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1810Property Rights of a Partner

b.

interest in the partnershipthe partners shares of the


profits and losses

Not subject to legal support: because


the property belongs to the partnership and
not to the others. But their interest in
partnership is subject to support.

Right to participate in the managementproperty right

1812Partners Interest in the Partnership

Partnership Capitalconstant and remains unchanged and not


affected by fluctuations in the value of partnership property,
although it may be increased or decreased by consent of
partners. It represents the aggregate of the individual
contributions made by the partners.

A partners interest in the partnership (his share in the profits


and surplus) can in general be assigned, be attached and be
subject to legal support.

Partnership Propertyvariable, it changes. It includes not


only the original capital but all property subsequently
acquired on account of partnership name.
1811Co-ownership in Specific Partnership Property
-a partner is a co-owner with his partners of specific
partnership property but rules of co-ownership does not
necessarily apply
Rights of a Partner in Specific Partnership Property
contemplates only tangible things
1.

2.

3.

4.

has an equal right with his partners to possess but


only for partnership purposes (not for other
purposes) without the consent of other partners.
a. Transmissible to surviving heirs. They have
the right to wind up business.
he cannot assign his right except if all the other
partners assign their rights in the same
property; violation of this rule renders the
assignment is void.
a. Reason: it is impossible to determine the
extent of his beneficial interest in the
property until after liquidation of partnership
affairs. A partner has no interest in it but his
share of what remains after all partnership
debts are paid.
b. Reason for non-assignability: prevents
interference by outsiders in partnership
affairs.
c. An authorized assignment by a partner of
his right is void, but it may be regarded as a
valid assignment of the partners interest in
the partnership.
His right is not subject to attachment or execution
without the consent of all partners (except on a claim
against the partnership)
a. If there is a partnership debt, the specific
property CAN be attached. The partners
cannot claim exemption under homestead
or exemption laws.
b. Reason why in general, right cannot be
attached: If he cannot make a voluntary
assignment, neither should his separate
creditors be allowed an involuntary
assignment because the beneficial rights of
the separate creditors of a partner in
specific partnership property should be no
greater than the beneficial rights of their
debtor.
His right is not subject to legal support (Art.291)
a. Reason: would result to diminution of
property to the extent of the exemption
granted.

Transferee cannot interfere or participate in the management


or administration but he can receive the net profits to which
the partner would have been entitled.
Profitmeans the excess of returns over expenditure in a
transaction or series of transactions; or the net income of the
partnership
Surplusassets of the partnership after partnership debts
and liabilities are paid and settled and the rights of the
partners among themselves are adjusted. It is the excess of
assets over liabilities.
A partner is not a creditor of the partnership for the
amount of his share.
1813Effects of Conveyance By Partner of His interest
in the Partnership
A partner may assign his interest in the partnership to any of
his co-partners or to a third person without the consent of the
other, in the absence of agreement.
1.

2.

3.
4.
5.

If a partner conveys (assigns, sells, donates) his


whole interest, either two things may happen
a. The partnership may still remain
b. The partnership may be dissolved
The assignee does not necessarily become a partner.
The assignor is still the partner, with a right to
demand accounting and settlement.
The assignee cannot even interfere in the
management or administration.
The assignee cannot demand: information,
accounting
Cannot inspect any of the partnership books.

Rights of Assignee
1.
2.
3.

4.

To get whatever profits the assignor-partner would


have obtained
To avail himself of the usual remedies in case of fraud
in the management
To ask for annulment of the contract of assignment if
he was induced to enter into thru any vices of
consent or he himself was incapacitated to give
consent.
To demand accounting

*A partners conveyance operates as dissolution only when


it is clear that the parties contemplated and intended the
withdrawal from the partnership of such partner and the
termination of the partnership as between the partners.
1814Charging of Interst of a partner
Charging Ordersubjecting the interest of the debtor in the
partnership with the payment of unsatisfied amount of
judgment.
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GR: While a partners 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:


The claims of partnership creditors must be satisfied
first before the separate creditors of the partners can
be paid out of the interest charge.
Separate or individual creditors have
preference in separate or individual properties.

