PARTNERSHIP and TRUSR BAR EXAM

Partnership a. 'o. A corpor

(2009 Bar Question
 TRUE or FALSE.
FALSE. An oral partnership is valid.
SU!!ESTE" ANS#ER$
 TRUE. Partnership
Partnership isis a consensual
consensual contract,
hence, it is valid even though not in writing.
AN%THER SU!!ESTE" ANS#ER$
 TRUE. An oral
oral contract of
of partnership
partnership is valid
even though not in writing. However, if it
involves contriution of an i!!ovale
propert" or a real right, an oral contract of
partnership
partnersh ip is void. #n such a case, the
contract of partnership to e valid, !ust e
in a pulic instru!ent $Art. %&&%, '((), and
the inventor" of said propert" signed " the
parties !ust e attached to said pulic
instru!ent $Art. %&&*, '((.).
AN%THER SU!!ESTE" ANS#ER$
 TRUE. Partnership
Partnership is
is a consensual
consensual contract,
hence, it is valid even though not in writing.
 The oral contract
contract of partnership
partnership is also
also valid
even if an i!!ovale propert" or real right is
contriuted thereto. +hile the law in such a
case, reuires the partnership to e in a
pulic docu!ent, the law does not e-pressl"
declare the contract void if not e-ecuted in
the reuired for! $Article %/01&2, '((). And
there eing nothing in the law fro! which it
can e inferred that the said reuire!ent is
prohiitor"
prohiitor" or !andator" $Article 3, '((),
the said oral contract of partnership !ust
also e valid. The interested part" !a"
si!pl" reuire
reuire the contract to e !ade into a
pulic docu!ent in order to co!pl" with the
reuired for! $Article %*3&, '((). The
purpose of the law in reuiring a pulic
docu!ent is si!pl" to notif" the pulic aout
the contriution.
contriution.
corporatio
ation
n is !ana
!anaged
ged "
" its
oard of directors. #f the
corporation were
were to eco!e a
partner, co7partners would have
the power to !a8e the corporation
part" to transactions in an irregular
!anner since the partners are not
agents su9ect to the control of the
:oard of ;irectors. :ut a
corporation !a" enter into a <oint
venture with another corporation
as long as the nature of the
venture is in line with the usiness
authori4ed " its charter. $Thdson
& Co., Inc. v. Bolano, 03 Phil. %/=).
. As a gener
general
al rule
rule a corpo
corporat
ration
ion
!a" not for! a general partnership
with another corporation or an
#ndividual ecause a corporation
!a" not e ound " persons who
are neither directors nor o>cers of
the corporatio
corporation.
n.
However, a corporation !a" for! a
general partnership with another
corporation or an individual
provided the following conditions
are !et?
%) The Articles of #ncorporatio
#ncorporationn of
the corporation e-pressl" allows
the corporation to enter into
partnerships@
6) The Articles of Partnership !ust
provide that all partners will
!anage the partnership, and the"
shall e 9ointl" and severall" liale@
and
*) #n case of a foreign corporation,
it !ust e licensed to do usiness
in the Philippines.

(&99' Bar Question c. 'o. A corp

'o. corpora
oratio
tion
n !a"
!a" not
not e a
%. (an two cor
corpora
porations
tions org
organi4
ani4eea general partner ecause the
general partnership under the (ivil principle of !utual agenc" in
(ode of the Philippin
Philippines5
es5 general partnership allowing the
6. (an a corpor
corporatio
ation
n and
and an ind
individu
ividual
al other general partner to ind the
for! a general partnership5 corporation will violate the
corporation law principle that onl"
SU!!ESTE" ANS#ER$ the oard of directors !a" ind the
%. corporation.

Pae ) &
 PARTNERSHIP and TRUSR BAR EXAM
6. 'o, for the sa!e reasons given in the
Answer to 'u!er 6 aove.
(&9** Bar Question
;istinguish co7ownership fro! partnership.
SU!!ESTE" ANS#ER$
(o7ownership is distinguished fro! an
ordinar" partnership in the following wa"s?
$%) As to creation? +hereas co7ownership
!a" e created " law, contract,
succession, fortuitous event, or
occupanc", partnership is alwa"s
created " contract.
$6) As to purpose? +hereas the purpose of  answer.
co7ownership is the co!!on
en9o"!ent of the thing or right owned
in co!!on, the purpose of a
partnership is to otain prots.
$*) As to personalit"? +hereas a co7
ownership has no 9uridical personalit"
which is separate and distinct fro!
that of the owners, a partnership has.
$) As to duration? +hereas an agree!ent
not to divide the co!!unit" propert"
for !ore than ten "ears is not allowed
" law such an agree!ent would e
perfectl" valid in the case of
partnerships. This is so, ecause under
the law, there is no li!itation upon the
duration of partnerships.
$3) As to power of !e!ers? +hereas a
co7owner has no power to represent
the co7ownership unless there is an
agree!ent to that eBect, a partner
has the power to represent the
partnership, unless there is a
stipulation to the contrar".
$=) As to eBect of disposition of shares? #f
a co7owner transfers his share to a
third person, the latter eco!es
auto!aticall" a co7owner, ut if a
partner transfers his share to a third
person, the latter does not eco!e a
partner, unless agreed upon " all of
the partners.
