ALS Partnership Reviewer

7/29/2019 ALS Partnership Reviewer

http://slidepdf.com/reader/full/als-partnership-reviewer 1/19

QuickTime™ and a TIFF (Uncompressed) decompressor

are needed to see this picture.

ATENEO CENTRAL BAR OPERATIONS 2008

Civil LawSUMMER REVIEWER

ILAW ON PARTNERSHIP

CHAPTER 1: GENERAL PROVISIONS

General Professional Partnership (Art.1767,¶2): Two or more persons may also form apartnership for the exercise of a profession.

ELEMENTS OF A PARTNERSHIP:

There shall be a partnership whenever:1. There is a meeting of the minds;2. To form a common fund;3. With intention that profits (and losses) will bedivided among the contracting parties.

ESSENTIAL FEATURES:

1. There must be a VALID CONTRACT.

2. The parties must have LEGAL CAPACITY

to enter into the contract.

3. There must be a mutual contribution of

money, property, or industry to aCOMMON FUND.

4. There must be a LAWFUL OBJECT.

5. The purpose or primary purpose must be to

obtain PROFITS and DIVIDE the sameamong the parties.

• It is also required that the articles

of partnership must NOT be kept SECRETamong the members; otherwise, the associationshall have no legal personality and shall begoverned by the provisions on CO-OWNERSHIP(Art. 1775).

• "kept secret among the

members" = secrecy directed not to third

persons but to some of the partners• this does not mean that therecould be no contractual relations amongstthe parties; there is only no partnership orassociation with distinct legal personality

CHARACTERISTICS:

1. Essentially contractual in nature (Art.

1767, 1784)

2. Separate juridical personality (Art. 1768)

3. Delectus personae

4. Mutual Agency (Art. 1803)

5. Personal liability of partners for partnershipdebts

FORM OF PARTNERSHIP CONTRACT

GR: No special form is required for the validity of acontract. (Art. 1356)

CHAPTER 2: OBLIGATIONS OF PARTNERS

Art. 1784. A partnership begins from the moment of the execution of the contract, unless it isotherwise stipulated.

• Atty. Villareal: This is not entirely

accurate. It is better to say that its legal lifebegins from the moment of the perfectionof the contract amongst the parties,UNLESS OTHERWISE STIPULATED (e.g. theparties can agree that the partnership isdeemed to commence legal existence on alater date)

Exceptions:

1. Where immovable property/real rights

are contributed (Art. 1771)a. Public instrument is necessaryb. Inventory of the property

contributed must be made, signedby the parties and attached to thepublic instrument otherwise it isVOID

2. When the contract falls under the

coverage of the Statute of Frauds (Art.1409)

3. Where capital is P3,000 or more, in

money or property (Art. 1772) a. Public instrument is necessaryb. Must be registered with SEC

NOTE:

• Generally, partnerships may be

CONSTITUTED IN ANY FORM (Art. 1771);thus, even if there is no compliance withArt. 1772, ¶ 1 (contracts of partnershiphaving capital of Php3,000 or more inmoney or property shall appear in a publicinstrument registered with the SEC), the

—Adviser: Dean Cynthia Roxas-Del Castillo, Atty. Eugenio Villareal; Heads: Joy Stephanie Tajan, JohnPaul Lim; Understudies: Charmaine Haw, Kristi Fe Mari Lu; Subject Head: Rimo Rico; Pledgees: Kris

Buenaventura, Kit Singson—

PARTNERSHIP - a contract wherein two or morepersons bind themselves to contribute money,property, or industry to a common fund, with theintention of dividing the profits among themselves.(see Art. 1767, CC )







Civil Law Summer Reviewer

ATENEOCENTRAL BAR OPERATIONS 2008 objective of which is notice to the public,particularly those interested in dealing withthe partnership, there may be a validlyexisting partnership, save in cases whereimmovables are contributed where publicinstrument and inventory necessary.

• failure to comply with public

instrument/registrationrequirement shall not affect liabilityof partnership and of partners to3rd persons (Art. 1772, ¶ 2)

Torres v. CA 320 SCRA 428 (1999)

A “void” partnership under Article 1773, in relationto Article 1771, may still be considered a partnership de facto or by estoppel vis-à-vis third persons; and may be considered by the courts asan ordinary contract (though not exactly an “Art.1767” partnership) from which rights and obligations may legally stem.

• SEC Opinion, 1 June 1960: For

purposes of convenience in dealing withgovernment offices and financialinstitutions, registration of partnershiphaving a capital of less than Php 3,000 isrecommended.

SEPARATE JURIDICAL PERSONALITY

Art. 1768. The partnership has a juridical personality separate and distinct form that of

each of the partners, even in case of failure tocomply with the requirements of Article 1772,first paragraph.

As a JURIDICAL PERSON, a partnership may:1. acquire and possess property of all kinds;2. incur obligations; and

3. bring civil or criminal actions, in conformity

with the laws and regulations of theirorganization. (See Art. 46)

DELECTUS PERSONAE - The selection or choice of the person.

Implications: (Dean Villanueva)• The assignment of a partner of his

share does not make assignee a partner(Art. 1804 and 1813)

• The existence of the partnership is

closely tied-up to the particular contractualrelationship of the partners (see instancesof dissolution of the partnership uponchange of contractual relationship.)

Ortega v. CA G.R. No. 109248, July 3, 1995

Doctrine of Delectus Personae:

The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person

wishes to associate himself is the very foundationand essence of that partnership.

• Plural form is delectus

personarum; this doctrine, however does notapply to a limited partner who merelycontributes his interest and is not barred fromengaging in competitive business or from

transacting business with the partnership as if he were a stranger (Art. 1866, in relation toArts. 1789, 1808, and 1854).

