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NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION

Kenneth and King C. Hizon _________________________________________________________________________________________________________________

UNIVERSITY OF SANTO TOMAS
Faculty of Civil Law
BAR REVIEW

NOTES ON CIVIL LAW REVIEW II:
PARTNERSHIP, AGENCY, TRUSTS
LEASE AND PRESCRIPTION

TITLE IX
PARTNERSHIP NOTE: Persons who attempt but fail to form a corporation and who
carry on business under the corporate name occupy the position of
CHAPTER 1 partnership inter se. Such a relation does not necessarily exist
General Provisions however for ordinarily persons cannot be made to assume the
relation of partners as between themselves when their purpose is
Article 1767. By the contract of partnership two or more persons that no partnership shall exist. No de facto partnership was created
bind themselves to contribute money, property, or industry to a among the parties which would entitle the petitioner to a
common fund, with the intention of dividing the profits among reimbursement of the supposed losses of the proposed corporation.
themselves.
PARTNERSHIP BETWEEN HUSBAND AND WIFE: The better view is
Two or more persons may also form a partnership for the exercise that they can enter into a partnership, so long as it does not violate
of a profession. (1665a) the fundamental provisions on conjugal partnerships, and so long as
the partnership is not universal.
Q: What is a (Business) Partnership?
NATURE OF PARTNERSHIP, A MERE PRIVILEGE
It is a contract between 2 or more persons who bind themselves to
contribute money, property or industry to a common fund with the The organization of a partnership is not a matter of absolute right
intention of dividing the profits among themselves (Pineda, 2006). but a privilege which may be enjoyed only under such terms as the
State may impose (Pineda, 2006).
Q: What is a Professional Partnership?
NOTE: Before the NCC, there are 2 kinds of partnerships: (1) civil;
0 It is a contract where two or more persons who do not contribute and (2) commercial or mercantile partnership. Now, they are
money or property may also form a partnership for the exercise of a governed by the NCC. There is no more distinctions between them
profession (Pineda, 2006). (Pineda, 2006).

REQUISITES FOR A CONTRACT OF PARTNERSHIP KINDS OF PARTNERSHIPS (Pineda, 2006)

0 Mutual contribution to a common stock As to nature Commercial Organized for the pursuit of
1 A joint interest in the profits business or trade
Professional Organized for the exercise of
NOTE: Without a common fund, there can be no partnership profession
(Pineda, 2006).
As to With a fixed Organized for a specific period.
NOTE: The consent to contribute to a common fund cannot be duration term Upon its expiration, it is
implied from the mere fact that a man and a woman lived together dissolved unless continued by all
in a state of concubinage the partners or by some of them
(Art. 1830, 1785)
COMMERCIAL CREDIT MAY ALSO BE CONTRIBUTED: Provided that At will Organized without any definite
the notice thereof is given the debtor. However, political credit period; not formed for a specific
cannot be contributed to the partnership. undertaking and is terminable at
anytime by the agreement or
INTENT CONTROLLING: Although the fact that parties to an consent of the parties.
agreement may refer to their relationship as one of a partnership is a
circumstance entitled to great weight in determining whether As to legality De jure One which has complied with all
partnership really exists, it is not conclusive. of its partnership the necessary requisites for its
organization lawful establishment.
In determining whether or not a particular transaction constitutes a De facto One which has failed to observe
partnership, their intention as disclosed by the entire transaction, partnership the requisites for its lawful
and as gathered from the facts and from the language employed by establishment.
them, as well as their conduct should be ascertained.

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________
As to Real partnership One which really exists between Principal Its life does not depend on the existence of another
exercise and and among partners themselves contract unlike a mortgage which depends upon a
rd
its relation and also as to 3 persons. contract of loan
to third Partnership by Not really a partnership but is Onerous Requires consideration consisting in the contribution
persons estoppel deemed a partnership only in of money, property or industry
relation to transacting third Preparatory After its constitution, another contract essential in
persons. the accomplishment of its purposes may be entered
into by the partners
It arises from acts of Capable of It is endowed with legal personality unless it is an
misrepresentation which may be suit unlawful partnership. It can sue and be sued.
oral or written or by conduct. Profit It is for the common benefit or interest of the
oriented partners (Art. 1770); its purpose must be for profit
rd
BASIS: To protect 3 persons and not just for the common enjoyment of the
who have relied on the property, money, etc. or else it is one of co-
misrepresentation of the alleged ownership.
partners who are called partners
by estoppel. KINDS OF PARTNERSHIP UNDER THE NCC

As to public Open One whose existence is made AS TO Real partner One who is really a
perception partnership known to the public MEMBERSHIP contributing member of an
Secret One whose existence is not existing legal partnership like
partnership made known to the public a general, limited or
industrial partner
As to its Universal One which has for its object all Partner by One who is not really a
object the present property or all the estoppel or partner but represents
profits (Art. 1778 and 1780) quasi-partner himself as one. He is liable as
Particular One which has for its object a partner so that innocent
determinate things, their use or third persons who relied on
fruits or the exercise of s his representation shall not
profession or vocation or be prejudiced
specific undertaking (Art. 1783)
AS TO Continuing One who continues the
NATURE OF THE RELATIONSHIP BETWEEN PARTNERS CONTINUATION partner partnership business after
OF THE the dissolution of the
It is essentially fiduciary. They are required to exercise the highest BUSINESS partnership due to the
degree of good faith. Each is a confidential agent of the other. Thus, AFFAIRS AFTER reasons stated in Art. 1840
a partner cannot, to the detriment of the other apply to his own DISSOLUTION
benefit the results of the knowledge and information gained in the Discontinuing One who does not participate
character of a partner (Pineda, 2006). partner in the partnership business
after its dissolution
PRINCIPLE OF DELECTUS PERSONAE
AS TO VALUE OF Majority One whose contribution
This means that no one become member of the partnership without CONTRIBUTION partner represents the majority or
the consent of all partners (Pineda, 2006). controlling interest
Nominal One whose contribution
JURIDICAL RELATIONS ARISING FROM THE PARTNERSHIP partner represents only a minority
interest
0 Between and among the partners themselves;
1 Between partners and the firm; AS TO EXPOSURE Secret partner One who participates in the
rd
2 Between the firm and 3 persons who may have TO PUBLIC profits and losses of the firm
contracted with it; and PERCEPTION but is not publicly known as a
3 Between the partners and such third persons (Pineda, partner. He participates in
2006). the affairs of the firm but his
involvement is not ostensible
CHARACTERISTICS OF A CONTRACT OF PARTNERSHIP Silent partner One who does not take any
(Pineda, 2006). active part in the partnership
although he may be known
Fiduciary Based on trust and confidence to be a partner. However, he
Nominate It has a specific name shares in the profits and
Consensual Perfected by mere consent although in certain cases, losses
formalities are required for validity (Art. 1771) Ostensible One who publicly takes active
Bilateral or 2 or more persons must be involved in the contract partner part in the business of the
multilateral

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________
firm and at the same time is partner or persons only to the extent of
publicly known as a partner special partner his contribution. His liability
Dormant One who does not take active is limited to a fixed amount,
partner part in the partnership that is, only up to his capital
business and is not publicly contribution unlike the
known as a part. general partner
Capitalist- One who contributes both
AS TO NATURE Original One who is a member of the industrial capital and industry
OF MEMBERSHIP partner partnership from the time of partner
its commencement as a
juridical person AS TO Managing One who actively manages
Incoming One who is not an original MANAGEMENT partner the business or affairs of the
partner member of the partnership. firm. He may be designated
He becomes a member in the articles or after the
subsequent to the constitution of the firm by
establishment of the firm or agreement of the partners
one who is to be admitted by Silent partner One who does not participate
the consent of all the in the management of the
members business or affairs of the firm
through he may be known as
AS TO STATE OF Surviving One who remains alive while a partner. He shares in the
SURVIVORSHIP partner one of the partners dies or profits and losses
one who continues to be in Liquidating One who liquidates or winds
the partnership after its partner up the affairs of the firm
dissolution by reason of the after its dissolution.
death of a partner
Deceased One who died while being a OTHER SPECIAL Subpartner One who associates with a
partner member of the partnership. CLASSIFICATIONS real partner in connection
He shares in the partnership with the latter’s share in the
will be paid to his legal partnership, but he is not a
representatives member of the said
partnership. A subpartner is
AS TO THE Expelled One who is expelled from the related only to the regular
EFFECT OF partner partnership by the other partner but not to the
EXPULSION partner/s for a valid cause partnership itself. He may be
Expelling Partner who caused the admitted only with the
partner expulsion of a partner for a consent of all the other
valid cause partners
Retiring One who withdraws or
AS TO THE Capitalist One who contributes capital partner retires from the partnership
NATURE OF partner (money or property). He Quasi-partners Those who represent
CONTRIBUTION cannot engage in other or partners by themselves as partners
business which competes estoppel although there is really no
with the business of the firm organized partnership.
unless there is a stipulation Nevertheless, they are bound
to the contrary. He is liable as partners in fact with
for the for the losses respect to third persons who
Industrial One who does not contribute deal with them and who
partner capital but only his industry relied on the former’s
or labor. He cannot engage in representation
any other business without
the express consent of the TEST OF EXISTECE OF PARTNERSHIP: What determines whether the
other partners. His industry transaction between the parties constitutes a partnership is their
or labor is supposed to be for intention as manifested by the entire transaction, attendant facts,
the firm alone language used and conduct of the parties (Pineda, 2006)

AS TO LIABILITY General One whose liability to third
partner or real persons extends to his
partner separate property when the
assets of the firm had been
exhausted
Limited One who is liable to third

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________

PARTNERSHIP v. CORPORATION (Pineda, 2006) PARTNERSHIP v. CO-OWNERSHIP (Pineda, 2006)

PARTNERSHIP CORPORATION PARTNERSHIP CO-OWNERSHIP
As to creation or establishment As to creation or establishment
By agreement of the parties By law or by incorporation under Created or established by It may be created without
the Corporation Code contract only whether expressly contract such as by law, other
As to commencement of legal personality or impliedly by conduct generating incidents like
It becomes a juridical person It becomes a juridical person confusion (Arts. 472, 473, 2170)
from the time the contract from the date of issuance of and succession (Art. 1078)
begins to exist Certificate of Registration by the As to Juridical personality
SEC It has a legal or juridical It has no legal or juridical
As to Lifetime personality from the time of personality
No time limit provided by law Not more than 50 years establishment
As to the power to bind As to lifetime
Partners, as a rule, are agents of It is the Board of Directors The law does not fix a time limit Term of co-ownership must not
the partnership. They can bind (Trustees) which binds the exceed 10 years
the partnership and their corporation. stockholders are As to effect of transfer of interest
partners not agents of the corporation Transferee cannot be a partner Co-owner can dispose of his
As to nationality as a juridical person without the consent of all the share in the property and the
It is a national of the country GR: It is a national of the partners transferee becomes a co-owner
where established country under whose laws it was without need of the consent of
incorporated except in time of the others
war where nationality of the As to purpose
controlling stockholders Intended for profit Intended for collective
prevails. The exception applies enjoyment
also in the acquisition of land, As to power to represent
natural resources and ownership GR: There is mutual power to GR: There is no mutual power to
or operation of public utilities. represent one another represent the co-owners except
As to extent of liability in ejectment cases as plaintiffs
Partners are liable with their Incorporators are liable only for As to effect of death
private property beyond the the amount of their subscribed It dissolves the partnership It does not dissolve the
amount of their contributions capital stocks, unless they act partnership
except limited partners unless with fraud
there is stipulation PARTNERSHIP v. AGENCY
As to management
When management is not Power to do business and An agent does not act for himself but only for his principal. However,
agreed upon, every partner is an management of its affairs are a partner is both a principal and an agent. He is a principal for his
agent of the partnership vested in the board of directors own interests but an agent for the partnership and for other
As to suit for mismanagement partners (Pineda, 2006).
A partner may sue as a A stockholder cannot sue in his
mismanaging partner name members of the BOD who PARTNERSHIP v. JOINT ADVENTURE
mismanage the corporation. The
suit must be in the name of the The outstanding difference is that a joint adventure relates to a
Corporaiton single transaction, although it may comprehend a business to be
As to Transferrability of Interest continued over several years, while a partnership relates to a general
Transferee does not become a Transfer makes the transferee a and continuing business of a particular kind. (Pineda, 2006)
partner unless all other partners stockholder. Consent of others is
give their consent not required CORPORATION CANNOT ENTER INTO A PARTNERSHIP: A
As to causes of dissolution corporation cannot enter into a partnership with another person or
a. Death Said causes are not grounds for entity. The reason is that if it be so allowed, it can be bound by
b. Insanity termination of the corporation persons who do not constitute the BOD. Corporations are bound
c. Retirement only by their BOD. However, they may engage in joint ventures with
d. Insolvency others (Pineda, 2006).
e. Civil interdiction
f. Termination of period Article 1768. The partnership has a juridical personality separate
or purpose of the and distinct from that of each of the partners, even in case of
partnership failure to comply with the requirements of article 1772, first
g. Expulsion paragraph. (n)

JURIDICAL PERSONALITY OF PARTNERSHIP: In case of suit against a
partnership, a partner, being represented by the firm, has no right to
appear or be made a party as an individual separate from the firm.

if the contribution of the establish a partnership. Hizon _________________________________________________________________________________________________________________ Article 1770. the partnership will be sustained if the illegal IT IS AS GOOD AS A WRITTEN ONE: Partnership exists as long as its object can be separated from legal objects of the partnership. (n) property. 2006). A partnership may be constituted in any form. the profits shall be confiscated in favor of the State. whether such-co-owners or co. Article 1771. (1667a) possessors do or do not share any profits made by the use of the property. LEASE AND PRESCRIPTION Kenneth and King C. though the amount of thousand pesos or more. goodwill of a business or other property by installments or otherwise. It may sue and be sued in its own name. among themselves (Pineda. establish a partnership. shall appear in a payment vary with the profits of the business. but no such inference shall be drawn if such profits were received in payment: REQUISITE TO BIND THIRD PERSONS: Where immovable property 23 As a debt by installments or otherwise.NOTES ON PARTNERSHIP AGENCY. participation in profits is prima facie. any property from which the returns are derived. 2006). and may be rebutted or outweighed by other circumstances. in which case a public instrument shall be necessary. an money. . The partners may recover the capital rules shall apply: contributed by them because the action for that purpose does not 23 Except as provided by article 1825. such as evidence that the But the mere failure to register the contract of partnership does not participation was referable to some other reasons such as invalidate the same as among the partners. RIGHT TO DEMAND CAPITAL: Only the fruits of an unlawful Article 1769. the partnership business is prima facie evidence that he is a partner in the is valid even if it is orally agreed or organized (Pineda. which must be recorded in the Office of the 27 As the consideration for the sale of a Securities and Exchange Commission. and it can be assumed that the members know the contents of the contract. Article 1772. had been constituted and the inventory properly made. (n) Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the JOINT OWNERSHIP OF PROPERTY: Joint ownership of business or members thereof to third persons. 25 As an annuity to a widow or representative of a deceased partner. When an unlawful partnership is dissolved by a judicial decree. not partners as to each other are not partners as to third persons. broker. salesman or has the essential requisites. 2006) business. to bind third 24 As wages of an employee or rent to a persons. rd registration is to give notice to the 3 parties. public instrument. the contract of partnership must be registered with the landlord. (1666a) because of the death of a partner. notwithstanding that profits are shared. so long as the contract compensation for services rendered as agent. IF ENTERED ORALLY. 2006). it may be adjudged and must be established for the common benefit or interest of the insolvent although its members may not be insolvent. ILLEGAL PURPOSE SEPARABLE: When a partnership is sought to be formed for several purposes. requisites are present: JURIDICAL DISSOLUTION OF UNLAWFUL PARTNERSHIP: No 0 Two or more persons bind themselves to contribute confiscation can be lawfully effected without due process of law. Registry of Property where the immovable is located. 26 The receipt by a person of a share of the profits of a NOTE: If personal property or money is contributed. sharing them have a joint or common right or interest in even if the amount of the capital contributed is in excess of P500. A partnership must have a lawful object or purpose. partnership is illegal. In determining whether a partnership exists. in money or property.000. without prejudice CASES FILED AGAINST PARTNERSHIP WILL NOT BE DISMISSED BY to the provisions of the Penal Code governing the confiscation of REASON OF DEATH OF A PARTNER: A case will not be dismissed the instruments and effects of a crime. these partnership are confiscated. because the main purpose of otherwise. EFFECT OF FAILURE TO REGISTER: Partnerships with a capital of less than P3. persons who are have to be based on the existence of the partnership. property or industry to a common fund action is therefore necessary to give the partners the opportunity to 1 Intention on the part of the partners to divide the profits defend themselves (Pineda.00. except 24 Co-ownership or co-possession does not of itself where immovable property or real rights are contributed thereto. COVERAGE OF CONFISCATION: Article 1770 authorizes only the NOTE: It may be constituted in any form. contributed thereto. 2006). Every contract of partnership having a capital of three 26 As interest on a loan.000. whether or not the persons partners is not in the form of immovables or rights in immovables. TRUSTS. FORM OF CONTRACT: An oral contract of partnership is perfectly 25 The sharing of gross returns does not of itself valid and binding between the parties.00 because the article requires only those with capital SHARING IN PROFITS: The presumption of partnership arising from a of P3.00 or more to register with the SEC. a public instrument is confiscation of profits but not the contributions of the partners necessary only when immovable property or real rights are which constitute the capital of the partnership (Pineda. partners. does not itself create a partnership. and only one of the purposes of the CONTRACT OF PARTNERSHIP IS CONSENSUAL. where a partnership possessing a personality distinct from any of the partners (Pineda. If a partnership commits an act of insolvency.

Art. title is passed to the buyer or grantee. partnership and one or more limited partners. In his contribution to the partnership (Pineda. 2006). (n) partnership General partners are liable even with their individual and separate properties to partnership ACQUISITION UNDET PARTNERSHIP NAME: All property of whatever creditors after the assets of the firm had been nature contributed to the partnership becomes the property of such exhausted partnership. CLASSIFICATION OF UNIVERSAL PARTNERSHIP: ND 23 Universal partnership of all the present property of the RECONCILIATION BETWEEN THE 2 SENTENCE OF ART. subject to inscription in the Registry of Property. as well as all the profits which they may must be alienated in the name of the said partner or partners. with third persons. personal property need not be conveyed in the name of the partnership (Pineda. if the immovable property is in the name of the firm but conveyed by . PARTICULAR PARTNERSHIP enumerated in the following article. If the law requires a document or other special form. A contract of partnership is void. a partnership may be general or limited. whose articles are kept register. Title so acquired can be General One where all the partners are general partners. (1672) IMPLICATION OF REFERENCE TO IMMOVABLE: The article expressly refers to immovable property. Any immovable property or an interest therein may As to liability of partners be acquired in the partnership name. 2006). only the equitable interest is Their failure to register does not affect the liability of the partnership passed to the buyer or grantee who acted in good faith (Pineda. and wherein any one of the members may contract in his own name with third persons. if it is in the name of the partner or partners. (1669) property is not made. shall have no Article 1773. it them to a common fund. Such property acquired by the firm may be conveyed Limited One where there is one or more general partners. only in the partnership name (Pineda. As to its object. and their 2006). Also. once the contract has been Universal One which has for its object all the present property perfected. (1671a) Article 1357. secret among the members. and attached to the public instrument. signed by the parties. 1783) Article 1774. because without its designation and description. 1819 with the present Article. they cannot be The law on co-ownership and not partnership shall govern. (1279a) their use or fruits or the exercise of s profession or vocation or specific undertaking (Art. and shall be governed by the provisions immovable property is contributed thereto. whenever juridical personality. TRUSTS. they may. Being void. LEASE AND PRESCRIPTION Kenneth and King C. Article 1777. 1819: “Real property” should be considered strictly “immovable 24 Universal partnership of all the profits derived by the property”. 2006). (1668a) ASSOCIATIONS AND SOCIETIES. A limited partner is one whose liability is limited only to the extent of NOTE: The present article will not apply if the firm has no name. While they cannot sue for lack of judicial personality. ORAL CONTRACT OF PARTNERSHIP: An oral contract of partnership Article 1776. be sued by third persons under the “common name” they made. conveyed only in the partnership name. if an inventory of said relating to co-ownership. the partners cannot invoke Article 1357 to compel the others to execute the articles of partnership (Pineda. contract. A universal partnership may refer to all the present property or to all the profits. Hizon _________________________________________________________________________________________________________________ a partner or some in his or their names.NOTES ON PARTNERSHIP AGENCY. 1774 & partners ART. 2006). 2006). it must be alienated in the the partners contribute all the property which actually belongs to name of the firm. (1673) both. 2006). However. 1819 (pars. use (Pineda. rd and the members to 3 persons. particular. The contract is declared void by law when no such inventory is however. 3. 4&5) recognizes the possibility that title partners in their business (Pineda. 2006) case of conveyance. This right may be exercised or all the profits (Art. A partnership of all present property is that in which property” is in the name of the firm. WHOSE ARTICLES ARE KEPT SECRET: Where the articles of such groups are kept secret among the EFFECT OF OMISSION: The execution of the public instrument would members and where anyone of them may contract in his own name be useless if there is no inventory of the property contributed. to real property may be in the name of the partner. Associations and societies. the same shall have no legal personality to sue. the partnership still has juridical personality even if it fails to Article 1775. it must be in the name of the partner/s (Pineda. To reconcile Art. as in the acts and contracts UNIVERSAL v. Impliedly. or some of the partners or all of the partners. a partnership is either universal or is void if immovable property is contributed to the partnership. In acquire therewith. the rule to follow should be: If the “immovable Article 1778. the contracting parties may compel each other to As to object observe that form. with the intention of dividing the same among themselves. contribution cannot prejudice third persons. 1778 and 1780) simultaneously with the action upon the Particular One which has for its object determinate things. 2006): As regards the liability of the partners. (Pineda.

their use or fruits. Hence. only the usufruct passing to the away. (1674a) Article 1782. but the property which the partners may acquire the universal partnership of present property would be onerous or subsequently by inheritance. PARTNERSHIP OF ALL things. and without the latter partnership. property of the partners. house property of all the partners and Only the usufruct (use and 24 Profession. practice of medicine the partnership fruits) shall become common by doctors. TRUSTS. When one of them makes a transaction while the other is continues to be his private property. UNIVERSAL PARTNERSHIP OF ALL PROFITS Article 1783. or the exercise PRESENT PROPERTY PROFITS of a profession or vocation. or a specific undertaking.to paint a building or develop a Only the profits derived from All profits acquired through the subdivision the property contributed “industry or work” of the common property but not partners become common profits arising from other property (Pineda. Articles of universal partnership. only constitute a universal partnership constitution of the partnership. having agreed to be a party to such deal.to buy and sell a particular lot and which become common continue to pertain to them. LEASE AND PRESCRIPTION Kenneth and King C. may by stipulation be considered as common property for the enjoyment of all . 2006). A particular partnership has for its object determinate UNIV. partnership. legacy. entered into without property which belonged to each of the partners at the time of the specification of its nature. The latter profits. only the usufruct passing to the in the practice of law. PARTNERSHIP OF ALL UNIV. or donation cannot be more burdensome (Pineda. as well as all the profits which they may acquire therewith. becomes the common property of of profits. Movable or immovable property which each of the partners may PARTICULAR PARTNERSHIPS-one composed of entirely industrial possess at the time of the celebration of the contract shall continue partners. partners Profits 25 Specific undertaking. account of the individual who executes it. included in such stipulation. and that if estate deals. devise. such each deal. ascendants) by reason of his office (Pineda. as in the case of 2 or more lawyers associating themselves to pertain exclusively to each. (1676) all the partners. (1678) Coverage All the present property actually Property which the partners Examples: belonging to the partners are owned at the time of the contributed to the partnership celebration of the contract shall 23 Determinate thing. it must be considered as a particular partnership for they did. existence of the partnership. If they have. it cannot be said that this particular deal is for their joint account but must be held only for the UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY v. A universal partnership of profits comprises all that of the same the partners may acquire by their industry or work during the 27 A person and a public officer (or his wife. 2006). (1675) When 2 individuals have not formed a general relation of PARTNERS’ PRIVATE PROPERTY: It might happen in partnerships that partnership but they have been jointly associated in various real no one of the partners would have any private property. descemdants. without using any funds of the latter. 25 Parties guilty of adultery or concubinage 26 Criminals convicted for the same offense in consideration Article 1780. donation cannot be included in the stipulation in universal (1677) partnership of present property: PERSONS DISQUALIFIED FROM ENTERING INTO UNIVERSAL 23 They are not present property. there is a partnership of industrial property.NOTES ON PARTNERSHIP AGENCY. 2006). To consider the partnership as one of also be made. In a universal partnership of all present property. except the fruits thereof. Persons who are prohibited from giving each other Reasons why subsequently acquired inheritance. legacy. the Article 1781. They are future property at PARTNERSHIP: the time of the constitution of the partnership 24 Things to be contributed to the partnership must be 23 Legally married spouses (however. Hizon _________________________________________________________________________________________________________________ Article 1779. known and certain a particular partnership like the exercise of a profession or 25 A universal partnership of all present property constitutes vocation a donation of property but future property cannot be 24 Common law spouses donated. Ratio: There is less obligation in universal partnership of profits considering that the properties owned by the partners are retained A stipulation for the common enjoyment of any other profits may by them in naked ownership. spouses may enter into determinate. the usufruct would be inconsiderable. or any donation or advantage cannot enter into universal partnership.practice of law by lawyers. however.

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________

CHAPTER 2 WARRANTIES OF A PARTNER
Obligations of the Partners
23 Warranty against eviction
SECTION 1 24 Warranty against hidden defects
Obligations of the Partners Among Themselves
CONTRIBUTION OF CREDIT: The partner warrants only its existence;
Article 1784. A partnership begins from the moment of the he does not warrant the solvency of the debtor unless expressly so
execution of the contract, unless it is otherwise stipulated. (1679) provided

COMMENCEMENT OF EXISTENCE 0F A PARTNERSHIP- Being a REASON FOR WARRANTY: The obligation of warranty against
consensual contract, it exists from the declaration of the celebration eviction is the necessary consequence of the nature of the
of the contract even if no contributions had been made yet as long partnership which is an onerous contact like a contract of sale. A
as the elements of a contract are present (Pineda, 2006). partner shall not contribute something that he does not own at the
time of the delivery. When the thing is delivered to the firm, the
AGREEMENT TO FORM PARTNERSHIP: A partnership in fact cannot latter shall from the time of delivery have the right to enjoy the legal
be predicated on an agreement to enter into a co-partnership at a peaceful possession of the thing (Pineda, 2006).
future day unless it is shown that such agreement was actually
consummated. So long as an agreement remains executor, the NOTE: There is still warranty if the thing delivered only for the “use”
partnership is inchoate. of the firm (Pineda, 2006).

Article 1785. When a partnership for a fixed term or particular REMEDY FOR BREACH:
undertaking is continued after the termination of such term or
particular undertaking without any express agreement, the rights 23 In case of eviction, the proper remedy is to recover the
and duties of the partners remain the same as they were at such proper indemnity from the partner
termination, so far as is consistent with a partnership at will. 24 And, if the partners can prove that they would not have
A continuation of the business by the partners or such of them as entered into the partnership contract, had it not been for
habitually acted therein during the term, without any settlement or the contribution which has been lost through the eviction,
liquidation of the partnership affairs, is prima facie evidence of a they may ask for the dissolution of the partnership
continuation of the partnership. (n)
RULE WHEN CREDIT IS CONTRIBUTED: If what is contributed is
NOTE: Dissolution is not termination because there is still a winding credit, the contributing partner will only warrant its existence but
up of the partnership affairs authorized by law. After the partnership not the solvency of the debtor unless there is a contrary stipulation
affairs have wound up, the partnership is said to have terminated (Pineda, 2006).
(Pineda, 2006).
Article 1787. When the capital or a part thereof which a partner is
PARTNERSHIP AT WILL- The actual continuation of the affairs of the bound to contribute consists of goods, their appraisal must be
partnership, after the termination of its period or accomplishment of made in the manner prescribed in the contract of partnership, and
its purposes, by the habitual managers is prima facie evidence of its in the absence of stipulation, it shall be made by experts chosen by
continuation as such partnership. The resulting partnership as the partners, and according to current prices, the subsequent
continued is called “partnership at will” because the existence changes thereof being for account of the partnership. (n)
depends upon the will of the partners or on the will of any one of
them (Pineda, 2006). RULE WHEN CONTRIBUTION IS IN GOODS: When a partner
contributes goods as capital, the amount thereof must be
Article 1786. Every partner is a debtor of the partnership for determined by proper appraisal of the value thereof at the time of
whatever he may have promised to contribute thereto. contribution (Pineda, 2006).

He shall also be bound for warranty in case of eviction with regard If there is a mode of appraisal agreed upon, same must be complied
to specific and determinate things which he may have contributed with. If there is none, same must be determined by experts chosen
to the partnership, in the same cases and in the same manner as by the partners (Pineda, 2006.
the vendor is bound with respect to the vendee. He shall also be
liable for the fruits thereof from the time they should have been SUBSEQUENT CHANGES IN VALUE: Any subsequent increase or
delivered, without the need of any demand. (1681a) decrease in value of the property contributed will be for the account
of the firm (Pineda, 2006.
DUTIES OF CONTRIBUTING PARTNERS:
Article 1788. A partner who has undertaken to contribute a sum of
23 To deliver what he has undertook to contribute money and fails to do so becomes a debtor for the interest and
24 To answer for his breach of warranty damages from the time he should have complied with his
25 To answer for the undelivered or delayed fruits (Pineda, obligation.
2006) The same rule applies to any amount he may have taken from the
partnership coffers, and his liability shall begin from the time he
converted the amount to his own use. (1682)

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________
EFFECT OF FAILURE TO PAY CONTRIBUTION: Such will make the Article 1790. Unless there is a stipulation to the contrary, the
partner indebted to it, with interest and any damages occasioned partners shall contribute equal shares to the capital of the
thereby, but does not entitle the other partner or partner to demand partnership. (n)
rescission of the partnership contract.
Article 1791. If there is no agreement to the contrary, in case of an
Ex: A partner in a construction venture who failed to stand by his imminent loss of the business of the partnership, any partner who
commitment to the partnership will be ordered to reimburse to his refuses to contribute an additional share to the capital, except an
co-partner whatever the latter invested and spent for the projects of industrial partner, to save the venture, shall he obliged to sell his
the venture. interest to the other partners. (n)

INDEMNIFICATION FOR DAMAGES: Includes: GR: CAPITALIST PARTNERS NOT OBLIGED TO CONTRIBUTE
0 Losses suffered ADDITIONAL CAPITAL IN CASE OF IMMINENT LOSS OF THE
1 Profits the obligee failed to obtain BUISNESS

ACCOUNTING FOR PARTNERSHIP FUNDS: Where a partner, without XPN: Unless there is an agreement to the contract. In such case, he
any authority, takes and use the money of the partnership in the is obliged to make additional contribution in accordance with the
purchase and acquisition of property which he later registers in his agreement (Pineda, 2006).
own name, he will be required, in a suit for the dissolution of the
partnership, to account to his partners for the money which he used NOTE: General partners, in case of impending loss of the business
in such purchase. are also obliged to make additional contribution to save the
business. If he unjustly refuses, he must sell his interest in the
Article 1789. An industrial partner cannot engage in business for partnership to the other partners
himself, unless the partnership expressly permits him to do so; and
if he should do so, the capitalist partners may either exclude him Ratio: His lack of cooperation and interest should not be rewarded
from the firm or avail themselves of the benefits which he may (Pineda, 2006).
have obtained in violation of this provision, with a right to
damages in either case. (n) Article 1792. If a partner authorized to manage collects a
demandable sum which was owed to him in his own name, from a
PARTNERSHIP OWNS SERVICES: The industry partner does not person who owed the partnership another sum also demandable,
contribute money or property but only his industry. The partnership, the sum thus collected shall be applied to the two credits in
therefore, is considered the owner of his services. proportion to their amounts, even though he may have given a
receipt for his own credit only; but should he have given it for the
The industrial partner himself cannot exploit his own services for his account of the partnership credit, the amount shall be fully applied
profit without the express permission of the partnership. to the latter.

Ratio for the prohibition: To prevent any conflict of interest between The provisions of this article are understood to be without
the industrial partner and the partnership, and to insure faithful prejudice to the right granted to the other debtor by article 1252,
compliance by said partner with his prestation. Hence, during the but only if the personal credit of the partner should be more
existence of the partnership, the industrial partner must devote his onerous to him. (1684)
full time to such partnership.
APPLICATION OF THE ARTICLE: Requisites:
Exception: The prohibition will not apply if the other partners give
the industrial partner express permission to do so (Pineda, 2006). 0 There are 2 separate credits which are both demandable
1 One credit is owing to the partnership
TOLENTINO: Nature of the prohibition: It is absolute and extends to 2 Another credit is owing to the collecting partner who must
all business outside of the partnership, even if the partnership is be a managing partner of the firm (Pineda, 2006).
engaged in only one trade, because if the industrial partner is
allowed to engage in the other business, the partnership will be NOTE: If the collecting partner is not a managing partner, the law will
prejudiced because of the reduction of the time or the effort which not apply (Pineda, 2006).
he will have for it.
Article 1793. A partner who has received, in whole or in part, his
SANCTION AGAINST INDUSTRIAL PARTNER WHO VIOLATES THE share of a partnership credit, when the other partners have not
PROHIBITION: collected theirs, shall be obliged, if the debtor should thereafter
become insolvent, to bring to the partnership capital what he
Exclude the industrial partner from the partnership with received even though he may have given receipt for his share only.
damages (1685a)
Recover the benefits which the industrial partner has gained in
the business where he had engaged himself without the Ratio: When the debtor becomes insolvent, the debt in favor of the
express consent of the firm or of the partners, with partnership becomes a bad debt and is a loss which must be borne
damages (Pineda, 2006). by all the partners, including the partner who has already received
his share in the partnership credit, because they have a community
of interest and a proportionate share in profits and losses.

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________
Article 1794. Every partner is responsible to the partnership for the partnership business, and for risks in consequence of its
damages suffered by it through his fault, and he cannot management. (1688a)
compensate them with the profits and benefits which he may have
earned for the partnership by his industry. However, the courts Reimbursement
may equitably lessen this responsibility if through the partner's
extraordinary efforts in other activities of the partnership, unusual The managing partner may be allowed funds borrowed or advanced,
profits have been realized. (1686a) and necessary for the completion of the work, within the scope of
the business and expressly provided for by the agreement among
NOTE: Damages caused by the faulting partner cannot be offset or partners.
compensated with the profits and benefits which he may have
earned for the partnership by his industry. Example: Where the land tax levied on real property owned by the
partnership is paid by a partner out of his private funds, such partner
Compensation cannot apply because a partner is both a debtor in his is entitled to be reimbursed therefor.
duty to secure profits and benefits for the partnership and also in his
duty to observe diligence in the performance of his obligations as a NOTE: The article does not apply where no money other than that
partner. In compensation, it is required that 2 persons in their own contributed as capital is involved.
rights are creditors and debtors of each other (Pineda, 2006).
NOTE: Even in the case of failure of the business entered into by the
Necessity of Liquidation partnership with third persons, reimbursement must be made to the
paying partner, as long as he is not at fault. The paying partner
For the purpose of adjudicating to a partner damages alleged to should not be liable personally because he is a mere agent of the
have been suffered by reason of the supposed fraudulent partnership (Pineda, 2006).
management of the partnership business by another partner, it is
first necessary that a liquidation of the business be made so that the PAYING PARTNER HAS NO RIGHT OF RETENTION: There is a
profits and the losses may be known and the causes of the latter and difference between an ordinary agent and a paying partner. The
the responsibility of the managing partner, as well as the damages former, if not refunded, may exercise the right of retention of the
which each partner may have suffered, may be determined. things which are the objects of the agency. The paying partner is not
given such authority (Pineda, 2006).
Claim against Deceased Partner
Article 1797. The losses and profits shall be distributed in
Any claim against a deceased partner or his estate, for a sum of conformity with the agreement. If only the share of each partner in
money due the partnership by reason of any misappropriation of its the profits has been agreed upon, the share of each in the losses
fund by him, or for damages resulting from his wrongful acts as shall be in the same proportion.
manager, should be prosecuted against his estate in administration
as provided for in the Rules of Court. In the absence of stipulation, the share of each partner in the
profits and losses shall be in proportion to what he may have
Article 1795. The risk of specific and determinate things, which are contributed, but the industrial partner shall not be liable for the
not fungible, contributed to the partnership so that only their use losses. As for the profits, the industrial partner shall receive such
and fruits may be for the common benefit, shall be borne by the share as may be just and equitable under the circumstances. If
partner who owns them. besides his services he has contributed capital, he shall also receive
a share in the profits in proportion to his capital. (1689a)
If the things contribute are fungible, or cannot be kept without
deteriorating, or if they were contributed to be sold, the risk shall SCOPE: It relates exclusively to the settlement of partnership affairs
be borne by the partnership. In the absence of stipulation, the risk among the partners themselves and has nothing to do with the
of the things brought and appraised in the inventory, shall also be liability of the partners to third persons.
borne by the partnership, and in such case the claim shall be
limited to the value at which they were appraised. (1687) Profits and losses: Where there is an agreement as to the manner of
sharing profits, the losses will be divided in the same proportion. The
NOTE: The owner bears the risk. The rule on res perit domino applies parties can validly stipulate a distribution of losses different from
to determine who bears the risk of loss of property held by the that of the profits, so long as nobody is excluded from the profits or
partnership, except as to fungible things and those under appraisal. the losses.

Although the law refers to appraisal in the inventory, the same NOTE: An industrial partner cannot claim for himself of any part of
solution applies even when the appraisal is separate from the the property contributed; he can share only in the profits and
inventory. benefits in conformity with this article, if the contrary is not
stipulated.
Article 1796. The partnership shall be responsible to every partner
for the amounts he may have disbursed on behalf of the Hibberd v. Estate of McElroy (25 Phil 164)
partnership and for the corresponding interest, from the time the
expense are made; it shall also answer to each partner for the Where a partner has paid certain expenses which represent a loss to
obligations he may have contracted in good faith in the interest of the partnership and there is no income from the partnership to
reimburse him, he has a right to look to the estate of his other
partner for such reimbursement.

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION
Kenneth and King C. Hizon _________________________________________________________________________________________________________________
Article 1800. The partner who has been appointed manager in the
LIABILITY OF INDUSTRIAL PARTNER FOR LOSSES: Although under articles of partnership may execute all acts of administration
the provisions the industrial shall not be liable for the losses, he may despite the opposition of his partners, unless he should act in bad
nevertheless be held liable, if by stipulation, he is specially made to faith; and his power is irrevocable without just or lawful cause. The
participate in the losses (People v. Tenorio, 53 O.G. 8577). vote of the partners representing the controlling interest shall be
necessary for such revocation of power.
“PROFITS” REFER TO NET PROFITS- The profits distributable to the
partners should be reduced by the amounts of the income tax A power granted after the partnership has been constituted may be
assessed against partnership (Pineda, 2006). revoked at any time. (1692a)

Article 1798. If the partners have agreed to in trust to a third POWERS OF MANAGING PARTNER
person the designation of the share of each one in the profits and
losses, such designation may be impugned only when it is A managing partner can be presumed to have all the incidental
manifestly inequitable. In no case may a partner who has begun to powers to carry out the object of the partnership in the transaction
execute the decision of the third person, or who has not impugned of business subject to the exception, however, that when the powers
the same within a period of three months from the time he had are specifically restricted, he cannot exercise the powers expressly
knowledge thereof, complain of such decision. denied him.

