This document discusses partnership property rights and obligations under Philippine law. It outlines:
1) Restrictions on capitalist partners engaging in competitive business without permission. Violations require profits to be surrendered and losses to be personally borne.
2) Partners' rights to formal accounting and access partnership information and books. Accounting may be demanded after dissolution or with allegations of fraud/error.
3) Distinctions between partnership property, which can fluctuate in value, and partnership capital, which remains fixed without partner consent. Partners are co-owners of specific partnership property.
4) Obligations of partners regarding third parties include liability for contractual obligations, with individual liability after partnership assets are exhausted. Certain stipulations exemp
This document discusses partnership property rights and obligations under Philippine law. It outlines:
1) Restrictions on capitalist partners engaging in competitive business without permission. Violations require profits to be surrendered and losses to be personally borne.
2) Partners' rights to formal accounting and access partnership information and books. Accounting may be demanded after dissolution or with allegations of fraud/error.
3) Distinctions between partnership property, which can fluctuate in value, and partnership capital, which remains fixed without partner consent. Partners are co-owners of specific partnership property.
4) Obligations of partners regarding third parties include liability for contractual obligations, with individual liability after partnership assets are exhausted. Certain stipulations exemp
This document discusses partnership property rights and obligations under Philippine law. It outlines:
1) Restrictions on capitalist partners engaging in competitive business without permission. Violations require profits to be surrendered and losses to be personally borne.
2) Partners' rights to formal accounting and access partnership information and books. Accounting may be demanded after dissolution or with allegations of fraud/error.
3) Distinctions between partnership property, which can fluctuate in value, and partnership capital, which remains fixed without partner consent. Partners are co-owners of specific partnership property.
4) Obligations of partners regarding third parties include liability for contractual obligations, with individual liability after partnership assets are exhausted. Certain stipulations exemp
This document discusses partnership property rights and obligations under Philippine law. It outlines:
1) Restrictions on capitalist partners engaging in competitive business without permission. Violations require profits to be surrendered and losses to be personally borne.
2) Partners' rights to formal accounting and access partnership information and books. Accounting may be demanded after dissolution or with allegations of fraud/error.
3) Distinctions between partnership property, which can fluctuate in value, and partnership capital, which remains fixed without partner consent. Partners are co-owners of specific partnership property.
4) Obligations of partners regarding third parties include liability for contractual obligations, with individual liability after partnership assets are exhausted. Certain stipulations exemp
Business Prohibition on Capitalist Partner - prohibited from engaging for his own account in any operation which is the kind of business in which the partnership is engaged
Instances where there is no prohibition a. when there is an express stipulation allowing the capitalist partner to engage himself; b. when the other partners expressly allow him to do so; c. when the other partners impliedly allowed him to do so; d. when the company ceases to be engaged in business during the period of liquidation and winding up; and e. when the general-capitalist partner becomes merely a limited partner in a competitive enterprise
· Effect of Violation a. the violator shall bring the partner shall of the profits illegally obtained; b. he shall personally bear all the losses
· Art. 1809 – Right of Partner to a Formal Account
Right to demand a formal account a. generally, no formal accounting is demandable until after dissolution b. however, under Art. 1809, formal accounting may be properly asked for
Estoppel - cannot be questioned anymore if it was accepted without objection for this would now be a case of estoppel, unless fraud and error are alleged and proved
· Stipulation and Continuing Share - valid and proper accounting must be made
III. Property Rights of a Partner
Art. 1810 – Property Rights of a Partner
Principal Rights: a. specific partnership b. interest in the partnership c. right to participate in the management
Related Rights: a. the right to reimbursement for amounts advanced to the partnership and to indemnification for risks in consequence of management; b. the right to access the inspection of partnership books; c. the right to true and full information of all things affecting the partnership; d. the right to formal account of partnership affairs under certain circumstances; and e. the right to have the partnership dissolved also under certain conditions
Distinction between Partnership Property and Partnership Capital
a. as to changes in value PP – variable; its value may vary from day to day with changes in the market value of the partnership assets PC – constant; remains unchanged as the amount fixed by agreement of partners, and is not affected by fluctuations in the value of partnership property, although it may be increased or diminished by unanimous consent of the partners b. as to assets included PP – includes not only the original capital contributions of the partners, but all property subsequently acquired on account of the partnership or with partnership funds, including partnership name and the good will of the partnership PC – represents the aggregate of the individual contributions made by the partners in establishing or continuing the partnership
Art. 1811 – Partnership in Specific Partnership Property
· Co-ownership in Specific Partnership Property - partners are co-owners but rules on co-ownership does not necessarily apply
· Rights of a partner in specific partnership property 1. in general, he has an equal right with his partners to posses, but only for partnership purposes; 2. he cannot assign his right; 3. his right is not subject to attachment or execution; and 4. his rights is not subject to legal support
Art. 1812 – Partner’s Interest in the Partnership is his share of the profits and surplus
In general., a partner’s interest in the partnership (his share in the profits and surplus) may be assigned, attached or be subject to legal support
Art. 1813 – Conveyance of Interest
· Effects of conveyance by partner of his Interest in the Partnership 1. Partnership may still remain; partnership may be dissolved 2. Assignee does not necessarily become a partner 3. Assignee cannot even interfere in the management or administration of the partnership business or affairs 4. Assignee cannot demand information, accounting or inspection of the partnership books
· Rights of Assignee 1. to get whatever profits the assignor-partner would have obtained; 2. to avail himself of the usual remedies in case of fraud in the management; 3. to ask for annulment of the contract of assignment if there was fraud, error, intimidation, force, undue influence; 4. to demand an accounting
Art. 1814 –
Charging Interest of a Partner - while a partner’s interest in the partnership may be charged or levied upon, his interest in a specific firm property cannot as a rule be attached.