MEANING of MUTUAL AGENCY

(According to Dean Villanueva)• In the absence of contractual

stipulation, all partners shall be consideredagents and whatever any one of them may doalone shall bind the partnership (Arts.1803(1), 1818)

• Partners can dispose of partnership

property even when in partnership name (Art.1819)

• An admission or representation

made by any partner concerning partnershipaffairs is evidence against the partnership (Art.1820)

• Notice to any partner of any matterrelating to partnership affairs is notice to thepartnership (Art. 1821)

• Wrongful act or omission of any

partner acting for partnership affairs makes thepartnership liable (Art. 1822)

• Partnership bound to make good

losses for acts or misapplications of partners(Art. 1823)

UNLIMITED LIABILITY(According to Dean Villanueva)

• All partners are liable pro rata with

all their properties and after partnership assetshave been exhausted, for all partnership debts(Art. 1816)

• Any stipulation against personal

liability of partners for partnership debts is

void , except as among them (Art. 1817)

• All partners are liable solidarily with

the partnership for everything chargeable to the


Buenaventura, Kit Singson—Page 158 of 297








ATENEOCENTRAL BAR OPERATIONS 2008 partnership when caused by the wrongful act oromission of any partner acting in the ordinarycourse of business of the partnership or withauthority from the other partners and forpartner's act or misapplication of properties(Art. 1824)

• A newly admitted partner into an

existing partnership is liable for all theobligations of the partnership arising before hisadmission but out of partnership property

shares (Art. 1826)

• Partnership creditors are preferred

to those of each of the partners as regards thepartnership property (Art. 1827)

• Upon dissolution of the partnership,

the partners shall contribute the amounts

necessary to satisfy the partnership liabilities(Art. 1839(4), (7))

PARTNERSHIP DISTINGUISHED FROM CO-OWNERSHIP AND CORPORATION

BASIS PARTNERSHIPCO-OWNERSHIP

CORP

Creation Created by a contract, bymere agreement of the

parties

Created by law Created by law

Juridical personality Has a juridical personalityseparate and distinct from

that of each partner

None Has a juridical personalityseparate and distinct fromthat of each stockholder

Purpose Realization of profits Common enjoyment of a

thing or right

Depends on AOI

Duration/ Term of existence

No limitation 10 years maximum 50 years maximum,extendible to not more

than 50 years in any one

instance

Disposal/ Transferability of interest

Partner may not dispose of his individual interest unlessagreed upon by all partners

Co-owner may freely doso

Stockholder has a right totransfer shares withoutprior consent of other

stockholders

Power to act with 3rd

personsIn absence of stipulation to

contrary, a partner may bindpartnership (each partner is

agent of partnership)

Co-owner cannotrepresent the co-

ownership

Management is vestedwith the Board of

Directors

Effect of death Death of partner results indissolution of partnership

Death of co-owner doesnot necessarily dissolve

co-ownership

Death of stockholder doesnot dissolve corporation

Dissolution May be dissolved at any timeby the will of any or all of the

partners

May be dissolved anytimeby the will of any or all of

the co-owners

Can only be dissolvedwith the consent of the

state

# of incor-porators Minimum of 2 persons Minimum of 2 persons Minimum of 5incorporators










ATENEOCENTRAL BAR OPERATIONS 2008

Commencement of juridical personality

From the moment of execution of contract of

partnership

None From date of issuance of certificate of incorporation

by the SEC











Heirs of Tan Eng Kee v. CA, G.R. No. 126881, October 3, 2000

Particular partnership distinguished from joint venture

A particular partnership is distinguished from

joint venture, to wit:1) a joint venture (an American concept similar

to our joint account) is a sort of informal partnership, with no firm name and no legal personality. In a joint account, the participatingmerchants can transact business under their ownname, and can be individually liable therefore; and

2) usually, but not necessarily a joint venture islimited to a single transaction, although thebusiness of pursuing to a successful terminationmay continue for a number of years; a partnershipgenerally relates to a continuing business of varioustransactions of a certain kind.

It would seem that under Philippine law, a joint venture is a FORM of PARTNERSHIP , specifically a particular partnership which has for its object specific undertaking.

Aurbach v. Sanitary Wares 180 SCRA 130 (1989)The Supreme Court has, however, recognized adistinction between these two business forms and has held that although a corporation cannot enter into a partnership, it may, however, engage in a joint venture with others.

WEAKNESSES OF A PARTNERSHIP(Dean Villanueva)

• Partners are co-owners of the

partnership properties and enjoy personalpossession (Art. 1811)

• Partners may individually dispose of

real property of the partnership even when inpartnership name (Art. 1819)

• Dissolution of the partnership can

come about by the change in the relationship of the partners, such as when a partner choosesto cease being part of the partnership (Arts.

1828, 1830(1)(b))• Expulsion of partner dissolves the

partnership (Art. 1830(1)(d))

• Dissolved by the loss of the thing

promised to be contributed to the partnership(Art. 1830(4))

• Death, insolvency, or civil

interdiction of a partner dissolves the

partnership (Art. 1830 (5),(6),(7))

• Petition by partner will dissolve the

partnership when a partner has been declaredinsane; or the partner has become incapable of performing his part of the partnership contract;a partner has been found guilty of such conduct

as tends to affect prejudicially the partnershipbusiness; partner willfully or persistentlycommits a breach of partnership agreement;the partnership business can only be carried ata loss; other equitable reasons (Art. 1831)

NOTE:

• SEC Opinion, 28 April 1995: The

death of a partner, as a general rule,dissolves the partnership by operation of law, except if the articles of partnership

stipulate for the continuance of the partnership relations upon the death of any of the partners.

• SEC Opinion, 5 August 1997: If the remaining partners of the dissolved partnership intended for all legal intentsand purposes, to continue the partnershipbusiness even after the death of a partner,there is continuity of personality of the partnership as there exists a "partnershipat will."

RULES TO DETERMINE EXISTENCE OFPARTNERSHIP

GR: Persons who are NOT partners as betweenthemselves, CANNOT be partners as to thirdpersons. (Art. 1769(1))

Exception: Partnership by Estoppel under Art.1825

OTHER RULES TO DETERMINE WHETHER APARTNERSHIP EXISTS: (Art. 1769)

1. Co-ownership or co-possession does not of itself establish a partnership

2. The sharing of gross returns does not of itself establish a partnership, whether ornot the persons sharing them have a jointor common right or interest in any propertyfrom which the returns are derived;

3. The receipt by a person of a share of the

profits of a business is prima facieevidence that he is a partner in thebusiness, UNLESS such were received inpayment:

a. As debt by installments orotherwise;

b. As wages or rent;










ATENEOCENTRAL BAR OPERATIONS 2008 c. As annuity;d. As interest on loan;e. As consideration for sale of goodwill

of business/other property byinstallments

Art. 1770. A partnership must have a lawful object

or purpose, and must be established for thecommon benefit or interest of the partners.When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated infavor of the State, without prejudice to the provisions of the Penal Code governing theconfiscation of the instruments and effects of acrime.

EFFECTS OF AN UNLAWFUL PARTNERSHIP:

1. The contract is void ab initio and the

partnership never existed in the eyes of thelaw. (Art. 1409(1))

2. The profits shall be confiscated in favor of the government. (Art. 1770)

3. The instruments or tools and proceeds of

the crime shall also be forfeited in favor of the government. (Art. 1770, Art. 45-RPC)

4. The contributions of the partners shall not

be confiscated unless they fall under no. 3.(See Arts. 1411 and 1412)

NOTE: Judicial decree is not necessary to dissolvean unlawful partnership.

