concepts Flashcards

Question

Money - common fund

Answer 1

The term is to be understood as referring to currency which is legal tender in the Philippines. It must be pointed out that checks, drafts, promissory notes payable to order, and other mercantile documents are not money but only representatives of money. Consequently, there is no contribution of money until they have been cashed.

Answer 2

The property contributed may be real or personal, corporeal or incorporeal. Hence, credit such as promissory note or other evidence of obligation or even a mere goodwill may be contributed, as they are considered property.

Answer 3

active cooperation, the work of the party associated, which may be either personal manual efforts or intellectual, and for which he receives a share in the profi ts (not merely salary) of the business.

Answer 4

if no contribution no enforceable contract exists. unless takes part in carrying on the enterprise and acquires all the rights of a co-partner.

Answer 5

The contribution to such fund need not be cash or fi xed assets; it could be an intangible like credit or industry. That the parties agreed that any loss or profi t from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership.

Answer 6

The object is unlawful when it is contrary to law, morals, good customs, public order, or public policy. no partnership can arise as the contract is inexistent and void ab initio. - illegal monopolies - in restraint of trade -to carry on gambling -smuggling;

Answer 7

Subject to this general limitation on contracts, a partnership may be organized for any purpose except that it may not engage in an enterprise for which the law requires a specifi c form of business organization, such as banking which, under the General Banking Law of 2000 (R.A. No. 8791, Sec. 8.), only stock corporations may undertake.

Answer 8

A partnership is formed to carry on a business. The idea of obtaining pecuniary profi t or gain directly through or as a result of the business to be carried on is the very reason for the existence of a partnership. - All that is needed is a profi t motive. Hence, even an unprofi table business can be a partnership provided the goal of the business is to generate profi ts.

Answer 9

pecuniary profit - It is suffi cient that it is the principal purpose even if there are, incidentally, moral, social, or spiritual ends.

Answer 10

1. Between persons guilty of adultery or concubinage at the time of donation 2. Made between persons found guilty of the same criminal offense, in consideration thereof 3. Made to a public officer or his wife, descendants and ascendants, by reason of his office Husband and wife may enter into a PARTICULAR PARTNERSHIP:  Where partners retained their separate interests – capital contributions were separately owned and contributed before marriage

Answer 11

o Acquisition of an immovable property for the purpose of reselling it at a profit o Professional partnership o Joint venture – created for a temporary or limited purpose

Answer 12

if there's stipulation in proportion of share of profit, then the same proportion is the loss. if no stipulation on the profit, share of losses is eq

Answer 13

The partnership has a juridical personal- ity separate and distinct from that of each of the part- ners even in case of failure to comply with the require- ments of Article 1772, fi rst paragraph.

Answer 14

the death of either A or B is not a ground for the dismissal of a pending suit against X & Co. Neither A nor B may sue on a cause of action belonging to X & Co., in his own name and for his own benefi t. X & Co. may sue and be sued in its fi rm name or by its duly authorized representative.

Answer 15

1. Contract must appear in a public instrument 2. Must be recorded or registered with SEC  Failure to do so will not prevent formation of partnership or affect liability

Answer 16

partnership acquires juridical personality.

Answer 17

 Absence of these will render contract VOID  Intended primarily for 3rd persons, a de facto partnership or estoppel may exist

Answer 18

the partnership shall not acquire any juridical personality because the contract itself is void.

Answer 19

it is essential that the partners are fully informed not only of the agreement but of all matters affecting the partnership. ∙ For the protection of members and 3rd persons from fraud and deceit ∙ A member who transacts for a secret partnership in his own name becomes personally bound to 3rd persons unaware of the existence of such association ∙ A person may be held liable as a partner or partnership liability may result of 3rd persons by estoppel

Answer 20

1. AS TO EXTENT: (2) a. UNIVERSAL PARTNERSHIP: (2) i. Universal partnership of all present property ii. Universal partnership of profits b. PARTICULAR PARTNERSHIP 2. AS TO LIABILITY: (2) a. GENERAL PARTNERSHIP – consists of general partners who are liable PRO RATA and subsidiarily, sometimes solidarily with their separate property for partnership debts (equally liable) b. LIMITED PARTNERSHIP – formed by 2 or more general partners + one or more limited partners, latter not being personally liable for the obligations of the partnership 3. AS TO DURATION: (3) a. PARTNERSHIP AT WILL – no time is specified and is not formed for a particular undertaking or venture b. PARTNERSHIP WITH A FIXED TERM – existence is fixed or agreed upon or formed for a particular undertaking 4. AS TO LEGALITY: (2) a. DE JURE PARTNERSHIP – complied with all legal requirements for its establishment b. DE FACTO PARTNERSHIP – failed to comply 5. AS TO REPRESENTATION TO OTHERS: (2) a. ORDINARY / REAL PARTNERSHIP – one which actually exist among the partners and also to 3rd persons b. OSTENSIBLE / BY ESTOPPEL – in reality is not a partnership, but has partnership liability 6. AS TO PUBLICITY: (2) a. SECRET PARTNERSHIP – existence to certain persons as partners is unknown to public / any of the partners b. OPEN / NOTORIOUS – existence is known to public 7. AS TO PURPOSE: (2) a. COMMERCIAL / TRADING – for transaction of business b. PROFESSIONAL / NON-TRADING – exercise of profession

Answer 21

(1) Except as provided by article 1825, persons who are not partners as to each other are not partners as to third persons; (2) Co-ownership or co-possession does not of itself establish a partnership, whether such co-owners or co- possessors do or do not share any profi ts made by the use of the property; (3) The sharing of gross returns does not of itself es- tablish a partnership, whether or not the persons shar- ing them have a joint or common right or interest in any property from which the returns are derived; (4) The receipt by a person of a share of the profi ts of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profi ts were received in payment: (a) As a debt by installments or otherwise; (b) As wages of an employee or rent to a land- lord; (c) As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profi ts of the business; (e) As the consideration for the sale of a good- will of a business or other property by installments or otherwise. (n)

Answer 22

1. PERSONS WHO ARE NOT PARTNERS AS TO EACH OTHER ARE NOT PARTNERS AS TO 3RD PERSONS: 2. CO-OWNERSHIP / CO-POSSESSION: 3. 3. SHARING OF GROSS RETURNS: 4. 4. RECEIPT OF SHARE IN THE PROFITS:

Answer 23

Persons who are partners as between themselves are partners as to third persons. Whether or not the parties call their relationship or believe their relationship a partnership is immaterial. Where the parties expressly declare they are not partners, this, as a rule, settles the question as between themselves.16

Answer 24

partnership by estoppel. Thus, where persons by their acts, consent, or representations have misled third persons or parties into believing that the former are partners in a non-existing partnership, such persons become subject to liabilities of partners to all who, in good faith, deal with them in their apparent relations. This

Answer 25

whenever the owner- ship (or co-possession) of an undivided/pro indiviso thing or right belongs to different persons.

Answer 26

no, they share in the profi ts made by the lease of the property, and not of the lease business itself. (2) In this case, the interests are “several”

Answer 27

Held: No. (1) Division of profi ts was merely incidental. — They were co-owners pure and simple. To consider them as partners would obliterate the distinction between a co-ownership and a partnership. C, etc. were not engaged in any joint venture by reason of that isolated transaction.18

Answer 28

The 15 persons were held liable for income tax as an unregistered partnership.

Answer 29

before August 30, 1950, - partneship current: Family code - capacitated to marry each other, live exclusively, void marriage - wages and salaries shall be owned by them in equal shares thus, coownnership

Answer 30

(1) Not even presumptive evidence of partnership. Evangelista vs. Collector of Internal Revenue, sharing of gross returns not prima facie evidence of the relation. sharing of Profit is prima facie evidence of the relation.

Answer 31

a partnership may result,

Answer 32

is a Strong presumptive evidence of partnership, prima facie evidence

Answer 33

(a) As a debt by installments or otherwise; (b) As wages of an employee or rent to a land- lord; (c) As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profi ts of the business; (e) As the consideration for the sale of a good- will of a business or other property by installments

Answer 34

1. Property which belonged to each of them at the time of constitution of partnership 2. Profits which they may acquire from the property contributed  Future properties cannot be contributed GR: property acquired by inheritance, legacy or donation cannot be included by stipulation XPN: fruits thereof - common property  Profits from other sources will become common property only if there is a stipulation

Answer 35

(1) Creation. — Co-ownership is generally created by law. It may exist even without a contract, but partnership is always created by a contract (Art. 1767.), either express or implied; (2) Juridical personality. — A partnership has a juridical personality separate and distinct from that of each partner (Art. 1768.), while a co-ownership has none; (3) Purpose. — The purpose of a partnership is the realization of profi ts (Art. 1767.), while in co-ownership, it is the common enjoyment of a thing or right (see Art. 486.) which does not necessarily involve the sharing of profi ts; (4) Duration. — Under the law, there is no limitation upon the duration of a partnership (see Arts. 1767, 1785.) while in co- ownership, an agreement to keep the thing undivided for more than ten years is not allowed (see Art. 494.); (5) Disposal of interests. — A partner may not dispose of his individual interest in the partnership (Art. 1812.) so as to make the assignee a partner unless agreed upon by all of the partners (see comments under Art. 1814.), while a co-owner may freely do so (see Art. 495.); (6) Power to act with third persons. — In the absence of any stipulation to the contrary (Art. 1803.), a partner may bind the partnership, while a co-owner cannot represent the co-ownership (see Arts. 491, 492.); hence, a judgment secured against only one of the co-owners will not bind the other co-owners (Smith vs. Lopez, 5 Phil. 78 [1905].); and (7) Effect of death. — The death of a partner results in the dissolution of the partnership (Art. 1830[5].), but the death of a co-owner does not necessarily dissolve the co-ownership. (Rodriguez vs. Ravalan, 17 Phil. 63 [1910].)

Answer 36

presumption is that partnership was intended merely for a partnership OF PROFITS Only applicable to universal partnerships

Answer 37

(1) Parties. — A business partnership is created by the volun- tary agreement of two or more partners (Art. 1767.) belonging to either sex, while a conjugal partnership arises in case the future spouses — a man and a woman — agree that it shall govern their property relations during the marriage (Art. 105, Family Code.); (2) Laws which govern. — The ordinary partnerships are, as a rule, governed by the stipulation of the parties (see Arts. 1159, 1308.), whereas a conjugal partnership is governed by law (Arts. 105-133, Ibid.); (3) Juridical personality. — A partnership has a juridical personality (Art. 1768.), while a conjugal partnership of gains has none; (4) Commencement. — A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated (Art. 1784.), while a conjugal partnership of gains commences precisely on the date of the celebration of the marriage and any stipulation to the contrary is void (Arts. 88, 107, Ibid.); (5) Purpose. — The primary purpose of the ordinary partnership is to obtain profi ts (Art. 1767.), while that of a conjugal partnership is to regulate the property relations of husband and wife during the marriage (Art. 74, Ibid.); (6) Distribution of profi ts. — In the ordinary partnership, the profi ts are divided according to the agreement of the partners or in proportion to their respective capital contributions (Art. 1797.), while in a conjugal partnership, the shares of the spouses in the profi ts are divided equally (Art. 106, Ibid.); (7) Management. — In the ordinary partnership, the manage- ment is shared equally by all the partners unless one or more of them are appointed managers in the articles of partnership (Arts. 1801-1803.), while in a conjugal partnership, although the administration belongs to both spouses jointly, the husband’s decision shall prevail in case of disagreement (Art. 124, Ibid.); and (8) Disposition of shares. — In the ordinary partnership, the whole interest of a partner may be disposed of without the consent of the other partners (see comments under Art. 1813.), while in a conjugal partnership, the share of each spouse cannot be disposed of during the marriage even with the consent of the other. (see Arts. 89, 107, 121, 127, Ibid.)

Answer 38

(1) Juridical personality. — A partnership has a juridical personality, while a voluntary association has none; (2) Purpose. — A partnership is always organized for pecuni- ary profi t, while in a voluntary association, this objective is lack- ing; (3) Contributions of members. — In a partnership, there is a contribution of capital, either in the form of money, property, or services, while in a voluntary association for social purposes, although fees are usually collected from the members to maintain the organization, there is no contribution of capital; and (4) Liability of members. — The partnership, as a rule, is the one liable in the fi rst place for the debts of the fi rm, while in a voluntary association, the members are individually liable for the debts of the association, authorized by them either expressly or impliedly, or subsequently ratifi ed by them. (Mechem, op. cit., p. 115.)

Answer 39

(a) The pool has a common fund, consisting of money and other valuables that are deposited in the name and credit of the pool. This common fund pays for the administration and operation expenses of the pool. (b) The pool functions through an executive board, which resembles the board of directors of a corporation, composed of one representative for each of the ceding companies. (c) True, the pool itself is not a reinsurer and does not issue any insurance policy; however, its work is indispensable, benefi cial and economically useful to the business of the ceding companies and Munich, because without it they would not have received their premiums. The ceding companies share ‘in the business ceded to the pool’ and in the ‘expenses’ according to a ‘Rules of Distribution’ annexed to the Pool Agreement. Profi t motive or business is, therefore, the primordial reason for the pool’s formation.’’ (d) Insurers become partners not mere co-owners. — “The petitioner’s reliance on Pascual vs. Commissioner (166 SCRA 560 [1988].) is misplaced, because the facts obtaining there- in are not on all fours with the present case. In Pascual, there was no unregistered partnership, but merely a co- ownership which took up only two isolated transactions. The Court of Appeals did not err in applying Evangelista, which involved a partnership that engaged in a series of transactions spanning more than ten years, as in the case at bar.’’ (AFISCO Insurance Corporation vs. Court of Appeals, 302 SCRA 1 [1999].)