Redemption of interest charged:

Redemptionmeans the extinguishment of the


charge or attachment on the partners interest in the
profits.
How made?
1. May be redeemed or purchased with the
separate property of any one or more of the
partners OR
2. with partnership property with the consent
of all the partners whose interests are not so
charged or sold.
The charge may be redeemed or bought at
anytime BEFORE foreclosure.
AFTER foreclosure, it may still be bought with
separate property or with partnership property
Non-debtor partner does not acquire absolute
ownership over the debtor-partners interest but
holds it in trust for him.

Lossesresponsibility among partners


GR: a partner has a right to make all partners liable for
contracts he makes for the partnership.
Except: a partner may assume a separate undertaking in his
name with a third person to perform a partnership contract or
make himself solidarily liable on a partnership contract.
Nature of individual liability
1.

2.

3.

1817-Stipulation against liabilityVOID and no effect


in so far as third persons are concerned. It is only valid and
enforceable between partners.
1818WHEN CAN A PARTNER CAN BIND OR CANNOT
BIND THE FIRM
1.
2.

Rights of partner under exemption lawshe can avail


them after partnership debts have been paid.
OBLIGATIONS OF PARTNERS TO THIRD PARTIES
ART 1815: REQUIREMENT OF FIRM NAME
Firmname, title, or style under which a company transacts
business (to distinguish the partnership which is a distinct and
separate juridical personality from individuals composing the
partnership.
GR: The partners may adopt any firm desired.
The partners cannot use a name that is identical or
deceptively confusingly similar to that of any existing
or corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to existing
laws.

3.

Except: limited partner who allows his name to be included in


the firm name, a person continuing the business of
partnership after dissolution.
1816LIABILITY VS LOSSES
liabilityrefers to the extent of the share of the partners in
the partnership liability for its contractual debts. It refers to
the responsibility towards third persons

The fact that the partner is an agent


The instances when he can bind the partnership
a. No duty on third persons as to acting
partners authority.
b. There is presumption that he has authority
to bind partnership.
c. But third parties had no right to assume
that partner has unlimited authority. When a
partner who has no express, implied or
apparent authority, the partnership is not
liable for his acts.
The instances when he cannot bind the partnership
(he alone should be liable)

Partnership is a mutual agency. Each partner is a principal


for his own behalf and agent for his co-partners.
When can a partner bind the partnership:
1.
2.

The continued use of the name of a deceased partner is


permissible provided that the firm indicates in all its
communications that said partner is deceased. (CPR)
Liability for inclusion of name in firm name: Persons
who, not being partners, include their names in the firm name
do not acquire the rights of a partner.

Pro rataequally or jointly, based on the number of


partners and not on the amount of contribution
*parasproportionate
Subsidiarypartners become personally liable only
after all the partnership assets have been exhausted.
They are liable if the partnership assets are not
sufficient to meet the obligations.
Industrial partnergenerally not liable for losses
but not to third persons for debts of partnership.

Expressly or impliedly authorized


When he acts in behalf and in the name of the
partnership
a. When the other partners do not object,
although they have knowledge
b. When the act is for apparently carrying on
his usual way the business of the
partnership

Liability of partnership for acts of partners


1.

Acts for apparently carrying on in the usual


way the business of partnership
a. The partner so acting has in fact no
authority
b. The third person knows that the acting
partner has no authority.
Usual wayusual for the particular partnership
or usual for similar partnerships
*refers only to acts of administration
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2.

3.

Acts of dominion or ownership (par 2 and 3)


a. Par3: limitations to the authority granted to
bind the partnership
b. Reasons:
i. Assign the propertythe firm will
virtually be dissolved
ii. Dispose of the goodwillgoodwill is
valuable property
iii. Do any other act which would make
it impossible to carry onevidently
prejudicial
iv. Confess a judgmentif done before
a case is filed, it is null and void
v. Compromisean act of ownership
and may be equivalent to
alienation
vi. Arbitration
vii. Renounce a claimthe claim
belongs to the partnership
Acts in contravention of a restriction on
authority (par4)
a. Partnership is not liable to third persons
having actual or presumptive knowledge of
the restrictions, whether or not the acts are
for apparently carrying on in the usual way
the business of the partnership.