The designation of losses and profits cannot be intrusted to one of When the articles of association do not specify the powers of a
the partners. (1690) managing partner, he has the powers of a general agent, and even
more; and when the object of the company is determined, the
Ratio: A partner will have conflict of interest (Pineda, 2006). manager has all the powers necessary for the attainment of such
object.
Article 1799. A stipulation which excludes one or more partners
from any share in the profits or losses is void. (1691) NOTE: Power of managing partner is generally irrevocable. The
power granted after the partnership had been already constituted
Prohibited stipulation: The essence of partnership is that the may be revoked at any time and for any cause. It can be reovoked:
partners share in the profits and losses. The law does not prohibit a 23 Upon showing of just and lawful cause
stipulation in which the distribution of the losses is not in proportion 24 Upon the vote of the partners representing the controlling
to that of the profits; what is prohibited is the exclusion of one or interest (Pineda, 2006).
more partners from the profits or losses.
THE POWER GRANTED AFTER CONSTITUTION OF PARTNERSHIP IS
Effect of such stipulation: The profits and losses will be distributed in REVOCABLE AT ANY TIME. It is a simple contract of agency. It may be
accordance with par. 2 of Art. 1797: revoked any time by the partners representing the controlling
interest (Pineda, 2006).
xx
23 Is the managing partner entitled to compensation for his
In the absence of stipulation, the share of each services as such?
partner in the profits and losses shall be in
proportion to what he may have contributed, 0 It depends. If there is an agreement stipulating that he shall
but the industrial partner shall not be liable for receive compensation, he shall be so entitled to the compensation
the losses. As for the profits, the industrial agreed upon for his services as managing partner. The details of the
partner shall receive such share as may be just compensation will be fixed in the agreement. If there is no
and equitable under the circumstances. If agreement, the managing partner, as a rule, is not entitled to
besides his services he has contributed capital, compensation. He is expected to render free service to the
he shall also receive a share in the profits in partnership for the common benefit of all partners (Pineda, 2006).
proportion to his capital. (1689a)
Article 1801. If two or more partners have been intrusted with the
xx management of the partnership without specification of their
respective duties, or without a stipulation that one of them shall
NOTE: French jurisprudence and writers consider that a violation of not act without the consent of all the others, each one may
the present article nullifies, not only the particular stipulation of the separately execute all acts of administration, but if any of them
profits and losses, but the entire contract of partnership. This should oppose the acts of the others, the decision of the majority
conclusion is maintained by analogy to obligations based on illicit shall prevail. In case of a tie, the matter shall be decided by the
condition, which annuls the obligation dependent on it. partners owning the controlling interest. (1693a)

There is, however, no reason why a stipulation to exempt the REQUISITES:
industrial partner from losses should be void.
0 Two or more partners are appointed managing partners
NOTE: A stipulation exempting the industrial partner from losses is 1 In their appointment papers, there is no specification of their
valid because it is just an affirmation of the law. The prohibition respective duties
applies only to capitalist partners (Pineda, 2006).

person with respect to his share. without the consent of the persons. 2006). even a majority will not suffice. LEASE AND PRESCRIPTION Kenneth and King C. In case it should have been stipulated that none of Example: A partner cannot validly sell or convey the partnership the managing partners shall act without the consent of the others. partnership business. The obligation to secure the consent of the other partner rests upon the partner entering into the contract. be annulled. Such opposition by one partner to whatever any one of them may do alone shall bind the the projected act by another is sufficient to prevent it. unanimous consent is controversy (Pineda. But if the refusal of consent by the other NOTE: It will be valid with respect to the third person who partners is manifestly prejudicial to the interest of the contracted with a partner. goes ahead and executes the acts. resort to the court may be pursued to secure JOINT MANAGEMENT the total consent. 2006). unless the contrary has been SUBPARTNERSHIP: Any partner may form a partnership with another previously manifested to the third person. each manager may execute any acts of administration without asking for the consent of the other managers. (1696) previously obtained the consent of the other. . 2006). in order to avoid an impending prejudice to the partnership (Pineda. Every partner may associate another person with him whether the partner entering into the contract. This is a new provision in the Code. deceit. 2006). his contract with an innocent third (Pineda. Generally. even if required to verify whether the partner entering into the contract has the partner having an associate should be a manager. and if the partnership. and the contract is one within the scope of the (1695a) administration of the partnership. one partner is empowered to contract in the name of the partnership. See Art. Article 1802. the following rules shall be observed: Each manager. the opposition. and the absence or disability of any one of them cannot be alleged. person binds the principal. business without the consent of all the other partners forming the the concurrence of all shall be necessary for the validity of the acts. Hizon _________________________________________________________________________________________________________________ 23 There is no stipulation that one of them shall not act the third person acted in good faith and the transaction refers to without the unanimous consent of all the other partners matters within the business of the partnership. and under such circumstances. 1803 and not to routine transactions. existing partnership separate and distinct from the original or main not only without the consent of the other but even against his will. 2006). such as ordinary purchases and sales for a firm engaged in the business if buying and selling merchandise OPPOSITION of all kinds. It is not required to verify Article 1804. Note that it is only in case of a tie or deadlock ACTS REQUIRING UNANIMITY: For acts of disposition or any that the partner owning the controlling interest will decide in the modification of the partnership articles. the article finds no application Ratio: The necessity of protecting third person from fraud and (Pineda. if such third person was not informed of partnership. NOTE: The article applies only where the articles of partnership Ratio: The partner contracting is an agent of the partnership. the court's intervention may be sought. if partnership (Pineda. all the TIE: In case of tie in the votes. A subpartnership is a sort of partnership within an NOTE: But even if the contract entered into by one partner is made. It is presumed that such consent has been given. not only as among the members but also to third 1 None of the partners may. It is not imposed in his share. (1694) alteration of the property is necessary and the unanimous consent cannot be obtained. unless there is imminent danger of grave or irreparable injury to JUDICIAL INTERVENTION. who had knowledge. make any important alteration in the immovable opposition. NOTE: If there is a designation of the respective duties of the appointed managing partners. however. then the controversy shall be decided partners are considered as agents of the partnership. ignoring such objection. When the manner of management has not been agreed upon. it 1801. SOLIDARY MANAGEMENT Application of the requirement of previous approval by the other partner: It only refers to the execution of formal contracts in writing. WHEN PROPER: When an important the partnership. Their association is called subpartnership. the contract cannot (Pineda.NOTES ON PARTNERSHIP AGENCY. by the partners owning the controlling interest. property of the partnership. naturally come within the scope of the general authority of the manager of a business. partnership. 2006). TRUSTS. shall be void. even if it may be useful to the partnership. and made no provision for the management of the business of the firm within the scope of his authority. Article 1803. of such others. or who could have known. but the associate shall not be admitted into the upon third person who enters into the contract and who is not partnership without the consent of all the other partners. without prejudice to the provisions of article latter. PARTNERS ARE PARTNERSHIP AGENTS: When the articles of Time for the opposition: It must be made before the particular act partnership make no provision for the management of the of administration has become effective. without prejudice to the liability of the guilty partner ot his co-partner. required. has the right to object to any act or 0 All the partners shall be considered agents and operation before it is celebrated.

When. 3 Whenever other circumstances render it just and DUTY TO MAKE DISCLOSURE reasonable. Such fiduciary relation exists only during the existence of the partnership. on his own private account. The capitalist partners cannot engage for their own there a duty on the part of the purchaser of goodwill and business of account in any operation which is of the kind of business in which a firm to store the books so that the former partners may inspect the partnership is engaged. express or implied. original partnership as such terms are mere internal arrangements between the partner and his subpartner (Pineda. (n) for the purpose of inspecting them NOTE: A capitalist partner cannot engage in the business for his own XPN: Equity will intervene to prevent one partner from keeping or account or benefit in a business which is similar to the business of concealing the books the partnership (Pineda. (Pineda. conduct. without necessarily requiring him to dissolve the partnership. The relation between the partners. or when the business will enhance healthy competition absence of any agreement. Article 1805. without any express agreement authorizing such exclusion. does not affect the validity of the contract of partnership nor its contracts Article 1809. each are confidential agent of the NOTE: The terms of the subpartnership are immaterial to the other. NOTE: The partners cannot derive a secret profit from partnership transactions unknown to the others. (n) contract. in the stage when all partnership affairs are wound up or completed. Every partner must account to the partnership for any XPN: Dissolution benefit. TRUSTS. GR: Each partner should have free access to the partnership books and shall personally bear all the losses. Keeping books in place of business It ends at the termination of the partnership. the legal representative of any deceased partner or of any partner 1 If the right exists under the terms of any agreement. Any partner shall have the right to a formal account as to partnership affairs: Article 1806. even though an active member in the partnership. GR: A partner is not entitled to a formal account Article 1807. and the acquisition of realty does LACK OF BOOKS: Absence of any formal books of the partnership not give the other partners interest therein. at the principal place of business Duration of the fiduciary relation: No fiduciary relation exists of the partnership. and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction NOTE: There is no reason why they should constantly render him connected with the formation. 2006). LEASE AND PRESCRIPTION Kenneth and King C. and not merely during some arbitrary period fo stipulate that the capitalist partners may engage in the same a few days chosen by the managers. Relation of Partners: Partners are required to exhibit towards each he should have the right to demand a formal account from his other the highest degree of good faith. business as that of the partnership if it is perceived that no destructive competition will arise such as when the place of PLACE WHERE THE BOOKS SHOULD BE KEPT: The books shall be operation is far away from the sphere of influence of the placed and kept in a place agreed upon by the partners. 2006) partners but no one partner is obliged to continue the place of business to preserve the books for the benefit of the others. the books to all the different from dissolution (Pineda. or liquidation of the accounts in the formal sense of the word. subject to any agreement between the partners. Hizon _________________________________________________________________________________________________________________ partners is essentially fiduciary. however. and every partner shall at any reasonable hour between persons negotiating for the formation of a partnership have access to and may inspect and copy any of them. under legal disability. It is absence of other agreement. (n) 2 As provided by article 1807. (n) Good faith not only requires that a partner should not make any RIGHT TO FORMAL ACCOUNT false concealment to his partner. 2006).means at reasonable hours on business days XPN TO THE PROHIBITION: The other partners may agree to throughout the year. Partners shall render on demand true and full 0 If he is wrongfully excluded from the partnership information of all things affecting the partnership to any partner or business or possession of its property by his co-partners. The partnership books shall be kept. “Reasonable Hours”. inspect or copy entries in the books for valid purposes ACQUISITION OF REALTY: No prohibition on any of the partners.NOTES ON PARTNERSHIP AGENCY. 2006). the books shall be kept at the principal with the business of the partnership (Pineda. . 2006). RIGHT TO INSPECT Any capitalist partner violating this prohibition shall bring to the common funds any profits accruing to him from his transactions. but also that he should abstain from all concealment. from acquiring realty. have access. he is partnership or from any use by him of its property. In the partnership. nor is Article 1808. contrary. place of business of the firm whereat each partner may come. and on dissolution. Termination is the This article refers to a going partnership. (n) excluded from the business or the possession of partnership property. unless there is a stipulation to the them.

It includes only actual It includes not only the original contributed and promised to the capital contributed but also all Effect of approval of account: The approval of the last and final partnership property subsequently acquired statement of accounts precludes any right on the part of the on account of the partnership complaining partners to a further liquidation. but has no right to possess such 4Right to dissolve the partnership under certain conditions property for his personal or other purposes without the other (Pineda. but each partner’s interest in partnership property is his share in the surplus after partnership debts are paid and the partnership PRINCIPAL RIGHTS: accounts have been settled. but merely from risks in management (Art. there is no duty to account. TRUSTS. except on a claim SECTION 2 against the partnership. unless the latter can (Pineda. 1806) A partner. acquisitions accruing after the termination of the partnership 1 A partner's right in specific partnership property is not (Pineda. To distinguish A partner has no individual property in any specific assets of the these rights from others. Hizon _________________________________________________________________________________________________________________ property of the partnership assets The right to demand an accounting exists as long as the partnership Extent exists. error or mistake in said approval. PARTNERSHIP PROPERTY partnership creditors to have partnership assets applied to firm debts (Pineda. deceit. and 3 A partner's right in specific partnership property is not 25 His right to participate in the management (n) subject to legal support under article 291. 2006) PARTNERSHIP CAPITAL PARTNERSHIP PROPERTY Susceptibility to change in value Example: If A and B are partners and A attempts to assign all his right Its value is constant.NOTES ON PARTNERSHIP AGENCY. Otherwise. show there was fraud. and the law recognizes the change. has an equal right obtained from transactions unrelated to the partnership affairs or with his partners to possess specific partnership property business. It does not Its value varies from time to in some partnership property. The property rights of a partner are: cannot claim any right under the homestead or 23 His rights in specific partnership property. however. This peculiarity of tenancy in partnership partnership is a necessary consequence of the partnership relation. Article 1810. firm. 24 His interest in the partnership. 1809 property for partnership purposes. It is not affected by time in accordance with the possibility of such a transfer C. They constitute property being susceptible of appropriation or exercise by the owner. 0Right to demand reimbursement for amounts he advanced to NOTE: The interest of one partner in the assets of a partnership does the partnership and to indemnity for the burdens arising not entitle him to any particular portion of such assets. or any of them. he has no account. 2006) partners’ consent. If the earnings and acquisitions of a partner are any agreement between the partners. the partnership. after termination of the partnership? The incidents of this co-ownership are such that: 0 A partner. When partnership property is Property Rights of a Partner attached for a partnership debt the partners. 1796) confers upon him a right to an accounting with other members of 1Right to have access and to inspect partnership books (Art. Extent of property right: A partnership has 3 distinct interests arising Transfer of rights: The right of a partner as a co-owner in specific from his partnership: partnership property is not separately assignable or subject to 0 His co-ownership in the specific property of the attachment and execution. has 3Right to demand a formal account of partnership affairs under an equal right with his partners to possess specific partnership the circumstances in Art. or the representatives of a deceased partner. 2006). Article 1811. for partnership purposes. would pro tanto become a partner fluctuations in the value of the fluctuations of the market value with B. (n) PROPERTY RIGHTS: The property rights of a partner are those PARTNER’S INTEREST IN ASSETS enumerated under this article. it is a recognized principle that a former partner’s duty to such property for any other purpose without the consent share profits with his former co-partner may extend to earnings and of his partners. they are referred to as principal rights. to C. exemption laws. subject to agreement between the partners. A partner is co-owner with his partners of specific 0Is there a duty to account for acquisition of earnings and property partnership property. such 1805) partner shall receive the share to which he is entitled. 1 His interest in the partnership as such 2 His right to participate in the management Rationale: This is intended to prevent interference by outsiders in partnership affairs and to protect the right of other partners and PARTNERSHIP CAPITAL v. 2Right to demand true and full information of all things affecting the partnership affairs (Art. and when affairs of the partnership are settled. LEASE AND PRESCRIPTION Kenneth and King C. but he has no right to possess Thus. 2 A partner's right in specific partnership property is not subject to attachment or execution. subject to the provisions of this Title and to 23 It depends. for the rights of A in the chattel are to possess the chattel for . 2006) assignable except in connection with the assignment of rights of all the partners in the same property.

but the remaining partners may refuse to recognize cannot have a partner thrust upon him by A without B’s consent. accounts and inquiries which the debtor partner might have made. 2006). or which the Article 1813. in case of fraud in the management of the partnership. or. but it merely ᜀ0 With separate property. . Hizon _________________________________________________________________________________________________________________ a partnership purpose. 2006). is the difference that results when the cover the period from the date only of the last account liabilities of the partnership are more than the assets (Pineda. therefore. by any one or more of the entitles the assignee to receive in accordance with his contract the partners. directions. partnership does not of itself dissolve the partnership. partners with the consent of all the partners whose interests are not so charged or sold. (n) partnership. or of being sold and conveyed.NOTES ON PARTNERSHIP AGENCY. as regards his interest in the the date only of the last account agreed to by all the partners. TRUSTS. or any other court. legal process. interest does not make the assignee of such interests a partner in the firm. (n) profits. nor entitle the assignee to interfere in the management of Article 1812. 2 To demand an accounting of partnership affairs. sometimes used per contract synonymously with net income for the period. In case of dissolution of the partnership. to interfere in foreclosure. Article 1814. and make all other orders. may charge the NOTE: The interest of a partner in an ongoing partnership business interest of the debtor partner with payment of the unsatisfied where there has been no settlement of his account is not a debt due amount of such judgment debt with interest thereon. B should operate. OTHER RIGHTS OF ASSIGNEE OR CONVEYANCE: The partner’s share in the undistributed profits and surplus constitutes his interest in the partnership. by any one or more of the the assignee may avail himself of the usual remedies. entitle the The interest charged may be redeemed at any time before assignee. competent court by any judgment creditor of a partner. under the exemption laws. ЀȀȀ⠀Ā⤀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ However. in the absence of any showing of an intent that it appointment of a receiver under this article rather than by attaching any particular partnership property. and adjustment of partnership accounts between himself and his co- partner. agreed to by all the partners (Pineda. partnership. is not subject to then or later appoint a receiver of his share of the profits. but only a future contingent right to a portion of the The interest of a partner in partnership property and business is the ultimate residue as the assignor may become entitled to receive by net balance found to be due him after payment of partnership dents virtue of his proportionate interest in the capital. Profit refers to excess of 0 To receive the profits accruing to the assigning partner as revenues over expenses for a transaction. or in case of a sale being directed by the court. 2006). and may to the partner by the partnership and. INTEREST OF PARTNER The assignment does not purport to transfer an interest in the partnership. It is gain realized from 1 To avail himself of the ordinary remedies provided by law business or investment over and above expenditures. the right of the assignee to join in the conduct of the business. the court which entered the judgment. or profits to which the assigning partner would otherwise be entitled. But partnership is a voluntary relation. NOTE: Unlike the partner’s interest in specific partnership property. on the other hand. made liable for his separate debts. or to require any information or account of partnership ЀȀȀ⠀Ā⤀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀ transactions. may be the management or administration of the partnership business or purchased without thereby causing a dissolution: affairs. Without prejudice to the preferred rights of the partner’s interest in the partnership may be assigned. While surplus in the event of fraud in the management of the refers to remains of a fund appropriated for a particular purpose partnership (Pineda. and for the partnership. on due application to a and subject to payment of legal support (Pineda. (n) Effect of assignment of Interest Enforcement of Judgment The assignment or conveyance of a partner’s interest in the The proper method of reaching a judgment debtor’s interest in a partnership does not act of itself operate as a dissolution of the partnership is by applying for a charging order. A conveyance by a partner of his whole interest in the circumstances of the case may require. and make such refusal a ground for dissolution. 2006). ᜀ1 With partnership property. the assignee is entitled to receive his assignor’s interest and may require an account from the Such interest is “property” and is susceptible of being seized under date only of the last account agreed to buy all the partners (Pineda. the assignee is entitled Nothing in this Title shall be held to deprive a partner of his right. LEASE AND PRESCRIPTION Kenneth and King C. A partner's interest in the partnership is his share of the partnership business or to receive anything except the assignee’s the profits and surplus. Hence. In case of a dissolution of the partnership. and such account shall Loss. as well as of being 2006). during the continuance of the partnership. attached partnership creditors under article 1827. if to receive his assignor's interest and may require an account from any. and of attachment or execution on a judgment recovered against the any other money due or to fall due to him in respect of the individual partner. but only in case the partnership is dissolved. as against the other partners in the absence of agreement. a creditor of one of the partners cannot be forced into the partnership by involuntary assignment thru attachment and RIGHTS OF ASSIGNEE: The transfer by a partner of his partnership execution. or to inspect the partnership books.

or industry to a common the partner so acting has in fact no authority to act for the fund. in which case. interest. and the separate partners may be joined in the same action. one or more but less than all the partners have been exhausted. the firm name of “Sharruf &Co. business of the partnership in the usual way does not bind the partnership unless authorized by the other partners. had juridical personality to sue. with the intention of dividing the profits among themselves. or a division according to share. NOTE: A withdrawing partner is not liable for debts and obligations No act of a partner in contravention of a restriction on authority of the partnership after he has ceased to be a member of the shall bind the partnership to persons having knowledge of the partnership and has only the position of a creditor unless the restriction. any partner may enter into a separate obligation to or on the assignee's promise to pay the debts of the perform a partnership contract. All partners. Every partner is an agent of the partnership for the the new firm retained the rights of the former firm under the same purpose of its business.NOTES ON PARTNERSHIP AGENCY. Hizon _________________________________________________________________________________________________________________ POWERS OF RECEIVER Industrial Partner also Liable: An industrial partner is liable to the same extent and in the same way as a capitalist partner for the debts 0 He is entitled to any relief necessary to conserve the and obligations of the partnership (although under Art. property. NOTE: The liability of the partners for the partnership debts is pro rata. it was held that Article 1818. under its signature and by a person authorized to act for the partnership. shall be liable Except when authorized by the other partners or unless they have pro rata with all their property and after all the partnership assets abandoned the business. private property of the latter cannot be taken in payment of the 4 Enter into a compromise concerning a partnership partnership debt until the common property of the concern is claim or liability. particularly to a decree nullifying unlawful efforts of a partner to assign or encumber his interest in specific When he has paid such debts out of his private property during the partnership property life of the partnership. exhausted. Article 1816. but the 3 Confess a judgment. for the contracts which may be entered into have no authority to: in the name and for the account of the partnership.” continuing the same business. including industrial ones. 0 Assign the partnership property in trust for creditors However. It partnership in the particular matter. including the policies. Any stipulation against the liability laid down in the preceding article shall be void. then. (n) withdrawal was with intent to defraud existing creditors. 1 Dispose of the good-will of the business. Consequently. or liability of Obligations of the Partners with Regard to Third Persons each (Pineda. and the act of every partner. and the person with whom he may be formed for the exercise of a profession or vocation. both the partnership carry on the ordinary business of a partnership. if their contributions are unequal. (n) Article 1817. Pro rata means in proportion SECTION 3 or ratably. 1816 is void. individually must respond for its debts. include their 2006). He is then partners. TRUSTS. shall be subject to the liability of a partner.Implies a partnership of 2 or more persons who bind partnership of which he is a member binds the partnership. Where the partnership has no visible assets. he is the only one bound for his own acts (Pineda. the partners 5 Submit a partnership claim or liability to arbitration. except as among the partners. The word is dealing has knowledge of the fact that he has no such authority. he is 1 He may be authorized to enforce any personal liability of entitled to credit for the amount so paid. must pay him. unless themselves to contribute money. when its affairs are settled. . and therefore. acting in his own name for the benefit of the partnership. then the capitalist partners partnership assets. names in the firm name. Article 1815. “firm” is also used to refer to the name. he is still liable as a partner. Against whom action filed: In order to enforce the liability of the 2 Do any other act which would make it impossible to partners for partnership debts and obligations. Every partnership shall operate under a firm name. 6 Renounce a claim of the partnership. (n) partnership. LEASE AND PRESCRIPTION Kenneth and King C. Eskenazi” which are the names of the same and only partners of the firm “Sharruf &Co. style or title under which An act of a partner which is not apparently for the carrying on of the company or concern transacts its business (Pineda. execution in the partnership name of any instrument. not being members of the partnership. and if it results that there is partners for firm debts because such liability constitutes not enough property in the partnership. for apparently carrying on in the usual way the business of the FIRM. (n) CHANGE OF FIRM NAME GR: Any stipulation by and among the partners contradicting the pro Where the partners of a general partnership doing business under rata liability of partners provided in Art. partnership assets for partnership purposes and industrial partners shall not be liable for loss). PARTNER MAY ACT HIS OWN NAME: A partner may enter into a which may or may not include the name of one or more of the separate obligation to perform a partnership contract. 2006).” obtained insurance policies issued to said firm. Those who. 2006). but later the firm name was changed to “Sharruf & XPN: Such stipulation is valid by and among the partners themselves. 1797.

such property. and the knowledge of any other partner who reasonably purchaser or his assignee. They are not in equity alone. provided the act is one within the authority of the partner under the provisions of the first ADMISSION AFTER DISSOLUTION: An admission made by a partner paragraph of article 1818. operate as notice to or knowledge of the partnership. 2006). or in his own name. and the knowledge of the partner acting in the property if the partners' act does not bind the partnership under particular matter. Where title to real property is in the partnership name. but which under well- partner is acting as principal on his own behalf and as agent for his recognized equitable principles should be and is convertible into a co-partners. LAW ON PARTNERSHIP IS A BRANCH OF THE LAW ON AGENCY: EQUITABLE INTEREST. An admission or representation made by any partner for the particular partnership or similar partnership. a of that partner. 2 KINDS OF ACTS OF A PARTNER CONTEMPLATED IN THE ARTICLE: PARTNERSHIP. partnership under the provisions of the first paragraph of article 1818. all the partners. 2006). equitable interest and acts of partmer. a concerning partnership affairs within the scope of his authority in partnership engaged in real estate is usually involved in the sale and accordance with this Title is evidence against the partnership.The term “usual way” means it is an ordinary activity Article 1820. or unless such property has been conveyed by the grantee or REQUISITES TO MAKE A PARTNER’S ADMISSION OR a person claiming through such grantee to a holder for value REPRESENTATION ADMISSIBLE AGAINST THE PARTNERSHIP: without knowledge that the partner. conveyances” (Pineda. 2006). and unenforceable at law. except in the Where the title to real property is in the name of one or more or all case of fraud on the partnership. in his own name. passes the It is made during the existence of the firm (Pineda. Notice to any partner of any matter relating to convey title to such property. committed by or with the consent the partners. unless the mind. 2006). any partner may convey title to such property by a Partnership is not bound by admissions or statements made by a conveyance executed in the partnership name. NOT ITS OFFICERS OR AGENTS SHOULD BE IMPLEADED IN LITIGATION INVOLVING PROPERTY REGISTERED IN 23 Acts which apparently are for the carrying of the business ITS NAME: The partners cannot be held liable for the obligations of of the partnership the partnership unless it is shown that the legal fiction of a different 24 Acts which do not apparently for carrying on the business juridical personality is being used for fraudulent. or in a third person in trust for the partnership. the partners in whose name the title stands may Article 1821. (n) conveyance executed by a partner in the partnership name. ADMISSIONS AFTER DISSOLUTION Article 1819. a It is within the scope of the partner’s authority conveyance executed by a partner. (n) purchase of lands and buildings. “USUAL WAY”. 2006). acquired while a partner or then present to his the provisions of the first paragraph of article 1818. Hizon _________________________________________________________________________________________________________________ AUTHORITY OF PARTNER Where the title to real property is in the name of all the partners a Where the express and avowed purpose of the partnership is to buy conveyance executed by all the partners passes all their rights in and sell real estate. Where title to real property is in the name of one or more but not 2006).An equitable interest or title is one cognizable There is more than mutual agency among the partners. (n) in-trade and thus within the ordinary powers of the partner. equitable interest of the partnership. The principle of agency that one who accepts or retains benefits of unauthorized acts of agents. When notice is given to the partner while he is a partner. Where the . will be deemed to have ratified those property which refers to immovable like land or building because of acts will be applicable to a question of ratification of unauthorized the use of the words “title to real property. it is a right or interest in property which is imperfect. after the dissolution of the firm will be binding upon the partnership only if connected with the winding up affairs of the firm (Pineda. passes the equitable interest of the partnership. is a holder for value. LEASE AND PRESCRIPTION Kenneth and King C. the immovables acquired form part of the stock. has exceeded his authority. but the partnership may recover such partnership affairs. with knowledge of material facts APPLICABILITY OF THE ARTICLE: The article applies only to real surrounding the transaction. the effect is the same as if notice was had by all the partners. without knowledge. purposes (Pineda. agents of one another but they are also of the partnership. and the record does not disclose the right of the partnership. in making the conveyance. Example. TRUSTS. NOTICE provided the act is one within the authority of the partner under the provisions of the first paragraph of article 1818. CONVEYANCE INCLUDE MORTGAGE RATIFICATION OF UNAUTHORIZED ACT The right to mortgage is included in the right to convey. Each uncognizable. unfair or illegal of the partnership in the usual way (Pineda. legal right or title (Pineda.NOTES ON PARTNERSHIP AGENCY. could and should have communicated it to the acting partner. The admission or representation must be connected with partnership affairs Where title to real property is in the name of the partnership. but the partnership former partner after the latter has withdrawn from the partnership may recover such property unless the partner's act binds the as to what took place during the period of partnership.

he is liable to any such deliberately violated. When a person. 0 Partner committed a wrongful act or omission (crime or quasi. 1 When no partnership liability results. the faith of such representation.NOTES ON PARTNERSHIP AGENCY. Hizon _________________________________________________________________________________________________________________ knowledge or notice has been received by one before he became a partner. or consents to another representing 4 There is no pre-existing contract between the partnership and him to anyone. and his partners are ignorant of this. represents himself. and if he has made such representation or DEFENSES AGAINST THE SUIT: To be exercised from liability. and his mind. the delict) liability of the partners. given credit to the actual or apparent partnership. there is no doubt that there has been neither knowledge of nor notice to the partnership. he is liable as made liable solidary with the offending partner is to seek recovery though he were an actual member of the partnership. is pro rata. or Article 1824. so consenting to the . ratify or have knowledge of such torts. LEASE AND PRESCRIPTION Kenneth and King C. and he is not the Article 1823. 1824 IS AN EXCEPTION TO ARTICLE 1816: Under Art. but it was grossly and or more persons not actual partners. the consented to its being made in a public manner he is liable to such partnership and the co-partner/s must prove that the erring partner person. the partners are liable as joint tort-feasors. and the knowledge is then present in person and misapplies it. loss or injury is caused to any person. 1824. against the latter for what they have paid with interest (Pineda. Where. SOLIDARY LIABILITY: All partners are liable jointly and severally for The test of liability: whether the wrong was committed in behalf of everything chargeable to the partnership by reason of the partner’s and within the reasonable scope of the business of the partnership. wrongful act or breach of trust wherein a third person is adversely If it was so. The partnership is bound to make good the loss: partner acting in the particular matter. (n) partnership or with the authority of his co-partners. Such done within the apparent scope of business and purpose of the liability is not dependent on the personal wrong of the individual partnership and for its benefit. the partnership. and partnership should be charged with knowledge. the partnership is liable therefor to the for everything chargeable to the partnership under articles 1822 same extent as the partner so acting or omitting to act. is liable for torts committed by one of the analogous to that of a principal for the acts of his agent since each members acting in the scope of the firm business. by any wrongful act or omission of any money or property so received is misapplied by any partner acting in the ordinary course of the business of the partner while it is in the custody of the partnership. RATIONALE: The law protects the latter who in good faith relied upon the authority of a partner. a partner in the partnership. be solidary under Articles 1822 and 1823. member of the partnership against which the liability is asserted. 2006). including industrial partners. All partners are liable solidarily with the partnership any penalty is incurred. not being a partner in the partnership. and misapplication of money or property of a third person received by a partner or the partnership. ART. 1816. a third person who transacted with GR: If the injury results from a wanton or willful act of one of the said partnership can hold the partners solidarily for the whole parties committed outside the agency or common business. who has. whether such authority is real or REQUISITES FOR APPLICATION OF THE LAW: apparent. by words spoken or written or by 3 The aggrieved third person is not a partner in the firm conduct. although they do partner acts both as principal and as agent of the other as to acts not participate in. (n) LIABILITY FOR WRONGFUL ACTS NATURE OF LIABILITY Under the principle of mutual agency. 2 Loss or injury is suffered by third person as a result of the wrongful act or omission Article 1825. if any. as a partner in an existing partnership or with one the third person. TRUSTS. 24 Where the partnership in the course of its business receives money or property of a third person and the Article 1822. whether the representation has or has not been made or committed the complained act while acting for purposes of his own communicated to such person so giving credit by or with the and not for the benefit of the partnership. consenting to its being made: REMEDY OF INNOCENT PARTNERS: The innocent partners who were 0 When a partnership liability results. (n) and 1823. 2006). under Art. LIABILITY FOR WANTON OR WILLFUL ACT While the liability of the partners are merely joint in transactions entered into by the partnership. if 23 Where one partner acting within the scope of his the partner acting in the particular matter acquired knowledge apparent authority receives money or property of a third before he became a partner. if there is. 2006). hence. on (Pineda. Yet. XPN: If the act was authorized by the members of the partnership or subsequently ratified by them. he is liable pro 2006). rata with the other persons. then the obligation if the case involves loss or injury caused to any person not person doing the act and causing the injury is alone responsible. this itself constitutes quasi-delict persons to whom such representation has been made. or acted not in the course knowledge of the apparent partner making the representation or of the business of the partnership (Pineda. the solidary partnership business liability of the partners (Pineda. or every The liability of a partner for the wrongful act of another partner is member of a partnership. The reason being that the partners even if the act is not connected with the violation of these two articles constitutes torts. the liability of all partners is declared to business of the partnership or with authority of the co. affected. 1 The guilty partner is acting in the ordinary course of the However.

representation holding out an individual as a partner. persons not actual partners 1 and 2 of this article. has been. otherwise 0 The alleged partner cannot disallow liability by claiming he separately. In the following cases creditors of the dissolved Mirasol v. unless there is a stipulation to the remaining partners to continue the business. and who act to their detriment. It is only of the existing partnership consent to the representation. when in fact he is not a partner or affairs. TRUSTS. 1 When all but one partner retire and assign (or the Requisites to make a person a partner by estoppel: representative of a deceased partner assigns) their rights in partnership property to the remaining partner. a insofar as third persons are involved and for the purpose of giving partnership act or obligation results. with respect to partners. or by his own deed or estate of the newly admitted partner. without notice of any break in the conduct of business. 2006). although. Existing and subsequent CRs have ESTOPPEL. or when any partner retires and assigns (or the representative of the deceased partner assigns) his ESTOPPEL OF THIRD PERSONS: He who enters or contract with a rights in partnership property to two or more of the partnership as such. Article 1840. given credit to the actual or apparent partnership 3 When all the partners or their representatives assign their rights in partnership property to one or more third . It must be stressed. partnership. (n) PROOF OF ESTOPPEL: Whoever alleges the existence of a partner or PERSONS PROTECTED partnership by estoppels has the burden of proof. both the existing and subsequent creditors may believe it is one and the same partnership. Hizon _________________________________________________________________________________________________________________ contract or representation as to incur liability. who 0 The person must represent himself as a partner of an continues the business without liquidation of partnership existing partnership. or to one or more of the partners and one or him growing out of such contract. that partner who has withdrawn is still liable for NOTE: The article eliminates the difficulty which arises when a new partnership liabilities. 2006). representations either express or implied (Pineda. Estoppel cannot be sustained on doubtful or ambiguous inferences (Pineda. When all the members of a contract. and third parties were contrary. In this case. he is When a person has been thus represented to be a partner in an actually not a partner (Pineda. except that this liability shall be satisfied Where a former partner entered into an agreement with the only out of partnership property. between the parties. liquidation of the partnership affairs. in contemplation of law. either alone or with others. 0 When any new partner is admitted into an existing 2006). A person admitted as a partner into an existing alleged partners or as respect third persons who have not in facr partnership is liable for all the obligations of the partnership arising been misled. The existence of the misrepresentation and the innocent reliance on it must be The article is for the benefit of third persons who are misled by the established (Pineda. not duly organized. 2006). He is bound as a “partner”. established as the truth either by while only the subsequent CRs have the rights against the separate acts of judicial or legislative officers. express or implied. if the business is continued without no properly organized (Pineda. Municipality of Tabaco partnership are also creditors of the person or partnership continuing the business: The admission or representation must be plain and clear. he is an agent of the persons consenting to such NO REAL PARTNERSHIP IS CREATED BY ESTOPPEL: Art. This is illustrated by the case where all the property of the existing DOCTRINE OF PARTNERSHIP BY ESTOPPEL partnership is taken over. consents to another representing him to anyone as a 2 When any partner retires or dies and the business of partner in an existing partnership or with one or more the dissolved partnership is continued as set forth in Nos. is stopped in a suit by the partnership against partners. A partnership. with the consent of the retired 1 Third person relied on the said misrepresentation not partners or the representative of the deceased partner. before his admission as though he had been a partner when such obligations were incurred. (n) misled into believing that they are dealing with the same old partnership. but in all other cases it is the them protection that the equitable principle of estoppel is joint act or obligation of the person acting and the persons recognized in the law (Pineda.It may be said that estoppel is a bar which precludes a equal rights as against partnership property and the separate person from denying or asserting anything contrary to that which property of all the previous existing members of the partnership. 2006). is not actually a partner. but it does not create a partnership as between the Article 1826. the third person has property. consenting to the representation. or with one or more persons not actual partners.NOTES ON PARTNERSHIP AGENCY. by the new partnership and the incoming partner. He is estopped from making a disclaimer. being aware of the deception but without any assignment of his right in partnership 2 On the faith of such representation. a real partnership is formed by virtue persons who rely upon the representation. existing partnership. 1825 does representation to bind them to the same extent and in the same not create or establish a real partnership as between the alleged manner as though he were a partner in fact. to claim that the partnership was more third persons. 2006). which has been recognized as thereby depriving the existing partnership of all its property. such in its dealings with third persons shall be considered as “partnership by estoppel” as far as third persons are concerned. LEASE AND PRESCRIPTION Kenneth and King C. partner is admitted without liquidation of firm debts.

