PARTNERSHIP SIMPLIFIED- PART 1

1.
In order that there may be a partnership, two or more persons
must agree to unite their money, property, labor or skill in carrying out
a legitimate business for profit. Two or more persons may also form a
partnership for the exercise of their profession.
2.
A partnership is consensual (it is perfected by mere consent,
when two or more persons agree expressly or impliedly), bilateral (it is
entered into by two or more persons with reciprocal rights and
obligations), principal (it does not depend for its validity or existence
upon some other contract), commutative (the undertaking of one
partner is regarded as equivalent of that of the other partners),
preparatory (it is entered into in order that such persons may lawfully
engage in business in order to realize profits which will then be divided
among themselves), onerous (one person contributes something in
order that he may share in the profit), and nominate (it has a special
name or designation under the law).
3.
A partnership duly formed under the law is a juridical person
which has a personality separate and distinct from the persons
composing the partnership. It may acquire and possess property of all
kinds, incur obligations and bring suits or become defendants in suits
brought before the courts of law.
4.
In order to establish the existence of a partnership, the following
essential features must be proven to exist: 1) a valid contract; 2) legal
capacity of the persons forming the partnership; 3) mutual
contribution of money, property or industry to a common business; 4)
its business must be lawful; and 5) the primary purpose must be
obtain profits and to divide the same among the parties. Article 1769
sets out the rules in determining the existence of a partnership and
enumerates certain features, which, taken alone would not prove the
existence of a partnership:
a. Persons who are not partners as between themselves are not
partners as to third persons. However, whether or not a
partnership exists depends upon how the parties conduct
themselves since third persons may be misled into believing that
the parties are partners because of the latters acts, consent of
representation, thus said parties become subject to the liabilities
of partners to third persons who in good faith deal with such
parties, in accordance with the doctrine of estoppel;

b. Co-ownership or co-possession exists whenever the ownership or

possession of an undivided thing belongs to different persons,
but this does not of itself establish a partnership even if these
persons derived profits from the joint ownership or joint
possession of said undivided thing, because in a partnership, the
profits must be derived from the operation of the business or
undertaking by the parties to the partnership;
c. The mere sharing of gross returns does not indicate the
existence of a partnership, since in a partnership, what is being
divided among the partners is the net profits after paying off all
the partnership liabilities; and
d. The receipt by a party of his share in the profits of a business is
a prima facie evidence of the existence of a partnership, which
may be contradicted if it can be proven that such profits were
received in payment of a debt, wages, rents, annuity, interest on
loan, or as consideration for the sale of a goodwill of a business.
5.
The essential elements of a partnership are as follows: lawful
object and common benefit or interest of the partners. Since a
partnership is really a contract between the parties, the parties are
free to choose the business or transaction they want to enter into
provided this is lawful and for the common benefit of the parties. If the
purpose of the partnership is unlawful, then the contract is void ab
initio. Consequently, if said unlawful partnership is dissolved by a
judicial decree, its profits shall be confiscated in favor of the
government, the instrument or tools and proceeds of the crime shall
likewise be forfeited in favor of the government, and even the
contributions of the partners shall be confiscated should they fall under
the instrument or tools and proceeds of the crime.
6.
As a general rule, a contract of partnership may be made orally
or in writing, unless immovable property or real rights are contributed
in which case the execution of a public instrument is required.
7.
Where the capital of the partnership is P3,000.00 or more,
whether in money or property, the contract of partnership must
appear in a public instrument and said contract must be recorded or
registered with the Securities and Exchange Commission. Failure to
comply with these requirements, however, does not prevent the
formation of a partnership nor affect its liability, and that of the
partners, to third persons.
8.
Where immovable property, regardless of value, is contributed
by any of the partners, the contract of partnership must be in a public

