer. %he in(ome ta3 is imposed not on the pro)essional , #hi(h is ta3 e3empt, but on the partners themselves in their individual (apa(ity (omputed on their distributive shares o) partnership pro)its.

- %here is no mutual a*en(y in that the a*ent is only the a*ent, and is not li,e#ise the prin(ipal o) his prin(ipal. %here is also no (ommon )und in a*en(y. Art. *8,+. +n determinin* #hether a partnership e3ists, these rules shall apply5 (1) <3(epts as provided by 'rti(le 1L2&, persons #ho are not partners as to ea(h other are not partners as to third persons; (2) "o-o#nership or (o-possession does not o) itsel) establish a partnership, #hether su(h (o-o#ners or (o-possessors do or do not share any pro)its made by the use o) the property; (!) %he sharin* o) *ross returns does not o) itsel) establish a partnership, #hether or not the persons sharin* them have a :oint or (ommon ri*ht or interest in any property )rom #hi(h the returns are derived; ($) %he re(eipt by a person o) a share o) the pro)its o) a business is prima facie eviden(e that he is a partner in the business, but no su(h in)eren(e shall be dra#n i) su(h pro)its #ere re(eived in payment5 a. 's a debt by installments or other#ise; b. 's #a*es o) an employee or rent to a landlord; (. 's an annuity to a #ido# or representative o) a de(eased partner; d. 's interest on a loan, thou*h the amount o) payment vary #ith the pro)its o) the business; e. 's the (onsideration )or the sale o) a *ood#ill o) a business or other property by installment or other#ise. Sir5 %he list is not e3(lusive Art. *-/5. ?hen a person, by #ords spo,en or #ritten or by (ondu(t, represents himsel), or (onsents to another representin* him to anyone, as a partner in an e3istin* partnership or #ith one or more persons not a(tual partners, he is liable to any su(h persons to #hom su(h representation has been made, #ho has, on the )aith o) su(h representation, *iven (redit to the a(tual or apparent partnership, and i) he has made su(h representation or (onsented to its bein* made in a publi( manner, he is liable to su(h person #hether the representation has or has not been made or (ommuni(ated to su(h person so *ivin* (redit by or #ith the ,no#led*e o) the apparent partner ma,in* the representation or (onsentin* to its bein* made5 (1) ?hen a partnership liability results, he is liable as thou*h he #ere an a(tual member o) the partnership; (2) ?hen no partnership liability results, he is liable pro rata #ith the other persons, i) any, so (onsentin* to the (ontra(t or representation as to in(ur liability, other#ise separately. ?hen a person has been thus represented to be a partner in an e3istin* partnership, or #ith one or more persons not a(tual partners, he is an a*ent o) the persons (onsentin* to su(h representation to bind them to the same e3tent and in the same manner as thou*h he #ere a partner in )at, #ith respe(t to persons #ho rely upon the representation. ?hen all the members o) the e3istin* partnership (onsent to the representation, a partnership a(t or obli*ation results; but in all other (ases it is the :oint a(t or obli*ation o) the person a(tin* and persons (onsentin* to the representation. CODE O$ CO66ERCE Title II" 3oint A''ounts 'rt. 2!9. 0er(hants may interest themselves in the transa(tion o) other mer(hants, (ontributin* thereto the part o) the (apital they

may a*ree upon, and parti(ipatin* in the )avorable or un)avorable results thereo) in the proportion they may determine. 'rt. 2$0. +n their )ormation, :oint a((ounts shall not be sub:e(t to any )ormality, and may be privately (ontra(ted orally or in #ritin*, and their e3isten(e may be proved by any o) the means re(o*ni.ed by la# (a((ordin* to the provisions o) 'rti(le &1). 'rt. 2$1. +n the transa(tions re)erred to by the t#o pre(edin* arti(les, no (ommer(ial name (ommon to all the parti(ipants (an be adopted, nor (an any )urther dire(t (redit be used than that o) the mer(hant #ho ma,es and dire(ts them in his name and under his individual responsibility. 'rt. 2$2. %hose #ho (ontra(t #ith the mer(hant #ho (arries on the business shall have a ri*ht o) a(tion a*ainst him only and not a*ainst the others interested therein, #ho shall also have no ri*ht a*ainst the third person #ho (ontra(ted #ith the mana*er, unless the latter )ormally (edes his ri*hts to them. 'rt. 2$!. %he liDuidation shall be made by the mana*er #ho, upon the (on(lusion o) the transa(tions, shall render a veri)ied a((ount o) their results. 0EC OPINION 9$e%ruar4 /+: *+-2; M89%<5 %his is only a summary o) the arti(le, but + thin, these are the important parts.N)O ' (orporation (annot ordinarily enter into a (ontra(t o) partnership #ith another (orporation or individual. %he limitation is based on publi( poli(y, sin(e in a partnership the (orporation #ould be bound by the a(ts o) persons #ho are not duly appointed and authori.ed a*ents and o))i(ers, #hi(h #ould be entirely in(onsistent #ith the poli(y o) the la# that a (orporation shall mana*e its o#n a))airs, separately and e3(lusively. +n enterin* into a partnership, the identity o) the (orporation is lost or mer*ed #ith that o) another. 2emember that a (orporation (an a(t only throu*h its duly authori.ed a*ents and is not bound by the a(ts o) anyone else. <G"< %+98S to the appli(ation o) this *eneral rule may be allo#ed 29=+D<D the )ollo#in* (onditions are met5 o %he arti(les o) in(orporation o) the (orporations involved must e3pressly authori.e the (orporation to enter into (ontra(ts o) partnership #ith others in the pursuit o) its business; o %he a*reement or arti(le o) partnership must provide that all the partners #ill mana*e the partnership; and o %he arti(les o) partnership must stipulate that all the partners are and shall be :ointly and severally liable )or all the obli*ations o) the partnership. 0oreover, t#o or more (orporations may enter into a :oint ventureI(onsortium i) the nature o) the venture is in line #ith the business authori.ed by its (harter. 1A% note that no independent le*al entity is borne out o) it and the same need not be re*istered #ith the "ommission.

GATC0AL A! /S. C R P'"%S5 Qat(halian and (ompany, by poolin* to*ether their resour(es, bou*ht a lotto ti(,et. %hey #on and are no# bein* (har*ed by the "+2 to pay in(ome ta3 on the pri.e. ;9>D+8Q5 ' partnership o) a (ivil nature #as or*ani.ed be(ause Qat(halian and (ompany put up money to buy a lotto ti(,et )or the sole purpose o) dividin* eDually the pri.e #hi(h they may #in, as they in )a(t, did. ;avin* or*ani.ed a partnership, it is the latter

#hi(h is bound to pay the in(ome ta3 and not the individual partners pro rata. PASCUAL /S. C R P'"%S5 as(ual et al. bou*ht t#o par(els o) land #hi(h it resold to a third person. %hey paid the (orrespondin* (apital *ains ta3, but are no# also bein* (har*ed #ith (orporate in(ome ta3 on the *round that they )ormed a partnership. ;9>D+8Q5 %here #as no partnership. %he (hara(ter o) habituality pe(uliar to business transa(tions en*a*ed in )or the purpose o) *ain #as absent. 'n isolated transa(tion #hereby t#o or more persons (ontribute )unds to buy (ertain real estate )or pro)it in the absen(e o) other (ir(umstan(es sho#in* a (ontrary intention (annot be (onsidered as a partnership. OB LLOS /S. C R P'"%S5 9billos bou*ht a par(el o) land and trans)erred his ri*hts thereto to his (hildren. %he (hildren resold the land. %hey are no# bein* ta3ed )or (orporate in(ome ta3 on the *round that they )ormed an unre*istered partnership. ;9>D+8Q5 %here #as no partnership. %he sharin* o) *ross returns does not o) itsel), establish a partnership. %here must be an unmista,able intention to )orm a partnership. +n this (ase, the division o) the pro)its #as only in(idental to the dissolution o) the (o-o#nership. R /ERA /S. PEOPLE1S BA!2 P'"%S5 2ivera #as the StephensonKs house,eeper and they e3e(uted a survivorship a*reement. Apon StephensonKs death, 2ivera tried to (laim the amount pursuant to the a*reement, but the ban, re)used. ;9>D+8Q5 2ivera and Stephenson #ere :oint o#ners. 's su(h, either o) them (ould #ithdra# any part o) the #hole o) said a((ount durin* their li)etime, and the balan(e, i) any, upon the death o) either, belon*ed to the survivor. TUASO! /S. BOLA!OS P'"%S5 %his #as an a(tion to re(over possession o) a par(el o) land #here the plainti)) #as represented by a (orporation. ;9>D+8Q5 %here is nothin* in the rules #hi(h prohibit a (orporation )rom bein* represented by another person, natural or :uridi(al. %he (ontention that one (orporation (annot a(t as mana*in* partner )or another sin(e the t#o (annot enter into a partnership is #ithout merit sin(e they may nevertheless, enter into a :oint venture #here the nature o) the venture is in line #ith the business authori.ed by its (harter. 0E RS O3 TA! E!G 2EE /S. CA P'"%S5 %his #as a (omplaint )iled by %an <n* Jee (and they later (ontinued by his heirs upon his death) a*ainst his brother %an <n* >ay )or a((ountin* , liDuidation and #indin* up o) the alle*ed partnership )ormed bet#een them. ;9>D+8Q5 %here #as no partnership bet#een the brothers. %here #as no )irm a((ount, no )irm letterheads, no (erti)i(ate o) partnership, no a*reement as to pro)its and losses, and no time )i3ed )or the duration o) the partnership. 0ost importantly, )or )orty years %an <n* Jee never demanded )or an a((ountin*. ' demand )or periodi( a((ountin* is eviden(e o) partnership. %he eviden(e support the establishment only o) a proprietorship. %he S" also dis(ussed the (on(ept o) a :oint venture. +t said that a parti(ular partnership is distin*uished )rom a :oint adventure in that the latter has no )irm name and no le*al personality. 'lso, a :oint venture is usually limited to a sin*le transa(tion, #hile a partnership *enerally relates to a (ontinuin* business.

