I.

NATURE; CREATION OF A PARTNERSHIP
Art. 1767 By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession.

When there are no third parties involved who may be prejudiced Art. 1773 does not apply. Art. 1773 is meant to protect third persons. (Torres v CA) Art.1666 provides that "A partnership must have a lawful object, and must be established for the common benefit of the partners. When the dissolution of an unlawful partnership is decreed, the profits shall be given to the charitable institutions of the domicile of the partnership, or in default of such, to those of the province." A charitable institution is not a necessary party in the present case for the determination of the rights of the parties. The action which may arise from said article, in the case of an unlawful partnership, is that for the recovery of the amounts paid in by the members from those in charge of the administration of said partnership, and it isn’t necessary for the said partners to base their action on the existence of the partnership, but on the fact of having contributed some money to the partnership capital. (Arbes v Polistico)

1. 2. 3. 4. 5.

A. Essential Features:

There must be a valid contract The parties must have legal capacity to enter into the contract There must be a mutual contribution of money, property, or industry to a common fund The object must be lawful The purpose or primary purpose must be to obtain profits and divide the same among the parties

B. Form of Contract General Rule: No special form is required for its validity or existence. Exceptions: 1. Where immovable property or real rights are contributed. • must be in writing in a public instrument • with an inventory of the property contributed, signed by the parties 2. Where the contract of partnership has a capital of P3,000 or more, in money or property. it shall appear in a public instrument and must be recorded in the Office of the Securities and Exchange Commission. However, a partnership has a juridical personality even in case of failure to comply with this requirement. • To be considered a juridical personality, a partnership must fulfill these requisites: (1) two or more persons bind themselves to contribute money, property or industry to a common fund; and (2) intention on the part of the partners to divide the profits among themselves. It may be constituted in any form; a public instrument is necessary only where immovable property or real rights are contributed thereto. This implies that since a contract of partnership is consensual, an oral contract of partnership is as good as a written one. Where no immovable property or real rights are involved, what matters is that the parties have complied with the requisites of a partnership. (Tocao v CA) There is no need to attach an inventory for what has been contributed in the partnership by the parties weren’t immovable property or real rights. None of the partners contributed either a fishpond or a real right to any fishpond. Art. 1773 of the Civil Code is not in point. (Agad v Mabato)

Rules to determine the existence of a partnership: General Rule: Persons who are not partners to each other are not partners as to third persons. exception: partnership by estoppel. • Co-ownership of a property does not itself establish a partnership, even though the co-owners share in the profits derived from the incident of joint ownership. Sharing of gross returns alone does not indicate a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; The receipt of the share in the profits is a strong presumptive evidence of partnership. However, no such inference will be drawn if such profits were received in payment: ⁃ As a debt by installments or otherwise; ⁃ As wages of an employee or rent to a landlord; ⁃ As an annuity to a widow or representative of a deceased partner; ⁃ As interest on a loan, though the amount of payment vary with the profits of the business; ⁃ As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. (art. 1769) All of essential features or characteristics of partnership must be shown as being present. Art. 1769 seeks to exclude from the category of

partnership certain features enumerated therein which, by themselves, are not indicative of the existence of a partnership Issue as to whether a partnership exists is a factual matter. Where circumstances taken singly may be inadequate to prove the intent to form a partnership, nevertheless the collective effect of these circumstances may be such as to support a finding of the existence of the parties’ intent. (Heirs of Tan Eng Kee v CA) DISTINCTIONS: Partnership Created by mere agreement of the parties; May be organized by only two persons

Power to act with Third Persons Dissolution

assignee a partner without unanimous consent Generally a partner may bind th partnership Death or incapacity of a partner dissolves the partnership there is mutual agency

Representation

Profits

must be stipulated upon

Juridical personality commences from the moment of execution of the contract of partnership May exercise any power authorized by the partners as long as it is not contrary to law, etc.

Created by operation Art. 1768, a partnership "has a • Under of law juridical personality separate and distinct from that of each of the Requires at least 5 incorporators; partners." The partners cannot be held liable for the obligations of the Personality commences from the date shown that the partnership unless it is of issuance of the certificate of incorporation by the sec legal fiction of a different juridical personality is being used for fraudulent, Can exercise such powers expressly granted by v unfair, or illegal purposes.(Aguila law or incident CA) existence to its

Power to • business isWON 2 in the board of do ISSUE: vested or more medium-sized If no agreement as to mgt. - every partner is an directors/ trustees; corporations (contractors) may enter agent of the partnership into a partnership or joint A partner as such may sue a co-partner who mismanages; venture/consortium Suit against the board of director who rule is that a HELD: The general mismanages must be brought in the corp.’s a contract corporation cannot enter into name; of partnership with another corporation

Has no right of succession; or individual. This limitation is based on The partners are liable personally and subsidiarily Has right of succession; public policy, since in a partnership the for partnership debts; corporation would be bound by the acts The stockholders are liablewho are not duly appointed of persons to the extent of the Based on delectus personam; shares subscribed by them; and authorized agents and officers, May be established for any period of time stipulated by the partners;

which would be entirely inconsistent Not based on delectus personam; the law that the with the policy of corporation shall manage its own May not be formed for a separately and 50 period exceeding exclusively. affairs, May be dissolved at anytime by the will of any or years; Exceptions may be allowed as all partners; long as the following are met: 1. The articles of incorporation of the Governed by the civil code May be dissolved only with the consentmust expressly corporations involved of the state; authorized the corporation to enter into contracts of partnership with others in Governed by the corp. Code its business; the pursuit of 2. The agreement of articles of partnership must provide that all the partners will manage the partnership; and 3. The articles of partnership must Partnership stipulate that all the partners are and Creation Always created by a contract shall be jointly and severally liable for all the obligations of the partnership. ether express or implied Moreover, two or more corporations may enter into a joint Juridical Personality Has a juridical personality venture/consortium if the nature of the separate and distinct from that venture is in line with business of each partner authorized by its charter through a Purpose Realization of Profits contract or voluntary agreement between the said parties. Please note Duration No limitation upon the duration that no independent legal entity is is set by law borne out of it and the same need not be registered with the Commission. Transfer of Interests A partner may not dispose of his Moreover when the joint individual interest in the venture/consortium would result in the partnership so as to make the formation of a corporation or

⁃ The transactions were isolated. Sanitary Wares. et al. the office issued the check for P50.000 in favor of Jose Gatchalian and Company. (Sevila v CA) • • • II. but upon the organization thereof and the winning of the prize. and a particular partnership may have for its object a specific undertaking. on the other hand. and is thus of a temporary nature. a partnership may be particular or universal. The Supreme Court has however recognized a distinction between these two business forms. Jose Gatchalian personally appeared in the office of the Philippine Charity Sweepstakes. they cannot be considered partners. 1769 provides that "the sharing of gross returns does not of itself establish a partnership. The legal concept of a joint adventure is hardly distinguishable from the partnership. shall have no right of action against the third person who contracted with the manager unless such manager formally transfers his right to them. since under the CC. and the said partner. 29. and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business. a joint adventure is a form of partnership.partnership. under Philippine law. ⁃ The character of habituality peculiar to business transactions for the purpose of gain was not present. and the latter. a partnership is . which was in fact merely a temporary state. whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived". in the same capacity. it was held that a joint adventure may be likened to a particular partnership. CC Art. property or industry to a common fund. There must be an unmistakable intention to form a partnership or joint venture. and that they intended to divide the profits among themselves. Other indications (as presented in the case): ⁃ Petitioners bought parcels of land but they did not sell the same nor make any improvements thereon. (Obillos v CIR) Particular partnership distinguished from a joint adventure: A joint adventure “presupposes generally a • parity of standing between the joint coventures or partners. The partnership was not only formed. collected the said check. 1980) • In deciding as to whether or not Gatchalian. the Court held that they organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win. In the Philippines this is not entirely accurate. and where each party exercises equal rights in the conduct of the business. Thus. and has held that although a corporation cannot enter into a partnership contract. it may however engage in a joint adventure with others. (Pascual and Dragon v Commissioner of Internal Revenue) Since petitioners were not engaged in any joint venture by reason of that isolated transaction and the division of the profit was merely incidental to the dissolution of the co-ownership.” In Aurbach v. in which each party has an equal proprietary interest in the capital or property contributed. (Gatchalian v Collector of Internal Revenue) There is co-ownership and not unregistered partnership when no evidence that petitioners entered into an agreement to contribute money. as such collected the prize. the same has to be registered with the Commission and the conditions and requirements abovementioned should be complied with. (Heirs of Tan Eng Kee v CA) • A partnership constituted in such a manner. in which each party has an equal proprietary interest in the capital or property contributed and where each party exercises equal rights in the conduct of the business. 1776. there being no mutual agreements between the partners. ⁃ It was only after several years when. formed a partnership. while the joint adventure is formed for the execution of a single transaction. the existence of which was only known to those who had an interest in the same. is exactly the accidental partnership of cuentas on participacion defined in article 239 of the Code of Commerce. shall have only a right of action against such person and not against the other persons interested. These circumstances prove the existence of a partnership. The main distinction is that the partnership contemplates a general business with some degree of continuity. (SEC OPINION to Antonio Librea dated Feb. CLASSIFICATION OS PARTNERSHIPS AND PARTNERS Art. Those who contract with the person under whose name the business of such partnership of cuentas en participacion is conducted. in his capacity as copartner. they sold the land. As to its object. (Bourns v Camran) A partnership generally presupposes a parity of standing between the partners.