Answer 40

(1) Manner of creation. — A partnership is created by mere agreement of the parties (Art. 1787.), while a corporation is created by law or by operation of law (Sec. 2, B.P. Blg. 68.); (2) Number of incorporators. — A partnership may be organized by only two persons (Art. 1767.), while a corporation (except a corporation sole) requires at least fi ve incorporators (Sec. 10, Ibid.); (3) Commencement of juridical personality. — A partnership commences to acquire juridical personality from the moment of the execution of the contract of partnership (Art. 1784.), while a corporation begins to have juridical personality only from the date of issuance of the certifi cate of incorporation by the Securities and Exchange Commission (Sec. 19, Ibid.); (4) Powers. — A partnership may exercise any power authorized by the partners provided it is not contrary to law, morals, good customs, public order, or public policy (Art. 1306.), while a corporation can exercise only the powers expressly granted by law or implied from those granted or incident to its existence (Secs. 2, 36, Ibid.); (5) Management. — In a partnership, when the management is not agreed upon, every partner is an agent of the partnership (Art. 1803.), while in a corporation, the power to do business and manage its affairs is vested in the board of directors or trustees (Sec. 23, Ibid.); (6) Effect of mismanagement. — In a partnership, a partner as such can sue a co-partner who mismanages (see Arts. 1794, 1806, 1809.), while in a corporation, the suit against a member of the board of directors or trustees who mismanages must be in the name of the corporation (see Sec. 23, Ibid.); (7) Right of succession. — A partnership has no right of succession (see Arts. 1828-1831, 1860.), while a corporation has such right (Sec. 2, Ibid.); (8) Extent of liability to third persons. — In a partnership, the partners (except limited partners) are liable personally and subsidiarily (sometimes solidarily) for partnership debts to third persons (see Arts. 1816, 1822-1824.), while in a corporation, the stockholders are liable only to the extent of the shares subscribed by them (see Secs. 64, 37, Ibid.); (9) Transferability of interest. — In a partnership, a partner cannot transfer his interest in the partnership so as to make the transferee a partner without the consent of all the other existing partners because the partnership is based on the principle of delectus personarum (see Arts. 1767, 1804.), while in a corporation, a stockholder has generally the right to transfer his shares without the prior consent of the other stockholders because a corporation is not based on this principle

Answer 41

EFFECTS OF UNLAWFUL PARTNERSHIP: (4) 1. Contract is void ab initio and the partnership never existed before the law 2. Profits shall be confiscated in favor of the gov’t 3. Instruments or tools and proceeds of the crime shall also be forfeited in favor of the gov’t 4. Contributions of the partners shall not be confiscated unless they fall under no. 3.  Juridical decree is not necessary to dissolve an unlawful partnership

Answer 42

1. Where the part of the business is legal and part illegal, legal part may be had 2. Innocent partners are not precluded as against the guilty partners from recovering their share of profits

Answer 43

Held: (1) The fi rst part is valid. — Although the fi shpond was then in possession of A, neither he nor B was the holder of a fi shpond permit over the area. Be that as it may, they were not, however, precluded from exploiting the fi shpond pending approval of A’s application over the same area. No law, rule, or regulation prohibited them from doing so. Thus, rather than let the fi shpond remain idle, they cultivated it. (2) The second part is illegal. — Under the law, only a holder of a permit or lease and no one else may enjoy the benefi ts allowed by the law. Since the partnership had for its object the division into two equal parts of the fi shpond between A and C after it shall have been awarded to the former, and therefore, it envisaged the unauthorized transfer of one-half thereof to C other than A, it was dissolved by the approval of the application and the award of the fi shpond. The approval was an event which made it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership and, therefore, caused its ipso facto dissolution. And since the contract is null and void, A cannot be made to execute a formal transfer of one-half of the fi shpond and to secure offi cial approval of the same as agreed upon. (Ibid., 29 SCRA 350 [1969].)

Answer 44

Partners must be reimbursed of the amount of their respective contributions

Answer 45

1. Relations among the partners themselves 2. Relations of the partners with the partnership 3. Relations of the partnership with 3rd persons with whom it contracts 4. Relations of the partners with such 3rd persons

Answer 46

GR: no special form is required for the validity or existence of the contract; contract may be made orally or in writing XPN: where contribution is immovable property or real rights, PUBLIC INSTRUMENT is necessary, otherwise VOID.  Transfer of real property to the partnership must be duly registered in the Registry of property of the province or city where property is located to affect 3rd persons

Answer 47

An agreement to enter in a partnership at a future time, which “by its terms is not to be performed within a year from the making thereof” is covered by the Statute of Frauds. Such agreement is unenforceable unless the same be in writing or at least evidenced by some note or memorandum thereof subscribed by the parties.

Answer 48

1. Contract must appear in a public instrument 2. Must be recorded or registered with SEC  Failure to do so will not prevent formation of partnership or affect liability

Answer 49

1. Contract must be in a public instrument 2. Inventory of property contributed must be made, signed by the parties, and attached to the public instrument  Absence of these will render contract VOID  Intended primarily for 3rd persons, a de facto partnership o estoppel may exist

Answer 50

1. When immovable property is possessed or owned by the partnership but not contributed by any of the partners 2. Personal property

Answer 51

1. To show how much is due from each partner to complete his share in the common fund 2. How much is due to each of them in case of liquidation

Answer 52

– immovable property may only be acquired and conveyed in the partnership name

Answer 53

 For the protection of members and 3rd persons from fraud and deceit  A member who transacts for a secret partnership in his own name becomes personally bound to 3rd persons unaware of the existence of such association  A person may be held liable as a partner or partnership liability may result of 3rd persons by estoppel

Answer 54

 Term of existence has been agreed upon expressly (when there is a definite period) or impliedly ( when a particular enterprise of transaction is undertaken)  Automatic dissolution upon expiration of term or accomplishment of undertaking  Can be extended expressly (written or oral agreement) or impliedly (by mere continuation of business after termination of such term or undertaking without any settlement / liquidation) – rights and duties remain the same  With such continuation, partnership for a fixed term or particular undertaking is dissolved, and a new one is created by implied agreement  Particular partnership is dissolved, partnership at will is created  Any one of the partners can dissolve the partnership but IN GOOD FAITH  Mere hope / expectation is not equal to partnership

Answer 55

1. Capitalist partner – contributes money / property to common fund 2. Industrial partner – contributes only industry / service 3. General partner (real partner) – liability to 3rd persons extends to his separate property; can be either capitalist or industrial 4. Limited partner (special partner) – limited to his capital contribution 5. Managing partner – manages affairs or business; appointed 6. Liquidating partner – takes charge of the winding up of partnership affairs upon dissolution 7. Partner by Estoppel (nominal partner) – not really a partner, not being a party to a partnership agreement, but is liable as a partner for protection of 3rd persons 8. Continuing partner – continues business after it has been dissolved by reason of admission of new partner, retirement, death expulsion of one or more partners 9. Surviving partner – remains after a partnership has been dissolved by death of any partner 10. Subpartner – not being a member of a partnership, contracts with a partner with reference to a latter’s share in the partnership

Answer 56

1. Property which belonged to each of them at the time of constitution of partnership 2. Profits which they may acquire from the property contributed

Answer 57

Future properties cannot be contributed GR: property acquired by inheritance, legacy or donation cannot be included by stipulation XPN: fruits thereof  Profits from other sources will become common property only if there is a stipulation

Answer 58

Since the law speaks only of profi ts which the partners may acquire by their industry or work, it follows that profi ts acquired by the partners through chance, such as lottery or by lucrative title without employment of any physical or intellectual efforts, are not included.

Answer 59

It is to be noted that in this class of partnership, the partners retain their ownership over their present and future property. What passes to the partnership are the profi ts or income and the use or usufruct of the same. Consequently, upon the dissolution of the partnership, such property is returned to the partners who own it.

Answer 60

fruits of property subsequently acquired by the partners do not belong to the partnership. Such profi ts may, however, be included by express stipulation. But profi ts which the partners may acquire by their industry or work during the existence of the partnership as well as the usufruct of their present properties belong to the partnership as a matter of right. An express stipulation is necessary to exclude any of them.

Answer 61

when articles of partnership do not specify whether partnership is of “present property” or “of profits” only, presumption is that partnership was intended merely for a partnership OF PROFITS

Answer 62

1. Between persons guilty of adultery or concubinage at the time of donation 2. Made between persons found guilty of the same criminal offense, in consideration thereof 3. Made to a public officer or his wife, descendants and ascendants, by reason of his office

Answer 63

Where partners retained their separate interests – capital contributions were separately owned and contributed before marriage

Answer 64

Held: (1) Partners retained their separate interests. — The view that by the marriage of A and B the company became a single proprietorship is erroneous. Their capital contributions were separately owned and contributed by them before their marriage; and after they were joined in wedlock, such contributions remained their respective separate property. (see Art. 148[1], Civil Code.31) Thus, the individual interest of A and B did not become common property of both after their marriage. The change in the membership of the fi rm is no ground for withdrawing the partnership from the coverage of Section 24 of the National Internal Revenue Code requiring it to pay income tax. A and B did not enter into matrimony and thereafter buy the interests of C with the premeditated scheme or design to use the partnership as a business conduit to dodge the tax laws. (2) Partnership, a particular one. — The fi rm was not a universal partnership, but a particular one. It follows that the partnership was not one that A and B were forbidden to enter under Article 1677. (now Art. 1782.) Nor could the subsequent marriage of the partners operate to dissolve it, such marriage not being one of the causes provided for that purpose by law. (Commissioner of Internal Revenue vs. Suter, supra.)

Answer 65

limited and well-defined, being confined to an undertaking of a single, temporary or ad hoc nature.

Answer 66

o Acquisition of an immovable property for the purpose of reselling it at a profit o Professional partnership o Joint venture – created for a temporary or limited purpose

Answer 67

1. Relations among the partners themselves 2. Relations of the partners with the partnership 3. Relations of the partnership with 3rd persons with whom it contracts 4. Relations of the partners with such 3rd persons

Answer 68

GR: commences from the time of execution of the contract XPN: when there is contrary stipulation  Registration in the SEC is not essential to give it juridical personality  Necessary that all essential requisites are present  Partners may stipulate some other date for the commencement – makes the partnership inchoate or unperformed, thus not yet consummated, haven’t started yet

Answer 69

— The partners may stipulate some other date for the commencement of the partnership. Persons who have entered into a contract to become partners at some future time or on the happening of some future contingency do not become partners until or unless the agreed time has arrived or the contingency has happened. As long as the agreement for a partnership remains inchoate or unperformed, the partnership is not consummated.

Answer 70

 Term of existence has been agreed upon expressly (when there is a definite period) or impliedly ( when a particular enterprise of transaction is undertaken)  Automatic dissolution upon expiration of term or accomplishment of undertaking  Can be extended expressly (written or oral agreement) or impliedly (by mere continuation of business after termination of such term or undertaking without any settlement / liquidation) – rights and duties remain the same  With such continuation, partnership for a fixed term or particular undertaking is dissolved, and a new one is created by implied agreement  Particular partnership is dissolved, partnership at will is created  Any one of the partners can dissolve the partnership but IN GOOD FAITH  Mere hope / expectation is not equal to partnership

Answer 71

1. ACTION for specific performance with damages and interests from the defaulting partner from the time he should have complied with his obligation 2. RESCISSION or annulment of partnership contract on the ground of fraud or misinterpretation committed by one of the parties

Answer 72

1. CONTRIBUTE at the beginning of the partnership / stipulated time the money, property or industry he promised to contribute 2. ANSWER for eviction in case the partnership is deprived of the determinate property contributed 3. ANSWER to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of the actual delivery 4. PRESERVE property with diligence of a good father of a family pending delivery to the partnership 5. INDEMNIFY partnership for any damage caused to it by delay of contribution

Answer 73

the remedy of the other partner or the partnership is not rescission but an action for specifi c performance (to collect what is owing) with damages and interest from the defaulting partner from the time he should have complied with his obligation. From the mere fact that the property which a partner ought to deliver does not pass to the common fund on time, the partnership fails to receive the fruits or benefi ts which the said contribution produced as well as those it ought to produce, thus prejudicing the common purpose of obtaining from them the greatest possible profi ts through some means of speculation or investment. The injury, therefore, to the partnership is constant.