9n the other hand, in a :oint a((ount, the parti(ipatin* mer(hants (an transa(t business under their o#n name and (an be individually liable there)ore. AURBAC0 /S. SA! TAR4 5ARES P'"%S5 %his #as the (ase #here there #ere essentially t#o *roups o) shareholders in the (ompany5 one (omposed o) Pilipinos, and the other *roup o) )orei*n investors. %here #as an in(rease in the latterKs shares in the (ompany so they #anted a proportionate in(rease in their nominees to the (ompanyKs 1oard o) Dire(tors. ;9>D+8Q5 'lthou*h a (orporation (annot enter into a partnership, it (an nevertheless en*a*e in a :oint venture #ith others. +n this (ase, ta,in* into (onsideration their intent and history, the parties )ormed a :oint venture and not a (orporation. %his be(omes relevant be(ause it implies that the ar*ument o) 'S+ (the )orei*n investors), havin* been based on the "orporation "ode, #ill not apply. ' :oint venture has been *enerally understood to mean an or*ani.ation )ormed )or some temporary purpose. +t is distin*uished mainly )rom a partnership in that the latter (ontemplates a *eneral business #ith some (ontinuity #hile the )ormer is )ormed )or the e3e(ution o) a sin*le transa(tion. L TO!"UA /S. L TO!"UA P'"%S5 %his #as a suit )iled by 'urelio a*ainst his brother <duardo )or spe(i)i( per)orman(e and a((ountin*, (ontendin* that they had a partnership arran*ement in the 9deon %heater business. %his #as premised on a letter #ritten by <duardo, addressed to 'urelio. ;9>D+8Q5 <duardo and 'urelio are not partners. %he )ormalities reDuired by la# #ere not (omplied #ith, to #it5 o ?hen immovable property or real ri*hts are (ontributed, or #hen the partnership has a (apital o) at least hp!,000, a publi( instrument is ne(essary. o ?hen immovable property is (ontributed, an inventory, si*ned by the parties, must be atta(hed to the publi( instrument. BOUR!S /S. CARMA! P'"%S5 %his #as an a(tion to re(over a sum o) money, )iled a*ainst >o-"him->im and his other (o-de)endants on the *round that they #ere :oint proprietors. ;9>D+8Q5 %here #as a partnership o) cuentas en participacion. +t #as a business (ondu(ted by >o-"him->im e3(lusively, in his o#n name, and under his personal mana*ement. ' partnership (onstituted in su(h a manner, the e3isten(e o) #hi(h #as only ,no#n to those #ho had an interest in the same, there bein* no mutual a*reements bet#een the partners, and #ithout a (orporate name indi(atin* to the publi( in some #ay that there #ere other people besides the one #ho ostensibly mana*ed and (ondu(ted the business, is e3a(tly the a((idental partnership o) cuentas en participacion. %hose #ho (ontra(t #ith the person under #hose name the business o) su(h partnership is (ondu(ted, shall have a ri*ht o) a(tion only as a*ainst that person, and not a*ainst other persons interested, and the latter shall li,e#ise, have no ri*ht o) a(tion a*ainst su(h third persons. SE/ LLA /S. CA P'"%S5 %his #as the (ase #here Sevilla had bound hersel) #ith the (orporation to pay )or rent. She mana*ed the business but #as subseDuently prevented )rom (ontinuin* as mana*er o) the bran(h #here she #or,ed. ;9D>+8Q5 %here #as no partnership or :oint venture as there #as no parity o) standin* bet#een Sevilla and %ourist ?orld Servi(es, and they did not e3er(ise eDual ri*hts. %he (ourt (on(luded that there #as an a*en(y relationship. P0 LE6 M ! !G /S. C R

P'"%S5 1a*uio Qold and hile3 0inin* entered into a (ontra(t #hereby the latter #ould operate the )ormerKs minin* (laim. hile3, apart )rom trans)errin* its o#n )unds )or the business, also shelled out money to (over )or the losses in(urred by the business. hile3 then attempted to dedu(t #hat it purported to be bad loans payable to it )rom 1a*uio Qold. %he "+2 disallo#ed the dedu(tion. ;9>D+8Q5 %he a*reement bet#een the parties (reated a partnership relationship bet#een them. 's su(h, the money (ontributed #as not a loan and (annot be dedu(ted )rom the partnershipKs ta3able in(ome. %he stron*est indi(ation o) the e3isten(e o) the partnership relation #as the )a(t that ea(h o) them #ould re(eive &0C o) the pro)its. 1y pe**in* its (ompensation as pro)its, hile3 stood not to be remunerated in (ase the mine had no in(ome. %his is de)initely not the nature o) a loan, instead, it parta,es o) the nature o) a (apital (ontribution.

+t does not (over5 (1) a(Duisitions o) the partners throu*h any means not reDuirin* the e3ertion o) human e))ort or intelli*en(e; (2) property #hi(h ea(h o) the partners a(Duired or possessed be)ore the (elebration o) the (ontra(t (only the usu)ru(t o) the property passes). iii. %ther Rules

Art. *8-*. 'rti(les o) universal partnership, entered into #ithout spe(i)i(ation o) its nature, only (onstitute a universal partnership o) pro)its. Art. *8-/. ersons #ho are prohibited )rom *ivin* ea(h other any donation or advanta*e (annot enter into universal partnership. Art. 8=+. %he )ollo#in* donations shall be void5 (1) %hose made bet#een persons #ho #ere *uilty o) adultery or (on(ubina*e at the time o) the donation; (2) %hose made bet#een persons )ound *uilty o) the same (riminal o))ense, in (onsideration thereo); (!) %hose made to a publi( o))i(er or his #i)e, des(edants and as(endants, by reason o) his o))i(e. +n the (ase re)erred to in 8o. 1, the a(tion )or de(laration o) nullity may be brou*ht by the spouse o) the donor or donee; and the *uilt o) the donor and donee may be proved by preponderan(e o) eviden(e in the same a(tion. %he presumption in 'rt. 14L1 is in a((ordan(e #ith the rule in interpretation o) (ontra(ts that, in (ase o) doubt, that #hi(h involves the least transmission o) ri*hts and interests #ill be )avored. %he prohibition in 'rt. 14L2 is )ounded on the theory that a (ontra(t o) universal partnership is )or all purposes a donation and, thus, see,s to prevent persons disDuali)ied )rom ma,in* donations )rom doin* indire(tly #hat the la# prohibits them )rom doin* dire(tly.

II. KIND0 O$ PARTNER0<IP

A. Universal Art. *88,. 's to its ob:e(t, a partnership is either universal or parti(ular. 's re*ards the liability o) the partners, a partnership may be *eneral or limited. Art. *888. ' universal partnership may re)er to all the present property or to all the pro)its. i. *niversal Partnership of Present Property Art. *88-. ' partnership o) all present property is that in #hi(h the partners (ontribute all the property #hi(h a(tually belon*s to them to a (ommon )und, #ith the intention o) dividin* the same amon* themselves, as #ell as all the pro)its #hi(h they may a(Duire there#ith. Art. *88+. +n a universal partnership o) all present property, the property #hi(h belon*s to ea(h o) the partners at the time o) the (onstitution o) the partnership, be(omes the (ommon property o) all the partners, as #ell as all the pro)its #hi(h they may a(Duire there#ith. ' stipulation )or the (ommon en:oyment o) any other pro)its may also be made; but the property #hi(h the partners may a(Duire subseDuently by inheritan(e, le*a(y, or donation (annot be in(luded in su(h stipulation, e3(ept the )ruits thereo). %he prohibition in 'rt. 1449, 2 nd par. is in (onsonan(e #ith the *eneral provision o) the "ode disallo#in* (ontra(ts upon )uture inheritan(e. 1ut it is believed that the usu)ru(t o) property a(Duired by inheritan(e, le*a(y, or donation may be stipulated as (ontributed to the (ommon )und.

(. Parti'ular Art. *88,. 's to its ob:e(t, a partnership is either universal or parti(ular. 's re*ards the liability o) the partners, a partnership may be *eneral or limited. Art. *8-=. ' parti(ular partnership has )or its ob:e(t determinate thin*s, their use or )ruits, or spe(i)i( underta,in*, or the e3er(ise o) a pro)ession or vo(ation. ". >eneral ((he(, 'rt. 144B) ' *eneral partnership is one #here all the partners are liable subsidiarily and pro rata #ith their individual property )or partnership obli*ations. ?i7ited ((he(, 'rt. 144B) +n a limited partnership, only some partners are personally liable )or partnership obli*ations; the others are not so liable, their liability bein* limited to their (apital (ontribution.

ii. *niversal Partnership of Profits Art. *8-2. ' universal partnership o) pro)its (omprises all that the partners may a(Duire by their industry or #or, durin* the e3isten(e o) the partnership. 0ovable or immovable property #hi(h ea(h o) the partners may possess at the time o) the (elebration o) the (ontra(t shall (ontinue to pertain e3(lusively to ea(h, only the usu)ru(t passin* to the partnership. +n other #ords, all that the partners may a(Duire, :ointly or separately, throu*h physi(al or intelle(tual e))ort #hether it be in the pursuit o) a trade or the e3er(ise o) an art or pro)ession or other#ise pertain to the partnership and are sub:e(t to division amon* the partners upon its termination.