in turn. at will (1785) b. surviving – remains after dissolution due to death j. which necessarily must have a purpose.” (In re Sycip) • A general professional partnership. by estoppel – liable as if he is a partner for the protection of 3rd persons . as to profits (1780) b." The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The 'purpose' of the partnership is not the specific undertaking referred to in the law. assumed or trade name in law practice is improper. respectively. There would therefore be no need to provide for articles on partnership at will as none would so exist. general – liability extends to separate property . Under the Tax Code on income taxation. it has been stated that “the use of a nom de plume. would all be considered as partnerships for a definite undertaking. are precluded to deny or disprove its existence (1825) 6) as to publicity a. de jure . liquidating – takes charge of the winding up g. dependent on the constancy of that mutual resolve. each of the individual partners. particular (1783) 2) as to liability of the partners a. industrial – contributes industry or personal service c. but is considered one in relation to those who. with a fixed term 4) as to legality of its existence a. professional or non-trading • A partnership that does not fix its term is a partnership at will. a partnership may be general or limited.liable pro rata (1816) or solidarily (1822-1824) b. as to all present property (1778) ii. is a specific undertaking or 'project' which has a definite or definable period of completion. Otherwise. but contracts w/ a partner re the latter’s share in the partnership Industrialist Partner contribution prohibition to engage in other business profits contributes his industry cannot engage in any business for himself receives a just and equitable share • losses exempted as to losses as . (1671a) A. commercial or trading (1767) b. general . (Ortega v CA) A partnership for the practice of law cannot be likened to partnerships formed by other professionals or for business. but on the partners themselves in their individual capacity computed on their distributive shares of partnership profits. and the ultimate distribution of such income to. unlike an ordinary business partnership (which is treated as a corporation for income tax purposes and so subject to the corporate income tax). limited – liability to 3rd persons limited to capital contribution . The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership.aka by implication or nominal or quasi-partner h continuing – continues the business after partnership has been dissolved i. ordinary or real – one w/c actually exists among the partners and also as to third persons b. de facto – one w/c has failed to comply with all the legal requirements for its establishment 5) as to representation to others a. the general professional partnership is deemed to be no more than a mere mechanism or a flowthrough entity in the generation of income by. subpartner – not a partner.aka real d. secret b. ostensible or by estoppel – one w/c in reality is not a partnership. which is tax exempt.one w/c has complied with all the legal requirements for its establishment (1772par2. (Tan v del Rosario) B. is not itself an income taxpayer. Kinds of partners (under the CC) a. by their conduct or admission. Apparently what the law contemplates. The income tax is imposed not on the professional partnership. universal (1777) i. capitalist – contributes money or property b. all partnerships.may be appointed either in the articles of partnership or after the constitution of the partnership . 1773) b. limited (1843) 3) as to its duration a. Kinds of partnerships 1) as to the extent of its subject matter a.aka special e.” Thus. along with each partner's capability to give it. and the absence of a cause for dissolution provided by the law itself. it is a mere relationship or association for a particular purpose… it is not a partnership formed for the purpose of carrying on trade or business or of holding property.aka general or real f. open or notorious 7) as to purpose a. It is not a legal entity.either universal or particular.may be capitalist or industrial . Its continued existence is. managing – manages the affairs or business of the partnership . As regards the liability of the partners.

of the existing partnership consent to the representation. of the same criminal offense. (n) between partners but it is liable to 3rd persons without prejudice • When is a person a partner by to reimbursement from the estoppel? When by words or by capitalist partners conduct he: 1. The following donations shall be void: represented himself to be a (1) Those made between persons who were partner or who consented to guilty of adultery or concubinage at the time of such representation and the donation. who partner or who consented to has. otherwise separately. or partners of an existing consents to another representing him to partnership consented to the anyone. or with one consented to his being or more persons not actual partners. 1825 does not create a partnership results. the or with one or more persons not actual liability of the person who partners. 1825. Please note: Art. (1677) representation. 739. then the consenting to the contract or representation as liability will be separate – that to incur liability. partner.persons consenting to the representation. so representation. he is partnership consented to such liable pro rata with the other persons. descendants and ascendants. actual partners is considered a (2) Those made between persons found guilty partnership liability. is joint or pro he is liable to such person. with respect to persons who rely the person who represented upon the representation. • profits from other sources (not from • To hold the party liable. then. or that only of partner in fact. When all the members himself as partner. Indirectly represents himself property contributed by consenting to another representing him as a partner General rule: in an existing partnership or in • future properties cannot be contributed a non-existing partnership. given his being represented as credit to the actual or apparent partnership. and all those who and if he has made such representation or made and consented to such consented to its being made in a public manner representation. by words spoken or representation. estoppel. if any. When a person. the 3rd person the properties contributed) will become must prove such misrepresentation and common property only if there is a that a bona fide reliance by him upon it stipulation caused him injury. in consideration ⁃ Case of partnership by thereof. of the person who represented When a person has been thus represented to be himself as a partner or who a partner in an existing partnership. (3) Those made to a public officer or his wife. Directly represents himself to anyone as a partner in an The ff become common property of all partners: existing partnership or in a • property w/c belonged to each of them non-existing partnership (w/ at the time of the constitution of the one or more persons not actual partnership partners). 1782. or none of the the partnership. on the faith of such representation. represents himself. but in all other cases it is the joint act as between the alleged partners. Partnership and Partner by represented as partners Estoppel consented to the Art. he is an represented as partner. and agent of the persons consenting to such those who made and representation to bind them to the same extent consented to the and in the same manner as though he were a representation. ⁃ When there is no existing partnership and all those C. he is liable to any such persons to represented himself to be a whom such representation has been made. Persons who are • When partnership liability results prohibited from giving each other any donation ⁃ When all actual partners or advantage cannot enter into universal consented to the partnership. representation has or has not been made or communicated to such person so giving credit • When liability separate by or with the knowledge of the apparent ⁃ When there is no existing partner making the representation or partnership and not all but only consenting to its being made: some of those represented as (1) When a partnership liability results. as a partner in an existing partnership representation. a partnership act or obligation • Art. • profits w/c thay may acquire from the 2. The or obligation of the person acting and the . partners in an existing (2) When no partnership liability results. or not all of the written or by conduct. he is partners consented to the liable as though he were an actual member of representation. then the liability of the person who Art. by reason of his • When liability pro rata office. whether the rata.

Relations created by a contract of partnership • • • • Relations among the partners themselves Relations of the partners with the partnership Relations of the partnership with 3rd persons with whom it contracts Relations of the partners with such 3rd persons • • III. but rather. (Pioneer Insurance v. (MacDonald v. CA) • • D. While an unregistered commercial partnership has no juridical personality. Obligation with respect to contribution of property Art. Difference w/ Art. by reason of the equitable principle of estoppe. the law considers them as partners. failing to comply with all the legal formalities. such denial need not precede plaintiff’s acting thereon if the denial was forthcoming promptly upon hearing of the representations. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto. • The law will not permit a denial or such representation where 3rd parties have in the exercise of reasonable diligence relied thereon to their detriment. Lack of any denial or refutation of the statements by the defendant. when their purpose is that no partnership shall exist. National City Bank) While it is ordinarily held that persons who attempt but fail to form a corporation and who carry on business under the corporate name occupy the position of partners inter se. OBLIGATIONS PARTNERS A. and if. persons cannot be made to assume the relation of partners. a partnership liability w/c continues for lack of proper termination. 1786. To preserve said property with the diligence of a good father of a family pending delivery to the partnership To indemnify the partnership for any damage caused to it by the retention of the same or by the delay in its contribution • • • • • • . it is a partnership de facto and the general provisions of the Civil Code applicable to all partnerships apply to it. Proof by plaintiff that he was individually aware of defendant’s representations as to his being a partner or that such representations were made by others and not denied or refuted by the defendant. where two or more persons attempt to create a partnership. w/c is not a partnership by estoppel. Applicability of general provisions of partnership ⁃ If the law recognizes a defectively organized partnership as de facto as far as 3rd persons are concerned. 21) makes liable as general partners “all persons who assume to act as a corporation” and may include persons who attempt. Reliance on such representations by the plaintiff. He shall also be liable for the fruits thereof from the time they should have been delivered. but fail to form a corporation and who carry on business under the corporate name.law considers them as partners and the association as a partnership only insofar as favorable to 3rd persons by reason of estoppel. 3. 2. in the same cases and in the same manner as the vendor is bound with respect to the vendee. for purposes of its de facto existence it should have such attribute of a regular partnership as a domicile. The Corporation Code (Sec. (1681a) • To contribute at the beginning of the partnership or the stipulated time the money. Contribute OF 1. without the need of any demand. registration of a chattel mortgage therein is valid. The association then • is a partnership in so far as it is a favorable to third persons. Elements to establish liability as a partner on ground of estoppel 1. He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership. by prudence and diligence the plaintiff might have learned of the truth or untruth of the representations. it should have such attribute of partnership as domicile. A de facto partnership among them is created. ⁃ Although it has no legal standing or juridical personality. property. Domicile – place where partnership conducts business. or industry which he may have promised to contribute To answer for eviction in case the partnership is deprived of the determinate property contributed To answer to the partnership for the fruits of the property the contribution of which he delayed. from the date they should have been contributed up to the time of actual delivery. nevertheless. If the law recognizes a defectively organized partnership as de facto as far as third persons are concerned. 1834 (last par). as between themselves.