$&) As to division of prots? +hereas in co7
ownership the division of the enets
and charges is -ed " law, in a
partnership the division of prots arid
losses !a" e su9ect to the
agree!ent of the partners.
$C) As to eBect of death? +hereas the
death of a co7owner has no eBect
upon the e-istence of the co7
ownership, the death of a partner shall
result in. the dissolution of the
partnership.
Rihts and %+,iations o- Partners
A.on The.se,/es
(20&2 Bar Question
A partner cannot de!and the return of his
share $contriution) during the e-istence of a
partnership. ;o "ou agree5 E-plain "our
SU!!ESTE" ANS#ER$
 Des, he is not entitled to the return of his
contriution to the capital of the partnership,
ut onl" to the net prots fro! the
partnership usiness during the life of the
partnership period. #f he is a li!ited partner,
however, he !a" as8 for the return of his
contriutions as provided in Art %C3= and
%C3&, (ivil (ode.
(20&0 Bar Question
A, :, and ( entered into a partnership to
operate a restaurant usiness. +hen the
restaurant had gone past rea87even stage
and started to ga!er considerale prots, (
died. A and : continued the usiness without
dissolving the partnership. The" in fact
opened a ranch of the restaurant, incurring
oligations in the process. (reditors started
de!anding for the pa"!ent of their
oligations.
+ho are liale for the settle!ent of the
partnerships oligations5 E-plain5
SU!!ESTE" ANS#ER$
 The two re!aining partners, A and :, are
liale. +hen an" partner dies and the
usiness is continued without an" settle!ent
of accounts as etween hi! or his estate,
the surviving partners are held liale for
continuing the usiness despite the death of
( (Articles 1841, 1785, par. 2, and 1833 of
the e! Civil Code".
Pae ) 2
 PARTNERSHIP and TRUSR BAR EXAM
(200& Bar Question
 <oe and Rud" for!ed a partnership to
operate a car repair shop in ue4on (it". <oe
provided the capital while Rud" contriuted
his laor and industr". Gn one side of their
shop, <oe opened and operated a coBee
shop, while on the other side, Rud" put up a
car accessories store. a" the" engage in
such separate usinesses5 +h"5
SU!!ESTE" ANS#ER$
 <oe, the capitalist partner, !a" engage in the
restaurant usiness ecause it is not the
sa!e 8ind of usiness the partnership is
engaged in. Gn the other hand, Rud" !a"
not engage in an" other usiness unless
their partnership e-pressl" per!its hi! to do
so ecause as an industrial partner he has to
devote his full ti!e to the usiness of the
partnership $Art. %&C0, (().
(&99* Bar Question
;ielle, Iarlo and Una are general partners in
a !erchandising r!. Having contriuted
eual a!ounts to the capital, the" also agree
on eual distriution of whatever net prot is
reali4ed per scal period. After two "ears of
operation, however, Una conve"s her whole
interest in the partnership to <ustine, without
the 8nowledge and consent of ;ielle and
IaJo.
%. #s the partnership dissolved5
6. +hat are the rights of <ustine, if an",
should she desire to participate in the
!anage!ent of the partnership and in the
distriution of a net prot of P*=/.///.//
which was reali4ed after her purchase of
Unas interest5
SU!!ESTE" ANS#ER$
%. 'o, a conve"ance " a partner of his
whole interest in a partnership does not of
itself dissolve the partnership in the asence
of an agree!ent. $Art. %C%*, (ivil (ode)
6. <ustine cannot interfere or participate in
the !anage!ent or ad!inistration of the
partnership usiness or aBairs. She !a",
however, receive the net prots to which Una
would have otherwise een entitled. #n this
case, P%6/,/// $Art. %C%*, (ivil (ode)
(&992 Bar Question
+, K, D and  organi4ed a general
partnership with + and K as industrial
partners and D and  as capitalist partners. D
contriuted P3/.///.// and  contriuted
P6/.///.// to the co!!on fund. :" a
unani!ous vote of the partners, + and K
were appointed !anaging partners, without
an" specication of their respective powers
and duties.
A applied for the position of Secretar" and :
applied for the position of Accountant of the
partnership.
 The hiring of A was decided upon " + and
K, ut was opposed " D and .
 The hiring of : was decided upon " + and
, ut was opposed " K and D.
+ho of the applicants should e hired " the
partnership5 E-plain and give "our reasons.
SU!!ESTE" ANS#ER$
A should e hired as Secretar". The decision
for the hiring of A prevails ecause it is an
act of ad!inistration which can e perfor!ed
" the dul" appointed !anaging partners, +
and K.
: cannot e hired, ecause in case of a tie in
the decision of the !anaging partner, the
deadloc8 !ust e decided " the partners
owning the controlling interest. #n this case,
the opposition of K and D prevails ecause D
owns the controlling interest $Art. %C/%, (ivil
(ode).
