OTHER FACTORS INDICATING PROPERTY OWNERSHIP:

Partnership is owner
=========================================
ART. 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management.
=========================================
Income generate by property received by
partnership
Partnership pays for taxes
NOTE: Funds used to repair/maintain property which
was purchased with the funds of an
individual partner NOT SUFFICIENT TO
PROVE PARTNERSHIP OWNS PROPERTY

PRINCIPAL RIGHTS
Rights in specific partnership property
Interest in the partnership
Right to participate in the management
=========================================
ART. 1811. A partner is co-owner with his partners of
specific partnership property.
The incidents of this co-ownership are such that:

RELATED RIGHTS (1) A partner, subject to the provisions of this

Right to reimbursement for amounts Title and to any agreement between the
advanced to the partnership and to partners, has an equal right with his partners
indemnification for risks in consequence of to possess specific partnership property for
management partnership purposes; but he has no right to
Right of access and inspection of partnership possess such property for any other purpose
books without the consent of his partners;
Right to true and full information of all things
affecting the partnership (2) A partner's right in specific partnership
Right to a formal account of partnership affairs property is not assignable except in
under certain circumstances connection with the assignment of rights of
Right to have the partnership dissolved under
all the partners in the same property;
certain conditions
(3) A partner's right in specific partnership
property is not subject to attachment or
PARTNERSHIP PROPERTY vs. PARTNERSHIP CAPITAL execution, except on a claim against the
PARTNERSHIP PROPERTY PARTNERSHIP CAPITAL partnership. When partnership property is
Variable Constant attached for a partnership debt the
Value may vary Amount fixed by partners, or any of them, or the
from day to day the partners not representatives of a deceased partner,
with the changes affected by the cannot claim any right under the
in market value fluctuations in the homestead or exemption laws;
of the assets value of the
partnership (4) A partner's right in specific partnership
property property is not subject to legal support
under Article 291.
Includes original Represents aggregate =========================================
capital contributions + of the individual
all property contributions made by
subsequently acquired the partners
PARTNER ---
on account of the Does not actually own any part of
partnership partnership property (TANGIBLE PROPERTY)
Only has rights in specific partnership assets
PROPERTY USED BY THE PARTNERSHIP
If NO EXPRESS AGREEMENT: does not make it Equal right of possession
partnership property None may possess/use other than for
INTENT OF PARTIES is the controlling factor partnership purposes
Express agreement If used for personal gain, accountable
Acts of particular conduct to partners for profits or value of his
wrongful possession

PROPERTY ACQUIRED BY A PARTNER WITH GR: Partner cannot separately assign right in specific
PARTNERSHIP FUNDS partnership property

GR: Property acquired by a partner in his own name XPNs:

with partnership funds presumed to be partnership (1) Partners agree to assign their rights in the same
property property
(2) Retiring partner assigns rights to the continuing
XPN: Contrary Intention/Evidence partners