Answer 74

1. If a partner neglects or refuses without reasonable cause and the partnership suffered loss 2. If partner is compelled to make good the loss, each member of the firm, including himself, will receive his proportion of the amount in the distribution of the partnership assets and in no just sense can this be regarded as compensation for the service individually rendered. 3. If under the circumstances of the case the proper measure of the damages or loss is the value of the services wrongfully withheld, then defendant should be charged this value

Answer 75

– makes the partner ipso jure a debtor of the partnership even in the absence of any demand

Answer 76

1. ACTION for specific performance with damages and interests from the defaulting partner from the time he should have complied with his obligation 2. RESCISSION or annulment of partnership contract on the ground of fraud or misinterpretation committed by one of the parties

Answer 77

– no demand is necessary to put partner in default

Answer 78

1. If a partner neglects or refuses without reasonable cause and the partnership suffered loss 2. If partner is compelled to make good the loss, each member of the firm, including himself, will receive his proportion of the amount in the distribution of the partnership assets and in no just sense can this be regarded as compensation for the service individually rendered. 3. If under the circumstances of the case the proper measure of the damages or loss is the value of the services wrongfully withheld, then defendant should be charged this value

Answer 79

1. If there is no stipulation – share of each partner in the profits and losses is in proportion to contribution 2. Appraisal is made: a. First, in the manner prescribed by the contract of partnership b. Second, in the absence of stipulation, by experts chosen by the partners c. According to prices  In case of immovable property – appraisal is made in the inventory of said property

Answer 80

1. Delayed contribution of money 2. Partnership money converted to the personal use of the partner

Answer 81

1. CONTRIBUTE on the date due the amount he has undertaken to contribute 2. REIMBURSE any amount he may have taken and converted for own use 3. PAY the agreed / legal interest, if he fails to pay contribution on time or when he uses common fund for personal use 4. INDEMNIFY the partnership for the damages caused by the delay or conversion

Answer 82

GR: He is liable for interest and damages from the time contribution was due or from the time he converted amount for his own use XPN: unless there is a stipulation fixing a different time

Answer 83

1. Where fraudulent misappropriation committed – partner is guilty of ESTAFA 2. Where there was mere failure to return – no ESTAFA  REMEDY: civil case arising from the partnership contract for a liquidation of partnership and levy on its assets if there should be any

Answer 84

GR: He cannot engage in business for himself XPN: unless he is expressly permitted to do so

Answer 85

1. EXCLUDE him from firm (with right to damages) 2. AVAIL themselves of the benefits which he may have obtained in violation (with right to damages)

Answer 86

1. As regards an industrial partner – prohibition is absolute and applies whether to engage in same business or any kind of business 2. As regards capitalist partner – prohibition extends only to any operation which is of the SAME KIND of business which partnership is engaged in  XPN: stipulation to the contrary  Partnership acquires an EXCLUSIVE RIGHT to avail of the industrial partner’s services; engaging in business for himself is prejudicial to the interest of the other partners  Action for specific performance to compel partner to performed promised work or service is not applicable – will amount to involuntary servitude  Mere toleration by partnership will not exempt the industrial partner from liability

Answer 87

1. Partnership acquires an EXCLUSIVE RIGHT to avail of the industrial partner’s services; engaging in business for himself is prejudicial to the interest of the other partners 2.  Action for specific performance to compel partner to performed promised work or service is not applicable – will amount to involuntary servitude 3. Mere toleration by partnership will not exempt the industrial partner from liability

Answer 88

GR: Partners shall contribute equal shared to the capital of partnership XPN: Unless there is a stipulation to the contrary  Not applicable to I.P. unless he also contributed capital aside from services

Answer 89

1. CONTRIBUTE additional share 2. If he refuses to contribute, SELL his interest to other partners

Answer 90

1. There is imminent loss in the business 2. Majority of the capitalist partners think that additional contribution would save the business 3. A capitalist partner refuses deliberately to contribute additional share (dahil kupal lang talaga siya) 4. There is no agreement that even in case of imminent loss, they are not obliged to contribute

Answer 91

REQUISITES: (3) 1. There exists at least 2 debts: a. One from partnership b. Another from a particular partner 2. Both debts are demandable 3. Partner who collects is authorized to manage and actually manages the partnership EXAMPLE: A and B are partners in X and Co., with A as the managing partner. C is indebted to A in the sum of P2,000.00. C is also indebted to the partnership in the sum of P4,000.00. Both debts are demandable. A collects the amount of P1,500.00 from C. If A issues a receipt to the effect that it is in payment of his (A’s) credit, P500.00 will be applied only to his credit, the partnership being entitled to a proportionate amount of P1,000.00 in the payment made by C. But if A gives a receipt for the account only of the partnership credit, the amount of P1,500.00 will be fully applied to the latter.

Answer 92

 The sum received but the managing partner shall be APPLIED to both credits in proportion to their amounts XPN: where he received it specifically for the partnership only, the whole sum should be applied to partnership credit Where the manner of management has not been agreed upon and all the partners participate in the management of partnership, then every partner shall be considered a managing partner  Does not apply where collecting partner for his own credit only is NOT authorized to manage  Where the manner of management has not been agreed upon and all the partners participate in the management GR: Partnership credit should always be prioritized XPN: debtor is given the right to prefer payment of the debt to partner if it should be more onerous to him (has higher interest rate)

Answer 93

1. A partner has received his share of partnership credit (in whole or in part) 2. Other partners have not collected their shares 3. Partnership debtor has become insolvent D owes partnership X and Co. P4,500.00. A, a partner, received a share of P1,500.00 ahead of B and C, the two other partners. When B and C were collecting from D, the latter was already insolvent. In this case, even if A had given a receipt for his share only, he can be required to share the P1,500.00 with B and C.

Answer 94

GR: Partnership credit should always be prioritized XPN: debtor is given the right to prefer payment of the debt to partner if it should be more onerous to him (has higher interest rate)

Answer 95

1. Yes – based on the principle of community and equality which ought to exist among all the partners 2. No – it would not be just for the person who was diligent in collecting the money to suffer in the negligence of the other partners; and dissolution also dissolves obligation of each partner to one another

Answer 96

GR: Damages caused by a partner to the partnership cannot be offset by the profits or benefits which he may have earned for the partnership by his industry 1. Partner has the obligation to secure benefits for partnership 2. Has the obligation to exercise diligence in the performance of his obligation as a partner 3. Obligation to repair the injury XPN: If unusual profits are realized through the extraordinary efforts of the partner at fault, the courts may equitably mitigate or lessen his liability for damages

Answer 97

1. BORNE BY PARTNER – Specific and determinate things which are NOT FUNGIBLE where only use is contributed 2. BORNE BY PARTNERSHIP – Specific and determinate things the ownership of which is transferred to the partnership 3. BORNE BY PARTNERSHIP – Fungible things or thing which cannot be kept without deteriorating even if they are contributed only for the use of the partnership 4. BORNE BY PARTNERSHIP – Things contributed to be sold 5. BORNE BY PARTNERSHIP – Things brought and appraised in the inventory

Answer 98

1. REFUND amounts disbursed by the partner in behalf of the partnership (loans / advances) plus interest from the time the expenses are made (not from the date of demand) 2. ANSWER for the obligations the partner may have contracted in good faith in the interest of the business 3. ANSWER for the risks in consequence of its management  XPN: unless there is a stipulation to the contrary: In the absence of an aggreement to the contrary, no partner is entitled to compensation for his services to the partnership without the consent of all the partners unless it can be implied from the circumstances that the parties intended a partner to receive additional compensation where the partner’s work was beyond normal partnership functions.

Answer 99

Held: Inasmuch as in this case nothing appears other than the failure to fulfi ll an obligation on the part of a partner who acted as agent in receiving money for a given purpose, for which he has rendered no accounting, such agent is responsible only for the losses which, by a violation of the law, he incurred. This being an obligation to pay in cash, there are no other losses than the legal interest which interest is not due except from the time of the judicial demand (see Art. 2212.) or, in the present case, from the fi ling of the complaint. Article 1796 is not applicable insofar as it provides that “the partnership shall be responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest from the time the expenses are made,” for the reason that no other money than that contributed as capital is involved. (Martinez vs. Ong Pong Co., 14 Phil. 726 [1909].)

Answer 100

1. Partners share the profits according to their agreement 2. If there is no agreement: a. Proportionate to capital contribution b. Industrial partner will first receive his share before the capitalist partners; amount is not fixed as long as it is just and equitable under the circumstances

Answer 101

1. Distributed according to agreement 2. If there is no agreement: a. Proportionate to profit-sharing ratio b. Industrial shall not be liable for losses 3. If no profit-sharing is stipulated: a. Losses shall be borne by the partners in proportion to their capital contributions b. Purely industrial partners will not be liable for losses

Answer 102

 3 rd person is not a partner  To guarantee utmost impartiality in the distribution of shares of profits and losses  His designation is generally binding unless manifestly inequitable (lantarang pandaraya?)  A partner who has begun to execute the decision of the 3 rd person / fails to impugn the same W/IN 3 MONTHS from the time he had knowledge of it can no longer complain

Answer 103

 Even if stipulation is void, partnership is still valid  Profits and losses shall be apportioned as if stipulation did not exist  Stipulation expressly stipulating that there shall be no liability for losses / party does not intend to share in the losses – factor in determining that no partnership exists  Where the one excluded from profit / loss-sharing is not intended to become a partner, stipulation is valid  Industrial partner is excluded from loss-sharing  Unequal sharing is valid unless it is so gross as to exclude partners from shares

Answer 104

GR: a partner appointed as manager has all the powers of a general agent as well as all incidental powers necessary to carry out the object of the partnership in the transactions of its business XPN: when the powers of the manager are specifically restricted

Answer 105

Each partner in a general partnership has equal voice in management of business.

Answer 106

Can execute all acts of administration notwithstanding the opposition of the other partners, unless he acts in bad faith  His power is revocable: a. Only upon just and lawful cause b. Upon the vote of the partners representing the controlling interest

Answer 107

 Can be revoked at any time for any cause  Merely a simple contract of agency

Answer 108

GR: Partner is not entitled to compensation other than his share of profits XPN: Where law provides a contract for compensation: 1. A partner engaged by his co-partners to perform services not required of him in fulfillment of duties 2. Where there is extraordinary neglect on the part of one partner to perform his duties toward the firm’s business, imposing entire burden on the remaining partner 3. One partner may employ his co-partner to do work for him outside and independent of co-partnership and become personally liable therefor

Answer 109

As a partial distribution of profi ts. A was a glass blower and was recommended to B as one who was familiar with, and had the ability to build, neon signs. B was “to furnish the necessary fi nancial backing” and it is a reasonable inference that A, in turn, was to devote himself to the manufacture, at least, of the signs. Under such arrangement and the specifi c agreement “to go 50-50,” neither partner was entitled to compensation for services in the absence of an express or implied agreement. There was no specifi c agreement that A should receive any salary, as such. A’s drawing account is a well-recognized modern business method of furnishing the employee with means of maintenance while engaged in a service from which wages and commissions are to accrue. In any event, he did not stipulate, in any terms, for the payment of any salary. He was merely to receive a weekly amount, termed a “drawing account,” from a partnership that was upon a “50-50” basis. Upon all the fi ndings, A’s drawing account was against possible profi ts, and not by way of payment for his services. (Boyer vs. Bowles, 37 N.E. 2d 489 [Mass. 1941].)

Answer 110

Each one may separately perform acts of administration:  If one / more managing partners shall oppose the acts of others, the decision of majority will prevail  Right to oppose can be exercised only by those entrusted with the management of the partnership and not just by any partner  In case of tie: decided by the vote of the partners owning the controlling interest, that is, more than 50% of the capital investment  When partnership DO NOT SPECIFY respective duties: one partner has no more powers than the others in the conduct and management of the firm’s business  If partnership SPECIFIES: decision of the partner concerned shall prevail, but should act in GOOD FAITH

Answer 111

1. 2 / more partners have been appointed as managers 2. No specification of their respective duties 3. No stipulation that one of them shall not act without the consent of all the others

Answer 112

(1) A, B, and E were appointed as managing partners without specifi cation of their respective duties. A contract entered into by A, if with the conformity of B although against the objection of E, is valid. (2) If the managing partners are A, B, C, and E, and C sided with E so that there was a tie and when the matter was put to a vote of all the partners, A, B, and D were in favor, with C, E, and F against, the contract is not valid; if A and E were the ones who originally voted in favor of the contract and subsequently, F sided with them, the transaction is deemed ratifi ed by the controlling interest in the partnership. (3) Suppose after a tie, the voting is as follows: A, B, and F — in favor, and C, D, and E — against, both sides representing 50% of the interest, with neither side willing to give way to the other, what shall be the rule? The law is silent on this point. It is believed that in such case the contract should be considered as having been entered into without authority. In other words, when the partners are equally divided, those who vote against the contract or who resist change must prevail. The best solution is for the partners to dissolve the partnership. A shall be responsible for damages if it is found that he was at fault. (see Art. 1794.) If the contract is merely proposed, it may or may not be entered into depending upon the decision of the majority of the managing partners or of the controlling interest, as the case may be.

Answer 113

GR: If it is stipulated that none of the managing partners shall act without the consent of others, CONCURRENCE OF ALL shall be necessary for validity of the acts, absence or disability of any one of them cannot be alleged XPN: there is imminent danger of grave or irreparable injury to the partnership XPN to the XPN: When one of the managers opposes to the proposed act  Consent of managing partners is not necessary in routine transactions  Written authority refers to formal and unusual written contracts

Answer 114

All partners have equal rights in the management of partnership affairs  Whatever any one of them may do alone shall bind partnership  In case of timely opposition of the partner, the matter shall first be decided by the majority vote  In case of a tie: matter will be decided by the vote of the partners representing the controlling interest

Answer 115

Consent need not be express  It may be presumed from the fact of knowledge of the alteration without interposing any objection  If refusal to give consent is MANIFESTLY PREJUDICIAL: o REMEDY: court intervention

Answer 116

SUBPARTNER – is 3rd person that a partner may have with him in his share without the consent of the other partners.

Answer 117

SUBPARTNERSHIP – partnership formed BETWEEN a member of the partnership and a 3rd person for division of profits  Distinct and separate from the main or principal partnership  Does not affect the composition, existence, or operations of the firm  Subpartner does not become a member of the partnership, even though the agreement is known to the other members of the firm  Subpartner does not acquire rights of the partner, nor is he liable for its debts

Answer 118

The original contract of partnership between A, B, and C is not in any manner altered. D is considered merely a creditor of A who associated him in his share. Consequently, D has no right to intervene in the partnership to which he is a mere stranger. Like an assignee, D cannot interfere in the management or administration of the partnership business, require information or account, or inspect partnership books.

Answer 119

 Shall be kept, subject to any agreement, between the partners o Primarily rests on managing / active partner o Or particular partner given record-keeping duties  Kept at the principal place of business  Every partner shall have access at any reasonable hour o Business days throughout the year o Even after dissolution  To inspect and copy any of them o To enable the partners to have true and full information of all things affecting partnership

Answer 120

 True and full information to every partner / representative of deceased partner / partner under legal disability upon request or demand  Also under the duty of voluntary disclosure of material facts relating to or affecting partnership affairs  No concealment, just GOOD FAITH  Does not arise with respect to information in the partnership books

Answer 121

In this case, A is liable to B for the latter’s share in the profi ts. When A purchased B’s interests, A was under the duty to make disclosure of facts having a bearing on the value of such interests which were not known to B. (2) If A discovered a valuable mine on a land of the partnership, he is under a duty to disclose such information before purchasing the interest of B.

Answer 122

1. Act for common benefit 2. Begins during formation of partnership, continues even after dissolution, until termination 3. Account for commissions and discounts received in acquiring property for future partnership 4. Account for secret & similar profits  REMEDY: Petition for judicial dissolution of partnership 5. Make full disclosure of information belonging to the partnership 6. Not acquire interest / right adverse to the partnership 7. Account for earnings accruing even after termination

Answer 123

B has a right to share in the profi t and A holds as trustee the profi ts derived by him from the transaction.

