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PARTNERSHIP REVIEWER

CONSEQUENCES OF THE PARTNERSHIP BEING A JURIDICAL ENTITY

PARTNERSHIP 1. its juridical personality is SEPARATE and DISTINCT from that of each
 it is a CONTRACT whereby two or more persons (1) bind themselves to partner
CONTRIBUTE money, property, or industry to a COMMON FUND (2) with the
intention of dividing the PROFITS among themselves or in order to EXERCISE a 2. the partnership CAN in GENERAL:
PROFESSION A) acquire and possess property of all kinds
B) incur obligations
 a STATUS and a FIDUCIARY RELATION subsisting between persons C) bring civil and criminal actions
carrying on a business in common with a view on profit D) can be adjudged insolvent even if the individual members be each
financially solvent
CHARACTERISTICS OF THE CONTRACT OF PARTNERSHIP
[C, C, L, I, AS, NP] 3. unless he is generally sued, a partner has no right to make a separate
1. CONSENSUAL appearance in court, if the partnership being sued is already represented
 perfected by mere consent
2. CONTRIBUTION of money, property or industry to a COMMON FUND LIMITATIONS ON ALIEN PARTNERSHIP
3. object must be a LAWFUL one 1) if 60% capital is not owned by Filipinos
4. INTENTION of DIVIDING the PROFIT among the PARTNERS  the firm cannot acquire by purchase or otherwise AGRICULTURAL
5. “AFFECTIO SOCIETATIS” Philippine lands
 the desire to formulate an ACTIVE UNION, with people among whom 2) foreign partnership may “lease” lands provided the period does not exceed 99
there exist a mutual CONFIDENCE and TRUSTS years
6. NEW PERSONALITY 3) foreign partnership may be “MORTGAGEES” of land
 the object must be for profit and not merely for the common enjoyment  period of 5 years, renewable for another 5 years
otherwise only a co-ownership has been formed. HOWEVER, pecuniary  they cannot purchase it in a foreclosure sale
profit need not be the only aim, it is enough that it is the principal purpose
RULES IN CASE OF ASSOCIATIONS NOT LAWFULLY ORGANIZED AS
BUSINESS TRUSTS PARTNERSHIP
 when certain persons entrust their property or money to others who will 1. it possesses NO LEGAL PERSONALITY
manage the same for the former  it cannot sue as such HOWEVER, the partners in their individual capacity
CAN
RULES ON CAPACITY TO BECOME A PARTNER 2. one who enters into a contract with a partnership as such cannot when
1. a person capacitated to enter into contractual relations may become a sued later on for recovery of the debt, allege the lack of legal personality
partner on the part of the firm, even if indeed it had no personality
 ESTOPPEL
2. an UNEMANCIPATED MINOR CANNOT become a partner UNLESS his parent
or guardian consents  whether a partnership has a juridical personality or not depends on its
PERSONAL LAW of the partnership or the law of the place where the partnership
3. a MARRIED WOMAN, cannot contribute conjugal funds as her contribution was organized
to the partnership UNLESS she is permitted to do so by her husband OR
UNLESS she is the administrator of the conjugal partnership, in which the REQUISITES FOR EXISTENCE OF PARTNERSHIP [I, CF, JI]
COURT must give its consent authority 1. INTENTION to create a partnership
2. COMMON FUND obtained from contributions
4. a PARTNERSHIP being a juridical person by itself can form another 3. JOINT INTERESTS in the PROFITS
partnership
WHAT DO NOT ESTABLISH A PARTNERSHIP
5. a CORPORATION cannot become a partner on grounds of public policy 1. mere co-ownership or co-possession
 even with profit sharing
 a partner shares not only in profits but also in the losses of the firm 2. mere sharing of GROSS returns
 even with joint ownership of the properties involved
RULE:
 the partnership has a PERSONALITY SEPARATE and DISTINCT from that RULES TO DETERMINE THE EXISTENCE OF A PARTNERSHIP
of each partner