D.

E. At @ill Art. *8-5. ?hen a partnership )or a )i3ed term or parti(ular underta,in* is (ontinued a)ter the termination o) su(h term or parti(ular underta,in* #ithout any e3press a*reement, the ri*hts and duties o) the partners remain the same as they #ere at su(h termination, so )ar as is (onsistent #ith a partnership at #ill.

' (ontinuation o) the business by the partners or su(h o) them as habitually a(ted therein durin* the term, #ithout any settlement or liDuidation o) the partnership a))airs, is prima )a(ie eviden(e o) a (ontinuation o) the partnership. ' partnership #hi(h is desi*ned to (ontinue )or no )i3ed period o) time and is )ormed to last only durin* the mutual (onsent or pleasure o) the parties, its e3isten(e bein* terminable at the #ill o) any one or more o) them. $or a Ter7 or UndertaAin ((he(, 'rt. 14L&) ' partnership #here the period o) time durin* #hi(h the partnership shall e3ist has been spe(i)ied. 9r a partnership )ormed to en*a*e in a spe(i)i( underta,in* #ithout spe(i)i(ation o) the term but, o#in* to the nature o) its purpose, #ith the implied understandin* that it shall last only and until the (ompletion o) the underta,in*.

P.

o o

>. Co77er'ial Art. *8,8. 1y the (ontra(t o) partnership t#o or more persons bind themselves to (ontribute money, property, or industry to a (ommon )und, #ith the intention o) dividin* the pro)its amon* themselves. %#o or more persons may also )orm a partnership )or the e3er(ise o) a pro)ession. ' (ommer(ial partnership has )or its ob:e(t the reali.ation o) some mer(antile o) (ommer(ial a(t either as a means or an end Professional ((he(, 'rt. 14B4) %his is the (lass o) partnerships )ormed by pro)essional )or the e3er(ise o) the pro)essions they belon* to. o o

erson #ho5 1y (a) #ords spo,en or #ritten or by (b) (ondu(t 2epresents himsel) or (onsents to representation 's a partner in an e3istin* partnership or 's a partner in an apparent partnership %o anyone 'nd su(h person has *iven (redit to the representation 0anner o) 2epresentation ubli( ersonalI8on-publi( >iability artnership >iability (i) there is an e3istin* partnership and #hen the a(t is rati)ied by the partnership) /oint >iability (i) there is only an apparent partnership)

;.

artnershipI/oint 9bli*or 2eDuires (onsent +) all partners (onsent, partnership a(t results +) only some (onsent, :oint a(t results amon* those #ho (onsented and the partner by estoppel 'pparent partner be(omes a*ent

I. (4 EstoppelBApparent Art. *-/5. ?hen a person, by #ords spo,en or #ritten or by (ondu(t, represents himsel), or (onsents to another representin* him to anyone, as a partner in an e3istin* partnership or #ith one or more persons not a(tual partners, he is liable to any su(h persons to #hom su(h representation has been made, #ho has, on the )aith o) su(h representation, *iven (redit to the a(tual or apparent partnership, and i) he has made su(h representation or (onsented to its bein* made in a publi( manner he is liable to su(h person, #hether the representation has or has not been made or (ommuni(ated to su(h person so *ivin* (redit by or #ith the ,no#led*e o) the apparent partner ma,in* the representation or (onsentin* to its bein* made5 (1) ?hen a partnership liability results, he is liable as thou*h he #ere an a(tual member o) the partnership; (2) ?hen no partnership liability results, he is liable pro rata #ith the other persons, i) any, so (onsentin* to the (ontra(t or representation as to in(ur liability, other#ise separately. ?hen a person has been thus represented to be a partner in an e3istin* partnership, or #ith one or more persons not a(tual partners, he is an a*ent o) the persons (onsentin* to su(h representation to bind them to the same e3tent and in the same manner as thou*h he #ere a partner in )a(t, #ith respe(t to persons #ho rely upon the representation. ?hen all the members o) the e3istin* partnership (onsent to the representation, a partnership a(t or obli*ation results; but in all other (ases it is the :oint a(t or obli*ation o) the person a(tin* and the persons (onsentin* to the representation. artner by <stoppel5

O'te7a vs. CA %he birth and li)e o) a partnership at #ill is predi(ated on the mutual desire and (onsent o) the partners. %hrou*h the do(trine o) dele(tus personae, all the partners have the po#er, thou*h not ne(essarily the ri*ht, to dissolve the partnership. %hus, any o) the partners may dissolve the partnership at #ill at his sole pleasure; but he must do so in *ood )aith or he #ill be liable )or dama*es.

III. KIND0 O$ PARTNER0

A. Industrial Art. *8-+. 'n industrial partner (annot en*a*e in business )or himsel), unless the partnership e3pressly permits him to do so; and i) he should do so, the (apitalist partners may either e3(lude him )rom the )irm or avail themselves o) the bene)its #hi(h he may have obtained in violation o) this provision, #ith a ri*ht to dama*es in either (ase. Art. *8+8. %he losses and pro)its shall be distributed in (on)ormity #ith the a*reement. +) only the share o) ea(h partner in the pro)its has been a*reed upon, the share o) ea(h in the losses shall be in the same proportion. +n the absen(e o) stipulation, the share o) ea(h partner in the pro)its and losses shall be in proportion to #hat he may have (ontributed, but the industrial partner shall not be liable )or the losses. 's )or the pro)its, the industrial partner shall re(eive su(h share as may be :ust and eDuitable under the (ir(umstan(es. +) besides his servi(es he has (ontributed (apital, he shall also re(eive a share in the pro)its in proportion to his (apital. %he industrial partnerKs (ontribution is based on Duantum meruit.

(. Capitalist Art. *8-+. 'n industrial partner (annot en*a*e in business )or himsel), unless the partnership e3pressly permits him to do so; and i) he should do so, the (apitalist partners may either e3(lude him )rom the )irm or avail themselves o) the bene)its #hi(h he may have obtained in violation o) this provision, #ith a ri*ht to dama*es in either (ase. Art. *8+2. Anless there is a stipulation to the (ontrary, the partners shall (ontribute eDual shares to the (apital o) the partnership. Art. *8+8. %he losses and pro)its shall be distributed in (on)ormity #ith the a*reement. +) only the share o) ea(h partner in the pro)its has been a*reed upon, the share o) ea(h in the losses shall be in the same proportion. +n the absen(e o) stipulation, the share o) ea(h partner in the pro)its and losses shall be in proportion to #hat he may have (ontributed, but the industrial partner shall not be liable )or the losses. 's )or the pro)its, the industrial partner shall re(eive su(h share as may be :ust and eDuitable under the (ir(umstan(es. +) besides his servi(es he has (ontributed (apital, he shall also re(eive a share in the pro)its in proportion to his (apital. Art. *-2-. %he (apitalist partners (annot en*a*e )or their o#n a((ount in any operation #hi(h is o) the ,ind o) business in #hi(h the partnership is en*a*ed, unless there is a stipulation to the (ontrary. 'ny (apitalist partner violatin* this prohibition shall brin* to the (ommon )unds any pro)its a((ruin* to him )rom his transa(tions, and shall personally bear all the losses. 'rt. 1490 embodies the presumption o) the la# as to the eDuality in standin* o) the partners. 'rt. 1L0L is limited to business #hi(h (ompetes #ith the partnership business; thus, it must be the same produ(ts (same (ate*ory), same servi(es, and in the same lo(ation.

a(t #ithout the (onsent o) all the others, ea(h one may separately e3e(ute all a(ts o) administration, but i) any o) them should oppose the a(ts o) the others, the de(ision o) the ma:ority shall prevail. +n (ase o) a tie, the matter shall be de(ided by the partners o#nin* the (ontrollin* interest. Art. *-2/. +n (ase it should have been stipulated that none o) the mana*in* partners shall a(t #ithout the (onsent o) the others, the (on(urren(e o) all shall be ne(essary )or the validity o) the a(ts, and the absen(e or disability o) any one o) them (annot be alle*ed, unless there is imminent dan*er o) *rave or irreparable in:ury to the partnership. 'rt. 1L00 spea,s o) the mana*in* partner. 'rt. 1L01 re)ers to a situation #here there is more than one mana*in* partner and there is solidary mana*ement amon* them. 'rt. 1L02 spea,s o) :oint mana*ement. 1ut, sin(e this relates to the obli*ations o) partners inter se, the a(ts o) a mana*in* partner in violation o) 'rt. 1L02 may still be bindin* inso)ar as third persons in *ood )aith are (on(erned. (4 Estoppel See previous dis(ussion on ,inds o) partnerships.

D.

