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PARTNERSHIP
> It is a CONTRACT whereby two or more persons (1) bind themselves to CONTRIBUTE money, property, or industry to a COMMON UN! (2) with the intention o" dividin# the $RO IT% amon# themselves or in order to E&ERCI%E a $RO E%%ION > a %TATU% and a I!UCIAR' RE(ATION subsistin# between persons )arryin# on a business in )ommon with a view on pro"it CHARACTERISTICS OF THE CONTRACT OF PARTNERSHIP [C, C, L, I, AS, NP] *+ CON%EN%UA( > per"e)ted by mere )onsent ,+ CONTRIBUTION o" money, property or industry to a COMMON UN! -+ ob.e)t must be a (A/ U( one 0+ INTENTION o" !I1I!IN2 the $RO IT amon# the $ARTNER% 3+ 4A ECTIO %OCIETATI%5 > the desire to "ormulate an ACTI1E UNION, with people amon# whom there e6ist a mutual CON I!ENCE and TRU%T% 7+ NE/ $ER%ONA(IT' > the ob.e)t must be "or pro"it and not merely "or the )ommon en.oyment otherwise only a )o8ownership has been "ormed+ 9O/E1ER, pe)uniary pro"it need not be the only aim, it is enou#h that it is the prin)ipal purpose BUSINESS TRUSTS > when )ertain persons entrust their property or money to others who will mana#e the same "or the "ormer RULES ON CAPACITY TO BECOME A PARTNER *+ a person )apa)itated to enter into )ontra)tual relations may be)ome a partner ,+ an UNEMANCI$ATE! MINOR CANNOT be)ome a partner UN(E%% his parent or #uardian )onsents -+ a MARRIE! /OMAN, )annot )ontribute )on.u#al "unds as her )ontribution to the partnership UN(E%% she is permitted to do so by her husband OR UN(E%% she is the administrator o" the )on.u#al partnership, in whi)h the COURT must #ive its )onsent authority 0+ a $ARTNER%9I$ bein# a .uridi)al person by itsel" )an "orm another partnership 3+ a COR$ORATION )annot be)ome a partner on #rounds o" publi) poli)y > a partner shares not only in pro"its but also in the losses o" the "irm RULE: > the partnership has a $ER%ONA(IT' %E$ARATE and !I%TINCT "rom that o" ea)h partner

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CONSEQUENCES OF THE PARTNERSHIP BEING A JURIDICAL ENTITY *+ its .uridi)al personality is %E$ARATE and !I%TINCT "rom that o" ea)h partner ,+ the partnership CAN in 2ENERA(: A; a)<uire and possess property o" all =inds B; in)ur obli#ations C; brin# )ivil and )riminal a)tions !; )an be ad.ud#ed insolvent even i" the individual members be ea)h "inan)ially solvent -+ unless he is #enerally sued, a partner has no ri#ht to ma=e a separate appearan)e in )ourt, i" the partnership bein# sued is already represented LIMITATIONS ON ALIEN PARTNERSHIP *; i" 7>? )apital is not owned by ilipinos > the "irm )annot a)<uire by pur)hase or otherwise A2RICU(TURA( $hilippine lands ,; "orei#n partnership may 4lease5 lands provided the period does not e6)eed @@ years -; "orei#n partnership may be 4MORT2A2EE%5 o" land > period o" 3 years, renewable "or another 3 years > they )annot pur)hase it in a "ore)losure sale RULES IN CASE OF ASSOCIATIONS NOT LAWFULLY ORGANI ED AS PARTNERSHIP *+ it possesses NO (E2A( $ER%ONA(IT' > it )annot sue as su)h 9O/E1ER, the partners in their individual )apa)ity CAN ,+ one who enters into a )ontra)t with a partnership as su)h )annot when sued later on "or re)overy o" the debt, alle#e the la)= o" le#al personality on the part o" the "irm, even i" indeed it had no personality > E%TO$$E( > whether a partnership has a .uridi)al personality or not depends on its $ER%ONA( (A/ o" the partnership or the law o" the pla)e where the partnership was or#aniAed REQUISITES FOR E!ISTENCE OF PARTNERSHIP [I, CF, JI] *+ INTENTION to )reate a partnership ,+ COMMON UN! obtained "rom )ontributions -+ BOINT INTERE%T% in the $RO IT% WHAT DO NOT ESTABLISH A PARTNERSHIP *+ mere )o8ownership or )o8possession > even with pro"it sharin# ,+ mere sharin# o" 2RO%% returns > even with .oint ownership o" the properties involved RULES TO DETERMINE THE E!ISTENCE OF A PARTNERSHIP *+ persons who are not partners to ea)h other are not partners as to third persons EXCEPTION: > $ARTNER%9I$ B' E%TO$$E( ,+ CO8O/NER%9I$ o" a property does not itsel" establish a partnership, even thou#h the )o8owners share in the pro"its derived "rom the in)ident o" .oint ownership

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-+ %9ARIN2 O 2RO%% RETURN% A(ONE does not indi)ate a partnership whether or not the persons sharin# them have a .oint or )ommon ri#ht or interest in any property "rom whi)h the returns are derived 0+ the re)eipt o" the share in the pro"its is a stron# presumptive eviden)e o" partnership 9O/E1ER, no su)h in"eren)e will be drawn i" su)h pro"its were re)eived in payment A; as a !EBT by installments or otherwise B; as /A2E% o" an employee C; as RENT to a landlord !; as an ANNUIT' to a widow or representative o" a de)eased partner E; as INTERE%T on a (OAN, thou#h the amount o" payment vary with the pro"its o" the business ; as the CON%I!ERATION "or the sale o" a 2OO! /I(( o" a business or other property or otherwise > )reditors are not partners, "or their only interest in the sharin# o" pro"its is the re)eipt or payment o" their )redits > in a partnership, the partners are supposed to trust and have )on"iden)e in all the partners PARTNERSHIP BY ESTOPPEL > I , persons not partners represent themselves as partners to stran#ers, a partnership by estoppel results > /9EN , persons, who are partners, in )onnivan)e with a "riend who is not a partner in"orm a stran#er that said "riend is their partner, a partnership by estoppel also result to the end that the stran#er should not be pre.udi)ed RULE: LAWFUL OBJECT "# PURPOSE > a partnership must have (A/ U( OBBECT or $UR$O%E, and must be established "or the )ommon bene"it or interest o" the partners > it must be within the )ommen)e o" man, possible and not )ontrary to law, morals, #ood )ustoms, publi) order or publi) poli)y > I a partnership has %E1ERA( $UR$O%E%, one o" whi)h is UN(A/ U(, the partnership )an still validly e6ist so lon# as the ille#al purpose )an be separated "rom the le#al purposes > NO need "or BU!ICIA( !ECREE to dissolve an unlaw"ul partnership > 1OI! AB INITIO > one o" the )auses "or the dissolution o" a partnership is 4 any event which makes it unlawful for the business of the partnership to be carried on RULE: > when an UN(A/ U( $ARTNER%9I$ is dissolved by a .udi)ial de)ree, the $RO IT% shall be CON I%CATE! in A1OR o" the %TATE G$ R$ > a partnership may be )onstituted in any "orm E!CEPTION: $UB(IC IN%TRUMENT *+ IMMO1AB(E $RO$ERT' is )ontributed ,+ REA( RI29T% are )ontributed

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need "or IN1ENTOR' o" IMMO1AB(E%