Answer 124

Held: No. In this case, when A redeemed the property in question he became a trustee for the benefi t of his co-partner, B, subject to his right to demand from the latter his contribution to the price of redemption plus legal interest. (Catalan vs. Gatchalian, 105 Phil. 1270 [1959].)

Answer 125

Held: No. A occupied a double role in the transactions which gave rise to the litigation: fi rst, as lessee, and secondly, as a purchaser seeking to terminate the lease. While yet a partner, A participated in the creation of the lease to the partnership; and when he sold out his interest in the fi rm to B, this operated as transfer to B of his interest in the fi rm assets, including the lease; and A cannot now be permitted, in the guise of a purchaser, to destroy an interest derived from himself and for which he has received full value. A acted in bad faith. He had been in relation of confi dence with B and in that position had acquired knowledge of the possibilities of the property. On account of his status as partner, A knew that the original lease had been extended and the extent of the valuable improvements that had been made thereon. It would be shocking to the moral sense if the condition of the law were found to be such that A, after profi ting from the sale of his interest in a business, worthless without the lease, could intervene as purchaser of the property, and confi scate for his own benefi t the property which he had sold for a valuable consideration to B. Above all other persons in business relations, partners are required to exhibit towards each other the highest degree of good faith.

Answer 126

Held: No. After the termination of an agency, partnership, or joint adventure, the party who stood in a fi duciary relation to another is free to act in his own interest with respect to the same subject matter provided he has done nothing during the continuance of the relation to lay a foundation for an undue advantage to himself. To act as fi duciary of another does not necessarily imply the creation of a permanent disability in the fi duciary to act for himself in regard to the same subject matter.

Answer 127

Held: No. Article 1807 is not applicable. Since B was in control of the affairs of the partnership, it is hard to believe that C and D could have defrauded B of the amounts A claims. The more logical inference is that if C and D had obtained any portion of the funds of the partnership for themselves, it must have been with the knowledge and consent of B, for which reason no accounting could be demanded from them therefor, considering that Article 1807 refers only to what is taken by a partner without the consent of the other partner or partners. Since the properties supposed to have been acquired by C and D with partnership funds appear to have been transferred to their names long after the dissolution of the partnership, C and D have no obligation to account to anyone for such acquisitions in the absence of clear proof that they had violated the trust of B, the deceased partner, during the existence of the partnership.

Answer 128

Held: Yes. There is no relation of trust or confi dence known to the law that requires of the parties a higher degree of good faith than that of partnership. Nothing less than absolute fairness will suffi ce. Each partner is the confi dential agent of all the other and each has the right to know all that the others know. Nor will one partner be permitted to benefi t at the expense of the fi rm. A, B, C, D, and E were under a legal obligation as partners to share proportionately with F the option money which was obtained by the optioners by virtue of the partnership relationship. The important factor is that they received money which should have gone into the partnership treasury and then should be divided proportionately among all of the partners. When they received the money under the conditions recited, they became, in effect, trustees of this fund for the benefi t of F for his share in the proceeds.

Answer 129

 Capitalist – RELATIVELY prohibited to engage in the same / similar line of business (stipulation to the contrary)  Industrial – ABSOLUTELY prohibited to engage in the same / similar line of business

Answer 130

1. Bring to common fund all profits accrued during his own transactions 2. Bear for all the losses 3. Be evicted

Answer 131

1. Wrongfully excluded in the partnership / right to possession to property 2. Right exist in the terms of agreement 3. Provided in 1807 4. Just and reasonable circumstances

Answer 132

 Commenced and tried where defendant resides / where plaintiff resides at the election of latter Personal action / action in personam  Nature – performance of a personal duty on his part

Answer 133

Held: They cannot be considered profi ts until costs and expenses have been deducted. Moreover, the profi ts of a business cannot be determined by taking into account the result of one particular transaction instead of all the transactions had. Hence, the need for a general liquidation before a member of a partnership may claim a specifi c sum as his share of the profi ts. (Sison vs. H. McQuaid, 94 Phil. 201 [1953].)

Answer 134

Held: No. There was no intention on the part of B to relinquish his rights as a partner nor did he give any ground whatever to make A believe that he intended to relinquish them. On the contrary, B notifi ed A when he accepted the money that he waived none of his rights in the partnership. Furthermore, the money fell short of the capital contrib- uted by B and it was possible that profi ts might have been realized from the business during the period in which A was administering it and if so, still retained in A’s hands. For these reasons, the acceptance of the money was not in itself incon- sistent with the continuance of the partnership relations, as would have been the case had B withdrawn his entire interest in the partnership. There was, therefore, nothing upon which a waiver, express or implied, could be predicated.

Answer 135

Held: Such failure should be construed as a strong circumstance indicating the accuracy of the account.

Answer 136

Held: No. After accepting his shares without any reservation, B virtually confi rmed his approval of the statement of accounts, and its signing thereby became a mere formality to be complied with by B exclusively. His refusal to sign, after receiving the shares, amounted to a waiver of that formality in favor of A who had already performed his obligation. This approval precludes any right on the part of B to a further liquidation, unless he can show there was fraud or mistake in said approval.

Answer 137

Held: Yes. A has faithfully complied with her prestation with respect to the other partners. This is clearly shown by the fact that it was only after the fi ling of the complaint by A and the answer thereto that appellants (B, C, and D) exercised their right to exclusion by alleging in their supplemental answer dated July 29, 1964 — or after around nine (9) years from June 7, 1955 — the agreement aforementioned. Having always known A as a City Judge even before she joined the appellant company as an industrial partner, it took the appellants so many years before excluding her from said company. There was no pretense even on the part of the appellants that A engaged in any business antagonistic to that of appellant company. Furthermore, the theory that A has never been an industrial partner cannot be reconciled with the agreement evidenced by the amended articles of partnership. As an industrial partner, A has the right under Article 1809 for a formal accounting and to receive her share in the net profi t that may result from such an accounting.

Answer 138

1. Reimbursement of advanced amounts and indemnification of risks as consequences of management 2. Access and inspection of partnership books 3. True and full information affecting partnership affairs 4. Formal accounting 5. Dissolution under certain conditions

Answer 139

GR: Property used, when there is no express agreement, will not be partnership property XPN: Implied (intent of the partners): 1. Property is listed as asset in partnership books 2. Income generated by property is RECEIVED by partnership 3. Taxes are also paid by partnership XPN to the XPN: repair & maintenance of property only

Answer 140

GR: Property acquired in own name using partnership funds is presumed partnership property XPNS: (2) 1. Stipulation to the contrary 2. If after dissolution but before termination, it will be a SEPARATE property, but said partner will be liable for the funds used

Answer 141

1. Equal rights to possess specific partnership property for partnership purposes 2. No right to possess if for other purpose w/o consent of partners 3. Not assignable - A partner cannot separately assign his right to specifi c partnership property but all of them can assign their rights in the same property. 4. Not subject to attachment / execution XPN: claims against partnership; representatives of deceased partner cannot claim under homestead / exemption laws 5. Not subject to legal support

Answer 142

1. Agreement 2. Proportion to contribution Industrial partner – just & equitable under the circumstances

Answer 143

1. INTERFERE in management 2. REQUIRE information / account 3. INSPECT partnership books

Answer 144

(1) Dissolution of partnership not intended. — The new rule is preferable for many partnership assignments are made merely as security for loans, the assigning partner never intending to destroy the partnership relation. Moreover, if the assigning partner neglects his partnership duties after assignment, the other partners may dissolve the partnership under Article 1830(1, c) which provides that “Dissolution is caused . . . by the express will of all the partners who have not assigned their interests, or suffered them to be charged for their separate debts, either before or after the termination of any specifi ed term or particular undertaking.” (Teller, op. cit., p. 53.) (2) Dissolution of partnership intended. — A partner’s convey- ance of his interest in the partnership operates as a dissolution of the partnership only when it is clear that the parties contemplat- ed and intended the entire withdrawal from the partnership of such partner and the termination of the partnership as between the partners.

Answer 145

1. RECEIVE in accordance w/ his contract of profits accruing to assigning partner 2. AVAIL of usual remedy in the event of fraud 3. RECEIVE the assignor’s interest in case of fraud 4. REQUIRE account of partnership affairs, but only when partnership is dissolved

Answer 146

In this case, B has no legal claim against the partnership to the extent of P300,000.00. Under Article 1813, the mortgage merely entitles it to receive in accordance with its contract the profi ts to which A would otherwise be entitled.

Answer 147

1. CHARGING ORDER:  Condition: claims of partnership creditors must be satisfied first  Then secure judgment on his credit and then apply to proper court for a C.O. subjecting the interest of debtor w/ payment of the unsatisfied amount of such judgment + interest 2. Other remedies in Art. 1814 of judgment if debt remains unsatisfied, notwithstanding issuance of C.O.  Appointment of receiver  Sale of interest  Etc.

Answer 148

No. T’s remedy is to apply for a charging order against the partnership. No specifi c property is attached. The partnership continues and T’s judgment is satisfi ed out of partnership assets. The partnership need not be necessarily dissolved.

Answer 149

With respect, however, to the partner’s interest in the part- nership as distinguished from his interest in specifi c partnership property, the partner may avail himself of the exemption laws after partnership debts have been paid. A partner’s interest or share in the partnership is really his property.

Answer 150

Held: No. (1) Partner’s interest, not in specifi c partnership property, but in partnership itself. — Tenancy in partnership is a restricted adaptation of the common-law joint tenancy to the particular needs of the partnership relation. One of those needs arose from the formerly confl icting claims to specifi c partner- ship property of (1) separate creditors of a partner, and (2) as- signees of a partner’s share in an aliquot part of the fi rm assets. To meet that need, two simple “incidents” have been at- tached to the tenancy of the partnership: (1) expressly, the inter- est of each tenant or partner in specifi c partnership property is put beyond reach of his separate creditors; and (2) it has been made non-assignable. This means simply that the partner-own- er is deprived of all power of separate disposition even by will. All a partner has now, subject to his power of individual disposition, and all that is subject to the claims of his separate creditors, is his interest, not in specifi c partnership property, but in the partnership itself. Plain is the purpose that all part- nership property is to be kept intact for partnership purposes and creditors. (2) Receiver of partner’s “share in profi ts” entitled to relief. — It follows that a receiver of a partner’s “share of profi ts,” acting under a charging order and Section 28 (Art. 1814.) has the right in a proper action to have adjudicated the nullity of any mortgage Art. 1814 Art. 1814 OBLIGATIONS OF THE PARTNERS 165 Property Rights of a Partner or any other assignment by some but not all of the partners of their interest in specifi c property of the partnership less than the whole. Such a receiver is entitled to any relief under the language of the statute “which the circumstances of the case may require” to accomplish justice under the law. Obviously, a part of such relief is the avoidance of any unauthorized attempt to dispose of the partnership property. Such a receiver is entitled to the “share of the profi ts and surplus” of the partner who happens to be the judgment debtor. While he is not entitled to the management of the fi rm as a partner, the receiver would be of little use if he could not protect “profi ts and surplus” by preventing such unauthorized and illegal dissipations of fi rm assets. (Windom National Bank vs. Klein, 254 N.W. 602 [Minn. 1934].)

Answer 151

1. Use of misleading name 2. Use of names of deceased partners - unless the firm indicates in all its communications that said partner is deceased

Answer 152

The legacy vests in partnership X, notwithstanding that E, F, and G were unknown to A during his lifetime. It may be argued, however, that the intention of A was to give the legacy to the old partnership which no longer exists.

Answer 153

Held: No. The use of the name of A will run counter to Article 1815. In fact Article 1830(5) clearly ordains that a partnership is dissolved by the death of any partner. Unlike in the United States, in our jurisdiction there is no local custom that sanctions the practice of allowing the continued use of a deceased or former partner’s name in the fi rm name of law partnerships, and even if such a custom exists, the same cannot be applied as it is contrary to law. Firm names, under our custom, identify the more active and/or more senior members or partners of the law fi rm.

Answer 154

 Partners become personally liable only after all the partnership assets have been exhausted  Industrial partner – will have to pay but can recover amount from capitalist partners o XPN: unless there is an agreement to the contrary o He cannot be relieved from liability to 3rd persons

Answer 155

Held: No. In the instant case, there were fi ve general partners when the promissory note in question was executed for and in behalf of the partnership. Since the liability of the partners are pro rata, the liability of each partner shall be limited to only one- fi fth of the obligations of X company. The fact that the complaint against F was dismissed, upon motion of A, does not unmake F as a general partner in the defendant company. (Island Sales, Inc. vs. United Pioneers General Construction Company, 65 SCRA 554 [1975]; see Dietrich vs. Freeman, 18 Phil. 341

Answer 156

Under Article 1816, D can sue the fi rm and all the part- ners including C, the industrial partner. The capital assets of P20,000.00 shall fi rst be exhausted thereby leaving an unsatis- fi ed liability of P6,000.00. D can recover the amount from A, B, and C jointly or pro rata at P2,000.00 each. After paying D, C can recover for reimbursement of P1,000.00 each from A and B. Under Article 1797, he is exempted from the loss of P6,000.00 as among themselves, unless there is a stipulation to the contrary. If, in the same example, the capital contributions of A and B are P15,000.00 and P5,000.00, respectively, in the absence of stipulation, they share in the loss of P6,000.00 in proportion to their contributions, to wit: A — 3/4 or P4,500.00, and B — 1/4 or P1,500.00. Hence, B can recover P500.00 and C, P2,000.00 from A.

Answer 157

EXAMPLE: A, B, and C are partners in a business. Each of them contributed P10,000.00 each. They stipulated that the liability of A shall not exceed his capital contribution. Thus, if the partnership assets have been exhausted and there still remains an unpaid balance of P9,000.00 in favor of creditor D, the latter can still recover P3,000.00 each from the partners as their stipulation cannot adversely affect him. However, since the agreement is binding among the partners, A is entitled to credit from B and C for the amount of P3,000.00 paid by him to D. A, however, cannot recover his contribution of P10,000.00. (see Art. 1799.)