· Preferential Rights of Partnership Creditors - preference is given to partnership creditors in the partnership assets; - separate or individual creditors have preference in separate or individual properties
· Remedies of separate Judgment Creditor of a Partner 1. Application for the “charging order” after securing judgment on his credit 2. Availability of other remedies
· Receivership a. when the charging order is applied for and granted, the court may at the same time or later appoint a receiver of the partner’s share in the profits or money due him b. the receiver appointed is entitled to any relief necessary to conserve the partnership assets for partnership purposes
· Redemption of the Interest Charged a. redemption- means the extinguishment of the charge or attachment on the partner’s interest in the profits; b. when redemption is made - any time before closure; - after closure, it may still be bought with separate property or with partnership property
IV. Obligation of the Partners with regard to Third Persons
Art. 1815 – Firm Name
· Firm Name - name, title or style under which a company transacts business; a partnership of two or more persons; a commercial house
· Purpose - necessary to distinguish the partnership which has a distinct and separate juridical personality from the individuals composing the partnership and from other partnerships and entities.
· Liability of strangers who include their name - liability as partners because of estoppel, but do not have the rights as partners
Art. 1816 – Liability for Contractual Obligations of Partners
· Partnership Liability · Individual Liability
Liability Distinguished from Losses - an industrial partner is exempted by law for losses’ but not from liability; - third persons may sue the firm and the partners, including the industrial partners; - partners will be personally liable only after the assets of the partnership have been exhausted
Stipulations such as those exempting all the industrial partners and some of the capitalist partners, insofar as third persons are concerned, would be null and void
Art 1817 – Stipulations Eliminating Liability
Art. 1799 and 1817 reconciled: - it is permissible to stipulate among them that a capitalist partner will be exempted from liability in excess of the original capital contributed; but will not be exempted insofar as his capital is concerned
Liability vs. Losses Liability – refers to responsibility towards third persons Losses – refers to responsibility as among partners
Art. 1818 – Partner as an Agent of Partnership
When a partner can bind or cannot bind the firm a. Art. 1818 speaks of an instance when the partner is an agent; and b. when he can and cannot bind as agent · Agency of a partner - partnership is a contract of mutual agency - each partner acting as a principal on his own behalf and as an agent for his co- partners or the firm
When can a partner bind the partnership Requisites: a. when he is expressly authorized or impliedly authorized; and b. when he acts in behalf and in the name of the partnership
When will act not bind the partnership A. when, although for apparently carrying on in the usual way the business of the partnership,” still the partner has in fact NO AUTHORITY, and the third party knows that the partner has no authority; B. when the act is not for apparently carrying on in the usual way of the partnership and the partner has no authority
NOTE: The 7 kinds of acts enumerated in Art. 1818 are instances of acts which are NOT for apparently carrying on in the usual way the business of the partnership. In the 7 instances, the authority must be unanimous except if the business has been abandoned.
· Reasons why 7 acts are “unusual” a. assign the firm property – firm will virtually be dishonored b. dispose of the goodwill – good will is valuable property c. do any other act which would make it impossible to carry on – this is evidently prejudicial d. confers a judgment – if done before a case is filed, this is null and void; if done later, the firm would be jeopardized e. compromise – an act of ownership and may be said to be equivalent to alienation f. arbitration – an act of ownership which may not be justified g. renounce a claim – why should a partner renounce a claim that does not belong to him but to the partnership?