CC "or E ECTI1IT' o" the partnership )ontra)t inso"ar as inno)ent third persons are )on)erned the same must be RE2I%TERE! i" REA( $RO$ERTIE% are IN1O(1E! > a partnership )ontra)t is NOT CON1ERE! by the %TATUTE o" RAU!% > an A2REEMENT TO ORM a partnership does not itsel" )reate a partnership > when there are )onditions to be "ul"illed or when a )ertain period is to lapse, the partnership is not )reated till a"ter the "ul"illment o" the )onditions or the arrival o" the term and this is true even i" one o" the parties has already advan)ed his a#reed share o" the )apital RULE: i" CA$ITA( is $-,>>> or more REQUIRED: *+ $UB(IC IN%TRUMENT ,+ RECOR!E! D %+E+C+ C > AI(URE TO COM$(' D shall not e""e)t the liability o" the partnership and its members to third persons CC > I REA( $RO$ERTIE% have been )ontributed, RE2AR!(E%% o" the 1A(UE, a publi) instrument is needed "or the attainment o" le#al personality REQUIREMENTS WHERE IMMO%ABLE & REAL PROPERTY IS CONTRIBUTED *+ $UB(IC IN%TRUMENT ,+ IN1ENTOR' D si#ned and atta)hed to the $+I+ C > applies re#ardless o" the value o" the real property C > applies even i" only real ri#hts over the real property are )ontributed C > applies i" aside "rom real property, )ash or personal property is )ontributed > TRAN% ER o" land to the partnership must be duly 4re)orded5 in the RO! to ma=e the trans"er e""e)tive inso"ar as third persons are )on)erned RULE: > any immovable property or an interest therein maybe a)<uired in the partnership name > title so a)<uired )an be )onveyed only in the partnership name >I the partnership has A(IEN%, it CANNOT O/N (AN!%, whether publi) or private or whether a#ri)ultural or )ommer)ial E&CE$T throu#h 9ERE!ITAR' %UCCE%%ION

LIMITATIONS ON ACQUISITION *+ A2RICU(TURA( (AN!% D *>,0 9ECTARE% ,+ lease o" publi) lands E2RAFIN2; D ,>>> 9A%+ RULES IF !" articles are kept secret amon# the members

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*+ ,+ -+ 0+ 3+

$" any one of the members may contract in his %own name with third persons NOT a partnership D NOT a (E2A( $ER%ON it may be sued by third person under the )ommon name it uses it )annot sue as su)h and )annot be ordinarily be a party to a )ivil a)tion inso"ar as inno)ent third parties are )on)erned > the parities )an be )onsidered as members o" a partnership as between themselves or inso"ar as third persons are pre.udi)ed > only the rules o" )o8ownership must apply

EFFECT OF CERTAIN TRANSACTIONS *+ )ontra)ts entered into by a 4partner5 in his own name may be sued upon still by him in his individual )apa)ity, not withstandin# the absen)e o" a partnership ,+ when two or more individuals, havin# a )ommon interests in a business brin# a )ourt a)tion, it should be presumed that they prose)ute the same in their individual )apa)ity as )o8owners and not in behal" o" a partnership whi)h does not e6ist in le#al )ontemplation CLASSIFICATION OF PARTNERSHIPS A; !CCO&'IN( TO )!NNE& O* C&E!TION *+ ORA((' )onstituted ,+ )onstituted in a $RI1ATE IN%TRUMENT -+ )onstituted in a $UB(IC IN%TRUMENT 0+ RE2I%TERE! D %+E+C+ B; !CCO&'IN( TO O$+ECT *+ UNI1ER%A( ,+ $ARTICU(AR C; !CCO&'IN( TO ,I!$I,IT*+ (IMITE! $ARTNER%9I$ ,+ 2ENERA( $ARTNER%9I$ !; !CCO&'IN( TO ,E(!,IT*+ (A/ U( OR (E2A( ,+ UN(A/ U( OR I((E2A( E; !CCO&'IN( TO '.&!TION *+ "or a %$ECI IC $EIO! or I&E! $ERIO! ,+ $ARTNER%9I$ AT /I(( ; !CCO&'IN( TO &EP&E/ENT!TION TO OT0E&/ *+ OR!INAR' $ARTNER%9I$ ,+ $ARTNER%9I$ B' ETO$$E( 2; !/ TO ,E(!,IT- O* EXI/TENCE *+ !E BURE $ARTNER%9I$ ,+ !E ACTO $ARTNER%9I$ 9" !/ TO P.$,ICIT*+ %ECRET $ARTNER%9I$ ,+ NOTORIOU% G O$EN $ARTNER%9I$ I" !/ TO P.&P/E *+ COMMERCIA( G TRA!IN2 ,+ $RO E%%IONA( G NON8TRA!IN2 GENERAL PARTNERSHIP > one where all the partners are #eneral partners > they are (IAB(E even with respe)t to their individual properties, a"ter the assets o" the partnership has been e6hausted LIMITED PATNERSHIP

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> one where at least one partner is a #eneral partner and the others are limited partners > one whose liability is limited only up to the e6tent o" his )ontribution > a partnership where all the partners are limited partners cannot e1ist as a limited partnership > RE U%E! RE2I%TRATION > I it )ontinuous as su)h, it will be )onsidered as a #eneral partnership and all the partners will be #eneral partners 'INDS OF UNI%ERSAL PARTNERSHIP *+ $ARTNER%9I$ O A(( $RE%ENT $RO$ERT' ,+ $ARTNER%9I$ O A(( $RO IT% (UNI%ERSAL PARTNERSHIP OF ALL PRESENT PROPERTY > CONTRIBUTION o" *+ A(( the properties a)tually belon#in# to the partners ,+ the $RO IT% a)<uired with said property > BECOME% COMMON $RO$ERT' > E&CE$T all UTURE $RO$ERT' > RUIT% o" UTURE $RO$ERT' D INC(U!E! I %TI$U(ATE! U$ON (UNI%ERSAL PARTNERSHIP OF PROFITS > )omprises all that the partners may a)<uire by the IN!U%TR' or /ORH o" the partners be)ome )ommon property re#ardless o" within said pro"its were obtained throu#h the usu"ru)t )ontributed > EXCEPT $RIFE% and 2I T% RULE: > arti)les o" universal partnership, entered without spe)i"i)ation o" its nature, only )onstitute a universal partnership o" $RO IT% RULE: > persons who are prohibited "rom #ivin# ea)h other any donation or advanta#e )annot enter into universal partnership 20O: *+ 9U%BAN! and /I E ,+ those #uilty o" A!U(TER' or CONCUBINA2E -+ those #uilty o" the same )riminal o""ense i" the partnership was entered into in )onsideration o" the same > while spouses )annot enter into a universal partnership, they )an enter into a parti)ular partnership or be members thereo" > a universal partnership is virtually a donation to ea)h other o" the partners properties or at least their usu"ru)t

PARTICULAR PARTNERSHIP > a parti)ular partnership has "or its OBBECT: *+ !ETERNMINATE T9IN2% D their use or "ruits ,+ %$ECI IC UN!ERTAHIN2 -+ E&ERCI%E o" a $RO E%%ION or 1OCATION