of the said partnership are taken over by the new partnership. 2006). have rights against the separate property of the newly admitted 0 When any partner wrongfully causes a dissolution and partner. However. those of each partner as regards the partnership property. 2006). unless there is a the business of the end of the contrary stipulation. EFFECT OG ADMISION OF NEW PARTNER ON THE STATUS OF YJE Dissolution is descriptive of that change in the partnership relation EXISTING PARTNERSHIP: The admission of the new partner dissolves which ultimately culminates in its termination. have been wound contracted before his admission. 2006). existing and dissolution does not necessarily mean subsequent creditors shall have equal rights as against partnership that a partner can evade previous . The partnership should deceased partner's interest in the dissolved partnership or on apply its property to the payment first of its debts to its own account of any consideration promised for such interest or for his creditors. LEASE AND PRESCRIPTION Kenneth and King C. shall not of itself make the individual property of the Article 1828. under this article. (n) dissolved partnership. TRUSTS. 1826. Nothing in this article shall be held to modify any right of creditors to set aside any assignment on the ground of fraud. harsh for the incoming partner. either the new firm (Pineda. irrespective of the times when they became CRs and the carry on the are wound up. It is the carrying on of Officially. have equal rights to the property. The change in the The process of It is the state which relation of the settling the business follows after all the LIABILITY OF NEWLY ADMITTED PARTNER: The incoming partner or partners caused by affairs of the partnership affairs newly admitted partner is liable for all the obligations of the firm any partner ceasing partnership (Pineda. The creditors of the partnership shall be preferred to contrary. 2006). alone or with others. have a prior right to any claim of the retired partner or the INDIVIDUAL PARTNERS: The reason for this grant of priority of representative of the deceased partner against the person or payment is that the partnership has a separate and distinct partnership continuing the business. the private property of the partners cannot be right in partnership property. it is the only up to his share in the partnership property. 2. taken as payment for partnership debts until the common property of the firm had been exhausted (Pineda. termination of the partnership or of the rights and powers of partners. Under Art. the problem is solved partnership continuing the business. In effect. or Bebeng ceased to be connected with it. The dissolution of a partnership is the change in the deceased partner liable for any debts contracted by such person or relation of the partners caused by any partner ceasing to be partnership. It is not the the old partnership (Pineda. but all the CRs of the partners cease to partnership affairs affairs after business. up or concluded. second paragraph. the is deprived of all its properties. now under the new firm composed of all the original members and the newly admitted one. his liability is limited. partnership (Pineda. or the name of a deceased partner as part thereof. No. should business together. By making The liability of a third person becoming a partner in the the new partner liable even to old creditors. the old partnership On the partners 1. the old creditors do not lose their preference as the remaining partners continue the business under the partnership creditors because they are recognized as the creditors of provisions of article 1837. All the properties of the existing partnership are assumed by the new firm without notice of any discontinuance in the conduct of the EFFECTS OF DISSOLUTION business. (n) NOTE: Article 1826 and 1840 are based on the principle that where there has been one continuous business. to the (Pineda. 2006). Hizon _________________________________________________________________________________________________________________ persons who promise to pay the debts and who continue property of all original partners while only the subsequent creditors the business of the dissolved partnership. exact combinations of persons then owning the business. unless there is a stipulation to the Article 1827. partnership creditors (Pineda. Reason for making new partner liable for obligations contracted 1 When a partner is expelled and the remaining before admission: To eliminate the difficulty which arises when by partners continue the business either alone or with his admission. On the surface. the fact that Ayel has been DISSOLUTION TERMINATION WINDING UP admitted to the business. (n) associated in the carrying on as distinguished from the winding up of the business. dissolution. Old creditors lose their preference as partnership creditors. Designates the point Is the point in time Is the process of should not be allowed to cause endless confusion as to the claims of in time when the when all the settling partners CRs on the property employed in the business. Without prejudice to this right. Conversely. the existing partnership is dissolved and all properties others without liquidation of the partnership affairs. creditors of the dissolved partnership shall be satisfied out of the partnership property only. 2006). As to previous obligations. 2006). on account of the retired or personality from the individual partners. this appears to be to be associated in 2006). CHAPTER 3 The use by the person or partnership continuing the business of Dissolution and Winding Up the partnership name. His separate property will not be reached by partnership (Pineda. as against the separate creditors of the retiring or deceased partner or the representative of the deceased PARTNERSHIP CREDITORS PREFERRED TO CREDITORS OF partner. and without liquidation of the partnership affairs. the private creditors of each partner may When the business of a partnership after dissolution is continued ask the attachment and public sale of the share of the latter in the under any conditions set forth in this article the creditors of the partnership assets.NOTES ON PARTNERSHIP AGENCY. Hence.

but continues until the winding up of partnership affairs is completed. A partnership may be dissolved by one partner may joint debtors. but the others through the previous partnership shall not be dissolved by the loss of the thing partnership when it occurs after the partnership has acquired the 3. may be dissolved by the act of any partner alone in accordance with his own pleasure and will. On dissolution the partnership is not terminated. the partnership will be reputed as existing until the juridical relations arising out of the contract are dissolved. one for a specified term is that in case of a partnership for a definite By the express will of any partner. business is materially interrupted 2 When a specific thing which a partner had promised 2. Any change in the membership of the the express will of any partner at any time. (1700a original articles of partnership by the and 1701a) remaining partners or by them and the new partners AUTHORITY AND POWERS OF PARTNERS TERMINATION OF TERM OR PURPOSE Article 1829. impliedly XPN: These new obligations are 0 In contravention of the agreement between the essential for the winding up of the partners. or whether those articles contain any stipulation Without violation of the agreement between the partners: as to the time of existence. A change in the relation of the ownership thereof. unequivocally bringing home notice to the other partners that he no longer intends to be a partner. Irrespective of any agreement as to the period of duration of a partnership. when the partners if there is admission of the partner who contributed it having reserved the new partner even if the business had ownership thereof. partnership is dissolved by the lapse (n) of time on the expiration of such period. During dissolution. Hizon _________________________________________________________________________________________________________________ obligations entered into by the them to be charged for their separate debts. partners will cause the dissolution of 3 By the death of any partner. As to new obligations: specified term or particular undertaking. If a fixed duration is agreed on. where the circumstances do not permit a partnership affairs dissolution under any other provision of this article. it is PARTNERSHIP IS NOT TERMINATED dissolved on the completion of the enterprise for which it was formed. who must act term. disturb the continuance of the 5 By the civil interdiction of any partner. LEASE AND PRESCRIPTION Kenneth and King C. the partnership but this will not 4 By the insolvency of any partner or of the partnership. GR: Dissolution spares the former By the expulsion of any partner from the partners from new obligations entered business bona fide in accordance with such a into by the partnership to which they power conferred by the agreement between the did not consent either expressly or partners. It If no time prescribed by the agreement for the duration of a general has no effect on debts due from the partnership to third parties partnership. perishes before the partnership are considered incoming delivery. a dissolution before the expiration of the stipulated time is a in good faith. when no definite term or breach of agreement which subjects such partner to a claim for particular is specified. All partners constituting new to contribute to the partnership. in any case by the loss of the thing. partnership either before or after the termination of any 2. Dissolution affects only future obligations of the business. On the other hand. Dissolution does not abrogate its contracts which continue until performed or otherwise become inoperative. TRUSTS. In contravention of agreement Article 1830. and as to EXPRESS WILL OF ANY PARTNER past transactions the partnership continues until it satisfies all its pre-existing obligations. the dissolution of partnership at will affords the By the express will of all the partners who have not assigned their interests or suffered . whether under the articles of partnership it is to exist for a definite period of time or for the accomplishment of a particular purpose.NOTES ON PARTNERSHIP AGENCY. Dissolution is caused: Any partnership. damages for breach of contract if the dissolution is not justified. business of the partnership under the 6 By decree of court under the following article. has only transferred to the been theretofore conducted by the partnership the use or enjoyment of the same. it may be dissolved totally by the express will of any except that partners may not act for each other any further than partner. By the termination of the definite term or particular undertaking specified in the The difference between a partnership for an indefinite period and agreement. by On membership 1. partnership will result in its dissolution 1 By any event which makes it unlawful for the business and in the formation of a new of the partnership to be carried on or for the members to partnership so long as the course of its carry it on in partnership.

Article 1831. ᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀȀȀ⠀⤀ĀᜀĀᜀĀᜀĀᜀĀᜀ 3 A partner wilfully or persistently commits a breach of the partnership agreement. which may be retracted at any time as to future dealings although the term of the partnership may not have expired. In either case the action is of one partner actually dissolves the partnership. By such notice the partnership is dissolved. All that is required is that notice of the dissolution must be communicated forthwith to the other members of the firm. Hizon _________________________________________________________________________________________________________________ other partner no ground for complaint. On application by or for a partner the court shall decree a dissolution whenever: ᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀȀȀ⠀⤀ĀᜀĀᜀĀᜀĀᜀĀᜀ 0 A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind. willful neglect of partnership obligations. (n) Misconduct. The rights of the parties upon dissolution are safeguarded by Art. 1837. subdivision (2). and such other causes as are productive of serious and permanent injury to the partnership concern. and lack of based on the assent of each of the partners. irreconcilable differences. gross neglect. great extravagance or unwarranted negligence on the part of the partner in conducting the business of the partnership justifies a judicial dissolution of the partnership at the instance of the other partner.NOTES ON PARTNERSHIP AGENCY. or breach of duty GR: Gross misconduct. DISSENSION. 1 At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued. of his own motion. TRUSTS. or which render it impracticable to carry on the partnership business. to treat the partnership as ended and take to himself all the benefits of the joint labors and property. want of good faith. or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. Also. ᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀȀȀ⠀⤀ĀᜀĀᜀĀᜀĀᜀĀᜀ 2 A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business. On the application of the purchaser of a partner's interest under article 1813 or 1814: 0 After the termination of the specified term or particular undertaking. Where the purpose of the partnership can no longer be accomplished harmoniously or profitably because of serious This is because a contract of partnership is a contract of agency dissensions. are proper grounds for the dissolution of the partnership by a court of equity at the instance of the innocent partner. personal ill-will. habitual drunkenness. ᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀȀȀ⠀⤀ĀᜀĀᜀĀᜀĀᜀĀᜀ 4 The business of the partnership can only be carried on at a loss. ᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀȀȀ⠀⤀ĀᜀĀᜀĀᜀĀᜀĀᜀ 1 A partner becomes in any other way incapable of performing his part of the partnership contract. although such facts do not authorize the other. ᜀĀᜀĀĀȀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀȀȀ⠀⤀ĀᜀĀᜀĀᜀĀᜀĀᜀ 5 Other circumstances render a dissolution equitable. LEASE AND PRESCRIPTION Kenneth and King C. LACK OF CONFIDENCE .

insolvency or death of a partner. or When the dissolution is by such act. settle and pay its debts. whether to meet pre-existing obligations or not. Remedy: Injunction 1 Friction among the partners Article 1832. insolvency or death of a partner. the partner acting for the partnership had knowledge of the dissolution. and to adjust. the partner acting for the partnership had knowledge or notice of the death or insolvency. The complaining partner must show that the things relied upon are of serious and permanent character as to prevent the profitable continuance of the partnership business. including authority as before to represent his firm in all acts necessary to complete partnership contracts. by borrowing money. dissolution terminates all authority of any partner to act for the partnership: 0 With respect to the partners. however. each partner is liable to his co-partners for his share of any liability created by any partner acting for the partnership as if the partnership had not been dissolved unless: 0 The dissolution being by act of any partner. courts of equity can consider these grounds for the dissolution of the partnership. inasmuch as such borrowing. 1 With respect to persons not partners. except when such power has been expressly or impliedly conferred upon him. death or insolvency of a partner.confidence between partners. Yet. When the conversion of property into cash is necessary for the completion of the winding-up process. or 1 The dissolution being by the death or insolvency of a partner. NOTE: A member of a dissolved partnership cannot. the partner who caused the want of confidence or is the author of the ill-feeling between himself and his partners will not be permitted to make the strained relation he has induced the ground for the dissolution of the partnership. (n) AUTHORITY AND POWERS OF PARTNERS: The dissolution of a partnership terminates the general agency of one partner for his co- partners. When the dissolution is not by the act. Not grounds for dissolution: 0 trifling and minor grievances involving no permanent mischief. Article 1833. is generally considered as a new contract. bind his co-partners. . as declared in article 1834. Where the dissolution is caused by the act. each partner is deemed to have power after dissolution to dispose of such firm property. Except so far as may be necessary to wind up partnership affairs or to complete transactions begun but not then finished. in cases where article 1833 so requires. but leaves each of the partners with an equal duty and an equal power to do whatever is necessary to collect the debts due the partnership.

advertising the fact of 2006). and that fact was said to have been in any degree due to his connection unknown to the partner who subsequently makes a contract of with it. when they dissolve the partnership of the dissolution. or 5890 Where the partner has no authority to wind up In such case. if the partner acting is subject to a been advertised in a newspaper of general liability to third persons. LEASE AND PRESCRIPTION Kenneth and King C. provided the other party NOTICE OF DISSOLUTION: Since a partnership once established is. partnership affairs. advertised in the manner provided for he alone is responsible for the liability incurred (Pineda. the fact of dissolution had not the act of one of the parties. The liability of a partner under the first paragraph. dissolution. and act at their peril when they give credit to the survivor or completing transactions unfinished at dissolution. unless he has a special authority to do so. 2 (b). time of the act. or been prior to dissolution: in contravention of the partnership. the representing partner who acts for the no knowledge or notice of his want of authority. Nothing in this article shall affect the liability under article 1825 of UNIFORM PARTNERSHIP ACT any person who after dissolution represents himself or consents to another representing him as a partner in a partnership engaged in 0 A person has knowledge of a fact within the meaning of carrying on business. in to the transaction: the absence of anything to indicate its termination. shall be satisfied out of partnership assets alone when such partner had Example: A. presumed to 0 Had extended credit to the partnership prior continue to exist. B under contract is made. makes a 0 Unknown as a partner to the person with whom the contract for the partnership in ignorance of the dissolution. 2. subsequently. having partner. in a new transaction. for the protection of innocent third to dissolution and had no knowledge or notice persons. unless the act is Death appropriate for winding up partnership affairs. or relation or when dissolution is effected by the retirement or 1 Though he had not so extended credit. a partner remains liable to his co. (n) the Act not only when he has actual knowledge thereof. the ĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ̀̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀ representing partner had knowledge of the dissolution ᜀĀᜀĀᜀĀᜀ769 Had not extended credit to 1 The dissolution is caused by the death or insolvency of a the partnership prior to dissolution. a partner can bind the partnership. LIABILITY LIMITED BY NOTICE OF DISSOLUTION: The liability of or by other means of communication. or Insolvency of a partner 5889 Where the partner has become insolvent. or delivers through the mail. despite dissolution. B. the duty of giving notice of the nevertheless known of the partnership prior to dissolution of the partnership. By any transaction which would bind the partnership if dissolution had not taken place. B. dissolution in the first paragraph. had knowledge or notice of such death or the fact of his want of authority has not been insolvency and still transacts business for the partnership. partnership. and this article would have the right to call upon A and C to assume their 1 So far unknown and inactive in partnership affairs that share of the burden. Hizon _________________________________________________________________________________________________________________ SCOPE OF THIS ARTICLE: Where the dissolution has been caused by of dissolution. After dissolution. and. No. except by a transaction with one who partners for his share of any liability incurred by any partner acting - for the partnership as if there is no dissolution ĀȀĀ⸀ĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀĀᜀᄀ̀̀ĀȀ㨀ĀᜀĀᜀĀᜀĀᜀĀ ᜀĀᜀĀᜀĀᜀ768 Had extended credit to the XPNs: partnership prior to dissolution and had no knowledge or notice of his want of authority. and C are partners. he can call on his co-partners to contribute circulation in the place (or in each place if more towards this liability to the same extent as if there has been no than one) at which the partnership business dissolution. had withdrawal of one of the partners. the law. provided he had no knowledge of the dissolution. a the circumstances shows bad faith partner cannot bind the partnership or his co-partners by accepting 1 A person has notice of a fact within the meaning of this Act a bill drawn on the firm.NOTES ON PARTNERSHIP AGENCY. in accordance with his right. but also when he has knowledge of such other facts as in ACCEPTANCE OF BILL: After the dissolution of a partnership. No. The partnership is in no case bound by any act of a partner after dissolution: NOTE: The article applies when the partnership is dissolved by: 5888 Where the partnership is dissolved because it is Act unlawful to carry on the business. at the was regularly carried on. TRUSTS. A. states the fact to such person. when the person who claims the benefit of the notice. imposes upon partners. or 0 The dissolution being by an act of the partner. a written statement partnership property for partnership debts does not extend to debts of the fact to such persons or to a proper person at his contracted by one partner after a dissolution with one having place of business or residence. Article 1834. and. having no knowledge or notice The members of a partnership after dissolution continue to be liable to those with whom they have previously dealt as partners who have no notice or knowledge of the dissolution of the firm and who . Persons dealing with a surviving partner with notice of the co- except as provided in the third paragraph of this article: partner’s death are bound to recognize the limitation on his By any act appropriate for winding up partnership affairs authority. knowledge of dissolution. The same principle applies when the dissolution the business reputation of the partnership could not be is caused by the death or insolvency of a partner. partnership.

No. he may also incur obligations for litigation expenses Article 1835. subject to liability for damages in the second 0 The partner who is expressly authorized by agreement to paragraph. and the partnership continuing the business or without agreement the rights of the partners shall be as follows: novation. may have the partnership property applied to discharge its dissolution and the person or partnership continuing the business. a retiring partner’s 0 Each partner who has not caused dissolution liability on contracts of the partnership made before dissolution. 2.0 If the business is not continued under the provisions of the second paragraph. all the partners may second paragraph.NOTES ON PARTNERSHIP AGENCY. less any damages recoverable under the second paragraph. The authority is only with partnership. of this article. has the right to wind up others. provided. Hizon _________________________________________________________________________________________________________________ in good faith continue to act in the belief that the firm is still in 5888 He may engage the services of counsel for existence. but expulsion of a partner. as the partnership creditor and the person or partnership continuing against his co-partners and all persons claiming through them in the business. 2006). all WHO CAN INITIATE WINDING UP: the rights of a partner under the first paragraph. but in ascertaining the value of the the respect to the winding up of the business affairs partner's interest the value of the good-will of the business shall not be considered. and NOTE: A partner who has withdrawn from the partnership is 0. that any partner. . breach of the agreement. to damages withdrawal has been published.1 The right. express or implied agreement between himself. the partners who have not wrongfully. 2. except in of the partnership by an agreement to that effect between himself. No.0 All the rights specified in the first paragraph of this article. contravention of the partnership agreement. No. to have the value of his interest in 3 Assignee (Pineda. and the surplus applied to pay in cash the net amount The individual property of a deceased partner shall be liable for all owing to the respective partners. (n) 1 He may borrow money to meet accruing liabilities of the firm or may sell property to raise money to pay its debts 2 He may incur obligations necessary to complete existing DISCHARGE OF LIABILITIES: Generally. the partnership. 0. No. may do so. may obtain partnership property. during the agreed term for the the partnership affairs. the value of his KINDS OF WINDING UP interest in the partnership at the dissolution. bona fide under the partnership agreement subject to the prior payment of his separate debts. wrongfully shall have: continues as that of a principal or as a co-principal debtor. and to be released from all existing liabilities of the 0 He is the sole agent of the partnership for the purpose of winding up of the firm’s affairs. 1 JUDICIAL EXTRA-JUDICIAL (b) of this article. or the payment secured by a bond approved by the court. The dissolution of the partnership does not of itself (Pineda. and the co- partners or their creditors are entitled to only such property as remains after satisfaction of partnership debts. however.1 If the business is continued under the 1 If there is no such agreement. discharge the existing liability of any partner. if they all desire to continue the business in wrongfully dissolved the partnership or the legal representative of the same name either by themselves or jointly with the last surviving partner. as against each partner who has released from liability only when there has been liquidation and his caused the dissolution wrongfully. But if dissolution is caused by obligations of the partnership incurred while he was a partner. and such agreement may be inferred from the course respect of their interests in the partnership. of this article. liabilities. less any damage caused to his co-partners by the dissolution. (n) by bond approved by the court. 1 (b). a legal representative intervention (Pineda. ascertained and POWERS OR PREROGATIVES OF THE LUQUIDATING PARTNER: paid to him in cash. reasonable fees to prosecute or defend cases of the firm. shall have: or assignee of a partner 2. 1 The partners who have not caused the dissolution Article 1836. his partnership and for that purpose may possess the legal representative or his assignee. A partner is discharged from any existing liability upon dissolution Article 1837. or pay any partner who has caused the dissolution wrongfully. not insolvent. provided they secure the payment winding up by the court. and in like manner indemnify him When there is a court When the dissolution is against all present or future partnership liabilities. 2006). he shall receive in cash only the net discharge the existing contractual liability of any partner without amount due him from the partnership. LEASE AND PRESCRIPTION Kenneth and King C. initiate the winding up 2. either by payment or agreement under the second CONTINUATION OF LIABILITY: Dissolution of partnership does not paragraph of article 1835. the institute the winding up right as against his co-partners and all claiming 2 The legal representative of the last surviving partner who through them in respect of their interests in the must not be insolvent partnership. Unless otherwise agreed. each partner. upon cause shown. the partnership When dissolution is caused in contravention of the partnership creditor. unless otherwise of dealing between the creditor having knowledge of the agreed. and in the absence of such factors. (n) and if the expelled partner is discharged from all partnership liabilities. partnership property must contracts or to preserve partnership assets first be applied to the payment of partnership debts. TRUSTS. When dissolution is caused in any way. intervention initiated by any voluntary without any court 2 A partner who has caused the dissolution wrongfully partner. 2006).

court will compel the repayment of whatever sums may have been improperly obtained. to partnership. Hizon _________________________________________________________________________________________________________________ Upon the dissolution of a partnership by death of a partner. rescind the contract of right to enforce the contributions specified in No. 4. the party entitled to rescind is. the 6 The individual property of a deceased partner shall be appropriate technical word for the setting aside of the contract liable for the contributions specified in No. the claims against his separate property shall RIGHTS OF PARTIES ENTITLED TO ANNUL: rank in the following order: 0 Right of lien on the surplus of the partnership property 0 Those owing to separate creditors. 2. as provided by article making the representation against all debts and liabilities 1797. 1 The liabilities of the partnership shall rank in order of payment. all 0 Right to be indemnified by the supposed partner guilty of members of the firm are entitled to a division of the surplus of the the fraud or misrepresentation against all debts and assets over the amount necessary to discharge the liabilities of the liabilities of the partnership (Pineda. liabilities to third persons for any sum of money paid by 3 Those owing to partners in respect of him for the purchase of an interest in the partnership and profits. the following rules shall be observed. 8 Where a partner has become insolvent or his estate is insolvent. NOTE: Since the ground indicated in the article to set aside the contract of partnership is fraud or misrepresentation. 1 The contributions of the partners necessary GOODWILL OF PARTNERSHIP: The guilty partner is not entitled to a for the payment of all the liabilities specified in proportionate share of the value of the goodwill if the firm. partnership liabilities. persons for any sum paid for any capital or advances 2 Those owing to partners by way of contributed by him. Article 1839. in the place of the creditors of the partnership declaration in No. partnership. 2006). When fraud is established. (n) 4 An assignee for the benefit of creditors or any person RESCISSION DUE FRAAUD appointed by the court shall have the right to enforce the contributions specified in the preceding number. 2006). the surplus of the 2 Those owing to partners in respect of partnership property after satisfying the partnership capital. 0 The assets of the partnership are: 2006) 0 The partnership property. should be “annulled” and not “rescinded” (Pineda. 7 When partnership property and the individual The deceit must be material and mere exaggerations as to the properties of the partners are in possession of a court for prospects of an enterprise or the value of the property which he has distribution. the court. partnership property and separate creditors on individual property. without prejudice to any partners. Where a partnership contract is rescinded on the ground of the fraud or misrepresentation of one of the parties 0 Those owing to creditors other than thereto. TRUSTS. 2006). LEASE AND PRESCRIPTION Kenneth and King C. after satisfaction of the partnership liabilities to third 1 Those owing to partnership creditors. partnership creditors shall have priority on put into the firm as capital is not a ground for dissolution. as follows: Article 1838. for any capital or advances contributed by him. other right. of the partnership. the amount necessary to satisfy the liabilities. saving the rights of lien or secured creditors. Where one is induced to form a partnership by reason of fraud or misrepresentation. penalty for his bad faith in wrongfully dissolving the firm (Pineda. 1 Right to subrogate partnership creditors after his payment LIQUIDATION NECESSARY BEFORE RECOVERY OF SHARE: A partner of partnership liabilities to them who has retired must first ask for liquidation of the partnership before he can recover his proportionate share of the partnership . 1 To stand. 1 of this article to the satisfaction of for any payments made by him in respect of the the liabilities. the extent of the amount which he has paid in excess of his share of the liability. entitled: 1 Those owing to partners other than for capital and profits. 0 To a lien on. This is right of retention of the contribution. 4. and 2 To be indemnified by the person guilty of the fraud or 3 The partners shall contribute. In settling accounts between the partners after CAUSES OF DISSOLUTION UNDER THIS ARTICLE: dissolution. after all liabilities to third persons have been 2 The assets shall be applied in the order of their satisfied. or right of retention of. (n) surplus. subject to any agreement to the contrary: Dissolution not in contravention of partnership agreement Dissolution in contravention of partnership agreement (Pineda. This is a No.NOTES ON PARTNERSHIP AGENCY. upon prompt application of injured 5 Any partner or his legal representative shall have the party after deceit becomes known.

(n) 23 Separate creditors 24 Partnership creditors SCOPE 25 Partners who gave contributions (Pineda. and a the business of the dissolved partnership. In the following cases creditors of the dissolved admitted or a partner retires. 23 Where there are no debts and division in kind may be fairly but without any assignment of his right in partnership and equitably made. discharge of the creditors whose claims enjoy preference over those of the partners. LEASE AND PRESCRIPTION Kenneth and King C. neither does it alter the representative of the deceased partner assigns) his the rule that on any change of personnel. 2. as against the separate creditors of the property. It is self-evident that all partners of the partnership When the business of a partnership after dissolution is continued are interested in its assets and business. 24 When any partner retires or dies and the business of the dissolved partnership is continued as set forth in Nos. an agreement of dissolution and settlement others without liquidation of the partnership affairs. 2006) The article deals with the right of CRs when a new partner is Article 1840. property. TRUSTS. Hizon _________________________________________________________________________________________________________________ assets. will not be set aside merely because one partner has made an improvident agreement and settlement is on the basis different from The liability of a third person becoming a partner in the that provided by the articles. to the creditors of the dissolved partnership shall be satisfied out of the Partner’s share cannot be returned without first dissolving and partnership property only. on account of the retired or 23 Those owing the creditors other than partners deceased partner's interest in the dissolved partnership or on 24 Those owing to partners other than capital and profits account of any consideration promised for such interest or for his 25 Those owing to partners in respect of capital right in partnership property. second paragraph. 2006). if the business is continued without liquidation of the partnership affairs. more third persons. shall not of itself make the individual property of the Order: deceased partner liable for any debts contracted by such person or partnership. 2006) Nothing in this article shall be held to modify any right of creditors to set aside any assignment on the ground of fraud. or when any partner retires and assigns (or a partnership and creates a new partnership. unless there is a stipulation to the liquidating the partnership. with the consent of the retired partners or the representative of the deceased partner. No. or to one or more of the partners and one or paid first as they enjoy priority of payment (Pineda.NOTES ON PARTNERSHIP AGENCY. either alone or with others. retiring or deceased partner or the representative of the deceased partner. the in partnership property to the remaining partner. 24 If sale of assets would be prejudicial to an innocent partner 25 When all the partners or their representatives assign who has not consented to the sale. under this article. expenses and debts. judicial sale of the assets would amount to confiscation. CONVERSION OF ASSETS INTO CASH 23 When all but one partner retire and assign (or the representative of a deceased partner assigns) their rights GR: After taking an accounting on dissolution of partnership. and are entitled to be heard under any conditions set forth in this article the creditors of the in the matter of the firm’s liquidation and the distribution of its dissolved partnership. 26 Those owing to partners in respect of profits (Pineda. and their rights in partnership property to one or more third 25 Where dissolution of the partnership is had on suit of a persons who promise to pay the debts and who continue partner upon violation of a partnership agreement. is expelled or dies and the business is partnership are also creditors of the person or partnership continued without liquidation of all debts of the partnership continuing the business: dissolved by the change in personnel. for the return is dependent on the contrary. who court should require a sale of the partnership property and continues the business without liquidation of partnership distribute the proceeds to the partners after payment of costs and affairs. 26 When any partner wrongfully causes a dissolution and the remaining partners continue the business under the AGREEMENT AS TO DISTRIBUTION OF ASSETS provisions of article 1837. 23 When any new partner is admitted into an existing This does not alter the rule that any change in membership dissolves partnership. have a prior right to any claim of the retired partner or the PREFERENCES OF PAYMENT: representative of the deceased partner against the person or partnership continuing the business. and without liquidation of the Co-partners may agree in what proportion assets of the partnership partnership affairs. may be divided between them upon dissolution. partnership continuing the business. the property of the rights in partnership property to two or more of the dissolved partnership becomes the property of the partnership . 27 When a partner is expelled and the remaining partners continue the business either alone or with Where there is no fraud. either alone or with others. RULE IN CASE OF INSOLVENCY OF A PARTNER OR THAT OF HIS The use by the person or partnership continuing the business of ESTATE IN CASE OF HIS DEATH: the partnership name. XPNs: 1 and 2 of this article. The reason is that the creditors of the partnership must be partners. or the name of a deceased partner as part thereof.

unless otherwise agreed. at his option or at the option of his losses to that amount on the parties complying with certain legal representative. CRs of the dissolved partnership Applying the general law on prescription of actions. in the absence contributions or investments of any agreement to the contrary. to the amount they have contributed or invested in the provided that the creditors of the dissolved partnership as against partnership (Pineda. the other general partner recognized her as a Agreements between the partners with respect to liquidation of the general partner. (n) The partnership debts or obligations are paid out of the partnership assets and the separate properties of the PRESCRIPTION OF ACTION general partners The limited partners may get back their capital contribution Prescription begins to run only upon dissolution of the partnership prescribed by law (Pineda. or in article 1837. having as members one or more general partners and one or more limited Article 1841. that is. article. at the date of dissolution. or the representative of the retired or deceased partner. Their liability is limited to a fixed amount. the use of his right in the property of the dissolved partnership. and shall receive as an ordinary creditor an Such is formed under laws permitting an individual to contribute to a amount equal to the value of his interest in the dissolved specified sum to the capital of a firm and then limiting his liability for partnership with interest. he or his legal representative as against such person or It is one in which the liability of the members is limited (but not all). TRUSTS. 2006).NOTES ON PARTNERSHIP AGENCY. All general partner with authority to administer and alienate rights against the surviving partners are merged in said agreement partnership property. The right to an account of his interest shall accrue to management of the business any partner. NATURE OF LIABILITY person or partnership continuing the business. and if not. it is 6 years from dissolution (Pineda. 2. 2006). third paragraph. No. SIX SITUATIONS WHERE THERE IS DISSOLUTION BY REASON OF CHANGE IN MEMBERSHIP CAUSED BY ANY OF THE FF: 512 Admission of a new partner CHAPTER 4 513 Retirement of a partner Limited Partnership (n) 514 Assignment of rights in partnership property 515 Death of a partner Article 1843. shall have priority on any claim arising under this SUCCESSION TO GENERAL PARTNER article. When any partner retires or dies. Hizon _________________________________________________________________________________________________________________ continuing the business. ADVANTAGES OF A LIMITED PARTNERSHIP: . the separate creditors. and is now in estoppel to deny her position as a partnership on the death of one of the members are binding. without any settlement of accounts as between him or his estate and the LIMITED PARTNERSHIP. (n) Mere acceptance of the inheritance does not make the heir of a AGREEMENTS AS TO LIQUIDATION general partner a general partner himself. and deceased partner’s representatives have no rights outside said agreement. and the business is partners. as provided article 1840. But liquidation is not necessary where there is already a settlement CHARACTERISTICS OF LIMITED PARTNERSHIP: or agreement as to what the retiring partner shall receive. One or more limited partners contribute to the partnership capital who share in the profits but do not take part in the Article 1842. he is entitled to payment parties controls in determining the existence of a partnership of what may be due him after a liquidation. or his legal representative as against the winding up The limited partner/s are not personally liable for the partners or the surviving partners or the person or partnership partnership obligations beyond the amount of their continuing the business. 1844 which is mandatory whatever rights or claim the withdrawing partners might have in the Partnership business is under the control of one or more of dissolved partnership. 2006). (Pineda. the period of become CRs of the new partnership. when the final accounting is done. CALLING A PARTNERSHIP AS LIMITED DOES NOT NECESSARILY MAKE IT ONE: The legal intention deducible from the acts of the GR: When a partner retires from the firm. second paragraph. prescription is 10 years if the contract of partnership is in writing. The limited partners as such shall not be bound by the continued under any of the conditions set forth in the preceding obligations of the partnership. Hence. partnership property which is a limited partner could not be authorized to do. 2006). partnership may have the value of his interest at the date of dissolution ascertained. Where the return of the contributions of the retiring partners was There must be compliance with the statutory requirement of understood and intended by all the parties as a final settlement of form under Art. or. the acceptance of such payment precludes general partners who are personally liable to partnership the retiring partners from later on claiming their supposed share in creditors the profit of the firm at the time of dissolution. LEASE AND PRESCRIPTION Kenneth and King C. No specific amounts or properties may be adjudicated to the heirs of But by authorizing the widow of a managing partner to manage the deceased partner without the liquidation being first terminated. the profits attributable to established requirements. A limited partnership is one formed by two or more 516 Expulsion persons under the provisions of the following article. in lieu of interest.

5 The additional contributions. 11 The right. The surname of a limited partner shall not appear in 10 The right. 2006). if any. ( f ) The amount of cash and a description of NOTE: Strict compliance is not required. by limiting the liability of the former to the incidental A partnership transacting business is prima facie a general amount actually contributed by them (Pineda.NOTES ON PARTNERSHIP AGENCY. Article 1844. to be DEFECTIVE CERTIFICATE made by each limited partner and the times at which or events on the happening of which they If the certificate of formation of a limited partnership is defective shall be made. and Prior to the time when the limited partner became such. contributed by each limited partner. 8 The right. a court can of its motion hold that a limited contribution of each limited partner is to be partnership has not been formed. of a limited partner to the business has been carried on under a name in which demand and receive property other than cash his surname appeared. TRUSTS. of the remaining general the partnership name unless: partner or partners to continue the business on the death. in return for his contribution. Mere substantial and the agreed value of the other property compliance in good faith will suffice (Pineda. 4 The term for which the partnership is to 2006) exist. if agreed upon. they will be estopped from insisting that there is no limited partner shall receive by reason of his such partnership or that the terms of the partnership were not contribution. general and limited partners being general and limited respectively designated. substitution. 2006). retirement. or or insolvency of a general partner. to obtain the privilege of limited liability. and the terms and conditions of the property. of a limited partner to substitute an assignee as contributor in his Article 1845. if given. of one or more of the take active part in the management of the partnership. A limited partner whose surname appears in a partnership name contrary to the provisions of the first paragraph is liable as a general partner to partnership creditors who extend credit to the . the word "Limited". adding thereto partnership in which all the members are liable. which shall state – partnership. compensation by way of income. sufficiently stated in the notice of its formation. if given. 1 The character of the business. Article 1846. The required certificate containing all the 14 enumerated data. if given. civil interdiction. Two or more persons desiring to form a limited partnership shall: Hence. from others for purposes of their business while retaining the control and supervision of the partnership business. if given. ( j) The right. A limited partnership is formed if there has been On the part of limited partner: The limited partner shares on substantial compliance in good faith with the foregoing the profits without risk of personal liability (Pineda. REQUISITES IN THE ESTABLISHMENT OF A LIMITED PARTNERSHIP: 2 The location of the principal place of business. if given. The contributions of a limited partner may be cash or place. and the nature of such priority. PURPOSE OF STATUTE AUTHORIZING LIMITED PARTNERSHIP: To COMPLIANCE WITH LAW encourage those having capital to become partners with those having skills. he shall be considered an industrial additional limited partners. of the partners to admit NOTE: If he contributes services. A limited partnership that has not complied with the law is not considered as a limited partnership but a general 0 The name of the partnership. This means limited partners to priority over other limited he will be exercising some controlling power in the business which is partners. insanity It is also the surname of a general partner. both member. 7 The share of the profits or the other XPN: If attaching CRs recognize and deal with a firm as a limited compensation by way of income which each partnership. as to contributions or as to not supposed to be exercised by a limited partner (Pineda. that is. 3 The name and place of residence of each must be signed and sworn by all the partners. A limited partner who contributes services will 9 The right. returned. 2006). and shows on its face that the statutory requirements have not been 6 The time. 2006) requirements. partnership and those who seek to avail themselves of the protection of laws permitting the creation of a limited partnership must show due compliance with such laws. one must conform to the statutory requirements regulating the formation of limited Sign and swear to a certificate. Hizon _________________________________________________________________________________________________________________ File for record the certificate in the Office of the Securities On the part of the general partners: They can secure capital and Exchange Commission. and general partner. but not services. LEASE AND PRESCRIPTION Kenneth and King C. The certificate must be filed with the Office of the SEC (Pineda. when the complied with.

he shall have the rights against the other members Confess a judgment against the partnership. or as a limited partner. Continue the business with partnership property on the Right of such person: Such person shall have all the rights and death. a general partner partner unless. in the same partnership at the same time subject to the condition Admit a person as a general partner. retirement. A limited partner shall not become liable as a general of his exercise of the rights of a limited partner. or limited partner shall have the right to receive a share of Subsequently. in addition to the exercise of his rights and powers with the person or in the partnership carrying on the business. civil interdiction or powers and be subject to all restrictions of a general partner. unless the right so to (Pineda. In a limited partnership. is not. Have on demand true and full information of all things Article 1847. he is liable with his private property to the creditors of the . the surname of a limited general partner to: partner shall not appear in the partnership name because he is exempted from general liability.NOTES ON PARTNERSHIP AGENCY. provided that written consent or ratification of the specific act by all the limited this fact shall be stated in the certificate provided for in article partners. insanity. except that. and Have dissolution and winding up by decree of court. a certificate. in respect to his the ordinary business of the partnership. a general partner or all of the general partners have no 1844. additional business conducted by the partnership or person erroneously limited partners may be admitted upon filing an amendment to the believing that he is a limited partner. Article 1850. 2006). original certificate in accordance with the requirements of article 1865. one who affecting the partnership. However. or to file a petition for its cancellation or person who has contributed to the capital of a business conducted amendment as provided in Art. Otherwise. do is given in the certificate. that this fact be stated in the certificate provided for in Art. Relate to 1848 which seems to be the only XPN to the right of a partner to take advantage of the provisions of the article. If the certificate contains a false statement. shall have all the rights and powers and be subject to all Do any act which would make it impossible to carry on the restrictions of a general partner. SURNAME OF LIMITED PARTNER: Partnerships are required to have Article 1851. A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a Article 1853. which he would have had if he were not also a general partner. contribution. but within a sufficient time before the the profits or other compensation by way of income. 1865 (Pineda. provided that on ascertaining the mistake he promptly renounces his GR: A limited partner is not liable as a general partner interest in the profits of the business. A person may be a general partner and a limited partnership without limited partners. bound by the obligations of such person or partnership. cancellation or amendment as provided in article 1865. XPN: If he takes part in the control of the business which contemplates active participation in the business of the partnership. Possess partnership property. His liability is limited. 2006). and statement was relied upon to enable him to cancel or to the return of his contribution as provided in articles amend the certificate. NOTE: A person advancing money to a limited partner and who deny he becomes liable as a general partner (Pineda. but within a sufficient time before the statement was relied upon to enable him to cancel or amend the Article 1852. TRUSTS. or to file a petition for its 1856 and 1857. LEASE AND PRESCRIPTION Kenneth and King C. unless the right so to do partner. It covers all cases where one has contributed to the capital of a Article 1849. and at a reasonable hour to partner (Pineda. by reason Article 1848. partner. without the partner in the same partnership at the same time. that they are partners are within the protection of the provision. POWER TO CONTRACT REQUISITES FOR PARTY’S KNOWLEDGE OF FALSE STATEMENT: A limited partner has no power to bind the partnership by a At the time of the signing of the certificate contract. A limited partner shall have the same rights as a a firm name. is given in the certificate. Without prejudice to the provisions of article 1848. he takes part in the control of the business. that is why. Subsequently. 2006). he Have the partnership books kept at the principal place of is referred to as a limited partner. Hizon _________________________________________________________________________________________________________________ partnership without actual knowledge that he is not a general insolvency of a general partner. and a formal account of suffers loss by reliance on such statement may hold liable any party partnership affairs whenever circumstances render it just to the certificate who knew the statement to be false: and reasonable. 2006) by a person or partnership erroneously believing that he has become a limited partner in a limited partnership. After the formation of a lifted partnership. authority to: A person who is a general. for other than a NOTE: A person may be both a general partner and a limited partner partnership purpose. inspect and copy any of them. Thus. A At the time he signed the certificate. or other compensation by way of income. and also at the same time a limited Do any act in contravention of the certificate. or assign their rights in specific partnership property. he becomes a general business of the partnership. 1844 Admit a person as a limited partner.