NOTE: That there is no legally constituted

partnership DOES NOT mean that there areno contractual or legal relations among theparties.

EFFECT OF PARTIAL ILLEGALITY:1. Where a part of the business of a

partnership is legal and a part illegal, anaccount of that which is legal may be had.

2. Where, without the knowledge or

participation of the partners, the firm'sprofits in a lawful business have beenincreased by wrongful acts, the innocent

partners are not precluded as against theguilty partners from recovering their shareof the profits. (De Leon, p. 65)

WHO MAY BE PARTNERS

GR: Any person capacitated to contract may enterinto a contract of partnership.

Exceptions:

1. Persons who are prohibited from giving

each other any donation or advantage

cannot enter into a universalpartnership. (Art. 1782)

2. Persons suffering from civilinterdiction.

3. Persons who cannot give consent to acontract:

a. Minorsb. insane personsc. deaf-mutes who do not know how

to write

• De Leon: There is no prohibition

for partnerships to be partners, BUT THIS ISDOUBTFUL AND IMPRACTICAL on account of Art. 1768 (that a partnership has a juridical personality separate from that of each of the partners) and of the essential attribute calleddelectus personae.

MAY CORPORATIONS ENTER INTOPARTNERSHIP?

Philippine Corporate Law (2001) by DeanVillanueva (p. 902) citing various SEC Opinions:

• Corporations may enter intopartnership agreements on the followingconditions:

1. Authority to enter into a partnershiprelation is expressly conferred bythe charter or the articles of incorporation (AoI), and the natureof the business venture to beundertaken by the partnership is inline with the business authorized bythe charter or AoI.

2. If it is a foreign corporation, it mustobtain a license to transact businessin the country in accordance withthe Corporation Code of thePhilippines.

NOTE: How tax law treats the matter:

• Notion of partnership no matter

how created or organized: a pool of insurancecompanies was considered a partnership underapplicable tax law ( Afisco v. CA, G.R. No.112675, January 25, 1999)

• Without prejudice to the formation

of a joint venture (J.M. Tuazon v. Bolanos,95 Phil. 106 (1954); Aurbach v. Sanitary Wares Manufacturing, 180 SCRA 130(1989)).

WHAT MAY BE CONTRIBUTED











• must be in equal shares unlessotherwise stipulated (Art. 1790).

1. Money – failure to contribute promised money

makes the promissory-partner liablenot only for the amount promised, butalso for interest due and damages

arising from the time the formershould have complied with his or herundertaking (Art. 1786, ¶ 1) (uponperfection of contract, unless contrarystipulation)

- if there is fraud or misrepresentation,action for rescission may be filed andthe party entitled to rescind, withoutprejudice to any other right, has theright to:

a. lien on, or right of retention

over, the surplus of partnershipproperty after satisfying

partnership liabilities to thirdpersons (for any sum paid by theinjured partner for the purchaseof an interest in the partnershipand for any capital or advancescontributed by the latter)b. stand in place of creditors of the partnership for any paymentsmade by the injured partner inrespect of partnership liabilities,after all liabilities to third personshave been satisfied

c. indemnity by the guilty

partner against all partnership

debts and liabilities (Art. 1838);relate to Art. 1831: with orwithout fraud ormisrepresentation, injured partnermay seek judicial dissolution

2. Property – may include intangible or

incorporeal, e.g. credit (Lim

Tong Lim v. Phil. FishingGear, 316 SCRA 728 (1999)).

- Art. 1786, ¶¶ 1 and 2

applies: liable for fruits fromthe time property should havebeen delivered without need of

demand; also include obligationto preserve the promisedproperty with the diligence of agood father of a family pendingdelivery.

3. Industry – may concur with any or both of the

first two or in the absence of anyone or both of them; manualand/or intellectual in consideration

of share in the profits; hence, asgenerally, partners are not entitledto charge each other (Marsh’s

Appeal, 69 Pa. St. 30).

- “Every partner is bound to

work to the extent of his ability forthe benefit of the whole, withoutregard to the services of his co-partners, and without comparison

of value; for services to the firmcannot, from their very nature, beestimated and equalized bycompensation of differences.” (Beatty v. Wray, 7 Harris 519).

- BUT: a partner who has

agreed to render special service tothe partnership, for theperformance of which he isqualified, and which is one of theinducements for the other

members to enter the partnership,was found liable civilly to accountfor the value of such service upona finding that he wrongfullyrefused to perform such service.- BUT THEN AGAIN, specificperformance not available due toconstitutional prohibition vs.involuntary servitude

Since Art. 1786 expressly declares him adebtor, does this bar a criminal prosecutionfor say, estafa, on account of theconstitutional prohibition vs. non-payment of

debt? Atty. Villareal: Not if your legal theory is groundedon criminal liability, since any civil aspect thereof ismerely incidental.

NOTE: A limited partner is not allowed to contributeservices, only “cash or other property” (Art.1845); otherwise, he is considered an “industrial and general partner” and thus,not exempted from personal liability.

WHEN IMMOVABLES OR REAL RIGHTSCONTRIBUTED

Art. 1773. A contract of partnership is void,whenever immovable property is contributedthereto, if an inventory of said property is notmade, signed by the parties, and attached tothe public instrument.

GR: Failure to comply with the requirement of appearance in public instrument and SECRegistration will not affect the liability of the










ATENEOCENTRAL BAR OPERATIONS 2008 partnership and the members thereof to thirdpersons. (Art. 1772, ¶ 2)

Exception: When IMMOVABLE PROPERTY/REAL RIGHTS are contributed,

*public instrument + inventory*

made and signed by the parties and attached tothe public instrument (Arts. 1771 and 1773)is required for the benefit of third persons.

EFFECT OF ABSENCE OF REQUIREMENTSUNDER ARTICLES 1771 AND 1773

CONDITIONOF

PARTNERSHIPWHERE REALPROPERTY ISCONTRIBUTED

BAUTISTA, E. DE LEON

No publicInstrument, No

InventoryVOID VOID

With PublicInstrument, No

InventoryVOID VOID

No PublicInstrument,

With Inventory

VALID

but either partymay compelexecution of

publicinstrument so

it may be

registered inthe registry of

property;nonetheless,partnershipagreement

may beenforced (cf.

Arts. 1356 to1358)

VOID

With PublicInstrument,

With InventoryVALID VALID

(Source: Bar Review Notes for Partnership Law by Atty. Villareal)

• Atty. Villareal: The safer view is De Leon’s

due to his simplified view of statute.