XPN to XPN: Property acquired after dissolution

NOTE: In case of death of partner RIGHT IN
Separate property of such partner
SPECIFIC PROPERTY goes to surviving partners
Liability to account for the funds
used in the acquisition (not his heirs)
1
 Right limited to share of what remains after
partnership debts have been paid
Specific partnership property not
subject to
Attachment
Execution
Garnishment
Injunction
Legal support
Partners cannot claim any right
under homestead or exemption laws
=========================================
ART. 1812. A partner's interest in the partnership is his
share of the profits and surplus.
=========================================
PROFIT
Excess of returns over a transaction or series
of transactions
Net income of the partnership for a given
time
SURPLUS
Assets of the partnership after partnership
debts and liabilities and paid and settled
and rights of the partners among themselves
are adjusted
Excess of assets over liabilities
NOTE: A partner is not a creditor of the partnership
for the amount of his share
=========================================
ART. 1813. A conveyance by a partner of his whole
interest in the partnership does not of itself dissolve
the partnership, or, as against the other partners in
the absence of agreement, entitle the assignee,
during the continuance of the partnership, to
interfere in the management or administration of
the partnership business or affairs, or to require any
information or account of partnership transactions,
or to inspect the partnership books; but it merely
entitles the assignee to receive in accordance with
his contract the profits to which the assigning
partner would otherwise be entitled. However, in
case of fraud in the management of the
partnership, the assignee may avail himself of the
usual remedies.
In case of a dissolution of the partnership, the
assignee is entitled to receive his assignor's interest
and may require an account from the date only of
the last account agreed to by all the partners.
=========================================
GR: Partner/s right in specific partnership property is not
assignable
XPN: He may assign his interest in the partnership to any
of his co-partners or to a third person (without
consent of other partners)
XPN to XPN: Contrary agreement with the other partners
ASSIGNMENT OF INTEREST IN PARTNERSHIP
Sale
Donation
Collateral security for a loan
Does not divest assignor of status/rights as a
partner
Does not dissolve the partnership
Typically made as security for loans
with the assigning partner not having
any intent to destroy the relations
Assignee
Does not become a partner
NO RIGHT TO:
o Interfere with management
o Require any info/account
o Inspect any of the partnership books
HAS RIGHTS TO:
(1) Receive profits accruing to the
assigning partner
(2) Avail himself of the usual remedies
provided by law in the event of
fraud in management
(3) Receive assignors interest in case of
dissolution
(4) Require an account of partnership
affairs from date only of the last
account agreed to by all partners
(only when partnership is dissolved)
GR: Assignee cannot ask for dissolution of the
partnership
XPNs:
(1) After termination of specified term/particular
undertaking
(2) At any time if the partnership was a partnership
at will when the interest was assigned or the
when the charging order was issued
NOTE: Non-assigning partners have the option to
dissolve the partnership [Art. 1830 (1)(c)] if
assigning partner neglects his duties after the
assignment
=========================================
ART. 1814. Without prejudice to the preferred rights
of partnership creditors under Article 1827, on due
application to a competent court by any judgment
creditor of a partner, the court which entered the
judgment, or any other court, may charge the
interest of the debtor partner with payment of the
unsatisfied amount of such judgment debt with
interest thereon; and may then or later appoint a
receiver of his share of the profits, and of any other
money due or to fall due to him in respect of the
partnership, and make all other orders, directions,
accounts and inquiries which the debtor partner
might have made, or which the circumstances of
the case may require.
The interest charged may be redeemed at any
time before foreclosure, or in case of a sale being
2
directed by the court, may be purchased without
thereby causing a dissolution:
(1) With separate property, by any one or more
of the partners; or
(2) With partnership property, by any one or
more of the partners with the consent of all
the partners whose interests are not so
charged or sold.
Nothing in this Title shall be held to deprive a
partner of his right, if any, under the exemption
laws, as regards his interest in the partnership.
=========================================
CHARGING ORDER
EXCLUSIVE REMEDY for a separate creditor
of an individual partner
Apply for charging order after securing
judgment on his credit in order to subject
the interest of the debtor partner
WRIT OF EXECUTION
Not proper since partnership assets are
reserved for partnership creditors
=========================================
ART. 1815. Every partnership shall operate under a
firm name, which may or may not include the
name of one or more of the partners.