instrument and an inventory of the property contributed must be

made, signed by the parties, and attached to the public instrument.
Failure to comply with these requirements will render the contract of
partnership void, insofar as the contracting parties are concerned.
With regards third persons, however, a de facto partnership or
partnership by estoppel may exist.
9.
Immovable property or any interest therein may be acquired in
the partnership name since it has a juridical personality separate from
and distinct from the partners and title so acquired can thus be
conveyed only in the partnership name.
10. The element of delectus personae exists in a partnership.
Delectus personae may be defined as the right of a person to choose
whom he wants to associate with. A partnership is thus formed by the
voluntary agreement between the parties and it is a must that the
parties be fully apprised of the agreement and all the matters affecting
the partnership since he is considered the agent of his co-partners and
of the partnership in respect of all the partnership transactions. Thus,
associations whose articles are kept secret among the members and
wherein they contract in their own name with third persons, are not
partnerships because they do not have juridical personality, and shall
be governed by the provisions on co-ownership.
11. As to subject matter, a partnership is either universal (one which
refers to all the present property or to all profits) or particular (one
which has for its object determinate things, their use or fruits, or
specific undertaking, or the exercise of a profession or vocation). As
to liability of partners, a partnership may be general (one consisting of
general partners who are liable pro rata and subsidiarily or at times,
solidarity with their separate property for partnership obligations) or
limited (one formed by two or more persons having as members one
or more general partners and one or more limited partners (who are
not personally liable for the partnership obligations).
12. A universal partnership of all present property in a partnership in
which the partners contribute all properties belonging to them at the
time of the constitution of the partnership to a common fund or
business, with the intention to divide the same, as well as the profits
which they may acquire from these properties, among themselves. In
other words, in a universal partnership of all present property, the
property which belonged to each of them at the time of the
constitution of the partnership and the profits which they may acquire
from said property contributed become the common property of all the

partners. With regard to future properties, any stipulation including the

properties subsequently acquired by the partners through inheritance,
legacy, or donation is void. Profits from other sources (that is, not
from the properties contributed by the partners) will become common
property only if there is a stipulation, hence, fruits of the properties
subsequently acquired by inheritance, legacy or donation may be
included in the stipulation.
13. A universal partnership of profits is one which comprises all
those properties which the partners may acquire by their industry or
work during the existence of the partnership, including the usufruct (or
the right to enjoy or use the property of another, with the obligation to
preserve the propertys form and substance) of movable or immovable
property which each of the partners may possess at the time of the
celebration of the contract. The partners retain their ownership over
both their present and future properties and what is actually
contributed to the partnership are the income and the use of the
property. Upon the dissolution of the partnership the properties are
returned to the partners who own them. Only those profits which the
partners may acquire by their work or industry are included in the
partnership while those profits acquired by the partners through
chance such as lottery are excluded. Fruits of property subsequently
acquired by the partners are likewise not included, unless there is an
express stipulation to the contrary.
14. If the articles of partnership do not specify the nature of the
partnership, it is presumed that the parties intended only a partnership
of profits.
15. Persons who are prohibited by law to give donations cannot
enter into a universal partnership. A partnership formed by persons
who are prohibited from giving each other any donation or advantage
is null and void. A husband and wife may, however, form a particular
partnership.
16. A particular partnership is one which has for its object
determinate things, their use or fruits, or specific undertaking, or the
exercise of a profession or vocation. Examples of this kind of
partnership are: partnership formed by professionals (like accountants,
lawyers, engineers) who associate themselves in the practice of their
profession; or those partnerships created for the purpose of carrying
out a specific project.