NOTE:

Torres v. CA 320 SCRA 428 (1999)

Partnerships void under Art.1773, in relation Art.1771 may still be considered either de facto or estoppel partnerships vis-à-vis third persons; may even be treated as an ordinary contract from whichrights and obligations may validly arise, althoughnot exactly a partnership under the Civil Code.Failure to prepare an inventory of the immovable

property contributed, in spite of article 1773declaring the partnership void would not render the partnership void when:

a. NO THIRD PARTY INVOLVED (since Art.1773 was intended for the protection of 3rd parties;b. Partners have MADE A CLAIM ON THE PARTNERSHIP AGREEMENT.

CLASSIFICATIONS OF PARTNERSHIP

AS TO EXTENT OF ITS SUBJECT MATTER

1. UNIVERSAL PARTNERSHIPa. UNIVERSAL PARTNERSHIP OF ALL

PRESENT PROPERTY - comprisesthe following:

i. Property which belonged toeach of the partners at thetime of the constitution of the partnership

ii. Profits which they mayacquire from all propertycontributed

b. UNIVERSAL PARTNERSHIP OFPROFITS - comprises all that thepartners may acquire by theirindustry or work during theexistence of the partnership

NOTE: Persons who are prohibited from givingdonations or advantage to each other cannot enter into a universal partnership.(Art. 1782)

2. PARTICULAR PARTNERSHIP—has for itsobjects:a. Determinate thingsb. Their use or fruitsc. Specific undertakingd. Exercise of profession or vocation

AS TO LIABILITY OF PARTNERS

1. GENERAL PARTNERSHIP—consists of

general partners who are liable pro rata

and subsidiarily and sometimessolidarily with their separate propertyfor partnership debts.

2. LIMITED PARTNERSHIP—one formed by

2 or more persons having as members










ATENEOCENTRAL BAR OPERATIONS 2008 one or more general partners and oneor more limited partners, the latter notbeing personally liable for theobligations of the partnership

AS TO DURATION

1. PARTNERSHIP AT WILL—one in which nofixed term is specified and is not formedfor a particular undertaking or venturewhich may be terminated anytime bymutual agreement

2. PARTNERSHIP WITH A FIXED TERM—

the term for which the partnership is toexist is fixed or agreed upon or oneformed for a particular undertaking

AS TO LEGALITY OF EXISTENCE

1. DE JURE PARTNERSHIP—one which has

complied with all the legalrequirements for its establishment

2. DE FACTO—one which has failed to comply

with all the legal requirements for itsestablishment

AS TO PURPOSE

1. COMMERCIAL OR TRADING

PARTNERSHIP—one formed for thetransaction of business

2. PROFESSIONAL OR NON TRADING

PARTNERSHIP—one formed for theexercise of a profession

KINDS OF PARTNERS:

1. CAPITALIST—one who contributes

money or property to the common fund

2. INDUSTRIAL—one who contributes

only his industry or personal service

3. GENERAL—one whose liability to 3rd

persons extends to his separateproperty

4. LIMITED—one whose liability to 3rd

persons is limited to his capitalcontribution

5.MANAGING—one who manages theaffairs or business of the partnership

6. LIQUIDATING—one who takes charge

of the winding up of partnership affairsupon dissolution

7. PARTNERS BY ESTOPPEL—one who is

not really a partner but is liable as apartner for the protection of innocent 3 rd

persons

8. CONTINUING PARTNER —one who

continues the business of a partnership

after it has been dissolved by reason of the admission of a new partner,retirement, death or expulsion of one of the partners

9. SURVIVING PARTNER —one whoremains after a partnership has been

dissolved by death of any partner

10. SUBPARTNER —one who is not a

member of the partnership whocontracts with a partner with referenceto the latter's share in the partnership

11. OSTENSIBLE—one who takes active

part and known to the public as partnerin the business

12. SECRET—one who takes active part in

the business but is not known to be apartner by outside parties

13. SILENT—one who does not take anyactive part in the business although hemay be known to be a partner

14. DORMANT—one who does not take

active part in the business and is notknown or held out as a partner

OBLIGATIONS OF THE PARTNERS TO ONEANOTHER

A) OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES 1. PROMISED CONTRIBUTIONObligations with respect to contribution of

property:

a. to contribute at the beginning of the

partnership or at the stipulated timethe money, property or industrywhich he may have promised tocontribute (Art. 1786)

b. To answer for eviction in case the

partnership is deprived of thedeterminate property contributed(Art. 1786)

c. To answer to the partnership for the

fruits of the property thecontribution of which he delayed,from the date they should havebeen contributed up to the time of actual delivery (Art. 1786)

d. To preserve said property with the

diligence of a good father of afamily pending delivery topartnership (Art. 1163)











e. To indemnify partnership for any

damage caused to it by the

retention of the same or by thedelay in its contribution (Arts.1788, 1170)

EFFECT OF FAILURE TO CONTRIBUTEPROPERTY PROMISED:

1. Partners becomes ipso jure a debtor of the

partnership even in the absence of anydemand (See Art. 1169[1])

2. Remedy of the other partner is not

rescission but specific performance withdamages from defaulting partner (Art.1788)

Obligations with respect to contribution of money and money converted to personal use:

a. To contribute on the date fixed

the amount he has undertaken tocontribute to the partnership

b. To reimburse any amount hemay have taken from thepartnership coffers and converted tohis own use

c. To pay for the agreed or legalinterest, if he fails to pay hiscontribution on time or in case hetakes any amount from thecommon fund and converts it to hisown use

d. To indemnify the partnershipfor the damages caused to it bydelay in the contribution orconversion of any sum for hispersonal benefits

(See Art. 1788)

2. FIDUCIARY DUTYA partnership is a fiduciary relation—one

entered into and to be maintained on the basis of trust and confidence. With that, a partner mustobserve the utmost good faith, fairness, andintegrity in his dealings with the others:

a. he cannot directly or indirectly usepartnership assets for his ownbenefit;

b. he cannot carry on a business of thepartnership for his privateadvantage;

c. he cannot, in conducting the

business of the partnership, takeany profit clandestinely;

d. he cannot obtain for himself that heshould have obtained for thepartnership (e.g. business

opportunity)

e. he cannot carry on another businessin competition with the partnership;

f. he cannot avail himself of knowledge or information whichmay be properly regarded as theproperty of the partnership;

PROHIBITION AGAINST ENGAGING INCOMPETITIVE BUSINESS

INDUSTRIAL PARTNER CAPITALISTPARTNER

- cannot engage inbusiness (w/n same line

of business with thepartnership) unless

partnership expresslypermits him to do so.