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OBLIGATIONS OF THE PARTNERS RULE: > a $ARTNER%9I$ BE2IN% "rom the moment o" the E&ECUTION o" the CONTRACT C > even i" )ontributions have not yet been made the "irm already e6ists, "or partnership is a )onsensual )ontra)t DURATION OF PARTNERSHIP > UN(IMITE! C > MA' BE A2REE! U$ON *+ E&$RE%%(' D de"inite period ,+ IM$(IE!(' D upon a)hievement o" its purpose PARTNERSHIP AT WILL > a partnership wherein its )ontinued e6isten)e really depends upon the will o" the partners or even on the will o" any o" them 3 4IN'/: *+ when there is no term, e6press or implied ,+ when it is )ontinued by the habitual mana#ers althou#h the period has ended or the purpose has been a))omplished ) IMPORTANT DUTIES OF E%ERY PARTNER [C, D*F, W] *+ duty to CONTRIBUTE what had been promised ,+ duty to !E(I1ER the RUIT% o" what should have been delivered -+ duty to /ARRANT RIULES ON THE DUTY TO CONTRIBUTE *+ the )ontribution must be made at the time the partnership is entered into UN(E%% a di""erent period is stipulated ,+ no demand is needed to put the partner in de"ault -+ the partner must e6er)ise due dili#en)e in preservin# the property to be )ontributed be"ore he a)tually )ontributes the same 0+ a partner who promises to )ontribute to the partnership be)omes a promissory debtor o" the partnership RULES ON THE DUTY TO DELI%ER THE FRUITS *+ I property has been promised, the "ruits thereo" should also be #iven ,+ the "ruits re"erred to are those arisin# "rom the time they should have been delivered, without a need o" any demand -+ I the partner is in BA! AIT9, he is liable not only "or the "ruits a)tually produ)ed, BUT also "or those that )ould have been produ)ed 0+ I MONE' 9A% BEEN $ROMI%E!, INTERE%T and !AMA2E% "rom the time he should have )omplied with his obli#ation should be #iven 3+ NO !EMAN! is needed to put the partner in de"ault 7+ it is !E(I1ER', a)tual or )onstru)tive that TRAN% ER% O/NER%9I$ RULES ON THE DUTY TO WARRANT

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*+ the warranty in )ase o" evi)tion re"ers to spe)i"i) and determinate thin#s already )ontributed ,+ there is E1ICTION whenever by a "inal .ud#ment based on a ri#ht prior to the sale or an a)t imputable to the partner, the partnership is deprived o" the whole or a part o" the thin# pur)hased RULE WHEN CONTRIBUTION CONSISTS OF GOODS > A$$RAI%A( o" 1A(UE is needed to determine how mu)h was )ontributed 0O2 !PP&!I/!, )!'E *+ as $RE%CRIBE! in the CONTRACT ,+ in de"ault, by E&$ERT% )hosen by the partners, and at CURRENT $RICE% C> ne)essity o" the IN1ENTOR' D A$$RAI%A( RULE "+ RIS' ", LOSS > a"ter #oods have been )ontributed, the partnership bears the ris= o" subse<uent )han#es in the value RULE: > a partner who 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 with his obli#ation CAPITALIST PARTNER > one who URNI%9E% CA$ITA( C> NOT E&EM$TE! "rom (O%%E% C> he )an en#a#e in other business $RO1I!E! there is no )ompetition between the partnership and his business C> share in the pro"its a))ordin# to a#reements INDUSTRIAL PARTNER > one who URNI%9E% IN!U%TR' or (ABOR C> he is E&EM$TE! "rom (O%%E% as between the partner BUT liable to stran#ers without pre.udi)e to reimbursement "rom the )apitalist partner C> he CANNOT en#a#e in any other BU%INE%% /IT9OUT the e6press CON%ENT o" the other partners, OT9ER/I%E *+ he )an be E&C(U!E! "rom the "irm 8 plus dama#es OR ,+ the BENE IT% he obtains "rom the other businesses CAN BE A1AI(E! o" by the other partners - plus dama#es > whether or not there is COM$ETITION C> in )omputin# always loo= "or 88888> NET $RO IT% 88888> NET (O%%E% CAPITALIST - INDUSTRIALIST PARTNER > one who )ontributes BOT9 CA$ITA( and IN!U%TR' GENERAL PARTNER > one who is liable 4beyond5 the e6tent o" his )ontribution LIMITED PARTNER > one who is liable 4only5 to the e6tent o" his )ontribution

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CCC> an industrial partner )an only be a #eneral partner, never a limited partner MANAGING PARTNER > one who mana#es a)tively the "irms a""airs SILENT PARTNER > one who does not parti)ipate in the mana#ement, thou#h he shares in the $RO IT% or (O%%E% LIQUIDATING PARTNER > one who winds up or li<uidates the a""airs o" the "irm a"ter it has been dissolved OSTENSIBLE PARTNER > one whose )onne)tion with the "irm is publi) and open SECRET PARTNER > one whose )onne)tion with the "irm is )on)ealed or =ept se)ret DORMANT PARTNER > one who is both a se)ret Ehidden; and silent Enot mana#in#; partner NOMINAL PARTNER > one who is not really a partner BUT who may be)ome liable as su)h inso"ar as third persons are )on)erned RULE: > partners shall CONTRIBUTE EIUA( %9ARE% to the )apital o" the partnership C> it is permissible to )ontribute UNEIUA( %9ARE% I there is a stipulation to this e""e)t C> in the absen)e o" proo", the shares are presumed to be e<ual CONDITIONS before a capitalist partner is obliged to sell his shares / interest to the other partners [IL, RC, NA] *+ i" there is IMMINENT (O%% o" the BU%INE%% o" the partnership ,+ he RE U%E% to CONTRIBUTE an A!!ITIONA( %9ARE to the CA$ITA( -+ there is no a#reement to the )ontrary C> IN!U%TRIA( $ARTNER I% E&EM$TE! (RULE ., MANAGING PARTNER COLLECTS A CREDIT REQUISITES: 1. e6isten)e o" at least , debts 8888> $ARTNER%9I$ 8888> $ARTNER ,+ both sums are demandable -+ the )olle)tin# partner is the mana#in# partner C> the sum thus )olle)ted shall be applied to the two )redits in proportion to their amounts

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RULE: C> where a partner receives his share in the partnership credit CONDITIONS: *+ a partner has re)eived his share in the partnership )redit D in whole or in part ,+ the other partners have not )olle)ted their part o" the )redit -+ the debtor subse<uently be)omes IN%O(1ENT RULE: 8 the partner shall be obli#ed to brin# to the partnership )apital what he re)eived even thou#h he may have #iven re)eipt "or his share only C> !OE% NOT A$$(' when debt was )olle)ted a"ter dissolution o" the partnership RULE: C> every partner is responsible to the partnership "or dama#es su""ered by it throu#h his "ault C> he )annot )ompensate them with the pro"its and bene"its, whi)h he may have earned "or the partnership by his industry C> the )ourts may e<uitably lessen his responsibility /RES PERIT DOMINO0 (RULES ON WHO BEARS THE RIS' OF LOSS *+ i" %$ECI IC and !ETERMINATE T9IN2% NOT UN2IB(E whose U%U RUCT is en.oyed by a "irm > the $ARTNER who O/N% it bears the loss "or ownership was never trans"erred to the "irm ,+ UN2IB(E or !ETERIORAB(E > IRM bears the loss "or it is evident ownership was trans"erred

-+ T9IN2% CONTRIBUTE! to be %O(! > IRM bears the loss "or evidently the "irm was intended to be the owner 0+ CONTRIBUTE! under A$$RAI%A( > IRM bears the loss be)ause this has the e""e)t o" an implied sale