IC. PARTNER0 O(?I>ATION0 TO T<E PARTNER0<IP

A. To Contri%ute; @arrant Art. *8-,. <very partner is a debtor o) the partnership )or #hatever he may have promised to (ontribute thereto. ;e shall also be bound )or #arranty in (ase o) evi(tion #ith re*ard to spe(i)i( and determinate thin*s #hi(h he may have (ontributed to the partnership, in the same (ases and in the same manner as the vendor is bound #ith respe(t to the vendee. ;e shall also be liable )or the )ruits thereo) )rom the time they should have been delivered, #ithout the need o) any demand. Art. *8-8. ?hen the (apital or a part thereo) #hi(h a partner is bound to (ontribute (onsists o) *oods, their appraisal must be made in the manner pres(ribed in the (ontra(t o) partnership, and in the absen(e o) stipulation, it shall be made by e3perts (hosen by the partners, and a((ordin* to (urrent pri(es, the subseDuent (han*es thereo) bein* )or a((ount o) the partnership. Art. *8--. ' partner #ho has underta,en to (ontribute a sum o) money and )ails to do so be(omes a debtor )or the interest and dama*es )rom the time he should have (omplied #ith his obli*ation. %he same rule applies to any amount he may have ta,en )rom the partnership (o))ers, and his liability shall be*in )rom the time he (onverted the amount to his o#n use. Art. *8-+. 'n industrial partner (annot en*a*e in business )or himsel), unless the partnership e3pressly permits him to do so; and i) he should do so, the (apitalist partners may either e3(lude him )rom the )irm or avail themselves o) the bene)its #hi(h he may have obtained in violation o) this provision, #ith a ri*ht to dama*es in either (ase. Art. *8+2. Anless there is a stipulation to the (ontrary, the partners shall (ontribute eDual shares to the (apital o) the partnership. Art. *8+*. +) there is no a*reement to the (ontrary, in (ase o) an imminent loss o) the business o) the partnership, any partner #ho

C. 6ana in Art. *8+/. +) a partner authori.ed to mana*e (olle(ts a demandable sum #hi(h #as o#ed to him in his o#n name, )rom a person #ho o#ed the partnership another sum also demandable, the sum thus (olle(ted shall be applied to the t#o (redits in proportion to their amounts, even thou*h he may have *iven a re(eipt )or his o#n (redit only; but should he have *iven it )or the a((ount o) the partnership (redit, the amount shall be )ully applied to the latter. %he provisions o) this arti(le are understood to be #ithout pre:udi(e to the ri*ht *ranted to the other debtor by 'rti(le 12&2, but only i) the personal (redit o) the partner should be more onerous to him. Art. *-22. %he partner #ho has been appointed mana*er in the arti(les o) partnership may e3e(ute all a(ts o) administration despite the opposition o) his partners, unless he should a(t in bad )aith; and his po#er is irrevo(able #ithout :ust or la#)ul (ause. %he vote o) the partners representin* the (ontrollin* interest shall be ne(essary )or su(h revo(ation o) po#er. ' po#er *ranted a)ter the partnership has been (onstituted may be revo,ed at any time. Art. *-2*. +) t#o or more partners have been intrusted #ith the mana*ement o) the partnership #ithout spe(i)i(ation o) their respe(tive duties, or #ithout a stipulation that one o) them shall not

re)uses to (ontribute an additional share to the (apital, e3(ept an industrial partner, to save the venture, shall he obli*ed to sell his interest to the other partners. Art. *8+5. %he ris, o) spe(i)i( and determinate thin*s, #hi(h are not )un*ible, (ontributed to the partnership so that only their use and )ruits may be )or the (ommon bene)it, shall be borne by the partner #ho o#ns them. +) the thin*s (ontribute are )un*ible, or (annot be ,ept #ithout deterioratin*, or i) they #ere (ontributed to be sold, the ris, shall be borne by the partnership. +n the absen(e o) stipulation, the ris, o) the thin*s brou*ht and appraised in the inventory, shall also be borne by the partnership, and in su(h (ase the (laim shall be limited to the value at #hi(h they #ere appraised. %he 2nd senten(e o) 'rt. 14LB, #hen it spea,s o) spe(i)i( and determinate thin*s, re)ers to non-)un*ible thin*s. 'rt. 14LB only spe(i)i(ally tal,s about #arranty a*ainst evi(tion but ro). 1autista states that the other #arranties o) sale (#arranty a*ainst hidden de)e(ts and #arranty )or mer(hantability )or purpose) should also be made appli(able. 'rt. 14LB e3pli(itly does a#ay #ith the need )or demand as to the )ruits in the last senten(e thereo). %he appraisal in 'rt. 14L4 is ne(essary to ,no# the value o) the (apital (ontribution o) property. o =aluation is usually done by a*reement be(ause the trans)er o) property to the partnership is similar to a sale; or it may be done by an e3pert (appraiser). o +) itKs throu*h the )ormer, the value is based on the a*reement. 1ut i) itKs throu*ht he latter, the value is based on (urrent pri(es or the )air mar,et value 'rt. 1491 re)ers to total loss o) the business su(h that the partnership (an no lon*er (ontinue to pursue its purpose. o %here must )irst be (apital (all; there must be an a*reement )or everyone to (ontribute to (ontinue the business; a)ter su(h a*reement, the )ailure to (ontribute *ives the ri*ht to buy-out the interest o) the un(ontributin* partner. Ander the 1st par. o) 'rt. 149&, the partner retains o#nership be(ause he only (ontributes the usu)ru(t and, thus, he still bears the ris, o) loss (prin(iple o) respirit domino); it also only re)ers to non-)un*ible thin*s. Ander the 2nd par. o) 'rt. 149&, i) a partner loses the )un*ible *oods be)ore delivery, he remains an obli*or and, thus, still a partner sub:e(t to the delivery o) his (ontribution, #hi(h is a )un*ible thin*. 8ote that the ris, o) loss is trans)erable by stipulation.

C. To Co7pensate Art. *8+1. <very partner is responsible to the partnership )or dama*es su))ered by it throu*h his )ault, and he (annot (ompensate them #ith the pro)its and bene)its #hi(h he may have earned )or the partnership by his industry. ;o#ever, the (ourts may eDuitably lessen this responsibility i) throu*h the partnerHs e3traordinary e))orts in other a(tivities o) the partnership, unusual pro)its have been reali.ed. %his also (overs ne*li*en(e o) a partner D. To (e ?o4al; $idu'iar4 Dut4 Art. *-28. <very partner must a((ount to the partnership )or any bene)it, and hold as trustee )or it any pro)its derived by him #ithout the (onsent o) the other partners )rom any transa(tion (onne(ted #ith the )ormation, (ondu(t, or liDuidation o) the partnership or )rom any use by him o) its property. o o o 1asi( )idu(iary duties o) a partner5 '((ount )or any pro)it a(Duired in a manner in:urious to the partnershipKs interest; "annot a(Duire )or himsel) a partnership asset nor divert to his o#n use a partnership opportunity; 0ust not (ompete #ith partnership #ithin its s(ope o) business.

L#wana7 vs. CA <ven #hen a (ontra(t o) partnership has been entered into, #hen money or property have been re(eived by a partner )or a spe(i)i( purpose and he later misappropriated it, su(h partner is *uilty o) esta)a.

US vs. Cla'#n ?hen a partner (ontributes to the (ommon )und, he invests it in the ris,s or bene)its o) the business and, even i) only the usu)ru(t over the money has been (onveyed, the duty to return su(h (apital devolves upon the partnership and not any o) the partners. ?hen money has been re(eived by the partnership, the business (ommen(ed and pro)its a((rued, the a(tion that lies #ith the partner #ho )urnished (apital )or re(overy o) his money is not a (riminal a(tion )or esta)a, but a (ivil one arisin* )rom the partnership (ontra(t )or a liDuidation o) the partnership and a levy on its assets i) there should be any. Pan7 L#- vs. Lo Sen7 artners are reDuired to e3hibit to#ards ea(h other the hi*hest de*ree o) *ood )aith be(ause the relation is essentially )idu(iary as ea(h is (onsidered the (on)idential a*ent o) the other. %here)ore, one partner (annot, to the detriment o) another, apply e3(lusively to his o#n bene)it the results o) the ,no#led*e and in)ormation *ained in the (hara(ter o) partner. Catalan vs. Gatc(al#an %he ri*ht o) redemption pertains to the o#ner o) the property; as it #as the partnership #hi(h o#ned the property, in this (ase, it #as only the partnership #hi(h (ould properly e3er(ise the ri*ht o) redemption. ?hen "atalan redeemed the properties, he be(ame a trustee and held the same in trust )or his (o-partner Qath(halian, sub:e(t to his ri*ht to demand )rom the latter his (ontribution to the amount o) redemption.

(. To Appl4 0u7s Colle'ted P'o Rata Art. *8+/. +) a partner authori.ed to mana*e (olle(ts a demandable sum #hi(h #as o#ed to him in his o#n name, )rom a person #ho o#ed the partnership another sum also demandable, the sum thus (olle(ted shall be applied to the t#o (redits in proportion to their amounts, even thou*h he may have *iven a re(eipt )or his o#n (redit only; but should he have *iven it )or the a((ount o) the partnership (redit, the amount shall be )ully applied to the latter. %he provisions o) this arti(le are understood to be #ithout pre:udi(e to the ri*ht *ranted to the other debtor by 'rti(le 12&2, but only i) the personal (redit o) the partner should be more onerous to him.