Those who, not being members of the partnership,
include their names in the firm name, shall be
subject to the liability of a partner.
=========================================
FIRM
Name, title, or style under which a company
transacts business
Necessary to distinguish the partnership
which has a distinct and separate juridical
personality
Must be registered with the IPO
GR: Partners may adopt any firm name they desire
Individual partner
Surnames of all partners
Surname of one or more partners with the
addition of and Company
Individual names wholly distinct from names
of members
Name purely fanciful or fictitious
XPNs:
(1) Cannot use misleading name
(2) Must only use names of living partners/living
persons
XPN to XPN: Rule 3.02 of the Code of Professional
Responsibility (06/21/1988)
Continued use of name of
deceased partner allowed
provided that firm indicates in all its
communications that said partner is
deceased
GR: Inclusion in firm name = LIABLE to third persons
XPNs:
(1) Limited partner
(2) Deceased partner
(3) Person continuing business of a partnership
after dissolution
=========================================
ART. 1816. All partners, including industrial ones, shall
be liable pro rata with all their property and after all
the partnership assets have been exhausted, for the
contracts which may be entered into in the name
and for the account of the partnership, under its
signature and by a person authorized to act for the
partnership. However, any partner may enter into a
separate obligation to perform a partnership
contract.
=========================================
Partnership liability for its contractual debts
Partners are liable to creditors of the
partnership for the obligations contracted
by a partner in the name and for the
account of the partnership
Partners principals to the other partners and
agents for them and the partnership
GR: Partner has right to make all partners liable for
contracts he makes for the partnership in the
name and for the account of the partnership
XPNs:
(1) Such partner was not authorized
(2) Partner assumes a separate undertaking in his
name or makes himself solidary liable on a
partnership contract
Individual liability to creditors: PRO RATA & SUBSIDIARY
PRO RATA
o Jointly or equally
o Pro-rating based on # of partners
(not on the amount of their contribution
to common fund)
SUBSIDIARY
o Secondary
o Liable only after all the partnership
assets have been exhausted
NOTE:
If partner has absconded, his share of the
liability cannot be enforced
If individual liability of a partner condoned by
creditor, it cannot increase liability of other
partners
Liability of an Industrial Partner
Ordinarily not liable for losses
Liable to third persons for the debts of the
partnership
LIABILITY LOSS
Exemption of industrial partner to
pay losses relates exclusively to the
settlement of partnership affairs
among the partners themselves
Industrial partner not exempted from
liability to third persons for debts of
the partnership
3
=========================================
ART. 1817. Any stipulation against the liability laid
down in the preceding article shall be void, except
as among the partners.
=========================================
GR: Stipulation among partners contrary to pro rata
and subsidiary liability VOID and NO EFFECT as to
third persons
XPN: Valid and enforceable among the partners
Pro rata in payment to third persons
Partners may later on recover from
other partners pursuant to the prior
agreement between themselves
=========================================
ART. 1818. Every partner is an agent of the
partnership for the purpose of its business, and the
act of every partner, including the execution in the
partnership name of any instrument, for apparently
carrying on in the usual way the business of the
partnership of which he is a member binds the
partnership, unless the partner so acting has in fact
no authority to act for the partnership in the
particular matter, and the person with whom he is
dealing has knowledge of the fact that he has no
such authority.
An act of a partner which is not apparently for the
carrying on of business of the partnership in the
usual way does not bind the partnership unless
authorized by the other partners.
Except when authorized by the other partners or
unless they have abandoned the business, one or
more but less than all the partners have no authority
to:
(1) Assign the partnership property in trust for
creditors or on the assignee's promise to pay the
debts of the partnership;
(2) Dispose of the good-will of the business;
(3) Do any other act which would make it
impossible to carry on the ordinary business of a
partnership;
(4) Confess a judgment;
(5) Enter into a compromise concerning
partnership claim or liability;
(6) Submit a partnership claim or liability
arbitration;
(7) Renounce a claim of the partnership.
No act of a partner in contravention of a restriction
on authority shall bind the partnership to persons
having knowledge of the restriction.
=========================================
DOCTRINE OF APPARENT AUTHORITY
In the absence of agreement to the
contrary, all partners have equal rights in the
management and conduct of the
partnership business