1818conveyance of real property belonging to the


partnership
Applicable to real property only
To convey or conveyance means a sale or
donation or mortgage
Real property must be registered or owned in the
name of:

The partnership
One or more but not all the partners
One or more or all the partners, or in a third person
in trust for the partnership.

5.

1820admission by a partner
GR: a person is not bound by the act, admission statement, or
agreement of another of which he has no knowledge or to
which he has not given is consent except by virtue of a
particular relation between them.
An admission made by a partner is an admission against the
partnership under the conditions given:
1.
2.

Restriction:
1.

2.

Effect of Notice to a Partner


1.

1.

3.

3.

4.

Notice to a partner is notice to the firm, subject to


restrictions.

Cases of knowledge of a partner

Par 3&4: what is conveyed is equitable interestall


interest which the partnership had, except title. These are
beneficial interest like use, fruits, but not the naked
ownership.

2.

The admission made before dissolution are binding


only when the partner has authority to act on
the particular matter.
Admissions made after dissolution are binding only if
the admissions were necessary to wind up the
business

1821NOTICE TO, OR KNOWLEDGE OF, A PARTNER OF


MATTER AFFECTING PARTNERSHIPS

2.

Title in partnership name, conveyance in partnership


name (without authority)passes the title to
buyer except
a. The conveyance is not in the usual way of
business
b. Had knowledge of the fact of no authority
Title in partnership name, conveyance in partners
nameequitable interest
Title in name of one or more partners, conveyance in
name of partner or partners in whose name title
standsA and B sold the land in their own name.
Title is conveyed
a. If without authority:
i. If buyer is in good faith and had no
knowledgetitle passes
ii. If buyer is in bad faith, the firm can
recover.
Title in name of one or more or all partners or a third
person in trust for partnership, conveyance executed

The admission must concern partnership affairs


Within the scope of his authority

When a partner makes admission for himself only, he alone


shall be chargeable with his admissions.

Par 1&2: what is conveyed is the title

1.

in partnership name or in name of the partner


equitable interest in both cases
Title in name of all partners, conveyance in name of
ALL partnerstitle passes

Knowledge of the partner acting in the particular


matter acquired while a partner
Knowledge of the partner acting in the particular
matter then present to his mind (obtained while
already a partner)
Knowledge of any other partner who reasonably
could and should have communicated it to the acting
partner.

1822/23LIABILITY FROM PARTNERS WRONGFUL ACT


OR OMISSION OR BREACH OF TRUST -- QUASI-DELICT
OR TORT NOT CONTRACTUAL OBLIGATIONS UNDER 1816
(Joint)
Solidaryliable for the wrongful act or omission or breach of
trust of partner acting within the scope of the firms business
or with the authority of his co-partners. This is true even if
the partners did not participate in, or ratify, or had no
knowledge of the act or omission, without prejudice to
their right to recover from the guilty partner.
Requisites:
1.
2.

The partner must be guilty of a wrongful act or


omission
He must be acting in the ordinary course of
business or with the authority of his copartners even if the act is unconnected with the
business.
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Partnership is not liable if the partner acted on his own


and not for the benefit of the partnership in the course of
some transaction not connected with the partnership
business.
Criminal liabilitynon-acting partner is not liable unless the
partnership is engaged in an unlawful enterprise.
When the firm and partners are not liable (Paras)
1.

2.
3.
4.

If the wrongful act or omission was not done within


the scope of the partnership business and for its
benefit.
If the act or omission was not wrongful.
If the act or omission, although wrongful, did not
make the partner concerned liable himself.
If committed after the firm has been dissolved.

b.
c.

1826-Incoming partner
Does the admission of new partner dissolve the old firm and
create a new one? Yes, because 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.
Liability
1.