RULE "+ RESPONSIBILITY ", 123 FIRM *+ to RE UN! amounts disbursed on behal" o" the "irm plus le#al interest "rom the time e6penses where made ,+ to AN%/ER to ea)h partner "or OB(I2ATION% he may have entered into in #ood "aith in the interest o" the partnership, as well as the ris=s in )onse<uen)e o" its mana#ement

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C> RE UN! must be made even in )ase o" "ailure o" the enterprise entered into, provided the partner is not at "ault C> AMOUNT !I%BUR%E! D does not re"er to the ORI2INA( CA$ITA( (HOW PROFITS ARE DISTRIBUTED *+ a))ordin# to A2REEMENT ,+ I NONE, a))ordin# to amount o" CONTRIBUTION (HOW LOSSES 4#3 DISTRIBUTED *+ a))ordin# to A2REEMENT as to losses ,+ I NONE, a))ordin# to a#reement as to $RO IT% -+ I NONE, a))ordin# to amount o" CONTRIBUTION C> an IN!U%TRIA( $ARTNER shall re)eive a BU%T and EIUITAB(E share in the pro"its (RULE "+ INDUSTRIAL PARTNERS5 LIABILITIES 8 may be held liable by third persons BUT he may re)over what he has paid "rom the other )apitalist partners CRULE "+ DESIGNATION 67 THIRD PERSON ", SHARES .+ PROFITS 4+8 LOSSES C> third person is NOT a P!&TNE& 88> appointed to only distribute shares C> the desi#nation o" shares by third persons may be IM$U2NE!, I it is MANI E%T(' INEIUITAB(E C> the desi#nation o" shares by third persons CANNOT be IM$U2NE! E1EN I MANI E%T(' INEIUITAB(E I : *+ the a##rieved partner has already BE2UN to E&ECUTE the de)ision ,+ the a##rieved partner has not IM$U2NE! the distribution within - months he had =nowled#e (RULE IF APPOINTMENT OTHER THAN .+ 123 ARTICLES ", PARTNERSHIP *+ power to a)t may be RE1OHE! at AN' TIME with or without .ust )ause > REMO1A( should be done by the )ontrollin# interest ,+ E&TENT o" $O/ER > as lon# as he remains mana#er, he )an per"orm all a)ts o" administration BUT D i" others oppose and he persists, he )an be removed (RULE WHEN 123#3 4#3 2 "# MORE MANAGERS CONDITIONS: *+ , or more partners are mana#ers ,+ there is no spe)i"i)ation o" respe)tive duties -+ there is no stipulation re<uirin# UNANIMIT' SPECIFIC RULES: *+ ea)h may separately e6e)ute all a)ts o" administration > UN(IMITE! $O/ER to A!MINI%TER ,+ I any o" the mana#ers O$$O%E > MABORIT' RU(E > IN CA%E O A TIE 8 persons ownin# )ontrollin# interest prevail provided they are also mana#ers C> ri#ht to oppose is not #iven to NON8MANA2ER%

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C> O$$O%ITION should be done BE ORE the a)ts produ)e le#al e""e)ts inso"ar as third persons are )on)erned RULE WHEN UNANIMITY .9 REQUIRED *+ the CONCURRENCE o" all shall be ne)essary "or the validity o" the a)ts ,+ the AB%ENCE or !I%ABI(IT' o" AN'ONE o" them CANNOT BE A((E2E! UN(E%% there is imminent dan#er o" #rave or irreparable in.ury to the partnership RULE ON DUTY ", THIRD PERSONS > third persons are not re<uired to in<uire as to whether or not a partner with whom he transa)ts has the )onsent o" all the mana#ers *RULES to be observed when the manner of management has not been agreed upon: *+ all the partners are )onsidered A2ENT% > whatever any one o" them may do alone shall not bind the partnership ,+ I the a)ts o" one are opposed by the rest, the ma.ority shall prevail -+ when a partner a)ts in his O/N NAME, he does not bind the partnership 0+ authority to bind the "irm does not apply i" somebody else has been #iven authority to mana#e in the arti)les o" or#aniAation or throu#h some other means 3+ A(TERATION% REIUIRE UNANIMIT' 8 IMMO1AB(E partnership property 8 BUT i" the re"usal to )onsent by the others is pre.udi)ial to the interest o" the partnership 8 COURT% INTER1ENTION may be sou#ht RULES "+ ASSOCIATE ", PARTNER *+ every partner may asso)iate another person with him in his share ,+ "or a partner to have an asso)iate in his share > )onsent o" all the other partners is NOT REIUIRE! -+ "or the asso)iate to be)ome a partner > A(( MU%T CON%ENT

RULES "+ PARTNERSHIP BOO'S *+ =ept at the prin)ipal pla)e o" business o" the partnership ,+ at any reasonable hour, every partner shall have a))ess to and may inspe)t and )opy any o" them DUTY ", PARTNERS TO GI%E INFORMATION > #ood "aith not only re<uires that a partner should not ma=e any CONCEA(MENT, BUT he should abstain "rom all )on)ealment DUTY 1" ACCOUNT [B, P, U*PJ > every partner must account to the partnership *+ any bene"it a)<uired A(%E

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,+ any pro"its re)eived -+ any use o" partnership property RIGHT TO DEMAND 4 FORMAL ACCOUNT > any partner shall have the ri#ht to a formal account as to partnership affairs *+ i" wron#"ully e6)luded "rom partnership BU%INE%% ,+ i" wron#"ully e6)luded "rom partnership $RO$ERT' by his )o8partners -+ i" the ri#ht e6ists under the terms o" a#reement 0+ i" the other partner re)eives other bene"its, pro"its or uses partnership property 3+ whenever other )ir)umstan)es render it .ust and reasonable C> the ri#ht to demand an a))ountin# e6ists as lon# as the partnership e6ists C> pres)ription be#ins to run only upon the dissolution o" the partnership when the "inal a))ountin# is done PROPERTY RIGHTS OF PARTNERS [P, I, M] *+ ri#hts in spe)i"i) $ARTNER%9I$ $RO$ERTIE% ,+ INTERE%T% in the $ARTNER%9I$ -+ ri#ht to $ARTICI$ATE in the MANA2EMENT RULE: C> a partner is CO8O/NER with his partners o" %$ECI IC $ARTNER%9I$ $RO$ERT' (> RIGHTS ", 4 PARTNER .+ SPECIFIC PARTNERSHIP PROPERTY *+ he has e<ual ri#hts with his partners to $O%%E%% the property BUT only "or $ARTNER%9I$ $UR$O%E% > he may possess su)h property "or other purposes $RO1I!E! the other partners e6pressly or impliedly #ives their CON%ENT ,+ he CANNOT A%%I2N his ri#ht to the property E&CE$T i" all the other partners assi#n their ri#hts in the same property -+ his ri#ht to the property is NOT %UBBECT to ATTAC9MENT or E&ECUTION, E&CE$T on a )laim a#ainst partnership 0+ his ri#ht to the property is NOT %UBBECT to (E2A( %U$$ORT C> i" there is $ARTNER%9I$ !EBT, the spe)i"i) property )an be atta)hed RULE: C> a $ARTNER% INTERE%T in the partnership is his %9ARE o" the $RO IT% and %UR$(U% IT C!N $E: [A, A, LS] *+ A%%I2NE! ,+ ATTAC9E! -+ be sub.e)t to (E2A( %U$$ORT (EFFECTS ", CON%EYANCE 67 PARTNER ", 2.9 INTEREST .+ 123 PARTNERSHIP *+ I he )onveys his /9O(E INTERE%T A; partnership may still remain B; partnership may be dissolved C> mere )onveyan)e does not dissolve the partnership ,+ the A%%I2NEE does not ne)essarily be)ome a partner