when the other partners have not collected theirs. 1788. he contributed capital. (Liwanag v CA) • The capital having been received by the partnership. 1790. Pay damages . 1787. Unless there is a stipulation to the contrary. the partners shall contribute equal shares to the capital of the partnership. in case of an imminent loss of the business of the partnership. • • Requisites: • A partner has received. if the debtor should thereafter become insolvent. his share of a partnership credit. Obligation with respect to contribution of money and money converted to personal use Art.Effect of failure to contribute property promised: makes the partner ipso jure a debtor of the partnership even in the absence of any demand. OCC now Arts. and with the business commenced and profits accrued. 5. 1793. shall he obliged to sell his interest to the other partners. shall be obliged. The same rule applies to any amount he may have taken from the partnership coffers. if he fails to pay his contribution on time or in case he takes any amount from the common fund and converts it into his own use. Requisites: • There is an imminent loss of the business • The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business • The capitalist partner refuses deliberately to contribute an additional share • There is no agreement to the contrary • An industrial partner is exempted from the requirement to contribute • • 6. except an industrial partner. • Different from 1792 which treats 2 distinct credits. whereas Arts. one in favor of the partnership and another in favor of the managing partner. in whole or in part. A partner who has received. his share of the partnership credit • The other partners have not collected their shares • The partnership debtor has become insolvent B. in whole or in part. Obligation of capitalist partner to contribute additional capital Art. An action for rescission under art. to bring to the partnership capital what he received even though he may have given receipt for his share only. because it refers to the resolution of obligations in general. (Lozana v Depakakibo) When money or property have been received by a partner for a specific purpose and he later misappropriated it. but a civil one arising from the partnership contract for a liquidation of the partnership and a levy on its assets if there should be any. it shall be made by experts chosen by the partners. Appraisal of goods or property contributed Art. Remedy of other partner or partnership: not rescission but an action for specific performance with damages and interest 2. (1682) • • • To contribute on the date due the amount he has undertaken to contribute To reimburse any amount he may have taken from the partnership coffers and converted to his own use To pay the agreed or legal interest.(US v Clarin) 4. 1791. 1681 and 1682. When the capital or a part thereof which a partner is bound to contribute consists of goods. their appraisal must be made in the manner prescribed in the contract of partnership. the action that lies with the partner who furnished the capital for the recovery of his money is not a criminal action for estafa. and according to current prices. the subsequent changes thereof being for account of the partnership. 1786 and 1788 specifically refer to the contract of partnership in particular. 3. Bring to partnership capital credit received Art. and in the absence of stipulation. any partner who refuses to contribute an additional share to the capital.1191 cannot be applied to a case where a partner failed to contribute what he promised to the partnership.(Sancho v Lizarraga) Equipment which was contributed by one of the partners to the partnership becomes the property of the property and as such cannot be disposed of by the party contributing the same without the consent or approval of the partnership or of the other partner. If there is no agreement to the contrary. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation. and his liability shall begin from the time he converted the amount to his own use. To indemnify the partnership for he damages caused to it by the delay in the contribution or the conversion of any sum for his personal benefit. such partner is guilty of estafa. to save the venture. Obligation of partner who receives share of partnership credit Art. • Above rule not applicable to industrial partner unless in addition to his services.

the risk shall be borne by the partnership. Powers of partner as agent of partnership Acts for carrying on in the usual way the businessEvery partner of the partnership with binding ef Except: when 3 authority Act w/c is not apparently for the carrying ofDoes not bind business in the usual way other partners Acts of strict dominion or ownership: Assign partnership property in trust for creditors Dispose of good-will of business Do an act w/c would make it impossible to carry on ordinary business of partnership Confess a judgement Enter into compromise concerning a partnership isclaim or liability borne by partner isSubmitby partnership borne partnership claim or liability to arbitration isRenounce partnership borne by claim of partnership isActs in by partnership of a restriction on authority Partnership not borne contravention or presumptive is borne by partnership • • Liability of partner acting without authority: generally. La Protectora). the following rules shall be observed: (1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership. Mutual agency Art. without the consent of the others. (1687) Risk of loss of things contributed Specific and determinate things which are notRisk fungible where only the use is contributed Specific and determinate things the ownership ofRisk which is transferred to the partnership Fungible things (consumable) Risk Things contributed to be sold Risk Things brought and appraised in the inventory Risk agents. • Art. All partners have equal rights in the management and conduct of partnership affairs and whatever any one of them may do alone shall bind the partnership (subject to Art 1801 that in case of timely opposition of any partner. personal liability. shall also be borne by the partnership. the courts may equitably lessen this responsibility if through the partner's extraordinary efforts in other activities of the partnership. Strangers dealing with a partnership have the right to assume. 129. or cannot be kept without deteriorating. and in such case the claim shall be limited to the value at which they were appraised. that every general partner has power to bind the partnership. In case of a tie. and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. make any important alteration in the immovable property of the partnership. Every partner is responsible to the partnership for damages suffered by it through his fault. 1698 declares that a member of a civil partnership is not liable solidarily (solidariamente) with his co-partners for its entire indebtedness. 1818. (1686a) 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. (2) None of the partners may. each is liable with the others (mancomunadamente) for his part of such indebtedness (CoPitco vs. the court's intervention may be sought. the risk of the things brought and appraised in the inventory. Rule rests on equity. If the things contribute are fungible. When the manner of management has not been agreed upon. without prejudice to the provisions of Article 1801. • Consent need not be express. even if it may be useful to the partnership. shall be borne by the partner who owns them. the matter shall be decided by the vote of the partners representing the controlling interest. However. 1795. but read in connection with art. The risk of specific and determinate things. 1794. Exception: If unusual profits are realized through extraordinary efforts of the partner at fault. Art.Art. (1695a) Rules when manner of management has not been agreed upon: • All partners considered managers and • . specially those partners acting with ostensible authority. 1803. or if they were contributed to be sold. contributed to the partnership so that only their use and fruits may be for the common benefit. 1137. in the absence of restrictive clauses in the copartnership agreement. Yulo/Bachrach v. unusual profits have been realized. which are not fungible. • Unanimous consent required for alteration of immovable property. Code of Commerce provides that “if the management of the general partnership has not been D. Though Art. Note: Art.). the matter shall first be decided by the majority vote. Bear risk of loss Art. C. In the absence of stipulation. the courts may equitably mitigate or lessen his liability for damages. 1803(1) should be read in relation to Article 1818. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership. but may be presumed from the fact of knowledge of the alteration without interposing any objection.

The partnership may have outstanding credits which for the moment may be unavailable for the payment of debts. the consent of his copartnert. and the members present shall come to an agreement for all contracts or obligations which may concern the association. (Litton v Hill) E. does not unmake Lumauig as a general partner in United. or liquidation of the partnership or from any use by him of its property. for the contracts which may be entered into in the name and for the account of the partnership. Island Sales • . 1806. but he is under the duty of voluntary disclosure of material facts within his knowledge relating to or affecting partnership affairs (see Art. Account for benefits Art. (La Compania Maritima v Munoz) • • • Art. 1807. Since the liability of the partners is pro rata. However. This is not imposed upon a third person who contracts with the partnership. are liable to creditors of the partnership for its contractual obligations. which consists in asking the other's consent before contracting for the partnership. The fact that the complaint against Lumauig was dismissed. Any stipulation against the liability laid down in the preceding article shall be void.a partner may assume a separate undertaking in his name with a3rd party to perform a partnership contract or make himself solidarily liable ob a partnership contract. Bearing this in mind it will be found that there in reality is no conflict between the two articles quoted. 1817. at the expense or to the detriment of the other partners. creates an obligation between the two partners. (n) • The dismissal of the complaint to favor one of the general partners of a partnership does not increase the liability of each of the remaining partners. Render full information Art. and doesn’t necessarily affect the validity of the acts of a partner. Aboitiz) The exemption of the industrial partner to pay for losses relates exclusively to the settlement of the partnership affairs among the partners themselves and has nothing to do with the liabilities of the partners to third persons. any partner may enter into a separate obligation to perform a partnership contract. (Goquiolay et al v Sycip) Note: This case creates a presumption which 1818 does not provide. • The stipulation in the articles of partnership that any of the two managing partners may contract and sign in the name of the partnership with the consent of the other. under its signature and by a person authorized to act for the partnership. 1816. one speaks of liabilities. Every partner must account to the partnership for any benefit. 1821) F. A third person may and has a right to presume that the partner with whom he contracts has. except as among the partners.” this obligation is one imposed by law on the partners among themselves. in the ordinary and natural course of business. Duties of a partner are analogous to those of a trustee. (n) • A partner is not only bound to give information on demand in certain circumstances. In so moving to dismiss the complaint. including the industrial partner. All partners. the liability of each partner shall be limited to only 1/5 of the obligations of United. A partner cannot. and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation. In the instant case. There is a marked distinction between a liability and a loss. as a whole. all shall have the power to take part in the direction and management of the common business. there were 5 general partners when the promissory note in question was executed for and in behalf of the partnership. (n) • Partnership liabilityAll partners. conduct. while acting within the scope of the ordinary course of business of the partnership. Liable for contracts Partnership Art.limited by special agreement to any of the members. Individual liability. (Pacific Commercial vs. (n) • Relationship between partners is essentially fiduciary involving trust and confidence. In such case. has been operated at a loss. partner is personally bound. shall be liable pro rata with all their property and after all the partnership assets have been exhausted. the other of losses. upon motion of Island Sales. Lo Seng) G. as regards third persons without notice. and the inability of a partnership to pay a debt to a third party at a particular time does not necessarily mean that the partnership business. including industrial ones. sue or apply exclusively to his own individual benefit partnership assets or the results of the knowledge and information gained in the character of partner (Pang Lim v. Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or of any partner under legal disability. but which eventually may be realized upon and yield profits more than sufficient to cover all losses.