(Art. 1789)

- cannot engage inbusiness (with samekind of business withthe partnership) for

his own account,unless there is astipulation to the

contrary.( Art. 1808)

CONSEQUENCES IF AN INDUSTRIAL PARTNER ENGAGES IN ANY BUSINESS: (Art. 1789)

1. he can be excluded from the partnership; or

2. the capitalist partners can avail of thebenefit he obtained from the business, or

3. the capitalist partners have the right to filean action for damages against the industrialpartner, in either case.

CONSEQUENCES IF THE CAPITALIST PARTNER ENGAGES IN A BUSINESS (which competes withthe business of the partnership):

1. he may be required to bring to the common

fund the profits he derived from the otherbusiness; (Art. 1808)

2. he shall personally bear the losses; (Art.

1808)3. he may be ousted form the partnership,

especially if there was a warning.

Obligations with respect to contributionto partnership capital:

a. Partners must contribute equal

shares to the capital of thepartnership unless there is










ATENEOCENTRAL BAR OPERATIONS 2008 stipulation to contrary (Art. 1790)

b. Partners (capitalist) must contribute

additional capital in case of imminent loss to the business of thepartnership and there is nostipulation otherwise; refusal to doso shall create an obligation on hispart to sell his interest to the otherpartners (Art. 1790)

Requisites:a. There is an imminent loss of the

business of the partnershipb. The majority of the capitalist

partners are of the opinion that anadditional contribution to thecommon fund would save thebusiness

c. The capitalist partner refusesdeliberately to contribute (not due

to financial inability)d. There is no agreement to thecontrary

Obligation of managing partners whocollects debt from person who also owed the partnership (Art. 1792)

a. Apply sum collected to 2 credits inproportion to their amounts

b. If he received it for the account of partnership, the whole sum shall beapplied to partnership credit

Requisites:

a. There exists at least 2 debts, onewhere the collecting partner iscreditor and the other, where thepartnership is the creditor

b. Both debts are demandable

c. The partner who collects isauthorized to manage and actuallymanages the partnership

Obligation of partner who receives shareof partnership credit

a. Obliged to bring to the partnership

capital what he has received eventhough he may have given receiptfor his share only (Art. 1793)

Requisites:a. A partner has received in whole or

in part, his share of the partnershipcredit

b. The other partners have not

collected their sharesc. The partnership debtor has become

insolvent

BEARING THE RISK OF LOSS OF THINGSCONTRIBUTED (Art. 1795)

Specific and determinate thingswhich are not fungible where onlythe use is contributed

Risk is borne bypartner

Specific and determinate thingsthe ownership of which istransferred to the partnership

Risk is borne bypartnership

Fungible things (consumable) Risk is borne bypartnership

Things contributed to be sold Risk is borne bypartnership

Things brought and appraised inthe inventory

Risk is borne bypartnership

Specific and determinate things

which are not fungible where onlythe use is contributed

Risk is borne by

partner

RULES FOR DISTRIBUTION OF PROFITS ANDLOSSES (See Art. 1797)

PROFITS LOSSES

With According toagreement

According toagreement

Without agreement

1. Share of capitalistpartner is inproportion tohis capitalcontribution

2. Share of industrialpartner is notfixed - as maybe just and

equitableunder thecircumstances

1. If sharing of profits isstipulated -apply tosharing of losses

2. If no profitsharingstipulated -losses shallbe borne

according tocapitalcontribution

3. Purelyindustrialpartner notliable forlosses

Art. 1799. A stipulation which excludes one or more partners from any share in the profits and losses is void.

NOTE: Stipulation exempting a partner from lossesshould be allowed. If a person can make agift to another, there is no sound reason why










ATENEOCENTRAL BAR OPERATIONS 2008 a person cannot also agree to bear all thelosses. Of course, as far as THIRD PERSONSare concerned, any such stipulation may beproperly declared void.(De Leon, pp. 124-125, citing Espiritu andSibal)

RIGHTS AND OBLIGATIONS WITH RESPECT TOMANAGEMENT

Partner isappointed manager in thearticles of partnership

Power of managingpartner isirrevocablewithout just/lawfulcause;Revocable onlywhen in badfaith

Vote of partnersrepresentingcontrollinginterestnecessary torevoke power

Partner is

appointed manager after constitution of partnership

Power is

revocable anytime for anycause

2 or more persons entrusted with management of partnershipwithout specification of duties/stipulationthat each shall not act w/o theother's consent

Each mayexecute all actsof administration

In case of opposition,decision of majorityshall prevail;In case of tie, decisionof partners

owningcontrolling

interest shallprevail

Stipulated that none of themanaging partners shall act w/o the consent of others

Concurrence of all necessaryfor the validityof acts

Absence ordisability of any onecannot beallegedunless thereis imminentdanger of

grave orirreparableinjury topartnership

Manner of management not agreed upon

1. All partnersare agentsof thepartnership

2. Unanimousconsentrequired foralteration

of

If refusal of partner ismanifestlyprejudicial tointerest of partnership,court'sintervention

may be

immovableproperty

sought

Other rights and obligations of partners:

1. Right to associate another person with himin his share without consent of otherpartners (subpartnership)

2. Right to inspect and copy partnership booksat any reasonable hour

3. Right to a formal account as to partnershipaffairs (even during existence of partnership):

a. If he is wrongfully excluded frompartnership business or possessionof its property by his copartners

b. If right exists under the terms of any agreement

c. As provided by art. 1807

d. Whenever other circumstancesrender it just and reasonable

4. Duty to render on demand true and fullinformation affecting partnership to anypartner or legal representative of anydeceased partner or of any partner underlegal disability

5. Duty to account to the partnership asfiduciary

B) PROPERTY RIGHTS OF A PARTNER

1. His rights in specific partnership

property

2. His interest in the partnership

3. His right to participate in the

management(Art. 1810)

NATURE OF PARTNER'S RIGHT INSPECIFIC PARTNERSHIP PROPERTY—a partner has an equal right to possessionwhich is not assignable and such right islimited to the share of what remains afterpartnership debts have been paid

NATURE OF PARTNER'S RIGHT IN THEPARTNERSHIP—a share in the profitsand surplus

C) OBLIGATION OF PARTNERS WITH REGARDTO THIRD PERSONS 1. Every partnership shall operate under a

firm name. Persons who include theirnames in the partnership name even if they are not members shall be liable as apartner