SCOPE OF PREFERENCES: The obligation of a limited partner who has withdrawn from the partnership to CRs of the firm in which he was a partner can be The return of contributions discharged by nothing less than payment. As regards his contribution. unless the return of the contribution may be rightfully demanded under the The receiving of collateral security. its return has arrived. stipulated for in the certificate. 2006). whether from property of the partnership or that of a Article 1854. and release in violation of the foregoing provisions is a fraud on the The certificate is cancelled or so amended as to set forth creditors of the partnership. he shall have priority over general partners in the return of the share of the profits or the compensation by way of income their respective contributions (Pineda. 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 Receive or hold as collateral security any partnership until: property. Subject to the provisions of the first paragraph. Article 1856. a limited NOTE: The relationship between a limited partner and the partner may rightfully demand the return of his partnership is not based on trust and confidence. has only the right to demand and of Fraud): receive cash in return for his contribution. or provisions of the second paragraph. be alleged in an action against him. as general or limited partners. or release from liability if at the general partners and to limited partners on account of time the assets of the partnership are not sufficient to their contributions. partnership. 2006) limited partner as against the other members. or business will complete with the one being conducted by the 1 When the date specified in the certificate for partnership (Pineda. LEASE AND PRESCRIPTION Kenneth and King C. irrespective of the TRANSACTIONS PROHIBITED OF LIMITED PARTNERS (Presumption nature of his contribution. or The other liabilities of the partnership have not been Article 1855. if no time is specified in the certificate. notwithstanding that at Compensation by way of income the time of his withdrawal the assets left with the general partners were insufficient to discharge the outstanding liabilities. a pro rata share of the assets. except liabilities to payment. the limited partner is NOTE: The article applies only when there are several limited liable for all sums withdrawn by him. or Receive from a general partner or the partnership any All liabilities of the partnership. and. The consent of all members is had. any other matter. he shall have the rights as a Other matters where some benefit is granted (Pineda. either for the return of the GR: A limited partner is entitled to a pro rata share of the contribution or for the dissolution of the partnership assets together with the creditors of the partnership partnership. and in the absence of such a statement all the LIABILITY AFTER WITHDRAWAL limited partners shall stand upon equal footing. TRUSTS. the withdrawal or reduction. he would be entitled to recover what he has paid. A limited partner is contribution: not prohibited from engaging in business for himself is not prohibited from engaging in business for himself even if such 0 On the dissolution of a partnership. or 2 After he has six months' notice in writing to SHARING PRO RATA WITH GENERAL CREDITORS: all other members. If he was ordered to rd pay 3 persons. have been paid or there remains discharge partnership liabilities to persons not claiming property of the partnership sufficient to pay them. or as to return of his contribution. A limited partner may have the partnership dissolved and its affairs Receiving or holding as collateral security any partnership wound up when: property Receiving any payment. A limited partner may receive from the partnership further. If the assets are not sufficient to pay debts. conveyance. receive on account of resulting claims against the of their contributions and to general partners. unless he is also of the partnership except liabilities to limited partners on account a general partner.NOTES ON PARTNERSHIP AGENCY. with general creditors. or release from liability if it He rightfully but unsuccessfully demands the return of his will prejudice the right of third persons (Pineda. that after such payment is made. conveyance. XPN: Unless he is also a general partner In the absence of any statement in the certificate to the contrary or the consent of all members. as to their compensation by way of income. 1. and have a priority over other limited partners as to the return of their the limited partner would otherwise be entitled to the contributions. provided. or payment. Where there are several limited partners the paid. No limited partner shall in respect to any such claim: Article 1857. the partnership assets are in excess of all liabilities transact other business with the partnership. 2006) contribution. or the partnership property is insufficient for their members may agree that one or more of the limited partners shall payment as required by the first paragraph. Hizon _________________________________________________________________________________________________________________ partnership. but insufficiency of assets must partners. No. It finds no applicability if there is only one. . conveyance. a limited partner. A limited partner also may loan money to and general partner. 2006).

Hizon _________________________________________________________________________________________________________________ When there is failure to comply with the requisites for the Liability is limited to the capital contribution as long as it is left at the formation of limited partnership (Pineda. or the return of his contribution. A limited partner is liable to the partnership: partnership. or under Art. TRUSTS. and An assignee becomes a substituted limited partner when the Money or other property wrongfully paid or certificate is appropriately amended in accordance with article conveyed to him on account of his contribution. and by the consent of all members. he is nevertheless liable to the partnership for any sum. The liabilities of a limited partner as set forth in this article can be waived or compromised only The substituted limited partner has all the rights and powers. no waiver can be effected (Pineda. not in excess of such return with SUBSTITUTED LIMITED PARTNER: A person admitted to all the rights interest. if there is a Article 1859. contributed or which has been wrongfully returned. a cancellation or amendment of the certificate. part of the capital of his contribution. gives the assignee that contributed by him. NOTE: The liabilities of a limited partner may be waived by the partnership if all the members of the partnership give their consent. The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under articles When a contributor has rightfully received the return in whole or in 1847 and 1858. 2006). 2006) risk of the business. A limited partner's interest is assignable. he is For any unpaid contribution which he agreed in the only entitled to receive the share of the profits or other certificate to make in the future at the time and on the compensation by way of income. the interest presumably earned must be included as part of the sum available to CRs. conditions stated in the certificate. to which his assignor would otherwise be entitled. XPN: He may receive his contribution in another form. and partnership transactions or to inspect the partnership books.NOTES ON PARTNERSHIP AGENCY. 1854 . statement to that effect in the certificate. RESPONSIBILITIES OF A LIMITED PARTNER: TIME WHEN RETURN OF CONTRIBUTION MAY BE DEMANDED: Difference between his actual contribution and that stated in the certificate as having been made On the dissolution of the limited partnership Unpaid contributions which he agreed to make at specified On the arrival of the date specified in the certificate future time and on the conditions stated in the certificate On the lapse of 6 months from notice in writing to all other (Pineda. being Specific property stated in the certificate as thereunto empowered by the certificate. On the other hand. 2006) EXCEPTIONS TO THE GENERAL RULE ON THE NON-LIABILITY: NOTE: Limited partner’s interest in the partnership is assignable. 2006). GR: Return of the contribution should be in cash If one disagrees. a general partner cannot assign his interest in the When he contributes services instead of only money or partnership as to make the assignee a new partner without the property consent of the other partner/s (Pineda. or even if none. if all the partners give their consent (Pineda. partnership (Pineda. but which was not right. When withdrawn. LEASE AND PRESCRIPTION Kenneth and King C. 2006). When his surname appears in the firm name When there is a false statement in the certificate or articles of When may an assignee become a substituted partner? partnership which he knows and failed to correct on time When he participates and takes part in the control of the business of the firm When he commits fraud on the creditors of the partnership 0 If all the members of the partnership consent thereto. 2006). 2006) members if no time is specified for the date of the return or dissolution (Pineda. to enforce such liabilities. but a waiver or is subject to all the restrictions and liabilities of his assignor. except compromise shall not affect the right of a those liabilities of which he was ignorant at the time he became a creditor of a partnership who extended credit limited partner and which could not be ascertained from the or whose claim arose after the filing and before certificate. 1865. A limited partner holds as trustee for the partnership: An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor. For the difference between his contribution as actually An assignee. 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 Article 1858. who does not become a substituted limited partner. necessary to discharge its liabilities to all creditors who of a limited partner who has died or has assigned his interest in a extended credit or whose claims arose before such return. made and that stated in the certificate as having been has no right to require any information or account of the made.

TRUSTS. his statutory exemption. 2006). This is a sort of a foreclosure of the interest of the indebted dissolved by the retirement. 6 par. The remedies conferred by the first paragraph shall not be deemed He has the right to receive the share of the profits or other exclusive of others which may exist. The CR may file a petition to charge the interest of the latter in the This article applies to the retirement. directions and inquiries which Status and rights of an assignee who did not become a substituted the circumstances of the case may require. and To inspect the partnership books (Pineda. transactions. Yet. or indebted limited partner With the consent of all members. Hizon _________________________________________________________________________________________________________________ When the assignor who is empowered in the Articles of business is conducted by the remaining general partners under a Partnership gives the assignee the right to become a right stated in the certificate or even if not so stated.) (Pineda. 2006). In any event. The charged interest may be redeemed with the separate property XPN: The limited partnership is not dissolved even if a general of any general partner. The retirement. 2006). it is still required that the certificate or articles of partnership be properly amended in accordance with Art. 2006). Article 1860. interdiction of a general partner. settling the estate (Pineda. 2006). insolvency. Liability of the substituted limited partner The article applies if one who died is a limited partner. Thus. and such power as the deceased had To acquire any information or account of the partnership to constitute his assignee a substituted limited partner. 2006). members have given their consent to the continuation of the business (Pineda. 1858 Article 1862. limited partner The interest may be redeemed with the separate property of any He shall remain a mere assignee. death. The limited partnership is claim. Neither is the assignor relieved of his responsibility under Art. when all the substituted limited partner. the assignee becomes a substituted limited (Pineda. Article 1861. and make all other orders. insolvency. transactions or affairs. The fact that the assignee has become a substituted limited partner Liability of the estate of deceased limited partner does not relive the limited partner of all liabilities to the partnership vis-à-vis a person who relied on a false statement in the certificate of It shall be liable for all his obligations or liabilities to the partnership partnership. He shall be subject to all restrictions and liabilities of the assigning limited partner (Pineda. insolvency. unless profits and surplus. 2006). the certificate must be amended to reflect the continuation of the business by the remaining general partners After the amendment. insanity or civil limited partner for the satisfaction of the creditor’s claim (Pineda. unless it is with the . insanity or partnership with the payment of the unsatisfied amount of the CRs civil interdiction of a general partner. The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner. the court may CRs who extended credit to the partnership or whose claims arose charge the interest of the indebted limited partner with payment before the return of his capital (Pineda. and may appoint a receiver. insanity or civil The partner’s interest in the partnership consists of his share in the interdiction of a general partner dissolves the partnership. the presence of any Redemption of charged interest of the said circumstances will not dissolve the partnership. death. 1859. 2006). compensation by way of income or the return of his contribution to Nothing in this Chapter shall be held to deprive a limited partner of which his assignor would otherwise be entitled (Pineda. LEASE AND PRESCRIPTION Kenneth and King C. Rights of executor or administrator of the estate of the deceased limited partner XPN: Those liabilities he was ignorant at the time he became a limited partner and could not be ascertained in the certificate or He shall acquire all the rights of a limited partner for the purpose of th articles of partnership (Art. as a limited partner (Pineda. death. On due application to a court of competent which states that the liabilities of a limited partner specially to all jurisdiction by any creditor of a limited partner. the business is continued by the remaining general partners: Rights of CRs of limited partners to charge the interest of the Under a right so to do stated in the certificate. as a general partner.NOTES ON PARTNERSHIP AGENCY. neither can he inspect the partnership books. But if the partner involved is a limited partner. It may not however be redeemed by any one partner is involved in any of the above 5 circumstances provided the or more partners using partnership property. partner. On the death of a limited partner his executor or Rights of substituted limited partner administrator shall have all the rights of a limited partner for the purpose of setting his estate. 2006). but may not be redeemed with partnership matter of right. 2006). 1865. information or account of the partnership property. he cannot require. of the unsatisfied amount of such claim.

and A person is admitted as a general partner. Retirement. and to a contribution. dissolved. Those to general partners other than for capital and profits. in the order of priority as provided by partners. Those to limited partners in respect to the capital of their contributions. except for the dissolution of the partnership or for the return of those to limited partners on account of their contributions. existence. The members desire to make a change in any other statement in the certificate in order that it shall Those to limited partners in respect to their share of the profits and accurately represent the agreement among them. If there is no agreement in the certificate. In settling accounts after dissolution the liabilities of Those to general partners in respect to capital. or the return of a contribution. 2006). insanity or civil interdiction of a A certificate shall be amended when: general partner. death. Charging of interest is not an exclusive remedy. dies. The article applies to liquidation of a limited partnership. share in the partnership assets and profits in proportion to the Those to general partners in respect to capital. insane. Subject to any statement in the certificate or to subsequent Priority of claims among the limited partners agreement. business is continued under article 1860. in proportion to the respective amounts of such of partnership affairs. general partners. the partnership shall be entitled to payment in the following order: It is notable that limited partners are given priority over general Those to creditors. in the order of priority as provided by law. becomes insolvent or contribution but the same was unjustifiably denied. There is a change in the time as stated in the certificate Those to creditors. LEASE AND PRESCRIPTION Kenneth and King C. the limited partners shall Those to general partners in respect to profits. power to wind-up the partnership’s affairs. Winding up of the limited partnership affairs Those to limited partners in respect to their share of the profits and other compensation by way of income on It is the general and not the limited partners who have the duty and their contributions. When all limited partners ceased to be such. and in respect to their claims for The members of limited partners may include in the partnership profits or for compensation by way of income on their contribution articles an agreement for priority of distribution on the winding up respectively. There is a change in the character of the business of the Settling of accounts/liabilities after dissolution of a limited partnership. no time having been The pertinent laws on concurrence and preference of credit shall be specified in the certificate. Proportionate sharing by limited partners Those to general partners other than for capital and profits. Those to limited partners in respect to the capital of their contributions. The certificate shall be cancelled when the The following are the causes of dissolution: partnership is dissolved or all limited partners cease to be such. There is a change in the name of the partnership or in the Expiration of the term or period of existence of the partnership. except those to limited partners on account of their contributions. amount or character of the contribution of any limited By agreement of all partners before the lapse of the period of partner. In the absence of such an agreement. limited partners share in the partnership assets in respect to their claims for capital.NOTES ON PARTNERSHIP AGENCY. partnership There is a false or erroneous statement in the certificate. . Article 1863. Those to general partners in respect to profits. general partner against limited partner/s. 1830 and 1831. between the partners themselves. insolvency. When the limited partner demanded the return of his A general partner retires. A person is substituted as a limited partner. 2006). Creditors are given priority of payment over both limited and general The article applies only after the limited partnership had been partners in case of insolvency of the partnership (Pineda. Hizon _________________________________________________________________________________________________________________ consent of all partners whose interests are not charged (Pineda. Such agreement becomes controlling as claims. and to general partners. Misconduct of a general partner or fraud committed by a An additional limited partner is admitted. A time is fixed for the dissolution of the partnership. all limited partners shall stand on equal footing. TRUSTS. respective amounts of their claims. law. or is sentenced to civil interdiction and the Other causes: Art. Article 1864. other compensation by way of income on their contributions. or applicable.

the effectivity of this Code. The writing to amend a certificate shall: When is a certificate deemed amended or cancelled? Conform to the requirements of article 1844 as far as It is deemed amended or cancelled by the filing of the amended necessary to set forth clearly the change in the certificate certificate or the instrument of cancellation with the SEC (Pineda. Q: When can a limited partner be a proper party in a suit as such? If the court finds that the petitioner has a right to have the writing If the object of the action is to enforce his individual rights against executed by a person who refuses to do so. rule. certificate. substitution. Amendment of certificate of articles of partnership REQUISITES FOR THE CANCELLATION OF CERTIFICATE OF The certificate or articles will not be cancelled but shall only be PARTNERSHIP: amended in case any of the 10 changes and circumstances has transpired or is present.NOTES ON PARTNERSHIP AGENCY. it shall order the Office the partnership as authorized in Art. unless he is a general partner. TRUSTS. continued after the time fixed. writing refuses to do so. the limited partner is liable generally. LEASE AND PRESCRIPTION Kenneth and King C. the assigning limited partner must also sign 2006). His liability is not to certificate. to record the cancellation or amendment of the to the latter (Pineda. The amended certificate must be filed with the SEC (Pineda. 2006). and 2006). 0 The instrument of cancellation must be signed by all the members The purpose of the cancellation or amendment is to put on inquiry 1 The instrument of cancellation must be recorded with the all persons who may deal with the partners or with the partnership SEC. may petition the court to order a cancellation or amendment thereof. and the time when the contribution was made. the court shall also cause to be filed for record in said office a certified copy Article 1867. . There can be no the new members if some are added. or That the property of the partnership exceeds the amount A certified copy of the order of the court in accordance sufficient to discharge its liabilities to persons with the provisions of the fourth paragraph. 2006). with the SEC (Pineda. second paragraphs as a person who must execute the 2006). may become a limited partnership under this Chapter by complying with the provisions of article A certificate is amended or cancelled when there is filed for record 1844. where the certificate is recorded: The amount of the original contribution of each limited partner. except member to be substituted or added. Be signed and sworn to by all members. 1851. LIMITED PARTNER IS A MERE CONTRIBUTOR: The article referred to The writing to cancel a certificate shall be signed by all the limited as a mere contributor to stress the point that as a general members. he cannot be a proper party in a case for or against the partnership. in case of limited partnership if there is no limited partner (Pineda. and when the certificate is to be amended. He can be a defendant in of the Securities and Exchange Commission where the certificate is an action filed against him by the partnership to enforce his liability recorded. 2006). Article 1865. and an amendment substituting a limited partner or adding a Article 1866. Hizon _________________________________________________________________________________________________________________ EFFECT OF FAILURE TO AMEND After the certificate is duly amended in accordance with this article. A contributor. a itself about the status of the partnership so they cannot claim later certification of the final order of the court must be filed that they were misled. If the cancellation is by order of the court. he signed by the assigning limited partner. if any person designated in the first and the creditors of the partnership but to the partnership itself (Pineda. A writing in accordance with the provisions of the first or and second paragraph. the amended certified shall thereafter be for Failure to amend the certificate under this article and business is all purposes the certificate provided for in this Chapter. is not a limited or general partner shall be signed also by the proper party to proceedings by or against a partnership. REQUISITES FOR THE AMENDMENT OF THE CERTIFICATE OF Cancellation of Certificate or Articles of Partnership PARTNERSHIP: Q: When shall the certificate be cancelled? The amendment must conform with Art. The A: amendment must be in writing and under oath When the partnership is dissolved. A limited partnership formed under the law prior to of its decree setting forth the amendment. and It must be signed and sworn to by all the members including When all limited partners cease to be such. provided the certificate sets forth: in the Office of the Securities and Exchange Commission. The reason for this is that a limited partner is not a A person desiring the cancellation or amendment of a principal party in the partnership transactions. 1844 setting forth clearly the change desired in the certificate. which it is desired to make. the amendment shall also be liability to the partnership. and when a limited where the object is to enforce a limited partner's right against or partner is to be substituted.

Hizon _________________________________________________________________________________________________________________ not claiming as general or limited partners by an amount greater than the sum of the contributions of its limited partners. Partnership.. until or unless it becomes a limited partnership under this Chapter. Agency and Trusts. Vol. The Law on Sales. 2005 PINEDA. Agency.NOTES ON PARTNERSHIP AGENCY... TRUSTS. Co. REFERENCES: DE LEON. Inc. Central Book Publishing.. ARTURO M. Inc. Central Book Publishing.. A limited partnership formed under the law prior to the effectivity of this Code. Rex Bookstore... ERNESTO L. V. LEASE AND PRESCRIPTION Kenneth and King C. 1991 . Commentaries and Jurisprudence on the Civil Code of the Philippines. Inc.. shall continue to be governed by the provisions of the old law. HECTOR S. 2006 TOLENTINO. and Credit Transactions. Co.

g. aliens cannot purchase land through a Filipino agent. 1 Object which is the subject matter of the contract. and 1 Agent—one who acts for and represents another. the following requisites must concur: 0 Consent of the contracting parties. right to vote. principal. Hizon _________________________________________________________________________________________________________________ Title X. . Representation constitutes the basis of agency. if done Agency is both a contract and a representation. principal to advance the latter’s purposes of his own and he The relation of an agent to his principal is fiduciary in character since it is Business must generally return it whether based on trust and confidence. required to be made under oath should be made 2 The agent acts as representative and not for himself. 1 The object is the execution of a juridical act in relation to E. and 4 Preparatory because it is entered into as a means to an G. AGENCY LOAN The acts of the agent on behalf of the principal within the scope of his An agent is given funds by Barrower is given money for authority produce the same legal effect as if they were personally done by the principal. making of a will. (1709a) 0 Principal—one whom the agent represents and from whom he derives his authority.R: What a man may do in person. What are the characteristics of a contract of agency? In case of an agent. since he assumes no personal liability. 3 Unilateral if it is gratuitous because it creates obligations What are the acts that may be delegated to agents? for only one of the parties—the agent. BASIS AND PURPOSE OF AGENCY delegate to another authority to do an act which. are concerned.AGENCY Q: What is the purpose of agency? CHAPTER 1 It is to extend the personality of the principal. agent must be competent to bind himself. such as insane 1 Principal because it can stand by itself without the need of persons cannot be agents. by the principal would be illegal. 2 Nominate because it has its own name. But persons who are absolutely incapacitated. he does not have to possess full capacity to act insofar as third persons are The contract of agency is a: concerned. FORM AND KINDS OF AGENCY Who are the parties to the contract? Art. NATURE. TRUSTS. XPN: What are the essential elements of agency? 0 Personal acts—if personal performance is required by law or public policy or the agreement of the parties. 1 Criminal acts or acts not allowed by law—an attempt to NATURE. establish the relationship. As a contract. the servant. and personally. he may do thru another. the doing of the act by a person on behalf of another does not 0 There is consent. statements which are third persons. CAPACITY OF THE PARTIES It is this power to affect the principal’s contractual relations with third persons that differentiates the agent from the EE. Q: What is the difference between agency and lease of service? .g. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another. is void. 0 Consensual contract.NOTES ON PARTNERSHIP AGENCY. E. or not his own business is successful. LEASE AND PRESCRIPTION Kenneth and King C. As a representative relation—the agent renders some service or does something in representation or on behalf of another. of the parties to constitute performance by the latter. and What are the distinctions between agency and loan contracts? 2 Cause which is established. a third person on behalf of a principal. he is the It is a relationship which implies a power in an agent to contract with person acting in a representative capacity. 1868. Insofar as his obligations to his principal another contract. or bilateral if it is for compensation because it gives rise to reciprocal rights and obligations. he is the person Q: What is a contract of agency? represented. express or implied. Any person who is capacitated to act in his own right may be a and the independent contractor. with the consent or authority of the latter. end—creation for other contracts. 3 The agent acts within the scope of his authority.

His only office is to bring circumstances that the agent acts exclusively in his own name. Making of wills and testaments The presence of the accused during trial of a criminal case . for this purpose is placed purchaser and the vendor. LEASE AND PRESCRIPTION Kenneth and King C. is without his knowledge. but under another name. as if the transaction were his own. either express or Art. binding contract is one for a piece of upon him. to the execution of the contract In such case the agent is the one directly bound What is the difference between agency and brokerage? in favor of the person with whom he has contracted. AGENCY BROKERAGE A commission agent is engaged Has no relation with the thing he The provisions of this article shall be in the purchase or sale for buys or sells. of the owner of the business but employment. Agent exercises discretionary The servant ordinarily performs Agent acts according to the Gestor acts according to the powers only ministerial functions express will of the principal. except when the contract involves things belonging to the principal. presumed will of the owner by exercising all the diligence of a TOLENTINO: The legal possibility of an agency without good father of a family.NOTES ON PARTNERSHIP AGENCY. part of the presumed principal of the benefits received. The element of representation is absent. but fiction or principal has no right of action against the simultaneous agreement on the presumption of consent because persons with whom the agent has contracted. the part of Jose. A contract A quasi-contract particularly the last paragraph: Implied agency is founded on There is no simultaneous the lack of contradiction or consent. and enters into a Agent is subject to the control Where one part undertakes to contract with Jose. neither have such persons against the principal. The together the parties to the true essence of the distinction in such case. representation may be inferred from the provisions of Article 1883. but also with the property which is the subject matter of the What is the difference between agency and independent contract? transaction. it is conferred. between lease of He maintains a relation not only transaction. And on the part of Juan. Hizon _________________________________________________________________________________________________________________ What is the difference between agency and negotiorum gestio? A: AGENCY LEASE OF SERVICE The agent executes a juridical Lessor of services performs a AGENCY NEGOTIORIUM GESTIO act on behalf of another material act for the benefit of In both cases. What is the difference between agency and partnership? ACTS SUSCEPTIBLE OF AGENCY: GR: Agency is admissible in all contracts or acts AGENCY PARTNERSHIP XPNs: Agent acts only for his principal Partner acts not only for his co- partners and the partnership but Entering into a marriage contract also as principal of himself. (1717) which. with or without representation of the principal. unless it is annulled on the ground of error or fraud on work. 1883. merely an understood to be without prejudice to the another of personal property intermediary between the actions between the principal and agent. lies in that the agent enters or is designed to with his principal and the enter into juridical relations. TRUSTS. Representation is expressly It is only without the authority Basis is representation Basis is service. there is no knowledge that the contract is on behalf of a and without being subject to person other than the one before him or with whom he is other party’s control except as to negotiating. On the according to his own methods part of Jose. there is representation another. This is Juan’s own contract. purchaser or vendor. who thinks he is contracting actually with Pedro. and direction of the principal accomplish a certain result whom he represents. If an agent acts in his own name. A: NO AGENCY IN IMPERSONATION: There is no agency in impersonation. if Juan pretends to be Pedro. there is no agency. AGENCY INDEPENDENT CONTRACT Illustration: Thus. in his possession and at his The existence of an agency is perfectly consistent with the disposal. he is not acting in another’s the result of the work—the name. services and agency. the opposition which constitutes the implied.

General-one which comprises all the business of the principal. The mere use of the term “agency” in one clause terms and is deemed to comprise only acts of cannot dominate the whole contract. If any special capacity is required for the act entrusted to the agent. from his silence attorney from the principal himself personally without any objection. when performed.one where the agent receives no compensation for binding effect on the principal. or implied such fraudulent acts. from his acts which carry out the agency. the acceptance of the repudiate the agency. agency cannot be implied from the silence of the agent. not as the parties stipulated. 0 Ostensible or representative. Between persons who are absent.one where the agent receives Art. he is stopped from acquiring or asserting title adverse to that of the principal.implied from the acts of the principal. as between themselves. contract that his purpose was to establish an agency does not determine its nature. so long as he has sufficient intelligence and freedom of will. It may even be implied from the NOTE: An incapacitated agent can set up his incapacity against his circumstances. 1869. 1872. It may be oral or written. administration. TRUSTS. the agent must have the capacity to bind himself.one where the agent acts in Ratio: It is the principal who will receive the benefits and incur the the name and representation of the principal. or implied from the acts of the principal. principal. or his failure to Art. or from his silence or inaction according to the circumstances. An agency is impliedly accepted if the agent receives a power of Implied. Acceptance by the agent may also be express. knowing that another person is acting on his agency may also be implied if the principal delivers his power of behalf without authority. it is the principal and not the agent who must have special As to its nature and effects: capacity in addition to the general capacity to contract. there must be consent by both parties. The law does not sanction Art. 1871. and such agent would be liable to the principal only in cases of illicit acts and unjust enrichment. What is a power of attorney? As to its character: It is a written authorization to an agent to perform specified acts in behalf of his principal which acts. and may be defeated by What are the kinds of agency? proof to the contrary. 1 Simple or commission.one where the agent acts for the account of the principal but in his own name. It can be express or implied. As a contract. 1870. both being present. (1710a) PRESUMPTION: This article presumes the acceptance of the agency. or Compensated or onerous.NOTES ON PARTNERSHIP AGENCY. Couched in specific terms-one authorizing only the CAPACITY OF PARTIES: Both parties must have capacity to give performance of a specific act or acts. What is the required form of agency? But with respect to his obligations and responsibilities towards the principal. Express-the agent has been actually authorized by the principal either orally or in writing. obligations or losses arising therefrom. or CREATION OF AGENCY: The testimony of the person who drafted the Special-one which comprises one or more specific transactions. knowing that another person is acting on his behalf without authority. except: . the parties did not perform the contract in As to authority conferred: accordance with its terms and conditions with its terms and a contract must be considered. but as Couched in general terms-one which is created in general they performed it. NOTE: As regards implied acceptance by agent. but such presumption is only prima facie. (n) Agency may be oral. (n) RELATION OF PRINCIPAL AND AGENT: The relations of an agent to his principal are fiduciary and in regard to the property forming the Q: What is the required form of acceptance by agent? subject matter of an agency. There are no formal requirements governing the appointment of an agent. Agency may be express. from his silence or lack of action. unless the law requires a specific form. attorney to the agent and the latter receives it without any objection. Art. can enter into a contract of agency. or lack of action or his failure to repudiate the agency. Between persons who are present. shall have Gratuitous. his services. the law distinguishes between cases: 0 As to the manner of its creation: Where persons are present. and Where persons are absent. CAPACITY OF AGENT: No particular capacity is required for the agent. the acceptance of the compensation for his services. consent. LEASE AND PRESCRIPTION Kenneth and King C. Hizon _________________________________________________________________________________________________________________ As to extent of business covered: NOTE: The spouses.

1875. the person appointed as agent is What are the classifications of agents? considered such with respect to the person to whom it was given. LEASE AND PRESCRIPTION Kenneth and King C. the principal transmits the power of attorney to the agent there is proof to the contrary. 1874. If the agent writes a letter acknowledging receipt of power of attorney but offers no objection to the creation of the agency. Agency is presumed to be for a compensation. therefore. (n) agency is implied. 1872. so that his silence may not be interpreted as the latter if they were not given notice thereof. and in the latter case with regard to any person. or to his desire to deliberate on whether to is not entitled to the commission. Hizon _________________________________________________________________________________________________________________ If by public advertisement. the latter thereby becomes a duly authorized agent. one or more specific transactions. This article speaks only of an agency for sale of a piece of land or any interest therein. the sale shall be void. (1712) If by special information.2. unless In 1872. the failure to answer may be merely due to negligence buyer and seller to an agreement in regard to the terms of the sale. the mere compensation was specified. 1876. who receives it without any objection. or the reasonable value of the agent’s services if no RECEIPT WITHOUT OBJECTION: Under the first paragraph. and later. . failure to reply to the letter or telegram. When the principal entrusts to him by letter or telegram a power of Q: What is the manner of revocation of agency? attorney with respect to the business in which he is habitually engaged as an agent. Yet. The EFFICIENT-AND-PROCURING CLAUSE: That special condition in a court should consider all the special circumstances of each case to contract entitling the broker to the stipulated commission when the determine whether there has been an acceptance or not. and he did not reply to the letter or telegram. person. 1873. To be entitled to commission. etc. This presupposes however that the fact that the agent does not answer refusing the agency. NOTE: The principal must pay the agent the compensation agreed upon. in cases falling outside of par. more than mere failure to reply is required. it has been held that the out the agency as when he begins to act under the authority latter containing the authority to sell was sufficient. implied from his silence or inaction. not having quite succeeded in bringing the minds of the personally. What are the ways of giving notice of agency? The former comprises all the business of the principal. Art. such has expired. NOTE: In the cases contemplated by this article. conferred upon him. does not justify a departure from the rule advertisement that he has given a power of attorney to a third that the broker must be the efficient agent or procuring cause of the person. the acceptance is implied from the property on the terms and conditions imposed by the owner. TRUSTS. interpreted as an acceptance. the acceptance of NOTE: If the agency has been entrusted for the purpose of the agency is not compulsory. an acceptance. otherwise. but the agent wants to refuse it. its revocation shall not prejudice must act immediately. If a person specially informs another or states by public the life of such agency. Art. in 2 cases under Art. the agent as such with regard to any When the principal transmits his power of attorney to the agent. NOTE: Sale for a piece of land or any interest thereon like usufruct. wrote to agent or the acceptance could be inferred from his acts which carry her to sell one parcel of land which she did. property is sold within a certain period following the expiration of the agency agreement to a purchase procured by the broker during Art. former case with respect to the person who received the special information. the authority of the latter shall be in writing. An agency is either general or special. The retention of the power of attorney is not a clear proof of acceptance in this case as when it is delivered But a broker. Q: When is there an implied acceptance? mortgage. (n) Art. it is not sufficient for him to find a buyer but to find one who will actually buy the Under the second paragraph. in the sale. through an agent is void unless the authority of the agent is in writing. NOTE: His failure to give reply however does not mean that the agency has been accepted unless the power of attorney is with Illustration: Where the owner of certain parcels of land left them in respect to the business on which he is habitually engaged as an the care of his sister as his agent. he contracting with specified persons. while absent. A Power Of Attorney (POA) must be revoked in the same manner in (n) which it was given. and so he may not incur responsibilities. and these words provide off the test in The power shall continue to be in full force until the notice is determining whether the agent was the procuring cause of the sale. nor if his exclusive authority to accept or not. rescinded in the same manner in which it was given.NOTES ON PARTNERSHIP AGENCY. (n) while in 1871 he personally delivers the power of attorney to the agent. acceptance by the agent is not through an agent. The latter. on the part of the agent. When a sale of a piece of land or any interest therein is If both the P and the A are absent. cannot be agent has complied with his obligation as such to the principal. The efficient-and-procuring clause is synonymous with the ready- willing-and-able rule.

Illustration: When in a general power of attorney the agent is Unless the contrary appears. such agent is to include all the necessary and usual means to carry out the agency empowered to sell any real property of the principal. either Q: What is the meaning of acts of administration? by giving authority for all acts of a particular character or by specifying therein the act or transaction for which a special power is Those which do not imply the authority to alienate for the exercise needed. of administration. TRUSTS. should expressly mention the act for which it is drawn. may consider appropriate. necessary to perform any act of strict ownership even if the principal states: To ratify or recognize obligations contracted before the agency. or even though the agency should authorize a general and unlimited management. To effect novation. (n) To obligate the principal as a guarantor or surety. 1877. business. unless the latter act be urgent and A general agent or one authorized to transact alld the business of indispensable for the preservation of the things which are under the principal. Hizon _________________________________________________________________________________________________________________ To make gifts. Special powers of attorney are necessary in the following cases: 0 To make payment. which he can lawfully delegate to another the power of doing. To loan or borrow money. without the into effect. to renounce the An act of ownership because it involves conveyance of ownership of money right to appeal from a judgment. or in other words to do all acts. particular place.NOTES ON PARTNERSHIP AGENCY. Art. It includes only acts of administration and an express power is To accept or repudiate an inheritance. as mere act of administration. or employment. Any other act of strict dominion. To bind the principal to render some service without Art. 0 That he withholds no power. Q: What is an agency couched in general terms? To create or convey real rights over immovable property. But such special power can be included in a general power of attorney. But if payment is made in the ordinary course of management it is considered of an action or to abandon a prescription already acquired. the authority of the agent is presumed authorized to sell the principal’s immovable property. except customary ones for charity or those made to Universal agent or one authorized to do all acts that the principal employees in the business managed by the agent. as required by this article. To enter into any contract by which the ownership of an immovable Q: What is novation? is transmitted or acquired either gratuitously or for a valuable consideration. of which an express power is necessary. of an obligation. LEASE AND PRESCRIPTION Kenneth and King C. 1878. more specific transactions or to act upon a particular occasion. even if the principal should state that he withholds no power or that the agent may execute such acts as he To bind the principal in a contract of partnership. necessity of a special power to sell for every specific property. To make such payments as are not usually considered as acts of Q: What is payment? administration. (n) 1 That the agent may execute such acts as he may consider appropriate. An agency couched in general terms comprises only acts compensation. 2. to waive objections to the venue or property. or SPECIAL POWERS: The power of attorney. to submit questions to arbitration. 2 That he authorizes a general or unlimited management. To waive any obligation gratuitously. To effect novations which put an end to obligations already in It is the delivery of money or the performance in any other manner existence at the time the agency was constituted. To compromise. To lease any real property to another person for more than one A special or particular agent or one authorized to act with one or year. or all business of a particular kind or in a administration. It is the extinction of an obligation through the creation of new one which substitutes it by changing the object or principal . may personally do. connected with a particular trade. Examples: Under what circumstances is a special power of attorney necessary? The right to commence suits to collect debts owing to the principal The following are general acts of strict dominion or ownership and To appoint servants or employees of a firm thus a special power of attorney is necessary for their execution through an agent.

Similarly. the lessor gives to the lessee the enjoyment or use and customary contract for its sale. NOTE: But the making of customary gifts for charity. or to avail himself of any other means. it would carry with it the authority to make and enter into the usual In case of lease. or subrogating another in 10. the barrower is bound to pay the creditor an equal amount is for cash the agent is also considered authorized to receive the of the same kind and quality. 1879. and not on credit. merely one of the means indicated for attaining that object. unless the latter is expressly authorized. A special power to sell excludes the power to mortgage. or those made Art. by making reciprocal concessions. 1 Objections to the venue of an action. remission. Any other act of strict dominion. without making some kind of a contract. which requires an act of strict ownership. (n) 0 To loan or borrow money. property. substituting a debtor. If the sale In loan of money. POWER TO RAISE MONEY: If the power is to raise a sum of money for which purpose the agent is authorized to sell a particular real An unrecorded lease of real estate is not binding upon third persons. It is one where the guarantor binds himself to fulfill the obligation of Q: What is arbitration? the principal debtor in case the latter should fail to do so. 0 The right to appeal from a judgment. price. The same applies with respect to the authority of the agent to waive: To accept or repudiate an inheritance. the agent is considered as employed to mortgage the property. If the person binds himself solidarily. But a special power to mortgage real estate does not include the power to To bind the principal to render service gratuitously. the right of the creditor. he cannot ratify or recognize obligations contracted before 2 To convey or acquire immovable. 7 refers to money and not to other fungible things. A contract of guaranty is unenforceable unless it is made in writing. It is a contract whereby parties. and for a period which may be definite or indefinite. . an agent cannot sell in a foreign country 0 To lease realty for more than 1 year. 2 Prescription already acquired. sell. To bind the principal in a contract of partnership. he is a surety and the contract is It is where the parties submit their controversies to one or more called suretyship. To ratify obligations contracted before the agency. In this case the An agreement for the leasing of real property for a longer period real object of the agency is to raise the sum of money. NOTE: Agent cannot effect novation of obligations existing at the time of constitution of the agency unless he be especially authorized 1 To waive an obligation gratuitously—condonation or to do so. to employees in the business managed by the agent are considered and a special power to mortgage does not include the power to as acts of administration. arbitrators for decision. its execution. LEASE AND PRESCRIPTION Kenneth and King C. Hizon _________________________________________________________________________________________________________________ conditions thereof. What is a contract of guaranty? avoid a litigation or put an end to one already commenced. contract loans for the principal. It is an act of ownership since they involve the possibility of disposing of the thing or right subject of the compromise or To create or convey real rights over immovable property arbitration. TRUSTS.NOTES ON PARTNERSHIP AGENCY. 3 To make gifts. and if he had power to sell. belonging to his principal without special power. It is an act of liberality whereby a person disposes gratuitously of a A power of attorney is valid although no notary public intervened in thing or right in favor of another who accepts it. By the nature of things. A contract of partnership creates an obligation and the fulfillment of 0 To compromise. POWER TO SELL: A power to sell must be understood as for cash. No. NOTE: What are gifts or donation? Sale or purchase of personal property. and the sale is than 1 year is unenforceable unless made in writing. The agent is empowered to barrow money. the agency without special power from the principal. of a thing for a price certain. NOTE: The agent cannot sell or mortgage the property belonging to the principal without special power. What is a compromise? 0 To obligate the principal as guarantor or surety.