1. persons who are not partners to each other are not partners as to third
persons
EXCEPTION:
 PARTNERSHIP BY ESTOPPEL
2. CO-OWNERSHIP of a property does not itself establish a partnership, even
though the co-owners share in the profits derived from the incident of joint
ownership
3. SHARING OF GROSS RETURNS ALONE does not indicate a partnership
whether or not the persons sharing them have a joint or common right or
interest in any property from which the returns are derived
4. the receipt of the share in the profits is a strong presumptive evidence of
partnership HOWEVER, no such inference will be drawn if such profits were
received in payment
A) as a DEBT by installments or otherwise
B) as WAGES of an employee
C) as RENT to a landlord
D) as an ANNUITY to a widow or representative of a deceased
partner
E) as INTEREST on a LOAN, though the amount of payment vary with
the profits of the business
F) as the CONSIDERATION for the sale of a GOOD WILL of a business
or other property or otherwise
 creditors are not partners, for their only interest in the sharing of
profits is the receipt or payment of their credits
 in a partnership, the partners are supposed to trust and have
confidence in all the partners
PARTNERSHIP BY ESTOPPEL
 IF 2 persons not partners represent themselves as partners to strangers,
a partnership by estoppel results
 WHEN 2 persons, who are partners, in connivance with a friend who is
not a partner inform a stranger that said friend is their partner, a partnership by
estoppel also result to the end that the stranger should not be prejudiced
RULE: LAWFUL OBJECT or PURPOSE
 a partnership must have LAWFUL OBJECT or PURPOSE, and must be
established for the common benefit or interest of the partners
 it must be within the commence of man, possible and not contrary to
law, morals, good customs, public order or public policy
 IF a partnership has SEVERAL PURPOSES, one of which is UNLAWFUL,
the partnership can still validly exist so long as the illegal purpose can be separated
from the legal purposes
 NO need for JUDICIAL DECREE to dissolve an unlawful partnership
 VOID AB INITIO
2
 one of the causes for the dissolution of a partnership is “any event which
makes it unlawful for the business of the partnership to be carried on”
RULE:
 when an UNLAWFUL PARTNERSHIP is dissolved by a judicial decree, the PROFITS
shall be CONFISCATED in FAVOR of the STATE
G. R.
 a partnership may be constituted in any form
EXCEPTION: PUBLIC INSTRUMENT
1. IMMOVABLE PROPERTY is contributed
2. REAL RIGHTS are contributed
* need for INVENTORY of IMMOVABLES
** for EFFECTIVITY of the partnership contract insofar as innocent
third persons are concerned the same must be REGISTERED if REAL
PROPERTIES are INVOLVED
 a partnership contract is NOT CONVERED by the STATUTE of FRAUDS
 an AGREEMENT TO FORM a partnership does not itself create a
partnership
 when there are conditions to be fulfilled or when a certain period is to
lapse, the partnership is not created till after the fulfillment of the conditions or the
arrival of the term and this is true even if one of the parties has already advanced
his agreed share of the capital
RULE: if CAPITAL is P3,000 or more
REQUIRED:
1. PUBLIC INSTRUMENT
2. RECORDED – S.E.C.
*  FAILURE TO COMPLY – shall not effect the liability of the partnership and its
members to third persons
**  IF REAL PROPERTIES have been contributed, REGARDLESS of the VALUE, a
public instrument is needed for the attainment of legal personality
REQUIREMENTS WHERE IMMOVABLE / REAL PROPERTY IS CONTRIBUTED
1. PUBLIC INSTRUMENT
2. INVENTORY – signed and attached to the P.I.
*  applies regardless of the value of the real property
*  applies even if only real rights over the real property are
contributed
*  applies if aside from real property, cash or personal property is
contributed
 TRANSFER of land to the partnership must be duly “recorded” in the ROD to make
the transfer effective insofar as third persons are concerned
RULE:
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 any immovable property or an interest therein maybe acquired in the partnership 2. PARTNERSHIP BY ETOPPEL
name G) AS TO LEGALITY OF EXISTENCE
 title so acquired can be conveyed only in the partnership name 1. DE JURE PARTNERSHIP
2. DE FACTO PARTNERSHIP
IF the partnership has ALIENS, it CANNOT OWN LANDS, whether public or private H) AS TO PUBLICITY
or whether agricultural or commercial EXCEPT through HEREDITARY SUCCESSION 1. SECRET PARTNERSHIP
2. NOTORIOUS / OPEN PARTNERSHIP
I) AS TO PURPSE
1. COMMERCIAL / TRADING
LIMITATIONS ON ACQUISITION 2. PROFESSIONAL / NON-TRADING
1. AGRICULTURAL LANDS – 1024 HECTARES
2. lease of public lands (GRAZING) – 2000 HAS.
GENERAL PARTNERSHIP
RULES IF A) articles are kept secret among the members  one where all the partners are general partners
B) any one of the members may contract in his “own” name  they are LIABLE even with respect to their individual properties, after the assets of
with third persons the partnership has been exhausted
1. NOT a partnership – NOT a LEGAL PERSON
2. it may be sued by third person under the common name it uses LIMITED PATNERSHIP
3. it cannot sue as such and cannot be ordinarily be a party to a civil action  one where at least one partner is a general partner and the others are limited
4. insofar as innocent third parties are concerned partners
 the parities can be considered as members of a partnership  one whose liability is limited only up to the extent of his contribution
5. as between themselves or insofar as third persons are prejudiced
 only the rules of co-ownership must apply  a partnership where all the partners are limited partners cannot exist as a limited
partnership
EFFECT OF CERTAIN TRANSACTIONS  REFUSED REGISTRATION
1. contracts entered into by a “partner” in his own name may be sued upon  IF it continuous as such, it will be considered as a general partnership and all
still by him in his individual capacity, not withstanding the absence of a the partners will be general partners
partnership
2. when two or more individuals, having a common interests in a business KINDS OF UNIVERSAL PARTNERSHIP
bring a court action, it should be presumed that they prosecute the same 1. PARTNERSHIP OF ALL PRESENT PROPERTY
in their individual capacity as co-owners and not in behalf of a partnership 2. PARTNERSHIP OF ALL PROFITS
which does not exist in legal contemplation

CLASSIFICATION OF PARTNERSHIPS *UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY

A) ACCORDING TO MANNER OF CREATION  CONTRIBUTION of
1. ORALLY constituted 1. ALL the properties actually belonging to the partners
2. constituted in a PRIVATE INSTRUMENT 2. the PROFITS acquired with said property
3. constituted in a PUBLIC INSTRUMENT  BECOMES COMMON PROPERTY
4. REGISTERED – S.E.C.  EXCEPT all FUTURE PROPERTY
B) ACCORDING TO OBJECT  FRUITS of FUTURE PROPERTY – INCLUDED IF STIPULATED UPON
1. UNIVERSAL
2. PARTICULAR
C) ACCORDING TO LIABILITY *UNIVERSAL PARTNERSHIP OF PROFITS
1. LIMITED PARTNERSHIP  comprises all that the partners may acquire by the INDUSTRY or WORK of the
2. GENERAL PARTNERSHIP partners become common property regardless of within said profits were obtained
D) ACCORDING TO LEGALITY through the usufruct contributed
1. LAWFUL OR LEGAL  EXCEPT PRIZES and GIFTS
2. UNLAWFUL OR ILLEGAL
E) ACCORDING TO DURATION RULE:
1. for a SPECIFIC PEIOD or FIXED PERIOD  articles of universal partnership, entered without specification of its nature, only
2. PARTNERSHIP AT WILL constitute a universal partnership of PROFITS
F) ACCORDING TO REPRESENTATION TO OTHERS
1. ORDINARY PARTNERSHIP RULE:
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 persons who are prohibited from giving each other any donation or advantage
cannot enter into universal partnership 3. the partner must exercise due diligence in preserving the property to be
WHO: contributed before he actually contributes the same
1. HUSBAND and WIFE
2. those guilty of ADULTERY or CONCUBINAGE 4. a partner who promises to contribute to the partnership becomes a
3. those guilty of the same criminal offense if the partnership was entered promissory debtor of the partnership
into in consideration of the same
RULES ON THE DUTY TO DELIVER THE FRUITS
 while spouses cannot enter into a universal partnership, they can enter into a 1. IF property has been promised, the fruits thereof should also be given
particular partnership or be members thereof
2. the fruits referred to are those arising from the time they should have been
 a universal partnership is virtually a donation to each other of the partners delivered, without a need of any demand
properties or at least their usufruct
3. IF the partner is in BAD FAITH, he is liable not only for the fruits actually
produced, BUT also for those that could have been produced
4. IF MONEY HAS BEEN PROMISED, INTEREST and DAMAGES from the time
PARTICULAR PARTNERSHIP he should have complied with his obligation should be given
 a particular partnership has for its OBJECT:
1. DETERNMINATE THINGS – their use or fruits 5. NO DEMAND is needed to put the partner in default
2. SPECIFIC UNDERTAKING
3. EXERCISE of a PROFESSION or VOCATION 6. it is DELIVERY, actual or constructive that TRANSFERS OWNERSHIP