(&9*9 Bar Question
MKN used his savings fro! his salaries
a!ounting to a little !ore than P6,/// as
capital in estalishing a restaurant. MDN gave
the a!ount of P,/// to MKN as Mnancial
assistanceN with the understanding that MDN
would e entitled to 66O of the annual
prots derived fro! the operation of the
restaurant. After the lapse of 66 "ears, MDN
led a case de!anding his share in the said
prots. MKN denied that there was a
partnership and raised the issue of
prescription as MDN did not assert his rights
an"ti!e within ten $%/) "ears fro! the start
Pae ) 
 PARTNERSHIP and TRUSR BAR EXAM
of the operation of the restaurant. #s MDN a
partner of MKN in the usiness5 +h"5 +hat is
the nature of the right to de!and ones
share in the prots of a partnership5 ;oes
this right prescrie5
SU!!ESTE" ANS#ER$
 Des, ecause there is an agree!ent to
contriute to a co!!on fund and an intent
to divide prots. #t is founded upon an
e-press trust. #t is i!prescriptile unless
repudiated.
A1TERNATIE ANS#ER$
'o, MDN is not a partner ecause the a!ount
is e-tended in the for! of a nancial
assistance arid therefore it is a loan, and the
!ere sharing of prots does not estalish a
partnership. The right is founded upon a
contract of loan where" the orrower is
ound to pa" principal and interest li8e all
ordinar" oligations. Des, his right prescries
in si- or ten "ears depending upon whether
the contract is oral or written.
%+,iations o- Partnership3Partners to
Third Persons
(20&0 Bar Question
A, :, and ( entered into a partnership to
operate a restaurant usiness. +hen the
restaurant had gone past rea87even stage
and started to ga!er considerale prots, (
died. A and : continued the usiness without
dissolving the partnership. The" in fact
opened a ranch of the restaurant, incurring
oligations in the process. (reditors started
de!anding for the pa"!ent of their
oligations.
+hat are the creditors recourses5 E-plain.
SU!!ESTE" ANS#ER$
(reditors can le the appropriate actions, for
instance, an action for the collection of su!
of !one" against the Mpartnership at willN
and if there are no su>cient funds, the
creditors !a" go after the private properties
of Aand : (Article 181#,e! Civil Code".
(reditors !a" also sue the estate of (. The
estate is not e-cused fro! the liailities of
the partnership even if ( is dead alread" ut
onl" up to the ti!e that he re!ained a
partner $Article %C60, %C*3, par. 6@ '((,
$estate %state of ota v. 'erra, & Phil. =
1%0632). However, the liailit" of (s
individual propert" shall e su9ect rst to
the pa"!ent of his separate dets (Article
1835,e! Civil (ode).
(&99 Bar Question
A, : and ( for!ed a partnership for the
purpose of contracting with the Qovern!ent
in the construction of one of its ridges. Gn
 <une */, %006, after co!pletion of the
pro9ect, the ridge was turned over " the
partners to the Qovern!ent. Gn August */,
%006, ;. a supplier of !aterials used in the
pro9ect sued A for collection of the
indetedness to hi!. A !oved to dis!iss the
co!plaint against hi! on the ground that it
was the A:( partnership that is liale for the
det. ; replied that A:( partnership was
dissolved upon co!pletion of the pro9ect for
which purpose the partnership was for!ed.
+ill "ou dis!iss the co!plaint against : if
"ou were the 9udge5
SU!!ESTE" ANS#ER$
As <udge. # would not dis!iss the co!plaint
against A ecause A is still liale as a general
partner for his pro rata share of %* $Art.
%C%=, (. (.). ;issolution of a partnership
caused " the ter!ination of the particular
underta8ing specied in the agree!ent does
not e-tinguish oligations, which !ust e
liuidated during the Mwinding up of the
partnership aBairs $Articles %C60 and %C*/,
par. %7a, (ivil (ode).
"isso,ution
(20&0 Bar Question
A, :, and ( entered into a partnership to
operate a restaurant usiness. +hen the
restaurant had gone past rea87even stage
and started to ga!er considerale prots, (
died. A and : continued the usiness without
dissolving the partnership. The" in fact
opened a ranch of the restaurant, incurring
oligations in the process. (reditors started
de!anding for the pa"!ent of their
oligations.
Pae ) '
 PARTNERSHIP and TRUSR BAR EXAM
A. +ho are liale for the settle!ent of the
partnerships oligations5 E-plain5
:. +hat are the creditors recourses5
E-plain.
SU!!ESTE" ANS#ER$
A. The two re!aining partners, A and :, are
liale. +hen an" partner dies and the
usiness is continued without an" settle!ent
of accounts as etween hi! or his estate,
the surviving partners are held liale for
continuing the usiness despite the death of
( (Articles 1841, 1785, par. 2, and 1833 of
the e! Civil Code".
:. (reditors can le the appropriate actions,
for instance, an action for the collection of
su! of !one" against the Mpartnership at
willN and if there are no su>cient funds, the
creditors !a" go after the private properties
of A and : (Article 181#, e! Civil Code".
(reditors !a" also sue the estate of (. The
estate is not e-cused fro! the liailities of
the partnership even if ( is dead alread" ut
onl" up to the ti!e that he re!ained a
partner $Article %C60, %C*3, par. 6@ '((,
$estate %state of ota v. 'erra, & Phil. =
1%0632). However, the liailit" of (s
individual propert" shall e su9ect rst to
the pa"!ent of his separate dets (Article
1835, e! Civil (ode).