Art. 1819 – Conveyance of Real Property
· the article speaks of “:to convey” or a conveyance · real property may be registered or owned in the name of - the partnership - all the partners - one, some or not all the partners in trust for the partnership
Art. 1920 – Admission or representation made by a partner
Conditions: - admission must concern partnership affairs; - within the scope of the authority
Restrictions on the rule: a. admission made BEFORE dissolution are binding only when the partners has authority to act on the particular matter b. admissions made AFTER dissolution are binding only if the admissions were necessary to wind up the business
note: a previous admission of a partner is admissible in evidence against the partnership when it is made within the scope of the partnership, and during the existence, provided of course that the existence of the partnership is first proved by evidence other than such act or declaration
Art. 1821 – Notice to a Partner
· Cases of Knowledge of a Partner 1. knowledge of a partner acting in a particular matter acquired while a partner; 2. knowledge of a partner acting in a particular matter then present to his mind; and 3. knowledge of any partner who reasonably could and should have communicated it to the acting partner
· Effect of Notice to a Partner a. in general, notice to a partner is notice to the partnership, that is, a partnership cannot claim ignorance if a partner knew (but this is with restriction) b. notice to a partner, given while already a partner, is a notice to the partnership provided it relates to partnership affairs
· Effect of knowledge although no notice was given - notice of the partner is also knowledge of the firm provided: a. the knowledge was acquired by a partner who is acting in the particular matter involved; b. the knowledge may have been acquired by a partner not acting in the particular matter involved
Art. 1822 – Liability of Partnership
· Requisites for Liability a. the partner must be guilty of a wrongful act or omission; and b. he must be acting in the ordinary course of business, or with the authority of his co-partners even if the act is unconnected with the business
note: partnership liability does not extend to criminal liability
· Instances when the firm and other partners are not liable: a. if the wrongful act or omission was not done within the scope of the partnership business and for its benefit; b. if the act or omission was not wrongful; c. if the act or omission, although wrongful, did not make the partner concerned liable himself; and d. if the wrongful act or omission was committed after the firm had been dissolved and the same was not in connection with the process of winding up
Art. 1823 – Liability for Misappropriation
· Liability of partnership for misappropriation - the difference between par. 1 and par. 2 is that in the former misappropriation is made by the receiving partner, while in the latter, the culprit may be any partner. The effect however is the same in both cases
Art. 1824 – Solidary Liability of partners - not only the partners that are liable in solidum; it is also the partnership
Art. 1825 – Partner by Estoppel and Partnership by Estoppel
· Estoppel - a bar which precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied
When Partnership Liability Results: - if all the actual partners consented to the representation, then the liability of the person who represented himself to be a partner or who consented to such representation and the actual partners is considered a partnership liability.
Elements to establish liability as a partner on ground of estoppel: 1. proof by plaintiff that he was individually aware of the defendant’s representations as to his being a partner or that such representations were made by others and not denied or refuted by the defendant; 2. reliance on such representations by the plaintiff; and 3. lack of denial or refutation of the statements by the defendants; such denial need not precede plaintiff’s acting thereon if the denial was forthcoming promptly upon hearing of the representations, and if, by prudence and diligence the plaintiff might have learned the truth or untruth of the representations.
· When the problem may arise: A person may: a. represent himself as a partner of an existing partnership with or without the consent of the partnership; b. represent himself as a partner of a non-consent partnership
When estoppel does not apply: - when although there is misrepresentation, the third party is not deceived, the doctrine of estoppel does not apply
Burden of Proof - the creditor, or whoever alleges the existence of a partner or partnership by estoppel has the burden of proving the existence of the misrepresentation and the innocent reliance on it
Art. 1826 – Entry of a New Partner
· Entry of a new partner into an existing partnership - the newly admitted partner would be liable as an ordinary original partner for all partnership obligations incurred after his admission to the firm
· Creation of a new partnership in view of the entry - the admission of a new partner dissolves the old firm and creates a new one; - since the old firm is dissolved, the original creditors would not be the creditors of the new firm, but only of the original partners; hence, they may lose their preference; - under the civil code, they are considered creditors of the new firm
· Liability of incoming partner for partnership obligations 1. limited to his share in partnership property for existing obligations, unless there is stipulation to the contrary; 2. extends to his separate property for subsequent obligations
· Liability of an Outgoing Partner - where a partner gives notice of his retirement or withdrawal from the partnership, he is freed from any liability on contracts entered into thereafter, but his liability on existing incomplete contract continues.
· the rule of holding the new partner liable for previous obligations of the firm is not harsh on the said new partner. After all the incoming partner partakes of the benefit of the partnership, property and an established business
Art. 1827 – Creditors of Partnership
Reason for the Preference of Partnership Creditors
- after all, the partnership is a juridical person with whom the creditors have contracted; moreover the assets of the partnership must first be executed
Reason why industrial creditors may still attach the partner’s share
- after all, remainder belongs to the partner
Sale by a partner of his share to a third party
- if a partner sells his share to a third party, but the firm itself still remains solvent, creditors of the partnership cannot assail the validity of the sale by alleging that it is made in fraud of them, since they have not really been prejudiced