OBLIGATIONS OF THE PARTNERS RULES ON THE DUTY TO WARRANT

RULE: 1. the warranty in case of eviction refers to specific and determinate things
 a PARTNERSHIP BEGINS from the moment of the EXECUTION of the CONTRACT already contributed

*  even if contributions have not yet been made the firm already exists, for 2. there is EVICTION whenever by a final judgment based on a right prior to
partnership is a consensual contract the sale or an act imputable to the partner, the partnership is deprived of
the whole or a part of the thing purchased
DURATION OF PARTNERSHIP
 UNLIMITED RULE WHEN CONTRIBUTION CONSISTS OF GOODS
*  MAY BE AGREED UPON  APPRAISAL of VALUE is needed to determine how much was contributed
1. EXPRESSLY – definite period
2. IMPLIEDLY – upon achievement of its purpose HOW APPRAISAL MADE
1. as PRESCRIBED in the CONTRACT
PARTNERSHIP AT WILL 2. in default, by EXPERTS chosen by the partners, and at CURRENT PRICES
 a partnership wherein its continued existence really depends upon the will of the * necessity of the INVENTORY – APPRAISAL
partners or even on the will of any of them
2 KINDS: RULE on RISK of LOSS
1. when there is no term, express or implied  after goods have been contributed, the partnership bears the risk of
2. when it is continued by the habitual managers although the period has subsequent changes in the value
ended or the purpose has been accomplished
RULE:
3 IMPORTANT DUTIES OF EVERY PARTNER [C, D-F, W]  a partner who has undertaken to contribute a sum of money and fails to do so
1. duty to CONTRIBUTE what had been promised becomes a debtor for the interest and damages from the time he should have
2. duty to DELIVER the FRUITS of what should have been delivered complied with his obligation
3. duty to WARRANT
CAPITALIST PARTNER
RIULES ON THE DUTY TO CONTRIBUTE  one who FURNISHES CAPITAL
1. the contribution must be made at the time the partnership is entered into * NOT EXEMPTED from LOSSES
UNLESS a different period is stipulated * he can engage in other business PROVIDED there is no competition
between the partnership and his business
2. no demand is needed to put the partner in default * share in the profits according to agreements
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* it is permissible to contribute UNEQUAL SHARES IF there is a stipulation to
INDUSTRIAL PARTNER this effect
 one who FURNISHES INDUSTRY or LABOR
* he is EXEMPTED from LOSSES as between the partner BUT liable to * in the absence of proof, the shares are presumed to be equal
strangers without prejudice to reimbursement from the capitalist partner
* he CANNOT engage in any other BUSINESS WITHOUT the express CONDITIONS before a capitalist partner is obliged to sell his shares /
CONSENT of the other partners, OTHERWISE interest to the other partners [IL, RC, NA]
1. he can be EXCLUDED from the firm
- plus damages OR 1. if there is IMMINENT LOSS of the BUSINESS of the partnership
2. the BENEFITS he obtains from the other businesses CAN BE AVAILED of by
the other partners 2. he REFUSES to CONTRIBUTE an ADDITIONAL SHARE to the CAPITAL
- plus damages
 whether or not there is COMPETITION 3. there is no agreement to the contrary
* in computing always look for ----- NET PROFITS
----- NET LOSSES * INDUSTRIAL PARTNER IS EXEMPTED

CAPITALIST – INDUSTRIALIST PARTNER

 one who contributes BOTH CAPITAL and INDUSTRY *RULE if MANAGING PARTNER COLLECTS A CREDIT

GENERAL PARTNER REQUISITES:

 one who is liable “beyond” the extent of his contribution 1. existence of at least 2 debts ---- PARTNERSHIP
---- PARTNER
LIMITED PARTNER 2. both sums are demandable
 one who is liable “only” to the extent of his contribution 3. the collecting partner is the managing partner

*** an industrial partner can only be a general partner, never a limited partner * the sum thus collected shall be applied to the two credits in
proportion to their amounts
MANAGING PARTNER
 one who manages actively the firms affairs RULE:
* where a partner receives his share in the partnership credit
SILENT PARTNER CONDITIONS:
 one who does not participate in the management, though he shares in the 1. a partner has received his share in the partnership credit – in whole or in
PROFITS or LOSSES part
2. the other partners have not collected their part of the credit
LIQUIDATING PARTNER 3. the debtor subsequently becomes INSOLVENT
 one who winds up or liquidates the affairs of the firm after it has been dissolved
RULE: - the partner shall be obliged to bring to the partnership
OSTENSIBLE PARTNER capital what he received even though he may have given receipt for
 one whose connection with the firm is public and open his share only

SECRET PARTNER * DOES NOT APPLY when debt was collected after dissolution of the partnership
 one whose connection with the firm is concealed or kept secret
RULE:
DORMANT PARTNER * every partner is responsible to the partnership for damages suffered by it
 one who is both a secret (hidden) and silent (not managing) partner through his fault

