Section 2 - Property Rights of a Partner

Art 1810 - Property Rights of a Partner

1. Rights in specific property

2. His interest in the partnership
3. Right ro participate in the management
 Related rights
1. Right to reimbursement for (abono/amounts advanced to partnership)
2. Right to access and inspect partnership books
3. Right to true and full information of things affecting partnership
4. Right to formal account (1809)
5. Right to dissolve partnership under certain conditions
 Partnership property: changes with regards to market value and it includes assets subsequently acquired
with partnership funds
 Partnership capital: value is fixed and represents the contributions made by partners, they are returnable
on dissolution
 A partner may contribute to the partnership only the usufruct of a property, reserving his ownership
 Property acquired by a partner in his own name with partnership funds is presumed to be partnership
property
 Property listed in the partnership books is the of course the partnership's property

Art 1811 - Partner's Right in a Specific Property

 A partner is a co-owner with his partners of specific partnership property, but the rules of co-ownership
do not necessarily apply
 A partner has an equal right to possess a specific partnership property for partnership purposes only
o If this is violated:
1. He must account profits derived
2. His co-partners have a right to formal account
3. The right to possess may be surrendered by agreement
 (Assignment)
o The partner's right in specific partnership property is not assignable
o Why? Bcs it prevents interference by outsiders in partnership's affairs
o Exception: law allows a retiring partner to assign his rights in partnership property to a partner/s
continuing the business
 (Attachment)
o the specific property is not subject to attachment or execution except on a claim against the
partnership
o and since it belongs to the partnership, when a specific property is attached for partnership debt,
the partners cannot claim any right under exemption laws
 Legal support
o a partner's right in specific partnership property is not subject to legal support because it belongs
to the partnership
 Partner's interest not a debt due from partnership
o Creditors of an individual partner may reach the interest of the partner in the partnership but they
cannot go after any specific partnership property
 A partner's interest in the partnership is not a debt of the partnership to him

Art 1812 - A Partner's Interest in the Partnership is His Share of the (1)Profits and (2)Surplus
  The share in profits is going concern
 The share in surplus after dissolution
o Profits - the excess of returns over expenditure in a transaction, or net income
o Surplus - excess of assets over liabilities
 Value of partners share usually cannot be accurately determined until liquidation of the business and
partnership accounts have been settled

Art 1813 - Effect of Conveyance of Partner's Whole Interest in Partnership

 The conveyance itself does not dissolve the partnership

o exception: if the parties had made it clear that the conveyance of interest constitutes an entire
withdrawal from the partnership
o but the co-partners may dissolve the partnership if the assignor (which is still a partner) neglects
his duties and has caused damage
 Assignment of interest entitles the assignee to:
1. To interfere in the administration of the partnership
2. To require any information of partnership transactions
3. To inspect the partnership books
 The rights of the assignor in the partnership is not affected, he is still the partner.
 The only rights the assignee acquires:
0. To receive the profits the assignor would otherwise be entitled to
1. To receive the interest the assignor would get in case of dissolution
2. To avail remedy in case of fraud in the management
3. To require an account of partnership affairs only in case of dissolution

Art 1814 - Remedies of Separate Judgement Creditor of a Partner

 Purpose of 1814: A separate creditor of a partner cannot attach upon specific partnership property for the
satisfaction of his credit
 The remedy in 1814: He can file for a "charging order" subjecting the interest of the debtor-partner to
become the payment of his unsatisfied credit plus interest
o However, partnership creditors must be paid first before the separate creditors of the partners.
Which means that the interest or the shares of the business must be sufficient to the partnership
creditors first, before it can be applied as a form of payment of debtor-partners to their own
creditors
 Redemption of interest charged:
o may be redeemed with (1) separate property of any one of the partners, (2) partnership property
with consent of all partners
 because what happens if it was not redeemed and the debtor-partner is insolvent:
o if all of his shares are attached, then that could be a ground for dissolution
o and if the partners don't want that, they may redeem the interest charged before the foreclosure
sale or before the redemption period fixed by court

Section 3 - Obligations of the Partners With Regard To Third Persons

Art 1815 - Importance of Having a Firm Name

 Every partnership shall operate under a firm name, which may or may not include the name of one or
more of the partners
  Those who are not partners but include their names in the firm name is subject to the liability of a partner.
But it does not pertain to a 3rd person who represents himself as a partner (partner by estoppel)
 Firm - the name, title, or style under which a company transacts business
 A firm name is necessary to distinguish the partnership which has a separate juridical personality
 The firm name must be registered with DTI
 Rule on choosing a name : "No false or misleading name shall be used. The continued use of the name of
a deceased partner is permissible provided that the firm indicates in all its communications that said
partner is deceased."

Art 1816 - Liability for Contractual Obligations of the Partnership

 Partners(even industrial partners) are liable to 3rd person who have dealt with the partnership
o remedy of industrial partner: seek reimbursement from the capitalist partners
o note: the industrial partner is exempted from loss and not from liability
 General rule: a partner has the right to make all partners liable for contracts he makes for the partnership
in the name and for the account of the partnership
 If he wants to assume a separate undertaking in his name with a 3rd person, then he is solidarily liable and
he is personally bound by the contract
 The liability to creditor is (1) pro rata and (2) subsidiary
1. pro rata - equally and jointly (joint not solidary)
2. subsidiary - partners become personally liable only after all the partnership assets are exhausted

Art 1817 - Any Stipulation Against Pro Rata and Subsidiary Liability ON 3RD PERSONS is VOID

 But is valid against the partners only

Art 1818 - Power of Partner as Agents and Liability of Partnership for Acts of Partners

 In the absence of agreement, all partners have equal rights in the management and conduct of the
partnership business
 Power of partner as agent among themselves
o In absence of agreement of partner's authority, each partner has implied authority to do all things
necessary to carry out the ordinary business
o Apparent authority is based on the doctrine of estoppel, each partner is regarded as both a
principal and an agent
o An act of a partner that is not apparently for the carrying on of the business in the usual way does
not bind the partnership unless authorized by the other partners
 Power of partner as agent to third persons
o founded upon the doctrine of mutual agency
o 3rd persons have:
 the right to assume that every general partner has power to bind the partnership
 are not bound to assure that the transaction has been consented by all of the partners
 the right to presume that each individual partner is an agent and can be binded in carrying
partnership transactions
 no right to assume that a partner has unlimited authority
 Liability of Partnership for Acts of Partners
1. Acts for Apparently Carrying On in the Usual Way the Business of the Partnership
 every partner is an agent and may execute normal acts even if he has no authority unless
the 3rd person has knowledge of the lack of authority
  Partnership is not liable when the partner (1) has really no authority and (2) 3rd person
knows it
2. Acts Not Considered As the Usual Way of Business
 may not be performed unless partner has consent of all or the rest have abandoned the
business:
1. Assignment of partnership property in trust for creditors or on assignee's promise
to pay the debts of the partnership
2. Disposition of the goodwill of the business
3. Acts that would make the ordinary business impossible to carry on
4. Confession of judgement
5. Enter into a compromise concerning a partnership claim or liability
6. Submit a partnership claim or liability to arbritration
7. Renounce a claim of the partnership
3. Acts in Contravention of a Restriction on Authority
 not binding to persons having knowledge of the restriction