The partnership is bound to make good the loss: (1) Where one partner acting within the scope of his apparent authority . CA) receives money or property of a third person and misapplies it. • Being a mere agent. or if they were contributed to be sold. or cannot be kept without deteriorating. from the time the expense are made. Those who. Every partnership shall operate under a firm name. (Muñasque v. which may or may not include the name of one or more of the partners. (n) IV. 1795. and acted within the scope of his authority (1897. and for risks in consequence of its management. he is freed from any liability on contracts entered into thereafter. the partnership is liable therefor to the same extent as the partner so acting or omitting to act. Liability of outgoing / incoming partner: • Where a partner gives notice of his retirement or withdrawal. include their names in the firm Art. not being members of the partnership. OBLIGATION PARTNERSHIP A. The risk of specific and determinate things. All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823. a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823. loss or injury is caused to any person. except that this liability shall be satisfied only out of partnership property. the risk shall be borne by the partnership. partnership Solidarily liable with Art. H. 2). The partnership shall be responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest. If the things contribute are fungible. (1688a) 1796 speaks of the 3 obligations of the partnership to the partners: 1. 1815. 1898. by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of co-partners. and 3. 1824. 1910 par. • He is liable for goods sold and delivered after his retirement or withdrawal and notice thereof. 1826. 1796. Answer for risks in consequence of its management. While the liability of the partners are merely joint in transactions entered into by the partnership. Refund amounts disbursed on behalf of the partnership plus corresponding interest from the time expenses are made (not from date of demand). and in such case the claim shall be limited to the value at which they were appraised. (n) Art. contributed to the partnership so that only their use and fruits may be for the common benefit. it shall also answer to each partner for the obligations he may have contracted in good faith in the interest of the partnership business. Where. United Pioneers) • It is but fair that the consequences of any wrongful act committed by any of the partners therein should be answered solidarily by all the partners and the partnership as a whole. but his liability on existing incomplete contracts continues. (n) Liability of incoming partner for partnership obligations: • Limited to his share in partnership property for existing obligations. or any penalty is incurred. Operate under firm name Art. Here. 1912). and (2) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. unless there is a stipulation to the contrary. Reimburse Art. whether such authority is real or apparent. shall be borne by the partner who owns them.(Island Sales v. the partner is NOT personally liable. The obligation is solidary because the law protects him who in good faith relied upon the authority of a partner. 1822. provided.merely condoned Lumauig’s individual liability. that he is free from all fault (Art. not being a partner in the partnership. (1687) B. which are not fungible. shall also be borne by the partnership. the law refers to loans or advances made by a partner to the partnership other than capital contributed by him. Answer for obligations the partner may have contracted in good faith in the interest of the partnership business. A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred. But unlike an ordinary agent. In the absence of stipulation. 2. (n) Art. • Extends to his separate property for subsequent obligations • Incoming partner personally not liable for existing partnership obligations unless there is a stipulation to the contrary. the risk of the things brought and appraised in the inventory. he is not given the right of retention if he is not reimbursed or indemnified (1914). C. however. 1823. if the sale was pursuant to a contract made before such retirement or withdrawal. Bear risk of loss OF Art.

the industrial partner shall receive such share as may be just and equitable under the circumstances. 1823. 1820. Exception to exception: When a partner makes admissions for himself only w/o purporting to act for the partnership. 1840. Exception: Admissions by a party as testified to by a 3rd person are admissible in evidence against him in litigation. (n) Art. Notice to any partner of any matter relating to partnership affairs. • An admission by a partner who was no longer a partner at the time is not admissible in evidence against the partnership. Bound by notice to partner Art. the partnership is liable therefor to the same extent as the partner so acting or omitting to act. the admission of a partner made during the existence of the partnership are binding against the partnership and copartners when such admissions refer to a matter concerning partnership affairs and made w/in the scope of his authority. (1689a) Rules for distribution of profits and losses DISTRIBUTION OF PROFITS According to agreement Share of capitalist partner is in proportion to his capital contribution With agreement Without agreement . The losses and profits shall be distributed in conformity with the agreement. 1815 does NOT cover • a limited partner who allows his name to be included in the firm name (Art. 1822. 1984 addressed to Atty. Bound by admission of partner Art. Under Art. Liable for wrongful act of partner Art.02 of the Code of Professional Responsibility. the share of each in the losses shall be in the same proportion. If only the share of each partner in the profits has been agreed upon. not being a partner in the partnership. Art. shall be subject to the liability of a partner. or any penalty is incurred. Trillana) E. which permits the surviving partners of a law firm the continued use of the name of a deceased partner provided there is an indication that the partner is already dead. RIGHTS OF PARTNERS A. committed by or with the consent of that partner. while the partnership name should contain the word ‘Company’. the share of each partner in the profits and losses shall be in proportion to what he may have contributed. 1820. 1797. but the industrial partner shall not be liable for the losses. Renato J. (SEC Opinion dated Oct 19. statement. or agreement of another of w/c he has no knowledge or to w/c he has not given his consent except by virtue of a particular relation between them. (n) • V.) • The corporate name should contain the word ‘Corporation’ or ‘Incorporated’. acquired while a partner or then present to his mind. As for the profits. he alone shall be chargeable w/ his admissions. he shall also receive a share in the profits in proportion to his capital. (n) Liability for inclusion of name in the firm name: Persons who. loss or injury is caused to any person. by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of co-partners. Admissions by another are received against a party if the former is acting in the capacity of agent of the latter. not being partners include their name in the firm name do not acquire the rights of a partner BUT they shall be subject to liabilities of a partner.name. If besides his services he has contributed capital. except in the case of fraud on the partnership. and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner. operate as notice to or knowledge of the partnership. Share in losses and profits Art. admission. last par. 1821. In the absence of stipulation. Santiago) Note that the ruling in In re Sycip here has been abandoned in view of Rule 3.” The only instance when a domestic partnership name may be recorded in this Commission without the use of the word “Company” is when the primary purpose for which the partnership is organized is to engage in the practice of profession of a particular discipline. (n) F. and the knowledge of the partner acting in the particular matter. D. and (2) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. The partnership is bound to make good the loss: (1) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it. Where. (n) General Rule: Person is not bound by the act. (Congco vs. 1815) • a person continuing the business of a partnership after a dissolution who uses the name of the dissolved partnership or the name of a deceased partner as part thereof (Art. An admission or representation made by any partner concerning partnership affairs within the scope of his authority in accordance with this Title is evidence against the partnership.

IAC) E. (3) As provided by article 1807. Subpartner does not acquire the rights of a partner. at the date of dissolution. In no case may a partner who has begun to execute the decision of the third person. The designation of losses and profits cannot be intrusted to one of the partners.) D. 1809. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done. The incidents of this co-ownership are such that: (1) A partner. (n) GEN RULE: During the existence of the partnership. but the associate shall not be admitted into the partnership without the consent of all the other partners. has an equal right with his partners to possess specific partnership • • .as may be just and agreement. Any partner shall have the right to a formal account as to partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners. equitable under the (4) Whenever other circumstances render it circumstances just and reasonable. A partner may: ⁃ contribute to the partnership only the use of property ⁃ allow the partnership to use his separate propert ⁃ hold the title to partnership property in his own name without having it belong to him. 1804. and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation. (n) • Access to partnership books at “any reasonable hour: reasonable hours on business days throughout the year and not merely during some arbitrary period of a few days chosen by the managing partners (Pardo v. conduct. (Fue Leung v. Art. Lumber Co. 1810. at the principal place of business of the partnership. General rule: Property acquired by a partner in his own name with partnership funds is partnership property. complain of such decision. The property rights of a partner are: (1) His rights in specific partnership property. A stipulation which excludes one or more partners from any share in the profits or losses is void. 1807. (2) His interest in the partnership. or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business. Obtain formal account Art. even if the partner having an associate should be a manager. • Property acquired by a partners with partnership funds. (1696) Contract of subpartnership: The partnership formed between a member of a partnership and a third person for a division of the profits coming to him from the partnership enterprise. and (3) His right to participate in the management. 1807. The industrial partner is not liable for losses because he cannot withdraw the work or labor already done by him. subject to any agreement between the partners. 1805. The partnership books shall be kept. If the partners have agreed to intrust to a third person the designation of the share of each one in the profits and losses. (n) Art. Associate another person Art. or liquidation of the partnership or from any use by him of its property. in the absence of any agreement to the contrary. Every partner must account to the partnership for any benefit. Exceptions: ⁃ Contrary intention appears ⁃ Property was acquired after dissolution but before the winding up [but he would be liable to account to the partnership] Art. (1690) Art. His laboring in vain is his contribution to the loss. and every partner shall at any reasonable hour have access to and may inspect and copy any of them. and 1809 show that the right to demand an accounting exists as long as the partnership exists. • The right to an account of his interest shall accrue to any partner. 1799. 1798. (1691) • Although this stipulation is void. Articles 1806. B. Every partner may associate another person with him in his share. a partner is not entitled to a formal account of the partnership affairs.(2) If the right exists under the terms of any Share of industrial partner is not fixed . subject to the provisions of this Title and to any agreement between the partners. 1811. Property rights Art. A partner is co-owner with his partners of specific partnership property. such designation may be impugned only when it is manifestly inequitable. EXCEPTIONS: the special and unusual situations enumerated under Article 1809. the partnership is valid. subsists and the profits or losses shall be apportioned as if there were no stipulation on the same. (n) Property used by the partnership. or who has not impugned the same within a period of three months from the time he had knowledge thereof. Access partnership books Art. nor is he liable for partnership debts C.