C. PARTNER0D O(?I>ATION !TER SE

A. To %rin to 'ollation Art. *8+=. ' partner #ho has re(eived, in #hole or in part, his share o) a partnership (redit, #hen the other partners have not (olle(ted theirs, shall be obli*ed, i) the debtor should therea)ter be(ome insolvent, to brin* to the partnership (apital #hat he re(eived even thou*h he may have *iven re(eipt )or his share only. (1BL&a) %here is one debtor and one or 2 partners have re(eived their share o) debt in their personal (apa(ity then the debtor be(omes insolvent

#ithin a period o) three months )rom the time he had ,no#led*e thereo), (omplain o) su(h de(ision. %he desi*nation o) losses and pro)its (annot be intrusted to one o) the partners. (1B90) %he desi*nation o) pro)its and losses may be desi*nated to 2 or more partners, but not to 1 partner

Art. *8++. ' stipulation #hi(h e3(ludes one or more partners )rom any share in the pro)its or losses is void. (1B91) Mo'an: "'. v. CA -ui(, Pa(ts5 e(son and 0oran entered into an a*reement to print 9&,000 posters ()eaturin* the dele*ates o) the 1941 "on-"on). %hey a*reed ea(h #ould (ontribute 1&,000 and that e(son #ould re(eive 1,000 (ommission per month. e(son (ontributed 10,00; 0oran supervised the #or,. 9nly 2,000 posters #ere printed. e(son )iled an a(tion as,in* )or the return o) his (ontribution, pro)its he would have earned and promised (ommission. 2atio5 %here is no basis )or the a#ard o) spe(ulative dama*es in )avor o) 0oran as there #as no eviden(e that the partnership #ould be a pro)itable venture. artners are to share in the pro)its and the losses. ;o#ever, e(son is not barred )rom totally re(overin*. ;e is entitled to B,000 (out o) 10,000 only $,000 #as used in printin*) )or his (ontribution #hi(h remained unused and !,000 )or R share in net pro)its )rom the sale o) 2,000 posters. (Sir noted that there #as an a#ard o) unused (apital even i) there #as no liDuidation.) C. To render true and full infor7ation Art. *-2,. artners shall render on demand true and )ull in)ormation o) all thin*s a))e(tin* the partnership to any partner or the le*al representative o) any de(eased partner or o) any partner under le*al disability. (n) Ma't#ne; v. On7 Pon7 Co -ui(, Pa(ts5 0artine. delivered 1,&00 to 9n* on* "o and 9n* >ay to invest in a store. %hey a*reed that the pro)its and losses #ould be eDually shared by all o) them. 0artine. #as demandin* )or the 2 9n*s to render an a((ountin* or to re)und him the 1,&00. 9n* on* "o alle*ed that 9n* >ay, no# de(eased #as the one #ho mana*ed the business, and the (apita o) 1,&00 resulted in a loss. 2atio5 %he 2 partners (9n*s) #ere the administrators and obli*ed to render a((ountin*. Sin(e neither o) them rendered an a((ount nor proven the losses, they are obli*ed to return the (apital. 'rt. 149B is not appli(able be(ause no other money than that (ontributed as (apital #as involved. %he liability o) the partners is :oint. 9n* on* "o shall only pay 4&0 to 0artine.. A7ust#n v. nocenc#o -ui(, Pa(ts5 %he parties are all industrial partners. Por the (onstru(tion o) a (as(o, pro)its o) the business #ere (ontributed and money #as borro#ed )rom #i)e o) the mana*in* partner, +no(en(io, +no(en(io also advan(ed )unds ne(essary to (omplete the #or,. %he other partners #ere not in)ormed o) the borro#in* and the advan(ement but the boo,s #ere al#ays open to their inspe(tion. 2atio5 %he nature o) the transa(tion ((onstru(tion o) (as(o) #as #ithin the s(ope o) the business o) the partnership so +no(en(io, in borro#in* money and advan(in* )unds, #as a(tin* #ithin the s(ope o) his authority as a mana*in* partner. 'll the partners are liable )or the debt. Soncu,a v. De Luna -ui(, Pa(ts5 Son(uya, de >una and de(eased 'velino #ere members o) a partnership, "entro <s(olar de Senoritas. Son(uya

P#onee' nsu'ance v. CA -ui(, Pa(ts5 >im, o#ner-operator o) Southern 'ir >ines, pur(hased 2 air(ra)ts and set o) spare parts )orm /apan Domesti( 'irlines to be paid in installments. ioneer e3e(uted a surety bond in )avor o) /D' )or the balan(e. 1ormahe(o, "ervanteses and 0a*lana (ontributed )unds )or the )ormation o) a ne# (orporation proposed by >im. %here #as no in(orporation. 2atio5 ersons #ho attempt, but )ail, to )orm a (orporation and #ho (arry on business under the (orporate name o((upy the position o) partners inter se. ;o#ever, su(h a relation does not ne(essarily e3ist, )or ordinarily persons (annot be made to assume the relation o) partners, as bet#een themselves, #hen their purpose is that no partnership shall e3ist and it should be implied only #hen ne(essary to do :usti(e bet#een the parties. >im never intended to )orm a (orporation despite his representations. 8o de facto partnership #as (reated. Evan7el#sta 8 Co. v. Aba9 Santos -ui(, Pa(ts5 /ud*e 'bad Santos is an industrial partner in <van*elista E "o. #ith ! petitioners #ho #ere the (apitalist partners. 'bad Santos alle*ed that the other ! partners #ere re)usin* to let her e3amine the partnership boo,s and #ere not payin* her share in the pro)its. 9ther ! are ar*uin* that 'bad Santos (ould not be an industrial partner sin(e she #as a "ity "ourt :ud*e ('rt.14L9). 2atio5 'bad Santos is not en*a*ed in any business anta*onisti( to the partnership as bein* a :ud*e (an hardly be (hara(teri.ed as a business. (. To share in the profitsBlosses Art. *8+8. %he losses and pro)its shall be distributed in (on)ormity #ith the a*reement. +) only the share o) ea(h partner in the pro)its has been a*reed upon, the share o) ea(h in the losses shall be in the same proportion. +n the absen(e o) stipulation, the share o) ea(h partner in the pro)its and losses shall be in proportion to #hat he may have (ontributed, but the industrial partner shall not be liable )or the losses. 's )or the pro)its, the industrial partner shall re(eive su(h share as may be :ust and eDuitable under the (ir(umstan(es. +) besides his servi(es he has (ontributed (apital, he shall also re(eive a share in the pro)its in proportion to his (apital. (1BL9a) >iability )or loss re)ers to loss 'P%<2 liDuidation +n (ase o) losses, it (an be stipulated that the industrial partner share in the losses

Art. *8+-. +) the partners have a*reed to intrust to a third person the desi*nation o) the share o) ea(h one in the pro)its and losses, su(h desi*nation may be impu*ned only #hen it is mani)estly ineDuitable. +n no (ase may a partner #ho has be*un to e3e(ute the de(ision o) the third person, or #ho has not impu*ned the same

)iled a (omplaint prayin* )or dama*es as result o) the )raudulent administration by mana*in* partner De >una. 2atio5 Por a partner to be able to (laim dama*es alle*edly su))ered by him by reason o) the )raudulent administration o) the mana*in* partner, a previous liDuidation o) the partnership is ne(essary. ' liDuidation o) the business is ne(essary so the )ollo#in* may be determined5 pro)its and losses, (auses o) the losses, responsibility o) the de)endant and dama*es ea(h partner may have su))ered. D. Not to en a e in another %usiness Art. *8-+. 'n industrial partner (annot en*a*e in business )or himsel), unless the partnership e3pressly permits him to do so; and i) he should do so, the (apitalist partners may either e3(lude him )rom the )irm or avail themselves o) the bene)its #hi(h he may have obtained in violation o) this provision, #ith a ri*ht to dama*es in either (ase. (n) Art. *-2-. %he (apitalist partners (annot en*a*e )or their o#n a((ount in any operation #hi(h is o) the ,ind o) business in #hi(h the partnership is en*a*ed, unless there is a stipulation to the (ontrary.

1) Dire(ts the partnership to pay any pro)its that may be due to the :ud*ment debtor, in )avour o) the :ud*ment (reditor in satis)a(tion o) his (redit (in(ludin* interests) 2) 0ay as, the (ourt to appoint a re(eiver - to (olle(t money !) may be sold at au(tionI)ore(losure remedy5 ri*ht o) redemption a) #ith separate property b) #ith partnership property (reDuires the (onsent o) all partners) "est (hoice+ 8o. 1 )irst sin(e the payment #ill be on*oin* 8o. 2 (omes se(ond 8o. ! is a poor remedy, sin*le payment; net e))e(t5 only sell ba(, to :ud*ment debtor Art. *-/8. %he (reditors o) the partnership shall be pre)erred to those o) ea(h partner as re*ards the partnership property. ?ithout pre:udi(e to this ri*ht, the private (reditors o) ea(h partner may as, the atta(hment and publi( sale o) the share o) the latter in the partnership assets. (n) pre)eren(e o) partnership (reditors over personal (reditors (in (ase o) insolven(y or liDuidation) 2nd senten(e5 #ithout pre:udi(e to private (reditorsK ri*ht to as, atta(hment (. To %e lia%le pro rata for partnership de%ts )su%sidiar4 E &oint.

CI. PARTNER0D O(?I>ATION0 TO PER0ONA? AND PARTNER0<IP CREDITOR0; T<IRD PARTIE0

A. To have his partnership interest 'har ed for personal de%ts )pri7ar4.

Art. *-*1. ?ithout pre:udi(e to the pre)erred ri*hts o) partnership (reditors under 'rti(le 1L24, on due appli(ation to a (ompetent (ourt by any :ud*ment (reditor o) a partner, the (ourt #hi(h entered the :ud*ment, or any other (ourt, may (har*e the interest o) the debtor partner #ith payment o) the unsatis)ied amount o) su(h :ud*ment debt #ith interest thereon; and may then or later appoint a re(eiver o) his share o) the pro)its, and o) any other money due or to )all due to him in respe(t o) the partnership, and ma,e all other orders, dire(tions, a((ounts and inDuiries #hi(h the debtor partner mi*ht have made, or #hi(h the (ir(umstan(es o) the (ase may reDuire. %he interest (har*ed may be redeemed at any time be)ore )ore(losure, or in (ase o) a sale bein* dire(ted by the (ourt, may be pur(hased #ithout thereby (ausin* a dissolution5 (1) ?ith separate property, by any one or more o) the partners; or (2) ?ith partnership property, by any one or more o) the partners #ith the (onsent o) all the partners #hose interests are not so (har*ed or sold. 8othin* in this %itle shall be held to deprive a partner o) his ri*ht, i) any, under the e3emption la#s, as re*ards his interest in the partnership. (n) remedy o) a :ud*ment (reditor a*ainst a partner %his re)ers to partnerKs interest in the partnership and 89% to his ri*ht over a spe(i)i( partnership property partnerKs interest share o) the pro)its and surplus ri*hts to spe(i)i( partnership property ri*ht o) possession )or partnership purposes