NOMINAL PARTNER * he cannot compensate them with the profits and benefits, which he may
 one who is not really a partner BUT who may become liable as such insofar as have earned for the partnership by his industry
third persons are concerned
* the courts may equitably lessen his responsibility
RULE:
 partners shall CONTRIBUTE EQUAL SHARES to the capital of the partnership
“RES PERIT DOMINO”
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*RULES ON WHO BEARS THE RISK OF LOSS * the designation of shares by third persons may be IMPUGNED, IF it is
MANIFESTLY INEQUITABLE
1. if SPECIFIC and DETERMINATE THINGS NOT FUNGIBLE whose USUFRUCT * the designation of shares by third persons CANNOT be IMPUGNED EVEN IF
is enjoyed by a firm MANIFESTLY INEQUITABLE IF:
 the PARTNER who OWNS it bears the loss for ownership was never 1. the aggrieved partner has already BEGUN to EXECUTE the decision
transferred to the firm 2. the aggrieved partner has not IMPUGNED the distribution within 3 months
he had knowledge
2. FUNGIBLE or DETERIORABLE
 FIRM bears the loss for it is evident ownership was transferred *RULE IF APPOINTMENT OTHER THAN in the ARTICLES of PARTNERSHIP
1. power to act may be REVOKED at ANY TIME with or without just cause
3. THINGS CONTRIBUTED to be SOLD  REMOVAL should be done by the controlling interest
FIRM bears the loss for evidently the firm was intended to be the owner
2. EXTENT of POWER
4. CONTRIBUTED under APPRAISAL  as long as he remains manager, he can perform all acts of administration
 FIRM bears the loss because this has the effect of an implied sale BUT – if others oppose and he persists, he can be removed

*RULE WHEN there are 2 or MORE MANAGERS

CONDITIONS:
1. 2 or more partners are managers
2. there is no specification of respective duties
RULE on RESPONSIBILITY of the FIRM 3. there is no stipulation requiring UNANIMITY

1. to REFUND amounts disbursed on behalf of the firm plus legal interest from SPECIFIC RULES:
the time expenses where made 1. each may separately execute all acts of administration
 UNLIMITED POWER to ADMINISTER
2. to ANSWER to each partner for OBLIGATIONS he may have entered into in
good faith in the interest of the partnership, as well as the risks in 2. IF any of the managers OPPOSE
consequence of its management  MAJORITY RULE
 IN CASE OF A TIE
* REFUND must be made even in case of failure of the enterprise entered into, - persons owning controlling interest prevail provided they are also
provided the partner is not at fault managers
* AMOUNT DISBURSED – does not refer to the ORIGINAL CAPITAL
* right to oppose is not given to NON-MANAGERS
*HOW PROFITS ARE DISTRIBUTED * OPPOSITION should be done BEFORE the acts produce legal effects insofar as
1. according to AGREEMENT third persons are concerned
2. IF NONE, according to amount of CONTRIBUTION
RULE WHEN UNANIMITY is REQUIRED
*HOW LOSSES are DISTRIBUTED 1. the CONCURRENCE of all shall be necessary for the validity of the acts
1. according to AGREEMENT as to losses
2. IF NONE, according to agreement as to PROFITS 2. the ABSENCE or DISABILITY of ANYONE of them CANNOT BE ALLEGED
3. IF NONE, according to amount of CONTRIBUTION UNLESS there is imminent danger of grave or irreparable injury to the
partnership
* an INDUSTRIAL PARTNER shall receive a JUST and EQUITABLE share in the
profits RULE ON DUTY of THIRD PERSONS
 third persons are not required to inquire as to whether or not a partner with whom
*RULE on INDUSTRIAL PARTNERS’ LIABILITIES he transacts has the consent of all the managers
- may be held liable by third persons BUT he may recover what he has paid from
the other capitalist partners *RULES to be observed when the manner of management has not been
agreed upon:
*RULE on DESIGNATION by THIRD PERSON of SHARES in PROFITS and 1. all the partners are considered AGENTS
LOSSES  whatever any one of them may do alone shall not bind the partnership
* third person is NOT a PARTNER -- appointed to only distribute shares
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2. IF the acts of one are opposed by the rest, the majority shall prevail
PROPERTY RIGHTS OF PARTNERS [P, I, M]
3. when a partner acts in his OWN NAME, he does not bind the partnership 1. rights in specific PARTNERSHIP PROPERTIES
2. INTERESTS in the PARTNERSHIP
4. authority to bind the firm does not apply if somebody else has been given 3. right to PARTICIPATE in the MANAGEMENT
authority to manage in the articles of organization or through some other
means RULE:
* a partner is CO-OWNER with his partners of SPECIFIC PARTNERSHIP PROPERTY
5. ALTERATIONS REQUIRE UNANIMITY
- IMMOVABLE partnership property * RIGHTS of a PARTNER in SPECIFIC PARTNERSHIP PROPERTY
- BUT if the refusal to consent by the others is prejudicial to the interest of
the partnership 1. he has equal rights with his partners to POSSESS the property BUT only for
- COURTS INTERVENTION may be sought PARTNERSHIP PURPOSES
 he may possess such property for other purposes PROVIDED the other
RULES on ASSOCIATE of PARTNER partners expressly or impliedly gives their CONSENT
1. every partner may associate another person with him in his share
2. he CANNOT ASSIGN his right to the property EXCEPT if all the other
2. for a partner to have an associate in his share partners assign their rights in the same property
 consent of all the other partners is NOT REQUIRED
3. his right to the property is NOT SUBJECT to ATTACHMENT or EXECUTION,
3. for the associate to become a partner EXCEPT on a claim against partnership
 ALL MUST CONSENT
4. his right to the property is NOT SUBJECT to LEGAL SUPPORT

* if there is PARTNERSHIP DEBT, the specific property can be attached

RULES on PARTNERSHIP BOOKS
1. kept at the principal place of business of the partnership
RULE:
2. at any reasonable hour, every partner shall have access to and may * a PARTNERS INTEREST in the partnership is his SHARE of the PROFITS and
inspect and copy any of them SURPLUS
IT CAN BE: [A, A, LS]
DUTY of PARTNERS TO GIVE INFORMATION 1. ASSIGNED
 good faith not only requires that a partner should not make any FALSE 2. ATTACHED
CONCEALMENT, BUT he should abstain from all concealment 3. be subject to LEGAL SUPPORT