(&994 Bar Question
Stating rieJ" the thesis to support "our
answer to each of the following cases, will
the death  of a partner ter!inate the
partnership5
SU!!ESTE" ANS#ER$
 Des. The death of a partner will ter!inate the
partnership, " e-press provision of par. 3,
Art. %C*/ of the (ivil (ode.
(&995 Bar Question
Pauline, Patricia and Priscilla for!ed a
usiness partnership for the purpose of
engaging in neon advertising for a ter! of
ve $3) "ears. Pauline suseuentl" assigned
to Philip her interest in the partnership.
+hen Patricia and Priscilla learned of the
assign!ent, the" decided to dissolve the
partnership efore the e-piration of its ter!
as the" had an unproductive usiness
relationship with Philip in the past. Gn the
other hand, unaware of the !ove of Patricia
and Priscilla ut sensing their negative
reaction to his acuisition of Paulines
interest, Philip si!ultaneousl" petitioned for
the dissolution of the partnership.
%. #s the dissolution done " Patricia and
Priscilla without the consent of Pauline or
Philip valid5 E-plain.
6. ;oes Philip have an" right to petition for
the dissolution of the partnership efore the
e-piration of its specied ter!5 E-plain.
SU!!ESTE" ANS#ER$
%. Under Art. %C*/ $%) $c) of the '((, the
dissolution " Patricia and Priscilla is valid
and did not violate the contract of
partnership even though Pauline and Philip
did not consent thereto. The consent of
Pauline is not necessar" ecause she had
alread" assigned her interest to Philip, The
consent of Philip is not also necessar"
ecause the assign!ent to hi! of Paulines
interest did not !a8e hi! a partner, under
Art. %C%* of the '((.
A1TERNATIE ANS#ER$
#nterpreting Art. %C*/ $%) $c) to !ean that if
one of the partners had assigned his interest
on the partnership to another the re!aining
partners !a" not dissolve the partnership,
the dissolution " Patricia and Priscilla
without the consent of Pauline or Philip is not
valid.
6. 'o, Philip has no right to petition for
dissolution ecause he does not have the
standing of a partner $Art. %C%* '(().
(&99 Bar Question
A, : and ( for!ed a partnership for the
purpose of contracting with the Qovern!ent
in the construction of one of its ridges. Gn
 <une */, %006, after co!pletion of the
pro9ect, the ridge was turned over " the
partners to the Qovern!ent. Gn August */,
%006, ;. a supplier of !aterials used in the
pro9ect sued A for collection of the
indetedness to hi!. A !oved to dis!iss the
Pae ) 5
 PARTNERSHIP and TRUSR BAR EXAM
co!plaint against hi! on the ground that it
was the A:( partnership that is liale for the
det. ; replied that A:( partnership was
dissolved upon co!pletion of the pro9ect for
which purpose the partnership was for!ed.
+ill "ou dis!iss the co!plaint against : if
"ou were the 9udge5
SU!!ESTE" ANS#ER$
As <udge. # would not dis!iss the co!plaint
against A ecause A is still liale as a general
partner for his pro rata share of %* $Art.
%C%=, (. (.). ;issolution of a partnership
caused " the ter!ination of the particular
underta8ing specied in the agree!ent does
not e-tinguish oligations, which !ust e
liuidated during the Mwinding up of the
partnership aBairs $Articles %C60 and %C*/,
par. %7a, (ivil (ode).
(&9*4 Bar Question
 To!as, Rene and <ose entered into a
partnership under the r! na!e Manila
Lu!er.N Suseuentl", upon !utual
agree!ent, To!as withdrew fro! the
partnership and the partnership was
dissolved. However, the re!aining partners,
Rene and <ose, did not ter!inate the
usiness of Manila Lu!er.N #nstead of
winding up the usiness of the partnership
and liuidating its assets, Rene and <ose
continued the usiness in the na!e of
Manila Lu!erN apparentl" without
o9ection fro! To!as. The withdrawal of
 To!as fro! the partnership was not
pulished in the newspapers.
(ould To!as e held liale for an" oligation
or indetedness Rene and <ose !ight incur
while doing usiness in the na!e of Manila
Lu!erN after his withdrawal fro! the
partnership5 E-plain.
SU!!ESTE" ANS#ER$
 Des. To!as can e held liale under the
doctrine of estoppel. :ut as regards the
parties a!ong the!selves, onl" Rene and
 <ose are liale. To!as cannot e held liale
since there was no proper notication or
pulication.
#n the event that To!as is !ade to pa" the
liailit" to third person, he has the right to
see8 rei!urse!ent fro! Rene and <ose
$Articles %C*& to %C/@ Qouiola" vs. S"cip, 0
S(RA ==*).
1i.ited Partnership
(&99' Bar Question
(an a husand and wife for! a li!ited
partnership to engage in real estate
usiness, with the wife eing a li!ited
partner5
SU!!ESTE" ANS#ER$
a) Des. The (ivil (ode prohiits a husand
and wife fro! constituting a universal
partnership. Since a li!ited partnership is
not a universal partnership, a husand and
wife !a" validl" for! one.