General presumption that each individual
partner is an agent of the firm and that he
has authority to bind the firm in carrying on
the partnership transactions
GR: Third persons not bound to inquire into acting
partners authority
XPN: Third persons cannot assume that a partner has
unlimited authority
GR: Partnership not liable for acts of a partner who did
not have expressed/implied/apparent authority
XPNs:
(1) Estoppel
(2) Other partners ratify his acts
LIABILITIES OF PARTNERSHIP FOR ACTS OF PARTNERS:
Acts for apparently carrying on in the usual way
the business of the partnership
Acts binding upon third persons even
partner had no authority
USUAL WAY usual acts of administration
of the business
NO LIABILITY:
1. Partner has in fact no authority
2. Third person aware of such fact
Acts of strict dominion or ownership
Powers not specifically delegated in a
partnership agreement are presumed to be
withheld
For acts beyond scope/objectives of
partnership to bind the partnership, acting
partner must be vested with express/implied
authority
Acts in contravention of a restriction on authority
Partnership not liable to third persons having
actual/presumptive knowledge of
restrictions
a
NOTE: If partner acts without authority to bind the
to partnership to a contract, he personally
liable on such contract
=========================================
ART. 1819. Where title to real property is in the
partnership name, any partner may convey title to
such property by a conveyance executed in the
partnership name; but the partnership may recover
such property unless the partner's act binds the
partnership under the provisions of the first
paragraph of article 1818, or unless such property
has been conveyed by the grantee or a person
claiming through such grantee to a holder for value
without knowledge that the partner, in making the
conveyance, has exceeded his authority.
4
Where title to real property is in the name of the
partnership, a conveyance executed by a partner,
in his own name, passes the equitable interest of
the partnership, provided the act is one within the
authority of the partner under the provisions of the
first paragraph of Article 1818.
Where title to real property is in the name of one or
more but not all the partners, and the record does
not disclose the right of the partnership, the partners
in whose name the title stands may convey title to
such property, but the partnership may recover
such property if the partners' act does not bind the
partnership under the provisions of the first
paragraph of Article 1818, unless the purchaser or
his assignee, is a holder for value, without
knowledge.
Where the title to real property is in the name of
one or more or all the partners, or in a third person
in trust for the partnership, a conveyance executed
by a partner in the partnership name, or in his own
name, passes the equitable interest of the
partnership, provided the act is one within the
authority of the partner under the provisions of the
first paragraph of Article 1818.
Where the title to real property is in the name of all
the partners a conveyance executed by all the
partners passes all their rights in such property.
=========================================
Prima Facie ownership of real property:
MUNIMENT OF TITLE
Title registered in partnership name
Presumption that property purchased with
partnership funds belong to the partnership
Title/Ownership
CONVEYANCE Equitable Interest
Mortgage
REAL PROPERTY may be registered/owned in the name of
Partnership
1 but not all partners
1 or ALL partners, or in a third person in trust for the
partnership
ALL of the partners
GR: If AGENT (partner) has no authority = transaction
not binding to the PRINCIPAL (partnership)
XPNs:
(1) Conveyance done in the usual way of
business
(2) Third party had knowledge of the lack of
authority
NOTE: Doctrine of Innocent Purchaser for value &
good faith applicable (except if purchaser is a
bank or juridical entity)
=========================================
ART. 1820. An admission or representation made by
any partner concerning partnership affairs within
the scope of his authority in accordance with this
Title is evidence against the partnership.
=========================================
GR: A person is not bound by the act, admission,
statement, or agreement of another which he has
no knowledge or to which he has not given
consent
XPN: Partnership relation
Admission of a partner made during the
existence of a partnership are binding
against the partnership when:
o with re: to the partnership affairs
o made within scope of his authority
Admissions made after dissolution in
connection with winding up of partnership
affairs
XPNs to XPN: Admissions made by the partner
(1) for himself only without purporting
to act for the partnership
(2) after dissolution (if not related with
winding up)
NOTE: Partnership Relation must be proved by other
independent evidence, statements, or admissions,
before partnership can be charged with the
admission of the partner
=========================================
ART. 1821. Notice to any partner of any matter
relating to partnership affairs, and the knowledge of
the partner acting in the particular matter,
acquired while a partner or then present to his