DUTY to ACCOUNT [B, P, U-P] *EFFECTS of CONVEYANCE by PARTNER of his INTEREST in the
 every partner must account to the partnership PARTNERSHIP
1. any benefit acquired 1. IF he conveys his WHOLE INTEREST
2. any profits received A) partnership may still remain
3. any use of partnership property B) partnership may be dissolved
* mere conveyance does not dissolve the partnership
RIGHT TO DEMAND a FORMAL ACCOUNT
 any partner shall have the right to a formal account as to partnership affairs 2. the ASSIGNEE does not necessarily become a partner
1. if wrongfully excluded from partnership BUSINESS  the ASSIGNOR is still the partner, with a right to demand accounting and
2. if wrongfully excluded from partnership PROPERTY by his co-partners settlement
3. if the right exists under the terms of agreement
4. if the other partner receives other benefits, profits or uses partnership 3. the ASSIGNEE CANNOT interfere in the MANAGEMENT or ADMINISTRATION
property of the firm
5. whenever other circumstances render it just and reasonable  the ASSIGNEE CANNOT also DEMAND [I, A, I]
A) INFORMATION
* the right to demand an accounting exists as long as the partnership exists B) ACCOUNTING
* prescription begins to run only upon the dissolution of the partnership when the C) INSPECTION of partnership books
final accounting is done

*** while a partners INTEREST in the firm may be CHARGED or LEVIED upon, his
INTEREST in a specific firm PROPERTY CANNOT be attached.
RIGHTS of the ASSIGNEE
1. to get whatever profits the assignor-partner would have obtained
2. to avail himself of the usual remedies in case of fraud in the management
3. to ask for ANNULMENT of the contract of assignment IF:
A) he was induced to enter into it through any of the vices of consent
OR
B) he himself was incapacitated to give consent
4. to demand an accounting BUT only if the partnership is dissolved
PREFERENTIAL RIGHTS of PARTNERSHIP CREDITORS
* partnership creditors are entitled to PRIORITY over partnership assets, including
the partners interest in the profits
** SEPARATE or INDIVIDUAL creditors have PREFERENCE in separate or individual
properties
* when the CHARGING ORDER is applied for and granted, the court may appoint a
receiver of the partners share in the profits
 the receiver appointed is entitled to any relief necessary to conserve the
partnership assets for partnership purposes
* interest charged may be redeemed at any time before foreclosure
* AFTER FORECLOSURE the interest may still be redeemed by (without causing
dissolution)
1. with separate property, by any one or more of the partners OR
2. with partnership property, by any one or more partners with the consent of all
the partners whose interests are not so charged or sold
* consent of the delinquent partner not needed
RULE:
 every partnership shall operate under a FIRM NAME
* the firm name may or may not include the name of one or more of the
partners
** STRANGERS who include their names in the firm are liable as partners because
of ESTOPPEL, BUT do NOT have the RIGHTS of partners
** IF a LIMITED PARTNER includes his name in the firm name, he has obligations
BUT not the rights of a general partner
RULE on LIABILITY for CONTRACTUAL OBLIGATIONS
* all partners, including industrial ones, shall be liable pro-rata with all their
property and after all the partnership assets have been exhausted
* NOT APPLICABLE for TORTS or CRIMES ----- LOSS
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----- INJURY
----- MISAPPROPRIATION
** while an INDUSTRIAL PARTNER is exempted by law from LOSSES as between
the partners, he is NOT EXEMPTED from liability insofar as third persons are
concerned
 he may recover what he has paid from the CAPITALIST partners
* under the law the liability of the partners is subsidiary and joint NOT principal
and solidary
*RULE on LIABILITY of a PARTNER who has WITHDRAWN
1. a partner who withdraws is not liable for liabilities contracted after he has
withdrawn
2. if his interest has not yet been paid him
 his right to the same is that of a mere creditor
** a stipulation exempting liability to third persons is VOID
* any partner may enter into a separate obligation to perform a partnership
contract
RULE:
* every partner is an “agent” of the partnership for the purpose of its business
G.R.- the act of every partner for apparently carrying on in the USUAL WAY the
business of the partnership of which he is member binds the partnership
EXCEPT:
1. if he has NO AUTHORITY and
2. the person with whom he was dealing with HAS KNOWLEDGE of the fact that he
has no such authority
RULE:
 an act of a partner which is not apparently for the carrying on of business of the
partnership in the usual way does not bind the partnership UNLESS authorized by
the other partners
* a partnership is a CONTARCT of MUTUAL AGENCY, each partner acting as a
principal on his own behalf and as an agent for his co-partners or the firm
REQUISITES on WHEN can a partner BIND the partnership
1. expressly or impliedly AUTHORIZED
2. when he acts in BEHALF AND IN THE NAME of the partnership
INSTANCES of IMPLIED AUTHORIZATION
1. when the other partners DO NOT OBJECT, although they have knowledge
of the act
2. when the act is for “apparently carrying on in the usual way the business
of the partnership
* this is binding on the firm even if the partner was not really authorized
PROVIDED that the third party is in GOOD FAITH
 9
RULE on UNUSUAL ACTS *RULE on ADMISSION or REPRESENTATION MADE by a PARTNER
 one or more but less than all the partners HAVE NO AUTHORITY TO:  an admission by a partner is an admission against the partnersip,under the
[AP, DG, AI, CJ, EC, SA, RC] following conditions:
1. ASSIGN the PARTNERS PROPERTY 1. the admissions must concern partnership affairs
2. DISPOSE of GOODWILL 2. must be within the scope of his authority
3. do any other act which would make it impossible to carry on the ordinary
business of the partnership RESTRICTIONS ON THE RULE:
4. CONFESS a judgment 1. admissions made BEFORE DISSOLUTION are binding only when the partner
5. ENTER into a COMPROMISE has authority to act on the particular matter
6. SUBMIT to ARBITRATION
7. RENOUNCE to CLAIM 2. admissions made AFTER DISSOLUTION are binding only if the admissions
were necessary to WIND UP the business
*RULES on CONVEYANCE of REAL PROPERTY
3. an admission made by a former partner made after he has RETIRED from
1. where title to real property is in the partnership name the partnership is not evidence against the firm
 any partner may convey title to such property by a conveyance executed
in the partnership name EFFECT of NOTICE to a PARTNER
 notice to a partner is notice to the partnership
* PARTNERSHIP MAY RECOVER SUCH PROPERTY
EXCEPT: *notice to a partner, given while already a partner is a notice to the partnership
1. if the firm is engaged in the buying and selling of land (USUAL PROVIDED it relates to partnership affairs
BUSINESS)
2. if property was conveyed to a HOLDER for VALUE and who had NO EFFECT of KNOWLEDGE ALTHOUGH NO NOTICE WAS GIVEN:
KNOWLEDGE of the partners LACK of AUTHORITY
* knowledge of the partner is also knowledge of the firm PROVIDED THAT:
2. where title is in the name of the partnership and partner sold in his OWN 1. the knowledge was acquired by a partner who is acting in the particular
NAME matter involved;and
2. the partner having knowledge, had reason to believe that the fact related
 IF DONE IN USUAL BUSINESS to a matter which had some possibility of being the subject of the
 buyer does not become owner BUT ACQUIRES EQUITABLE INTEREST partnership business AND he was so situated that he could communicate it
to the partner acting on that particular matter
 IF NOT DONE IN USUAL BUSINESS
 buyer does not become owner and is not even entitled to equitable * SERVICE of PLEADINGS on the partner in a law firm is also service on the whole
interest firm and the other partners