The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner What if the agent acts without the authority or in excess or beyond more advantageous to the principal than that specified by him. the contract is not an absolute nullity. The agent. expressly or Q: What is an authority of an agent? impliedly. the former’s act. is not deemed to have exceeded his accomplishment of the purpose of the agency. representative. and 1 The agent must act on behalf of the principal. While the principal may have confidence in the agent’s judgment. The agent becomes personally liable for the 4 Special. transactions. unenforceable against the principal as the agent acted beyond his powers. purporting to have been executed by the owners of certain registered lands. the scope of authority? (1715) Such act shall be unenforceable. G. by the person on whose behalf it has been executed. TRUSTS. the form. A special power to compromise does not authorize Power is considered as the source or cause and the latter is the submission to arbitration. 0 The agent must act within the scope of his authority. no distinction exists. and mortgages were made by such agent by virtue What are the requisites in order that the principal may be bound to thereof. and he sells on credit limited powers. at a higher price. LIMITATION ON AUTHORITY: The powers and duties of an agent are confined and limited to those which are specified and defined in his What are the different kinds of authority? power of attorney.refers to all the business of the principal. misrepresented.R: The principal is not bound by the acts of an agent beyond his Thus. he would have also followed the powers? more advantageous course. It is the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s NOTE: But the agent is not deemed to have exceeded the limits of manifestation of consent to him. if an agent is empowered to sell for cash. but only reasonably necessary to accomplish the purpose of the voidable at the instance of the party who has been improperly agency. before it is revoked by the other contracting party. (1714a) authority even if the agent has in fact exceeded the limits of his authority. and is binding upon. because it is assumed that When is the principal bound by the acts of the agent beyond his if the principal were the one acting. Art. Q: Distinguish between power and authority. which limitation is a notice to. the existence of an emergency. 1 Implied-when it is incidental to the transaction or exceeds his authority. the person dealing with such agent. unless it is ratified. in entering into a contract on behalf of his principal.when it is limited only to one or more specific damages. EFFECT OF UNAUTHORIZED ACTS: Where an agent or 0 Express-when it is conferred by words. the sale of mortgage will be price paid by him. authority when he acts in a manner more advantageous to the principal that that specified by the latter. or the object of the agency. Hizon _________________________________________________________________________________________________________________ to escape liability to the principal if the latter demands that the cash In the absence of special authority. 2 Apparent or ostensible-conferred by conduct or silence. He is NOTE: The condition of the agency can be improved but not made authorized to do such acts as may be conducive to the worse. Art. Art. 1882. and the registration of the mortgages executed thereunder were likewise null and void and could not in any way A: prejudice the rights of the registered owners of the property in question. NOTE: An agent with authority to do act has also the power to bind the arbitrator may not possess the trust of the principal. Ostensible authority is another name for authority by When the agent exceeds the scope of his authority. (1713a) effect. principal is prejudiced and the latter is the only one who can impugn 3 General.NOTES ON PARTNERSHIP AGENCY. he cannot allege the advantage of the higher price XPN: . 5 Authority by necessity-when it is demanded by virtue of NOTE: But where the powers of attorney are forged by an agent. LEASE AND PRESCRIPTION Kenneth and King C. The agent must act within the scope of his authority. it was held that such powers of attorney were without force third persons by the act of the agent? and effect. A: This article refers to an advantage which can be obtained without modifying the conditions. 1880. 1881. therefore. only the estoppel. the principal but the power may exist without authority. An act may do such acts as may be conducive to the accomplishment of within the power of the agent is deemed within the scope of his the purpose of the agency. He So far as third persons are concerned. his authority should he perform the agency in a manner more advantageous to the principal than that indicated by him.

neither have such persons against the principal. . it shall not be necessary for him to state the name of his principal. If the party sues upon is not the proper party. 1 He acts instead in his own name To pay interest on funds he has applied to his own use. principal. the principal does not have the right of action against the Where the principal’s acts have contributed to deceive third third person nor the third person against him. Where the principal has placed in the hands of the agent It is when the contract involves things belonging to the principal. should he receive also on a sale. until an agency is appointed. To answer for damages should he prefer in case of conflict. he does not principal. But there are cases where it is immaterial to the third person to know with whom he contracts. his own 2 Undisclosed principal-if the other party has no notice that interests to those of the principal. Where the limitations upon the power created by him could not Q: What is the exception to such rule? have been known by third persons. there is no representation of the principal when the To indemnify the principal for damages for his failure to collect the agent acts in his own name. To distinguish goods by countermarks and designate the 0 Where the agent being authorized to act on behalf of the merchandise respectively belonging to each principal. the principal has no JUDGMENT AGAINST AGENT: A judgment. to obtain actual and positive relief. notice of the principal’s identity. for it cannot be enforced or executed. Not to loan to himself without the consent of the principal when he has been authorized to lend at interest. where an authorized sale of credit has been NOTE: In such case. the agent is the one directly liable to the person made. person with whom he has contracted. What are the different kinds of principal? should delay detail any danger. In instruments signed by him in blank. 1883. principal may suffer. when a person He must also finish the business already begun on the death of the contracts with the driver of an ordinary vehicle for hire. Hizon _________________________________________________________________________________________________________________ Hence. To be responsible in certain cases for the acts of the substitute. the principal may suffer. 1883 applicable? To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency. principal’s identity. Thus. of such sale. any decision that may be rendered In such case the agent is the one directly bound in favor of the against him would be futile. practical purpose. such case. (1717) Art. To what circumstances is Art. for or against an agent. is contracting. except when the contract involves things belonging to the principal. What are the specific obligations of the agent? PERSONAL LIABILITY OF AGENT: When the agent transacts business in his own. Accordingly. and shall be directly liable. To act in accordance with the instructions of the principal. If an agent acts in his own name. Am action is brought for a contracted. persons not having any right of action against the principal nor the To answer for the damages which through his nonperformance the latter against them. through his non- cases where it is material to the third person to know with whom he performance. and is liable for the damages which. with whom he had contracted as if the transaction were his own. a guarantee commission. (1718) trouble himself to find out who owns the vehicle. Art. 1 Partially disclosed principal-if the other party has notice Not to carry out the agency if its execution would manifestly result in that the agent is or may be acting for a principal but has no loss or danger to the principal. The agent is bound by his acceptance to carry out the SCOPE OF THIS ARTICLE: The rule contained is applicable only to agency. principal and the third person. said To carry out the agency in accordance with its terms. the contract is considered as entered into between the Where the principal has ratified the acts of the agent. the agent is acting for a principal. CHAPTER 2 The provisions of this article shall be understood to be without OBLIGATIONS OF THE AGENT prejudice to the actions between the principal and agent. as if the business were for his own account. in right of action against the persons with whom the agent has no way binds the real party in interest. credits of his principal at the time that they become due. To finish the business already begun on the death of the principal. To inform the principal.where the other party thereto has To advance the necessary funds should there be a stipulation to that notice that the agent is acting for a principal and of the effect. LEASE AND PRESCRIPTION Kenneth and King C. To observe the diligence of a good father of a family in the custody and preservation of the goods forwarded him by the owner in case he declines n agency. To bear the risk of collection. to the persons with whom the transacts the same. as if the transaction were his own.NOTES ON PARTNERSHIP AGENCY. 1884. 0 Disclosed principal. should delay entail any danger. persons in good faith. TRUSTS.

he cannot borrow it represent the principal. NOTE: Although the death of the principal extinguishes the agency. he will be liable to the principal for any loss or damage resulting Obligation to finish business upon principal’s death therefrom.R: The principal must advance to the agent. In case a person declines an agency. they may stipulate that the agent shall advance the utmost good faith and loyalty towards his principal. hence. (n) request. By appointing an agent. even though it may not be owing to the principal. 1889. the consent of the P because the agent may prove to be bad debtor. Having accepted the agency. NOTE: Persons dealing with the agent do so at their own risk and are duty bound to investigate his authority because if the fact is done NOTE: A person is free to refuse to be an agent but once he accepts outside the scope of his authority the principal is not bound. NOTE: The agent cannot. Accordingly. INTERPRATIONS OF INSTRUCTIONS: Instructions of the principal must be interpreted in accordance with his presumed will and In the second sentence of the article. the A cannot barrow without usages of trade. should the latter prefer his own. 1887. (1719) performing his agency. without a special power of attorney. (n) RESULT IN LOSS: In order that this article may apply. If he has Authority is the extent of the limitation of the agent’s power to been authorized to lend money at interest. . Q: What is the rule where there are no specific instructions? the agent has an obligation to conclude the business already begun on the death of the principal. TRUSTS. Yet. Hizon _________________________________________________________________________________________________________________ 17. The rule applies necessary funds. the possible loss NOTE: This rule is based on equity. he shall be bound to do so except when the principal is insolvent. (n) Art. 1888. there being a conflict between his interests and those of the principal. Upon his failure to do so. the agent is bound to furnish such whether the agency is onerous or gratuitous. he may himself be the lender at the current rate of interest. the sums necessary for the execution of the agency. In such case. transactions and to deliver to the principal whatever he may have received by virtue of the agency. Q: Distinguish between authority and instructions. that a good father of a family would do as required by the nature of the business. the agent shall act in accordance with the instructions of the principal. it is necessary that as soon as practicable either: to anyone the transaction is undoubtedly prejudicial. the agency. loan or borrow money. to depart from them Art. he is bound to observe the diligence of a good father of a family in the custody Art. the A shall do all entail any danger. Art. Q: What is the basis for such rule? Art. LEASE AND PRESCRIPTION Kenneth and King C. If the agent has been empowered to borrow money. agent form part of the agency. as required by the nature of the business. he shall do all that a good father of a family places the rights and welfare of his principal above his own in would do. There is a possible conflict of interest. The reason for prohibiting the agent from engaging in self-dealing is to shut the door against temptation on his part and to ensure that he In default thereof. (n) principal may give the agent to follow in the discharge of his duties as such agent. Instructions are directions which the without the consent of the principal. he is liable for the damage which the It is the responsibility of the agent to obey the reasonable and lawful principal may suffer. and NOTE: The agent is not bound in all cases to carry out the agency as By taking charge of the goods. funds except when the principal is insolvent. In such case. In the execution of the agency. But the duty exists only should delay In the absence of the specific instructions of the P. An agent shall not carry out an agency if its execution and preservation of the goods forwarded to him by the owner until would manifestly result in loss or damage to the principal. NOTE: Agency is fiduciary in character—agent is required to observe NOTE: Yet. violates or fails to act upon such instructions. (n) the latter should appoint an agent or take charge of the goods. Every agent is bound to render an account of his is to exceed the authority conferred on the agent. when its execution would manifestly result in the loss or damage to the principal. 1890. to refuse it. when he was free instructions given to him by his principal. If the agent exceeds. Art. since they concern only the P and the A. advance the necessary funds. the owner must act or damage must not be a matter of appreciation. the duty of the agent is to render service Art. 1886. 1891.NOTES ON PARTNERSHIP AGENCY. the agent betrays the confidence reposed on him if he does not fulfill the mandate. To answer for his fraud or negligence. Should there be a stipulation that the agent shall for the benefit of the P and not to act to his detriment. they constitute the means or the orders carrying out the power granted. The transaction may thus be EFFECT OF INSTRUCTIONS: The instructions of the principal to the prejudicial to the P. The agent shall be liable for damages if. 1885. he should G. he is bound to carry it out in accordance with its terms in they need not verify or investigate the instructions of the principal good faith.

is not solidary. the acts of the substitute shall 42 SCRA 131 be void. then he is liable only for his own omission or fault. the A shall be primarily OBLIGATION TO ACCOUNT responsible for the acts of the substitute as he himself executed them. however. money and property which may have come into his hands during and by virtue of the agency embraces not only such money and property Art. 0 If the substitute is appointed by the agent against the express prohibition of the P. 2 If the substitution is not authorized but not prohibited— even if the principal does not suffer any injury by reason of such the law recognizes the validity of the substitution if the breach. forfeits his right to collect the commission that may be due him. however. contracting parties. When he was not given the power to appoint one. the agent may appoint a subagent or It is immaterial whether such money or property is the result of the substitute. If the substitution has occasioned damage to the P. 1893. if comes into the agent’s hands as the result of his agency. substitute with respect to the obligations which the latter has contracted under the substitution. cannot act without the others. but also that which they have been appointed simultaneously. But the knowledge of a fact by one of them is USE OF EMPLOYEES: The use of employees by the agent is different considered as knowledge of all. solidarity has not been expressly stipulated. the acts of the substitute: Under joint agency. but he shall be responsible for whom the agents may contract. the principal may furthermore bring an action against the separately. whether they act together or separately. virtue of or as a result of the agency. The agent. NOTE: Unless prohibited. (1721) considered as a single unit. In such case. In the cases mentioned in Nos. and heirs. LEASE AND PRESCRIPTION Kenneth and King C. the substitution has the An agent who takes a secret profit in the nature of a bonus. SCOPE: This article. The declaration of one of them to a third person in relation to the When he was given such power. The P has also a right of action against the SCOPE: The duty of the agent to account to his principal for all substitute. This article has reference to the relation of the agents to the principal. each agent is responsible for his own acts to the principal. or excluded by the nature and purpose of the agency. by mistake. same is beneficial to the P. so that one negligence of such employees. because he is the one against who an action may be brought by the payor to recover the excess amount paid. TRUSTS. 1 If the substitution is authorized. 1894. DOMINGO his authority. 1892. and the agency is not performed due to the omission of the agent. Art. does not apply to over-payment by What are the different effects of substitution? mistake. unless this is expressly prohibited by the LIABILITY IS PERSONAL principal. The right of a principal to an accounting is also transmissible to his heirs. the NOTE: It is the duty of the A to account for and deliver to the P all performance of an act for the principal which the agent has been the money and property which may have come into his hands by empowered to perform through his representative. All acts of the substitute appointed against the prohibition of the In other words. 1 and 2 of the preceding responsibility for the injury caused. several agents are appointed to act collectively.NOTES ON PARTNERSHIP AGENCY. (1722a) . The agent can make use of his employees in carrying out the agency. (1720a) He is a person to whom the agent delegates as his agent. all must act towards the same end to bind the principal. made by the first agent. such agent may keep the excess. The responsibility of two or more agents. pays to the agent more than what is owing to the principal. If a debtor. But if each one can act article. Hizon _________________________________________________________________________________________________________________ Every stipulation exempting the agent from the obligation to Q: What is a subagent? render an account shall be void. form a substitution. and the person appointed was notoriously incompetent or declaration to the same person or ratify the declaration already insolvent. but without designating the agency does not become effective until the others make the same person. (1723) TRANSMISSIBILITY: The obligation or the agent to render an account JOINT AGENCY is transmissible to his heirs. The agent may appoint a substitute if the principal has It does not regulate joint agency in relation to third persons with not prohibited him from doing so. gratuity effect of releasing the agent from his responsibility unless or personal benefit from the vendee without revealing the same to the person appointed is notoriously incompetent or his principal is guilty of a breach of his loyalty to the latter and insolvent. then he alone bears the entire Art. even though as may be received directly from the principal. they are principal shall be void. the agent exceeds the limits of DOMINGO v. The right of action against the substitute is an exception performance or violation of the A’s duty since A cannot be permitted to the general rule that contracts are binding only between the to derive advantage from his own neglect or violation of duty. shall always be liable to the principal for the fault or If the agents are charged with a joint undertaking. assigns.

For the fault or negligence of his fellow agents provided the The agent who converted to his personal use the funds of the P is latter acted within the scope of their authority. the mere fact that one agent oversteps the limits of his authority But if the A gave sufficient notice of his power to third persons does not exempt the others from discharging the agency. however. and on those which negligence of his fellows agents.R: The presumption is that an obligation is joint. each of the agents is Art. contracted is aware of the limits of the powers granted by the 1 at P10. the consent of one will not be required to validate the acts of the other.NOTES ON PARTNERSHIP AGENCY. it shall be void if the party with whom the agent Two agents are authorized solidarily to sell a parcel of land No. (n) NOTE: The present article contemplates 2 distinct cases: G. One agent collects the entire the contract. In this case. 1 has been sold for P6. and can bind the party with whom he contracts.000 instead of P10. 1896. 1898. Both Article 1894 and this article apply to a joint or collective agency In case the A acts in excess of his authority. the A is the price. Art. It is clear that if by provision of law the agent is bound to deliver to the P whatever he may have received by virtue of the agency Q: What is solidary agency? demand is no longer necessary. (1725) When a person appoints 2 agents independently. The agent owes interest on the sums he has applied to responsible for the non-fulfillment of agency. If solidarity has been agreed upon. It is one in which there being several agents for the same purpose. If the agent contracts in the name of the principal. prevent performance on the part of his principal. he thereby obligates himself ACTS BEYOND POWERS personally and by his own act. LEASE AND PRESCRIPTION Kenneth and King C. The A is shall be solidarily liable to the principal. deprive the principal of the guaranty arising from the stipulated neither the P nor the A are bound. (n) But if parcel land No. Hizon _________________________________________________________________________________________________________________ Art. The effect of The agents empowered to sell an immovable are authorized to representation is to bind the P as though he personally entered into receive only part of the price. person with whom he has contracted nor in case such person is aware of the limits of the powers granted by the P. unless he expressly binds himself or principal without the intervention of the others.000 this irregular performance of the agency makes NOTE: The agent is precluded from doing any positive act that could both agents solidary liable to the principal for damages. relations of agents to third persons are governed by other principles. unless that NOTE: The agent is precluded from doing any positive act that could appears positively to have been the principal’s intention. The other agent cannot be held liable for this act. not personally liable to the party whom he contracts. they have no power to prevent it and they because by his wrong or omission he deprives the third person with should be held liable for it. to secure the principal's ratification. the P is not bound unless but are limited to the liability of the agents to the principal. 1895. nor does it dealing with him and such person nevertheless contract with him. The other agents are not liable to the principal for one personally liable unless there is subsequent ratification by the P. prevent performance on the part of his principal. Illustrations: exceeding the scope of his authority. the excess collected. For the non-fulfillment of the agency. exceeds the limits of his authority without giving such party sufficient notice of his powers. TRUSTS.00. An act of one agent beyond the scope of the agency does not If he exceeds in his authority. each of the agents becomes use. 2 principal. One of the agents sells parcel land No. and solidarily liable: Sums which the agent still owes the P after the expiration of the agency. . The agent who acts as such is not personally liable to the each one acts independently of the others. Art. solidarity. If the agent acts in excess of his authority. (1724a) fellow agents acted beyond the scope of their authority. SOLIDARY AGENCY Q: Is it necessary that demand be made by the P? The article governs solidarity in the relation of the agents to the principal and not in relation to third persons. because as to that excess the act is Yet. The he ratifies the act. and for the fault or his own use from the day on which he did so. liable for interest as compensation or indemnity from the day on which he did so. Yet. the agent becomes personally liable concern the other agents. 1897. the agent is liable if he undertook instead. When the A expressly binds himself. except in the latter case when the he still owes after the extinguishment of the agency. the A will not be liable if he gave notice of his powers to the beyond the scope of the agency. and the principal does not ratify the contract.000. Sums belonging to the P which the A applied to his own XPN: If solidarity has been agreed upon. This governs a joint agency where the agency act collectively as a An agent who acts as such within the scope of his authority unit in relation to third persons but where it is stipulated that they represents the P so that his contract is really the principal’s. whom he contracts of any remedy against the P.

NOTE: The third person cannot set up the fact that the A exceeded his authority to disaffirm his contract not only after the P has ratified Art. An act of NOTE: A commission agent can sell on credit only with the express or the A within the terms of the POA within the scope of the agent’s implied consent of the P. (n) If the authority is in writing. TRUSTS. This is NOTE: Ignorance of the agent’s authority is not an excuse. (n) He is one whose business is to receive and sell the goods for Q: What is the effect of the ignorance of the agent? commission and who is entrusted by the P with the possession of the goods to be sold. he has been deceived. the same. but the Q: What if the authority is written? commission agent shall be entitled to any interest or benefit. if the principal does not ratify his act. (n) Every person dealing with the A is under obligation. But if the third attorney or instructions shown them. it is evident that he tacitly ratifies them. to make an inquiry not only as to the existence of the agency but also as to the Art. (n) . shall distinguish Q: What is the effect of an unwritten authority? them by countermarks. with a his willingness to ratify. the P has 2 alternative authority although the agent has in fact exceeded the limits of his remedies: actual authority. So far as third persons are concerned. and designate the merchandise respectively belonging to each principal. sell on credit. It is the duty of the third person to require the A to produce his POA RATIFICATION: The acts of an agent beyond the scope of his to ascertain the scope of his authority. unless. 1900. Should he fail to do so. If the P appoints an A who is ignorant. Otherwise. statement of the names of the buyers. 1897. 1906. he is to blame and he is Private or secret orders and instructions of the principal do not not entitled to recover damages from the agent. consignment. implied consent of the principal. or his willingness to ratify the agent's acts. 1901. 1905. implied under Art. aware.NOTES ON PARTNERSHIP AGENCY. Hizon _________________________________________________________________________________________________________________ EXCESS OF AUTHORITY: The liability of an agent who has exceeded Art. he ratifies them: Expressly Q: Is the third person bound by the P’s private instructions? Impliedly The third person is chargeable with knowledge of the terms of the Only the principal can ratify. which belong to different owners. on behalf of the principal may require the presentation of the depends upon whether or not the third person knows the limits of power of attorney. Art. the sale shall be deemed to have been made for cash insofar as the principal is concerned. sell on credit. without the express or nature and extent of authority of the agent. If he knows such limits. statement of the damage or deterioration if the goods received by even if the agent has in fact exceeded the limits of his authority him do not agree with the description in the consignment. Art. with authority of the the A’s acts but even before such ratification where he has signified principal. Q: What is the liability of such agent as to the goods received? Art. A third person cannot set up the fact that the agent has from the sale shall belong to the A since the P cannot be exceeded his powers. To avoid liability. as written. authority does not bind the principal. unless the latter prejudice third persons who have relied upon the power of undertook to secure the principal’s ratification. (n) Art. if the principal has ratified. (n) Ratify the sale on credit in which case it will have all the risks and advantages to him. the principal may demand from him payment in cash. the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was. the agent cannot ratify his own POA as written and the instructions disclosed to him. Yet he is not unauthorized acts. 1903. He may require payment in cash and any interest or benefit Art. unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. LEASE AND PRESCRIPTION Kenneth and King C. The commission agent cannot. 1899. 1902. and the agent is liable for damages to him. or the instructions as regards the agency. Should the commission agent. A third person with whom the agent wishes to contract the scope of his authority. The commission agent shall be responsible for the goods NOTE: If the principal receives the benefits from the unauthorized received by him in the terms and conditions and as described in the acts of the agent. 1904. If a duly authorized agent acts in accordance with the (n) orders of the principal. or ought to Q: Who is a factor or commission agent? have been. Should he do so. such agent should make a written if such act is within the terms of the power of attorney. an act is deemed He will be responsible for any damage or deterioration suffered by to have been performed within the scope of the agent's authority. or has signified allowed to enrich himself at the A’s expense. the agent’s power. The commission agent who handles goods of the same kind and mark. he shall so inform the principal. (n) person is unaware of the limits of the authority conferred. according to an understanding between the principal and the agent. which may result from such sale. the third party is not required to inquire further than the terms of the written power of attorney. And the principal must have knowledge of the bound by the secret orders and instructions of the P. acts he is to ratify. the fault is his alone and he must suffer the consequences of his acts.

. show that the credit should not be collected notwithstanding the exercise of due diligence on his part. The commission agent who does not collect the credits performance of an obligation of the principal. LEASE AND PRESCRIPTION Kenneth and King C. he shall bear the risk of collection and shall pay the the agency may have caused the latter without fault or principal the proceeds of the sale on the same terms agreed upon negligence on his part. or sell what he has been commissioned to buy. the A must also factor or commission agent guarantees to the P the payment of act in a representative capacity. Q: What is estoppel? As for any obligation wherein the agent has exceeded his power. Hizon _________________________________________________________________________________________________________________ To reimburse the A for all the advances made by him provided Art. Even when the agent has exceeded his authority. The agent is responsible not only for fraud. the principal is liable because of his own negligence When the agent secures a contract through fraud. the that effect from its principal. because of the manner in which the agent has performed it. (n) GR: But if the fault or crime committed by the agent is not in the NOTE: The agent who has made an authorized sale on credit must performance of an obligation of the principal. unless he proves that he the same even if the illicit of the agent amounts to a crime. but also for When the delict or quasi-delict was committed by the agent negligence. 1907. Apparent authority is that those cases where the P by his 1 To advance to the A. or due courts. without the permission of fraudulent alienation. (1726) part. LIABILITY FOR AGENT’S ILLICIT ACTS: When the agent is in the Art. debts arising through his agency. the sums necessary for the execution of the agency. exercised due diligence for that purpose.NOTES ON PARTNERSHIP AGENCY. TRUSTS. (1727) his own deed or representation. Art. The rule is demandable shall be liable for damages. but becomes criminal only him but also for negligence. even if it is done in demandable. him. then principal is liable to third persons who act in good It is held that the failure of a subagent with whom film has been left faith. another called a guarantee To indemnify the A for all the damages which the execution of commission. for safekeeping to insure against loss by fire does not constitute negligence or fraud on its part when it has received no instruction to Art. transaction executed for him When the crime consists in the performance of an act which is NOTE: The A is responsible to the P not only for fraud committed by within the powers of the agent. or executes a simulated contract. addition to the ordinary commission. because the illicit act is inseparable from the This prohibition ceases upon the termination of the agency. directly or indirectly buy for himself what he has of these acts are imputable to the principal as if done by commissioned to sell. The liability extends only to third persons who have lawfully supposed the existence of the authority. Otherwise. the reasonable value of the agent’s services. this is culpa contractual. What are the specific obligations of the P? Distinguish between apparent authority and authority by estoppel? A: 0 To comply with all the obligations which the agent may Apparent authority Authority by estoppel have contracted within the scope of his authority and in Authority by estoppel arises in the name of the P. 1908. which shall be judged with more or less rigor by the because of defective instructions from the principal. according to whether the agency was or was not for a to the lack of necessary vigilance or supervision on his compensation. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. all the principal. in the A is free from fault. Should the commission agent receive on a sale. Q: What is a guarantee commission? NOTE: Representation is the essence of agency. should the latter so request. XPNs: Art. the latter generally is collect the credits due the P at the time they become due and not bound by the illicit act of the agent. It is not enough that It is one where in consideration of an increased commission the the A should act within the scope of his authority. (n) BASIS OF LIABILITY: The basis is the failure to adopt the necessary CHAPTER 3 measures to prevent third persons from being deceived by the OBLIGATIONS OF THE PRINCIPAL apparent authority of the agent. 1910. the fault of the agent of his principal at the time when they become due and is attributable to the principal. 1911. 1909. he shall be liable for damages unless he can connection with his functions. or makes a BREACH OF TRUST: The agent may not. It is a bar which precludes a person from denying or asserting the principal is not bound except when he ratifies it expressly or anything contrary to that which has been established as the truth by tacitly. principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. with the purchaser. (n) To pay the agent the compensation agreed upon or otherwise.

1544. This is a pledge created by operation of law. . The reimbursement shall include interest on the sums advanced. knowledge of the conduct of the Art. liable. provided that they are for the same transaction. the principal must the parties may agree to negate such solidarity. and the two contracts are incompatible with each other. the agent can recover from any principal the whole compensation and indemnity owing to him by others. only the latter are solidarily liable. If the same thing should have been sold to different vendees. The authority of the agent is not The P have all concurred in the appointment of the same agent. The solidarity does not disappear by the mere partition affected by the principals after the accomplishment of the agency. Art. and. reimburse him therefor. (n) PROFESSIONAL SERVICES Art. which are common and others are not. the sums necessary for the execution of the agency. 1913. prejudice to the effects of negotiorum gestio with respect to others. if it should have paid as reasonable compensation for professional services be movable property. common transaction or undertaking. (1729) Art. real but only apparent and The principal alone is liable If the estoppel is caused by the The agent appointed for a common transaction or undertaking. provided the agent is free from all fault. the agent is not entitled to the excess in case granted. When two persons contract with regard to the same thing. without execution of the agency. and pays the indemnity set forth in the two preceding articles. the principal agent to exercise powers not the things are sold to satisfy his claim and the proceeds thereof are knowingly permits the agent to granted to him. even though the more than the amount due. one of them with the agent and the other with the principal. they shall be solidarily liable to the agent for all the consequences of the agency. provided there is good faith. the A will not be liable for the damage which the P may And if the power granted includes various transactions some of suffer. only those interested in each transaction shall be liable for it. Article 1544. without prejudice to the provisions of execution of the agency has caused the agent. 1916. the ownership shall belong to Art. There is an actual agency. 1914. TRUSTS. he is liable to any third person who relied on the SOLIDARITY OF PRINCIPALS misrepresentation. should the not from the act of constituting the agency. if the estoppels is caused by the The article applies even when the appointments were made by the agent. If two or more persons have appointed an agent for a A. that of The liability of the P for damages is limited only to that which the prior date shall be preferred. rendered by third persons in the execution of the agency. latter so request. without fault or negligence on his part. By virtue of this solidarity. even if the business or undertaking was not successful. But Should the agent have advanced them.NOTES ON PARTNERSHIP AGENCY. exercise or holds out as P may have no notice or possessing. The principal must also indemnify the agent for all the damages which the execution of the agency may have caused the latter. the A has the right to retain in pledge the things which are the object of the agency. Should it be immovable property. then only the agent is principals in separate acts. LEASE AND PRESCRIPTION Kenneth and King C. 1915. If the P fails to do so. (1730) Should there be no inscription. the ownership shall pertain to the person who in good faith was first in the possession. The solidarity arises from the common interest of the principals and Art. Hizon _________________________________________________________________________________________________________________ which though not actually culpable negligence permits his In such case however. The agent may retain in pledge the things which are the the person acquiring it who in good faith first recorded it in the object of the agency until the principal effects the reimbursement Registry of Property. in the Q: Is the A authorized to retain the object of the agency in pledge? absence thereof. The principal must advance to the agent. the ownership shall be transferred to the person who The principal must reimburse the agent for amounts the latter may may have first taken possession thereof in good faith. (1473) If the P fails to reimburse or indemnify the A. but only The P must advance to the A upon his request the sums necessary for the some create the agency. P. to the person who presents the oldest title. 1912. (1731) Distinguish between implied agency and agency by estoppel? What are the 3 requisites for the application of the above article? A: IMPLIED AGENCY AGENCY BY ESTOPPEL There are 2 or more principals. (1728) If the undertaking is one in which several are interested. from the day on which the advance was made.

Death of principal When the expenses were due to the fault of the agent. interest of a third person who has accepted the 1 By the withdrawal of the agent. (1738) What are the different modes of extinguishing an agency? Art. and the period has not yet expired. stipulation in his favor. 5 By the expiration of the period for which the agency was is valid and shall be fully effective with respect constituted. without 4 By the accomplishment of the object or purpose of the knowledge of the death of the principal or of agency. if the principal was not aware The authorization by a principal to another to furnish necessaries to thereof. LEASE AND PRESCRIPTION Kenneth and King C. By operation of law. Q: What are the kinds of revocation? The death. the P can compel the A to period of his sentence of the right to manage his property and return the same so as to prevent the A from making use of the dispose of such property by any act or any conveyance inter vivos. Agency is extinguished: if it has been constituted in the common interest of the latter and of the agent. right to do so. Art. 1917. 1930. Such By agreement. It may be express or implied as when the P appoints a new agent for the same business and transaction or when the P manages the Q: What is civil interdiction? business entrusted to the agent. The principal may revoke the agency A: at will. (1733a) By the subsequent acts of the parties which may be either: Revocation-when the agency is terminated by the principal. Art. revocation may be express or implied. By the act of both parties or by mutual consent. 1920. or change in the conditions not anticipated by the parties like the If the agent acted in contravention of the principal's instructions. The principal is not liable for the expenses incurred by the agent in the following cases: Other causes include change in law affecting the subject matter or transaction involved like if it makes illegal the required act. Renunciation. Agency is terminated by the death of the principal. if the Q: Are the modes mentioned exclusive? agent has acted in good faith. and CHAPTER 4 MODES OF EXTINGUISHMENT OF AGENCY Art. any other cause which extinguishes the agency. While the P may have the absolute power to revoke the A at anytime. . it stands to reason that it should cease when such confidence disappears. Hizon _________________________________________________________________________________________________________________ Art. The agency shall remain in full force and effect even after the death of the principal. agency may also be extinguished by the modes of the agent acted in bad faith. insanity. he must respond to damages in those cases wherein not having the 3. preventing or making impossible the unless the latter should wish to avail himself of the benefits accomplishment of the purpose of the agency. (n) XPNs: 0 Article 1930. (n) 2 By the death. or that the latter would be allowed only a certain sum. By the unilateral act of one of them. It is a form of disqualification which deprives the offender during the If the authority of the agent is in writing. and compel the agent to return the document evidencing the agency. civil interdiction. or Confidence is the cardinal basis of the relation. outbreak of war. derived from the contract. or in the 0 By its revocation. civil interdiction. insanity or insolvency of the principal or of the agent. Anything done by the agent. Art. but also because death of a principal terminates the agency. the former’s grandson could not be made to extend after his death. 1931. 1918. 1919. he alone shall be responsible. In the case referred to in the preceding article. Agency requires the existence and capacity of both the P and the A. (1732a) to third persons who may have contracted with him in good faith.NOTES ON PARTNERSHIP AGENCY. 1 Article 1931 3 By the dissolution of the firm or corporation which entrusted or accepted the agency. If No. (n) extinguishment of obligations when applicable lime loss of the thing and novation. he should discharge the agent. even if the When the agent incurred them with knowledge that an agency is for a definite period.when the same is done by the agent. unfavorable result would ensue. not only because the obligation to furnish support is personal and is When it was stipulated that the expenses would be borne by the extinguished upon the death of the person obliged to give support agent. TRUSTS. the principal shall be liable in damages to the third person whose contract must be rejected. or insolvency of either party terminates the agency.

either in perpetuity or for a definite period. this is equivalent to notification. the agent can recover damages from the principal. 1923. XPN: If the revocation was made in such a manner as to constitute an abuse of right. If the agency has been entrusted for the purpose of buy lands in same locality. the principal NOTE: Revocation does not become effective as between the P and cannot revoke the agency. Hence. The agreement may take 2 forms: the provisions of the two preceding articles. the notice must be personal. LEASE AND PRESCRIPTION Kenneth and King C. agent. (1734) NOTICE TO THE FIRST AGENT Accordingly. an directly with the principal. it may be The principal cannot revoke the agency in BF and as a means to personal. is not specified. 1922. which is not thereby revoked. even when the agency is granted as agent may be appointed to buy lands in certain locality without exclusive because the principal cannot renounce future acts. Under 1921. knowledge of the revocation will not be prejudiced thereby. this is not necessarily incompatible with contracting with specified persons. since the third persons have been made to believe that the A is authorized to deal with them. in which case. to the latter. A mere obligation of the principal not to revoke. or the A until it is in same way communicated to the latter. even if they were not rd This is an XPN to the general rules of contract. agent Where there is no incompatibility. of the termination the representation. it must be considered that the first agent acted under a valid power of attorney which had not been legally revoked. If the agent had general powers. agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. NOTE: Publication constitutes notice to third persons and this is true whether or not they have read the newspaper concerned. does not prevent the principal INCOMPATIBILITY OF POWERS from executing the delegated act himself. If 3 persons have knowledge of the revocation. revocation of the the agency is gratuitous or remuneratory. prejudice the latter if they were not given notice thereof. The article also applies to cases where the authority of the agent has been communicated to particular persons. the new agency may only mean a cannot prevent third persons from exercising their right to deal division of the agency and the 2 agencies can co-exist. The rule applies whether Art. specification of the particular properties. its revocation shall not the first agency. (n) GR: The principal is not liable for damages for having made use of his power to revoke the agency. Notice of the revocation INDEMNITY TO AGENT in a newspaper of general circulation is a sufficient warning to third persons. Hizon _________________________________________________________________________________________________________________ power and thus avoid liability to third persons who may SCOPE OF THE ARTICLE: It is the duty of the principal on the subsequently deal with the A on the faith of the instrument. The agent has no power to oppose such termination even if there was a definite period fixed for the agency. TRUSTS. termination of the agency to give due and timely notice thereof to third persons to whom he has given special invitation to deal with his POWER TO REVOKE agent and failure to do so renders him liable to them for whatever may have been in good faith and without negligence sent to the BASIS: It is the will of the person represented that may put an end to agent without knowledge.NOTES ON PARTNERSHIP AGENCY. APPLICATION OF THE ARTICLE Stipulation on irrevocability The article refers to agency in which the person with whom the Parties may validly stipulate that the agency shall be irrevocable for a agent is to contract. A new agency revokes an existing one only when 2 are incompatible AGENCY IS NOT EXCLUSIVE with each other or when the principal makes known to the first agent that his powers have ceased by the appointment of the new An agency conferred to carry out certain transaction is not exclusive. avoid paying compensation to the agent. The appointment of a new agent for the same business There is no reason why it cannot become irrevocable by agreement or transaction revokes the previous agency from the day on which so long as the agreement is according to the agency and not contrary notice thereof was given to the former agent. his powers being limited to the amount stated in his powers. Otherwise. Even an irrevocable power however. it does not prevent the principal from concluding the transaction himself or naming other persons with the same authority. Otherwise. without prejudice to to morals. actual or constructive. . (1735a) A renunciation of a right to revoke. converted into a true alienation of the personality. in which case the agency may be revoked but the principal becomes Rights of third persons who acted in good faith and without liable for breach of contract. If a second agent is appointed to Art. indicated at the time the agency was created. under 1922. Art. the representation would be of the agency. they have a right to presume The grant of a new power of attorney to the new agent must be that the representation continues in the absence of notification by made known to the first agent in order to revoke the power granted the P.’ certain period. 1921.