Misapplication of money or property


1.
2.

was received within the scope of partner authority


or by any other partner after it was received by the
partnership in the ordinary course of business while
in its custody.

2.
3.
4.

1825partner by estoppels
5.
1.
2.

3.

4.

5.

6.

7.

8.

It is not a partnership.
Estoppelis 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.
Instances
a. Directly represents himself to anyone as a
partner in an existing partnership or in a
non-existing partnership
b. Indirectly represents himself by consenting
to another representing him as a partner in
an existing partnership or in a non-existing
partnership.
When partnership liability results
a. If actual partners consented to the
representation
When liability is pro ratathere is no existing
partnership and all those represented as partners
consented to the representation, or the person who
represented to be a partner and all those who
consented to such.
When liability is separatethere is no existing
partnership and not all but only some of those
represented partners consented to the act, OR none
of the partners consented, the person will solely be
liable.
Paras
a. Represent himself as partner with or without
consent
i. Deceiver is partner by estoppel
ii. If there is consent, partnership
liability results.
b. Represent himself as a partner of a nonexistent partnership (no partnership liability
result, the liability is imputed to the person
who represents and all those others who
aided him)
Elements
a. Proof by plaintiff that he was individually
aware of the defendants representations as
to his being a partner or that such
representations were made by others and
not denied or refuted by the defendant.

Reliance on such representations by plaintiff


Lack of any denial or refutation of the
statements by the defendant

Limited to his share in partnership property for


existing obligationshe is liable for all
obligations existing at the time of his
admission as though he was already a partner
when such obligations were incurred.
Only subsequent creditors have a right against the
separate property of the newly admitted partner.
Reason: because he partakes the benefits of the
partnership property and an established business.
Liability of outgoing partner: he is freed from liability
on contracts entered thereafter, but his liability on
existing incomplete contracts continues.
Performance by new partner: liable for the goods
delivered to the partnership after his admission to it,
where the goods so delivered are in the performance
of a contract made before his admission.

1827PREFERENCE OF PARTNERSHIP CREDITORS


Ratio: The partnership is a juridical person with whom the
creditors have contracted. The assets of the partnership must
first be exhausted.
Exhaustion of partnership property is necessary before going
to the separate property.
Remedy of private creditors of a partner: Without
prejudice to the right of preference of partnership creditors,
the creditors of each partner may ask for the attachment and
public sale of the share in the partnership assets. Such share
belongs to the partner.
1828-DISSOLUTION AND WINDING UP
1.

2.

3.

Dissolutionis the change in the relation of the


partners caused by any partner ceasing to be
associated in the carrying on of the business.
Winding upthe process of settling business affairs
after dissolution ex. Paying of obligations, collecting
of assets demandable, contracting for new business
if needed to wind up.
Terminationthe point in time after all the
partnership affairs have been wound up.

Change in the relation of the partners will dissolve the


partnership but will not disturb the continuance by the
remaining partners or by the existing and new partners of the
business as before.
1829-EFFECT OF DISSOLUTION
1.

2.

Dissolution does not automatically result in the


termination of the legal personality of the
partnership
Partnership continues for a limited purpose
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a.

3.

of making good all outstanding


engagements,
b. of taking and settling all accounts
c. collecting all the property, means and
assets for the benefit of all interested.
Transaction of new business prohibited

1830-CAUSES OF DISSOLUTION (automatic) exclusive

1832EFFECT OF DISSOLUTION ON AUTHORITY OF


PARTNER
GR: Dissolution terminates the actual authority of a partner to
undertake new business for the partnership
1.

4 categories:
1.

2.

3.
4.

5.
6.

7.

8.

