PARTNERSHIP 1987 Partnership Dissolution: Withdrawal of a Partner; Continuance of Business; Effects Q. Tomas, Rene and Jose entered into a partnership under the firm name ”Manita Lumber” Subsequently, upon mutual agreement, Tomas withdrew from the partnership and the partnership was dissolved. However, the remaining partners, Rene and Jose, did not terminate the business of” Manila Lumber.” Instead of winding up the business of the partnership and liquidating its assets, Rene and Jose continued the business in the name of “Manila Lumber” apparently without objection from Tomas. The withdrawal of Tomas from the partnership was not published in the newspapers. Could Tomes be held liable for any obligation or indebtedness Rene and Jose might incur while doing business in the name of “Manila Lumber” after his withdrawal from the partnership? Explain. ‘A. Yes. Tomas can be held liable under the doctrine of estoppel. But as regards the parties among themselves, only Rene and Jose are lizble. Tomas cannot be held liable since there was no proper notification or publication. In the event that Tomas is made to pay the lisbility to third person, he has the right to seek reimbursement from Rene and Jose (Articles 1837 to 1840; Goquiolay vs. Sycip, 9 SCRA 663). 1989 Article 1767 Q. “X" used in his savings from his salaries amounting to a little more than 2,000 as capital in establishing a restaurant. “Y” gave the amount of P4,000 to “X” as “financial assistance” with the understanding that “Y” would be entitled to 22% of the annual profits derived from the operation of the restaurant. After the lapse of 22 years, “Y" filed a case demanding his share in the said profits. ““X’ denied that there was a partnership and raised the issue of prescription as “Y” did not assert his rights anytime within ten (10) years from the start of the operstion of the restaurant. Is “Y” a partner of “x” in the business? Why? What is the nature of the right to demand one’s share in the fita of a nartnershin? Does this rieht prescribe?1992 Rights of a Managing Partner Q. W, X, ¥ and Z organized a general partnership with W and X as industrial partners and ¥ and Z as capitalist partners. Y contributed P 50,000.00 and Z contributed P20, 000.00 to the common find. By a unanimous vote of the partners, W and X were appointed managing partners, without any specification of their respective powers and duties. A applied for the position of Secretary and B applied for the position of Accountant of the partnership. ‘The hiring of A was decided upon by W and, but was opposed and. Who of the applicants should be hired by the partnership? Explain and give your reasons, % tiv, PH wos decided wr byw; ZL jot wo cepued py Aa A. A should be hired as Secretary. The decision for the hiring of a prevails because it is an act of administration which can be performed by the duly appointed managing partners, W and X. B cannot be hired, because in case of a tie in the decision of the managing partners, the deadlock must be decided by the partners owning the controlling interest. In this case, the opposition of X and Y prevails because Y owns the controlling interest (Art. 1801, Civil Code) 1993 Liabilities of General Partners Q. A,B and C formed a partnership for the purpose of contracting with the Government in the construction of one of its bridges. On June 30, 1992, after completion of the project, the bridge was turned over by the partners to the Government. On August 30, 1992, D a supplier of materials used in the project sued A for collection of the indebtedness to him. A moved to dismiss the complaint against him on the ground that it ‘was the ABC partnership that is liable for the debt. D replied that ABC partnership was dissolved upon completion of the project for which purpose the partnership was formed. ‘Will you dismiss the complaint against A if you ‘were the Judge? A. As Judge, I would not dismiss the complaint against A, because A is still liable as a general partner for his pro rata share of 1/3 (Art. 1816 of the Civil Code). Dissolution of partnership caused by the termination of the paticular undertaking specified in the agreement does not extinguish obligations, which must be liquidated during the “winding up” of the partnership affairs (Arts 1829 and 1830, Civil Code).1994 Partnership Q. (a) Can a husband and wife form a limited partnership to engage in real estate business, with the wife being a limited partner? (b) Can two corporations organize a general partnership under the Civil Code of the Philippines? (©) Can a corporation and an individual form a general partnership? A. (a) Yes, the Civil Code prohibits a husband and wife from constituting a universal partnership. Since a limited partnership is not a universal partnership, a husband and awife may validly form one. (b) No. A corporation is managed by its board of directors. If the corporation were to become a partner, co-partners would have the power to make the corporation party to transactions in an irregular manner since the partners are not agents subject to the control of the Board of Directors. But a corporation may enter into a joint venture with another corporation as long as the nature of the venture is in line with the business authorized by its charter. (Tuason & Co., Inc. v. Bolano, 95 Phil. 106) (©) No, for the same reasons given in the Answer to Number 2 above. 