This is G. EFFECT OF IRREVOCABLE AGENCY: SUBSEQUENT GENERAL POWER Irrevocability of agency does not merely insure an indemnity to the agent or third persons prejudiced by the revocation. (n) reimbursement or indemnity. Art. and Art. The express intention must prevail over that OTHER CASES OF IRREVOCABILITY which is merely presumed by law. the agent must indemnify him therefor. A general power of attorney is revoked by a special one Irrevocable agency is not perpetual. it is expressly provided that the special power otherwise stipulated. NOTE: Direct management of the business by the P himself. the CR is According to Sec. to collect a certain amount from CJ and to apply the same to the DIRECT INTERVENTION BY PRINCIPAL unpaid price. the agency is irrevocable. If the latter should suffer any damage by Art. the rule under Argentine Code applies to appointed as an agent to sell the property given as security or to our jurisdiction: even when there is incompatibility the agency still collect the fruits therefrom. 1928. the implied revocation is deemed made in bad faith. The agency is revoked if the principal directly manages Such as when the A parted with value or incurred liability at the P’s the business entrusted to the agent. and cannot be sanctioned Example: Ayel buys a piece of land from Bebeng. any one of them may revoke the same without the consent of the others. subsists if the principal expressly manifests that he has no intention of revoking the agency. If the CONDITION IN BILATERAL CONTRACT purpose is to avoid payment of his agent’s commission. it is usual to stipulate that the agency shall NOTE: An agency coupled with interest cannot be terminated by the be exclusive. Tolentino. Art. It must be limited to a particular granted to another agent. the principal is deprived of the right to appoint a sole will of the P although it is so revocable after the interest ceases. new agent for the same transaction whether jointly with the exclusive agent or by way of revocation of his powers. NOTE: A specific power naturally prevails over the general power. based on constitutional prohibition against involuntary servitude. This is applicable in our jurisdiction. act authorized under the special power. TRUSTS. with part of the without the commission which is due to the A. but stipulating that he appoints Bebeng as agent. This Yet. or if it is the means of fulfilling an obligation unless the agent should base his withdrawal upon the impossibility already contracted.NOTES ON PARTNERSHIP AGENCY. (n) against indefinite or irrevocable obligations. When two or more principals have granted a power of When the agency is for the benefit of the agent. but also for the interest of third person. 1927. If. except when In the Argentine Code. otherwise. or if a partner is appointed manager of a of continuing the performance of the agency without grave partnership in the contract of partnership and his removal from the detriment to himself. (n) Stipulation of irrevocability: Art. therefor. (n) NOTE: The A may withdraw from the agency at any time. to indemnify the P When the agency is created not only for the interest of the P should the latter suffer damage by reason of such withdrawal. in a contract of loan with a mortgage or pledge. The direct intervention by the principal will revoke the agency only MEANS OF FULFILLMENT when such intervention is incompatible with the agency. . depends upon it. XPN: If the same is without just cause-the A has the duty to give notice to the P and if the withdrawal is without just cause. When there is an express stipulation to that effect.R: The P may revoke an agency at will. A cannot revoke the agency of B. it extends the agency even against the will of of attorney is not revoked by a subsequent general power of the principal in the sense that the acts of the agent will bind the attorney given to another agent. An agency cannot be revoked if a bilateral contract reason of the withdrawal. In cases where the agency is for compensation. Hizon _________________________________________________________________________________________________________________ When the agency is created for the mutual interest of both the EXCLUSIVE AGENCY P and the A. as regards the special matter involved in transaction or to a determinate period because public order is the latter. attorney for a common transaction. 1925. 1926. LEASE AND PRESCRIPTION Kenneth and King C. dealing directly with third request. (1736a) management is unjustifiable. price on credit. and the Agency coupled with interest compensation depends upon the success of the transaction entrusted to the agent. 1924. it is essential that the interest of the agent shall be in the subject stipulation is valid provided that it is limited to the transaction or matter of the power conferred and not merely an interest in the with respect to time. In this case. looking to the exercise of the power as the means of persons. it will be contrary to the revocability exercise of the power because it entitles him to compensation of the agency. Thus. unless the latter refers also to the principal notwithstanding the untimely revocation. The agent may withdraw from the agency by giving due notice to the principal.

his heirs WAIVER OF RIGHT TO WITHDRAW must notify the principal thereof. The law requires good faith not only as to third persons but also the agent. BENEFIT OF THIRD PERSON This is illustrated by a case where a DR in selling his land. REFERENCES: XPN: PINEDA. ARTURO M. WHEN NOTICE IS IMPOSSIBLE When the heirs of the agent cannot give notice required by the Art. person who has accepted the stipulation in his favor. reasonable opportunity to take the necessary steps to meet the situation. If it has been constituted in the interest of third persons.. GF of a third person is sufficient basis in itself for his Filing of complaint by an agent against his principal for the collection protection. Anything done by the agent.NOTES ON PARTNERSHIP AGENCY.. and his rendering of a final account of his DEATH OF PRINCIPAL operations are equivalent to an express renunciation of the agency and terminate the juridical relation between them. turns it over to third party. to himself. WHAT CONSTITUTE WITHDRAWAL GOOD FAITH OF A THIRD PERSON When an agent informs his principal that for reasons of health he is rd about to depart from the place where he is exercising his agency. or is due to a fortuitous event. The power of sale given in a mortgage has been held to be a power coupled with interest which survives the death of the grantor. and asks his principal to execute a power of attorney to the revocation of power is unknown to a third person. authorizes the buyer to deliver part of the purchase price to his CR. his heirs must notify the principal in such case. 2006 the P and the A. If the agency has been constituted in the common interest of Co.. even if he should withdraw from the agency article because the whereabouts of the principal is unknown. The agency shall remain in full force and effect even after to take such steps as may be necessary to meet the situation but the death of the principal. Art. 1991 COMMON INTEREST This is illustrated by a case where a DR has authorized his CR to sell certain properties of the DR upon non-payment of the debt. Where accounts. Co. Commentaries and Jurisprudence on the Civil Code of the Philippines.as when it is based on the NOTE: Presupposes that the A acted without knowledge of the death impossibility of continuing with the agency without grave detriment of the principal or any other cause which extinguishes the agency. 1931. there being a third party. TOLENTINO. 1929. Inc. the third person can rely.. if it has been constituted in the common also to adopt such measures as the circumstance may demand for interest of the latter and of the agent. is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. V. the A cannot be held liable. they for a valid reason.R: Agency is terminated by the death of the P. Partnership. renders his even if the agent has knowledge of the cause of revocation. Vol. Hizon _________________________________________________________________________________________________________________ If the same is with just cause. it is proper to impute the risk to the principal. must continue to act until the principal has had should consign the things object of the agency to the court. (1738) . abandons his property. without knowledge of the death of the principal or of any other cause which extinguishes the agency. it is shown that he renounced his agency but must turn basis for confidence previously created by the Principal and on which over any balance of money to the principal. Law does not impose a duty on the heirs of the principal to notify the agent of the death of the principal. 1932.. (n) G. This article extends to 3 persons contracting in GF with the agent. Inc. The agent. If the agent dies. (1739) himself. LEASE AND PRESCRIPTION Kenneth and King C. Central Book Publishing. TRUSTS. the relationship may be terminated in case of an thereof. ERNESTO L. (1737a) The law imposes upon the heirs of the deceased A not only the obligation to notify the P to enable the latter reasonable opportunity Art. 1930. or in the interest of a third the interest of the P. of a balance in his favor resulting from a liquidation of the agency accounts between them. Agency and Trusts. and in the meantime adopt such measures as the impossibility of continuing the agency without serious injury to circumstances may demand in the interest of the latter. but if the agent dies.. Central Book Publishing. Agent may renounce his right to withdraw from the agency but even Art.

of the merchandise imported or purchased (Pineda. It is enough that the cestui que trust is sufficiently certain As to proof needed when immovable or interest therein is involved or identifiable (Pineda. there being a law creating it Trustor who establishes the trust As to manner of creation Trustee (fiduciary). and who may not suhc property. 2006) One created by the express One which is not created agreement of the parties. powers by the latter (Pineda. Imprescriptible Prescribes after 10 years from registration of the title.NOTES ON PARTNERSHIP AGENCY. as collateral. evincing an intention to create a trust NOTE: The cestui que trust need not be named at the time the trust is created. Hizon _________________________________________________________________________________________________________________ TITLE V. A person who establishes a trust is called the trustor. specific property. 2006) either expressly or inpliedly. TRUST v. another. contract or by a legal provision contract and never by operation one in whom confidence is reposed as regards property for the of law benefit of another person is known as the trustee. 2006) Trust is a fiduciary relationship involving a property whereby the fiduciary holds it for the benefit of another (Pineda. entitling him benefit of another called the be able to aqcuire credit except to the performance of certain duties and the exercise of certain beneficiary through utilization. and lehal title to which is vested in importers and retail dealers who responsibilities which are not strictly technical trusts (Pineda. TRUST RECEIPT TRUST.TRUSTS TRUST v. not one involving merely personal duties KINDS OF TRUST AS TO MANNER OF CREATION It involves the existence of equitable duties inposed upon the holder of the title to the property to deal with it for the EXPRESS TRUST IMPLIED TRUST benefit of another As to Creation It arises as a result of manifestation of intention to create the relationship (Pineda. the one in whom the confidence is reposed Created by the direct and the It is merely deducible from the as regards the property for the benefit of another person positive acts of the parties. It is a relationship with respect to property. 2006). but by operation of law. 2006). Express trusts are created by the intention of the trustor or of the parties. It It is always express and must be rd continues to exist unless accepted by the 3 person The trustee holds the property for the benefit of another repudiated before the grant stipulated in his (beneficiary) who could be the trustor himself or a third person. a trust is defined as the right. relations. by nature of the transaction some writing. TRUST TRUST RECEIPT enforceable solely in equity. but the word enjoyment of a property but the intended to aid in financing “trust” is frequently employed to indicate duties. deed or by words. It is either express or implied. whether real autrui could either be a specific or personal. the equitable ownership of the former. or by expressly by the parties or by PARTIES IN A TRUST: the intention of the trustor the trustor. 2006). otherwise barred Prescription of action Property cannot be acquired by Property can be acquired by prescription because the prescription (Pineda. LEASE AND PRESCRIPTION Kenneth and King C. Implied It us a relationship of fiduciary character trusts come into being by operation of law. and the person As to object for whose benefit the trust has been created is referred to as the The object of a trust is always a The object of a stipulation pour beneficiary. defined: In its technical sense. Beneficiary (cestui que trust) is the person for whose benefit the trust has been created (Pineda. TRUSTS. 2006) . including an property or other things CONCEPT OF TRUST (FIDEICOMMISSO): It is a fiduciary relationship undivided interest therein as in created by agreement or by law where the trustor of the property co-ownership or choses in action has the equitable title while the legal title is vested in another As to form (trustee). 2006) CHARACTERISTICS OF TRUST: It is a relationship Article 1441. favor is mutually revoked by the parties (Pineda. STIPULATION POUR AUTRUI CHAPTER 1 TRUST STIPULATION POUR AUTRUI General Provisions As to origin It can arise either by virtue of a It can arise only by virtue of a Article 1440. to be the beneficial enjoyment of The right to the beneficial It involves a security transaction property. Trusts are either express or implied. It is a legal relationship do not have sufficient funds or which is fiduciary in nature resources to finance the It is a legal relationship between one person having an equitable whereby a person called trustee importation or purchase of ownership in property and another person owning the legal title to is holding the propeprty for the merchandise. the legal title to which is vested in another. 2006).

or by words evincing an intention to create a trust. 2006). interest in property. but Article 1446. the determines the equitable legal right to property which he acceptance need not be in a public instrument (Pineda. A agreement or intention but in resulting trust is based on the the main by operation of law. 2006). the impliedly. to hold (Pineda. or by words 1. unless the contrary should appear in the instrument constituting the trust. that is. and the trustor did not provide that the adverse trust will be rendered ineffective in case of the death. or Prescription which arises when there is an express repudiation will. No express trusts concerning an immovable or any interest therein may be proved by parol evidence. the Code of Commerce. the former is preferred to the implied trust that is presumed created not by any word or trustee of the proceeds of the insurance policy in the absence of any always to have been phrase. EXPRESS TRUST IMPLIED TRUST GR: A trustee cannot acquire by Same rule when it comes to the Article 1444. Article 1442. No trust shall fail because the trustee appointed repudiation amounting declines the designation. insofar as they are not in conflict with this Code. by some writing or deed. ought not. either expressly or showing that the former is incompetent (Pineda. instrument of conveyance. NO ACCEPTANCE. Merger of the rights of the trustor and the trustee. repudiation have been has declined the appointment as such. adverse and peaceful in the concept of an owner for the required period PROOF NECESSARY TO ESTABLISH AN EXPRESS TRUST WHEN PROPERTY IS IMMOVABLE AND MOVABLE: There must be a ACQUISITIVE PRESCRIPTION AS A MODE OF ACQUIRING statement or mention of a written instrument to evidence the trust. 2006). gratuitous. or vice-versa EXPRESS TRUST: Express trusts are those which are created by the direct and positive acts of the parties. Acceptance by the beneficiary is necessary. the acceptance in trust does more valuable consideration fraud. NO TRUST CREATED: It is essential that the equitable doctrine that it is the construed against one who. performed unequivocal acts if Article 1445. It beneficiary. of the trust. However. There must direct and positive are present: acts of the parties. and who accepts the appointment will take over. OWNERSHIP: No express trust over a realty can be proved by parol evidence (Pineda. his acceptance shall be presumed. if the trust imposes no onerous condition upon the transaction although not satisfy the demands of justice. as when the trustor waived his beneficiak rights in favor of the trustee. to an ouster of the cestui que trust 2. Such positive acts of NOTE: If the designated trustee. TRUSTS. . if there is no proof expressed in a deed or does not come about by to the contrary. The principles of the general law of trusts. it being sufficient that a trust is clearly intended. found in the nature of their one which arises in order to Nevertheless. the designated substitute- made known to the trustee. removal or refusal of the designated trustee to assume the KINDS OF IMPLIED TRUSTS respobsibility. upon whom confidence is reposed. obtains or holds the —as this is not so provided. evincing a direct intention as to which can be intention to create a trust. LEASE AND PRESCRIPTION Kenneth and King C. prescriptiion the ownership of operation of prescription as a property entrusted to him mode of acquisition CREATION OF AN EXPRESS TRUST: What is important is that there XPN: Provided the ff. requisites must be a clear intent to establish it. by beneficiary accepts the trust. and continuous possession which is public. the court will appoint a new trustee (Pineda. Even if the real property is involved. it imposes no condition whatsoever upon the beneficiary. duress or abuse of not have follow the stringent requisites of acceptance of a donation than the legal title that confidence. by some writing or deed. or will. Hizon _________________________________________________________________________________________________________________ possession of the trustee is not If there is no substitute. XPN: There is a presumption of acceptance if the trust is purely 2006). in equity and good conscience. No particular words are required for the creation of an express trust. the EXTINGUISHMENT OF AN EXPRESS TRUST Rules of Court and special laws are hereby adopted. 2006). RESULTING TRUST CONSTRUCTIVE TRUST PREFERENCE IN THE DESIGNATION OF TRUSTEE BY THE COURT: A resulting trust is a species of A constructive trust is one Between the mother and the uncle. if there is any. resignation. The trustee has evincing an intention to create a trust (Pineda. Accomplishment of the aims of the trust Expiration of the agreed term Mutual agreement of all the parties Happening of the resolutory condition if one had been imposed CHAPTER 2 Total loss of the object of trust Express Trusts Annulment or rescissiion of the trust Decision of the court declaring it as terminated Article 1443. 2006). contemplated by the parties.NOTES ON PARTNERSHIP AGENCY.

the trustee together with other elements of KINDS OF IMPLIED TRUSTS prescription. the repudiation. Trustworthy evidence is the tine the beneficiary had XPN: There is repudiation required because oral evidence can easily be fabricated. and prescription (Pineda. as being superinduced on the transaction by operation of illegitimate child of the one paying the price. the action for b. duress or abuse of They arise from the nature or confidence. Hizon _________________________________________________________________________________________________________________ ceatui que trust The evidence thereon is BASIS OF IMPLIED TRUST: It is based on equity. fraud.NOTES ON PARTNERSHIP AGENCY. there is no Article 1448. there is no trust law basically by reason of equity (Pineda. However. of the one paying the price of the CHAPTER 3 sale. NOTE: The 10 year prescriptive period applies only when the cestui que trust is not in possesion of the property. contemplated by the parties. while the latter is the beneficiary. TRUSTS. 2006). or trustor determines the equitable title or justice and prevent unjust gained knowledge of interest and are presumed enrichment. if the person to whom the title is conveyed is a child. They arise contrary the repudiation by the always to have been to intention against one who. The former is the trustee. GR: An action to recover a. cannot be established upon vague and inconclusive within 10 years from the proof. if there is GR: The action does not evidence. and should not be made to rest on been filed within 10 years from loose. independently. LEASE AND PRESCRIPTION Kenneth and King C. it being disputably presumed that Implied Trusts there is a gift in favor of the child. without being does so for his own ineterest and benefit (Pineda. implied by law. NOTE: The enumerated causes of implied trusts are not excluisve (Pineda. the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. It applies to cases clear and conclusive where injustice would result if the legal title of the trustees will The adverse possession of prevail over the equitable right of the beneficiary (Pineda. there is a presumption that there is gift . Otherwise. to hold. A mere silent possession without acts amounting to ouster thereby becomes invested with Mere reciept of rents and profits by the trustee and the building legal title but is obliged in equity Declaration of the property in the trustee’s name for taxation to hold his legal title for the purposes does not constitute acts of repudiation benefit of another. The enumeration of the following cases of implied CASE WHERE PURCHASER PAID FOR THE PRICE BUT THE LEGAL trust does not exclude others established by the general law of TITLE OR ESTATE IS GRANTED TO ANOTHER: The Article refers to an trust. but the limitation laid down in article 1442 shall be implied resulting trust as there is a clear intent to create a trust but applicable. Constructive trust proof should be as fully convincing as if the acts giving rise to the recovery will prescribe trust obligation are proven by an authentic document. PRESCRIPTION OF ACTION FOR RECOVERY OF PROPERTY HELD IN Q: May an implied trust be converted into an express trust? TRUST Yes. Article 1447. It Resulting trusts are based on the Constructive trusts are created begins to run from equitable doctrine that valuable by the construction of equity in the time the consideration and not legal title order to satisfy the demands of beneficiary. the evidence must be trustworthy and received by the repudiation and no action had prescribe courts with extreme caution. 2006). must be at least 10 years in the RESULTING TRUSTS CONSTRUCTIVE TRUSTS concept of an owner. if the implied trustee recognizes the right of the owner over the EXPRESS TRUST IMPLIED TRUST property (Pineda. However. 2006). Resulting trust: property held in trust does not PROOF REQUIRED: While implied trusts may be proved by oral prescribe. 2006). equivocal or indefinite declarations. 2006). no trust is implied by law. are deducible from the nature of the transaction as matters of intent or. obtains or holds the ACTS WHICH WERE HELD INSUFFICIENT TO CONSTITUTE circumstances of the legal right to property which he REPUDIATION: consideration involved in a ought not. legitimate or illegitimate. 2006). In order to been inforned of the establish an implied trust in real property by parol evidence. An implied It prescribes if no action is filed trust. in fine. 2006). by trustee (Pineda. instead. There is a principle recognized in law that a person who pays for something generally IMPLIED TRUST: Implied trusts are those which. short of the ordinary instrument to reflect it. registration of the property in the name of the trustee. expressed. in equity and good transaction whereby one person conscience. There is an implied trust when property is sold. of the particular intention of the XPN: If the person who receives the legal title is a legitimate or parties.

an implied resulting trust is created because transmitted to the donee. his receipt of rents. 2006). the buyer must reconvey the possession which unequivocably constituted an ouster or property (Pineda. CO-OWNERSHIP IS A FORM OF A TRUST: A co-ownership is a form of Article 1454. There is also an implied trust when a donation is made to a person but it appears that although the legal estate is NOTE: In this situation. if it is not borne seller is the benefiicary and the buyer. of a resulting trust (Pineda. Requisites: NOTE: A resulting trust arises in the instant situation because of the An actual payment of money. he may demand the reconveyance of the property to adverse because a co-owner is. a clear intention to create a trust. a trust is established by operation of law in favor of the person to that he has performed unequivocal acts of repudiation whom the funds belong. When the seller out by clear and convincing evidence that he exercised acts of offers to pay his obligation when due. The taxes. after all. properties (Pineda. If the co-owners but in fact is beneficial to them. When property is conveyed to a person in reliance NOTE: No implied trust is created when purchase is made in upon his declared intention to hold it for. intention to establish a trust. However. When any trustee. Article 1455. There is no good reason why the principle cannot apply to personal Where the actual contrary intention is proved (Pineda. cannot serve as proof of exclusive ownership. This is like a sale with the right to fences and the planting of trees thereon and the payment of land repurchase. while the latter is the beneficiary. deprivation of the rights of the other co-owners. 2006). consulting valuable consideration property. property. In the absence of any specific agreement to the contrary. 2006). Article 1450. although. money is loaned or for whom its is paid. Hizon _________________________________________________________________________________________________________________ given in favor of the child. is paid by another for the purpose of having the beneficial interest of the property. if the causes the legal title to be put in the name of another. except that the right is not stated in the document. no trust is implied by law. there is still a need to follow the formalities of a donation required by law (Pineda. a trust by virtue of law is established. he nevertheless is either to have no of the declared intention of the grantee or to another person beneficial interest or only a part thereof. There is NOTE: A mere silent possession by a co-owner. There is an implied trust when property is sold. the trustee. 2006) granted to the child. Article 1449. The former is the Article 1451. When land passes by succession to any person and he trustee. a trust arises by operation of law in favor of the person to whom the Article 1448. or the grantor. 2006). NOTE: An implied resulting trust is created in this situation. or illegitimate. The law refers to inherited land. it being disputably presumed that NOTE: The article provides for a resulting trust there being a clear there is a gift in favor of the child. 2006). If two or more persons agree to purchase property st 1 sentence of Art.NOTES ON PARTNERSHIP AGENCY. 2006). PURCHASE MONEY RESULTING TRUST: The trust created under the Article 1452. TRUSTS. (Pineda. amounting to ouster cestui que trust or other co-owners CASE WHERE FIDUCIARY USED TRUST FUNDS IN PURCHASING PROPERTY IN HIS NAME: An impled constructive trust is created in . LEASE AND PRESCRIPTION Kenneth and King C. The reason is that the donation is void for that such positive acts or repudiation have been made known being an indirect donation (Pineda. or transfer it to another violation of law (Pineda. legitimate established by implication of law for the benefit of the true owner. If an absolute conveyance of property is made in a trust. there is an implied trust in favor of the person whose benefit is contemplated. Article 1453. If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made XPNs: to the lender or payor to secure the payment of the debt. guardian or other person holding a The elements in order that a co-owner’s possession may be deemed fiduciary relationship uses trust funds for the purchase of property adverse to the cestui que trust or the co-owner are: and causes the conveyance to be made to him or to a third person. The latter may redeem the and the legal estate is granted to one party but the price property and compel a conveyance thereof to him. 1448 is referred to as a purchase money resulting and by common consent the legal title is taken in the name of one trust. 2006). Mere actual possession fulfillment of the obligation is offered by the grantor when it by one will not give rise to the inference that the possession was becomes due. The purchasers are co-owners of the equivalent. the erection of buildings and the deed of conveyance. of them for the benefit of all. property or services or an intention to create one. to the cestui que trust or other co-owners and that the evidence thereon must be clear and convincing NOTE: Even if there is already a legal presumption that there is a gift (Pineda. Such consideration must be furnished by the alleged beneficiary their shares are presumed equal (Pineda. a trust is person to whom the title is conveyed is a child. entitled to possession of the him. of the one paying the price of the sale. a trust is created by force of law in favor of the others in proportion to the interest of each. 2006). with each owner being a trustee for each other and order to secure the performance of an obligation of the grantor possession of a co-owner shall not be regarded as adverse to other toward the grantee. 2006). it was not reflected in fruits or profits from the property.

the burden of proving the existence of a trust is on the party asserting its existence. Co. Further.. The article does not cover case of violation of a condition in donation (Pineda. Agency and Trusts. NOTE: As a rule. 2006). 2006) Rationale behind the article: To prevent the fiduciart from temptation of putting his own self-interest above that of his principal whom he is supposed to protect. and loyal to his principal (Pineda. ARTURO M. Inc.NOTES ON PARTNERSHIP AGENCY. Central Book Publishing. 2006). by force of law. 2006). Trustworthy evidence is required because oral evidence can easily be fabricated. 2006). Commentaries and Jurisprudence on the Civil Code of the Philippines. NOTE: This trust is created to prevent unjust enrichment on the part of the acquirer to the prejudice of the true owner. If property is acquired through mistake or fraud.. 1991 . Article 1456. considered a trustee of an implied trust for the benefit of the person from whom the property comes. Co. and such proof must be clear and satisfactorily show the existence of the trust and its elements. LEASE AND PRESCRIPTION Kenneth and King C. REFERENCES: PINEDA. 2006). ERNESTO L. PERSONS COVERED BY THE ARTICLE: trustee guardian agent partner confidential employee persons holding a fiduciary position (Pineda. and should not be made to rest on loose. TRUSTS. there is no trust (Pineda. equivocal or indefinite declarations.. the law is intended to keep and encourage the fiduciary to remain honest. Partnership.. If made by a party. Article 1457. An implied trust may be proved by oral evidence. Vol.. 2006 TOLENTINO. Central Book Publishing. V.. Inc. Hizon _________________________________________________________________________________________________________________ this situtation to prevent unjust enrichment on the part of the fiduciary (Pineda. NOTE: There can be an implied trust in the absence of mistake or fraud (Pineda. the person obtaining it is. While implied trusts may be proved by oral evidence. The mistake must be committed by a third person. the evidence must be trustworthy and received by the courts with extreme caution.

condition Q: Distinguish lease from simple loan. upon There is transmission of Only the use or enjoyment of of paymnet of a fixed amount ownershio of the thing sold the thing is transferred and only daily. Distinguished lease from usufruct. it is void. He property of the obligor. ARTICLE 1643. (1542) object. are lessees in name only.NOTES ON PARTNERSHIP AGENCY. title shall thereupon vest upon the period of the contract. safe ha no obligation to take care of the things kept therein. within the freedom of contract authorized by law. the contract is likewise lease. no lease for more than ninety-nine years shall be valid. Distinguish lease from commodatum. When the owner of the place or Distinguish between sale and lease. 3 Its price is fixed in relation to the period of use or enjoymnent. General Provisions there is a lease because deposit is a real contract which is ARTICLE 1642. or of work perfetced only by delivery of the and service. tenant. or the use of a Transmission is permanent safety deposit box in a bank. thing Includes all possible uses and May be limited to particular uses NOTE: The lease of a building includes the lease of the lot. and for a period which may be definite or indefinite. 2 It is onerous. In case of doubt. the locking up of an PURCHASE AND SALE LEASE automobile ina garage. TRUSTS. USUFRUCT LEASE (1543a) Always a real right A real right by exception To constitute a usufruct. Consist in the cession of the use of the thing to another Essentially gratuitous onerous EXTENT OF ENJOYMENT Distinguish lease from deposit. one Ownership is not required in LEASE OF THINGS must be the owner of the thing order to give an object in lease Owner allows the usufructuary Lessor places and maintains the The subject matter of lease must be within the commerce of men. It is noy indispensable that the use or enjoyment granted to the lessee be total or exclusive. the court must fix seuch period in an action brought for such purpose. The rents must be regarded as The relationship between the The relation between the parties paymnet of the price in instllments since the due payment of the parties is that of landlord and is that of the obligor and agrred amount results in the transfer if tilte to the lessee. RENT SIMPLE LOAAN The owner of the property does The thing loaned becomes the Contracts in the form of leases either with options to the buyer to not lose its ownership. lessee. and COMMODATUM LEASE 4 It is temporary. In the lease of things. 1 It is consensual. without special for a determinate period stipulations. obligee. has unless subject to a resolutory been held to be a lease. purchase for a small consideration at the end of the term. or with stipulation that if the the property rented during the rent throughout the term is paid. Hence. The contract of lease may be of things. manner of enjoyment of the by the contract property What are the special characteristics of a lease of things? May be for an indefinite peruod Must be for a determionte of time period. the parties may establish the terms they deemed . 0 Its essential purpose is to transmit the use or enjoymnet of a thing. provided simply loses his control oveer the so-called rent has been duly paid. one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain. otherwise. However. LEASE AND PRESCRIPTION Kenneth and King C. to use and enjoy the property lessee in the paymnet of the Otherwise. Hizon _________________________________________________________________________________________________________________ TITLE VIII DEPOSIT LEASE LEASE If the price is to be paid whether or not the objects are actually CHAPTER 1 kept in the premises or safe. the intention of the parties should be the guide in determining the contract entered into.

g: contract of carpenter e. It may be variable at different periods within the duration shall be considered as terminated after the end of 99 years. a lease made for more than 99 years tenement. it is considered as one for lofe. part of the parties. the provisions of the NCC are applicable to regarded more as a partnership than as a lease contract. It should not be so some service for a price certain. A: The party obligated to render service does not lease his person or his power or energy for work but a free activity within the limits set Location of the apartment incluing the neighborhood. LEASE OF SERVICE (LOCATIO LEASE OF WORK (LOCATIO PERIOD OF LEASE OPERARUM) OPERIS) The object of the contract is the The result is the object to be The law excludes perpetual lease. it may be a determinate or Our Code. the contract is absolutely VOID. The direct object of the contract The lessor’s labor although an In principle. TRUSTS. the acts in important factor is not the direct and if it is not fruit-producing. if the thing is fruit-producing. It may even be in some other prestation. fixed quantity or an aliquot part or percentage of the produce of the According to Sen. article 1687 governs. When the lease is for such time as the lessor or lessee may please. A lease of things during the lifetime of one of the parties is FORM OF RENT considered valid. Amount of rent ARTICLE 1644. the landowner has a right to demand an increase thereof upon the expiration of the LEASE OF SERVICES contract. the accomplished he is not entitled remuneration is due for the to demand the compensation Otherwise. article 1682 should govern is the lessor’s labor. the price in lease may be in money or in fruits or in some other useful things. services remdered. When the price consists of a certain percentage of the fruits LEASE OF MOVABLES obtaining from the thing. it will be a lease for an indeterminate term. There must always be a period serivce itslef and not the result delivered without considering which may be definite or indefinite. its type and construction as well as the age of the building. closet. the contract is to be regarded as a tenancy contract which is generally regarded as an important variation of the Code makes no special provisions for the lease of movables. After of the lease. bedrooms. But under our law. otherwise. one of the parties binds himself to execute a piece of work or to render to the other The price of lease must be serious or substantial. that period. leases of personal property. Even if the result intended is not The risk is upon the promissor so attained. ending upon the Unlike in sale where it is required that the price must be in money or death of the party who could have terminated the contract. (1544a) owner. land tenancy on shares is absence of special law. but the relation of principal and insignificant as to indicate an intention of liberality on the part of the agent does not exist between them. one of the parties binds himself to render some What are the factors in determining reasonableness of rental service that is his own activity or labor and the other party binds increases of buildings? himself to pay some remuneration. article 1687 should be applied. Hizon _________________________________________________________________________________________________________________ convenient. and the thing leased is a rural land. one of the parties binds himself to produce a result fo determination under the contract. object of the contract of the . In the lease of work or service. which such labor consists. kitchen. that of an artist to INCREASES OF RENT give a concert and that of a contractor to construct a building are contracts for work. CONTRACT FOR WORK The price must be determined by the parties or at least susceptible By such contract. its equivalent. BEYOND 99 YEARS When it consists in fruits or products. subjecting the manner of use or enjoyment to limitations and conditions. without fault on the that if the result promised is not If it is a rural land. forth by by the contract and by good faith. In the contract of lease. a house for another article 1682 shall apply. therefor.NOTES ON PARTNERSHIP AGENCY. the contract would not be a lease but a commodatum. Number of rooms. If the parties are not able to fix of work or labor and the other party to pay a remuneration. LEASE AND PRESCRIPTION Kenneth and King C.g: contract of architect to build When the period is indefinite. The area per floor or storey. facilites provided Distinguish between lease and contract of work. whoch it produces the labor that produces it. Tolentino. By such contract. allows leases of property for more than 99 years. these 2 articles should be applied by analogy. The contract of surgeon to make an operation. the price. Where there is no statute fixing a ceiling on rentals. e. Description of the buildig.

where there has been fixed for the services rendered by a EFFECT OF WANT OF SPECIAL POWER physician to a sick person the latter is obliged to pay to the former a reasonable and equitable compensation. with or without the testimony of minor. the amount of which shall Under the NCC. and even should it be the same cammot lawfully be thereon. binding upon third persons. CHAPTER 2 consideration immediately Lease of Rural and Urban Lands The object which the parties consider is not the labor but its SECTION 1 result. consideration for the contract of hiring. 1491 refers only to those This may consist of money or some other thing or of fixed sum or persons who. the complete and General Provisions finsihed work Law does not speak of risks for The price is stipulated taking Q: Distinguish between rural and urban tenements. GR: Consumable goods cannot be the subject matter of a contract of lease. MANAGER UNDER THE NEW CODE: Applies to a judicial administrator. and the manager without special power. Hence. it is urban. they can lease real or immovable property in the Philippines because Art. TRUSTS. But if the lease of real property is to be when they are accessory to an industrial establishment. cannot lease without special power. as well as XPNs: one of conjugal property. Notwithstanding the contitutional prohibition on foreigners to COMPENSATION acquire lands in the Philippines. if the lease is not to be recorded in the registry contract of lease. an administrator of a deceased’s property. not for the purpose of of patrimonial or private property of the State. amd exploitation of the soil. be fixed by the courts according to the uses and customs of the place the father and guardian with respect to the property of the child or and the evidence in the case. If a lease is to be recorded in the Registry of Property. par. by special relations they have with the property should certain percentage of the product of the work. the father or guardian as to the property of the minor or rendered. whatwever is not payable until the work is gardens or orchards. but this does not modify the nature of the juridical relation because the lease right has a life of its own independent of the registration. irrespective of whether the LEASE OF CONSUMMABLE GOODS lease will be recorded or not. even if it has labor he performs. 8 of Art. (1549a) Lease of consumables which constitute accessories in the lease of an industrial establishment such as the coal in a factory. LEASE IS A PERSONAL RIGHT: Lease is a personal right although its inscription in the Registry of Property gives it a certain effect against rd 3 person. (1545a) for a period or more than 1 year. ward. 1878 of the new Code requires a special power of attorney. (n) PROFESSIONALS CAPACITY OF FOREINERS NOTE: These are leases of services. they are merely guaranteed as against 3 persons. Every lease of real estate may be recorded in the to be drunk. workmen is paid for the but the fimished work. consuming it but for purposes of display or advertising such as wine to be placed in a showcase of a store but not Article 1648. It also applies to apply to the administrator or manager of property owned in common and to an administrator Lease of consumable property. are also disqualified to become lessees of the things mentioned therein. it shall not be ostentationem. the contract is nevertheless the following persons cannot constitute the same without proper valid if the amiunt of the implied compensarion can be determined authority: the husband with respect to the wife's paraphernal real by custom or frequent use in the place where the services were estate. LEASE AND PRESCRIPTION Kenneth and King C.NOTES ON PARTNERSHIP AGENCY. and if the principal purpose is the direct the result of the work assignes completed and accepted. The rights of the lessee are not altered by its rd registration. Hizon _________________________________________________________________________________________________________________ performed for the benefit of the contract not is immediately lessee are taken into taken into consideration. the husband with respect to the property of his wife. . the workmen never assumes into consideration not the labor them. destroyed by accident demanded if the work is destroyed before it is finished Article 1646. Consumable goods cannot be the subject matter of a said persons is valid. administration. 1490 and 1491. The persons disqualified to buy referred to in articles and accepted. Unless a lease is recorded. not be allowed to purchase. This is known as ad pompam et Registry of Property. (1548a) Hence. and an administrator with respect to property under his experts. it is rural even if ut has some structures to him. Although no fixed amount may have been determiend as the Article 1647. a lease executed by ARTICLE 1645. if the lease is to be recorded in the Registry of Property. except when they are merely to be exhibited or even withiut special power. It is submitted that this requirement applies to the persons mentioned in this article. the price If the principal purpose is for habitation.

and the lessor can ask for rescission and damages. Article 1650. a sale of the lessee’s Even when the lessor consents to have been made. The lessee cannot justify the breach of contract by proof that the (n) sublease is solvent and of good standing. bind the purchaser. prohibition to do so. and lessee may recover from the lessor. There is a succession of Sublessee does not have any ND particular title to one contract direct action against the lessor RATIO FOR 2 PAR. the consent of the lessor is necessary. SUBLEASE any rent due from the lessee. whose damages are included in whatvever damages the TRANSFER OF RIGHTS: A mere transfer of rights of the lessee. at the time of the extra- A transfer of a third person of Merely another contract of judicial demand by the lessor. without prejudice to his responsibility for the performance of the contract toward the lessor. where the original lease from the lease contract becomes in turn a lessor Payments of rent in advance by the sublessee shall be deemed not In fact. Article 1649. the sublease is also terminated. and when the lessor gives to the sublease. the lessee may sublet the thing leased. must be stated or declared EFFECT OF ACTUAL NOTICE: Where the lesse’s contract of lease with positively. 1606 of the said Code. said contract cannot or implication. LEASE AND PRESCRIPTION Kenneth and King C. the lessor’s rights would be prejudiced. It cannot be left to inferences the former owner was not recorded on the title. the rights and obligations arising lease. The lessee cannot assign the lease without the consent of the lessor. The sublessee is subsidiarily liable to the lessor for ASSIGNMENT OF THE LEASE v. ASSIGNMENT OF LEASE: The assignment of the lease by the lessee Article 1651. because with a supposed payment of or vice-versa rents in advance by the sublessee and the insolvency of the lessee. Without prejudice to his obligation toward the would involve the transfer. to be express. When in the contract of lease of things there is no TERMINATION OF SUBLEASE express prohibition. (1550) Under Art. the lessee and the sublessee. although it is not entered upon the certificate of title. as sublessor. in clear and direct language. unless there is a stipulation to the contrary. (1551) becomes the lessee of the property by assignment. or damages only. entitled to all the rights of a lessee. in whole or in part. The assignee stipulated between the lessor and the lessee. obligations under the contract OWNER’S DEMAND ON SUBLESSEE TO PAY: It does not exempt the The personality of the original There is a juxtaposition of 2 latter from his obligation to pay the sublessor (lessee) the rents lessee disappears and there only leases which are 2 distinct which he failed to pay the sublessor. of the contract by the lessor. so far as the lessor's claim is concerned. being not of the contract itself. he violates the contract. despite possessesion of a lessee of the premises and the lease has not yet GR: The power to sublease terminated. and said rights are enforceable only against the LIABILITY OF LESSOR TO SUBLEASE: The lessor is liable to the lessee owners of the property leased. but is not directly liable to the sublessee. unless rights. 1659.NOTES ON PARTNERSHIP AGENCY. It constitutes novation refer to the use and preservation of the thing leased in the manner by a substitution of the person of one of the parties. the sublessee shall not be responsible beyond the amount of rent due from him. The term of the sublease.: It is a precaution to avoid collusion between lease on the contract with the lessee. would not require the lessor’s consent. But where a purchaser of land at the time of the purchase has full and so the sublease terminates upon the termination of the lease. DELIVERY OF TITLE: The landowner may be compelled by the court to deliver the certificate of title to the lessee so that the lease can be WHEN DOES VIOLATION TAKE PLACE: Not upon the execution of the recorded therein. remains the juridical relation juridical relations although between the lessor and the related to each other This article does not annul the contractual relation between the assignee. said lease. however. in ASSIGNMENT OF THE LEASE SUBLEASE accordance with the terms of the sublease. cannot exceed that of the lease. the original lease contract subsists and is (1552a) lessee is released from his binding on the lessee. he is bound to respect REMEDY: When the lessee subleases the property inspite of a said lease. but when the extinguishment of the . contract of sublease but when the lessee places the thing at the disposal of the sublessee. his consent to it. when the lease ceases. Hizon _________________________________________________________________________________________________________________ GR: Writ of possession is issuable in foreclosure of mortgage. the original said payments were effected in virtue of the custom of the place. However. not only of rights but also of obligations. and not against the assignors of the for such damages as may be caused to the latter by reason of breach lease. the one directly liable to the sublessee. Article 1652. knowledge of the fact that the land has been leased to a third person and is informed of the terms of such lease. unless there is an express stipulation to the contrary. unnder Art. the sublessee is bound to the lessor for all acts which hence. Exceptions are where the lease had been registered or prior knowledge of the mortgagee of the existence and duration of XPN: Where there is an express prohibition the lease. NOTE: The prohibition. sublessor. but simply helps the owner of the property to lessee collect the rentals of the same. TRUSTS. who becomes the new lessee and sublessee.