17. A contract of partnership creates for kinds of relationships: 1)

among the partners; 2) between the partners and the partnership; 3)
between the partnership and third persons; and 4) between the
partners and third persons.
18. Since a partnership is a consensual contract, that is, perfected
by mere consent or agreement of the parties, it exists from the
moment of the execution of the contract, unless otherwise stipulated.
Thus, parties who have agreed to become partners at some future
time or upon the happening of a condition or arrival of a period, do not
become partners until the happening of the condition or unless the
period has arrived. A future partnership thus exists, which at the
moment has yet no juridical personality.
19. A partnership with a fixed term is one in which the term for
which the partnership is to exist is fixed or agreed upon or one formed
for a particular undertaking, and upon the expiration of the term or
accomplishment of the particular undertaking, the same is dissolved.
The expiration of the definite period agreed upon or the
accomplishment of the particular undertaking specified will result to
the automatic dissolution of the partnership.
This partnership,
however, may be extended expressly (by an agreement which is either
written or oral) or impliedly (by mere continuation of the business by
any of the partners after the termination of such term or particular
undertaking without any settlement or liquidation). If a partnership is
continued beyond the fixed term, the rights and duties of the partners
remain the same as they were at such termination but only insofar as
is consistent with a partnership at will. With such continuation, the old
partnership is dissolved and a new one, a partnership at will, is
created which can be lawfully terminated at anytime by the express
will of all the partners or any of them.
20. A partnership at will is one in which no time is fixed and is not
formed for a particular undertaking and may thus be terminated
anytime by mutual agreement of the partners, or by the will of any
one partner. Therefore, a partnership which is created for a fixed term
or particular undertaking and which is continued by the partners after
the termination of such term or particular undertaking in the absence
of an express agreement, is a partnership at will.
21. A capitalist partner is one who contributes money or property to
the common fund while an industrial partner is one who contributes
only his industry or personal service. Regardless of the nature of his
contribution to the partnership, however, every partner is obliged to

contribute at the beginning of the partnership or at the stipulated time

the money, property or industry which he may have promised to
contribute to the partnership. If he promised to contribute specific
property, he is obliged to preserve said property with the diligence of a
good father of a family pending delivery to the partnership. If a
partner fails to contribute the property which he promised, he
becomes liable as a debtor of the partnership, without need of any
demand, and the other partners can file an action against said
defaulting partner for specific performance with damages. He is
likewise liable for eviction in case the partnership is deprived of the
property contributed. Moreover, he is likewise liable to the partnership
for the fruits of the property the contribution of which he delayed from
the time they should have been contributed up to the time of actual
delivery even in the absence of any demand. He is obliged to
indemnify the partnership for any damage caused to the partnership
by the retention of the same or by the delay in its contribution.
22. When what is to be contributed by the partner consists of goods,
the appraisal of the value of said goods, done in accordance with the
manner prescribed in the contract of partnership, is required to
determine how much has been contributed by the partners and in the
absence of stipulation, by experts chosen by the partners and
according to current prices.
23. Every partner is obliged to contribute on the date due the
amount he has undertaken to contribute to the partnership and to
reimburse any amount he may have taken from the common fund and
converted to his own use. He is liable to pay the agreed or legal
interest should he fail to pay his contribution on time or in case he
takes any amount from the common fund and converts it to his own
use. Moreover, he is obliged to indemnify the partnership for the
damages caused to the partnership for his delay in the contribution or
by reason of his having converted any sum from the common fund for
his personal benefit. He is liable to pay both interest and damages
counted from the time he should have complied with his obligation to
contribute the sum of money or from the time he converted the
amount to his own use.
24. An industrial partner is one who contributes only his industry or
personal service to the partnership and he becomes a debtor of the
partnership for his work or services from the moment of the
commencement of the partnership. Thus, the partnership acquires an
exclusive right to the avail itself of his personal service, unless the
contrary is stipulated. Hence, if an industrial partner engages in

business for himself, whether or not it is the same business in which

the partnership is engaged or any kind of business, such act of an
industrial partner engaging in business for himself is considered as
prejudicial to the interest of the partnership and the other partners as
well.
25. An industrial partner is absolutely prohibited from engaging in
business fro himself without the express permission of the partnership.
If the industrial partner engages in business for himself, without the
express permission of the partnership, the capitalist partners, as well
as the other industrial partners since they are equally prejudiced by
the act of their co-industrial partner, have the right either to exclude
him from the partnership or to avail themselves of the benefits which
said industrial partner may have obtained, with a right to damages in
either case.
26. In the absence of any stipulation on the contribution of unequal
shares to the common fund, it is presumed that the contribution of the
partners shall be in equal shares.
27. A capitalist partner is one who contributes money or property to
the common fund. As a general rule, he is not bound to contribute to
the partnership more than what he agreed to contribute. However, in
case of an imminent loss of the business of the partnership, the
majority of the capitalist partners being of the opinion that an
additional contribution to the common fund would save the business,
and in the absence of an agreement to the contrary, he is obliged to
contribute an additional share to save the business. If the capitalist
partner refuses to do so (deliberately and not because he is financially
unable), he shall be obliged to sell his interest to the other partners.
Obviously, the industrial partner is exempted from the requirement to
contribute and additional share because having already contributed his
entire industry, he cannot contribute anything further.
28. A managing partner is one who manages the business of the
partnership, appointed either in the articles of partnership or after the
constitution of the partnership. He is a general partner or one whose
liability to third persons extends to his separate property and may be
either a capitalist or an industrial partner.
29. Article 1792 explains the obligation of a managing partner who
collects debts. In order that this article shall apply, there must
therefore be at least two debts which are demandable and collected by
the collecting partner who is duly authorized to manage and actually