3. where title is in the name of one or more BUT not all the partners

 partners in whose name the title is named MAY CONVEY BUT the LOSS OR INJURY
PARTNERSHIP may RECOVER such property IF done not in its USUAL
BUSINESS EXCEPT if he had transferred it to a Holder for value RULE on WRONGFUL ACT or OMISSION of a PARTNER (SOLIDARY
LIABILITY)
4. when property “held in trust” by partner * the partnership is solidarily liable with the partner if the wrongful act or
omission
 a sale only conveys EQUITABLE INTEREST 1. the partner is acting in the ordinary course of business of the partnership
OR
5. when title is in the name of all partners 2. with authority of his co-partners

 conveyance executed by all partners possess all rights of such property * innocent partners have right to recover from the guilty partner

EQUITABLE INTEREST * When the firm and other partners not liable:
-BENEFICIAL INTEREST, BUT NOT NAKED OWNERSHIP 1. if the wrongful act or omission was NOT DONE
A) within scope of partnership business
 10
B) with authority of the other co-partners RULE:
* he shall be liable for all the obligations of the partnership BUT his liability will
2. if the act or omission is NOT WRONGFUL extend only to his share in the partnership property

3. if the act or omission, although wrongful did not make the partner concern * his own individual property shall be excluded
liable
- DAMNUN ABSQUE INSURIA * same liability of a limited partner

4. if the wrongful act or omission was committed after the firm had been PREFERENCE of PARTNERSHIP CREDITORS
dissolved and the same was not in connection with the process of winding RULE:
up. * the creditors of the partnership shall be preferred to those of such partner as
regards the partnership property
LIABILITY of PARTNERSHIP for MISAPPROPRIATION – (SOLIDARY
LIABILITY) without prejudice to this right
1. RECEIVING PARTY MISAPPROPRIATES  the private creditors of each partner may ask the attachment and public sale of
2. ANY PARTNER MISAPPPROPRIATES the share of the latter in the partnership assets
- money or property in custody of partnership
**IF a partner sells his share to a third party, BUT the firm itself still remains
PARTNER BY ESTOPPEL SOLVENT, partnership creditors CANNOT assail the validity of the sale by alleging
 a person who represents himself or consents to another / others representing that it is made in fraud of them, since they have not really been prejudiced
him to anyone as a partner either in an existing partnership or in one that is
fictitious or apparent DISSOLUTION AND WINDING UP
 the change in the relation of the partners caused by any partner causing to be
PARTNERSHIP BY ESTOPPEL associated in the carrying on of the business
 when all the members of the existing partnership consent to such representation  it is the point of time the partners cease to carry on the business together
of a partner by estoppel
WINDING UP
RULES AND SITUATIONS:  the process settling business affairs after dissolution
1. if a third person is misled and acts because of such misrepresentation
 the deceiver is a partner by estoppel TERMINATION
 the point in time after all the partnership affairs have been wound up
2. if the partnership consented to such misrepresentation
 partnership liability results RULE ON DISSOLUTION
* on dissolution the partnership is not terminated BUT continues until the winding
3. if the firm had not consented up of partnership affairs is completed
 no partnership liability results BUT the deceiver is considered still as a
“partner by estoppel” with all the obligations but not the rights of a partner *EFFECT on OBLIGATIONS
1. just because a partnership is dissolved this does not necessarily mean that
4. when a person represents himself as a partner of a NON-EXISTENT a partner can evade previous obligations entered into by the partnership
partnership
 NO partnership liability results BUT the deceiver and all persons who 2. dissolution saves the former partners from new obligations to which they
may have aided him in the misrepresentation are still liable have not expressly or impliedly consented UNLESS the same be essential
 liability would be JOINT or PRO-RATA for winding up

* when although there is misrepresentation, if the third party is not deceived, the
doctrine of estoppel does not apply
BURDEN of PROOF
 the creditor or whoever alleges the existence of a partner or partnership by
estoppel has the burden of proving the existence of the MISREPRESENTATION AND
INNOCENT RELIANCE on it
ENTRY OF A NEW PARTNER into an EXISTING PARTNERSHIP
*CAUSES OF DISSOLUTION
1. without VIOLATION of the AGREEMENT between the partners
A) TERMINATION of the DEFINITE TERM or PARTICULAR
UNDERTAKING
B) EXPRESS WILL or ANY PARTY in GOOD FAITH (PARTNERSHIP by
WILL)
C) EXPRESS WILL of ALL of the PARTNERS except those who have
(interests) ASSIGNED or whose interests have been (separate
debts) CHARGED
 11
D) EXPULSION in good faith of a member DISSOLUTION CAUSED by A-I-D
2. in CONTRAVENTION of the agreement between the partners RULE: (STILL BOUND) – as to each partners
 by the EXPRESS WILL of ANY PARTNER at any time
3. UNLAWFULNESS of the BUSINESS G.R. where the dissolution is caused by the ACT, INSOLVENCY or DEATH of a
4. LOSS – thing promised partner, each partner is liable to his co-partners for his share of any liability created
A) SPECIFIC THING – PERISHES before delivery by any partner acting for the partnership
B) USUFRUCT is lost EXCEPT if ownership had been transferred to the EXCEPTION: - individual liabilities
partnership 1. if dissolution by ACT
5. DEATH of ANY partner  the partner acting for the partnership HAD KNOWLEDGE of the dissolution
6. INSOLVENCY of any partner or of the partnership OR
7. CIVIL INTERDICTION of any partner 2. if dissolution by DEATH or INSOLVENCY
8. DECREE of COURT  the partner acting for the partnership HAD “knowledge or notice” of the
death or insolvency
*** if the cause is not justified or no cause was given, the withdrawing partner is
liable for DAMAGES BUT in no case can he be compelled to remain in the firm * only the partner acting assumes liability