Art. *-*,. 'll partners, in(ludin* industrial ones, shall be liable pro rata #ith all their property and a)ter all the partnership assets have been e3hausted, )or the (ontra(ts #hi(h may be entered into in the name and )or the a((ount o) the partnership, under its si*nature and by a person authori.ed to a(t )or the partnership. ;o#ever, any partner may enter into a separate obli*ation to per)orm a partnership (ontra(t. (n) re)ers to all Q<8<2'> partners

- (an industrial partners be *eneral partnersS @<S - as a Q2, all partners are *eneral partners e3(eption5 stipulation limited partner 6liable pro rata #ith all their property7 both real and personal su%sidiaril4 and pro rata for all partnership o%li ations

- #hy not 6solidary7 liabilityS separate :uridi(al personality o) the partnership; there)ore, e3haust partnership assets )irst 6pro rata7 N proportional - basisS in proportion to his S;'2< in the 29P+%S 89% (apital (ontribution 6partnership obli*ation7 1) entered in the )irm name, under its si*nature 2) by a person authori.ed (e35 employee) #hen S9>+D'2+>@ liableS last senten(e separate obli*ation to per)orm a partnership (ontra(t

C<AR>IN> ORDER - atta(hes interest o) the partner

1) a*rees to solidary liability (this provision) 2) 1L22 (tort liability) !) 1L2! (misappropriation) Art. *-*8. 'ny stipulation a*ainst the liability laid do#n in the pre(edin* arti(le shall be void, e3(ept as amon* the partners. (n) #hat i) other parties #aivedS =9+D as a*ainst !rd parties there)ore, as to them, pro rata liability applies 6e3(ept as amon* partners7 i) there is #aiver by some parties, those bene)itted (an (laim a*ainst the other partners #hat he paid pro rata Art. *-=5. %he dissolution o) the partnership does not o) itsel) dis(har*e the e3istin* liability o) any partner. ' partner is dis(har*ed )rom any e3istin* liability upon dissolution o) the partnership by an a*reement to that e))e(t bet#een himsel), the partnership (reditor and the person or partnership (ontinuin* the business; and su(h a*reement may be in)erred )rom the (ourse o) dealin* bet#een the (reditor havin* ,no#led*e o) the dissolution and the person or partnership (ontinuin* the business. %he individual property o) a de(eased partner shall be liable )or all obli*ations o) the partnership in(urred #hile he #as a partner, but sub:e(t to the prior payment o) his separate debts. (n) 2nd para*raph 6dis(har*ed7 1) a*reement - (! parties5 partner, (reditor, and partnership) 2) no a*reement - ,no#led*e o) the (reditor and (ontinues to transa(t #ith the partnership (ontinuin* the business !rd para*raph 6estate7 pay personal debts be)ore partnership debts (ondition5 a) dead partner b) no more partnership assets C. Tort lia%ilit4; %rea'h of trust lia%ilit4 )pri7ar4 E solidar4.

(1) ?here one partner a(tin* #ithin the s(ope o) his apparent authority re(eives money or property o) a third person and misapplies it; and (2) ?here the partnership in the (ourse o) its business re(eives money or property o) a third person and the money or property so re(eived is misapplied by any partner #hile it is in the (ustody o) the partnership. (n) 0+S' 29 2+'%+98

Art. *-/1. 'll partners are liable solidarily #ith the partnership )or everythin* (har*eable to the partnership under 'rti(les 1L22 and 1L2!. (n) D. S9>+D'2@ >+'1+>+%@ ?ia%ilit4 in 'ase of estoppels

Art. *-/5. ?hen a person, by #ords spo,en or #ritten or by (ondu(t, represents himsel), or (onsents to another representin* him to anyone, as a partner in an e3istin* partnership or #ith one or more persons not a(tual partners, he is liable to any su(h persons to #hom su(h representation has been made, #ho has, on the )aith o) su(h representation, *iven (redit to the a(tual or apparent partnership, and i) he has made su(h representation or (onsented to its bein* made in a publi( manner he is liable to su(h person, #hether the representation has or has not been made or (ommuni(ated to su(h person so *ivin* (redit by or #ith the ,no#led*e o) the apparent partner ma,in* the representation or (onsentin* to its bein* made5 (1) ?hen a partnership liability results, he is liable as thou*h he #ere an a(tual member o) the partnership; (2) ?hen no partnership liability results, he is liable pro rata #ith the other persons, i) any, so (onsentin* to the (ontra(t or representation as to in(ur liability, other#ise separately. ?hen a person has been thus represented to be a partner in an e3istin* partnership, or #ith one or more persons not a(tual partners, he is an a*ent o) the persons (onsentin* to su(h representation to bind them to the same e3tent and in the same manner as thou*h he #ere a partner in )a(t, #ith respe(t to persons #ho rely upon the representation. ?hen all the members o) the e3istin* partnership (onsent to the representation, a partnership a(t or obli*ation results; but in all other (ases it is the :oint a(t or obli*ation o) the person a(tin* and the persons (onsentin* to the representation. (n) '2%8<2S;+ 1@ <S%9 <>

Art. *-//. ?here, by any #ron*)ul a(t or omission o) any partner a(tin* in the ordinary (ourse o) the business o) the partnership or #ith the authority o) (o-partners, loss or in:ury is (aused to any person, not bein* a partner in the partnership, or any penalty is in(urred, the partnership is liable there)or to the same e3tent as the partner so a(tin* or omittin* to a(t. (n) %92% (6#ron*)ul a(t or omission7) a) 6ordinary (ourse o) the business7 b) not in pursuan(e 1A% #ith the 6authority o) the (opartners7 () 6penalty7 re)ers to a (rime Art. *-/=. %he partnership is bound to ma,e *ood the loss5

6liability7 - liable as a partner5 pro rata and subsidiary 98>@ ?;<8 it results in a partnership liability %here is partnership liability #hen all the partners (onsent to the representation 6allo#s to be represented as a partner to a non-partner7 liability :oint, as i) one o) those liable Corporation Code

0e'. /*. Co')o'at#on b, esto))el. F 'll persons #ho assume to a(t as a (orporation ,no#in* it to be #ithout authority to do so shall be liable as *eneral partners )or all debts, liabilities and dama*es in(urred or arisin* as a result thereo)5 rovided, ho#ever, %hat #hen any su(h ostensible (orporation is sued on any transa(tion entered by it as a (orporation or on any tort (ommitted by it as su(h, it shall not be allo#ed to use as a de)ense its la(, o) (orporate personality. 9ne #ho assumes an obli*ation to an ostensible (orporation as su(h, (annot resist per)orman(e thereo) on the *round that there #as in )a(t no (orporation. 6assume to a(t as a (orporation7 - (orporations 0AS% be re*istered #ith the S<" 6,no#in* to be #ithout authority7 bad )aith 6liable as *eneral partners7 pro rata and subsidiarily in e))e(t5 partnership by estoppels 6ostensible (orporation7 la(, o) (orporate personality (annot be used as a de)ense 2nd para*raph -(ontemplates a situation #here !rd party is bein* sued -third person assumes liability, also (annot ma,e use o) the la(, o) personality E. ?ia%ilit4 of new partners )su%sidiar4.

result5 hinder (ommer(ial transa(tions F presu7ption of 7utual a en'4 MacDonal9 v. !at#onal C#t, Ban< 6representation7 - de)e(tively )ormed (orporationIpartnership de )a(to partnership - )or purposes o) the "hattel 0ort*a*e >a#, a de )a(to partnership also has domi(ile Co-)an#a Ma'#t#-a v. Mu=o; - %" absolved industrial partner on the theory that nothin* #as (ontributed - S"5 (ontributed industry, *eneral partner - un)airS 89, had a voi(e in mana*ement and shared in the pro)its Co&P#tco v. 4ulo %he )a(t that the other partner had le)t the (ountry "'889% in(rease the liability o) remainin* partners. e3tends to insolvent and dead partners Pac#f#c Co--e'c#al v. Abo#t#; Uapplied (ompania do(trine - distin*uished loss )rom liability - #hile '1$1 o) the "ode o) "ommer(e provides that industrial partners #ill not be liable )or 6loss7, '124 (#hi(h applies in this (ase) provides that '>> partners are liable )or )or transa(tions in the name o) the partnership, albeit subsidiarily Ma79usa v. Alba'an (in the Dui.) - demanded shares upon #ithdra#al )rom the partnership, suit a*ainst (apitalist, mana*in* partner only - S"5 partnerKs share (annot be returned #ithout )irst dissolvin* and liDuidatin* be(ause o) the pre)eren(e )or partnership (reditors '8D the )a(t that the others partners are indispensible parties to the suit - sin(e the liDuidation do(ument prepared by the mana*in* partner #as not si*ned by the others, it does not bind them - moreover, the mana*in* partner (ould not be held personally liable sin(e as su(h 0 , he merely a(ts as a trustee o) the partnership slan9 Sales v. Un#te9 - the (ase #as dismissed, upon motion o) the plainti)), in )avour o) one o) the & *eneral partners - S"5 (lari)ied pro rata liability remained at 1I&; (ondonation o) one did not unma,e him as a *eneral partner to e))e(t an in(rease in the shares o) the other partners Munas>ue v. CA - 6misunderstandin*7 bet#een the partners - S"5 third party had the ri*ht to presume the authority o) the partner #hen the (ontra(t #as entered into in the name o) the partnership authority - sin(e the payments #ere misappropriated, 'rt. 1L2! #ould apply on solidarity o) liability L#- Ton7 L#- v. P(#l#))#ne 3#s(#n7 Gea': nc. - )a(t o) partnership5 (ommon )unds, purpose o) business, sold boat )or partnersK debt, sharin* o) pro)its - S"5 (orporation by estoppels applies a*ainst third persons #ho bene)itted (partner); there)ore, liable as a *eneral partner despite not bein* named in the (ontra(t Bac('ac( v. La P'otecto'a - partnership (ommon (arrier - 1arba5 president and partner %"5 artnership and all partners liable solidarily