Answer 158

1. Partner had no authority to act such 2. 3 rd person had knowledge of lack of authority (bad faith)

Answer 159

XPN: when authorized by other partners

Answer 160

GR: 1 / more partners have no authority to: 1. Assign the property in trust for creditors / assignee’s promise to pay the debts of partnership 2. Dispose of the goodwill of the business 3. Do any act which would make it impossible to carry on the ordinary business 4. Confess a judgment 5. Enter into a compromise concerning a partnership claim / liability 6. Submit a partnership claim / liability to arbitration 7. Renounce claim of partnership XPNS: (2) 1. When authorized by other partners 2. Unless they’ve abandoned the business

Answer 161

Partner is not liable to 3rd persons having actual / presumptive knowledge of restrictions (BF), W/N apparently carrying usual way of business

Answer 162

(1) A, B, and C are partners in the buying and selling of home appliances. The sale of a refrigerator by C to D is binding upon the partnership because it is apparently for carrying on in the usual way the business of the partnership even if C had, in fact, no authority. But if D had knowledge of such lack of authority, then the partnership would not be bound by the act of C. (2) Where the partnership business is to deal in merchan- dise and goods, i.e., movable property, the sale of its real prop- erty (immovables) is not within the ordinary powers of a part- ner, because it is not in line with the normal business of the fi rm. But where the express and avowed purpose of the part- nership is to buy and sell real estate, the immovables thus ac- quired by the fi rm form part of its stock-in-trade (not merely as business site), and the sale thereof is in pursuance of partner- ship purposes, hence, within the ordinary powers of the part- ner. (Goquiolay vs. Sycip, 9 SCRA 663 [1963].)

Answer 163

No. The general rule is that a single partner has no implied power to sell partnership property not held for sale. (Teller, op. cit., p. 185.)

Answer 164

1. Conveyance was not in the usual way of business 2. D had knowledge of lack of authority (BF)

Answer 165

1. Selling land is not their usual course of business 2. D had knowledge of A’s lack of authority (BF)

Answer 166

D will only get E.I.

Answer 167

Passes all the rights in such property

Answer 168

1. May acquire a valid title – has the right to presume that possession / interest of the partnership is consistent w/ record title 2. No need for actual / constructive notice of any trust

Answer 169

EXAMPLES: (1) A borrowed P1,000 from B in whose favor he executed a promissory note. A made the statement that he was acting for C and that the money was intended for C. C never authorized A to borrow money from B. The declaration of A that he was acting for C and that the money was intended for C is not admissible against C as to make him liable to B. (2) Suppose C said on one occasion in the presence of D that he received the money or that the contract was entered into by A with his (C’s) consent, this statement can be testifi ed to by D in a litigation by B against C. (3) If A was really an agent of C in the transaction, then, whatever is said or done by A while acting within the scope of his authority is admissible against C, his principal, the same as if C personally entered into the contract with B. (4) Assuming that A is a partner and C is the partnership, it is clear, on the same legal principle, that the statement of A while transacting the business of the partnership within the scope of his authority is evidence against the partnership. (5) Where, however, A acted in his own name and B extended the loan on the personal credit of A, any admission made by A is not binding on C, the partnership.

Answer 170

Held: No. (1) Admission made not connected with partnership business. — Whether the admission of liability made by a partner binds the partnership depends on whether the partner was acting within the scope of express, implied, or apparent authority at the time of making the statements or declarations. One partner is not the agent of the firm for the purposes of admitting either the existence of the partnership or that a transaction was a part of the partnership’s business. A partner cannot by his declaration alone bring a transaction within the scope of the business when the facts show that it has no connection with the partnership business.

Answer 171

1. A borrowed 50K from B, said that he was acting for C and money was for C, but in fact C never authorized A:  NOT admissible against C 2. C admitted to D (a 3rd person) of an act made by A with his consent:  Statement by D in a litigation by B against C is ADMISSIBLE 3. A, agent of C, acting within scope of authority:  Any act / statement is ADMISSIBLE against C, who is the principal 4. A acted in his own name, B loaned on a personal credit of A  A’s admission is NOT BINDING on the partnership

Answer 172

1Article 1821 speaks of three cases of knowledge, namely: (1) Knowledge of the partner acting in the particular matter acquired while a partner; (2) Knowledge of the partner acting in the particular matter then present to his mind; and (3) Knowledge of any other partner who reasonably could and should have communicated it to the acting partner. EXAMPLES: (1) A, B, and C are partners in partnership X and Co. D fi led an action against X and Co. on a contract. The service of notice of the complaint made on A only, operates as service to the partnership or to all the partners. (2) A, acting for the partnership, bought a parcel of land from D. Before the sale, A acquired some knowledge that the land is involved in litigation in which E claims to be the owner. Nevertheless, A did not convey the information to the partnership. Later on, E was able to recover the land. In this case, A’s knowledge is knowledge of the partnership. The knowledge by A may have been acquired before he became a partner provided the same was then present to his mind. This proviso involves a question of fact and it may be diffi cult to prove that such knowledge was present to A’s mind. It is believed, however, that once prior knowledge by the acting partner is shown, such knowledge must be presumed to be “then present to his mind,” unless the partnership proves otherwise. (3) If B (he is not the acting partner) had received the information and it is reasonable to believe that he could and should have communicated it to A (the acting partner), B’s knowledge also operates as knowledge of the partnership. However, if B acquired knowledge or notice before he became a partner, then, there is neither notice to nor knowledge of the partnership. (4) If A, in the second example, deliberately did not inform the partnership regarding the claim of E for a consideration paid or promised by D, the notice to or knowledge of A cannot be imputed to the partnership, because the law says “except in the case of a fraud on the partnership committed by or with the consent of that partner.”

Answer 173

1. A partner is guilty of a wrongful act or omission in the ordinary course of business 2. With the authority of co-partners, loss or injury is caused to any person, or penalty is incurred  Partnership is LIABLE to the same extent as the partner so acting or omitting to act

Answer 174

1. Where a partner acts within the scope of his apparent authority receives money or property of a 3rd person and misapplies it 2. Where the partnership receives money / property of a 3rd person and these are misapplied by any partner while in custody of the partnership All partners are LIABLE SOLIDARILY with the partnership for everything chargeable to the partnership

Answer 175

Held: No. A partner cannot bind the partnership beyond the normal scope of his authority. In this case, the investment of money in the stock market was not a function of the practice of law, and counselling about investments was not a part of X’s business, which was limited to the practice of labor law. The criminal conduct of P was not a part of his anticipated services and T had no right to rely on the fi rm for the acts of a partner in excess of the partner’s authority.

Answer 176

Held: (1) Yes. M indorsed the fi rst check in favor of G. T, therefore, had every right to presume that G and M were true partners. If they were not, then M had only himself to blame for making the relationship appear otherwise, not only to T but to their other creditors as well. (2) It is solidary. Article 1816 should be construed together with Article 1824 While the liability of the partners is merely joint in transactions entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 and 1823. As between the partners G and M, justice dictates that M be reimbursed by G for the payments made by M representing the liability of their partnership to C and D as it was satisfactorily established that G acted in bad faith in his dealings with M as partner. (Muñasque vs. Court of Appeals, 139 SCRA 533 [1985].) Note: The Court of Appeals correctly ruled that the liability of the partners is joint or pro rata under Article 1816. The money was received by G from T, not from C or D. (See Art. 1823.)

Answer 177

CIRCUMSTANCES: (2) 1. DIRECTLY represents himself to anyone as a partner in an existing / non-existing partnership 2. INDIRECTLY represents himself by consenting to another representing him as a partner in an existing / non-existing partnership

Answer 178

A.  If all actual partners consented to the representation, then the liability of the person who represented himself to be a partner / who consented to such is considered a partnership liability B.  When there is no existing partnership and all those represented as partners consent to the representation / not all of the partners of an existing partnership consented  Person who represented himself to be a partner / consented + all those who made and consented to the representation C. LIABILITY SEPARATE:  When there is no existing partnership and not all of those represented as partners consented to the representation / none of the partners in an existing partnership consented to such  Liability is only to the person who represented himself

Answer 179

1. Proof by plaintiff that he was individually aware of the defendant’s representations as to his being partner / that representations were made by others and not denied / refuted by defendant 2. Reliance on such representation by plaintiff 3. Lack of any denial / refutation of the statements by the defendant

Answer 180

– all persons who assume to act as a corporation knowing it to be w/o authority to do so shall be liable as general partners for all debts, liabilities and damages incurred  PROVIDED: transaction entered into a corporation

Answer 181

(1) A, B, and C are partners in X & Co. D represented himself as a partner in X & Co. to E who, on the faith of such representation, extended credit to X & Co. D is a partner by estoppel. He is liable to E as though he is an actual member of X & Co. If all the partners A, B, and C consented to the representation, then a partnership liability results. This is a case of partnership by estoppel. All the partners and D are liable. (par. 1[1].) Note that in this case there is an existing partnership and all the partners consented to the representation. (2) If only A and B consented to the representation, there is no partnership liability. Only A, B, and D are partners by estoppel. They are liable pro rata to E. (par. 1[2].) (3) But if D acted alone without the consent of A, B, and C, then he alone is liable to E. He is liable separately. (Ibid.) (4) Suppose A, B, and C are not really partners, and D represented himself as a partner of A, B, and C to E. If the representation was made without the consent of A, B, and C, D alone shall be liable separately to E. If it was made with the consent of A, B, and C, then all of them (A, B, C, and D) shall be liable pro rata to E. They are partners by estoppel. If only A consented to the representation, separate liability is created only against A and D. Of course, if D is represented as a partner in an existing or non-existing partnership without his consent, he is not liable to E. In all the cases when there is no existing partnership (Example No. 4), or there is no consent by all the members of an existing partnership (Example No. 2), it is the joint act or obligation of the person acting and the persons consenting to the representation. (par. 2.) (5) A is held out with his consent as a partner of B who is in business by himself. E relied on the representation of B. Has E a priority on the property in the business of B over F, a creditor of B, who trusted only B and not the supposed partnership of A and B? No. A and B would be liable jointly, but, as there was, in fact, no partnership fund, E, who thought there was a partnership of A and B, would have no priority on the assets which B had in his business as distinguished from his other assets. (see Commissioners’ Note to Sec. 16, U.P.A., from which Art. 1825 was taken.)

Answer 182

Held: No. A did not enter into the sub-lease contract on the basis of representation on the part of B that he was a partner of C. In other words, for partnership by estoppel to exist, the holding out of a person who is charged as being a partner by estoppel must have been made before the contract with the third person was entered into and the third person must have been induced into entering into said contract by reason of such “holding out” of the partner by estoppel.

Answer 183

Held: (1) Where intention of parties was to form a corporation. — “While it has been held that as between themselves the rights of the stockholders in a defectively incorporated association should be governed by the supposed charter and the laws of the state relating thereto and not by the rules governing partners, it is ordinarily held that persons who attempt, but fail, to form a corporation and who carry on business under the corporate name occupy the position of partners inter se. Thus, where persons associate themselves together under articles to purchase property to carry on a business, and their organization is so defective as to come short of creating a corporation within the statute, they become, in legal effect, partners inter se, and their rights as members of the company to the property acquired by the company will be recognized. (Smith vs. Schoodoc Pond Packing Co., 84 A. 268, 109 Me. 555; Whipple vs. Parker, 29 Mich. 369.) So, where certain persons associated themselves as a corporation for the development of land for irrigation purposes, and each conveyed land to the corporation, and two of them contracted to pay a third the difference in the proportionate value of the land conveyed by him, and no stock was ever issued in the corporation, it was treated as a trustee for the associates in an action between them for an accounting, and its capital stock was treated as partnership assets, sold, and the proceeds distributed among them in proportion to the value of the property contributed by each. (Shorb vs. Beaudry, 56 Ca. 446.)’’ (2) Where participation of a party was limited to subscribing to proposed corporation. — “However, such a relation does not necessarily exist, for ordinarily, persons cannot be made to assume the relation of partners, as among themselves, when their purpose is that no partnership shall exist, and it should be implied only when necessary to do justice between the parties; thus, one who takes no part except to subscribe for stock in a proposed corporation which is never legally formed does not become a partner with other subscribers who engage in business under the name of the pretended corporation, so as to be liable as such in an action for settlement of the alleged partnership and contribution. It has been held that a partnership relation between certain stockholders and other stockholders, who were also directors, will not be implied in the absence of an agreement, so as to make the former liable to contribute for payment of debts illegally contracted by the latter. (Heald vs. Owen, 44 N.W. 210, 79 Iowa 23.)” (3) Where party was fraudulently induced to subscribe to proposed corporation. — “The record showed that L never had any intention to form a corporation with the respondents despite his representations to them, giving credence to the cross-claims of the respondents to the effect that they were induced and lured by the petitioner to make contributions to a proposed corporation which was never formed because the petitioner reneged on their agreement. Applying the principles of law cited to the facts of the case, necessarily, no de facto partnership was created among the parties which would entitle L to a reimbursement of the supposed losses of the proposed corporation. L acted on his own and not in behalf of his other would-be incorporators in the transaction.” (Pioneer Insurance & Security Corporation vs. Court of Appeals, 175 SCRA 668 [1989].)