1607. reduction the lessee has no right to cancel the lease contract for its unexpired shall be made in proportion to the time during which the lessee term. (1554a) lost be reconstructed totally or partially by the lessor. 1654. lessee in the condition in which it is at the time. duty to make such repairs. and the former cannot obtain possession. par. releases lessor acted with fraud amd in bad faith by concealing the defect in the . (1553) It is only when the owner fails to perform his duty after due notice. and to the deteriorations or damages. It is election is given by law to the lessee. which is only to be allowed when there is proof that the payment of the land tax results in the eviction of the lessee. he must remedy all the lessee. and a rescission of the lease. the reduction retroacts to the moment contract. ADEQUATE POSSESSION: It is the duty of the lessor to place the lessee in legal possession of the premises and to maintain Under Arts. the termination of the lease by confusion or merger in the rights of lessor and lesee. In the cases where the return of the price is required. out. the lessor is relieved of his his sublessees. shall be applicable to the contract of lease. and under it the lessee is not entitled to ask that the thing the lease for the entire duration of the contract. sublease. the lease is extinguished. Under Art. of partial destruction. The subkessees can only assert such right of possession as could have been granted them by their sublessors. unknown to said lessor. not to the lessor. In case of destruction. Once the enough that it can be used by him from the moment of delivery. which must be unless there is a stipulation to the contrary. LEASE AND PRESCRIPTION Kenneth and King C. to be occupied by another person. defects which impede or impair such use. of delivering to him the peaceful possession of the leased premises. enjoyed the thing. This is the rule even when the thing is insured and the lessor has recovered on the DELIVERY OF PROPERTY: When a lessee rents a building which turns policy. (2). the parties may validly stipulate that the thingh will be delivered in the former cannot change it. the lessor is liable for the warranty of him in the peaceful possesison of the property during the entire the thing leased against any hidden defects it may have. even if the latter are not sued in the ejectment case. repaired by the lessor under Art. in which case. is a tacit waiver of repairs. If the destruction is partial. PARTIAL DESTRUCTION: The lessee may choose between CONDITION FOR USED INTENDED: The thing need not be in a proportional reduction of rents and rescission of the lease. contract from the date he ceased to occupy the premises. If the thing leased is totally destroyed by a fortuitous event. their right of possession A stipiulation that the thing shall be delivered to and returned by the depending entirely upon that of the latter. Hizon _________________________________________________________________________________________________________________ lease is due to non-payment of rents by the lessee. The lessor is obliged: Article 1655. because the sublease is an independent contract and not merely an accessory to the original lease. not physical possession. however. his (lessee’s) cause of action is against the NOTE: The total destruction of a building. The duty to maintain the lessee in the peaceful and adequate enjoyment of the lease for the duration of the contract is merely a SECTION 2 warranty by the lessor that the lessee shall not be disturbed in his Rights and Obligations of the Lessor and the Lessee legal. upon formal notification by the lessee to make the necessary repairs undertook and completed the repairs. as when his non- damages. the present article To maintain the lessee in the peaceful and adequate enjoyment of governs. The provisions governing warranty. therefore. PEACEFUL.essee from the obligation to pay what is stipulated in the the thing leased and in not revealinhg it to the lessee. the sublease may DUTY TO MAKE REPAIRS: Since the lessor is bound to deliver and maintain the contract by complying with what is incumbent upon keep the thing suitable for the use intended. 1654 is not applicable. whether such defects existed before the delivery or came into existence later. Article 1653. but this liability for warranty of the thing leased does not amount to an obligation to indemnify the tenant for The non-fulfillment by the lessor of this obligation. WARRANTY OF LESSOR: The warranties implied in contracts of purchase and sale are also implied in contracts of lease. Art. TRUSTS. because it becomes binding on both. a room of which is leased lessor for breach of contract in that the latter violated the obligation by a lessee. . does not terminate the Repairs does not include reconstruction. or to EJECTMENT OF LESSEE: A judgment of eviction against a lessee affets particular kinds of repairs. partial. however. The condition that will satisfty every whim or caprice of the lessee. expressly or tacitly waive the right to repairs to keep the thing suitable for the use intended. terminates the latter’s lease. LIABILITY: If the lessor. contained in the Title on Sales. the To deliver the thing which is the object of the contract in such a lessee may choose between a proportional reduction of the rent condition as to render it fit for the use intended. in the absence of any provision in the contract to the contrary. that the action would lie. Article 1654. WAIVER: The lessee may. The choice of the lessee has been accepted by the lessor.NOTES ON PARTNERSHIP AGENCY. (n) To make on the same during the lease all the necessary repairs in SCOPE OF THIS ARTICLE: This article refers to destruction. total or order to keep it suitable for the use to which it has been devoted. even when term of lease. If the condition in which it might be at the time of perfectioon of the reductiion of rent is chosen. 1561 and 1566.

fails to pay on time the tenant is liable for the accrued legal interest thereon at the rate of 6 prooper rents. Where the ground relied resolution of the contract. governed by The obligation imposed upon the lessee to pay rent in the manner Art. for the purposes for which it may be suitable. but it could not be determined with NOTE: A devaluation or depreciation of the currency justifies definiteness who of them committed the first infraction of the terms increase in rentals. the lessee may use it for any of purposes. damages. LEASE AND PRESCRIPTION Kenneth and King C. he does not warrant the successful results of the business of the lessee in the premises. according to the custom of the place. recover damages that are appropriate upon for the increase of rent is the increase in assessment of the only where performance is demanded. recover per cent per annum. will entitle the lessor to evict the tenant and recover the unpaid rent. or agreed upon arises only where the contract has been actually carried the suspension of the payment of rents during the period of into effect by the delivery of the things leased to the lessee for the interruption. purposes stipulated in the contract. (n) USE INFERRED FROM THE NATURE OF THINGS: When a thing by its NOTE: When the lessor leases a part of a building for commercial nature is susecptible of various uses. . unless there is a stipulation to the contrary. the lessee is entitled to such damages as are INCREASE AND DECREASE OF RENTS: The owner of leased property appropriate to the particular remedy chosen. (n) may be inferred from the nature of the thing leased. (1556) WHO FIXES THE RENT: Only the owner has the right to fix the rent. with the parties suffering their respective FAILURE TO PAY. such as a bakery or a grocery. or only the latter. the lessor may elect between the remedies of: absolutely no right to have the court fix the rent and continue Performance occupyingh the premises pending judicial determination of said Resolution of the lease contract rents. 1655. the Where the lessee. and in addition to the rent due. no action can be maintained to enforce the contract. such as when he uses it for gambling or prostitution. only a ILLICIT USE OF THE THING: The use of the thing for an illicit purpose proportional reduction of rent will be decreed. Article 1659. he may use the other parts. If Article 1656. in the absence of some RESCISSION OF CONTRACT agreement to the contrary. or lease them to others. To pay the price of the lease according to the terms stipulated. NOTE: A tenant is released from the obligation to pay rents from the time he is unlawfully dispossessed. the lessor the lessee devotes the thing leased. which shall be absolutely void. his duty is to vacate the premises. The lessee may ask for the rescission of the contract. he has agreed upon. Where both parties defaulted in the performance of their corresponding duties. If the lessor or the lessee should not comply with the Where the lessor has refused to accept the rent being paid by the obligations set forth in articles 1654 and 1657. To pay expenses for the deed of lease. the situation would be similar to total or partial destruction of the property. devoting it to the lessee in peaceful and adequate enjoyment of the property the use stipulated. invalidates the contract. but if it is insignifant. The lessor of a business or industrial establishment it was stipulated. in possession of land. the aggrieved party lessee. NOTE: In either case. Hizon _________________________________________________________________________________________________________________ It is submitted that rescission will be allowed by the court only whe the destruction is substantial. to that which leased. If such use was stipulated. The lessee need not to the same purposes. allowing the contract to remain in force. but may not. NOTE: When the lease is for a commercial establishment dedicated to a particular business. unless there is a stipulation to may demand the termination of the contract. the contrary. the parties are in pari delicto and the contract is deemed extinguished. The lessee may suspend the payment of the rent in case the lessor fails to make the necessary repairs or to maintain To use the thing leased as a diligent father of a family. lease. The limit himself to the use to which the thing was devoted at the time lessor warrants only the peaceful and adequate enjoyment of the of the lease. (1555) FORCE MAJEURE: If force majeure or fortuitous event deprives the PAYMENT OF RENT lessee of the use or enjoyment of the property. the rent will be increased in the proportion of the increase in assessment. of the contract. The court cannot determine the rent and compel the lessor or owner ALRTERNATIVE REMEDIES to conform thereto and allow the lessee to occupy the premises on the basis of the rent fixed by it. Article 1658. The tenant who fails to pay the rent. upon ha no absolute right to increase the rents. If the lessee disagrees with the rent Upon failure of the lessee to pay the stipulated rent at the time fixed by the lessor. property. but the lessee later devotes the thing to such illicit may continue engaging in the same business or industry to which use. and in the absence of stipulation. the lessor has a right to rescind the contract. INTEREST losses. The lessee is obliged: cannot change the pupose of such establishment.NOTES ON PARTNERSHIP AGENCY. the lessee Article 1657. the latter should make a monthly tender of payment and may ask for the rescission of the contract and indemnification for notice of consignation for the monthly rentals. the unpaid rents and eject the tenant from the land. TRUSTS.

(1559a) . if they are not really urgent. rescission of the contract. he may rescind the contract if the main purpose of the lease is to provide a dwelling place for the lessee. Where rescission is the action taken. protection after the lessee has abandoned the same. condition. established therein requires. although it may be very annoying to him. An action which has for its object the recovery of damages is quite different from an action for ejectment. So judgment the circumstances of when urgent repairs are required. every usurpation or untoward act which any third person may have committed or may Article 1660. the lessee. Article 1661. cannot be considered as urgent repairs. even if at the the need of all repairs included in No. (1557a) cost. If the repairs last more than 40 days. But he cannot be obliged to leave the rescission of contracts in their thing to perish for lack of repairs during the term of the lease. human habitation is in such a condition that its use brings imminent and serious danger to life or health. The lessor has the burden of proving term within which the obligor the urgency of the repair. (1558a) ARTICLE 1191 and ARTICLE 1659 COMPARED URGENT REPAIRS ARTICLE 1191 ARTICLE 1659 Courts have the discretion to No such discretion is granted to A lessor cannot do anything which may disturb the lessee in the refuse the resolution or the courts enjoyment of the thing leased. he may be deprived of a part of the NOTE: Rescission will not be permitted for a slight or casual breach premises. Payment of the make some urgent repairs upon the thing leased. he has no Where the lessor resumes possession of his leased property for its right at all to rescission. will not lie in favor of a lessee of said becomes uninhabitable. If a dwelling place or any other building intended for be openly preparing to carry out upon the thing leased. A judicial action is necessary. The lessor cannot alter the form of the thing leased in If the lessor fails to make urgent repairs. the lessor has still the right. so as to insure another lease. which has for its purpose the REMEDIES OF LESSEE recovery of the possession of the leased property. overdue obligation NOTE: Modifications or improvements which the lessor may want to RECOVERY OF DAMAGES make on the thing prior to the expiration of the lease. in order to such a way as to impair the use to which the thing is devoted under avoid an imminent danger. The lessee is obliged to bring to the knowledge of the contract until the termination of the lease. tolerate the work. rents in this case if the repairs do not last more than 40 days. the lessee can ask for a But an action for damages against an occupant of buildings. and although during the same. but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the If the repairs last more than forty days the rent shall be reduced in agreement. of terminate the lease at once by notifying the lessor. NECESSITY OF JUDICIAL ACTION: A contract of lease is a bilateral When the work is of such a nature that the portion which the one and should its resolution be sought it cannot be decided by one lessee and his family need for their dwelling becomes party alone. of the property of which the lessee has been deprived. the lesssee will have to bear the the case warrant the fixing of a inconvenience they may cause. even for a short time. 2 of article 1654. Hizon _________________________________________________________________________________________________________________ CHANGES IN FORM AND SUBSTANCE: The lessee of a building under A lessor may seek rescission of lease contract and ejectment of a long term lease has the right to make such changes as the business lessee simultaneously in a single action for illegal detainer. LEASE AND PRESCRIPTION Kenneth and King C. TRUSTS. within the shortest possible time.and the part because the same is a remedy granted only to the injured party. or damages. proportion to the time . reduction of rents.including the first forty days . may be suffered by the proprietor. time the contract was perfected the former knew of the dangerous condition or waived the right to rescind the lease on account of this In both cases the lessee shall be liable for the damages which. If the portion used by the lessee unlawfully detains the same. who proportionate reduction of rents. may order the repairs at the lessor's the terms of the lease.NOTES ON PARTNERSHIP AGENCY. the rule is that both demands to pay rent and to vacate are necessary to make a lessee a deforciant Article 1662. of the contract. If during the lease it should become necessary to in order that an ejectment suit may be filed. he can ask for buildings who has never entered into possession under his lease. A breach of rental contract entitles the other party to demand imdemnity for damages. which cannot be arrearages in rental after demand to pay and to vacate does not deferred until the termination of the lease. proprietor. (n) through his negligence. the lessee is obliged to extinguish the cause of action for ejectment. if he elects. with the same urgency. but he cannot ask for the reduction of because there is no privity between the parties. he will be may fulfill or perform his liable for damages suffered by the lessor. to hold the lessee responsible under his Article 1663. uninhabitable. and they do not make the portion used by the lessee as adwelling uninhabitable. ENFORCEMENT OF LEASE If the repars do not last for more than 40 days. provided thaty neither the value nor the solidity of the building is impaired. the lessee may He is also obliged to advise the owner. Neither can rescission be availed of by the wrongdoer.

against the intruder latter’s possession The owner is entitled to defend his property from any aggression in Article 1665. HOW RETURN MADE: This article does not. required in their lease contract. which also stipulated that. the lessee is obliged to vacate lessee maintains a relation more direct and proximate to the thing and return the premises leased—the whole of the thing subject of leased. he shall leased. land has the right to cause the building erected on his estate to be It is not the duty of the lessor to constantly inspect the premises to taken down without incurring any obligation to return the estate in see if there are repairs to be made. (1560a) even more. the trespass is in fact only (de mero hecho). By its very nature. (1561a) NOTICE OF NEED OF REPAIRS: As during the peiod of the lease. The lessee. even because it is his obligation to return the subject matter of the lease. And pertaining to him. The lessor is not liable for trespass of this kind. is to enable the owner or impeded. or by ordinary wear and tear. the same was uninhabited and par. LEASE AND PRESCRIPTION Kenneth and King C. specify the manner in which the possession of leased OWNER FAILS TO MAKE REPAIRS property should be returned. save what has been lost if this was left to the tenant who has no interests and has no real or impaired by the lapse of time. he has the obligation to notify the lessor of the necessity of thr lease and not only a part thereof—to the lessor. it is incumbent upon the lessee to presumption that the lessee received the thing leased in good repel it. so that the latter can receive it Article 1664. the same condition in which he received it. however. who has a direct action for the disturbance in the of another. makes the tenant’s possession lawful. it is not to lessor. PRESUMPTION: In the absence of proof that when the lessees although he is liable for trespasses in law (de derecho). from an inevitable cause. Article 1667. (1562) stripped of all legal form or reason. law presumes that the lessee received it in good condition. TRUSTS. pursuant to accepted the building leased. no matter how long it may last. The lessee is responsible for the deterioration or loss of the thing leased. EFFECT OF LESSOR’S LENIENCY: The owner may allow a defaulting There is a mere act of trespass when the third person claims no tenant to remain in the rented property onee month. the owner of the making the repairs for he cannot allege that he does not know them. the lease. one year or right whatever. It is necessary that he place the thing at the disposal of the lessor. the NOTE: At the expiration of the lease. is not entitled to reimbursement for the costs of repairs and improvements undertaken by him on the leased NOTE: The expenses incurred by the lessee in placing the thing at premises without the lessor’s knowledge and consent. He must return the keys and leave no sub- trespass which a third person may cause on the use of the thing lessees or other persons in the property. and that consent. which would happen termination of the lease. but the lessee shall have a direct action against the continue to be liable for the payment of rents. as he received it. Disturbance in Law The purpose of requiring the lessee to bring to the knowledge of the DISTURBANCE IN FACT DISTURBANCE IN LAW owner of the property leased every usurpation and untoward act Takes place when the enjoyment Takes place when by jurdicial or which any third person may have committed or may be openly of the lease is physically reduced extra-judicial acts of third preparing to carry out upon the thing leased. and no other legal provision does. the intruder not person questions the right of the to maintain his civil possession. repair of the leased premises is not to suspend rental payments but to make the urgent repair themselves and charge the costs thereof In order to return the thing leased to the lessor. unless in such wise that the lessee can only distinguish the material fact. cannot be charged against the lessor. 1654. The lessee shall return the thing leased. the legal property leased. and therefore. enough that the lessee vacates it. they shall be for the sole account of the tenant. PURPOSE OF NOTICE Disturbance in Fact vs. unless an agreement was executed prior to the construction of the building. claiming any right to the thing or lessee to enjoy the property or to its enjoyment. The lessor is not obliged to answer for a mere act of without any obstacle. 3 of Art. Hizon _________________________________________________________________________________________________________________ USURPATION OR UNTOWARD ACT. TRESASS IN FACT Article 1666. however. otherwise. condition applies. by suit if necessary. unless he proves that it took place without his . or right in the property leased. summary possessory action will lie against him who disturbs another The lessor is not liable to the The lessor is liable to the lessee in his possession whether acting in his own behalf or under direction lessee. upon the order to prevent serious injury to his interests. which was the disposal of the lessor. there is proof to the contrary. the relinquishment of possession need no be accomplished by physical delivery or any The remedy of tenants where lessor refuses to make an urgent other prescribed form.NOTES ON PARTNERSHIP AGENCY. and claims it for RIGHT OF OWNER-LESSOR: Upon ouster of the tenant the owner himself by virtue of a right may commence summary proceedings to recover possession. the which reveals a really juridic intention on the part of the trespasser. intruder. when the lessor had previously comsented thereto. Trespass in fact affects only the use of the inadequate for the use for which it was leased. In the absence of a statement concerning the If the act of trespass is not accompanied or preceded by anything condition of the thing at the time the lease was constituted.

The lessee is liable for any deterioration caused by members of his household and by guests and visitors. Stipulatioons for the (n) extension of the period of lease at the exclusive option of the lessee. selecting and supervising his household helpers. the tenancy expires with the NOTE: The 15-day clause of this article is not applicable to successive term and no notice to quite is necessary. lease after the period stipulated has expired. (unless he NOTE: Implied new lease revives only those terms of the original breaks the terms of the contract). visitors and guests. DESTRUCTION OF PROPERTY: When leased property is destroyed by TERMINATION OF THE LEASE fire. Hizon _________________________________________________________________________________________________________________ fault. and the tenant has the DURATION: When the tenant.NOTES ON PARTNERSHIP AGENCY. the former of this character the tenant is favored. term of the lease. is to be understood as having been promised to the lessee. TACIT RENEWAL INCREASE OF RENT: At the end of the period of the lease. at the expiration of thirty days from receipt of such notice. are valid. the periods established by Arts. he lease is not for the same term of that of the original contract but for cannot be ejected until he defaults in said obligation. which makes him responsible to the owner for the resulting damages. (1567) terms of the renewal or extension implies an extension or renewal upon the same terms as provided in the original lease contract. creates an implied new lease. If the lease was made for a determinate time. it is understood that there ceases upon the day fixed. there can be no renewal. Article 1673. with the acquiesence of the landlord. option to pay the new rent or to vacate the premises in order to holds over after the expiration of the term the tacit renewal of the avoid paying the higher rent. in case of uncertainty in the shall be subject to the responsibilities of a possessor in bad faith. (1563a) the period of which is established nu Art. the landlord has the right to increase the rent. Article 1672. There is no need of proving that he was negligent in condition happens and the lessee is notified accordingly. 1687 of the NCC. but for the time established in articles 1682 and 1687. the lease of a dwelling house at a term. storm or other natural expiration of the period of the lease. If he agrees to pay the new rent. (1566a) Where the lease is for a definite period. 1687. He is liable from the mere fact of having allowed them into the Article 1670. Special agreements foreign to right of occupancy are excluded. The lessor may judicially eject the lessee for any of the following causes: . If at the end of the contract the lessee should immovable leased. A stipulation that the lease is extendible for 6 years “agreed upon by both parties” gives to the lessee the right to take additional period Article 1671. lessor is a usufructuary and the usufruct is terminated failure by the lessee to make the repairs which causes the By the will of the purchaser or transferee of the thing destruction of the building renders him liable to the lessor. Upon the expiration of the renewals under Art. leased premises. before the the lease may be extended for a further similar period. gives the lease a notice to vacate. can continue the lease and occupy contract germane to the lesse’s right of enjoyment of possession of the premises on notice to the lessor. under which the lessee has may be terminated when the former needs it for his business or assumed the custody of the thing of which the lessor has been when his children need the same. and not the landlord. calamity. and unless a notice to the contrary by Article 1669. without need of further consent of the lessor. When the agreement rd between the lessor and the lessee is that the lease is only temporary BASIS OF LIABILITY: The liability of the lessee for the acts of 3 persons is based on the contract itself. 1682-1687. (1564a) NOTE: An agreement of the parties that either of them may terminate tge lease on a 30-dat notice is valid. over the lessor's objection. By rescission due to non-performance of the obligation of one of the parties Article 1668. the extension expiration of the term. it either party has previously been given. whether or not such termination coincides. if the lessor. continue enjoying the thing leased for fifteen days with the acquiescence of the lessor. such as when the undertakes to make the necessary repairs on the building leased. EXTENSION: When a contract contains a provision that the term of However. in the absence The lease may terminate: of proof that the loss happened without the lessee’s fault. LEASE AND PRESCRIPTION Kenneth and King C. The other LEASE FOR DEFINITE PERIOD terms of the original contract shall be revived. the tenant thenceforth becomes a deforciant withholding the monthly rentak terminable upon 30 days’ written notice terminates property unlawfully. In case of an implied new lease. By the expiration of the period By the total loss of the thing NOTE: Under the contractual stipulation whereby the lessee By the resolution of the right of the lessor. Thus. This burden of proof on the lessee does not apply when the Continued possession of the premises by the lessee after the destruction is due to earthquake. TRUSTS. not for the period of the original contract. (1565) is an implied new lease. the obligations contracted by a third person for the security of the principal A covenant to renew a lease which makes no provision as to the contract shall cease with respect to the new lease. with a day on which rent is NOTE: The court is completely devoid of authority to extend the payable. there arises a presumption against the lessee. If the lessee continues enjoying the thing after the or to quit upon the expiration of the term. without the need of a demand. In construing provisions expiration of the contract. according to the character of the property and the periods of payment of the rent. the lease is terminated when the dispossessed. and the latter. flood.

but the failure of the lessee to pay rents after a demand therefor that Article 1676. Article 1674. In ejectment cases where an appeal is taken the Lack of payment of the price stipulated. in an ejectment case. has expired. save when there is a stipulation to the contrary in the Failure or refusal of the lessor to receive the rent is not a valid contract of sale. Except in cases stated in article 1673. in the case of the REASONABLENESS OF RENT: It was held that the determination of lessee. dilatory. the lessor has the right to terminate the lease. INCREASE OF RENT: Where after the notice of increased rental. the or on mere tolerance or under a temporary permit. enough that the plaintiff is the owner of the land and the defendant is in temporary occupancy thereof whether under a lease contract. or a breach of contract to pay rents. or that which is fixed for the conditions of the contract. in such instances the debtor-lessee must the lease. counted from the date when the petitioning party is notified of the perfection of the appeal. he thereby merely assumes the obligation of applicable where after the termination of the lease contract. Hizon _________________________________________________________________________________________________________________ action. or the paying the new rental. it is leased property to another lessee.NOTES ON PARTNERSHIP AGENCY. For the purpose of this article. courts should not interfere with it. The lessorsare not in law required to bring first an action for the supposed vendee cannot make use of the right granted in the rescission. (1571a) contract of lease upon violation of its terms and conditions. the lessee shall Mere failure to pay rents. is valid and binding. The sale is presumed to be fictitious if the ejection of the lessee in a single action for illegal detainer. lease that is not recorded in the Registry of Property may terminate the lease. consign the amount due from him. for the purpose of extinguishing the lease. shall also apply. the phrase “higher court” and it is the higher court with must satisffy itself that the appeal is either frivolous or dilatory.The issuance of the writ of preliminary mandatpry expiration of the period of lease. If the sale is fictitious. If the buyer makes use of this right. NON-PAYMENT OF RENT Article 1675. 3 which provides the current agricultural year and that the vendor indemnify him for that the lessor may judicially eject the lessee for violaiton of any of damages suffered. the lessee may demand that he VIOLATION OF CONTRACT: The landlord has the right to terminate a be allowed to gather the fruits of the harvest which corresponds to contract of lease under Art. duration of leases under articles 1682 and 1687. if the higher court is satisfied that the lessee's appeal is frivolous or Violation of any of the conditions agreed upon in the contract. or prima facie meritorious. A stipulation in a lease contract authorizing the lessor to take possession of the leased premises. or when the purchaser knows of the existence of defense in ejectment cases. does have a right to make use of the periods established in articles 1682 not render the possession of the lessee per se unlawful. but could ask the court to do so and simultaneously seek first paragraph of this article. second paragraph. remains in possession without agreeing to the increase. or that the lessor's appeal is prima facie meritorious. (1569a) Prior physical possession by the plaintiff of the property in litigation in an unlawful detainer case is not indispensable for the issuance of TERMINATION OF PERIOD: Upon the termination of the period of the writ of preliminary mandatory injunctionn where said plaintiff is lease. and unless the PERIOD OF 1O DAYS: The period of 10 days within which to file a ordinance passed by the board on the matter is ultra vires or clearly petition for a writ of preliminary mandatory injunction should be unreasonable. The ejectment of tenants of agricultural lands is governed by special laws. but also to the buildings standing thereon. the lessor is entitled to recover possession and dispose of the the vendee of the property. and if the tenant thereafter injunction as authorized by the present article. its intent and reason justify its application to any other form of alienation. A lessor has the right to increase the rent from and after the HIGHER COURT. 1673 of the NCC par. he is bound is expressly vested in the appellate court. remedy granted in article 539. (n) stipulated which causes the deterioration thereof. in the case of the lessor. 2 of article 1657. The period of ten days referred to in said article shall be counted from When the lessee devotes the thing leased to any use or service not the time the appeal is perfected. upon failure of the lessee to comply with the terms and When the period agreed upon. lease of lands. SCOPE OF THIS ARTICLE: Although this article makes express EXTRAJUDICIAL REMEDY reference only to sales. This article is lessee elects to stay. the sale is not recorded in the Registry of Property. It is not the and 1687. what is to be paid for leasing municipal property lies within the power and discretion of the city or municipal board. the lessee or occupant unlawflly prolongs said obligation. his occupation of the premises. The purchaser of a piece of land which is under a entitles the lessor to bring an action of unlawful detainer. or if he does not observe the requirement in No. on the principle that the accessory follows the principal. at the time the supposed vendee demands the termination of the Definite or indefinite. LEASE AND PRESCRIPTION Kenneth and King C. (1570) failure of the lessee to pay rents as agreed upon in a contract. without resorting to judicial . and could not be ejected until he defaults in revocation of the permit. as regards the use SCOPE OF THE ARTICLE: The present article applies not only to the thereof. TRUSTS. the conditions agreed upon in the contract. because the law employs to pay the reasonable value of the use and occupation.

even though the principal thing may an existing lease not recorded on the title. which was longer than the period made objects. and he fails to pay the agreed rent. when the original period has expired. And where the failure of the right to terminate it by the collection of rents under the lease lessee to pay rent is attributable to the lessor’s omission or neglect contract or by other similar acts. applicable to a case where the vendor. reserving to the lessee only the right to gather the fruits SALE OF LEASED PROPERTY. is bound to respect said lease. allthough it is not tendered intended. Where the lease is on month to month basis. but he may remove the ornamental of the duration of the lease. but who was informed that the lease was to terminate at a certain time. RIGHT OF VENDEE: A contract of lease of the crop corresponding to the current agricultural year. The vendee may be barred from terminating the lease when between the parties as to the place of the payment. on disposing of real property under the right of repurchase. thus. to collect at his domicile. the gathering of fishers which require 2 years before they are of any commercial value. in the absence of contrary lessor. constitutes a notice of Article 1677. if he does not make use of his right. such tenant is a third based onn the present article. for he had a right to rely on the certificate of title and the lessor does not choose to retain them by paying their value at was not bound to make further inquiries. If nothing has been stipulated concerning the place the puchaser thereof in foreclosure proceedings is not bound to and the time for the payment of the lease. The limitation contained in month to month. but on his right as the owner or person with respect to said vendor and purchaser. and not to those from of the purchaser by the payment of rent. the lessee would termination of the right to hold possession. the vendor-lessee may also be ejected for breach of the lease agreement. the lessee must pay to the new owner. and with respect to the mortgage. wherefore. or when he tacitly renounces his payable at the domicile of the lessees. the custom of the place shall be followed. the time the lease is extinguished. may recover his damages from the vendor. without altering the form or substance of the property upon the certificate of title. Should the lessor refuse to reimburse said amount. the lessee may But where land registered in the name of the landlord is subject to remove the improvements. and known to him. the purchaser’s right is not purchaser under an agreement of redemption. and the terms of the lease suffer damage thereby. If the lessee makes. cause any more are not known to a person dealing subsequently with the property. and if after due notice from the latter. impairment upon the property leased than is necessary. LEASE AND PRESCRIPTION Kenneth and King C. the same cannot be a ground for their ejectment. In the absence of an agreement in force.NOTES ON PARTNERSHIP AGENCY. the rent is he expressly accepts or ratifies it. he may be evicted by excluding that which existed between the vendor and the lessee. NOTE: The act of the new owner of giving notice of an increase of rent. (1574) RARTIFICATION: The termination of the existing lease is optional to PLACE OF PAYMENT OF RENT: The rent should be paid in the place the vendee. the lessor upon the termination of the lease shall pay the contract of sale. if the vendee to recover possession from a tenant holding-over after the vendor should by redemption recover property. the provisions or article respect a lease which was recorded subsequent to yje registration of 1251 shall be observed as regards the place. the lease continues designated in the obligation. continues nevertheless in possession APPLICATION OF THIS ARTICLE: The provisions of the present article thereof by virtue of a special agreement. not as owner. After vendee cannot avail himself of the right granted by this article. useful and is informef of the terms of such lease at the time of the improvements which are suitable to the use for which the lease is purchase. he pays to the SCOPE AND LIMITATION: The provision of this article is not former owner may still recover the amount of rent from him. but as tenant apply only to the leases for a fixed term. The purchaser in a sale with the right of redemption termination of the original lease.the the vendee even before the period of redemption has expired. and said article refers to the tenant or lessee who has contracted with the purchaser seeks to recover from the lease the property which the vendor and who has had no relation whatever with the said lessee has leased from the vendor. The lease in effect become part of the leased. cannot make use of the power to eject the lessee until the end of the period for the redemption. because. does not extend to subleases made by the lessee. WHEN AVAILED OF: No special period for its exercise. however. He shall not. his have effect when the property is sold. The of real property exeucted by the vendor. EFFECT OF ACTUAL NOTICE: A purchaser of land who has full knowledge of the fact that the land has been leased to a third person Article 1678. RECOVER DAMAGES: The law grants the purchaser of a leased estate the right to terminate . the time. in good faith. again be entitled to the enjoyment of the lease. The new owner may terminate both the lease and any corresponding to the current agricultuaral year. provided no damage is caused to the principal thing. ceases to lessee. a tenant. The purchaser of said property is not bound by an unrecorded lease thereof which is not mentioned in the deed of The right granted to a lessee to gather the fruits of the crop conveyance. the limitation of the puchaser’s right is proper and just. TRUSTS. however. it was held that the latter’s knowledge that a lessee was in With regard to ornamental expenses. the lessee shall not be possession of the land was not sufficient to charge him with notice entitled to any reimbursement. lessee one-half of the value of the improvements at that time. unless recorderd. agreement. It may be asserted at any time before the action prescribes. the title has been consolidated in the vendee. But when a new VENODR AS LESSEE: But where the vendor remains in possession as relation is created between the vendee and the lesee. Article 1679. (1572) Upon purchase of the leased property. Hizon _________________________________________________________________________________________________________________ the lessee. RIGHT OF THE LESSEE TO GATHER FRUITS. (n) PURCHASER IN FORECLOSURE: When an immovable is mortgaged.

The lease of a piece of rural land. the tenant cannot demand a reduction understood that the repairs are chargeable against him. under the present article. (1575) customs of the place. and which the contracting parties could not have harvesting and enjoyment of the fruits in accordance with the reasonably foreseen. war. Article 1681. the courts may also fix a longer period after leased may yield in one year. the courts may likewise determine a longer has not been fixed.a fishpond is also an agricultural land. or by reason of outgoing lessee to do whatever may be necessary for the gathering the loss of fruits due to ordinary fortuitous events. because in the Philippines. and no period their stalk. reciprocally. (1578a) fruits through extraordinary and unforeseen fortuitous events. much less a mere by the more or less valuable improvements voluntarily made by the occupant. the rent is fixed at property for which the lessor shall be liable. the courts may fix a longer term for the lease after the lessee has occupied the premises for over one year. although dependent upon the will of the AGRICULTURAL LAND. the stipulations of the parties. lessee upon the property. However. Article 1686. OWNERSHIP OF FRUITS: This article does not determine the ownership of the fruits existing on the tenement at the termination Extraordinary fortuitous events are understood to be: fire. (1577a) APPLICATION: This article refers to a “lessee”. (1580a) on account of loss of more than ½ of the crop by fortuitous events. (1579a) The land leased must be of rural character More than ½ of the fruits must have been lost REQUISITES OF TENANCY SHARES: The loss must have occurred through extraordinary and unforseen fortuitous event. If the period for the lease has not been fixed. It does not contemplate sublessees upon the stipulation in the contract of rental and cannot be affected having no contractual relations with such owner. So is the will of a third person who the land is officially classified and assessed as residential. this refers to the fruits which under the other provisiobs pertain to the lessee. from month to month. is understood to have been for all the time period after the lessee has been in possession for over six months. unusual flood. i. RIGHT TO REDUCTION Article 1684. one who has a EFFECT OF IMPROVEMENTS MADE: The duration of a lease depends contract of lease with the owner. Hizon _________________________________________________________________________________________________________________ SECTION 3 Article 1683. (1581a) two or more years have to elapse for the purpose. and from day to day. all in accordance with the have such right in case of the loss of more than one-half of the custom of the place. Neither does the lessee have any right to a reduction if the rent is weekly. and. save always when there is a specific stipulation to the contrary. it cannot prevents performance of the obligation. be considered agricultural. The outgoing lessee shall allow the incoming lessee or Special Provisions for Leases of Rural Lands the lessor the use of the premises and other means necessary for the preparatory labor for the following year. the Article 1680. TRUSTS. The tenant on shares cannot be ejected except in said that they are uncommin and not be reasonably foreseen by the cases specified by law. Article 1682.NOTES ON PARTNERSHIP AGENCY. . It only requires the incoming lessee or lessor to permit pestilence.e. from week to week. The lessee shall have no right to a reduction of the incoming lessee or the lessor is under obligation to permit the rent on account of the sterility of the land leased. if the rent agreed upon is annual. In case of doubt it is an aliquot part of the crops. of the lease. and war. or which it may yield once. when its duration If the rent is weekly. Where the land is within the poblacion. In default of a special stipulation. (1576) for the lease has been set. if it is monthly. the presumption is that is residential. understood to be from year to year. (n) contracting parties. but he shall or harvesting and utilization of the fruits. the provisions on partnership and by the customs of the place. necessary for the gathering of the fruits which the whole estate In case of daily rent. SECTION 4 PERCENTAGE OF REDUCTION: The rent stipulated should be reduced Special Provisions for the Lease of Urban Lands in the same ration that the actual receipts are to the normal income obtainable from the leased tenement. Land tenancy on shares shall be governed by special Requisites: laws. earthquake. although the lessee has stayed in the place for over one month. even though a monthly rent is paid. LEASE AND PRESCRIPTION Kenneth and King C. the custom of the place shall be observed with regard to the kind of repairs on urban XPN: Where by the terms of the contract of lease. if the rent is to be paid of the rent if the fruits are lost after they have been separated from daily. or others which are the outgoing lessee to do whatever is necessary for the gathering or uncommon. locusts. The violence of robbers though not independent of human will. and the failure to deliver the stipulated proportion of the crop Article 1687. Where combatants. NOTE: Typhoons are not extra-ordinary fortuitous event events. root or trunk. it is gathered entitles the landlord to evict the tenant. it cannot be Article 1685. and The parties are the landowner and the tenant There must be no stipulation against the application of the The subject is agricultural land article There is consent The purpose is agricultural production FORTUITOUS EVENT: Depradation of strangers is a fortuitous event There is personal cultivation which constitutes a justification for the reduction of rental due from There is sharing of harvests the lessee. is caso fortuito.