) Des. +hile spouses cannot enter into a
universal partnership, the" can enter into a
li!ited partnership or e !e!ers thereof
$(#R v. 'ter, et al., 6& S(RA %36).
20&&620&' Bar Questions
20&' Bar Question
 Ti!oth" e-ecuted a e!orandu! of
Agree!ent $GA) with Iristopher setting up
a usiness venture covering three $*)
fastfood stores 8nown as Hungr" Toppings
that will e estalished at all Uno, all ;os,
and all Tres.
 The pertinent provisions of the GA
provides?
%. Ti!oth" shall e considered a
partner with thirt" percent $*/O)
share in all of the stores to e set up
" Iristopher@
6. The proceeds of the usiness, after
deducting e-penses, shall e used to
pa" the principal a!ount of
Pae ) 7
 PARTNERSHIP and TRUSR BAR EXAM
P3//,///.// and the interest therein
which is to e co!puted ased on the
an8 rate, representing the an8 loan
secured " Ti!oth"@
*. The net prots, if an", after
deducting the e-penses and pa"!ents
of the principal and interest shall e
divided as follows? sevent" percent
$&/O) for Iristopher and thirt" percent
$*/O) for Ti!oth"@
. Iristopher shall have a free hand in
running the usiness without an"
interference fro! Ti!oth", his agents,
representatives, or assigns , and
should such interference happen,
Iristopher has the right to u" ac8
the share of Ti!oth" less the a!ounts
alread" paid on the principal and to
dissolve the GA@ and
3. Iristopher shall su!it his !onthl"
sales report in connection with the
usiness to Ti!oth".
+hat is the contractual relationship etween
 Ti!oth" and Iristopher5
SU!!ESTE" ANS#ER$
 The contractual relationship etween
 Ti!oth" and Iristopher is that of
partnership. Article %&=& of the (ivil (ode
provides that under a contract of
partnership, two or !ore persons ind
the!selves to contriute !one", propert" or
industr" to a co!!on fund, with the
intention of dividing the prots a!ong
the!sleves. oreover, article %&=0 of the
(ivil (ode states in part that receipt " a
person of a share of the prots of a usiness
is pri!a facie evidence that he is a partner in
the usiness, provided that the said prots
were not received in pa"!ent for det, as
wages, annuit", interest on a loan, or as
consideration for a sale. #n this case, the
GA etween Ti!oth" and Iristopher
stipulated that the" shall share in the prots
of the usiness */7&/. The contriutions of
the partners include a an8 loan otained "
 Ti!oth" and industr" in the for! of
!anaging the properties " Iristopher. Thus,
the reuisites for estalishing a contract of
partnership are co!plied with.
$6/%* :ar uestions)
#n 6//3, L, , ', / and P for!ed a
partnership. L,  and ' were capitalist
partners who contriuted P3//,/// each,
while /, a li!ited partner, contriuted P% ,
///,///. P 9oined as an industrial partner,
contriuting onl" his services. The Articles of
Partnership, registered with the Securities
and E-change (o!!ission, designated L and
/ as !anaging partners@ L was liale onl" to
the e-tent of his capital contriution@ and P
was not liale for losses.
#n 6//=, the partnership earned a net prot
of PC//,///. #n the sa!e "ear, P engaged in
a diBerent usiness with the consent of all
the partners. However, in 6//&, the
partnership incurred a net loss of P3//,///.
#n 6//C,the partners dissolved the
partnership. The proceeds of the sale of
partnership assets were insu>cient to settle
its oligation. After liuidation, the
partnership had an unpaid liailit"
ofP*//,///.
$l) Assu!ing that the 9ust and euitale
share of the industrial partner, P, in the prot
in 6//= a!ounted to P% //,///, how !uch is
the share of /, a li!ited partner, in the
PC//,/// net prot5
$A) P%=/,///.
$:) P%&3,///.
$() P6C/,///.
$;) P6//,///.
$E) 'one of the aove.
SU!!ESTE" ANS#ER$
$() P6C/,///. First, deduct the share of P
fro! the prots. PC//,/// less P%//,/// is
P&//,///. 'e-t, get the share of G "
following the proportion that the shares of L,
, ', G is %?%?%?6, respectivel".
Pae ) 4
 PARTNERSHIP and TRUSR BAR EXAM
$##) #n 6//&, how !uch is the share of /, a
li!ited partner, in the net loss of P3//,///5
$A) P /.
$:) P% //,///.
$() P%63,///.
$;) P6//,///.
$E) 'one of the aove.
SU!!ESTE" ANS#ER$
$;) P6//,/// A li!ited partner shall not
eco!e liale a s a general partner unless,
in addition to the e-ercise of his rights and
powers as a li!ited partner, he ta8es part in
the control of the usiness $Art %0C, (ivil
(ode). #n the asence of stipulation as to
prots and losses, the share of each partner
in the losses shall e proportionate to what
he !a" have contriuted $Art %&0&).