or injunction. or which the circumstances of the case may require. A partner's interest in the partnership is his share of the profits and surplus. Where title to real property is in the partnership name. (n) • Profit – net income during the carrying out of the business of the partnership • Surplus – the excess of assets over liabilities (after accounting/dissolution) Art. Subject to the provisions of the succeeding articles. or any of them. 195. has exceeded his authority. any partner may convey title to such property by a conveyance executed in the partnership name. (4) Parents and their illegitimate children and the legitimate and illegitimate children of the latter. or unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner. In case of a dissolution of the partnership. or to require any information or account of partnership transactions. 1814. during the continuance of the partnership. in making the conveyance. (2) A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property. whether of full or half-blood (291a) • • A partner cannot separately assign his right to specific partnership property. 1812. as against the other partners in the absence of agreement. please add another row to thisphrase) table and insert this last phrase) ndi ko maform walang table. may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon. or any other court. Thus. he 2 lang nagappe • Partnership is a relation in which delectus personae is an important element. Convey real property Art. by any one or more of the partners. and of any other money due or to fall due to him in respect of the partnership. (n) Rights of the transferee or assignee Wha To receive in accordance with his contract theinterfere in the profits accruing to the assigning partner To avail of the usual remedies provided by law inrequire any info the event of fraud in the management inspect any of To receive the assignor’s interest in case ofadd another ro dissolution (jas. directions. Without prejudice to the preferred rights of partnership creditors under Article 1827. but the partnership may recover such property unless the partner's act binds the partnership under the provisions of the first paragraph of article 1818. or in case of a sale being directed by the court. in case of fraud in the management of the partnership. 195. in his own name.specific partnership property is not subject to attachment. cannot claim any right under the homestead or exemption laws. and make all other orders. and may then or later appoint a receiver of his share of the profits. and (5) Legitimate brothers and sisters. the assignee is entitled to receive his assignor's Art. 1813. the following are obliged to support each other to the whole extent set forth in the preceding article: (1) The spouses. No one may be introduced into the firm as a partner without the unanimous consent of the other partners. (2) Legitimate ascendants and descendants. accounts and inquiries which the debtor partner might have made. as regards his interest in the partnership. The interest charged may be redeemed at any time before foreclosure. without the consent of all partners. A partner’s right is limited to his share of what remains after all partnership debts have been paid. but he has no right to possess such property for any other purpose without the consent of his partners.FC Art.CC is now Art. execution. under the exemption laws. 1819. 291. or to inspect the partnership books. Nothing in this Title shall be held to deprive a partner of his right. a conveyance executed by a partner. (4) A partner's right in specific partnership property is not subject to legal support under Article 291. or. somewhere. to interfere in the management or administration of the partnership business or affairs. However. provided the act is . but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. except on a claim against the partnership interest and may require an account from the date only of the last account agreed to by all the partners. (3) Parents and their legitimate children and the legitimate and illegitimate children of the latter. the court which entered the judgment. may be purchased without thereby causing a dissolution: (1) With separate property. passes the equitable interest of the partnership.property for partnership purposes. (3) A partner's right in specific partnership property is not subject to attachment or execution except on a claim against the partnership. (n) F. entitle the assignee. Art. garnishment. if any. Where title to real property is in the name of the partnership. or (2) With partnership property. (n) Art. on due application to a competent court by any judgment creditor of a partner. the assignee may avail himself of the usual remedies. by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold. A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership. When partnership property is attached for a partnership debt the partners. or the representatives of a deceased partner.

(Syjuco v Castro) of the object for which it was created NOTE: This is different from the provisions on the partnership is extinguished. the partners in whose name the title stands may convey title to such property. without knowledge. (n) VII. Provided that: The the new person into the admission of partner who sold it was carrying on in the usual incoming business of business are way the partners. partnership. 1819 provides that: “Where the the limited purpose of winding up its title to real property is in the names of affairs. or in a third person in trust for the partnership. Conveyance inConveyance passes title but partnership can others. or 2) winding had of partnership affairsthe COMPLETED. Preference of creditors Art. 1819 B. and the record does not disclose the right of the partnership. there on the usual way the business of the partnership (1818) hence binding the partnership. but the partnership may recover such property if the partners' act does not bind the partnership under the provisions of the first paragraph of Article 1818. the partnership will be reputed as existing until the juridical relations arising out of the contract are dissolved. DISSOLUTION AND WINDING UP Art. which provide that a special power to pending the winding up of some sell excludes the power to mortgage [Art. RIGHTS PARTNERSHIP OF . Without prejudice to this right. All persons forming Title in partnership name. Partnership continues for • Art. Acquire immovables existing obligations. Conveyance does notnew title but only equitable the pass partnership the upon Conveyance in partner's name interest. 1827. even the partnership (1818) hence binding the has though the same business partnership theretofore been conducted by the Title in name of 1/ more partners. 1774. in the On dissolution the partnership partnership (1818) hence binding continues until the NOT TERMINATED. (n) • Any change in the membership of a partnership produces an immediate Effects of Conveyance of Real Property dissolution of the existing partnership Title in partnership name Conveyance passes title but formation of can new relation and the partnership a Any partner may convey under partnership name recover unless: 1)The partner who sold it was one. name if partner/partners in whose name titlerecover unless: 1)The partner who sold it was stands carrying on 1829. The dissolution of a partnership is the CHANGE IN RELATION of the partners caused by ANY PARTNER CEASING TO BE ASSOCIATED in the carrying on as distinguished from the winding up of the business. The dissolution of a firm does not relieve any of its members from liability for A. The term not be understood in the absolute and “conveyance” used in this provision strict sense so that at the termination includes a mortgage. is a holder for value. Art. although it does save them from new obligations to Art. Any IMMOVABLE property OR an which they have not expressly or INTEREST therein may be acquired in the impliedly assented. passes the equitable interest of the partnership. and any of them partnership name. Where the title to real property is in the name of all the partners a conveyance executed by all the partners passes all their rights in such property. unless the purchaser or his assignee. Effects of The partner who sold it was in trust for partnership. or in his own name. usual way the business of the is Art. but the partnership. Conveyance executed inProvided that: Dissolution: does not automatically partnership name of in name of partners carrying • in Dissolutionway the business of the on the usual result in the termination of the partnership (1818) hence binding the partnership legal personality of the partnership. nor of the relations of the partners among themselves. all the partners a conveyance executed by all the partners passes all their • The dissolution of a partnership must rights in such property. incidents and obligations of the 1879]. Where title to real property is in the name of one or more but not all the partners. provided the act is one within the authority of the partner under the provisions of the first paragraph of Article 1818. (n) *cf. but in such case. Buyer up no knowledge of is lack of authority of the seller (n) Title in name of 1/more/all partners or 3rd personConveyance will only pass equitable interest.one within the authority of the partner under the provisions of the first paragraph of Article 1818. the private creditors of each partner may ask the attachment and public sale of the share of the latter in the partnership assets. (n) conveyed ONLY in the partnership name. The creditors of the partnership shall be preferred to those of each partner AS REGARDS PARTNERSHIP PROPERTY. Where the title to real property is in the name of one or more or all the partners. a conveyance executed by a partner in the partnership name. 1828. agency. is no such thing as an “incoming or 2) Buyer had no knowledge of the lack of into partner” or “admission of a person authority of the seller an existing firm”. carrying • in Strictly and technically speaking. Title so acquired can be may be discharged from old obligations VI.

The partnership. (Ex: paying of previous obligations. (Bearneza v Dequilla) The dissolution of the partnership did not mean that the juridical entity was immediately terminated and that the distribution of the assets to its partners should perfunctorily follow. (Lichauco v Lichauco) Not being a mercantile partnership (hence. It cannot be maintained that the partnership continued to exist after the death of Perpetua for it does not appear that any stipulation to that effect has ever been made by her and Dequilla. at which time the winding up of its affairs should have been completed and the net partnership assets are partitioned and distributed to the partners. ⁃ express will of any partner. (Idos v CA) The provision prohibiting the dissolution of the association under review. (2) Winding Up . as the contracting with a demolition company for the demolition of the garage used in a "used car" partnership. ⁃ when business becomes unlawful ⁃ when a specific thing promised to be contributed to the partnership perishes before delivery ⁃ loss of a specific thing when the partner reserved ownership over it ⁃ death ⁃ insolvency of a partner/ partnership ⁃ civil interdiction • In contravention of the agreement between the partners: ⁃ where the circumstances do not permit a dissolution under 1830 by the express will of any partner at any time. and the only rights inherited by Perpetua’s heir. except by the consent and agreement of twothirds of its partners. in no wise limited or restricted the rights of the individual partners in the event the dissolution of the association was effected. the partnership bond having been dissolved. It would be unreasonable to hold that such an association could never be dissolved and liquidated without the consent and agreement of two-thirds of its partners. not governed by the Code of Commerce. but by the express mandate of statutory law. Causes: • Without violation of the agreement between the partners: ⁃ termination of the definite term or particular undertaking specified in the agreement. who must act in good faith. but the CC). it was dissolved by the death of Perpetua. It is that point of time the time the partners cease to carry on the business together. or that the enterprise for which it had been organized had been concluded or abandoned. ⁃ partner wilfully or persistently commits a breach of the partnership agreement ⁃ business of the partnership can only be carried on at a loss. pursuant to the provisions of art. if any. or had become bankrupt.the process of settling business affairs of dissolution. ⁃ partner becomes incapable of performing his part of the contract. continues to exist until its termination. (Testate of Mota v Serra) • The three final stages of a partnership are: (1) Dissolution. it is impossible to determine what rights or interests. not by any act of theirs.) (3) Termination Defined.the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business (Art. ⁃ expulsion of any partner in accordance with such a power conferred by the agreement. Causes of Dissolution The statutory enumeration of causes of dissolution is exclusive. The partnership having been dissolved. ⁃ express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts. (Sy v CA) A. and nothing more. Other causes are provided in Art. 1830 (extrajudicial) and 1831(judicial) provide for causes of dissolution. 1840. 1830 Upon application of a partner: ⁃ partner has been declared insane or is shown to be of unsound mind. although dissolved. The dissolution simply effected a change in the relationship among the partners. even new business if needed to wind up. 1828). were those resulting from the liquidation in favor of the Perperua. when no definite term or particular is specified.the point in time after all the partnership affairs have been wound up.by novation or other form of release. ⁃ equitable grounds • • • • . before or after the termination of any specified term or particular undertaking. Art. its subsequent legal status was that of a partnership in liquidation. Before this liquidation is made. 1704. ⁃ partner has been guilty of such conduct that prejudices the business. notwithstanding that it had lost all its capital. collecting of assets previously demandable. Perpetua had.