Page 14 of 26

> the A%%I2NOR is still the partner, with a ri#ht to demand a))ountin# and settlement -+ the A%%I2NEE CANNOT inter"ere in the MANA2EMENT or A!MINI%TRATION o" the "irm > the !//I(NEE C!NNOT also 'E)!N' [I, A, I] A; IN ORMATION B; ACCOUNTIN2 C; IN%$ECTION o" partnership boo=s CCC> while a partners INTERE%T in the "irm may be C9AR2E! or (E1IE! upon, his INTERE%T in a spe)i"i) "irm $RO$ERT' CANNOT be atta)hed+ RIGHTS ", 123 ASSIGNEE *+ to #et whatever pro"its the assi#nor8partner would have obtained ,+ to avail himsel" o" the usual remedies in )ase o" "raud in the mana#ement -+ to as= "or ANNU(MENT o" the )ontra)t o" assi#nment I : A; he was indu)ed to enter into it throu#h any o" the vi)es o" )onsent B; he himsel" was in)apa)itated to #ive )onsent 0+ to demand an a))ountin# BUT only i" the partnership is dissolved PREFERENTIAL RIGHTS ", PARTNERSHIP CREDITORS C> partnership )reditors are entitled to $RIORIT' over partnership assets, in)ludin# the partners interest in the pro"its CC> %E$ARATE or IN!I1I!UA( )reditors have $RE ERENCE in separate or individual properties C> when the C9AR2IN2 OR!ER is applied "or and #ranted, the )ourt may appoint a re)eiver o" the partners share in the pro"its > the re)eiver appointed is entitled to any relie" ne)essary to )onserve the partnership assets "or partnership purposes C> interest )har#ed may be redeemed at any time be"ore "ore)losure C> !*TE& *O&EC,O/.&E the interest may still be redeemed by 5without causin# dissolution" *+ with separate property, by any one or more o" the partners OR ,+ with partnership property, by any one or more partners with the )onsent o" all the partners whose interests are not so )har#ed or sold C> )onsent o" the delin<uent partner not needed RULE: > every partnership shall operate under a IRM NAME C> the "irm name may or may not in)lude the name o" one or more o" the partners CC> %TRAN2ER% who in)lude their names in the "irm are liable as partners be)ause o" E%TO$$E(, BUT do NOT have the RI29T% o" partners CC> I a (IMITE! $ARTNER in)ludes his name in the "irm name, he has obli#ations BUT not the ri#hts o" a #eneral partner OR

Page 15 of 26

RULE "+ LIABILITY ,"# CONTRACTUAL OBLIGATIONS C> all partners, in)ludin# industrial ones, shall be liable pro8rata with all their property and a"ter all the partnership assets have been e6hausted C> NOT A$$(ICAB(E "or TORT% or CRIME% 88888> (O%% 88888> INBUR' 88888> MI%A$$RO$RIATION CC> while an IN!U%TRIA( $ARTNER is e6empted by law "rom (O%%E% as between the partners, he is NOT E&EM$TE! "rom liability inso"ar as third persons are )on)erned > he may re)over what he has paid "rom the CA$ITA(I%T partners C> under the law the liability o" the partners is subsidiary and .oint NOT prin)ipal and solidary (RULE "+ LIABILITY ", 4 PARTNER :2" 249 WITHDRAWN *+ a partner who withdraws is not liable "or liabilities )ontra)ted a"ter he has withdrawn ,+ i" his interest has not yet been paid him > his ri#ht to the same is that o" a mere )reditor CC> a stipulation e6emptin# liability to third persons is 1OI! C> any partner may enter into a separate obli#ation to per"orm a partnership )ontra)t RULE: C> every partner is an 4a#ent5 o" the partnership "or the purpose o" its business G$R$* the a)t o" every partner "or apparently )arryin# on in the U%UA( /A' the business o" the partnership o" whi)h he is member binds the partnership E!CEPT: *+ i" he has NO AUT9ORIT' and ,+ the person with whom he was dealin# with 9A% HNO/(E!2E o" the "a)t that he has no su)h authority RULE: > an a)t o" a partner whi)h is not apparently "or the )arryin# on o" business o" the partnership in the usual way does not bind the partnership UN(E%% authoriAed by the other partners C> a partnership is a CONTARCT o" MUTUA( A2ENC', ea)h partner a)tin# as a prin)ipal on his own behal" and as an a#ent "or his )o8partners or the "irm REQUISITES "+ WHEN ;4+ 4 <4#1+3# BIND 123 <4#1+3#92.< *+ e6pressly or impliedly AUT9ORIFE! ,+ when he a)ts in BE9A( AN! IN T9E NAME o" the partnership INSTANCES ", IMPLIED AUTHORI ATION *+ when the other partners !O NOT OBBECT, althou#h they have =nowled#e o" the a)t ,+ when the a)t is "or 4apparently )arryin# on in the usual way the business o" the partnership

Page 16 of 26

C> this is bindin# on the "irm even i" the partner was not really authoriAed $RO1I!E! that the third party is in 2OO! AIT9 RULE "+ UNUSUAL ACTS > one or more but less than all the partners 0!6E NO !.T0O&IT- TO : [AP, DG, AI, CJ, EC, SA, RC] *+ A%%I2N the $ARTNER% $RO$ERT' ,+ !I%$O%E o" 2OO!/I(( -+ do any other a)t whi)h would ma=e it impossible to )arry on the ordinary business o" the partnership 0+ CON E%% a .ud#ment 3+ ENTER into a COM$ROMI%E 7+ %UBMIT to ARBITRATION K+ RENOUNCE to C(AIM (RULES "+ CON%EYANCE ", REAL PROPERTY 78 where title to real property is in the partnership name > any partner may )onvey title to su)h property by a )onveyan)e e6e)uted in the partnership name 9> P!&TNE&/0IP )!- &ECO6E& /.C0 P&OPE&TEXCEPT: *+ i" the "irm is en#a#ed in the buyin# and sellin# o" land EU%UA( BU%INE%%; ,+ i" property was )onveyed to a 9O(!ER "or 1A(UE and who had NO HNO/(E!2E o" the partners (ACH o" AUT9ORIT' ,+ where title is in the name of the partnership and partner sold in his O2N N!)E > I !ONE IN U%UA( BU%INE%% > buyer does not be)ome owner BUT ACIUIRE% EIUITAB(E INTERE%T > I NOT !ONE IN U%UA( BU%INE%% > buyer does not be)ome owner and is not even entitled to e<uitable interest -8 where title is in the name of one or more $.T not all the partners > partners in whose name the title is named MA' CON1E' BUT the $ARTNER%9I$ may RECO1ER su)h property I done not in its U%UA( BU%INE%% E&CE$T i" he had trans"erred it to a 9older "or value 0+ when property %held in trust by partner > a sale only )onveys EIUITAB(E INTERE%T :8 when title is in the name of all partners > )onveyan)e e6e)uted by all partners possess all ri#hts o" su)h property EQUITABLE INTEREST 8BENE ICIA( INTERE%T, BUT NOT NAHE! O/NER%9I$ (RULE "+ ADMISSION "# REPRESENTATION MADE 67 4 PARTNER