Answer 184

 Liable for all obligations existing at the time of his admission GR: Liability is limited to his share in the partnership property XPN: Stipulation to the contrary

Answer 185

CREDITORS: 1. Existing and subsequent creditors have equal rights against partnership property + separate property of previously existing partners 2. Only subsequent creditors have rights against separate property of incoming / newly admitted partners  If incoming partner assumed obligation of retiring partner = he is liable directly to the old partnership creditors such that these creditors have the right of action against incoming partner

Answer 186

1. OUTGOING:  Liability on existing incomplete contracts continues  Liable for goods sold and delivered after retirement 2. INCOMING:  Not personally liable for existing partnership obligations  XPN: Stipulation to the contrary  Liable for goods delivered to the partnership after his admission

Answer 187

EXAMPLE: A, B, and C are partners engaged in a drug store business. Their contribution is P10,000.00 each. D is admitted as a new partner with a contribution of P4,000.00. At the time of his admission, the partnership has an outstanding obligation to E in the amount of P40,000.00. In this case, D is also liable to E for this obligation of P40,000.00. Thus, if the assets of the partnership amount to P34,000.00, the same will be exhausted thereby leaving a balance of P6,000.00 for which only A, B, and C shall be liable jointly or pro rata, out of their separate property. D is not personally liable in the absence of an agreement. However, if the obligation was incurred by the partnership subsequent to the admission of D, there would be no difference between old and new partners, as all of them shall be personally liable pro rata or P1,500.00 each. (Art. 1816.) D is entitled to a proportional reimbursement from A, B, and C the amount he has paid in excess of his share of the liability as follows: Shares of A, B, and C (10/34 of P6,000) = P1,764.70 each Shares of D (4/34 of P6,000) = P705.88 So A, B and C are liable for P264.70 each to D for the excess of P794.12, the difference between P1,500.00 and P705.88.

Answer 188

Held: Yes. (1) New partnership liable for other obligations. — C contends that since the lease was executed before he became a partner, the obligation of the lease arose before his admission and, therefore, his liability can only be satisfi ed out of partnership property. The contention of C would be sound if the only obligation of the partnership in this transaction was one which arose prior to his admission to the fi rm.

Answer 189

Ask for the attachment and public sale of the share of the partner in the partnership assets

Answer 190

As partnership creditor is preferred, D shall be paid fi rst the amount of P28,000.00, thereby leaving the partnership assets to only P12,000.00. Each partner shall, therefore, get only P4,000.00 as his share in the assets. Hence, E can collect only P4,000.00 from the assets of the partnership. His remedy is to recover the balance of P2,000.00 from the private property of A. (see Art. 1839[9].)

Answer 191

1. DISSOLUTION – change in the relation of partners caused by any partner ceasing to be associated in the carrying on of a business; doesn’t mean business must cease to exist for the partners 2. WINDING UP – actual process of settling the partnership affairs after dissolution; involves collection & distribution of partnership assets, payment of debts and determination of the value of each partner’s interest in the partnership 3. TERMINATION – all partnership affairs are completely wound up and finally settled; signifies end of partnership

Answer 192

1. Partnership not terminated 2. Partnership continues for a limited purpose  Make good all outstanding engagements, settling all accounts, collecting all property, means and assets 3. Transaction of new business is prohibited  No new partnership should be undertaken but affairs should be liquidated and distribution made to those entitled to the partner’s interest

Answer 193

1. Dissolution effected without violation of partnership agreement (GF): 2. Dissolution effected in contravention of partnership agreement: 3. Business becomes unlawful 4. Loss of a (specific) thing: 5. Death of any partner –

Answer 194

1. Dissolution effected without violation of partnership agreement (GF):  TERMINATION of definite term / particular undertaking  EXPRESS WILL of ANY partner (act in GF)  EXPRESS WILL of ALL partners (express / implied; unanimous)  EXPULSION of any partner  Should be in good faith  If done in bad faith, partner can claim damages  May be vested in 1 partner exclusively 2. Dissolution effected in contravention of partnership agreement:  Partner can withdraw any time without consent of others if there is sufficient reason; expressly withdrawing  Delectus Personae – allows the partners to have power, although not necessarily the right, to dissolve partnership 3. Business becomes unlawful – involuntarily; i.e. appointment of a position; conflict of interest; contrary to law to continue business 4. Loss of a (specific) thing: a. Loss BEFORE delivery:  Partnership is dissolved; no contribution as to the thing to be contributed cannot be substituted with another b. Loss AFTER delivery:  Partnership is not dissolved; but it assumes the loss of thing having acquired ownership; may contribute additional capital to save venture c. Where only use / enjoyment contributed:  Partner who reserved ownership cannot fulfill his undertaking to make available the use of the specific thing contributed  Partner bears loss; considered in default w/ respect to his contribution 5. Death of any partner – deceased partner ceases to be associated in the carrying of business GR: ipso facto dissolution of partnership XPN: clause in the articles of partnership providing for the continuation of the firm even after death of one the partners 6. Insolvency of any partner/ship:  Adjudged by the court: LIQUIDATION ORDER  Insolvency renders property in the hands of the partners liable for the satisfaction of the partnership obligation resulting in their inability to continue the business  REMEDY: reconveyance by assignee / liquidator of properties pursuant to order of court after termination of insolvency proceedings = has the effect of restoring partnership to its status quo 7. Civil Interdiction of any partner:  Capacity is limited; cannot validly give consent no right to manage his property and dispose of such by any act / conveyance inter vivos 8. Decree of Court:  Right to Expel:  GR: a partner cannot be expelled due to mere derelictions  XPNS: 1. Partner guilty of extreme / gross faults 2. Industrial partner engaging in business for himself 3. Power expressly given by agreement – expel in good faith

Answer 195

Held: Article 1808 only requires the capitalist partner (who violates the prohibition against engaging for his own account in any operation which is of the kind of business in which the partnership is engaged) to bring to the common fund of the partnership, profi ts he might have realized. (2nd par.) It does not prevent him from withdrawing from the partnership. (Lee Tee vs. Ching Chiong,

Answer 196

Held: Yes. Both A and B must be deemed to have expressly withdrawn from the partnership, thereby causing its dissolution pursuant to Article 1830(2) which provides, inter alia, that dissolution is caused “by the express will of any partner” at any time. (Deluao vs. Casteel, 26 SCRA 475 [1968].)

Answer 197

Contracts of partnership are necessarily dissolved by a state of war between the countries where the respective parties are citizens or where they become alien enemies, or by a civil war, since in both cases commercial intercourse is rendered unlawful between the partners belonging to opposing sides. This rule is based upon consideration of public policy, and is not affected by the intention of the parties. (see 40 Am. Jur. 307.)

Answer 198

Held: (1) B is a general partner. — By seeking authority to manage partnership property, B showed that she desired to be considered a general partner. By authorizing B to manage partnership property (which a limited partner could not be authorized to do), C recognized her as such partner, and is in estoppel to deny her position as a general partner with authority to administer and alienate partnership property. While the heir ordinarily becomes a limited partner for his own protection, he may disregard it and instead elect to become a general partner as B in this case did. Furthermore, the contractual stipulation in the articles of partnership contemplates that the heirs would become general partners rather than limited partners. The partnership certainly could not be continued if it were to be converted into a limited partnership, since the difference between the two kinds of association is fundamental (see Art. 1843, Chapter 4.); and especially because the conversion into a limited association would leave the heirs of the deceased partner without a share in the management. The stipulation, however, would not bind the heirs of the deceased partner should they refuse to assume personal and unlimited responsibility for the obligations of the fi rm. (2) B had authority to sell the real estate of the fi rm. — When the partnership business is to deal in real estate, i.e., to buy and sell real estate, as in the present case, one partner has ample authority as a general agent of the fi rm to enter into a contract for the sale of real estate. It must also be remembered that a third person has a right to presume that a general partner dealing with partnership property in pursuance of partnership purpose has the requisite authority from his co-partners. (Goquiolay vs. Sycip, 9 SCRA 663 [1963], Resolution of Motion for Reconsideration.)

Answer 199

1. Application by a partner: a. Insanity b. Incapacity (permanent) c. Misconduct and persistent breach of partnership agreement (permanent mischief) d. Business can be carried out only at a loss e. Other circumstances:  Abandonment of business  Fraud in the management of business  Refusal w/o justifiable cause to render accounting of partnership affairs 2. Application by a purchaser of a partner’s interest: a. After the termination of a specified term / particular undertaking b. Any time if Partnership was at will when the interest was assigned / when the charging order was issued

Answer 200

was purchased by D or a charging order was issued against C in favor of D, his judgment creditor, as provided in Article 1814, when the partnership was already a partnership at will, D, at any time, may ask for judicial dissolution. Note that the rule in Article 1831 (par. 2[2].) applies only if in continuing the business, a partnership at will is created, or the partnership is a partnership at will from the beginning.

Answer 201

Held: None. The complaint of A does not contain suffi cient facts to constitute a cause of action. For the purpose of adjudicating to A damages which he alleges to have suffered as a partner as a result of the fraudulent management of the partnership, it is fi rst necessary that a liquidation of the business thereof be made to the end that the profi ts and losses may be known, and the causes of the latter and the responsibility of the managing partner, as well as the damages which each partner may have suffered, may be determined. (Soncuya vs. De Luna, 67 Phil. 646 [1939].)

Answer 202

GR: Dissolution terminates all authority of any partner to act for the partnership 1. With respect to the partners: a. When the dissolution is NOT by the act, insolvency / death of a partner b. When dissolution is BY ACT (1833), insolvency / death of a partner 2. With respect to persons not partners in 1834 XPN: if necessary to wind up partnership affairs / complete unfinished transactions / acts which would bind the partnership if dissolution has not taken place

Answer 203

If today A enters into a new transaction (not necessarily for winding up or to complete a transaction begun but not yet fi nished) with D, he (A) alone assumes whatever liability may arise under the contract because his authority to act for the partnership X & Co. as to bind B and C terminated as of yesterday, when the partnership was dissolved. If the partnership is liable to D under Article 1834, B and C are entitled to indemnity from A.

Answer 204

GR: If dissolution is caused by act, death / insolvency of a partner, each partner is liable to his co-partners for his share of any liability created by any partner acting for the partnership as if it has not been dissolved XPNS: 1. Dissolution being BY ACT of any partner, the acting partner for the partnership had knowledge of the dissolution 2. Dissolution being BY THE DEATH / INSOLVENCY of a partner, the acting partner for the partnership had knowledge of the death / insolvency

Answer 205

 Actual knowledge of the fact o Knowledge of such other facts as in the circumstances that show bad faith  Notice of fact: o When person who claims the benefit of notice:  States the fact to such person  Delivers thru mail / other means of communication a written statement of the fact tosuch person / to a proper person to his place of business / residence  Applies only if partner binds partnership; if not; only the acting partner is personally liable

Answer 206

(2) If A had died or had become insolvent, knowledge or notice on the part of B will justify non-liability on the part of the other partners.

Answer 207

1. By an act appropriate for winding up affairs / completing unfinished transaction at dissolution 2. By any transaction which would bind the partnership if dissolution had not taken place, provided the other party: a. Extended credit to partnership prior dissolution and had no knowledge / notice of such b. Though didn’t extend credit, had known partnership prior to dissolution and had no knowledge of such because it wasn’t advertised in the newspaper of general circulation

Answer 208

1. Partner is unknown to the person with whom contract is made 2. Dormant partner – so far unknown and inactive

Answer 209

1. Where partnership is dissolved because it was unlawful to carry on business 2. Partner becomes insolvent 3. Partner had no authority to wind up affairs  XPN: transaction with: (3)  One who extended credit prior to dissolution and had no knowledge / notice of his want of authority  Didn’t extend credit / had no knowledge of his lack of authority – not advertised Character of notice required – actual notice and thru advertisement in a newspaper

Answer 210

(1) If B or C, purporting to act on behalf of the partnership, contracts with D (e.g., orders goods), the partnership (A, B, and C, jointly) is liable to D. (2) If A, purporting to act on behalf of the partnership, contracts with D, the partnership (A, B, and C, jointly) is liable to D. (Babb & Martin, op. cit., pp. 262-263.)

Answer 211

No. Prior dealers must be given actual notice of the dissolution of a partnership in order to prevent the continuance of partnership liability. T, however, is not a prior dealer. Hence, he is considered to have received notice as a matter of law when the fact of dissolution was advertised in the local newspaper. (Ibid., pp. 179-180, 187.)

Answer 212

Held: Yes. The judicial foreclosure of the chattel mortgage executed in favor of A did not relieve her from liability to the creditors of the partnership. X, etc. and the public in general had a right to expect that whatever credit they extended to B and C doing the business in the name of the partnership could be enforced against the properties of the partnership. Although A acted in good faith, X, etc. also acted in good faith in extending credit to the fi rm. Where one of two innocent persons must suffer, the person who gave occasion for the damages to be caused must bear the consequences. (Singson vs. Isabela Sawmill, 88 SCRA 623 [1979].)

Answer 213

Dissolution of partnership is not equal to discharge of existing liability of partner XPN: when there is said agreement between: 1. Himself 2. Partnership creditors 3. Other partners  Consent is implied from their conduct Deceased Partner’s estate:  Individual property of deceased partner is liable for all obligation of partnership incurred while he was still a partner  With respect to his separate property – priority is given to individual creditors over partnership creditors

Answer 214

Similarly, if A dies, his individual estate is available to partnership creditors, subject, however, to the claims of A’s personal creditors. Even an agreement among A, B, and C whereby B and C promised to assume the partnership debts does not release A, unless the creditors assent to such substitution of debtors, either by express agreement (novation) or by agreement inferable from course of dealing. (Babb and Martin, op. cit., p. 262.)