Nothing in this Title shall be held to deprive a partner of his right. Its continued existence is. along with each partner's capability to give it. a partner may cause the dissolution of the partnership. Without prejudice to the preferred rights of partnership creditors under Article 1827. or death of a partner the general rule applies. 1830. A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership. dictate a dissolution of the partnership at will. during the continuance of the partnership. Maglana) Art. any one of the partners may. • if dissolution is by act. but he cannot be compelled to remain in the firm. may be purchased without thereby causing a dissolution: (1) With separate property.• On the application of the purchaser of a partner's interest under Article 1813 or 1814: ⁃ TERMINATION of the term or undertaking ⁃ when partnership is at will and the INTEREST of one partner is ASSIGNED • that mutual resolve. (Rojas v. the cause of dissolution is the death or insolvency of a partner and the acting partner had knowledge or notice of such dissolution 2. directions. or in case of a sale being directed by the court. The interest charged may be redeemed at any time before foreclosure. With respect to third persons (1834) • When partner continues to bind the partnership even after dissolution ⁃ By an act appropriate for winding up partnership affairs ⁃ Act for completing unfinished transactions ⁃ Transaction which would bind the partnership if dissolution had not taken place provided that the other party: Had extended credit to partnership prior to dissolution .With respect to the partners (1833) • if dissolution is not by act. The cause of the dissolution is the act of a partner and the acting partner had knowledge of such dissolution b. insolvency or death of a partner the rule is that the authority of partners inter se to act for the partnership is not deemed terminated. even if there is specified term in the articles of partnership and even before the expiration of this period. or which the circumstances of the case may require. Art. act in good faith. and the absence of a cause for dissolution provided by the law itself. in case of fraud in the management of the partnership. (n) • The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. entitle the assignee. dependent on the constancy of B. Consequences of dissolution 1. accounts and inquiries which the debtor partner might have made. with or without justifiable cause. or any other court. under the exemption laws. insolvency. each partner is liable to his copartners for his share of any liability created by any partner acting for the partnership as if the partnership has not been dissolved. If no cause was given or if it is unjustified. He must. or to require any information or account of partnership transactions. As to partner's authority to act for the partnership General Rule: Authority of partners to bind partnership is terminated (1832) Exception: ⁃ Wind up partnership affairs ⁃ Complete transactions not finished Qualifications: 1. as regards his interest in the partnership. ⁃ Exception: a. on due application to a competent court by any judgment creditor of a partner. or (2) With partnership property. and may then or later appoint a receiver of his share of the profits. not that the attendance of bad faith can prevent the dissolution of the partnership but that it can result in a liability for damages. at his sole pleasure. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership. as against the other partners in the absence of agreement. In case of a dissolution of the partnership. if any. by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold. and make all other orders. but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. Dissolution terminates the actual authority of a partner to undertake new business for the partnership. (Ortega v CA) Under art. 1813. 1814. Verily. however. the assignee is entitled to receive his assignor's interest and may require an account from the date only of the last account agreed to by all the partners. the court which entered the judgment. or. by any one or more of the partners. may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon. the withdrawing partner becomes liable for damages. and of any other money due or to fall due to him in respect of the partnership. However. Thus. or to inspect the partnership books. in turn. to interfere in the management or administration of the partnership business or affairs. the assignee may avail himself of the usual remedies.

partner concerned 2. unless there is a stipulation to the contrary. 2. or when any partner retires and assigns (or the representative of the deceased partner assigns) his rights in partnership property to two or more of the partners. one. have a prior right to any claim of the retired partner or the representative of the deceased partner against the person or partnership continuing the business on account of the retired or deceased partner's interest in the dissolved partnership on account of any consideration promised for such interest or for his right in partnership property. who continues the business without liquidation of partnership affairs. 1 and 2 of this article. unless there is a stipulation to the contrary. except by transaction with one who: or the representative of the deceased partner. OR Did not extend credit to partnership prior to dissolution Had known partnership prior to dissolution Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on 2. Nothing in this article shall be held to modify any right Had extended credit to partnership prior to dissolution & Had no knowledge/notice of dissolution. (3) When any partner retires or dies and the business of the dissolved partnership is continued as set forth in Nos. under this article. second paragraph. Creditors of the old partnership can go after the partnership continuing the business except: (1) when there is a stipulation to the contrary. Isabela Sawmill) The liability of a third person becoming a partnership continuing the business. As to partner's existing liability General Rule: Dissolution does not automatically discharge the existing liability of any partner. (1835) Exception: A partner may be relieved from all existing liabilities upon dissolution only by an agreement between: 1. A withdrawing partner remains liable. and without liquidation of the partnership affairs. and. are liable for the debts of the preceding partnership. (2) when there has been a liquidation of partnership affairs Not only the retiring partners but also the new partnership itself which continued the business of the old. No. When the business of a partneship after dissolution is continued under any conditions set forth in 1840 the creditors of the retiring or deceased partner or the representative of the deceased partner. (6) When a partner is expelled and the remaining partners continue the business either alone or with others without liquidation of the partnership affairs. to the creditors of the dissolved partnership shall be satisfied out of the partnership property only. to a third party creditor of the old partnership. but without any assignment of his right in partnership property. either alone or with others. to the creditors of the dissolved partnership shall be satisfied out of the partnership property only. OR Did not extend credit to partnership Had known partnership prior to dissolution Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on • When partner cannot bind the partnership after dissolution ⁃ where partnership was dissolved because it was unlawful to carry on the business except when the act is for winding up ⁃ where the partner has become insolvent ⁃ where the partner is unauthorized to wind up partnership affairs. person/partnership business Liability continuing of the • • • • Art. (5) When any partner wrongfully causes a dissolution and the remaining partners continue the business under the provisions of article 1837. or to one or more of the partners and one or more third persons. In the following cases creditors of the dissolved partnership are also creditors of the person or partnership continuing the business: (1) When any new partner is admitted into an existing partnership. with a goodwill to protect rather than a professional partnership with no saleable goodwill but whose reputation depends on the personal qualifications of its individual members. person/partnership continuing the business 3. partnership creditors 3. if the business is continued without liquidation of the partnership affairs. dissolved. (2) When all but one partner retire and assign (or the representative of a deceased partner assigns) their rights in partnership property to the remaining partner. • The liability of a third person becoming a partner in the partnership continuing the business. This article treats more of a commercial partnership. with the consent of the retired partners • . under 1840. either alone or with others. (Singsong vs. (4) When all the partners or their representatives assign their rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the dissolved partnership. 1840.Had no knowledge/notice of dissolution.