Page 17 of 26

> an admission by a partner is an admission a#ainst the partnersip;under the followin# conditions: *+ the admissions must )on)ern partnership a""airs ,+ must be within the s)ope o" his authority RESTRICTIONS ON THE RULE: *+ admissions made BE ORE !I%%O(UTION are bindin# only when the partner has authority to a)t on the parti)ular matter ,+ admissions made A TER !I%%O(UTION are bindin# only i" the admissions were ne)essary to /IN! U$ the business -+ an admission made by a "ormer partner made a"ter he has RETIRE! "rom the partnership is not eviden)e a#ainst the "irm EFFECT ", NOTICE 1" 4 PARTNER noti)e to a partner is noti)e to the partnership Cnoti)e to a partner, #iven while already a partner is a noti)e to the partnership $RO1I!E! it relates to partnership a""airs EFFECT ", 'NOWLEDGE ALTHOUGH NO NOTICE WAS GI%EN: C knowled#e of the partner is also knowled#e of the firm P&O6I'E' T0!T : *+ the =nowled#e was a)<uired by a partner who is a)tin# in the parti)ular matter involvedLand ,+ the partner havin# =nowled#e, had reason to believe that the "a)t related to a matter whi)h had some possibility o" bein# the sub.e)t o" the partnership business AN! he was so situated that he )ould )ommuni)ate it to the partner a)tin# on that parti)ular matter C %ER1ICE o" $(EA!IN2% on the partner in a law "irm is also servi)e on the whole "irm and the other partners

LOSS OR INJURY RULE "+ WRONGFUL ACT "# OMISSION ", 4 PARTNER (SOLIDARY LIABILITY) C the partnership is solidarily liable with the partner i" the wron#"ul a)t or omission *+ the partner is a)tin# in the ordinary )ourse o" business o" the partnership OR ,+ with authority o" his )o8partners C innocent partners have ri#ht to re)over "rom the #uilty partner * When the firm and other partners not liable: *+ i" the wron#"ul a)t or omission was NOT !ONE A; within s)ope o" partnership business B; with authority o" the other )o8partners ,+ i" the a)t or omission is NOT /RON2 U( -+ i" the a)t or omission, althou#h wron#"ul did not ma=e the partner )on)ern liable 8 !AMNUN AB%IUE IN%URIA

Page 18 of 26

0+ i" the wron#"ul a)t or omission was )ommitted a"ter the "irm had been dissolved and the same was not in )onne)tion with the pro)ess o" windin# up+ LIABILITY ", PARTNERSHIP ,"# MISAPPROPRIATION - (SOLIDARY LIABILITY) *+ RECEI1IN2 $ART' MI%A$$RO$RIATE% ,+ AN' $ARTNER MI%A$$$RO$RIATE% - money or property in )ustody o" partnership PARTNER BY ESTOPPEL a person who represents himsel" or )onsents to another G others representin# him to anyone as a partner either in an e6istin# partnership or in one that is "i)titious or apparent PARTNERSHIP BY ESTOPPEL when all the members o" the e6istin# partnership )onsent to su)h representation o" a partner by estoppel RULES AND SITUATIONS: 78 if a third person is misled and acts because of such misrepresentation the de)eiver is a partner by estoppel 38 if the partnership consented to such misrepresentation partnership liability results <8 if the firm had not consented no partnership liability results BUT the de)eiver is )onsidered still as a 4partner by estoppel5 with all the obli#ations but not the ri#hts o" a partner =8 when a person represents himself as a partner of a NON>EXI/TENT partnership NO partnership liability results BUT the de)eiver and all persons who may have aided him in the misrepresentation are still liable liability would be BOINT or $RO8RATA C when althou#h there is misrepresentation, i" the third party is not de)eived, the do)trine o" estoppel does not apply BURDEN ", PROOF the )reditor or whoever alle#es the e6isten)e o" a partner or partnership by estoppel has the burden o" provin# the e6isten)e o" the MI%RE$RE%ENTATION AN! INNOCENT RE(IANCE on it ENTRY OF A NEW PARTNER .+1" 4+ E!ISTING PARTNERSHIP RULE: C he shall be liable "or all the obli#ations o" the partnership BUT his liability will e6tend only to his share in the partnership property C his own individual property shall be e6)luded C same liability o" a limited partner PREFERENCE ", PARTNERSHIP CREDITORS RULE: C the )reditors o" the partnership shall be pre"erred to those o" su)h partner as re#ards the partnership property

Page 19 of 26

without prejudice to this right 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 CCI a partner sells his share to a third party, BUT the "irm itsel" still remains %O(1ENT, partnership )reditors CANNOT assail the validity o" the sale by alle#in# that it is made in "raud o" them, sin)e they have not really been pre.udi)ed DISSOLUTION AND WINDING UP the )han#e in the relation o" the partners )aused by any partner )ausin# to be asso)iated in the )arryin# on o" the business it is the point o" time the partners )ease to )arry on the business to#ether WINDING UP the pro)ess settlin# business a""airs a"ter dissolution TERMINATION the point in time a"ter all the partnership a""airs have been wound up RULE ON DISSOLUTION C on dissolution the partnership is not terminated BUT )ontinues until the windin# up o" partnership a""airs is )ompleted (EFFECT "+ OBLIGATIONS *+ .ust be)ause a partnership is dissolved this does not ne)essarily mean that a partner )an evade previous obli#ations entered into by the partnership ,+ dissolution saves the "ormer partners "rom new obli#ations to whi)h they have not e6pressly or impliedly )onsented UN(E%% the same be essential "or windin# up (CAUSES OF DISSOLUTION *+ without 1IO(ATION o" the A2REEMENT between the partners A; TERMINATION o" the !E INITE TERM or $ARTICU(AR UN!ERTAHIN2 B; E&$RE%% /I(( or AN' $ART' in 2OO! AIT9 E$ARTNER%9I$ by /I((; C; E&$RE%% /I(( o" A(( o" the $ARTNER% e6)ept those who have Einterests; A%%I2NE! or whose interests have been Eseparate debts; C9AR2E! !; E&$U(%ION in #ood "aith o" a member ,+ in CONTRA1ENTION o" the a#reement between the partners by the E&$RE%% /I(( o" AN' $ARTNER at any time -+ UN(A/ U(NE%% o" the BU%INE%% 0+ (O%% D thin# promised A; %$ECI IC T9IN2 D $ERI%9E% be"ore delivery B; U%U RUCT is lost E&CE$T i" ownership had been trans"erred to the partnership 3+ !EAT9 o" AN' partner 7+ IN%O(1ENC' o" any partner or o" the partnership K+ CI1I( INTER!ICTION o" any partner M+ !ECREE o" COURT CCC i" the )ause is not .usti"ied or no )ause was #iven, the withdrawin# partner is liable "or !AMA2E% BUT in no )ase )an he be )ompelled to remain in the "irm