Answer 215

1. JUDICIAL – through the court upon cause shown by any partner, his legal rep / assignee 2. EXTRAJUDICIAL – partners themselves w/o court intervention Nature of action for liquidation – personal; could either be at the place of residence of P/D

Answer 216

1. Persons designated by agreement 2. If none, all partners who have not wrongfully dissolved the partnership 3. Legal representative (executor / admin) of last surviving partner (if all others are dead), not insolvent 4. Receiver appointed by court Duty of liquidating – surviving member/s of firm; Legal representative of the deceased partner has no right to interfere with the business

Answer 217

2. RAISE money to pay partnership debts 3. INCUR obligations to complete existing contracts / preserve assets 4. INCUR expenses necessary in the conduct of litigation

Answer 218

GR: Rights of each partner in dissolution w/o violation (not in contravention) to the partnership: (2) 1. To have partnership property applied to discharge the liabilities of the partnership 2. To have surplus, if any, applied to pay in cash the net amount owing to the respective partners XPN: unless otherwise agreed If dissolution is caused by expulsion bona fide: 1. Expelled partner may be discharged from all liabilities either by payment / agreement with him, the creditors and other partners 2. Can only receive in cash the net amount due him If dissolution is proper, no partner is liable for any loss

Answer 219

1. PARTNER WHO IS INNOCENT: (4) a. Have the partnership property applied as payment of its liabilities and to receive in cash his share of the surplus b. Be indemnified for the damages caused by the guilty partner c. Continue business in the same name during the agreed term of partnership, by themselves / jointly w/ others d. Possess property should they decide to continue business 2. PARTNER WHO IS GUILTY: (2) a. If business is NOT CONTINUED: i. Have the partnership property applied to discharge liabilities and receive in cash his share of the surplus less damages caused by his wrongful dissolution b. If business is CONTINUED: i. Have value of interest in the partnership at the time of dissolution, less damages ii. Be released from all existing and future liabilities GOOD WILL:  Advantage w/c it has from the establishment / from patronage of its customers, over and above the mere value of its property and capital  Includes advantages derived from partners holding themselves out as carrying on the business identified w/ the name of a particular firm GOOD WILL AS PART OF ASSETS – includes all assets applicable to the payment of debts FIRM NAME AS PART OF GOOD WILL – firm name is an element of the partnership enterprise, substantial asset, passes w/ sale of partnership property and good will EXISTENCE OF SALEABLE GOOD WILL – good will is proper subject of sale if in commercial partnership; not applicable to professional partnership

Answer 220

1. Assets of partnership:  Partnership property (including good will)  Contributions of partners for payment of all liabilities 2. Order of application of assets:  Owing to partnership creditors  Owing to partners other than for capitals and profits such as loans / advances  Owing for the return of capital contributed by the partners  If any asset is left, shall be contributed as profits to partners proportionally 3. Loans and advances by partners:  Capital contributions are returnable only on dissolution  Loans are payable at maturity  Accumulated profits may be withdrawn at any time by majority’s consent L & A = amounts paid into the partnership in excess of a partner’s capital contribution 4. Capital contributed by partners:  If assets are insufficient to repay capital investments, the deficit is a capital loss w/c requires contribution  Return of amount equivalent to capital contribution of each partner shall be increased by his share of undistributed profits / decreased by his share of net losses  Industrial:  GR: not entitled to any of firm capital on dissolution  XPN: if there is an agreement  Total capital contribution is not equal to gross assets to be distributed to the partners during dissolution 5. Rights of partner where assets are insufficient:  A partner / his legal rep (to the extent of amount w/c he has paid in excess of his share of liability)  Assignee, for the creditor’s benefit  Any person appointed by court  Will have the right to enforce the contributions of the partners  If any partner does not pay, others will have to pay  REMEDY: can sue non-paying partner for indemnification 6. Liability of deceased partner’s individual property  Liable for his share of contribution necessary to satisfy the liabilities of the partnership incurred while he was a partner 7. Priority of payments: DOCTRINE OF MARSHALLING ASSETS: a. Partnership property – pay first the partnership creditors b. Individual property – pay first separate creditors 8. Distribution of insolvent partner’s property: PRINCIPLE OF EQUITY: a. Owing to separate creditors b. Owing to partnership creditors c. Owing to partners thru contribution  REMEDY OF SEPARATE CREDITOR: Can execute against asset of the firm only to the extent of the interest of the partner in firm assets

Answer 221

1. Assets of partnership:  Partnership property (including good will)  Contributions of partners for payment of all liabilities 2. Order of application of assets:  Owing to partnership creditors  Owing to partners other than for capitals and profits such as loans / advances  Owing for the return of capital contributed by the partners  If any asset is left, shall be contributed as profits to partners proportionally 3. Loans and advances by partners:  Capital contributions are returnable only on dissolution  Loans are payable at maturity  Accumulated profits may be withdrawn at any time by majority’s consent L & A = amounts paid into the partnership in excess of a partner’s capital contribution 4. Capital contributed by partners:  If assets are insufficient to repay capital investments, the deficit is a capital loss w/c requires contribution  Return of amount equivalent to capital contribution of each partner shall be increased by his share of undistributed profits / decreased by his share of net losses  Industrial:  GR: not entitled to any of firm capital on dissolution  XPN: if there is an agreement  Total capital contribution is not equal to gross assets to be distributed to the partners during dissolution 5. Rights of partner where assets are insufficient:  A partner / his legal rep (to the extent of amount w/c he has paid in excess of his share of liability)  Assignee, for the creditor’s benefit  Any person appointed by court  Will have the right to enforce the contributions of the partners  If any partner does not pay, others will have to pay  REMEDY: can sue non-paying partner for indemnification 6. Liability of deceased partner’s individual property  Liable for his share of contribution necessary to satisfy the liabilities of the partnership incurred while he was a partner 7. Priority of payments: DOCTRINE OF MARSHALLING ASSETS: a. Partnership property – pay first the partnership creditors b. Individual property – pay first separate creditors 8. Distribution of insolvent partner’s property: PRINCIPLE OF EQUITY: a. Owing to separate creditors b. Owing to partnership creditors c. Owing to partners thru contribution  REMEDY OF SEPARATE CREDITOR: Can execute against asset of the firm only to the extent of the interest of the partner in firm assets

Answer 222

(a) D and E, who are partnership creditors, shall be paid fi rst the total sum of P120,000.00, leaving a balance of P380,000.00; (b) Then, A, who is also a creditor, will be paid his credit of P20,000.00, leaving a balance of P360,000.00; (c) Afterwards, the contributions of A, B, and C to the partnership capital shall be returned to them in the total sum of P300,000.00, thereby leaving a balance of P60,000.00; (d) The balance of P60,000.00 constitutes the profi t which shall be divided among A, B, and C (unless there is an agreement to the contrary [Art. 1839, 1st par.] which, however, cannot prejudice the rights of third persons) in proportion to their capital contributions. Therefore, A is entitled to 3/6 or P30,000.00, B, 2/6 or P20,000.00 and C, 1/6 or P10,000.00. (3) Suppose, in the same example, the liabilities of the partnership amount to P560,000.00. The partnership assets, then shall be exhausted to satisfy these liabilities thereby leaving an unpaid balance of P60,000.00. The partners shall then contribute to the loss, in the absence of an agreement to the contrary, in accordance with their capital contributions. Consequently, A is liable out of his separate property in the amount of P30,000.00, B, P20,000.00, and C, P10,000.00. These contributions which are necessary to pay the liabilities of the partnership are considered partnership assets (No. 1[b].) and any assignee for the benefi t of creditors and any person appointed by the court may enforce the contributions. In case C paid the whole amount of P60,000.00, then, he has a right to recover the amount which he has paid in excess of his share of the liability from A, P30,000.00 and from B, P20,000.00. (4) If B is already dead, his estate is still liable for the contributions needed to pay off the partnership obligations provided they were incurred while he was still a partner. Art. 1839 DISSOLUTION AND WINDING UP 262 PARTNERSHIP (5) Suppose now that under Nos. 1 and 2 above, C owes F P40,000.00. Following the rule that partnership creditors have preference regarding partnership property, only the share of C in the amount of P10,000.00 can be used to pay his debt to F and the unpaid balance of P30,000.00 must be taken from the individual property, if any, of C. (6) Suppose again, that the partnership debts amount to P560,000.00 as in No. 3. So, C is still liable out of his separate property to partnership creditors in the amount of P10,000.00. His separate property amounts to P45,000.00. In this case, his assets shall fi rst be applied to pay his debt of P40,000.00 to F and the balance of P5,000.00 to pay part of his debt of P10,000.00 still owing to partnership creditors in accordance with the rule that regarding individual properties, individual creditors are preferred.

Answer 223

1. New partner is admitted 2. A partner retires 3. A partner dies 4. A partner withdraws 5. A partner is expelled 6. Other partners assign their rights to a sole remaining partner 7. All partners assign their rights in partnership property to a 3rd person

Answer 224

1. Deemed mere continuation prior partnership 2. Obligation of company bought out considered assumed by vendee

Answer 225

1. Debts contracted by the person / partnership w/c continues the business using the partnership name / deceased partner’s name as part thereof 2. Commercial partnership w/ good will – proper subject of sale

Answer 226

A note to Uniform Partnership Act provides: “Where there is a continuous business carried on fi rst by A, B, and C, and then by A, B, C, and D, or by B and C, or by B and D, or by C and D, or by B, C, and D, without liquidation of the affairs of the dissolved partnership of A, B, and C, both justice and business convenience require that all creditors of the business, irrespective of the exact groupings of the owners at the time their respective claims had their origin, should be treated alike, all being given an equal claim on the property embarked in the business.” (Babb & Martin, op. cit., p. 265.) (2) Liability of persons continuing business. — Note that under paragraph 2, the liability of the new or incoming partners shall be satisfi ed out of partnership property only unless there is a stipulation to the contrary. (Art. 1826.) Note that paragraph 1, No. 4, applies only when the third person continuing the business of the dissolved partnership promises to pay the debts of the partnership. Otherwise, creditors of the dissolved partnership have no claim on the person or partnership continuing the business or its property unless the assignment can be set aside as a fraud on creditors under paragraph 4. EXAMPLE: If A, B, and C, partners, sell the partnership business to D, and if D promises to pay the debts and to continue the business, the creditors of the dissolved partnership of A, B, and C are also the creditors of D.

Answer 227

1. To have value of the interest of the retiring partner / deceased partner in the partnership ascertained as the date of dissolution 2. Receive as an ordinary creditor, amount equal to value of his share in the dissolved partnership with interest / at his option, in lieu of interest, the profits attributable to the use of his right  Partnership creditors have PRIOR RIGHT vs. separate creditor of the retired / deceased partner  If surviving partners continue w/o consent of the deceased partner’s estate, they do so w/o any risk to the estate  If estate consents it, becomes new partner and be liable for all debts and losses after death, but only to the extent of the decedent’s share in the assets

Answer 228

C or his legal representative has the right to have the value of his interest in the partnership ascertained and paid to him. Assuming that the interest of C has been ascertained to be P30,000.00, D has priority over the claim of C, his legal representative, or his separate creditor.

Answer 229

1. Right to demand accounting of value of interest accrues to any partner / legal rep after dissolution  XPN: when there is agreement to the contrary 2. Prescription starts upon dissolution of partnership when final accounting is done

Answer 230

1. Winding up partner 2. Surviving partner 3. Person / partnership continuing business

Answer 231

1. SHARE OF PROFITS – general liquidation before a member may claim a specific sum as share of profits 2. SHARE IN THE PARTNERSHIP – partner’s share cannot be returned w/o first dissolving and liquidating partnership, for the firm’s outside creditors have preference over the assets of the enterprise and firm’s property cannot be diminished to their prejudice WHEN NOT NEEDED: GR: when partnership is dissolved, the partner / his legal rep is entitled to payment of what may be due after a liquidation XPN: when there is already a settlement / agreement as to what he shall receive

Answer 232

cannot be returned without fi rst dissolving and liquidating the partnership, for the return is dependent on the discharge of creditors, whose claims enjoy preference over those of the partners; and it is self-evident that all members of the partnership are interested in its assets and business, and are entitled to be heard in the matter of the fi rm’s liquidation and the distribution of its property. The liquidation prepared by A is not signed by D and E, the other partners; it does not appear that they have approved, authorized, or ratifi ed the same and, therefore, it is not binding upon them. At the very least, they are entitled to be heard as to its correctness.

Answer 233

Held: No liquidation was called for because there was already a settlement as to what A should receive. It appeared that the settlement was agreed upon the very day the partnership was dissolved. The acceptance by A of his investment was understood and intended as a fi nal settlement of whatever right or claim A might have in the dissolved partnership. A was precluded from claiming any share in the profi ts should there be any, at the time of dissolution. (Bonnevie vs. Hernandez, 95 Phil. 175 [1954].)

Answer 234

Held: No. The statement was deemed approved when A received his share without any reservation. The signing became a mere formality to be complied with by A exclusively and his refusal to sign, after receiving his shares, amounted to a waiver of that formality. This approval precludes any right on the part of A to a further liquidation unless he can show that there was fraud, deceit, error, or mistake in said approval.

Answer 235

 Formed by 2 / more persons, 1 / more are general partners, and 1 / more are limited partners.  The limited partners shall NOT BE BOUND by the obligations of the partnership.  Liability to 3rd persons of 1 / more members are limited to a fixed amount, capital contribution / amount they have invested are limited  Investors  This is the XPN to the GR that all partners are liable pro rata w/ all property for partnership debts

Answer 236

1. Formed by compliance w/ statutory requirements 2. 1 / more general partners control the business and are personally liable to creditors 3. 1 / more limited partners contribute to the capital and share in the profits but do not participate in the management of the business and are not personally liable for the obligation beyond the amount contributed 4. Limited partners may ask for return of their capital contribution 5. The debts are paid out of common fund and of the individual properties of general partners

Answer 237

1. Secure capital from others for one’s business but still retain control 2. Share in profits of a business w/o risk of personal liability 3. Associated as partners with those having business skill

Answer 238

1. Sign and swear to a certificate / articles of limited partnership: (14) a. Name of partnership with the word “limited” b. Character of business c. Location of principal place of business d. Name & place of residence of each member, both gen & ltd. Partners e. Term of partnership’s existence f. Amount of cash and description of and agreed value of the other property contributed by each ltd partner g. Additional contribution if any, to be made by each ltd partner and when they shall be made h. Time, if agreed, when contributions are to be returned i. Share of the profits / other compensation by way of income w/c each ltd partner will receive because of contribution 2. File for record the certificate in the office of SEC  Ltd partnership is formed if substantial compliance with requirements + good faith  If not: liability becomes that of general partners as to 3 rd persons only  If certificate is defective: ltd partner is not formed o XPN: when creditors recognize them as ltd partnership, they are estopped from insisting that ltd partnership did not exist  Failure to extend term / renew: becomes general partners

Answer 239

 A partnership cannot be a ltd partner  General partner/ship can become a ltd partner/ship

Answer 240

Any of the partners may be a general partner and a limited partner at the same time. The contribution may be cash or property only, or both capital and services. Thus, if A, in addition to cash, also contributes services, he becomes a general partner and a limited partner at the same time; if he contributes services only, he is a general partner. If a partner contributes capital only, he is either a general partner or a limited partner, or both, depending upon the agreement as stated in the certifi cate.