to have the value of his interest in the partnership. the right as against his co-partners and all claiming through them in respect of their interests in the partnership. Rights of Partners upon dissolution 1.of creditors to set wide any assignment on the ground of fraud. No. provided. (3) A partner who has caused the dissolution wrongfully shall have: (a) If the business is not continued under the provisions of the second paragraph. Right to damages for wrongful dissolution Art. 1 (b) of this article. ascertained and paid to him in cash. (Yu v NLRC) C. No. which constitute the partner’s lien: • to have the partnership property applied to discharge partnership liabilities and • the surplus assets. No. Right to continue business . 2. but in ascertaining the value of the partner's interest the value of the good-will of the business shall not be considered. 1837. or 3. if any.Rights of guilty party: one who wrongly caused dissolution • Powers • • • • • • When a member of a mercantile partnership dies. (b) If the business is continued under the second paragraph. 3. and to be released from all existing liabilities of the partnership. partners designated by the agreement 2. less any damages recoverable under the second paragraph. and in like manner indemnify him against all present or future partnership liabilities. 1 (b). No. distributed in cash to the respective partners. 2. not insolvent The court may appoint a receiver to wind up the partnership affairs.and any claim against him or his estate should be prosecuted against his estate in administration. all the rights of a partner under the first paragraph. upon cause shown. may obtain winding up by the court. (n) • • Winding up may be done either: judicially or extrajudicially The ff. (Lota v Tolentino) 2. it is the duty of the surviving associates to take the proper steps to settle the affairs of the firm. When dissolution is caused in contravention of the partnership agreement the rights of the partners shall be as follows: (1) Each partner who has not caused dissolution wrongfully shall have: (b) The right. the legal representative (executor/ administrator) of the last surviving partner (when all the partners are already dead). subject to liability for damages in the second paragraph. the duty of liquidating its affairs devolves upon the surviving member/s of the firm. that any partner. are authorized to wind up the affairs of the partnership: 1. Unless otherwise agreed. his legal representative or his assignee. or pay any partner who has caused the dissolution wrongfully. the value of his interest in the partnership at the dissolution. in the absence of such agreement. Rights of innocent party: (dissolution in contravention of agreement) • Apply partnership property to discharge liabilities of partnership • Apply surplus. all the partners who have not wrongfully dissolved the partnership. 1837. or the payment secured by a bond approved by the court. of this article. of a liquidating partner: Make new contracts Raise money to pay partnership debts Incur obligations to complete existing contracts or preserve partnership assets Incur expenses necessary in the conduct of litigation “wrongfully dissolved” -done contravention of the agreement in on wrongful dissolution Art. during the agreed term for the partnership and for that purpose may possess the partnership property. has the right to wind up the partnership affairs. not insolvent. if they all desire to continue the business in the same name either by themselves or jointly with others. 1836. as against each partner who has caused the dissolution wrongfully. Rights where dissolution not in contravention of agreement (unless otherwise agreed). to damages breach of the agreement. however. provided they secure the payment by bond approved by the court. if any to pay in cash the net amount owed to partners • Indemnity for damages caused by partner guilty of wrongful dissolution • Continue business in same name during agreed term • Posses partnership property if business is continued 6. of this article. not upon the legal representatives of the deceased partner. after deducting what may be due to the firm from them as partners 5. (n) 4. the partners who have not wrongfully dissolved the partnership or the legal representative of the last surviving partner. xxx When dissolution is caused in contravention of the partnership agreement the rights of the partners shall be as follows: (2) The partners who have not caused the dissolution wrongfully. less any damage caused to his co-partners by the dissolution. Right to wind up Art. Upon the death of a partner. may do so.

Right to account Art. In settling accounts between the partners after dissolution. 1841. for the firm’s outside creditors have preference over the assets of the enterprise [Arts. 1810] and individual property when a partnership is dissolved. (2) The liabilities of the partnership shall rank in order of payment. hence the need for a general liquidation before a partner may claim a specific sum as his share of the profits [Sison vs. McQuaid]. 7. (b) The contributions of the partners necessary for the payment of all the liabilities specified in No. to the extent of the amount which he has paid in excess of his share of the liability. (b) Those owing to partners other than for capital and profits.• • If business not continued by others apply partnership property to discharge liabilities of partnership & receive in cash his share of surplus less damages caused by his wrongful dissolution If business continued by others . at the date of dissolution. subject to any agreement to the contrary: (1) The assets of the partnership are: (a) The partnership property. or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business. second paragraph. (7) The individual property of a deceased partner shall be liable for the contributions specified in No. • . (n) • The profits of a business cannot be determined by taking into account the result of one particular transaction instead of all the transactions had. 2. Right of retiring/ deceased partner Art. and the business is continued under any of the conditions set forth in the preceding article. as provided Article 1840. (5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in the preceding number. third paragraph. (d) Those owing to partners in respect of profits. (9) Where a partner has become insolvent or his estate is insolvent. (b) Those owing to partnership creditors. partnership creditors shall have priority on partnership property and separate creditors on individual property. 1827] and the firm’s property cannot be diminished to their prejudice [Magdusa vs. VIII. (n) 9. shall have priority on any claim arising under this article. or in Article 1837. 2. The right to an account of his interest shall accrue to any partner. Rights of injured partner where partnership contract is rescinded on ground of fraud/misrepresentation by 1 party: (1838) • • • Right to lien on surplus of partnership property after satisfying partnership liabilities Right to subrogation in place of creditors after payment of partnership liabilities Right of indemnification by guilty partner against all partnership debts & liabilities 8. as provided by article 1797. unless otherwise agreed. the amount necessary to satisfy the liabilities. 1839(2). (n) • This provision sets forth a priority system for the distribution of partnership property [see Art. (6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. (c) Those owing to partners in respect of capital. (c) Those owing to partners by way of contribution. 4. 1 of this article to the satisfaction of the liabilities. When any partner retires or dies. or the representative of the retired or deceased partner. 1839. at his option or at the option of his legal representative. (4) The partners shall contribute. (8) When partnership property and the individual properties of the partners are in possession of a court for distribution. Albaran]. as follows: (a) Those owing to creditors other than partners. the profits attributable to the use of his right in the property of the dissolved partnership. or. provided that the creditors of the dissolved partnership as against the separate creditors. A partner’s share cannot be retuned without first dissolving and liquidating SETTLEMENT ACCOUNTS BETWEEN PARTNERS OF Art.have the value of his interest at time of dissolution ascertained and paid in cash/secured by bond & be released from all existing/future partnership liabilities the partnership. 1842. in the absence of any agreement to the contrary. the claims against his separate property shall rank in the following order: (a) Those owing to separate creditors. No. the following rules shall be observed. without any settlement of accounts as between him or his estate and the person or partnership continuing the business. 4. (3) The assets shall be applied in the order of their declaration in No. AND shall receive as an ordinary creditor an amount equal to the value of his interest in the dissolved partnership with interest. saving the rights of lien or secured creditors. he or his legal representative as against such person or partnership may have the value of his interest at the date of dissolution ascertained. in lieu of interest.

A limited partnership is one formed by two or more persons under the provisions of the following article. PARTNERSHIP LIMITED Essential requirements for the formation of a limited partnership: (1844) • the certificate or articles of the limited partnership which states the matters enumerated in the article. insanity of gen partner dissolves partnership (1860) must contain the word company or Co. industry (2) A person is substituted as a limited partner. Personally liable for partnership Art. or (2) Subsequently. (Jo Chung Cang V. 4. by/against partnership (4) A person is admitted as a general partner. ORDER OF PAYMENT IN THE WINDING UP OF PARTNERSHIP LIABILITIES in a general partnership: 1839 (2) 1. but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate. (1845. equal right in the mgt. The certificate shall be cancelled obligations when the When manner of mgt. 14-00) *unless it is a professional partnership composed only of general partners Doctrine of Marshalling of Assets 1839 (8): 1. death. inclusion of partner's name in the Name may appear in firm name firm name prohibition to engage in other Prohibition against engaging in business business effect of retirement death insanity or insolvency firm name members of the partnership Retirement. one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew the statement to be false: (1) At the time he signed the certificate. A limited partnership that has not complied with the law of its creation is not considered a limited partnership at all. Those owing to partners in respect of capital. Pacific Commercial) Art. 1850) • One or more limited partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond the amount of their capital contributions. 1856) • The limited partners may ask for the return of their capital contributions under the conditions prescribed by law (1844(h). • Such certificate must be filed for record in the office of the SEC Who may become Limited Partners • A partnership cannot become a limited partner. or to file a petition for its cancellation or amendment as General Partnership provided in Article 1865. Those owing to partners other than for capital or profits. 1847. Those owing to creditors other than partners. Separate or individual creditors have preference in separate or individual properties 3. Characteristics: • formed by compliance with the statutory requirements (1844) • One or more general partners control the business and are personally liable to creditors (1848. Proper party to proceedings (3) An additional limited partner is admitted. subject to the rights of partnership creditors. • A general partnership may be changed into a limited one. 1843. but a general partnership in which all members are liable. If the certificate contains a false statement. of the A certificate shall be amended when: (1) There is a change in the name of the business partnership or in the amount or character of the Contribute cash. Art. and a partner in the former general partnership may become a limited partner in the limited partnership just formed. property or contribution of any limited partner. dies. becomes insolvent or insane. must be signed and sworn to. 3. not agreed partnership is dissolved or all limited partners upon. insolvency. 1857) • The partnership debts are paid out of the common fund and the individual properties of the general partners. having as members one or more general partners and one or more limited partners. 1864. (SEC Memo Circular No. (5) A general partner retires. Partnership creditors have preference in partnership assets 2. 2. either in their original partnership agreement or in a dissolution agreement.• • These rules are subject to variation by agreement of the partners. 1848. The limited partners as such shall not be bound by the obligations of the partnership. all gen partners have an cease to be such. or is sentenced to civil interdiction and the business is continued under extent of liability right to paticipate in the management contribution proper party to proceedings by or against the partnership . • The general rule for those who seek to avail of the protection of the laws permitting the creation of limited partnerships must show a substantially full compliance of such laws. Anything left from either goes to the other IX. Those owing to partners in respect of profits.