.. The action in this respect is not in accordance with Art.e. the extension of said term has been sought by appropriate action. NOTE: Art. where the duration of the lease is left to the will of the lessor. this does not bring about a tacit renewal of the lease for another term of 5 years. the lessor decided to terminate the contract of lease. for Code of the Philippines. 1991 instance. or industrial establishment. even if there has been no violation of the contract. however. or part thereof. is eventually granted therein granting relief. . A verbal contract of lease. used as a this article may arise in either of 2 ways: dwelling for a family. DURATION LEFT TO THE LESSEE: The present article fixing the legal terms for leases in which no conventional term is stipulated. without a definite period fixed. Vol. But when there is no agreement as to the duration of the lease and rent is paid monthly. LEASE AND PRESCRIPTION Kenneth and King C. governed thereafter. Commentaries and Jurisprudence on the Civil the lease the period of its duration was 5 years. there is a tacit renewal of the lease for a like term REFERENCE: If at the expiration of a lease for a definite period.. V. wherein the lessees have agreed to pay monthly rentals. the tenant is permitted to hold over for 15 days. DURATION OF LEASE: Where the lease is for a definite period the tenancy expires with the term and no notice to quit is necessary. has no application to a lease whose termination is expressly left to the will of the lessee. 1308. This court merely gives the court discretion to extend the period of the lease. A stipulatioon authorizing the lessees to continue occupying the leased premises indefinitely as long as they should faithfully fulfill the obligation with respect to the payment of rentals. The discretionary power of the court to fix the duration of the contract contemplates of a situation where neither of the parties being at fault. with the acquiescence of the landlord. and a monthly. should be considered as one existing from month to month. If the tenant is permitted to commence a new period. Hizon _________________________________________________________________________________________________________________ A tenancy from day to day. Central Book Publishing. or yearly rental was reserved. Co. month to month. TRUSTS. but in accordance with the present article. i. and upon its expiration the tenant. it is understood that it shall terminate without necessity of special notice. from month to month. if by the terms of TOLENTINO. holds over for 15 days. has been held invalid. ARTURO M. 1197 is not applicable. but creates a tenancy. 1197. FIXING LONGER PERIOD: The court may fix a longer term for such the lease after the leasen has been in occupation of the premises for a certain time. or when the lessor of a store.. as to duration and renewal by this article. and beingh renewed by tacit approval of the parties. quarter to quarter. because in a lease. duration and make no provision for its termination upon (1582) notice. and judgment. however. Inc. within the meaning of Art. also leases the furniture. the lessor is the creditor and the lessee the debtor. the validity and fulfillment of the contract. unless prior thereto. quarterly. upon the expiration of the term. since that would have leave to the sole and exclusive will of one of the contracting parties. the lease of the latter shall If the parties say nothing in the contract of lease as to its be deemed to be for the duration of the lease of the premises.NOTES ON PARTNERSHIP AGENCY. or year to year under Article 1688. until the lessor signified his intention to terminate the lease. the duration is determined by the agreement as to the period at which the rent is payable. as the case may be. When the lessor of a house. or from year to year.

against: ACQUISITIVE PRESCRIPTION EXTINCTIVE PRESCRIPTION Minors and other incapacitated persons who have parents. Prescription. during the minority or insanity of the latter. When discernment is wanting. These period is completed. the inconvenience Persons living abroad. should be borne by the party Juridical persons. either personally or through their parents. uncontested by the true distant past never existed or has before their disappearance. TRUSTS. representatives. real rights through the lapse of time in the manner and under the because the intent to appropriate the thing as one’s own is an conditions laid down by law. applied to actions under the common law. (1931a) 2 KINDS OF PRESCRIPTIONS: CAPACITY FOR PRESCRIPTION The acquisition of a right by the lapse of time. by Article 1108. LEASE AND PRESCRIPTION Kenneth and King C. . Hizon _________________________________________________________________________________________________________________ PRESCRIPTION AS A MATTER OF DEFENSE: It must be explicitly TITLE V relied upon in the pleadings. and between guardian and ward during the continuance of the guardianship. rights and conditions are lost by prescription. It cannot be availed of unless it is PRESCRIPTION specially pleaded in the answer. on the assertion by a usurper of experience. essential element of the possession. acquire the same by prescription. either appointed by them time. the new owner is considered as having acquired reasons exist even if there is a separation of property between them. given up such right in favor of caused by the lapse of time the former. rights by prescription. the word “limitation” as prescription. runs lapse of time specified by law. because reasons of influence or affection may other real rights through the prescription is retroactive. acquire by prescription. known as acquisitive prescription or adverse possession and GR: Capacity to acquire property or rights by other legal modes is usucapcion required for prescription. Prescription does not run between husband and wife. owners provided with the most perfect title may be deprived and dispossessed of their properties by usurpers who. the capacity to prescribe BASIS OF PRESCRIPTION: By abandonment. even though there be a separation of property agreed upon in the marriage settlements or by judicial decree. guardians or legal representatives. (1930a) When the prescription requires just title. carelessness. By prescription. it is necessary that they must have discernment. Acquisitive prescription is based Based on the probability. once the often prevent one from bringing an action against the other. under certain circumstances. has reference to the time within which an action must be brought after the right of action has Minors and other incapacitated persons may acquire property or accrued. as to give the already been extinguished.NOTES ON PARTNERSHIP AGENCY. and the same consideration can be given to the duty to return the thing to its true owner after its has been acquired by Neither does prescription run between parents and children. that the alleged an adverse right for such a long right which accrued in the Absentees who have administrators. (n) Whatever is paid or delivered due to the promptings of conscience cannot be recovered. prescription. or if presumption that the latter has it exists. except the State and its subdivisions. Our law considers an obligation barred by extinctive prescription as a natural one. The loss of a right of action by the lapse of time known as extinctive prescription or limitation of actions. they can acquire by prescription only throug their legal In the same way. On the other hand. Persons who are disqualified from administering their property Based on negligence or presumed abandonment by the owner of a have a right to claim damages from their legal representatives right. Persons who are capable of acquiring property or Prescription is generally used with reference to acquisition of a right rights by the other legal modes may acquire the same by means of by the lapse of time. For them to acquire Article 1106. and it must be proved or established with the same degree of certainty as any essential CHAPTER 1 obligation in the civil action. BETWEEN HUSBAND AND WIFE RETROACTIVITY OF PRESCRIPTION: The acquisition of ownership or The law does not permit prescription to run between the spouses during the marriage. whether patrimonial or remedial whose negligence has been the cause of prescription. (1932a) EFFECT OF ACQUISITIVE PRESCRIPTION Article 1109. both acquisitive and extinctive. or appointed by the courts. one acquires ownership and other by prescription. who have managers or administrators. negligence or will be the same capacity required for the particular title in question. negligent in the assertion of his right. born of guardians or other legal representatives. the thing or right from the moment the period began to run. owner of the right. XPN: Minors and other incapacitated persons may also. General Provisions Article 1107.

Persons with capacity to alienate property may should be free from prescription. of the right of pleading a prescription which may thereafter (1939) be acquired. The co-owner in adverse possession clearly possesses in NOTE: Under Art. Article 1115. Patrimonial property can be renounce prescription already obtained. then the excess may be acquired by prescription for all. While under the present article. 1108 and the present article. prescription does not run against the State representation of the co-ownership. prescribe in the future. (1935) proprietor. (1938) positive promise to pay the debt which has prescribed. Prescription. the prescription has a relation to the property owned in common. and the intransmissible rights. but if since the time this Code took effect the entire period herein required for RENUNCIATION VOID: A renunciation of prescription in advance is prescription should elapse. under Art. subdivisions. runs in favor the State or any of its subdivisions not patrimonial in character of. There is inconsistency between Art. and its subdivisions. prescription does possession must be in the concept of an owner in order to ripen into not run against the State and its subdivisions (irrespective of the kind ownership by prescription. All things which are within the commerce of men are susceptible of prescription. Thus. common things. Thus. contract. or against a married woman. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. acquisitive and extinctive. the present Code shall be applicable. Article 1113. No formality is required for it. Article 1114. but not the right to acquired by prescription against the State or any of its subdivisions. property of public dominion. Creditors and all other persons interested in making Prescription is deemed to have been tacitly renounced when the the prescription effective may avail themselves thereof renunciation results from acts which imply the abandonment of notwithstanding the express or tacit renunciation by the debtor or the right acquired. RENUNCIATION BY REPRESENTATIVES: Only persons with capacity to alienate property can renounce prescription already obtained. (1933) being appropriated may be the object of possession. does not amount Article 1116. 1108. (1937) RENUNCIATION IS UNILATERAL: Renunciation of prescription already CREDITORS MAY PLEAD PRESCRIPTION: A current creditor of a acquired is a unilateral act. cannot be acquired by prescription. Prescription already running before the effectivity of to a renunciation of the prescription. Since possession is an essential element of prescription. it is likewise clear that the congress intended that only property “not patrimonial in character” Article 1112. Article 1117. This article will apply only when by prescription. Hizon _________________________________________________________________________________________________________________ Article 1110. Property of . and the co-owner who is managing the land prescription: occupies more than the area owned. and does not require the acceptance of corporation may interpose the plea of prescription to prevent the the person to be benefited by it. 1108. as to prescription against the State and its In order that he may acquire possession for the other co-owners. LEASE AND PRESCRIPTION Kenneth and King C. only things susceptible of owner shall benefit the others. he waives the benetif of prescription. should be considered also in possession in The intent of the law is to exclude patrimonial patrimony from the the concept of owner. because there is no doubt that the Movables possessed through a crime assertion of ownership over such excess is but an extention of the Lands registered under the Torrens System co-ownership ober 100 hectares really owned by the 3 co-owners. TACIT RENUNCIATION: Where a party acknowledges the correctness NOTE: But prescription pleaded by one creditor does not inure to of a debt and promises to pay it after the same has prescribed and the benefit of another creditor. creditor. or even a part of payment. an administrator or executor is without the power to Prescription of Ownership and Other Real Rights renounce or waive prescription after it has been acquired in favor of the estate he represents. if 3 persons own in common a parcel of land with an XPNS TO THE RULE: The following cannot be acquired by area of 100 hectares. CHAPTER 2 Hence. unless otherwise provided. (n) shall not be the object of prescription. And because may be the object of prescription. For instance. it seems juridically incompatible wthat of property). pursuant to Art. (1936a) Article 1111. TRUSTS. at the time of entering into even though by the former laws a longer period might be required. co-owners who do not ratify and may not even know the possessory acts of another co-owner. The provisions of the present Title are understood to be without prejudice to what in this Code or in special laws is NOTE: A simple acknowledgment. OBJECT OF PRESCRIPTION: Under Art. 532. it things which are not susceptible of appropriation cannot be acquired seems ratification is not necessary. no renunciation can be made. 530. operation of acquisitive prescription. it corporation from payig prescribed debts ahead of the current may even be tacit. Prescription obtained by a co-proprietor or a co. it follows that NEED FOR RATIFICATION: In the language used by the article. which contains no new and established with respect to specific cases of prescription.NOTES ON PARTNERSHIP AGENCY. such as a promise to pay only ½. void. with full knowledge and with full knowledge of the prescription. patrimonial property they must ratify his act. this Code shall be governed by laws previously in force.

but later on is converted physical or moral. (1944a) CONCEPT OF OWNER Article 1122. When the possession begins in good faith. good faith and with just title for the time fixed by law. 429). .NOTES ON PARTNERSHIP AGENCY. the possession is A thing capable of acquisition by prescription converted into one in concept of owner and can be the basis of Possession of the thing under certain conditions prescription. Acts of possessory character executed in virtue of cause it should cease for more than one year. license or by mere tolerance of the owner shall not be available for The old possession is not revived if a new possession should be the purposes of possession. peaceful and uninterrupted. do not constitute Article 1123. it will be entirely a new one. If the possession is publicly known. CONVERSION OF POSSESSION: PEACEFUL: When it is acquired and maintained without violence. because EFFECT OF INTERRUPTION: When prescription is uninterrupted. (1945a) TOLERANCE v. how long should the prescription be. There are possible solutions: UNINTERRUPTED: It is continuous when the possessor has never 0 The supervening bad faith erases the former possession in ceased to manifest with external acts his intention to exercise a right good faith. Possession has to be in the concept of an owner. and extra-ordinary prescription will run from over the thing. It must be known to the owner of the With the just title for the time fixed by law thing. the possessor. This distinguishes interruption from suspension of prescription. whcin presupposes that he has never in fact ceased the date of possession in bad faith to exercise the right. public. 1109. the time elapsed shall be counted in favor of the prescription. Civil interruption is produced by judicial summons to possession. If the natural interruption is for only one year or less. Possession is interrupted for the purposes of ordinary prescription. Examples of suspension: when a child becomes insane. (n) Acts of a possessory character which are merely tolerated by bthe possessor or which are due to his license. ordinary or the possessor should use such force as is reasonably necessary to extra-ordinary? repel or prevent an actual or threatened unlawful physical invasion of the property (Art. in good faith shall be computed in the proportion that the period of extraordinary prescription bears to that of Article 1120. Lapse of time provided by law WHEN POSSESSION CONSIDERED PUBLIC: Public means the acts of REQUISITES OF ORDINARY PRESCRIPTION: enjoyment are executed in such a manner as to be manifest or visible to all. the cases contemplated in Art. all it reflects the difference betweenb the 2 kinds of prescription and the benefits acquired so far from the possession cease. favor of the holder of the thing owner to acts being performed by another which appear to be If the plaintiff should desist from the complaint or should allow the contrary to the rights of the proceedings to lapse. Judicial summons shall be deemed not to have been issued and shall not give rise to interruption: LICENSE TOLERANCE A positive act of the owner in The passive acquiescense of the If it should be void for lack of legal solemnities. LEASE AND PRESCRIPTION Kenneth and King C. faith and possession in bad faith are given identical effects. prescription. prescption runs again. REQUISITES OF ACQUISITIVE PRESCRIPTION: NOTE: From the moment the possessor disgards the owner and Capacity to acquire by prescription exercise rights in opposition to that of the latter. It is interrupted if there has been be counted form the time the possession began no act of deprivation of enjoyment of the things by a third person or 2 The prescription will be extraordinary but the possession any other act which interrupts prescription. (1942) exercised by the same adverse claimant. naturally or civilly. The possession continues to be peaceful even if into bad faith. (1940a) In both cases. The first is inadmissible because it places a possessor who began in goof faith in a worse position than the one who began in bad faith SUSPENSION OF PRESCRIPTION: In suspension. Possession is naturally interrupted when through any Article 1119. placed under guardianship. (1943) NOTE: The last solution appears to be the most acceptable. the past period is included in the computation. TRUSTS. or a ward is Article 1118. LICENSE Article 1124. unless there is clear proof to the contrary. Hizon _________________________________________________________________________________________________________________ Ordinary acquisitive prescription requires possession of things in former. (1941) Article 1121. when gives the proper value to possession in good faith. especially to the person against whom the possessopm Possession of things in good faith is being adversely asserted. It need no be absolute but only in relation to 1 The prescription will be extraordinary but the period will the nature of the right exercised. the possessor acts in recognition of the rights of the owner. being added to the period after The second is likewise unacceptable because possession in good prescription is resumed. it is presumed that the owner knows it.

Good faith in this connection. it can owner’s hereditary successors because the latter merely step into be connected to the time that has elapsed as if it were in fact the shoes of the decedent and merely the continuation of the continuous. relying on the registration of ownership in the he believes that the transferor was the owner of the thing anc could Registry. and follows the That the acquisition is from one who. Against a title recorded in the Registry of Property. must be considered as third persons. The declaration of a third person that the property ownership and other real rights. it is not enough that he knows of no defect person within the meaning of this rule. And unless As to lands registered under the Land Registration Act. the period of interruption is to be counted for the personality of their predecessor in interest. there is just title That such third person has no knowledge of the prescription when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights. can transmit title That the acquisition is registered Article 1129. under claim of onwership. indirectly approved. however. plaintiff. and even if the possession is reacquired. not only at the beginning of the possession. prescription. for a ordinary prescription of ownership or real rights shall not take period of 10 years. the old defeat the owner’s right to possessopn of land registered under the possession cannot be tackled to the new possession for purposes of Torrens system. Hizon _________________________________________________________________________________________________________________ NOTE: While the registered owner who executed the title which is (3) If the possessor should be absolved from the complaint. Lacuesta v. Under the Civil Code. unless it was originally acquired “with just title place to the prejudice of a third person. and could transmit his ownership. by the mere possession thereof. TRUSTS. When the title of first for the prescription. NOTE: Laches. RECORDED TITLES OF THIRD PERSONS: The owner of the thing at GOOD FAITH: The possessor muts believe that the title for his the beginning of the prescriptive period is not considered as a third acquisition is sufficient. Any express or tacit recognition which the possessor was the owner thereof. while it is always to be title also recorded. the the contrary is shown. the old possession loses all its REGISTERED LANDS: Adverse possession may not be allowed to juridical effects. contrary rule of the common law. as shown by the opening paragraph. the period of the interruption shall be counted by another who is not registered owner. The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing Article 1125. according to the Registry. must comply with the ff: prescription. (1950a) may make of the owner's right also interrupts possession. (1951) does not belong to the possessor. This belief must be founded and there is sufficient basis when right subsequently. shall be counted effect that a suit brought and abandoned or decided against the from the commencement of the possession under title of ownership. except in virtue of another and good faith”. not prescription may be set up as to the registered The use of the phrase “period of interruption” is misleading because land. founded belief that the person from whom title was received was himself the owner of the land with the right to convey. 527. EFFECT OF RECOVERY OF POSSESSION: Under Articles 1121 and 1122. in case of natural prescription. although the title by virtue of which it is held may not have been registered. he is however. if the possession is recovered. and they cannot be transmit the owneship thereof. in violation of Sec. a prescriptive title to real state is not acquired Article 1126. Neither can prescriprion be allowed against the registered But in case of civil interruption. 46 of the Land Registration Act. when such declaration has not been authorized or ratfied by the possessor.NOTES ON PARTNERSHIP AGENCY. but the grantor was not the owner or could not transmit any right. is considered as never having been commenced. The conditions of good faith required for possession RECOGNITION BY THE POSSESSOR: In order to interrupt in articles 526. and the time shall begin to run from the presumed in the absence of proof to the contrary. The possession is deemed continuous. the possessor of the land must be presumed provisions of that special law shall govern. (1949a) to be in good faith. The Code rejetcs Roman Law principle that supevening That the acquisition is by onerous title bad faith does not prejudice the prescription. requires a well- recording of the latter. and 529 of this Code are likewise prescription. the basis for prescription. regarded as a third person with respect to a title executed In all these cases. loss of the land by prescription would be prescription. there is really no interruption. but throughout the entitre period required for The third. otherwise. For the purposes of prescription. Article 1127. LEASE AND PRESCRIPTION Kenneth and King C. (1946a) transferee of a real right over the things is considered as a third person if his tilte is recorded. does not interrupt the POSSESSION IN GOOD FAITH possession of prescription. the recognition of the owner’s right mut be made by necessary for the determination of good faith in the prescription of the possessor. (1948) Article 1128. (n) . is not considered a third person. Guerrero The time for prescription to the prejudice of those who are not The general rule declared in Article 1124 of the Civil Code is to the considered as third persons with recorded titles. prejudiced by the period of possession prior to the date of their acquisition. But those who acquire their in it. persons. The good faith must exist. 528.

so long as it has not been annulled. shall not be counted in favor of the adverse claimant. can be the basis of ordinary prescription. where the possession is without title. may or may not be sufficient. but if however. person can validly alienate property. without prejudice to the effect of the resolution by the condition which may Examples: later happen. Ratio: All the abovementioned are all declaratory of property rights With regard to the right of the owner to recover personal property but do not transmit them. this Code shall be observed. do not constitute title: requires greater guarantees. then the title is not adequate The doctrine of constructive possession applies when the possession if the mistake refers to a fact in the application of a rule of law. and not merely in the mind of the possessor. lost or of which he has been illegally deprived. it is not sufficient covers the area over which the possession is asserted. the from a merchant's store the provisions of articles 559 and 1505 of title must exist actually. is under title calling for the whole. lease of things loan Article 1132. character of prescription. but if it refers to an act of the possessor himself. and proved. it is never presumed. he did not know that the vendor was insane.One which does not exist but is believed by the possessor to exist. the period of the grantor had been the owner. is not limited to the area actually occupied. In case the adverse claimant possesses by mistake an be based on an error of fact or of law: area greater. if the error of law refers to the validity of the act. LEASE AND PRESCRIPTION Kenneth and King C. and which would have actually transferred ownership if When the title is subject to a suspensive condition. Ownership and other real rights over immovable which conceals a prohibited act. Movables possessed through a crime can never be which is later discovered. acquired through prescription by the offender. valid. This vice or defect is the one cured prescription begins tot run from the fulfillment of the condition. a will cannot be a sufficient title if it has been revoked by an unknown subsequent will Article 1133. then the title is sufficient. (n) is sufficient for prescription. is an exception to the general succession rule embodied in article 541. the period that has run can be Article 1131. Hizon _________________________________________________________________________________________________________________ REVOCABLE TITLE. just title must be counted for the prescription. It does not apply. as well as with respect to movables acquired in a public sale. Article 1134. (1956a) But where there is only relative simulation. but once the reservation becomes ineffective. the true title hidden behind the fictitious one will suffice. proved. So is a title that is absolutely simulated. or less than that expressed in his title. when the civil courts are not open. The title for prescription must be true and valid. (1955a) A legally non-existent title is without value. For the purposes of prescription. Possession in wartime. the title is sufficient for CONSTRUCTIVE POSSESSION: The possession upon which prescription prescription is based. the ff. The ownership of movables prescribes through deposit uninterrupted possession for four years in good faith. (n) . a simulated title. (1954a) Ex: a sale witht the right to repurchase TITLE FOR PRESCRIPTION: For purposes of prescription. property are acquired by ordinary prescription through possession of ten years.The title for prescription must be true. the title is not sufficient.One in which the transferor has made a Article 1130. believing that an insane part of the property may be through a tenant. sale with delivery exchange TITLE MUST BE PROVED: The requirement that just title must be donation proved for purposes of prescription. if by prescription. However. and not merely defensive. Thus. the condition is resolutory the period begins at once. the title shall be based on the possession. which However. which presumes a just title for every dation in payment possessor in the concept of owner. (1957a) FALSE TITLE:. or TRUE TITLE. or market. without need of any court decisions other condition. The actual possession of a NOTE: If one buys from an insane party. The actual possession of part of there will be an adequate title the property is deemed to extend to the whole as shown by the limits or boundaries described in the title. the title of the possessor must be just. NOTE: A voidable title. To be true. The exception is based on the offensive. prescription If the mistake of fact refers to an act of a third person. cannot serve as a basis for a prescription. true. reservation by virtue of which the right of the possessor may (1953) disappear. TRUSTS. cannot be the basis for prescription. fair. Article 1136. JUST TITLE-An act which has for its purpose the transmission of ownership. if it refers to an act of a third person. The false belief may Article 1135. all contracts which do not transmit property rights partition The ownership of personal property also prescribes through compromise uninterrupted possession for eight years.NOTES ON PARTNERSHIP AGENCY.

They are not matters of substantive WHEN TTILE VOID: Even when title of the possessor is void such as rights but are available only as defenses. Ownership and other real rights over immovables also Statute of limitations: These are acts limiting the time withinwhich prescribe through uninterrupted adverse possession thereof for actions shall be brought. the law expires. When the predecessor is in good faith. unless there is proof to the contrary. the basic prinicple most Article 1138. this inequity being founded on some change of DIFFERENT CHARACTER OF POSSESSION: condition of the property or the relation of parties. There must be privity between them. an oral donation of real property. the courts of justice cannot supply the defense if the Prescription of Actions DR himself does not do so. It does not confer any right of action but thirty years. or some act done. ordinary prescription. within which an action may be brought. (1961) of a person changes while the period is running. obscure from the lapse of time or the defective memory or death or removal of witness. It is presumed that the present possessor who was also the possessor at a previous time. without need of title or of good faith. should not be limited to ordinary prescriptioon. enforced. Howerver. Mere delay in the enforcement of a claim does not posession of the predecessor cannot be counted. if it is apparent on the face of the complaint. may have been so long that it would be and proven with the same degree of certainty by which any essential beneficial allegation in the pleadings is established. (1960a) Prescription and laches: The defense of laches applies independently of prescription. otherwise unlimited. Tacking is possible delay only when there is succession of rights between the predecessor and A matter of time A quesrtion of inequity of the successor. the successor is in good faith. unless the full period required period of bad faith possession cannot be availed of for by law for prescription has expired. LEASE AND PRESCRIPTION Kenneth and King C. A mere usurper cannot invoke the possession of any permitting a claim to be previous possessor. to preserve a right. The present possessor in good faith. prescription bears that of ordinary prescription. the present possessor can But there is no extinctive prescription unless the period provided by claim under ordinary prescription. The purpose of the statute is to protect the diligent and vigilant not those who sleep on their rights. The first day shall be excluded and the last day included. but in this case. The period should be computed in Article 1139. might be asserted. (1959a) are enacted to restrict the period within which the right. It is deemed waived if not extinguishnent of obligations. and the obligation subsists until he avails CHAPTER 3 himself thereof. The more reaosonable view in computing the Based on fixed time Not period is that the tacking of the possession should be permitted in such case. Prescription to be pleaed: The bar of statute of limitations cannot be The period of possession of the predecessor. In the computation of time necessary for prescription genereally relied upon by the authoritties is that statute of the following rules shall be observed: limitations are statutes of repose. If the possession of the predecessor was in bad faith and that of Effect of lapse of time: It has the effect of extinguishing the action. The result in any reduction or loss of right. however. that is. Hizon _________________________________________________________________________________________________________________ Article 1137. It is thus error to permit proof of prescription if it has not been defensively pleaded and such proof is Prescription of actions or limitation of actions refer to the time objected to. In order that there cab be a tacking of possession. It is different from statute of TACKING OF POSSESSION limitations.NOTES ON PARTNERSHIP AGENCY. it may be favorably considered even after evidence is adduced. criminal actions. It is a legal and not a natural cause of the The right may be waived or renounced. TRUSTS. and the successor is in Statutory Not statutory bad faith. Since it is a defense which the DR alone can plead. However. . the object of which is to suppress fraudulent and stale claims from springing up at great distances of The present possessor may complete the period necessary for time and surprising the parties or their representatives when all the prescription by tacking his possession to that of his grantor or proper vouchers and evidences are lost or the facts have become predecessor in interest. although in asserted as a defense unless it is specifically pleaded in the answer bad faith. has continued to be in possession The prescription of actions in CC contemplates civil actions and not during the intervening time. the latter can assert only extra-ordinary Applies to law Applies to equity prescription. the period of possession in good faith should be computed Leap year in period: Febraury 28 and 29 should be counted as in the proportion that the period of extra-ordinary separate days not as one day. the present Prescription Laches possessor must have obtained his possession from the previous Concerned with the fact of delay Concerned with the effect of possessor. he may acquire ownership by prescription under the provisions of this title. Actions prescribe by the mere lapse of time fixed by the same manner as where the character of the possession law. timely raised or pleaded before or during the hearing of the case.

Article 1143. (1962a) Upon an injury to the rights of the plaintiff. (n) years from the time the possession thereof is lost. conduct of any public officer involving the exercise of powers or (1963) authority arising from Martial Law including the arrest. as long as the trustee does not repudiate the trust. are not extinguished by prescription: Upon a quasi-delict: where real property which belongs in ownershio to D and over which he was amd has always been in To demand a right of way.NOTES ON PARTNERSHIP AGENCY. The action for reconveyance of the title to the rightful owner clear legislation to the contrary. The following actions must be commenced within six there is no special provision which ordains otherwise. when Article 1145. 1980. (As amended by PD No. Actions to recover movables shall prescribe eight (2) Upon a quasi-contract. Article 1149. therafter filing his reinvindicatory action to imprescriptible are: recover the land from D in 1949. the same must be brought within one Article 1142. been filed within the prescriptive period to recover on a quasi-delict Action for mandamus. Such unjustified separation any part thereof from the principal itself. and 1144 to 1147 are without prejudice to those specified in other parts of this Code. The time for prescription for all kinds of actions. recover the interest must also be prescribed. The limitations of action mentioned in articles 1140 to years from the time the right of action accrues: 1142. The following rights. The following actions must be filed within one year: Action to quiet title to property in one’s possession. (n) Upon an obligation created by law. action will be barred after 4 years.) Not imprescriptible: The fact that a mortgage is registered does not Injury to rights: The 1-year period fixed by the rules of court within make the action to foreclose it imprescriptible. 24. if the action to from employment is an injury to the rights of the P and the action recover the mortgage debt itslef has prescribed. shall be years: counted from the day they may be brought. such right is imprescriptible. Action on fraud: It prescribes in 4 years from discovery of the fraud. Time from which period computed: The principal and most important point when we examine the character. when the action arises from or out of any act. (1964a) (1) year. detention and/or trial of the plaintiff. LEASE AND PRESCRIPTION Kenneth and King C. 1505. the action to may be brought within 4 years under this article. initio. the counterclaim fro reconveyance contained in the answer of D filed in 1951 should be held to have Action by the government or government entity. an Right to collect taxes: Limitations upon the right of the government implied or constructive trust is created by law in favor of the true to assess and collect taxes will not be presumed in the absence of owner. regulated in article 649. (n) time the right of action accrues. conditions and . The following actions must be brought within ten Article 1148. not implied trust. in the Code of Commerce. or acquisition of ownership and other real rights by prescription. A mortgage action prescribes after ten years. For defamation. is 4 years. Real actions over immovables prescribe after thirty years. But if fraud has by express statutory provision provided a limitation upon its right to been committed. All other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the Upon a judgment. counted from the date of ouster does not apply to a case where P is separated from his Effect of interest: It is not possible to separate legally the interest or employment for unjustifibale causes. (n) along that he was not the owner thereof but had only a paper title thereto. among others specified elsewhere in this Code. Upon a quasi-delict. Action to enforce an express trust. (1969) r (1) Upon an oral contract. (n) Implied trusts: When property is registered in another’s name. unless the possessor has acquired the ownership by prescription for a less Article 1146. laws. hence. and where the government has not prescribes in 10 years from the issuance of the title. Article 1150. and without prejudice to the years: provisions of articles 559. Action or defense to declare a contract or judgment void ab For forcible entry and detainer. and Action of the registered owner to recover his land. Article 1147. 1755. Article 1141. activity. (n) Article 1144. The following actions must be instituted within four period. according to articles 1132. Dec. the assess unpaid taxes. who had never claimed it and who knew all To bring an action to abate a public or private nuisance. which a petition for quo warranto should be filed. This provision is without prejudice to what is established for the However. possession but by mistake of the cadastral clerk came to be titled in 1935 in the name of L. TRUSTS. and in special Upon a written contract. and 1133. Hizon _________________________________________________________________________________________________________________ Article 1140. never bothered to disturb D’s pssession save only in 1948 Other Imprescritible actions: Among actions that have been held as when he sought to do so. and this is the basis of action.

The period claim adverse to his own. and not from the date of execution of the contract. The period is 10 years of the fraud or deceit. prescription beins to run from the date of suhc Where there is a period for the principal obligation which is not yet receipt because when the obligation is subject to a due. accounting runs from the day the persons who should render the same cease in their functions. the prescriptive period starts from the Article 1153. of the creditor to insist upon payment. Hizon _________________________________________________________________________________________________________________ consequences of prescription of actions under Code is the time from which we are to compute the period fixed by law for the When the action is for partition. Existence of a legal right in the P. TRUSTS. does not commence to run until a third person done. the period of prescription of action accrues or begins to run. prescription runs only from the running of interest at stipulated intervals does not cause the running happening of the condition. The period begins instituted. Article 1151. and the period of prescription is When an action is based on fraud. prescription would run only from such demand. overt acts not to hide by the true agreement. implied or constructive trusts. the period of prescription for the action to OBLIGATIONS WITH INTEREST: The rule in this article that the period close the same must be counted from the day they were of prescription in obligations with interest runs only from the last opened. From that moment. a delay by the debtor. with the privilege of extension for another year at the option of the creditor. claims a right under such instrument where in the meantime the intestate heir has been in possession of the Essential elements: properties and there was no occasion to seek judicial annulment of the instrument. payment of interest. The period for prescription of actions to demand the demand for payment by the board of directors. (1970a) When windows were opened in the building of a neighbor in violation of law. is applicable only to cases where the principal debt is already due.NOTES ON PARTNERSHIP AGENCY. and fulfillment of obligation declared by a judgment commences from therefore. which will commence only after the maturity of debt. according to Art. of the period of prescription. payment of interest at stipulated intervals does not cause the suspensive condition. the time the judgment became final. The time for the prescription of actions which have for their object the enforcement of obligations to pay principal with Prescriptive periods interest or annuity runs from the last payment of the annuity or of the interest. the time for prescription begins to run from the date of issuance of the original In cases where there is no special provision for such computation. or the failure Trial court Upon the expiration of the period for appeal. or Court of court pursuant to the dispositive part of its Appeals decision. deceit. prescription begins to run from the But where the existence of a past due mortgage was recognized by date of the note or obligation and not from demand. The prescriptive period within which to bring action to set aside A violation or breach of that right or duty with consequential a simulated written deed of pacto de retro sale starts only injury of damage to the plaintiff. or a note is payable on demand. as intestate heir to some properties. of a subscription to shares of a corporation. (1971) When a contract provides for the payment of money within a WHEN JUDGMENT BECOMES FINAL: year. The period for prescription of actions to demand day the quasi-delict occurred or was committed. prescription ran only from the past payment of last rule does not apply to liability for the unpaid balance interest. The period of prescription of the right of the nearest relative. LEASE AND PRESCRIPTION Kenneth and King C. the period of therefore computed from the date such prescription will begin to run on the date of the discovery judgment is entered. should not be made to retroact to the date of execution of the contract. In an obligation to pay upon receipt of an inheritance by the debtor. to question the validity Accrual of cause of action: It arises when that which should have of a purported will or donation mortis causa made by the been done is not done or that which should not have been done is decedent. certificate of title because the registration of an instrument recourse must be had to the rule that the period must be counted in the office of the Register of Deeds constitutes from the day on which the corresponding action could have been constructive notice to the whole world. This payments of interest. But where the obligation is without date of maturity. and prescription will run from the end of the Supreme Court The true judgment is that entered by the clerk of first year. does not import a thereafter prescription begins to run tacit renewal. and reconveyance based on extinguishment of the abandoned right of action. . With a corresponding legal duty in the defendant. It is the legal possibility of bringing the action which to run from the time a possessor was made aware of a determines the starting point for the computation. in this case. the liability of the subscriber does not arise until call or Article 1152.1144 In case of quasi-delict. for which he may when the alleged vendees made known their intention by maintain an action for appropriate relief.

The interruption lasts its form. but which contained acknowledgment of a debt in favor of during the pendency of the action.NOTES ON PARTNERSHIP AGENCY. hence. while in the verbal demand upon the debtor is not sufficient to interrupt or latter. a DR may FILING OF ACTION IN COURT renew the obligation and interrupt the prescription. and when there is any written acknowledge a debt so as to interrupt prescription. Filing a motion for reconsideration continues the suspension of Effect of part payment: It cannot interrupt the period of the running of the period of prescription. shall There must always be a writing but the recognition of the debt operate as mutual set-offs. Thus. and run for this therefrom. hence. (1972) NOTE: Although an option is started within the prescriptive period. on the date when the last balance was an acknowledgment of its existence. not from runs anew after the dismissal of the first action to revive the death of the decedent but from the date of the invalid will. the members from whom accounting is demanded. it was held that prescription ran against the claim. Hizon _________________________________________________________________________________________________________________ When prescription is interrupted by a judicial demand. and interrupts struckm and not when the business relations terminated. in favor of the respective parties. the right of action accrues. or administrator. (1973a) Effect of acknowledgement: By acknowledging a debt. a limitatiions begins to run on the date of the last item. prescription The listing of a mortgage indebtedness by the debtor in his Article 1154. The parties are exactly in the same joint account partner begins to run from the date of retirement of position as if no action had been commenced at all. the statute of creditor. and current account between 2 parties it is said that it implies that they have mutually consented In extinctive prescription. and the period A promise to pay a debt can be considered in no other light but of prescription begins to run. but only from the date of the last item. to be paid or enforced at once but that the items when such acknowledgment is in writing. and shall only begin to run Mere offer to compromise a suit upon a supposed debt again onn the date when the parties or counsel shall have received Denial of the correctness of the account claiming that the same notice to the effect that the records have been constituted. executor. so as to make it run only from the date of the acknowledgement. undoubtedly an implied acknowledgement of the debt. The period during which the obligee was prevented by schedule of liabilities filed in insolvency proceedings. Examples: When an accounting has been made betweeb the parties in their current account dealings. must be written. The law requires that such demand be in writing. and that the shifting balance. shall be the debt. it is obvious that the running of the period shall be interrupted when a demand is made CURRENT ACCOUNTS: There is a distinction as to the time when the by the creditor upon the debtor before the lapse of the period fixed period of prescription begins to run in mutual current accounts and by law. TRUSTS. WRITTEN ACKNOWLEDGMENT OF DEBT: When there is a mutual. (n) purpose of interrupting prescription. if ACTION TO COMPEL ACCOUNTING the plaintiff desists in its prosecution or judgment is unconditionally stayed for one reason or another. judgment. is a fortuitous event from enforcing his right is not reckoned against sufficient acknowledgment of such indebtedness for the him. the legal impossibility of . The burden of proof to show such demand is upon the in simple current open accounts. the full The period for the action arising from the result of the accounting period for the prescription must be reckoned from the runs from the date when said result was recognized by agreement cessation of the interruption. which runs again prescritpion. Our present requires that the acknowledgement. where a The filing of an action interrupts extinctive prescription as to decedent attempted to make a will. based on presumed abandonment of a right. It begins to run from the dissolutionof a partnership when the final accounting is WRITTEN EXTRA-JUDICIAL DEMAND: Since extinctive prescription is done. The prescription period another. occuring from time to time. is exorbitant. LEASE AND PRESCRIPTION Kenneth and King C. of the interested parties. acknowledgment of the debt by the debtor. the interruption through that each item shall not constitute an independent debt acknowldgment of the creditor’s right can take place only immediately. Article 1155. A partial payment before the period has elapsed is after the court proceedings have been finally terminated. In the former. open. The prescription of actions is interrupted when they NOTE: The acknowledgment of the debt may be made by a legal are filed before the court. mutual dealings. a guardian. when there is a written extrajudicial representative. may demand by the creditors. The law does not require express reason the statute of limitations does not run during such a state of acknowledgment. which was not valid because of the parties defendants therein. in order to interrupt prescription. item. the running of the period of The period of prescription of an action to compel an accounting by limitations is not suspended. Thus. when may be either expressly stated therein or may be implied either or both shall call for it. the statute begins to run from the date of each particular renew the prescriptive period. EFFECT OF DESTRUCTION OF JUDICIAL RECORDS: All terms or Examples of insufficient acknowledgment: periods fixed by law or regulations shall cease to run from the date of destruction of the records of the case.

TRUSTS. The extinction of the debt of one of various joint DRs does not necessarily affect the debt of the others. REFERENCE: TOLENTINO. Central Book Publishing. LEASE AND PRESCRIPTION Kenneth and King C. Other causes not interrupting: The death of DR does not interrupt the running of the statute of limitations because the CR has at his disposal appropriate means for the prosecution of an action to enforce the collection of his claim. Confinement in jail is not one of the grounds by which prescription of an action may be interrupted.NOTES ON PARTNERSHIP AGENCY. The institution of criminal action cannot have the effect of interrupting the institution of a civil action based on a quasi-delict. Commentaries and Jurisprudence on the Civil Code of the Philippines. Vol. Inc. ARTURO M. V.. The transfer of the right to another person does not suspend the running of the period of prescritpion because once it begins to run. 1991 .. Co. Hizon _________________________________________________________________________________________________________________ considering payment as an acknowledgement sufficient to interrupt prescription. and the acknowledgment of the debt by him will not stop the running of the statute of limitations as to them. An order to stay execution of a judgment does not suspend the running of the prescription against it. it never stops until legally interrupted..