$###) (an the partnership creditors hold L, /
and Pliale after all the assets of the
partnership are e-hausted5
$A) Des. The stipulation e-e!pting P fro!
losses is valid onl" a!ong the partners. L is
liale ecause the agree!ent li!iting his
liailit" to his capital contriution is not valid
insofar as the creditors are concerned.
Having ta8en part in the !anage!ent of the
partnership, / is liale as capitalist partner.
$:) 'o. P is not liale ecause there is a valid
stipulation e-e!pting hi! fro! losses. Since
the other partners allowed hi! to engage in
an outside usiness activit", the stipulation
asolving P fro! liailit" is valid. For /, it is
asic that a li!ited partner is liale onl" up
to the e-tent of his capital contriution.
$() Des. The stipulations e-e!pting P and L
fro! losses are not inding upon the
creditors. / is li8ewise liale ecause the
partnership was not for!ed in accordance
with the reuire!ents of a li!ited
partnership.
$;) 'o. The (ivil (ode allows the partners to
stipulate that a partner shall not e liale for
losses. The registration of the Articles of
Partnership e!od"ing such stipulations
serves as constructive notice to the
partnership creditors.
$E) 'one of the aove is co!pletel"
accurate.
SU!!ESTE" ANS#ER$
$E) 'one of the aove is co!pletel"
accurate.
20&& Bar Questions
 The liailit" of the partners, including
industrial partners for partnership contracts
entered into in its na!e and for its account,
when all partnership assets have een
e-hausted is
$A) Pro7rata.
$:) <oint.
$() Solidar".
$;) oluntar".
 <anice and <ennifer are sisters. <anice sued
 <ennifer and Laura, <ennifers usiness
partner for recover" of propert" with
da!ages. The co!plaint did not allege that
 <anice e-erted earnest eBorts to co!e to a
co!pro!ise with the defendants and that
such eBorts failed. The 9udge dis!issed the
co!plaint outright for failure to co!pl" with
a condition precedent. #s the dis!issal in
order5
$A) 'o, since Laura is a stranger to the
sisters, <anice has no !oral oligation to
settle with her.
$:) Des, since court should pro!ote a!icale
settle!ent a!ong relatives.
$() Des, since !e!ers of the sa!e fa!il",
as parties to the suit, are reuired to e-ert
earnest eBorts to settle their disputes efore
co!ing to court.
$;) 'o, the fa!il" council, which would
ordinaril" !ediate the dispute, has een
eli!inated under the Fa!il" (ode.
Pae ) *
 PARTNERSHIP and TRUSR BAR EXAM
Trust
"istinuish +et8een epress trust and
i.p,ied trust (&99:
Ans8er$
E-press trust and i!plied trust !a" e
distinguished fro! each other in the
following wa"s?
$%) Gur 'ew (ivil (ode denes an
e-press trust as one created " the
intention of the trustor or of the
parties, and an i!plied trust as one
that co!es into eing " operation
of law.
$6) E-press trusts are those created "
the direct and positive acts of the
parties, " so!e writing or deed or
will or " words evidencing an
intention to create a trust. Gn the
other hand, i!plied trusts are
those which, without eing
e-pressed, are deducile fro! the
nature of the transaction "
operation of law as !atters of
euit", in dependentl" of the
particular intention of the parties.
$*) Thus, if the intention to estalish a
trust is clear, the trust is e-press@ if  e-press trust which does not prescrie as
the intent to estalish a trust is to
e ta8en fro! circu!stances or
other !atters indicative of such
intent, then the trust is i!plied.
$(ua"ong v. (ua"ong, 6% S(RA
%%06).
$) 'o e-press trust concerning an
i!!ovale or an" interest therein
!a" e proved " parol evidence
$Art.%*, '((.), while the
e-istence of an i!plied trust !a"
e proved " parol evidence
$3) Laches and prescription do not
constitute a ar to enforce an
e-press trust, at least while the
trustee does not openl" repudiate
the trust, and !a8e 8nown such
repudiation to the eneciar",
while laches and prescription !a"
constitute a ar to enforce an
i!plied trust, and no repudiation is
reuired unless there is
conceal!ent of the facts giving rise
to the trust. $Faian v. Faian, 6%
S(RA 6%*).
Epress Trust; Pres<ription (&994
Gn /% <anuar" %0C/, Redentor and Re!edies
entered into an agree!ent " virtue of which
the for!er was to register a parcel of land in
the na!e of Re!edies under the e-plicit
covenant to reconve" the land to Re!igio,
son of Redentor, upon the sons graduation
fro! college. #n %0C%, the land was
registered in the na!e of Re!edies.
Redentor died a "ear later or in %0C6. #n
arch %0C*, Re!igio graduated fro!
college. #n Feruar" %006, Re!igio
accidentall" found a cop" of the docu!ent
so constituting Re!edies as the trustee of
the land. #n a" %00, Re!igio led a case
against Re!edies for the reconve"ance of
the land to hi!. Re!edies, in her answer,
averred that the action alread" prescried.
How should the !atter e decided5
SU!!ESTE" ANS#ER$
 The !atter should e decided in favor of
Re!igio $trustee) ecause the action has not
prescried. The case at ar involves an
long as the" have not een repudiated "
the trustee $;ia4 vs. Qorricho. %/* Phil, 6=%).