manages the partnership- one where said managing partner is the

creditor and the other one where the partnership is the creditor.
Where a person separately owes the partnership and the managing
partner at the same time, any sum received by the managing partner
has to be applied to the two obligations in proportion to their amounts,
except when the managing partner received the whole sum paid for
the account of the partnership in which case the entire amount shall
be applied to the obligations owing the partnership. Clearly, the article
does not apply if the partner who collects for his own credit only is not
authorized to manage the business. If, however, the manner of
management has not been agreed upon and all the partners
participate in the management of the partnership, then every partner
shall be considered as managing partner for purposes of application of
this article. If the obligation in favor of the managing partner is more
onerous or burdensome, the law allows the debtor to prefer the
payment of the managing partners credit in case he so desires, in
accordance with said debtors right to application of payment.
30. Article 1793 applies where a a person owes the partnership a
sum of money and a partner has received from said person his share,
in whole or in part, of the partnership credit ahead of the other
partners or while the other partners have not collected their share and
said person (the partnership debtor) has become insolvent. Under the
law, even if the partner who received his share of the partnership
credit had given a receipt for his share only, and regardless of whether
he is authorized to manage or not, he can be required to share the
amount he received from the partnership debtor with the other
partners.
31. Every partner who is guilty of fault or negligence in the
fulfillment of his obligation shall be liable for damages suffered by the
partnership. As a general rule, the damages caused by a partner to
the partnership cannot be offset by the profits or benefits which he
may have earned for the partnership by his industry. This is because
every partner is obliged to secure benefits for the partnership and to
exercise diligence in the performance of his obligation as partner. If
unusual profits are realized, however, through the extraordinary
efforts of the partner at fault, the courts may equitably mitigate the
partner at faults liability for damages.
32. Article 1795 provides the rules to be applied in determining who
bears the risk of loss of the things contributed, that is, things that
have been delivered actually or constructively to the partnership. In
case of specific and determinate things which are not fungible and

where only the use is contributed by the partner, the risk of loss is
borne by the partner since he remains to be the owner of the thing.
33. In case of specific and determinate things the ownership of
which is transferred to the partnership, the risk of loss is for the
account of the partnership, it being the owner. In case of fungible
things (things or goods of which any unit is, from its nature or by
mercantile usage, treated as the equivalent of any other unit such as
oil, wine, rice, etc.) or things which cannot be kept without
deteriorating even if they are contributed only for the use of the
partnership, the risk of loss is borne by the partnership because
obviously, the ownership to these things was transferred to the
partnership since the same cannot possibly be used without these
things being consumed or impaired. In case of things contributed in
order that the partnership may sell the same, the partnership bears
the risk of loss because ownership was transferred to the partnership
otherwise the partnership could not effect the sale. In case of things
brought and appraised in the inventory, the partnership bears the risk
of loss because the intention of the partners was to contribute to the
partnership the price of the things contributed. If the loss is due to the
fault of any of the partners, the partner at fault shall be liable for
damages to the partnership in accordance with Article 1794.
34. Under Article 1796, the partnership is obliged to refund to the
partner the amounts disbursed by him in behalf of the partnership,
such as advances for partnership obligations due and payable)
together with the corresponding interest from the time the expenses
were incurred. The partnership is also obliged to answer for the
obligation which the partner may have contracted in good faith in the
interest of partnership business and is obliged to answer for risks in
consequence of its management.
35. As to the distribution of profits, the partners share the profits
according to their agreement, subject to the provisions of Art. 1799. If
there is no such agreement, the share of each capitalist partner shall
be in proportion to his capital contribution and the industrial partner
shall be entitled to such share as may be just and equitable under the
circumstances and which share must be satisfied first before the
capitalist partners divide the profits.
36. As to the distribution of losses, the losses shall be distributed to
the partners according to their agreement, subject to Art. 1799. If
there is no such agreement, but there is an agreement on the sharing
of profits, the share of each partner in the losses shall be in