* the insolvency need not be judicially declared, it is enough that the assets be
less than the liabilities
DISSOLUTION by JUDICIAL DECREE WHEN ALOWED:
(I, UM, I-PP, C, PB, BL, OC)
1. partner declared “insane” in any judicial proceeding or is shown to be of
UNSOUND MIND
2. partner becomes INCAPABLE of performing his part of the partnership
contract
3. partner has been guilty of such CONDUCT as tends to affect prejudicially
the business
4. partners PERSISTENT BREACH of agreement
5. the business of the partnership can only be denied on at a loss
6. other circumstances which render dissolution equitable
*AFTER DISSOLUTION, a partner can still “bind” the PARTNERSHIP
(WU, UT, TB)
1. By any ACT appropriate for WINDING UP partnership affairs
2. By COMPLETING transactions UNFINISHED at dissolution
3. By any TRANSACTION which could bind the partnership IF dissolution had
not taken place PROVIDED the other party is:
A) PREVIOUS CREDITOR and had NO KNOWLEDGE or NOTICE of the
dissolution OR
B) NOT a PREVIOUS CREDITOR, had NO KNOWLEDGE or NOTICE and
dissolution was NOT PUBLISHED
* if there was publication of the dissolution it is presumed he already knows,
regardless of actual knowledge on non knowledge

IN CASE OF PURCHASER of PARTNERS INTEREST WHEN is the PARTNERSHIP NOT BOUND

1. after the termination of the specified term or particular undertaking 1. new business with third parties who are in bad faith
2. AT ANY TIME, if the partnership was a “partnership at will” when the 2. firm dissolved because UNLAWFUL except for acts of winding up
interest was assigned or when the charging ordered was issued 3. partner who acted became INSOLVENT
4. partner not authorized to wind up EXCEPT if customer in good faith
* proof as to the existence of the firm must first be given
* if after dissolution, if a stranger will represent himself as a partner although he
* even if a partner has not yet been previously declared insane by the court, is not one he will be a partner by estoppel
dissolution may be asked, as long as the insanity is duly proved in court
RULE:
* in a suit for dissolution, the court may appoint a RECEIVER at its discretion * the dissolution of the partnership does not itself discharge the “existing liability”
of any partner
 NEED for an AGREEMENT BETWEEN
1. partner concerned
EFFECTS OF DISSOLUTION 2. other partners
RULE: 3. creditors
* when the firm is dissolved, a partner can no longer bind the partnership

* a dissolved partnership still has the personality for the winding up of its affairs RULE:
 the firm is still allowed to collect previously acquired credits * the INDIVIDUAL PROPERTY of a DECEASED PARTNER shall be liable for all
 the firm is still bound to pay of its debts obligations of the partnership incurred while he was a partner BUT subject to prior
payments of his separate debts
 12
 CAPITAL
* IF there be a NOVATION of the OLD PARTNERSHIP DEBTS and such novation is  ADVANCES
done after one of the partners has “retired” and without the consent of such partner 2. Right of SUBROGATION – as creditor
 said partner cannot be held liable by creditors who made the novation with 3. Right of INDEMNIFICATION
knowledge of the firms dissolution
*ORDER of PAYMENT in WINDING-UP of PARTNERSHIP LIABILITIES
EXTRAJUDUCIAL AND JUDICIAL WINDING-UP GENERAL PARTNERSHIP: [C, R, C, P]
1. those owing to “creditors” other than partners
EXTRAJUDICIAL: 2. those owing to “partners” other than for capital or profits –
1. by the partners who have not wrongfully dissolved the partnership REIMBURSEMENTS
2. by the legal representative of the last surviving partners 3. those owing to partners in respect to CAPITAL
4. those owing to partners in respect to PROFITS
JUDICIAL:
 under the control and direction of the court, upon proper cause that is shown to * IF the partnership assets are insufficient, the other partners must contribute
the court more money or property

* profits that will actually enter the firm after dissolution as a consequence of PREFERENCE with RESPECT to the ASSETS
transactions already made before dissolution are included because they are 1. regarding partnership property
considered as profits existing at the time of dissolution  partnership creditors have preference

* any other income earned after the time, like interest or dividends on stock 2. regarding individual properties of partners
owned by the partners or partnership at the time of dissolution should not be  individual creditors are preferred
distributed as profits BUT as merely additional income to the capital

BETTER RIGHTS of INNOCENT PARTNERS RULE if PARTNER is INSOLVENT

 innocent partners have better rights than guilty partners and that the guilty - How INDIVIDUAL PROPERTY is DISTRIBUTED
partners are required to indemnify for the damages caused
ORDER OF PREFERENCE:
1. INDIVIDUAL or SEPARATE CREDITORS
* RIGHT of INOCENT PARTNERS TO CONTINUE the BUSINESS 2. PARTNERSHIP CREDITORS
 in essence this is a new partnership 3. those owing to other partners by way of contribution
 can use the same firm name
 can ask new members to join *When creditors of the dissolved partnership are also creditors of the
BUT shall: for protection of guilty partners partnership continuing business:
1. give a BOND approved by the court 1. new partner is admitted without liquidation
2. to PAY guilty partners his interests at the time of dissolution MINUS 2. a partner retires and assigns his rights IF the business is continued without
DAMAGES liquidation of the partnership affairs
3. all but one partner retire without liquidation
* a guilty partner who is EXCLUDED will be indemnified against all present or 4. when all partner assign their right to a person who will assume their debt
future partnership liabilities 5. after wrongful dissolution, remaining partners continue the business
without liquidation
RIGHT TO GET CASH 6. when partner expelled and remaining partners continue the business
 in case on non-continuance of the business, the interest of the partner should if without liquidation
he desires be given in cash
 assets may be sold * liability of third person becoming a partner in the partnership continuing the
business to the creditors of the dissolved partnership shall be satisfied out of the
 a guilty partner, in ascertaining the value of his interest is not entitled to a partnership property ONLY
proportional share of the value of GOOD WIL
G.R. – when a partner retires, he is entitled what is due him after liquidation BUT no
liquidation is needed if there is already a settlement at the date of dissolution
RIGHTS OF INNOCENT PARTNERS IN CASE of RESCISSION based on FRAUD
AND MISREPRESENTATION
1. Right to LIEN or RETENTION  SURPLUS JURISPRUDENCE