Page 20 of 26

C the insolven)y need not be .udi)ially de)lared, it is enou#h that the assets be less than the liabilities DISSOLUTION 67 JUDICIAL DECREE WHEN ALOWED: (I, UM, I*PP, C, PB, BL, OC) *+ partner de)lared 4insane5 in any .udi)ial pro)eedin# or is shown to be o" UN%OUN! MIN! ,+ partner be)omes INCA$AB(E o" per"ormin# his part o" the partnership )ontra)t -+ partner has been #uilty o" su)h CON!UCT as tends to a""e)t pre.udi)ially the business 0+ partners $ER%I%TENT BREAC9 o" a#reement 3+ the business o" the partnership )an only be denied on at a loss 7+ other )ir)umstan)es whi)h render dissolution e<uitable IN CASE OF PURCHASER ", PARTNERS INTEREST *+ a"ter the termination o" the spe)i"ied term or parti)ular underta=in# ,+ AT AN' TIME, i" the partnership was a 4partnership at will5 when the interest was assi#ned or when the )har#in# ordered was issued C proo" as to the e6isten)e o" the "irm must "irst be #iven C even i" a partner has not yet been previously de)lared insane by the )ourt, dissolution may be as=ed, as lon# as the insanity is duly proved in )ourt C in a suit "or dissolution, the )ourt may appoint a RECEI1ER at its dis)retion

EFFECTS OF DISSOLUTION RULE: C when the "irm is dissolved, a partner )an no lon#er bind the partnership C a dissolved partnership still has the personality for the windin# up of its affairs the "irm is still allowed to )olle)t previously a)<uired )redits the "irm is still bound to pay o" its debts DISSOLUTION CAUSED 67 A*I*D RULE: E%TI(( BOUN!; - as to ea)h partners G$R$ where the dissolution is )aused by the ACT, IN%O(1ENC' or !EAT9 o" a partner, ea)h partner is liable to his )o8partners "or his share o" any liability )reated by any partner a)tin# "or the partnership E!CEPTION: 8 individual liabilities *+ i" dissolution by ACT the partner a)tin# "or the partnership 9A! HNO/(E!2E o" the dissolution OR ,+ i" dissolution by !EAT9 or IN%O(1ENC' the partner a)tin# "or the partnership 9A! 4=nowled#e or noti)e5 o" the death or insolven)y C only the partner a)tin# assumes liability CAFTER DISSOLUTION, 4 <4#1+3# ;4+ 91.== /6.+80 123 PARTNERSHIP (WU, UT, TB) *+ By any ACT appropriate "or /IN!IN2 U$ partnership a""airs

Page 21 of 26

,+ By COM$(ETIN2 transa)tions UN INI%9E! at dissolution -+ By any TRAN%ACTION whi)h )ould bind the partnership I dissolution had not ta=en pla)e $RO1I!E! the other party is: A; $RE1IOU% CRE!ITOR and had NO HNO/(E!2E or NOTICE o" the dissolution OR B; NOT a $RE1IOU% CRE!ITOR, had NO HNO/(E!2E or NOTICE and dissolution was NOT $UB(I%9E! C i" there was publi)ation o" the dissolution it is presumed he already =nows, re#ardless o" a)tual =nowled#e on non =nowled#e WHEN .9 123 PARTNERSHIP NOT BOUND *+ new business with third parties who are in bad "aith ,+ "irm dissolved be)ause UN(A/ U( e6)ept "or a)ts o" windin# up -+ partner who a)ted be)ame IN%O(1ENT 0+ partner not authoriAed to wind up E&CE$T i" )ustomer in #ood "aith C i" a"ter dissolution, i" a stran#er will represent himsel" as a partner althou#h he is not one he will be a partner by estoppel RULE: C the dissolution o" the partnership does not itsel" dis)har#e the 4e6istin# liability5 o" any partner NEE' for an !(&EE)ENT $ET2EEN *+ partner )on)erned ,+ other partners -+ )reditors RULE: C the IN!I1I!UA( $RO$ERT' o" a !ECEA%E! $ARTNER shall be liable "or all obli#ations o" the partnership in)urred while he was a partner BUT sub.e)t to prior payments o" his separate debts C I there be a NO1ATION o" the O(! $ARTNER%9I$ !EBT% and su)h novation is done a"ter one o" the partners has 4retired5 and without the )onsent o" su)h partner said partner )annot be held liable by )reditors who made the novation with =nowled#e o" the "irms dissolution E!TRAJUDUCIAL AND JUDICIAL WINDING*UP E!TRAJUDICIAL: *+ by the partners who have not wron#"ully dissolved the partnership ,+ by the le#al representative o" the last survivin# partners JUDICIAL: under the )ontrol and dire)tion o" the )ourt, upon proper )ause that is shown to the )ourt C pro"its that will a)tually enter the "irm a"ter dissolution as a )onse<uen)e o" transa)tions already made be"ore dissolution are in)luded be)ause they are )onsidered as pro"its e6istin# at the time o" dissolution

Page 22 of 26

C any other in)ome earned a"ter the time, li=e interest or dividends on sto)= owned by the partners or partnership at the time o" dissolution should not be distributed as pro"its BUT as merely additional in)ome to the )apital BETTER RIGHTS ", INNOCENT PARTNERS inno)ent partners have better ri#hts than #uilty partners and that the #uilty partners are re<uired to indemni"y "or the dama#es )aused C RIGHT ", INOCENT PARTNERS TO CONTINUE 123 BUSINESS in essen)e this is a new partnership )an use the same "irm name )an as= new members to .oin $.T shall: for protection of #uilty partners *+ #ive a BON! approved by the )ourt ,+ to $A' #uilty partners his interests at the time o" dissolution MINU% !AMA2E% C a #uilty partner who is E&C(U!E! will be indemni"ied a#ainst all present or "uture partnership liabilities RIGHT TO GET CASH in )ase on non8)ontinuan)e o" the business, the interest o" the partner should i" he desires be #iven in )ash assets may be sold a #uilty partner, in as)ertainin# the value o" his interest is not entitled to a proportional share o" the value o" 2OO! /I( RIGHTS OF INNOCENT PARTNERS IN CASE ", RESCISSION 64938 "+ FRAUD AND MISREPRESENTATION *+ Ri#ht to (IEN or RETENTION %UR$(U% CA$ITA( A!1ANCE% ,+ Ri#ht o" %UBRO2ATION D as )reditor -+ Ri#ht o" IN!EMNI ICATION (ORDER ", PAYMENT .+ WINDING*UP ", PARTNERSHIP LIABILITIES GENERAL PARTNERSHIP: [C, R, C, P] *+ those owin# to 4)reditors5 other than partners ,+ those owin# to 4partners5 other than "or )apital or pro"its D REIMBUR%EMENT% -+ those owin# to partners in respe)t to CA$ITA( 0+ those owin# to partners in respe)t to $RO IT% C I the partnership assets are insu""i)ient, the other partners must )ontribute more money or property PREFERENCE :.12 RESPECT 1" 123 ASSETS 78 re#ardin# partnership property partnership )reditors have pre"eren)e 38 re#ardin# individual properties of partners individual )reditors are pre"erred