accordance with the profit-sharing ratio, but the industrial partner shall
not be liable for losses. In the absence of the profit sharing ratio or
agreement, the losses shall be borne by the partners in proportion to
their capital contribution, but the purely industrial partner shall not be
liable for the losses. If the industrial partner is also a capitalist partner,
he shall share in the losses in proportion to his contribution.
37. The partners may agree to delegate to a third person the
designation of the share in the profits and losses. The decision of the
third person is generally binding and may be impugned only when it is
manifestly inequitable. However, a partner who has started to execute
the decision of the third person or who failed to impugn the same
within three months from the time he had knowledge of said decision
can no longer complain.
38. Any stipulation which excludes one or more partners from any
share in the profits and losses is void but the partnership remains valid
and subsists and the profits and losses shall be distributed as if there
were no agreement. Thus, the share of each capitalist partner in the
profits shall be in proportion to his capital contribution and the
industrial partner shall be entitled to such share as may be just and
equitable under the circumstances and which share must be satisfied
first before the capitalist partners divide the profits. The losses shall be
borne by the partners in proportion to their capital contribution. With
regard to the industrial partner, a stipulation exempting him from the
losses is valid since the law itself excludes him from losses in
accordance with Art. 1797.
39. Article 1800 refers to the appointment of a partner as manager
of the partnership. A partner appointed as manager possess all the
necessary and incidental powers to carry out the business of the
partnership. While every partner has a right to participate in the
management of the partnership business, the partners may
nevertheless appoint a managing partner (one who manages the
business of the partnership, usually a general partner or one whose
liability to third persons extends to his separate property and may be
either a capitalist or an industrial partner) either in the articles of
partnership or after the constitution of the partnership.
40. A managing partner may be appointed by common agreement of
the partners in the articles of partnership, and whose powers include
all acts of administration notwithstanding the opposition of the other
partners unless he should act in bad faith. His power is revocable only

upon just and lawful cause and upon the vote of the partners
representing the controlling interest.
41. A partner may be appointed as managing partner after the
partnership has been constituted but his power may be revoked at any
time for any cause whatsoever and upon the vote of the partners
representing the controlling interest.
42. Where there are two or more managing partners who have been
appointed without specification of their respective duties or without
stipulation that one of them shall not act without the consent of all the
others, each of the managing partners may separately perform all acts
of administration. If one or more of the managing partners shall
oppose the acts of the others, the decision of the majority of the
managing partners shall prevail. In case of tie, the matter shall be
resolved by the partners owning the controlling interest, that is, more
than 50% of the capital investment of the partnership.
43. In case there is more than one managing partner appointed by
the partners and the partners have agreed that none of the managing
partners shall act without the consent of the other managing partners,
the unanimous consent of all the managing partners is required in
order for their acts to be valid. This consent is, however, not required
in case of routine transactions or transactions required in the regular
course of business of a partnership, in which case any of the partners
can act without the consent of others and his or her act alone shall be
valid. Example of this act is when a managing partner purchases goods
which are regularly purchased by the partnership in its business of
buying and selling goods. The consent of the managing partners
under Article 1802 is indispensable, in that the absence of one of the
managing partners or the disability of any of them cannot be alleged
or cited as an excuse or as a justification for not complying with the
requirement. There is, however, an exception to this- when there is an
imminent danger of grave or irreparable injury to the partnership. In
such a case, a managing partner may act alone and even without the
consent of the other managing partner or partners who may be absent
or under disability.
44. Article 1803 sets forth the rules to be observed when the
manner of management of the partnerships has not been agreed upon
either at the time of the perfection of the contract or after the
perfection of the contract of partnership. In case the partners fail to
designate who among them shall act as managing partner or partners,
all of them shall be considered as managers or agents of the