Art. *-/,. ' person admitted as a partner into an e3istin* partnership is liable )or all the obli*ations o) the partnership arisin* be)ore his admission as thou*h he had been a partner #hen su(h obli*ations #ere in(urred, e3(ept that this liability shall be satis)ied only out o) partnership property, unless there is a stipulation to the (ontrary. (n) ne# partnership - old partnership ipso :ure dissolved 1A%5 - same assets and same )irm name - there)ore, same liability ne# partnerKs liability e3tent5 limited to his (apital (ontribution n 'e S,c#) Q2 i) partner dies5 artnership is D+SS9>=<D. - in (ase o) )irm names, 'rt. 1L1& pre)ers to 6livin* persons7 - publi( relations use o) de(eased partnerKs name S"5 undue advanta*e - 'rt. 1L$0 no saleable 6*ood#ill7 to be distributed as a )irm asset on its dissolution - on (ustoms5 :udi(ial (ustom v. so(ial (ustom :udi(ial (ustom (an supplement statutory la# - result" )irms D+D 89% (omplyT S" merely denied and 'D=+S<D L#tton v. 0#ll - ;ill5 "eron entered into in his o#n name. + told >itton, #eKll be dissolvedT - S"5 :oint mana*ement +t is enou*h )or the third party to transa(t #ith the mana*in* partner - #hat i) third party is reDuired to determineS

S"5 authority *iven to bind only the partnership and not themselves; there)ore, liable as partners only (subsidiarily)

business, and other partners are in possession o) the partnership boo,s. Art. *-1/. %he ri*ht to an a((ount o) his interest shall a((rue to any partner, or his le*al representative as a*ainst the #indin* up partners or the survivin* partners or the person or partnership (ontinuin* the business, at the date o) dissolution, in the absen(e o) any a*reement to the (ontrary. (n) %he ri*ht to demand the a((ount a((rues at the date o) dissolution in the absen(e o) any (ontrary a*reement. D. Propert4 ri hts

CII.
A.

RI><T0 O$ A PARTNER

To asso'iate another in his share

Art. *-21. <very partner may asso(iate another person #ith him in his share, but the asso(iate shall not be admitted into the partnership #ithout the (onsent o) all the other partners, even i) the partner havin* an asso(iate should be a mana*er. (1B9B) Por a partner to have an asso(iate in his share, (onsent o) the other partners is not reDuired. Por the asso(iate to be(ome a partner, '>> must (onsent (#hether the partner havin* the asso(iate is a mana*er or not) 2easons5 o 0utual trust is the basis o) partnership o "han*e in membership is a modi)i(ation or novation o) the (ontra(t. To a''ess: inspe't and 'op4 partnership %ooAs

Art. *-*2. %he property ri*hts o) a partner are5 (1) ;is ri*hts in spe(i)i( partnership property; (2) ;is interest in the partnership; and (!) ;is ri*ht to parti(ipate in the mana*ement. (n) *. To possess spe'ifi' partnership propert4

Art. *-**. ' partner is (o-o#ner #ith his partners o) spe(i)i( partnership property. %he in(idents o) this (o-o#nership are su(h that5 (1) ' partner, sub:e(t to the provisions o) this %itle and to any a*reement bet#een the partners, has an eDual ri*ht #ith his partners to possess spe(i)i( partnership property )or partnership purposes; but he has no ri*ht to possess su(h property )or any other purpose #ithout the (onsent o) his partners; (2) ' partnerHs ri*ht in spe(i)i( partnership property is not assi*nable e3(ept in (onne(tion #ith the assi*nment o) ri*hts o) all the partners in the same property; (!) ' partnerHs ri*ht in spe(i)i( partnership property is not sub:e(t to atta(hment or e3e(ution, e3(ept on a (laim a*ainst the partnership. ?hen partnership property is atta(hed )or a partnership debt the partners, or any o) them, or the representatives o) a de(eased partner, (annot (laim any ri*ht under the homestead or e3emption la#s; ($) ' partnerHs ri*ht in spe(i)i( partnership property is not sub:e(t to le*al support under 'rti(le 291. (n) <a(h partner has been said to be possessed o) a :oint interest in the #hole o) partnership property, but does not o#n individually any parti(ular arti(le or any separate part or aliDuot part thereo). (1) %he ri*ht o) eDual possession in(ludes use and (ontrol, in(ludin* the po#er o) sale and disposition, su(h as applyin* partnership property to partnership debts, even #ithout the (onsent o) the other partners. +t is ho#ever sub:e(t to several limitations. 9ne limitation5 e3tends only to partnership purposes. ;e has no ri*ht to possess it )or any other purpose #ithout the (onsent o) his partners. +) he does, he is a((ountable )or the value o) su(h use as #ell as )or any pro)its he may have derived there)rom. +) he (onverts partnership money to his o#n use, he shall be liable not only )or the amount (onverted but also )or interest and dama*es )rom the time o) su(h (onversion. (2) %his rule obtains even i) the assi*nment is made a)ter dissolution o) the partnership but be)ore its termination by the (ompletion o) the #indin* up o) its business. 'ny separate assi*nment o) su(h ri*ht, or any attempt at su(h assi*nment is null and void, e3(ept #hen real property is involved and the provisions o) 'rt 1L19 relative to the interest o) an inno(ent pur(haser apply. +) the la# re(o*ni.ed the ri*ht o) a partner to assi*n his ri*ht in parti(ular partnership property to a third person, the

(.

Art. *-25. %he partnership boo,s shall be ,ept, sub:e(t to any a*reement bet#een the partners, at the prin(ipal pla(e o) business o) the partnership, and every partner shall at any reasonable hour have a((ess to and may inspe(t and (opy any o) them. (n) Sub:e(t to (ontrary a*reement, e3press or implied, the partnership boo,s belon* to all partners and ea(h one o) them has eDual ri*hts thereto. <very partner has the ri*ht, at any reasonable hour to have a((ess to and inspe(t and (opy any o) said boo,s. 6reasonable hour7 any reasonable hour on business days throu*hout the year, and not merely durin* some arbitrary period o) a )e# days (hosen by some or one o) the partners. %he ri*ht in this 'rti(le is *ranted to enable the partner to obtain true and )ull in)ormation o) the partnership a))airs, )or a)ter all, he is a (o-o#ner o) the properties, in(ludin* the boo,s.

C.

To have a for7al a''ount

Art. *-2+. 'ny partner shall have the ri*ht to a )ormal a((ount as to partnership a))airs5 (1) +) he is #ron*)ully e3(luded )rom the partnership business or possession o) its property by his (o-partners; (2) +) the ri*ht e3ists under the terms o) any a*reement; (!) 's provided by arti(le 1L04; ($) ?henever other (ir(umstan(es render it :ust and reasonable. (n) 2i*ht to )ormal a((ount V ri*ht to a((ountin* re)erred to in 1L04 Q<8<2'> 2A><5 no partner has a ri*ht to demand a )ormal a((ountin* e3(ept as a (onseDuen(e o) dissolution or unless he at the same time see,s dissolution o) the partnership. 'rti(le 1L09 provides the instan(es #hen the *eneral rule is not to be observed. %he last o) these instan(es (overs (ir(umstan(es, )reDuently arisin*, 6#hi(h impose on one or more partners the duty o) renderin* a )ormal a((ount to the (opartner, as #here one partner is travelin* )or a lon* period o) time on partnership

assi*nee #ould pro tanto be(ome a partner, sin(e he #ould have the ri*ht to possess the property )or partnership purposes irrespe(tive o) the desires o) the other partners. 1ut partnership is a voluntary relation, and the other partners (annot have a ne# partner thrust upon them #ithout their (onsent. (!) ' partnerKs interest in spe(i)i( property o) the )irm is ta,en out o) the rea(h o) his individual (reditors. ?hile a partnerKs ri*ht in spe(i)i( partnership property may not be atta(hed, e3e(uted upon, or *arnished by his separate (reditors, partnership (reditors may do so. ($) %his in(ident )ollo#s )rom the nature o) su(h ri*ht and the basi( poli(y o) the la# to ,eep inta(t partnership property )or (reditors and )or partnership purposes. ' partner has no personal property in any spe(i)i( property o) the partnership, and he has no ri*ht to possess or use it e3(ept )or a partnership purpose. To 'onve4 partnership interest

%he assi*nee does not ne(essarily be(ome a partner. %he assi*nor is still the partner, #ith a ri*ht to demand a((ountin* and settlement. 2i*hts o) assi*nee5 o %o *et #hatever pro)its the assi*nor-partner #ould have obtained. o %o avail himsel) o) the usual remedies in (ase o) )raud in the mana*ement. o %o as, )or annulment o) the (ontra(t o) assi*nment i) he #as indu(ed to enter it thru any o) the vi(es o) (onsent or i) he himsel) #as in(apa(itated to *ive (onsent. o %o demand a((ountin* but only i) indeed the partnership is dissolved, but even then, the a((ount (an (over the period only from the date of the last accounting which has been agreed to by all the partners. o 'ssi*nee (an demand dissolution o) the partnership #hen the partnership has be(ome a partnership at #ill. To asA for dissolution

/.