Page 23 of 26

RULE ., PARTNER .9 INSOL%ENT 8 9ow IN!I1I!UA( $RO$ERT' is !I%TRIBUTE! ORDER OF PREFERENCE: *+ IN!I1I!UA( or %E$ARATE CRE!ITOR% ,+ $ARTNER%9I$ CRE!ITOR% -+ those owin# to other partners by way o" )ontribution CWhen creditors of the dissolved partnership are also creditors of the partnership continuing business: *+ new partner is admitted without li<uidation ,+ a partner retires and assi#ns his ri#hts I the business is )ontinued without li<uidation o" the partnership a""airs -+ all but one partner retire without li<uidation 0+ when all partner assi#n their ri#ht to a person who will assume their debt 3+ a"ter wron#"ul dissolution, remainin# partners )ontinue the business without li<uidation 7+ when partner e6pelled and remainin# partners )ontinue the business without li<uidation C liability o" third person be)omin# a partner in the partnership )ontinuin# the business to the )reditors o" the dissolved partnership shall be satis"ied out o" the partnership property ON(' 2+R+ D when a partner retires, he is entitled what is due him a"ter li<uidation BUT no li<uidation is needed i" there is already a settlement at the date o" dissolution JURISPRUDENCE $!/TI'! vs8 )EN?I C arti)les o" asso)iation by whi)h , or more persons obli#ate themselves to pla)e in a )ommon "und any property, industry, or any o" these thin#s, in order to obtain pro"it, shall be COMMERCIA( $O&+! vs8 !''I/ON C a survivin# husband may "orm a partnership with the heirs o" the de)eased wi"e "or the mana#ement and )ontrol o" the )ommunity property BUT in the absen)e o" the "ormalities pres)ribed by the Civil Code, =nowled#e o" the e6isten)e o" the new partnership or )ommunity o" property must at least be brou#ht home to third persons dealin# with the survivin# husband in re#ard to the )ommunity real property in order to bind them by the )ommunity a#reement 4IE, vs8 /!$E&T C the de)larations o" one partner, not made in the presen)e o" his )o8partner, are not )ompetent to prove the e6isten)e o" a partnership between them as a#ainst su)h partner C the e6isten)e o" a partnership )annot be established by #eneral reputation, rumor or hearsay E6EN(E,I/T! vs8 C8I8&8 C By the )ontra)t o" partnership , or more persons bind themselves to )ontribute money, property, or industry to a )ommon "und, with the intention o" dividin# the pro"its amon# themselves

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ESSENTIAL ELEMENTS ", 4 PARTNERSHIP *+ an a#reement to CONTRIBUTE money, property, or industry to a COMMON UN! ,+ intent to divide the pro"its amon# the )ontra)tin# parties C when our internal Revenue Code in)ludes 4partnerships5 amon# the entities sub.e)t to the ta6 on 4)orporations5, said )ode whi)h are not ne)essarily 4partnerships5 in the te)hni)al sense o" the term C PARTNERSHIPS - in)ludes a %'N!ICATE, 2ROU$, $OO(, BOINT 1ENTURE, or other unin)orporated or#aniAation, throu#h or by the means o" whi)h any business, "inan)ial operation, or venture is )arried on C a .oint venture need not be underta=en in any o" the standard "orms, or in )on"ormity with the usual re<uirements o" the law on partnerships, in order that one )ould be deemed )onstituted "or purposes o" the TA& on )orporations P!/C.!, vs8 C8I8&8 C )o8ownership or )o8possession does not itsel" establish a partnership, whether su)h )o8owners or )o8possessors do or do not share any pro"its made by the use o" the property C the sharin# o" #ross returns does not itsel" establish a partnership, within the persons sharin# them have a .oint or )ommon ri#ht or interest in any property "rom whi)h the returns are derived C aside from the circumstances of profit; the presence of other elements constitutin# partnership is necessary; such as: *+ the )lear intent to "orm a partnership ,+ the e6isten)e o" a .uridi)al personality di""erent "rom that o" the individual partners AN! -+ the "reedom to trans"er or assi#n any interest in the property by one with the )onsent o" the others C an isolated transa)tion whereby , or more persons )ontribute "unds to buy )ertain real estate "or pro"it in the absen)e o" other )ir)umstan)es showin# a )ontrary intention )annot be )onsidered a partnership C persons who )ontribute property or "unds "or a )ommon enterprise and a#ree to share the #ross returns o" that enterprise in proportion to their )ontribution, BUT who severally retain the title to their respe)tive )ontribution, are not thereby rendered partners they have no )ommon sto)= or )apital and no )ommunity o" interest as prin)ipal proprietors in the business itsel" whi)h the pro)eeds derived C a .oint pur)hase o" land, by two does not )onstitute a )o8partnership in respe)t thereto, NOR does an a#reement to share the pro"its and losses on the sale o" land )reate a partnership C .+ "#83# 1" ;"+91.1>13 4 PARTNERSHIP INTER SESE 123#3 ?>91 63: A; an intent to "orm the same B; #enerally parti)ipatin# in both pro"its and losses AN! C; su)h a )ommunity o" interest, as "ar as third persons are )on)erned as enables ea)h party to ma=e a )ontra)t, mana#e the business, and dispose o" the whole property

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C the )ommon ownership o" property does not itsel" )reate a partnership between the owners, thou#h they may use it "or the purpose o" ma=in# #ains AN! they may without be)omin# partners, a#ree amon# themselves as to the mana#ement and use o" su)h property and the appli)ation o" the pro)eeds there"rom C the sharin# o" returns does not in itsel" establish a partnership within the persons sharin# therein have a .oint or )ommon ri#ht or interest in the property 123#3 ?>91 63: *+ )lear intent to "orm a partnership ,+ the e6isten)e o" a .uridi)al personality di""erent "rom the individual partners AN! -+ the "reedom o" ea)h party to trans"er or assi#n the whole property

'.TE&TE vs8 &!,,O/ C an a#reement between , persons to operate a )o)=pit, by whi)h one is to )ontribute his servi)es and the other to provide the )apital, the pro"its to be divided between them, )onstitutes a partnership 'E,.!O vs8 C!/TEE, C a )ontra)t o" partnership to e6ploit a "ishpond pendin# its award to any <uali"ied party or appli)ant is 1A(I! BUT a )ontra)t o" partnership to divide the "ishpond a"ter su)h award is I((E2A( C one o" the )auses o" dissolution is D any event whi)h ma=e it unlaw"ul "or the business o" the partnership to be )arried on or "or the members to )arry it on in partnership C8I8&8 vs8 /.TE& C a UNI1ER%A( $ARTNER%9I$ re<uires either that the ob.e)t o" the asso)iation be: *+ all the present property o" the partners as )ontributed by them to the )ommon "und OR ,+ all that the partners may a)<uire by their industry or wor= durin# the e6isten)e o" the partnership C the subse<uent marria#e o" the partners )ould not operate to dissolve the partnership be)ause it is not one o" the )auses provided "or dissolution by law with re#ards to limited partnerships C partnership has distin)t and separate personality "rom that o" its partners C a husband and wi"e may not enter into a )ontra)t o" #eneral )o8partnershipG UNI1ER%A( partnership !CO!' vs8 )!$!TO C a partnership may be )onstituted in any "orm E&CE$T where immovable property or real ri#hts are )ontributed thereto, in whi)h )ase a publi) instrument shall be ne)essary C A CONTRACT ", PARTNERSHIP .9 %OID whenever immovable property is )ontributed thereto, i" 4inventory5 o" said property is not made, si#ned by the parties and atta)hed to the publi) instrument E6!N(E,I/T! vs8 !$!' /!NTO/

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C an IN!U%TRIA( $ARTNER )annot en#a#e in BU%INE%% OR 9IM%E( , UN(E%% the partnership e6pressly permits him to do so I 9E %9OU(! !O %O, the )apitalist partners may either: *+ E&C(U!E him "rom the "irm OR ,+ A1AI( themselves o" the bene"its whi)h he may have obtained in violation o" this provision with a ri#ht to !AMA2E% in either )ase C the prohibition a#ainst an industrial partner en#a#in# in business "or himsel" see=s to prevent any )on"li)t o" interest between the industrial partner and the partnership and to ensure "aith"ul )omplian)e by said partner with his prostation