Answer 241

GR: promissory notes, post-dated checks, bonds are not considered ltd partner’s contribution XPN: certified check / manager’s check  Contribution should be paid BEFORE formation of partnership o XPN: additional contribution

Answer 242

1. Also a surname of a general partner 2. Prior to the time when the ltd partner became such, the business had been carried on under a name wherein his surname appeared  If name appears in contrary: he will be liable as ltd partner to 3rd persons IF they had no knowledge that he was not a general partner

Answer 243

1. Partner KNEW of the false statement when he signed the contract or subsequently, but having sufficient time to cancel / amend it / file petition for cancellation / amendment but did not do so 2. Person aggrieved RELIED UPON false statement in transacting with the partnership 3. Person aggrieved SUFFERED LOSS for reliance  Loss – if capital contribution was LESS than specified (and not the other way around)  REMEDY: Does not make ltd partner a general partner even to 3rd persons (can only be sued for damages)

Answer 244

Article 1847 is applicable, he may be made liable to innocent third persons for the difference of P5,000.00. In the above examples, A is not liable and is a limited partner with respect to his co-partners with knowledge of the falsity.

Answer 245

1. Business is carried on by a board of directors chosen by ltd partners 2. Term of the contract between parties, an appointee of the ltd partner becomes the directing manager of the firm 3. Ltd partner purchases entire property of the partnership taking title for himself and carries business in his own name 4. Makes / is a party to a contract w/ creditors of an insolvent firm w/ respect to disposal of firm’s assets in payment of firm’s debts  XPN to the XPN: taking part in the management because he settles its affairs after dissolution

Answer 246

1. Proper amendment to the certificate 2. Signed and sworn by ALL partners including the new ltd partners 3. Filed in SEC

Answer 247

1. DO ANY ACT in contravention of the certificate 2. DO ANY ACT w/c would make it impossible to carry on the ordinary business of partnership 3. CONFESS a judgment against the partnership 4. POSSESS partnership property / assign rights in specific partnership property for other than partnership purpose 5. ADMIT a person as general partner 6. ADMIT a person as ltd partner  XPN: right to do so is in the certificate 7. CONTINUE the business w/ property on the death, retirement, insanity, civil interdiction / insolvency of a general partner  XPN: right to do so is in the certificate

Answer 248

1. REQUIRE partnership books be kept at a principal place of business 2. INSPECT and copy at a reasonable hour 3. DEMAND true & full information of all things affecting the partnership 4. ASK for dissolution and winding up by decree of court 5. RECEIVE a share of profits / other compensation thru income 6. RECEIVE the return of his contribution  PROVIDED: partnership assets are in excess of all its liabilities

Answer 249

1. On ascertaining mistake, he promptly renounces his interest in the profits of the business / other compensation by way of income:  before partnership becomes liable to 3rd persons who has considered him a general partner  not necessary when no creditor is prejudiced  only profits / compensation not yet paid over, no obligation to return profits already received 2. Surname does not appear in partnership name 3. Doesn’t participate in the management of the business GR: an heir of a gen. partner admitted as partner, ORDINARILY becomes a ltd partner to avoid liability in excess of value of inheritance (personal assets) XPN: if he choose to elect to become a gen. partner WAIVED: “in the event of the death of a partner “the partnership shall be continued and the deceased partner shall be represented by his heirs and assignees in said partnership” as general partners

Answer 250

Held: Yes. Only the general partners could be adjudicated bankrupt. (Giles vs. Vette, 263 U.S. 553 [1924].)

Answer 251

PROVIDED: stated in the certificate 1. Rights and powers are those of a general partner – still liable to 3rd persons 2. With respect to his contribution as a ltd partner, he has a right of a ltd partner – entitled to recover from the gen partners what he has paid to 3rd persons and in settling accounts after dissolution, he shall have priority over gen. partners in the return of their respective contributions

Answer 252

1. Granting loans to the partnership 2. Transacting other business with it 3. Receiving pro rata share of partnership assets w/ gen. creditors if he is also not a gen. partner

Answer 253

1. Receiving / holding as collateral security any partnership property 2. Receiving any payment, conveyance / release from liability if it will prejudice the right of 3rd persons  Violation of prohibition = presumption of FRAUD  Doesn’t prohibit absolutely the taking of collateral security by a ltd partner of any partnership property PREFERENTIAL RIGHTS:  Ltd partner is considered non-partner creditor  3 rd persons are preferred insofar as partnership assets are concerned

Answer 254

D, however, is not prohibited from purchasing any partnership property if the purpose is to generate cash with which to pay off partnership obligations to third persons.

Answer 255

1. Return of their contributions 2. Compensation by way of income 3. Any other matter If not in the cert = all ltd partners shall stand on equal footing

Answer 256

 Creditors have priority over ltd partner’s rights (partnership assets – partnership liabilities = excess)  In determining partnership liabilities, exclude: (2) o Liabilities to ltd partners for contribution o Gen partners W/N for contribution

Answer 257

1. All partnership liabilities have been paid / if not paid, partnership assets are still sufficient to pay such liabilities 2. Consent of all members has been obtained except when return may be rightfully demanded 3. Certificate is cancelled / amended to set forth the withdrawal / reduction of contribution

Answer 258

1. On the dissolution of partnership 2. Upon the arrival of the date specified in the certificate for return 3. After expiration of the 6 months’ notice in writing given to other partners If no time is fixed in the certificate for the return of contribution / dissolution of partnership

Answer 259

1. When there is stipulation to the contrary in the cert 2. When all partners consent to the return other than cash

Answer 260

1. Dissolution by partners – ltd partner must ask the other partners to have the partnership dissolved, if they refuse, remedy is no. 2 2. Dissolution by judicial decree – additional grounds upon petition of ltd partner (2) a. When demand for return of his contribution is denied although has a right to such return b. Contribution is not paid although he is entitled to its return because the other liabilities of the partnership have not been paid / the partnership property is insufficient for payment

Answer 261

Yes. The total assets of P150,000.00 are well over the amount of P100,000.00, the total of the liabilities mentioned in Nos. (2), (4), and (5). The other liabilities are not considered in determin- ing whether the contribution of E can be returned to him.

Answer 262

1. For the difference between his actual contribution & that stated in the certificate he made 2. Unpaid contribution w/c he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate LIABILITY AS TRUSTEE: (4) 1. Specific property stated in the certificate as contributed by him but which he had not contributed 2. Specific property of partnership w/c had been wrongfully returned to him 3. Money wrongfully paid / conveyed to him on account of his contribution 4. Other property wrongfully paid / conveyed to him

Answer 263

1. With compensation made w/ consent of all partners 2. w/c does not prejudice partnership creditors who extended credit / whose claims arose before cancellation / amendment of  ltd partner is liable for the return of contribution lawfully received by him to pay creditors who extended credit  such liability cannot exceed sum received by him w/ interest

Answer 264

So, A should pay the difference of P2,000.00 and B, the amount of P4,000.00 on the date specifi ed or now, if the date has arrived.

Answer 265

Here, the credit was extended after the fi ling but before the amendment of the certifi cate. If the remaining assets are insuffi cient, X can still enforce the liabilities of A and B.

Answer 266

In this case, if the assets of the partnership are insuffi cient, the claim of X should be directed against the general partners. But if X extended credit or his claim arose before A received the return of his contribution, then, A is liable to the partnership. Thus, if the partnership needs P7,000.00 to discharge the liabilities to X, then A is liable for the said amount plus interest. But in no case is A liable beyond P10,000.00 plus interest because he is only a limited partner.

Answer 267

1. All members must consent to the assignee becoming a SLP / ltd partner being empowered by that cert, must give the assignee the right to become a ltd partner 2. Certificate must be amended 3. Amended certificate must be registered with SEC ASSIGNEE WHO ISN’T A SLP (LIMITATIONS): (2) 1. Has no right to require information / account of the partnership transactions or inspect books 2. Only entitled to receive share of profits / other compensation by way of income / return of his contribution LIABILITY OF SLP / ASSIGNOR: (3) 1. Liable for all liabilities of his assignor a. XPN: only those of w/c he was ignorant at that time he became a ltd partner and w/c couldn’t be ascertained from the certificate 2. Liable to persons who suffered damage by reliance on false statement in the certificate 3. Liable to creditors who extended credit / whose claims arose BEFORE substitution

Answer 268

GR: retirement, death, insolvency, insanity / civil interdiction of a gen. partner DISSOLVES partnership XPN: when continued by remaining gen partners: (2) 1. Under the right to do so as stated in the certificate 2. w/ consent of all members

Answer 269

1. Executor / administrator shall ACQUIRE ALL RIGHTS for the purpose of settling affairs of the ltd partner 2. Right to CONSTITUTE the deceased’s assignee as SLP a. Only if deceased partner is empowered to do so in the certificate b. Estate of the deceased ltd partner is liable for all his liabilities contracted while he was still a ltd partner

Answer 270

Creditors may apply to the proper court for an order charging the ltd partner’s interest in the partnership for payment of any unsatisfied amount: (CHARGING ORDER) 1. Interest so charged can be redeemed w/ separate property of any general partner but not with partnership property 2. Interest of debtor partner charged w/ payment of unsatisfied amount of the judgment debt can be redeemed w/ partnership property w/ consent of all the partners whose interest are not charged

Answer 271

1. Due to CREDITORS, including ltd partners, except those on account of their contributions, in the order of priority 2. Due to LIMITED PARTNERS in respect to their SHARE OF PROFITS and other compensation through income on their contribution 3. Due to LIMITED PARTNERS for RETURN OF CAPITAL contribution 4. LOANS due to GENERAL PARTNERS other than for capital and profits 5. Due to GENERAL PARTNERS in respect to PROFITS 6. Due to GENERAL PARTNERS for RETURN OF CAPITAL contribution

Answer 272

1. Misconduct of gen. partner 2. Fraud by gen. partner to the ltd partner 3. Retirement, death, etc. of gen. partner 4. All ltd partners ceased to be such 5. Expiration of term 6. Mutual consent of partners before expiration of firm’s original term

Answer 273

1. When there is MISCONDUCT of gen partner / there is INSOLVENCY: a. REMEDY of ltd partner – bring SUIT FOR DISSOLUTION of firm, an accounting, appointment of receiver (misconduct) b. REMEDY of creditors – same (insolvency) 2. When ltd partner rightfully but unsuccessfully demands the return of his contribution: a. REMEDY: he can have partnership DISSOLVED and affairs wound up b. XPN: liabilities to gen partners and to ltd partners on account of their contributions NOTICE OF DISSOLUTION: (2) 1. When NOT needed – when firm is dissolved by the EXPIRATION of term fixed in the certificate 2. When NEEDED – when by express will of the partners, certificate shall be cancelled before expiration  When ltd partnership has been dissolved, gen partners have the power to wound up affairs  It is not the ltd partner / representative of deceased partner’s obligation to collect firm’s assets  Representatives of gen partners succeed gen partners, not ltd partners PROPORTIONAL SHARING:  When assets are insufficient to pay claims  In absence of any statement as to share of profits w/c each partner shall receive by reason of contribution (pro-rata) PRIORITY CLAIMS OF LTD PARTNERS:  Ltd partners may have an agreement in the certificate as to priority, otherwise equal footing

Answer 274

1. When partnership is dissolved other than by reason of expiration of term 2. All ltd partners ceases to be such

Answer 275

1. Change in the name of partnership / amount / character of contribution of any ltd partner 2. A person is substituted as ltd partner 3. Additional ltd partner is admitted 4. A person is admitted as gen partner 5. Change in the character of business 6. False/erroneous statement in the certificate 7. Gen partner retires, dies, becomes insolvent or insane, or sentenced to civil interdiction and business is still continued 8. Change in the time as stated in the certificate for dissolution or for return of contribution 9. A time is fixed for dissolution or return of contribution, no time having been specified in the certificate 10. Members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them

Answer 276

1. In writing 2. Signed & sworn to by all members (old & new), assigning ltd partner in case of substitution / addition of ltd / gen partner 3. Amended certificate – filed for record with SEC  Effectively amended UPON filing with SEC

Answer 277

1. In writing 2. Signed & sworn to by all members 3. Filed for record with SEC  If cancellation is ORDERED BY COURT – certified copy of such order shall be filed with SEC  Approval by commission of amendment / cancellation NOT REQUIRED

Answer 278

1. If he is also a general partner 2. Where the object is to enforce a ltd partner’s right vs. liability of partnership

Answer 279

1. His contributions to the firm is NOT A LOAN, he is not a creditor 2. It is NOT a mere investment 3. He is an owner, but has NO PROPERTY RIGHT in firm’s assets; just a co-owner w/ his partners of the partnership property; tenancy in partnership 4. Ltd partner’s interest is in PERSONAL PROPERTY, thus immaterial whether firm’s assets consist of realty / tangible / intangible personalty 5. The nature amounts to a share in the assets after liabilities have been deducted and a balance struck; interest is a CHOSE IN ACTION therefore intangible personal property

Answer 280

1. Complies w/ Art. 1844 (REQUIREMENTS OF A LIMITED PARTNERSHIP) 2. Provided in the certificate: a. Amount of original contribution of each member at the time when it was made b. Partnership property exceeds the amount sufficient to discharge its liabilities to persons not claiming as gen / ltd partners by an amount greater than the sum of the contribution of its ltd partners

Answer 281

though a corporation has no power to enter into a partnership, it may enter into a joint venture where the nature of the venture is in line with the business authorized bu its charter.

Answer 282

partnership - not definite term of existence joint venture - organised for for a specific project or undertaking

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