Act of parties not in violation of their agreement


1) Termination of the definite term or particular
undertaking
2) By the express will of any partner who must
act in good faith when there is no definite
term and no specified undertaking
3) By express will of all the partners (except
those who have assigned or whose
interests have been charged)
4) Expulsion of a member in good faith and in
accordance with the power conferred by
the agreement between the partners.
In violation of their agreement
1) Withdrawal from a partnership with a
definite term or particular undertaking.
2) Effect: partner maybe held liable for
damages but he cannot be compelled to
remain in the firm (right of dissolution)
Unlawfulness of the business
Loss of specific thing
1) Before delivery: the firm is dissolved
because the partner has not given
contribution
2) After delivery: the firm bears the loss but
partnership is not dissolved.
3) If only the use is contributed: the owner
retains ownership-dissolves the partnership
Death of any partner (dissolution by operation of
law)-liquidation is entrusted to surviving partners
Insolvency of the partner (by virtue of a court
decree)
1) Reason: the business of a firm requires
solvency or ability to meet financial
demands of creditors.
2) An insolvent partner has no authority to act
for the firm.
Civil interdictiondeprives the offender the right to
manage his property and dispose by any act or any
conveyance.
Decree of court in 1831

2.

With respect to partners


a. When dissolution is NOT by act, insolvency,
or death of a partnerthe authority to act
and bind is terminated immediately
b. When by such act, insolvency or death
i. Partner had knowledge or notice of
dissolution
ii. Partner had no knowledge or notice
With respect to third persons
a. Partnership is generally bound by the new
contract without prejudice to recovering
from the acting partner

1833-- kinds of dissolution


1.
2.

Act, insolvency, death


By other things such as termination etc

Authority of partners to act for the partnership: not


deemed terminated except:
1.

2.

The cause of dissolution is the act of a partner


and the acting partner had knowledge of such
dissolution.
The cause of dissolution is the death or
insolvency and the acting partner had
knowledge or notice of such.
Notice of factif he states the fact to such
person or delivers through the mail or by other
means of communication, a written statement of
the fact to such person or to a proper at his
place of business or residence.

1834Power of partner to bind dissolved partnership


to third persons
When a partner continues to bind the partnership even after
dissolution
1.
2.

When there is no notice to third persons of


dissolution
When there is actual or constructive knowledge by
third persons of dissolution

1831-DISSOLUTION BY JUDICIAL DECREE


Notice of dissolution to creditors
1)

By a partner
a. Insanity-must materially affect the capacity
of the partner to perform his contractual
duties as a partner
b. Incapacityit should be lasting, from which
recovery is remote.
c. Misconduct and persistent breach of
partnership agreement
i. Ex. Drunkenness, rendering false
accounts, misappropriation, misuse
d. Business can only be carried on at a loss
i. Ex. It lost all its capital, insolvency,
abandonment etc
e. Other circumstances: abandonment of the
business, fraud in the management, refusal
to render accounting,

1.

2.

3.

As to persons who extended credit to partnership


affairs prior to dissolutionmust have knowledge or
notice to relieve the partnership from liability
As to persons who had known of partnerships
existencethe fact of publication would be sufficient
even if they did not actually read
Where acting partner has no authority to wind up
partnership affairsnotice is not needed except in
no.3 where the partner has no authority to wind up

Character of notice
1.
2.

As to prior dealersnotice must be actual


As to all othersnotice is accomplished by
advertisement. Actual notification is not necessary.
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1835EFFECT OF DISSOLUTION ON PARTNERS


EXISTING LIABILITY

1.
2.

Does not of itself discharge the existing liability of a partner.

3.
4.

1836WINDING UP
1.

2.

Judiciallyunder the control and direction of the


proper court upon cause shown by any partner, his
legal representative or his assignee
Extrajudicially
a. by the partners themselves without
intervention of the court
b. or by the legal representative of the last
surviving partner

Persons authorized to wind up

The partners designated by agreement.


In the absence of such, all the partners who not
wrongfully dissolved the partnership; or
The legal representative of the last surviving partner
*The court may appoint a receiver to wind up.

Powers of liquidating partner


1.
2.
3.
4.

Make new contracts


Raise money to pay partnership debts
Incur obligations to complete existing contracts or
preserve partnership assets.
Incur expenses necessary in the conduct of litigation
*the surviving partner has the full authority to do
everything that may be necessary, but his power is
limited to the performance of acts which are
indispensable to that end.

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