and ⁃ filed with the SEC. A limited partner is liable to the partnership: (1) For the difference between his contribution as actually made and that stated in the certificate as having been made. C. but a waiver or compromise shall not affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before a cancellation or amendment of the certificate. he takes part in the control of the business. 1847 d. unless the business is continued by the remaining general partners: (1) Under a right so to do stated in the certificate. and the assigning members in case of substitution or addition of a GP or LP. Art. A limited partner shall not become liable as a general partner unless. Art. ⁃ signed by all the members. but which was not contributed or which has been wrongfully returned. Art. The contributions of a limited partner may be cash or property. Rights in common with general partner The specific rights of a limited partner are as follows: • To require that partnership books be kept at the principal place of business of the partnership • To inspect and copy at a reasonable hour partnership books or any of them • To demand true and full information of all things affecting the partnership • To demand a formal account of partnership affairs whenever circumstances render it just and reasonable • To ask for dissolution and winding up by decree of the court • To receive a share of the profits or other compensation by way of income • To receive the return of his contribution provided the partnership assets are in excess of all its liabilities D. B. 1848. • What constitutes control of the business sufficient to make a limited partner liable as a general partner has not been clearly defined by the courts. Liability Art. 1845. death. • Requirements to amend a certificate: ⁃ amendment must be in writing. 1860. Loan and other Business Transactions with Limited Partnership • Art. LIMITED PARTNER A. To separate creditors (see 1862) • The liabilities of a limited partner as set forth in this article can be waived or compromised only by the consent of all members. Art. Contribution Art. if the cancellation is ordered by the court. (6) There is a change in the character of the business of the partnership. insanity or civil interdiction of a general partner dissolves the partnership. 1845 – when he contributes services b. Examples of limited partner taking part in the control of business: ⁃ Board of directors chosen by limited partners ⁃ An appointee of a limited partner becomes the directing • . 1848 e. or (10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them. To partnership creditors and other partners a. 1846 c. (7) There is a false or erroneous statement in the certificate. but not services. and (2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate. to enforce such liabilities. A limited partner holds as trustee for the partnership: (1) Specific property stated in the certificate as contributed by him. no time having been specified in the certificate. Art. or the return of a contribution. as amended. Liabilities of a limited partnership: 1. (9) A time is fixed for the dissolution of the partnership. X. Art. 1854 – in fraud of partnership creditors f. (8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution. The retirement. 1844 (2) – failure to substantially comply with the legal requirements governing formation of limited partnerships 3. must be filed for record in the SEC Requirements to cancel a certificate: ⁃ in writing. in addition to the exercise of his rights and powers as a limited partner. including the new members. and ⁃ the certificate. To the partnership (see 1858) 2. insolvency. ⁃ it must be signed and sworn to by all the members. and (2) Money or other property wrongfully paid or conveyed to him on account of his contribution. a certified copy of such order shall be filed with the SEC as well manager of the firm Art. 1858.Article 1860. or (2) With the consent of all members.

or release from liability if at the time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners. 1857. and (3) The certificate is cancelled or so amended • as to set forth the withdrawal or reduction. have been paid or there remains property of the partnership sufficient to pay them. irrespective of the nature of his contribution. or • after the expiration of 6 mos. receive on account of resulting claims against the partnership. except liabilities to general partners and to limited partners on account of their contributions. • The receiving of collateral security. Share of profits Art. 1857 Requisites for the return of contribution of limited partner: • All liabilities of the partnership have been paid • If not paid: assets of the partnership are sufficient to pay such liabilities • consent of all members • certificate is cancelled or so amended as to set forth such withdrawal or reduction of the contribution Limited partner may demand return of his contribution provided requisites 1 & 3 are complied with: • on the dissolution of the partnership. or payment. conveyance. or release in violation of the foregoing provisions is a fraud on the creditors of the partnership. as no. conveyance. Art. conveyance. with general creditors. or release from liability if it will prejudice the right of third persons • Third persons always enjoy a preferential right insofar as partnership assets are concerned E. Prohibited transactions: • Receiving or holding as collateral security any partnership property • Receiving any payment. transacting other business with it 3. or (2) When the date specified in the certificate for its return has arrived. all limited partners shall stand on the same footing in respect of those matters. A limited partner may have the partnership dissolved and its affairs wound up when: (1) He rightfully but unsuccessfully demands the return of his contribution. preference may be given over other limited partners as to the: • Return of their contributions • Their compensation by way of income • Any other matter Absent such agreement. provided that after such payment is made. A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate. as to their compensation by way of income. 1854. a pro rata share of the assets. 1 & 2 are modified by the requirement of sufficient assets to discharge the obligation of the partnership. 1855. or as to any other matter. a limited partner may rightfully demand the return of his contribution: (1) On the dissolution of a partnership. has only the right to demand and receive cash in return for his contribution. or (3) After he has six months' notice in writing to all other members. and. 1854 does not prohibit absolutely the taking as collateral security by a limited property of any partnership property. whether from property of the partnership or that of a general partner. unless he is also a general partner. 3 allowable transactions: 1. If such an agreement is made it shall be stated in the certificate. A limited partner shall not receive from a general partner or out of partnership property any part of his contributions until: (1) All liabilities of the partnership. either for the return of the contribution or for the dissolution of the partnership. (2) The consent of all members is had. or (2) Receive from a general partner or the partnership any payment. the partnership assets are in excess of all liabilities of the partnership except liabilities to limited . Art. Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority over other limited partners as to the return of their contributions. Return of contribution Art. or the partnership property is insufficient for their payment as required by the first paragraph.’ notice in writing given by him to the other partners if no time is fixed in the certificate for the return of the contribution or for the dissolution of the partnership F. and the limited partner would otherwise be entitled to the return of his contribution. In the absence of any statement in the certificate to the contrary or the consent of all members.Art. or (2) The other liabilities of the partnership have not been paid. unless the return of the contribution may be rightfully demanded under the provisions of the second paragraph. A limited partner also may loan money to and transact other business with the partnership. granting loans to partnership 2. or • upon arrival of the date specified in the certificate for the return. 1856. receiving a pro rata share of the partnership assets with general creditors if he is not also a general partner Art. 1. 1855 By agreement of all members. No limited partner shall in respect to any such claim: (1) Receive or hold as collateral security and partnership property. Art. Subject to the provisions of the first paragraph. No. and in the absence of such a statement all the limited partners shall stand upon equal footing. if no time is specified in the certificate. a limited partner.

Assign interests Art. must give the assignee the right to become a limited partner 2. A limited partner shall not become liable as a general partner unless. civil interdiction. being thereunto empowered by the certificate. A limited partner's interest is assignable. All the members must consent to the assignee becoming a substituted limited partner OR the limited partner. or to file a petition for its cancellation or amendment as provided in Article 1865. The interest may be redeemed with the separate property of any general partner. • Conditions for exemption: • On ascertaining the mistake. Person erroneously believing he is a limited partner Art. or in general partnership thinking that it is a limited one. and such power as the deceased had to constitute his assignee a substituted limited partner. provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business. in addition to the exercise of his rights and powers as a limited partner. death. by reason of his exercise of the rights of a limited partner. 1861. The certificate must be amended in accordance with Art. The certificate as amended must be registered in the SEC. he takes part in the control of the business. A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership. Nothing in this Chapter shall be held to deprive a limited partner of his statutory exemption. The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner. and may appoint a receiver. but may not be redeemed with partnership property. Art. 1859. G. or the return of his contribution. If the certificate contains a false statement. and make all other orders. • Creditor of a limited partner may apply to the proper court for an order charging the limited partner’s interest in the partnership for the payment of his claim. Substitution. and is subject to all the restrictions and liabilities of his assignor. has no right to require any information or account of the partnership transactions or to inspect the partnership books. On the death of a limited partner his executor or administrator shall have all the rights of a limited partner for the purpose of setting his estate. 1862. J. Without prejudice to the provisions of Article 1848. who does not become a substituted limited partner. or (2) Subsequently. addition of a limited partner does not necessarily dissolve the partnership. or other compensation by way of income. • This article provides exemption from general liability of a person who contributed capital with an erroneous belief that he has become a limited partner in a limited partnership. except those liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. to which his assignor would otherwise be entitled. 1847. is not. H. he promptly renounces his interest in the profits of the business or other compensation by way of income . a general partner with the person or in the partnership carrying on the business. The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under Articles 1847 and 1848. I. The substituted limited partner has all the rights and powers. insanity. An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with Article 1865. Right of creditor Art. Art. he is only entitled to receive the share of the profits or other compensation by way of income. An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor. but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate. insolvency. On due application to a court of competent jurisdiction by any creditor of a limited partner. or bound by the obligations of such person or partnership. gives the assignee that right. Effect of death Art. An assignee. withdrawal. The remedies conferred by the first paragraph shall not be deemed exclusive of others which may exist. 1865 3. a person who has contributed to the capital of a business conducted by a person or partnership erroneously believing that he has become a limited partner in a limited partnership. 1852. 1848. directions and inquiries which the circumstances of the case may require. the court may charge the interest of the indebted limited partner with payment of the unsatisfied amount of such claim. one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew the statement to be false: (1) At the time he signed the certificate. being empowered by the certificate.partners on account of their contributions and to general partners. • Requisites in order that the assignee may become a substituted limited partner: 1.

except those to limited partners on account of their contribution. • Those to general partners in respect to capital. and a dissolution is not effected until there has been compliance with this requirement. Where. the dissolution is by the express will of the partners. however. A limited partnership may be dissolved for: ⁃ the misconduct of a general partner ⁃ for fraud practiced on the limited partner by the general partner ⁃ Art. Settling accounts after • • • L. unless there is only one limited partner. 1860 ⁃ when all the limited partners ceased to be such – Art. the certificate shall be cancelled. Dissolution Any of such causes in 1860 affecting a limited partner does not result in its dissolution. • Those to general partners other than for capital and profits. and to general partners. 1844 (1e) ⁃ by mutual consent of the partners before the expiration of the firm’s original term When the firm is dissolved by the expiration of the term fixed in the certificate. • Those to general partners in respect to profits. . notice of the dissolution need not be given since the papers filed and recorded in the SEC are notice to all the world. • Those to limited partners in respect of their capital contributions. dissolution Order of Payment: Limited Partnership (1863) • Those owing to creditors.• • (interest must be renounced before partnership has become liable to 3rd persons in good faith) His surname does not appear in the partnership name He does not participate in the management of the business K. 1864 (1) ⁃ expiration of the term for which it was to exist – Art. • Those to limited partners in respect to their share of the profits and other compensation by way of income in their contributions.

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