E.

Art. *-*/. ' partnerHs interest in the partnership is his share o) the pro)its and surplus. (n) ro)it the *ain reali.ed )rom the business or investment over and above e3penditures or the e3(ess o) the value o) returns over the value o) advan(es. Surplus- the e3(ess o) assets over liabilities; simply #hat is le)t o) the assets o) a )irm a)ter all its liabilities have been satis)ied. %he interest o) the partner in the partnership has been other#ise des(ribed as the net balan(e remainin* to him; a)ter all partnership debts or (laims a*ainst it have been paid and the eDuities and a((ounts bet#een su(h partner and his (opartners have been ad:usted. Anli,e his ri*hts in spe(i)i( partnership property, a partnerKs interest in the partnership is assi*nable irrespe(tive o) the (onsent o) the other partners. +t may be rea(hed by the partnersK separate (reditors by means o) a (har*in* order and the other remedies spe(i)ied in 'rt 1L1$. 'nd the partner (an, #ith respe(t to it, (laim ri*hts under the e3emption la#s.

Art. *-=2. Dissolution is (aused5 M333O (2) +n (ontravention o) the a*reement bet#een the partners, #here the (ir(umstan(es do not permit a dissolution under any other provision o) this arti(le, by the e3press #ill o) any partner at any time; Art. *-=*. 9n appli(ation by or )or a partner the (ourt shall de(ree a dissolution #henever5 (1) ' partner has been de(lared insane in any :udi(ial pro(eedin* or is sho#n to be o) unsound mind; (2) ' partner be(omes in any other #ay in(apable o) per)ormin* his part o) the partnership (ontra(t; (!) ' partner has been *uilty o) su(h (ondu(t as tends to a))e(t pre:udi(ially the (arryin* on o) the business; ($) ' partner #ill)ully or persistently (ommits a brea(h o) the partnership a*reement, or other#ise so (ondu(ts himsel) in matters relatin* to the partnership business that it is not reasonably pra(ti(able to (arry on the business in partnership #ith him; (&) %he business o) the partnership (an only be (arried on at a loss; (B) 9ther (ir(umstan(es render a dissolution eDuitable. 9n the appli(ation o) the pur(haser o) a partnerHs interest under 'rti(le 1L1! or 1L1$5 (1) ')ter the termination o) the spe(i)ied term or parti(ular underta,in*; (2) 't any time i) the partnership #as a partnership at #ill #hen the interest #as assi*ned or #hen the (har*in* order #as issued. (n) (&) 6loss7 means operatin* loss )or an e3tended period o) time Dan 3ue Leun7 v. AC 'rts. 1L0B-1L09 sho# that the ri*ht to demand an a((ountin* e3ists as lon* as the partnership e3ists. artnership be*ins to run only upon the dissolution o) the partnership #hen the )inal a((ountin* is done. U0 v. Clarin su)'a E-nace v. CA '(tion )or a((ountin*, payment o) partnership shares, division o) assets and dama*es is a personal a(tion #hi(h may be (ommen(ed

Art. *-*=. ' (onveyan(e by a partner o) his #hole interest in the partnership does not o) itsel) dissolve the partnership, or, as a*ainst the other partners in the absen(e o) a*reement, entitle the assi*nee, durin* the (ontinuan(e o) the partnership, to inter)ere in the mana*ement or administration o) the partnership business or a))airs, or to reDuire any in)ormation or a((ount o) partnership transa(tions, or to inspe(t the partnership boo,s; but it merely entitles the assi*nee to re(eive in a((ordan(e #ith his (ontra(t the pro)its to #hi(h the assi*nin* partner #ould other#ise be entitled. ;o#ever, in (ase o) )raud in the mana*ement o) the partnership, the assi*nee may avail himsel) o) the usual remedies. +n (ase o) a dissolution o) the partnership, the assi*nee is entitled to re(eive his assi*norHs interest and may reDuire an a((ount )rom the date only o) the last a((ount a*reed to by all the partners. (n) +) partner (onveys (assi*ns, sells, donates) his ?;9>< interest in the partnership (his share in the pro)its and surplus), the partnership remains, in *eneral. ?o8 a dissolution results )rom the assi*nment depends on its nature as mu(h as on the intent or a*reement o) the parties, as may be *athered )rom the ori*inal partnership a*reement, the #ritten assi*nment, or )rom their subseDuent (ondu(t.

and tried #here the de)endant resides or may be )ound, or #here the plainti))s reside, at the ele(tion o) the latter. +) an a(tion is a*ainst a partner, on the basis o) his personal liability, it is an a(tion in personam, and the )a(t that t#o o) the assets o) the partnership are par(els o) land does not materially (han*e the nature o) the a(tion. %he heirs, as su((essors #ho stepped into the shoes o) their de(edent upon his death, (an brin* an a(tion )or a((ountin* ori*inally pertainin* to the de(edent. %his ri*ht is transmitted by la#. %he heirs are (omplainants in their o#n ri*ht as su((essors. Por as lon* as the partnership e3ists, any o) the partners may demand an a((ountin* o) the partnershipKs business, and pres(ription o) the said ri*ht starts to run only upon the dissolution o) the partnership #hen the )inal a((ountin* is done. res(riptive period5 10 years

(.

To re#uire an a''ount

Art. *-*=. ' (onveyan(e by a partner o) his #hole interest in the partnership does not o) itsel) dissolve the partnership, or, as a*ainst the other partners in the absen(e o) a*reement, entitle the assi*nee, durin* the (ontinuan(e o) the partnership, to inter)ere in the mana*ement or administration o) the partnership business or a))airs, or to reDuire any in)ormation or a((ount o) partnership transa(tions, or to inspe(t the partnership boo,s; but it merely entitles the assi*nee to re(eive in a((ordan(e #ith his (ontra(t the pro)its to #hi(h the assi*nin* partner #ould other#ise be entitled. ;o#ever, in (ase o) )raud in the mana*ement o) the partnership, the assi*nee may avail himsel) o) the usual remedies. +n (ase o) a dissolution o) the partnership, the assi*nee is entitled to re(eive his assi*norKs interest and may reDuire an a((ount )rom the date only o) the last a((ount a*reed to by all the partners. (n) +n (ase o) dissolution o) the partnership, the assi*nee is entitled to an a((ountin* )rom the date only o) the last a((ount a*reed to by all the partners and to re(eive, a)ter all the partnership a))airs have been settled and ad:usted, his assi*norKs share o) the residue, i) any, o) partnership assets.

CIII. PARTNER0<IPD0 O(?I>ATION0 TO T<E PARTNER0

A. To rei7%urse; to answer for o%li ations 'ontra'ted Art. *8+,. %he partnership shall be responsible to every partner )or the amounts he may have disbursed on behal) o) the partnership and )or the (orrespondin* interest, )rom the time the e3pense are made; it shall also ans#er to ea(h partner )or the obli*ations he may have (ontra(ted in *ood )aith in the interest o) the partnership business, and )or ris,s in (onseDuen(e o) its mana*ement. (1BLLa)

C.

To asA for dissolution

' partner has no obli*ation to loan or advan(e money to his )irm. ;e may ho#ever do so, in #hi(h (ase, i) there be no (ontrary a*reement, he be(omes a (reditor o) his )irm and as su(h entitled to reimbursement )or su(h loan or advan(e be)ore there (an be any distribution o) pro)its. 'ny voluntary (ontribution o) money or property )or the use o) the partnership beyond the amount reDuired to be (ontributed by the partnership a*reement is (onsidered an advan(e or a loan. %his in(ludes money to advan(ed to dis(har*e partnership obli*ations. %he )irm must re)und amounts disbursed on its behal) plus interest )rom the time e3penses #ere made (and not )rom demand, sin(e a)ter all, a partner is an a*ent, and the rule on a*en(y applies to him). %he "ode also ma,es the partnership ans#erable to ea(h partner )or the obli*ations he may have (ontra(ted in *ood )aith in the interest o) the partnership business. %hese in(lude personal obli*ations in(urred by him in the ordinary and proper (ourse o) partnershipKs a))airs and in the preservation o) its business or property. <a(h partner is )urther entitled to be indemni)ied by the partnership )or ris,s in (onseDuen(e o) its mana*ement. %his (ontemplates ris,s and losses #hi(h a partner ne(essarily in(urs on behal) o) the partnership.

Art. *-=*. 9n appli(ation by or )or a partner the (ourt shall de(ree a dissolution #henever5 (1) ' partner has been de(lared insane in any :udi(ial pro(eedin* or is sho#n to be o) unsound mind; (2) ' partner be(omes in any other #ay in(apable o) per)ormin* his part o) the partnership (ontra(t; (!) ' partner has been *uilty o) su(h (ondu(t as tends to a))e(t pre:udi(ially the (arryin* on o) the business; ($) ' partner #ill)ully or persistently (ommits a brea(h o) the partnership a*reement, or other#ise so (ondu(ts himsel) in matters relatin* to the partnership business that it is not reasonably pra(ti(able to (arry on the business in partnership #ith him; (&) %he business o) the partnership (an only be (arried on at a loss;

(B) 9ther (ir(umstan(es render a dissolution eDuitable.

9n the appli(ation o) the pur(haser o) a partnerHs interest under 'rti(le 1L1! or 1L1$5 (1) ')ter the termination o) the spe(i)ied term or parti(ular underta,in*; (2) 't any time i) the partnership #as a partnership at #ill #hen the interest #as assi*ned or #hen the (har*in* order #as issued. (n)

IG. RI><T0 O$ A00I>NEE0

A. To re'eive the interest 'ssi*nee has a ri*ht to dissolve partnership i) the partnership is a partnership at #ill.