1995 1. Dissolution of Partnership Q. Pauline, Patricia and Pricilla formed a business partnership for the purpose af engaging in neon advertising for a term af five (5) years. Pauline subsequently assigned to Philip her interest in the partnership. When Patricia and Priscilla leamed of the assignment, they decide to dissolve the partnership before the expiration of its term as they had an unproductive business relationship with Philip in the past. On the other hand, unaware of the move of Patricia and Priscilla but sensing thoir negative reaction to his acquisition of Pauline’s interest, Philip simultaneously petitioned for the dissolution of the partnership. (a) Is the dissolution done by Patrcia and Priscilla without the consent of Philip valid? Explain. (b) Does Philip have any right to petition for the dissolution of the partnership before the expiration of its specified term? Explain. A. (a) Under Art. 1830 (1) of the NCC, the dissolution by Patricia and Priscilla is valid and did not violate the contract of partnership even though Pauline and Philip did ‘not consent thereto. The consent of Pauline is not necessary because che had already assigned her interest to Philip. The consent of Philip is not also necessary because theassignment to him of Pauline’s interest did not make him a partner under Art. 1813 of the NCC. (b) No, Philip has no right to petition for dissolution because he does not have the standing of a partner. (Article 1813, NCC). 2. Implied Resulting Trust In 1980, Maureen purchased two lots in a plush subdivision registering Lot 1 in her name and Lot 2 in the name of her brother Walter with the latter’s consent. The idea ‘was to circumvent a subdivision policy against the acquisition of more than one lot by one buyer. Maureen constructed a house on Lot 1 with an extension on Lot 2 to serve as ‘a guest house. In 1987, Walter, who had suffered serious business losses demanded that, Maureen remove the extension house since the lot on which the extension was built was his property. In 1992, Maureen sued for the reconveyance to her of Lot 2 asserting that a resulting trust was created when she has the lot registered in Walter's name even if she paid the purchase price. Walter opposed the suit arguing that assuming the existence of a resulting trust the action of Maureen has already prescribed since ten years have already elapsed from the registration of the title in his name. Decide and discuss fly A. This is a case of an implied resulting trust. If Walter claims to have acquired ownership of the land by prescription or if he anchors his defense on extinctive prescription, the ten year period must be reckoned from 1987 when he demanded that ‘Maureen remove the extension house on Lot2 because such demand amounts to an express repudistion of the trust and was made known to Maureen. The action for reconveyance filed in 1992 is not yet barred by prescription. (Spouses Huang v. CA, September 13, 1994). 1998 Obligstions of Partners with Regard to Third Persons Q. Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed equal amounts to the capital, they also agree on equal distribution of whatever net profit is realized period. After two years of operation, however, Una conveys her whole interest in the partnership to Justine, without the knowledge and consent of Dielle and Karlo. (a) Isthe partnership dissolved? (b) What are the rights of Justine, if any, should she desire to participate in the management of the partnership and in the distribution of a net profit of P360,000.00 which was realized after her purchase of Una’s interest?A. (a) No, a conveyance by a partner of his whole interest in a partnership does not of itself dissolve the partnership in the absence of an agreement. (Ast. 1813, Civil Code) (b) Justine cannot interfere or participate in the management or administration of the partnership business or affairs, she may, however, receive the net profits to which ‘Una would have otherwise been entitled. In this case, P120,000 (Art. 1813, Civil Code) 2001 ‘Obligations of Partners Among Themselves Q. Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe provided the capital while Rudy contributed his labor and industry. On one side of their shop, Joe opened and operated a coffee shop, while on the other side, Rudy put up @ car accessories store. May they engage in such separate business? Why? A. Joo, the capitalist, may engage in the restaurant business because it is not the same kind of business the partnership is engaged in. On the other hand, Rudy may not engage in any other business unless their partnership expressly permits him to do 60 because as an industrial partner he has to devote his fall time to the business of the partnership (Article 1789 of the Civil Code).