partnership, in which case whatever any one of them may do alone

shall bind the partnership, subject to the timely opposition or objection
of any partner. In such a case, the matter shall be decided by the
majority vote of the partners who are entitled to one vote each. In
case of tie, then the matter shall be decided by the vote of the
partners representing the controlling interest. According to the second
paragraph of this article, the unanimous consent of all the partners
shall be required in case of any important alteration in the immovable
property of the partnership, even if such alteration may be useful or
beneficial to the partnership. This is because an important alteration
is considered as an act or ownership or strict dominion in which case
all the partners must give their consent since all have interest in the
partnership property. The consent need not be expressly given by a
partner but it may be impliedly given or presumed when a partner
knew of the alteration but interposed no objection thereto. If the
refusal of the consent of the partner or partners is evidently prejudicial
to the interest of the partnership, then the other partners may seek
the intervention of the court in order to secure the authority to effect
the necessary alteration.
45. Every partner has the right to associate another person with him
in his share of the profits coming from the partnership even without
the consent of the partners. This person becomes what is known as a
sub-partner. Being a sub-partner, such person is not a partner and
shall not become such in the absence of the unanimous consent of all
the other partners, even if the partner associating him is a managing
partner. He is not a partner and therefore, he does not acquire the
rights nor the liability of a partner. The reason for this is that the
partnership is created based on the mutual trust and confidence
among the partners, and naturally, a sub-partner does not ipso facto
enjoy the mutual trust and confidence among the partners. His
inclusion as a new partner will in effect be a modification of the
existing contract of partnership.
46. The partnership books is presumed to contain the true and
correct record of the accounts of the partnership and is normally in the
custody of the managing partner or partners, or in the absence of the
managing partner or partners, the active partners. The partnership
books is one of the properties of the partnership and as such, in the
absence of any agreement to the contrary, shall be kept at the
principal place of business of the partnership. Any of the partners may
freely have access to the partnership books and enjoy the right to
inspect or copy any of the books of the partnership at any reasonable
hour, and even after the dissolution of the partnership. Other partners

may, however, deny a partner of his rights to inspect the books if the
information to be gathered will be utilized for some purpose other than
the partnership purpose.
47. Since there exists mutual trust and confidence among the
partners, any and all of the partners have the duty to render true and
full information of all things affecting the partnership upon demand by
any partner, the legal representative of any deceased partner or any
partner suffering from legal disability. Any and all of the partners
have also the duty to voluntarily disclose all material facts within his
exclusive knowledge, which facts relate to or affect the partnership.
Note, however, that this obligation to disclose pertains only to those
matters which are not reflected in the partnership books which, as
discussed in the previous article, is already readily available to any
partner under his right of inspection.
48. Each of the partners occupies a fiduciary position as against the
other partners. He has the duty to act for the common benefit of all
the partners and is obliged to account for any profits he may have
acquired from any transaction involving the use of partnership
property, or from any transactions relating to the operation of the
partnership business. He cannot keep for himself any profit or benefit
received from the operation of the partnership business and is bound
to hold all these benefits as trustee for the partnership, more so, if the
same is derived by him in the absence of the consent of the other
partners.
49. In the absence of an agreement to the contrary, the capitalist
partner is prohibited from engaging for his own account in any
business which is the same or similar to and in competition with the
business in which the partnership is engaged. If he violated this
provision, he shall be duty-bound to bring to the common fund any
profits he derived from his transactions, but he shall personally bear
the losses. The partners may by agreement, however, permit the
capitalist partner to engage in the same kind of business as that of the
partnership.
50. As a general rule, during the existence of the partnership, a
partner does not have the right to a formal account of partnership
affairs since he already enjoys the right of access to partnership books
at any reasonable hour and a right to demand from his partners, a
true and full information of all things affecting the partnership. Thus, a
formal account as to partnership affairs would only be necessary upon
the dissolution of a partnership. In the following cases, however, a