I.p,ied Trust (&99*
 <uan and his sister <uana inherited fro! their
!other two parcels of far!land with e-actl"
the sa!e areas. For convenience, the Torrens
certicates of title covering oth lots were
placed in <uans na!e alone. #n %00=, <uan
sold to an innocent purchaser one parcel in
its entiret" without the 8nowledge and
consent of <uana, and wrongfull" 8ept for
hi!self the entire price paid.
%. +hat rights of action, if an", does <uana
have against andor the u"er5
6. Since the two lots have the sa!e area,
suppose <uana Jies a co!plaint to have
herself declared sole owner of the entire
re!aining second lot, contending that her
rother had forfeited his share thereof "
wrongfull" disposing of her undivided share
in the rst lot. +ill the suit prosper5
Pae ) 9
 PARTNERSHIP and TRUSR BAR EXAM
SU!!ESTE" ANS#ER$
%. +hen, for convenience, the Torrens title to
the two parcels of land were placed in <oans
na!e alone, there was created an i!plied
trust $a resulting trust) for the enet of
 <uana with <uan as trustee of one7half
undivided or ideal portion of each of the two
lots. Therefore, <uana can le an action for
da!ages against <oan for having fraudulentl"
sold one of the two parcels which he partl"
held in trust for <uanas enet. <uana !a"
clai! actual or co!pensator" da!age for
the loss of her share in the land@ !oral
da!ages for the !ental anguish, an-iet",
!oral shoc8 and wounded feelings she had
suBered@ e-e!plar" da!age " wa" of
e-a!ple for the co!!on good, and
attorne"s fees.
 <uana has no cause of action against the
u"er who acuired the land for value and in
good faith, rel"ing on the transfer certicate
of title showing that <uan is the registered
owner of the land.
AN%THER ANS#ER$
%. Under Article &= of the (ivil (ode, <uana
can le an action for uieting of title as there
is a cloud in the title to the su9ect real
propert". Second, <uana can also le an
action for da!ages against <uan, ecause
the settled rule is that the proper recourse of  and wounded feelings she had suBered@
the true owner of the propert" who was
pre9udiced and fraudulentl" dispossessed of
the sa!e is to ring an action for da!ages
against those who caused or e!plo"ed the
sa!e. Third, since <uana had the right to her
share in the propert" " wa" of inheritance,
she can de!and the partition of the thing
owned in co!!on, under Article
0 of the (ivil (ode, and as8 that the title
to the re!aining propert" e declared as
e-clusivel" hers.
However, since the far!land was sold to an
innocent purchaser for value, then <uana has
no cause of action against the u"er
consistent with the estalished rule that the
rights of an innocent purchaser for value
!ust e respected and protected
notwithstanding the fraud e!plo"ed " the
seller in securing his title. $Eduarte vs. (A,
63* S(RA *0%)
A""ITI%NA1 ANS#ER$
%. <uana has the right of action to recover $a)
her one half share in the proceeds of the sale
with legal interest thereof, and $) such
da!ages as she !a" e ale to prove as
having een suBered " her, which !a"
include actual or co!pensator" da!ages as
well as !oral and e-e!plar" da!ages due to
the reach of trust and ad faith $#!perial vs.
(A, 630 S(RA =3). Gf course, if the u"er
8new of the co7ownership over the lot he was
u"ing, <uana can see8 $c) reconven"ance of
her one7half share instead ut she !ust
i!plead the u"er as co7defendant and
allege his ad faith in purchasing the entire
lot. Finall", consistent with the ruling in
#!perial us. (A. <uana !a" see8 instead $d) a
declaration that she is now the sole owner of
the entire re!aining lot on the theor" that
 <uan has forfeited his one7half share therein.
A""ITI%NA1 ANS#ER$
%. <uana can le an action for da!ages
against <uan for having fraudulentl" sold one
of the two parcels which he partl" held in
trust for <uanas enet. <uana !a" clai!
actual or co!pensator" da!age for the loss
of her share in the land@ !oral da!ages for
the !ental anguish, an-iet", !oral shoc8
e-e!plar" da!age " wa" of e-a!ple for
the co!!on good, and attorne"s fees. <uana
has no cause of action against the u"er who
acuired the land for value and in good faith,
rel"ing on the transfer certicate showing
that <uan is the registered owner of the land.
SU!!ESTE" ANS#ER$
6. <uanas suit to have herself declared as
sole owner of the entire re!aining area will
not prosper ecause while <uans act in
selling the other lot was wrongful. #t did not
have the legal eBect of forfeiting his share in
the re!aining lot. However, <uana can le an
action against <uan for partition or
ter!ination of the co7ownership with a
pra"er that the lot sold e ad9udicated to
 <uan, and the re!aining lot e ad9udicated
and reconve"ed to her.
Pae ) &0
 PARTNERSHIP and TRUSR BAR EXAM
AN%THER ANS#ER$
6. The suit will prosper, appl"ing the ruling in
#!perial vs. (A cited aove. :oth law and
euit" authori4e such result, said the
Supre!e (ourt.