2. All partners shall be liable for contractual










ATENEOCENTRAL BAR OPERATIONS 2008 obligations of the partnership with theirproperty, after all partnership assets havebeen exhausted:

a. Pro ratab. Subsidiary

3. Admission or representation made by any

partner concerning partnership affairs

within scope of his authority is evidenceagainst the partnership

4. Notice to partner of any matter relating topartnership affairs operates as notice topartnership, except in case of fraud:

a. Knowledge, of partner acting inthe particular matter, acquiredwhile a partner

b. Knowledge of the partner actingin the particular matter thenpresent to his mind

c. Knowledge of any other partnerwho reasonably could andshould have communicated it to

the acting partner

5. Partners and the partnership are

solidary liable to 3rd persons for thepartner's tort or breach of trust6. Liability of incoming partner islimited to:

a. His share in the partnershipproperty for existing obligations

b. His separate property forsubsequent obligations

7. Creditors of partnership preferred inpartnership property & may attachpartner's share in partnership assets

8. Every partner is an agent o f thepartnership

POWER OF PARTNER AS AGENT OFPARTNERSHIP

Acts for carrying

on in the usualway the businessof thepartnership

Every partner is an agent and

may execute acts with bindingeffect even if he has noauthorityExcept: when 3rd person hasknowledge of lack of authority

1. Act w/cis notapparentlyfor thecarrying of business inthe usual

way2. Acts of strictdominion orownership:

Does not bind partnershipunless authorized by otherpartners

3. Assignpartnershipproperty intrust forcreditors4. Disposeof good-will

of business5. Do anact w/cwould makeitimpossibleto carry onordinarybusiness of partnership6. Confess

a judgement7. Enter

intocompromiseconcerningapartnershipclaim orliability8. Submitpartnershipclaim orliability toarbitration9. Renounce claim of partnership

Acts incontravention of a restriction onauthority

Partnership not liable to 3rd

persons having actual orpresumptive knowledge of therestrictions

EFFECTS OF CONVEYANCE OF REALPROPERTY BELONGING TO PARTNERSHIP

Title in partnership name,Conveyance in partnershipname

Conveyance passestitle but partnershipcan recover if:1. Conveyance was

not in the usualway of business,or

2. Buyer hadknowledge of lack of authority

Title in partnership name,Conveyance in partner'sname

Conveyance doesnot pass title butonly equitable











interest, unless:1. Conveyance was


2. Buyer hadknowledge of lack of

authorityTitle in name of 1/ morepartners, Conveyance inname if partner/partners inwhose name title stands

Conveyance passestitle but partnershipcan recover if:1. Conveyance was


2. Buyer hadknowledge of lack of authority

Title in name of 1/more/allpartners or 3rd person intrust for partnership,Conveyance executed inpartnership name if inname of partners

Conveyance willonly pass equitableinterest

Title in name of allpartners, Conveyance inname of all partners

Conveyance willpass title

PARTNER BY ESTOPPEL—by words or conduct, hedoes any of the ff.:1. Directly represents himself to anyone as a

partner in an existing partnership or in anon-existing partnership

2. Indirectly represents himself by consentingto another representing him as a partner inan existing partnership or in a non existingpartnership

ELEMENTS TO ESTABLISH LIABILITY AS APARTNER ON GROUND OF ESTOPPEL:

1. Defendant represented himself aspartner/represented by others as such andnot denied/refuted by defendant

2. Plaintiff relied on such representation3. Statement of defendant not refuted

LIABILITIES IN ESTOPPEL

All partners

consented torepresentation

Partnership is liable

No existingpartnership & allthose representedconsented;Not all partners of

Person who representedhimself & all those whomade representation liablepro-rata/jointly

existing partnershipconsents torepresentation

No existing

partnership & not allrepresentedconsented;

None of partners inexisting partnershipconsented

Person who represented

himself liable & those whomade/consented torepresentation separately

liable

ASSIGNMENT OF INTEREST IN PARTNERSHIP

Assignment is subject to three (3) conditions:1. made in good faith2. for fair consideration3. after a fair and complete disclosure of all

important information as to its value

RIGHTS OF AN ASSIGNEE:1. Get whatever assignor-partner would have

obtained2. Avail usual remedies in case of fraud in themanagement

3. Ask for annulment of contract of assignment if he was induced to jointhrough any of the vices of consent

4. Demand an accounting (only in case of dissolution)

D) RESPONSIBILITY OF PARTNERSHIP TOPARTNERS

1. To refund the amounts disbursed by partnerin behalf of the partnership + correspondinginterest from the time the expenses are

made (loans and advances made by apartner to the partnership aside from capitalcontribution)

2. To answer for obligations partner may havecontracted in good faith in the interest of thepartnership business

3. To answer for risks in consequence of itsmanagement

CHAPTER 3: DISSOLUTION AND WINDING UP

DISSOLUTION—change in the relation of thepartners caused by any partner ceasing to be

associated in the carrying on of the business;partnership is not terminated but continuesuntil the winding up of partnership affairs iscompleted

WINDING UP—process of settling the business orpartnership affairs after dissolution

TERMINATION—that point when all partnership










ATENEOCENTRAL BAR OPERATIONS 2008 affairs are completely wound up and finallysettled. It signifies the end of the partnershiplife.

CAUSES OF DISSOLUTION:1. Without violation of

the agreement between the partners

a. By termination of the definite term/particular undertaking specified in theagreement

b. By the express will of any partner, whomust act in good faith, when no definiteterm or particular undertaking isspecified

c. By the express will of all the partnerswho have not assigned their interest/charged them for their separate debts,either before or after the termination of any specified term or particularundertaking

d. By the bona fide expulsion of any

partner from the business in accordancewith power conferred by the agreement

2. In contravention of the agreement between the partners, wherethe circumstances do not permit adissolution under any other provision of thisarticle, by the express will of any partner atany time3. By any event whichmakes it unlawful for business to be carriedon/for the members to carry it on for thepartnership4. Loss of specificthing promised by partner before its delivery

5. Death of anypartner6. Insolvency of apartner/partnership7. Civil interdiction of any partner

8. Decree of court

under art. 1831

GROUNDS FOR DISSOLUTION BY DECREE OFCOURT (Art. 1831)

1. Partner declared insane in any judicialproceeding or shown to be of unsound mind

2. Incapacity of partner to perform his part of the partnership contract3. Partner guilty of conduct prejudicial to

business of partnership4. Willful or persistent breach of partnership

agreement or conduct which makes itreasonably impracticable to carry onpartnership with him

5. Business can only be carried on at a loss

6. Other circumstances which renderdissolution equitable

Upon application by purchaser of partner's interest:

• After termination of specifiedterm/particular undertaking

• Anytime if partnership at will when

interest was assigned/charging order issued

EFFECTS OF DISSOLUTION

AUTHORITY OF PARTNER TO BINDPARTNERSHIP

GR: Authority of partners to bind partnership isterminated

Exception:1. To wind up partnership affairs2. Complete transactions not finished

QUALIFICATIONS:

1. With respect to partners—a. Authority of partners to bind

partnership by new contract isimmediately terminated whendissolution is not due to ACT, DEATH orINSOLVENCY (ADI) of a partner (art1833);

b. If due to ADI, partners are liable as if partnership not dissolved, when the ff.concur:

i. If cause is ACT of partner,

acting partner must haveknowledge of such dissolutionii. If cause is DEATH or

INSOLVENCY, acting partner musthave knowledge/ notice

2. With respect to persons not partners (Art.1834)—

a. Partner continues to bind partnershipeven after dissolution in ff. cases:(1) Transactions in connection to

winding up partnershipaffairs/completing transactionsunfinished

(2) Transactions which would bindpartnership if not dissolved, whenthe other party/obligee:(a) Situation 1 -

i. Had extended credit topartnership prior todissolution &

ii. Had noknowledge/notice of dissolution, or

(b) Situation 2 -i. Did not extend credit to

partnership










ATENEOCENTRAL BAR OPERATIONS 2008 ii. Had known partnership

prior to dissolutioniii. Had no

knowledge/notice of dissolution/fact of dissolution not advertised

in a newspaper of general

circulation in the placewhere partnership isregularly carried on

b. Partner cannot bind the partnershipanymore after dissolution:(1) Where dissolution is due to

unlawfulness to carry on withbusiness (except: winding up of partnership affairs)

(2) Where partner has becomeinsolvent

(3) Where partner unauthorized to windup partnership affairs, except bytransaction with one who:

(a) Situation 1 -i. Had extended credit topartnership prior to dissolution& ii. Had noknowledge/notice of dissolution, or

(b) Situation 2 -i. Did not extend credit to

partnership prior todissolution

ii. Had known partnershipprior to dissolution

iii. Had no knowledge/notice of

dissolution/fact of dissolution not advertised ina newspaper of generalcirculation in the placewhere partnership isregularly carried on

B. DISCHARGE OF LIABILITY

Dissolution does not discharge existing liability of partner, except by agreement between:

• Partner and himself

• person/partnership continuing thebusiness

• partnership creditors

R IGHTS OF PARTNER WHERE DISSOLUTIONNOT IN CONTRAVENTION OF AGREEMENT:

1. Apply partnership property to dischargeliabilities of partnership2. Apply surplus, if any to pay in cash thenet amount owed to partners

RIGHTS OF PARTNER WHERE DISSOLUTION INCONTRAVENTION OF AGREEMENT:

1. Partner who did not cause dissolutionwrongfully:

a. Apply partnership property todischarge liabilities of partnership

b. Apply surplus, if any to pay in cash

the net amount owed to partnersc. Indemnity for damages caused by

partner guilty of wrongfuldissolution

d. Continue business in same nameduring agreed term

e. Posses partnership property if business is continued

2. Partner who wrongly causeddissolution:

a. If business not continued by others- apply partnership property todischarge liabilities of partnership & receive in cash his share of surplus

less damages caused by hiswrongful dissolution

b. If business continued by others -have the value of his interest attime of dissolution ascertained andpaid in cash/secured by bond & bereleased from all existing/futurepartnership liabilities

RIGHTS OF INJURED PARTNER WHEREPARTNERSHIP CONTRACT IS RESCINDED ONGROUND OF FRAUD/MISREPRESENTATION BY1 PARTY:

1. Right to lien on surplus of partnership

property after satisfying partnershipliabilities2. Right to subrogation in place of creditors after payment of partnershipliabilities3. Right of indemnification by guiltypartner against all partnership debts &

liabilitiesC. SETTLEMENT OF ACCOUNTS BETWEEN

PARTNERS

ASSETS OF THE PARTNERSHIP:

1. Partnership property (includinggoodwill)

2. Contributions of the partners

ORDER OF APPLICATION OF ASSETS:1. Partnership creditors2. Partners as creditors

3. Partners as investors—return of

capital contribution

4. Partners as investors—share of










ATENEOCENTRAL BAR OPERATIONS 2008 profits if any

D. WHEN BUSINESS OF DISSOLVEDPARTNERSHIP IS CONTINUED:

1. Creditors of old partnership are alsocreditors of the new partnership which

continues the business of the old one w/o

liquidation of the partnership affairs2. Creditors have an equitable lien onthe consideration paid to the retiring /deceased partner by the purchaser whenretiring/deceased partner sold his interestw/o final settlement with creditors3. Rights if retiring/estate of deceasedpartner:

a. To have the value of his interestascertained as of the date of dissolutionb. To receive as ordinary creditor thevalue of his share in the dissolvedpartnership with interest or profitsattributable to use of his right, at his

option

PERSONS AUTHORIZED TO WIND UP1. Partners designated by theagreement2. In absence of agreement, allpartners who have not wrongfully dissolvedthe partnership3. Legal representative of lastsurviving partner

NOTE:

Magdusa v. Albaran 115 Phil. 511 (1962)

A partner’s share cannot be returned without first dissolving and liquidating the business for the partnership’s outside creditors have preferenceover the enterprise’s assets. The firm’s property cannot be diminished to their prejudice.

Villareal v. Ramirez 406 SCRA 145

Due to its separate juridical personality from theindividual partners, it is thus the partnership –having been the recipient of the capital contributions – which must refund the equity of retiring partners. Such duty does not pertain to partners who managed the business.The amount to be refunded, supra, consistent with

the partnership being a separate and distinct entity,must necessarily be limited to what to the firm’stotal resources. It can only pay out what it has for its total assets. But this is subject to the priority enjoyed by outside creditors. “After all the (said)creditors have been paid, whatever is left of the partnership assets becomes available for the payment of partners’ shares.