partner has the right to a formal account of partnership affairs even

before the dissolution of the partnership: 1) when his co-partners
wrongfully or unjustifiably excludes him from the partnership business
or possession of the partnership property; 2) when there is an
agreement giving the partner the right to a formal account during the
existence of the partnership; 3) in case any of his co-partners need to
account to the partnership any benefits or profits the latter received
and holds as trustee for the partnership without the consent of the
other partners from any transaction connected with the operations of
the partnership business; and 4) whenever other circumstances render
the same just and reasonable, such as in case he is an absentee
partner who needs to determine his rightful share in the profits upon
his return.
51. Each partner has the following property rights: 1) his rights in
specific partnership property; 2) his interest in the partnership; and 3)
his right to participate in the management.
52. Accurately speaking, it is the partnership which has a personality
separate and distinct from the partners comprising it, which is the real
owner of the properties. Be as it may, however, this article provides
that a partner is a co-owner with his partners of specific partnership
property. As such, a partner stands on equal footing with his copartners relative to the right to possess specific partnership property
for partnership purposes. Should a partner desire to possess such
property for some other purpose then the consent of his partners is
necessary.
53. Even while a partner is considered as co-owner with his partners
of specific partnership property, separate creditors of an individual
partner still cannot run after any specific partnership property. This is
due to the impossibility of determining the extent of a partners
beneficial interest in the property until after the liquidation of
partnership affairs. Strictly speaking, a partner has no interest in the
partnership property except for his share of what remains after all the
partnership obligations are paid.
54. None of the partners can assign his right in specific partnership
property, nor can he dispose or mortgage his share. He can only
assign his right in specific partnership property if all his other copartners also assign their respective rights in such specific partnership
property, and in favor of a common individual or entity. The partners
right in specific property is likewise not subject to attachment or
execution except when the claim is against the partnership, in which

case not even any of the partners or representatives of a deceased

partner can claim any right under the homestead or exemption laws.
Furthermore, a partners right in specific partnership property is not
subject to legal support. It is the partners interest in the partnership
itself (which is actually his share in the profits and surplus), which may
be levied upon by a judgment creditor or may be subject to legal
support.
55. The partners interest in the partnership consists of his share in
the profits (defined as the excess of returns over expenditures in a
transaction or the net income) during the existence of the partnership
and his share in the surplus (defined as the net or remaining assets of
the partnership after all partnership obligations are paid and settled)
after its dissolution. The partners interest is his share of the residue or
balance after a formal account has been taken and the value of a
partners share cannot be determined until liquidation of the business
had taken place and all the obligations of the partnership settled. The
partners interest is his personal property and is therefore assignable
by him in the absence of any stipulation to the contrary. It may also
be levied upon by a judgment creditor and subject to legal support.
56. A partner may assign, sell, donate, encumber, or convey his
whole interest in the partnership without causing its dissolution. The
conveyance does not grant entitle the assignee the right to interfere in
the management or administration of the partnership business, to
require or demand any information or account of partnership
transactions, or to inspect the partnership books because these are the
rights available only to partners. The person to whom the conveyance
is made does not become a partner and his only rights are to receive
in accordance with his contract the profits accruing to the assigning
partner, to avail himself of the usual remedies under the law in case of
fraud in management, to receive the assignors interest in case of
dissolution, and in case the partnership is dissolved, to require an
account of partnership affairs covering the period from the date of the
last account agreed to by all the partners.
57. While a separate creditor of a partner cannot attach or levy upon
specific partnership property for the satisfaction of his credit, he can
go to court and secure a judgment on his credit and then apply to the
court for a charging order against the interest of the debtor- partner in
the partnership, but subject to the preferred rights of partnership
creditors. The interest of the debtor-partner so charged may be
redeemed with the separate property of any one or more of the
partners, or with partnership property but with the consent of all the

partners whose interests not so charged or sold. In addition, while a

partner cannot claim any right under the homestead laws or
exemption laws in case of specific partnership property being attached
for partnership debt, with respect to a partners interest in the
partnership, however, since such is really the property of a partner,
then the partner may avail himself of the exemption laws after
partnership debts have been paid.