Strictl" spea8ing, <uanas contention that her
rother had forfeited his share in the second
lot is incorrect. Even if the two lots have the
sa!e area, it does not follow that the" have
the sa!e value. Since the sale of the rst lot
on the Torrens title in the na!e of <uan was
valid, all that <uana !a" recover is the value
of her undivided interest therein, plus
da!ages. #n addition, she can as8 for
partition or reconve"ance of her undivided
interest in the second lot, without pre9udice
to an" agree!ent etween the! that in lieu
of the pa"!ent of the value of <uanas share
in the rst lot and da!ages, the second lot
e reconve"ed to her.
A1TERNATIE ANS#ER$
6. The suit will not prosper, since <uans
wrongful act of poc8eting the entire proceeds
of the sale of the rst lot is not a ground for
divesting hi! of his rights as a co7owner of
the second lot. #ndeed, such wrongdoing "
 <uan does not constitute, for the enet of
 <uana, an" of the !odes of acuiring
ownership under Art. &%6, (ivil (ode.
Trust; I.p,ied Resu,tin Trust (&995
#n %0=/, aureen purchased two lots in a
plush sudivision registering Lot % in her
na!e and Lot 6 in the na!e of her rother
+alter with the latters consent. The idea
was to circu!vent a sudivision polic"
against the acuisition of !ore than one lot
" one u"er. aureen constructed a house
on Lot % with an e-tension on Lot 6 to serve
as a guest house. #n %0C&, +alter who had
suBered serious usiness losses de!anded
that aureen re!ove the e-tension house
since the lot on which the e-tension was
uilt was his propert". #n %006, aureen sued
for the reconve"ance to her of Lot 6
asserting that a resulting trust was created
when she had the lot registered in +alters
na!e even if she paid the purchase price.
+alter opposed the suit arguing that
assu!ing the e-istence of a resulting trust
the action of aureen has alread" prescried
since ten "ears have alread" elapsed fro!
the registration of the title in his na!e.
;ecide. ;iscuss full".
SU!!ESTE" ANS#ER$
 This is a case of an i!plied resulting trust. #f
+alter clai!s to have acuired ownership of
the land " prescription or if he anchors his
defense on e-tinctive prescription, the ten
"ear period !ust e rec8oned fro! %0C&
when he de!anded that aureen re!ove
the e-tension house on Lot 'o. 6 ecause
such de!and a!ounts to an e-press
repudiation of the trust and it was !ade
8nown to aureen. The action for
reconve"ance led in %006 is not "et arred
" prescription. $Spouses Huang v. (ourt of
Appeals, Sept. %*, %00).
Trust "e Son Tort (2004
E-plain the concept of trust de son tort
$constructive trust) and give an e-a!ple.
SU!!ESTE" ANS#ER$
A constructive trust is a trust 'GT created "
an" word or phrase, either e-pressl" or
i!pliedl", evincing a direct intention to
create a trust, ut is one that arises in order
to satisf" the de!ands of 9ustice. #t does not
co!e aout " agree!ent or intention ut
!ainl" operation of law and construed as a
trust against one who, " fraud, duress or
ause of condence, otains or holds the
legal right to propert" which he ought not, in
euit" and good conscience, to hold $Heirs of 
Loren4o Dap v. (A, *&% Phil 36*, %00%). The
following are e-a!ples of constructive trust?
%. Art. %3= '(( which provides? #f propert"
is acuired through !ista8e or fraud, the
person otaining it is, " force of law
considered a trustee of an i!plied trust for
the enet of the person for who! the
propert" co!es. 6. Art %3% '(( which
provides? +hen land passes " succession
through an" person and he causes the legal
title to e put in the na!e of another, a trust
is estalished " i!plication of law for the
enet of the true owner. *. Art %3 '((
which provides? #f an asolute conve"ance
of propert" is !ade in order to secure the
perfor!ance of an oligation of the grantor
Pae ) &&
 PARTNERSHIP and TRUSR BAR EXAM
toward the grantee, a trust " virtue of law is
estalished. #f the fulll!ent of the oligation
is oBered " the grantor when it eco!es
due, he !a" de!and the reconve"ance of
the propert" to hi!. . Art %33 '(( which
provides? +hen an" trustee, guardian or an"
person holding a duciar" relationship uses
trust funds for the purchase of propert" and
causes conve"ance to e !ade to hi! or to
third person, a trust is estalished "
operation of law in favor of the person to
who! the funds elong.
20&&620&' Bar Questions
An action for reconve"ance of a registered
piece of land !a" e rought against the
owner appearing on the title ased on a
clai! that the latter !erel" holds such title
in trust for the plaintiB. The action
prescries, however, within %/ "ears fro!
the registration of the deed or the date of
the issuance of the certicate of title of the
propert" as long as the trust had not een
repudiated. +hat is the e-ception to this %/7
"ear prescriptive period5
$A) +hen the plaintiB had no notice of
the deed or the issuance of the
certicate of title.
$:) +hen the title holder concealed
the !atter fro! the plaintiB.
$() +hen fortuitous circu!stances
prevented the plaintiB fro! ling the
case sooner.
$;) +hen the plaintiB is in possession
of the propert".
Pae ) &2