BASTIDA vs. MENZI
* articles of association by which 2 or more persons obligate themselves to place
in a common fund any property, industry, or any of these things, in order to obtain
profit, shall be COMMERCIAL
BORJA vs. ADDISON
* a surviving husband may form a partnership with the heirs of the deceased wife
for the management and control of the community property
 BUT in the absence of the formalities prescribed by the Civil Code, knowledge of
the existence of the new partnership or community of property must at least be
brought home to third persons dealing with the surviving husband in regard to the
community real property in order to bind them by the community agreement
KIEL vs. SABERT
* the declarations of one partner, not made in the presence of his co-partner, are
not competent to prove the existence of a partnership between them as against
such partner
* the existence of a partnership cannot be established by general reputation,
rumor or hearsay
EVENGELISTA vs. C.I.R.
* By the contract of partnership 2 or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the
profits among themselves
ESSENTIAL ELEMENTS of a PARTNERSHIP
1. an agreement to CONTRIBUTE money, property, or industry to a COMMON
FUND
2. intent to divide the profits among the contracting parties
* when our internal Revenue Code includes “partnerships” among the entities
subject to the tax on “corporations”, said code which are not necessarily
“partnerships” in the technical sense of the term
* PARTNERSHIPS – includes a SYNDICATE, GROUP, POOL, JOINT VENTURE, or
other unincorporated organization, through or by the means of which any business,
financial operation, or venture is carried on
* a joint venture need not be undertaken in any of the standard forms,
or in conformity with the usual requirements of the law on partnerships, in order
that one could be deemed constituted for purposes of the TAX on corporations
PASCUAL vs. C.I.R.
* co-ownership or co-possession does not itself establish a partnership, whether
such co-owners or co-possessors do or do not share any profits made by the use of
the property
* the sharing of gross returns does not itself establish a partnership, within the
persons sharing them have a joint or common right or interest in any property from
which the returns are derived
13
* aside from the circumstances of profit, the presence of other elements
constituting partnership is necessary, such as:
1. the clear intent to form a partnership
2. the existence of a juridical personality different from that of the individual
partners AND
3. the freedom to transfer or assign any interest in the property by one with
the consent of the others
* an isolated transaction whereby 2 or more persons contribute funds to buy
certain real estate for profit in the absence of other circumstances showing a
contrary intention cannot be considered a partnership
* persons who contribute property or funds for a common enterprise and agree to
share the gross returns of that enterprise in proportion to their contribution, BUT
who severally retain the title to their respective contribution, are not thereby
rendered partners
 they have no common stock or capital and no community of interest as
principal proprietors in the business itself which the proceeds derived
* a joint purchase of land, by two does not constitute a co-partnership in respect
thereto, NOR does an agreement to share the profits and losses on the sale of land
create a partnership
* in order to constitute a PARTNERSHIP INTER SESE there must be:
A) an intent to form the same
B) generally participating in both profits and losses AND
C) such a community of interest, as far as third persons are
concerned as enables each party to make a contract, manage the
business, and dispose of the whole property
* the common ownership of property does not itself create a partnership between
the owners, though they may use it for the purpose of making gains AND they may
without becoming partners, agree among themselves as to the management and
use of such property and the application of the proceeds therefrom
* the sharing of returns does not in itself establish a partnership within the
persons sharing therein have a joint or common right or interest in the property
 there must be:
1. clear intent to form a partnership
2. the existence of a juridical personality different from the individual partners
AND
3. the freedom of each party to transfer or assign the whole property
DUTERTE vs. RALLOS
* an agreement between 2 persons to operate a cockpit, by which one is to
contribute his services and the other to provide the capital, the profits to be divided
between them, constitutes a partnership
DELUAO vs. CASTEEL
 14
* a contract of partnership to exploit a fishpond pending its award to any qualified
party or applicant is VALID BUT a contract of partnership to divide the fishpond after
such award is ILLEGAL

* one of the causes of dissolution is – any event which make it unlawful for the
business of the partnership to be carried on or for the members to carry it on in
partnership

C.I.R. vs. SUTER

* a UNIVERSAL PARTNERSHIP requires either that the object of the association
be:
1. all the present property of the partners as contributed by them to the
common fund OR
2. all that the partners may acquire by their industry or work during the
existence of the partnership

* the subsequent marriage of the partners could not operate to dissolve the
partnership because it is not one of the causes provided for dissolution by law with
regards to limited partnerships

* partnership has distinct and separate personality from that of its partners

* a husband and wife may not enter into a contract of general co-partnership/
UNIVERSAL partnership

ACOAD vs. MABATO

* a partnership may be constituted in any form EXCEPT where immovable
property or real rights are contributed thereto, in which case a public instrument
shall be necessary

* A CONTRACT of PARTNERSHIP is VOID

 whenever immovable property is contributed thereto, if “inventory” of
said property is not made, signed by the parties and attached to the public
instrument

EVANGELISTA vs. ABAD SANTOS

* an INDUSTRIAL PARTNER cannot engage in BUSINESS FOR HIMSELF, UNLESS
the partnership expressly permits him to do so
 IF HE SHOULD DO SO, the capitalist partners may either:
1. EXCLUDE him from the firm OR
2. AVAIL themselves of the benefits which he may have obtained in violation
of this provision
 with a right to DAMAGES in either case

* the prohibition against an industrial partner engaging in business for himself

seeks to prevent any conflict of interest between the industrial partner and the
partnership and to ensure faithful compliance by said partner with his prostation