CHAPTER 4: LIMITED PARTNERSHIP

CHARACTERISTICS:1. Formed by compliance withstatutory requirements

2. One or more general partners

control the business3. One or more general partnerscontribute to the capital and share in theprofits but do not participate in themanagement of the business and are notpersonally liable for partnership obligationsbeyond their capital contributions4. May ask for the return of theircapital contributions under conditionsprescribed by law5. Partnership debts are paid out o f common fund and the individual propertiesof general partners

DIFFERENCES BETWEEN GENERAL ANDLIMITED PARTNER/PARTNERSHIP

GENERAL LIMITED

Personally liable forpartnership obligations

Liability extends onlyto his capitalcontributions

When manner of mgt.not agreed upon, allgeneral partners havean equal right in themgt. of the business

No participation inmanagement

Contribute cash,

property or industry

Contribute cash or

property only, notindustry

Proper party toproceedings by/againstpartnership

Not proper party toproceedingsby/againstpartnership

Interest not assignablew/o consent of otherpartners

Interest is freelyassignable

Name may appear infirm name

Name must appear infirm name

Prohibition againstengaging in business

No prohibitionagainst engaging inbusiness

Retirement, death,insolvency, insanity of general partnerdissolves partnership

Does not have sameeffect; rightstransferred to legalrepresentative

REQUIREMENTS FOR FORMATION OF LIMITEDPARTNERSHIP:

1. Certificate of articles of thelimited partnership must state the ff.










ATENEOCENTRAL BAR OPERATIONS 2008 matters:

a. Name of partnership + word"ltd."b. Character of businessc. Location of principal place of business

d. Name/place of residence of

memberse. Term for partnership is toexistf. Amount of cash/value of property contributedg. Additional contributionsh. Time agreed upon to returncontribution of limited partneri. Sharing of profits/othercompensation j. Right of limited partner (if given) to substitute an assigneek. Right to admit additionalpartners

l. Right of limited partners (if given) to priority for contributionsm. Right of remaining genpartners (if given) or continuebusiness in case of death, insanity,retirement, civil interdiction,insolvencyn. Right of limited partner (if given) to demand/receiveproperty/cash in return forcontribution

2. Certificate must be filed withthe SEC

NOTE: To validly form a limited partnership, all thatis required is SUBSTANTIAL COMPLIANCE INGOOD FAITH with all the requirements underArt. 1844 (i.e. signing and swearing to acertificate, affixing the word “Limited” to thepartnership name, etc.). If no substantialcompliance, then the firm becomes a general

partnership to third persons (but as amongstthe partners, still limited).

WHEN GENERAL PARTNER NEEDSCONSENT/RATIFICATION OF ALL LIMITEDPARTNERS:

1. Do any act in contravention of thecertificate2. Do any act which would make itimpossible to carry on the ordinary businessof the partnership3. Confess judgment againstpartnership4. Possess partnership property/assignrights in specific partnership property otherthan for partnership purposes

5. Admit person as general partner6. Admit person as limited partner -unless authorized in certificate7. Continue business with partnershipproperty on death, retirement, civilinterdiction, insanity or insolvency of gen

partner unless authorized in certificate

SPECIFIC RIGHTS OF LIMITED PARTNERS:1. Right to have partnership books kept atprincipal place of business2. Right to inspect/copy books atreasonable hour3. Right to have on demand true and fullinfo of all things affecting partnership4. Right to have formal account of partnership affairs whenever circumstancesrender it just and reasonable5. Right to ask for dissolution and windingup by decree of court6. Right to receive share of profits/other

compensation by way of income7. Right to receive return of contributionsprovided the partnership assets are inexcess of all its liabilities

REQUISITES FOR RETURN OF CONTRIBUTIONOF LIMITED PARTNER:

1. All liabilities of partnership havebeen paid/if not yet paid, at least sufficientto cover them2. Consent of all members has beenobtained3. Certificate is cancelled/amended as

to set forth withdrawal /reduction of contribution

LIABILITIES OF A LIMITED PARTNER

To the partnership1. for the difference

between his contribution as actually madeand that stated in the certificate as havingbeen made, and2. for any unpaidcontribution which he agreed in thecertificate to make in the future time

As a trustee for the partnership1.for the specific property stated in thecertificate as contributed by him but whichhe had not contributed;2.for the specific property of the partnershipwhich had been wrongfully returned to him;and










ATENEOCENTRAL BAR OPERATIONS 2008 3.Money or other property wrongfully paid orconveyed to him on account of hiscontribution.

DISSOLUTION OF LIMITED PARTNERSHIP

(Priority in Distribution of Assets):

1. Those due to creditors, includinglimited partners2. Those due to limited partners inrespect of their share inprofits/compensation3. Those due to limited partners of return of capital contributed4. Those due to general partner otherthan capital & profits5. Those due to general partner inrespect to profits6. Those due to general partner forreturn of capital contributed

AMENDMENT OF CERTIFICATE OFPARTNERSHIP1. In case any of the ten enumerated changes and

circumstances in Art. 1864, par. 2 are present.2. It must be signed and sworn to by all the

members including the new members if someare added; in case of substitution, the assigninglimited partner must also sign.

3. The cancellation or amendment must berecorded in the SEC.

NOTE:

• Any person who suffers loss by reliance on

false statement in certificate may hold liable fordamages any party to the certificate who knewthe statement to be false at the time the lattersigned the certificate or came to know suchfalsity subsequently but within sufficient timebefore reliance to enable such party to cancelor amend the certificate or file the properpetition for such purpose (under Art. 1865).

(Art. 1847; Walraven v. Ramsay, 55 N.W.d 853).

• A general partner’s DIIC (death,insolvency, insanity, or civil interdiction)dissolves the partnership unless the business iscontinued by the surviving general partners

under a right stated in the certificate or withtheir common (i.e. all) consent (Art. 1860).Still, even if allowed under the certificate orconsented to by all, there must be anamendment further to Arts. 1864 and 1865 (cf.Bautista). Otherwise, limited partners will notbe able to avail of the protection of the law asregards liability. The partnership will beconsidered general (Lowe v. Arizona Power

& Light Co., 427 P. d. 366).

• A limited partner shall not become liable as

a general partner, unless in addition to theexercise of his rights and powers as a limitedone, he takes part in the control (andmanagement) of the business (Art. 1848;

Holzman v. Escamilla, 195 P. d. 833).- Actually, a person may be general

and limited at the same time provided this

is stated in the certificate. He shall have allthe powers, rights, and restrictions of ageneral partner; but with respect to hiscapital contribution, his right against theother members of the firm would be that of a limited partner (Art. 1853).

- A limited partner may also loan

money to and transact other business withthe firm. BUT, he cannot: (1) receive orhold as collateral any partnership property;or (2) receive from a general partner or

from the firm any payment, conveyance,release if at that time assets of the firm arenot sufficient to discharge liabilities tooutside creditors; Art. 1854: any violationwould be fraud on such creditors.

- The remedy of a general partner who

suffers from or faces interference from hislimited partners is dissolution (Weil v.Diversified Properties, 319 F. Supp778).


Buenaventura, Kit Singson—P 175 f 297

Date post:	04-Apr-2018
Category:	Documents
Upload:	diane-steffi-titong-guillamon
View:	221 times
Download:	2 times

ALS Partnership Reviewer

Documents