mind, and the knowledge of any other partner who
reasonably could and should have communicated
it to the acting partner, operate as notice to or
knowledge of the partnership, except in the case of
fraud on the partnership, committed by or with the
consent of that partner.
=========================================
Fiduciary Relationship among Partners
Presumed that partners disclose to one another
all relevant information concerning partnership
business
Each partner is an agent, notice to a partner is as
good as notice given to each of the partners
NOTICE DELIVERED
to ONE PARTNER = effective communication
to the partnership
3 CASES OF KNOWLEDGE OF A PARTNER:
(1) Knowledge of the partner acting in the
particular matter acquired while a partner
(2) Knowledge of the partner acting in the
particular manner then present to his mind
(3) Knowledge of any other partner who
reasonable could and should have
communicated it to the acting partner
5
=========================================
LIABILITY FOR WRONGFUL
ACTS/OMMISSIONS OF ANY PARTNER
ART. 1822. Where, by any wrongful act or omission
of any partner acting in the ordinary course of the
business of the partnership or with the authority of
co-partners, loss or injury is caused to any person,
not being a partner in the partnership, or any
penalty is incurred, the partnership is liable therefor
to the same extent as the partner so acting or
omitting to act.
------------------------------------------------------------
ART. 1823. The partnership is bound to make good
the loss:
(1) Where one partner acting within the scope
of his apparent authority receives money or
property of a third person and misapplies it;
and
(2) Where the partnership in the course of its
business receives money or property of a
third person and the money or property so
received is misapplied by any partner while
it is in the custody of the partnership.
------------------------------------------------------------
ART. 1824. All partners are liable solidarily with the
partnership for everything chargeable to the
partnership under Articles 1822 and 1823.
=========================================
Partnership liability arising from partners
wrongful act/omission/breach of trust
SOLIDARY liability of all the partners to third
persons
SECONDARY liability each partner
personally liable to offended party if
partnership assets not sufficient to cover
liability
Erring partner must have acted
within scope of the firms business
with the authority of his co-partners
NOTE: Rule of Respondeat Superior (vicarious
liability) applies to law of partnership
REQUISITES for LIABILITY (ART.1822)
1. Partner must be guilty of a wrongful act or
omission
2. Partner 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
GR: Partners liable for negligence in the use of
partnership property by a partner acting in the
course of business
XPNs:
(1) Partner acted on his own and used such
property not for the benefit of the partnerhip
(2) If wrongful act/omission was committed after
dissolution and the same was not connected
to the winding up of partnership affairs
Liability under Art.1822:
DOES NOT EXTEND TO CRIMINAL LIABILITY
Non-acting partner NOT LIABLE for criminal
acts of another partner
ALL PARTNERS criminally liable if partnership
engaged in an unlawful enterprise (unless a
partner was in good faith)
Liability under Art.1823:
PARTNERSHIP LIABLE FOR MISAPPLICATION OF
MONEY/PROPERTY OF A THIRD PERSON
Partnership liable for losses suffered by a
third person whose money/property is:
Misappropriated by a partner who
received it within the scope of his
authority
Received by the partnership in the
ordinary course of business while in its
custody
=========================================
ART. 1825. When a person, by words spoken or
written or by conduct, represents himself, or
consents to another representing him to anyone, as
a partner in an existing partnership or with one or
more persons not actual partners, he is liable to any
such persons to whom such representation has
been made, who has, on the faith of such
representation, given credit to the actual or
apparent partnership, and if he has made such
representation or consented to its being made in a
public manner he is liable to such person, whether
the representation has or has not been made or
communicated to such person so giving credit by
or with the knowledge of the apparent partner
making the representation or consenting to its
being made:
(1) When a partnership liability results, he is
liable as though he were an actual member
of the partnership;
(2) When no partnership liability results, he is
liable pro rata with the other persons, if any,
so consenting to the contract or
representation as to incur liability, otherwise
separately.
When a person has been thus represented to be a
partner in an existing partnership, or with one or
more persons not actual partners, he is an agent of
the persons consenting to such representation to
bind them to the same extent and in the same
manner as though he were a partner in fact, with
respect to persons who rely upon the
representation. When all the members of the
existing partnership consent to the representation, a
partnership act or obligation results; but in all other
cases it is the joint act or obligation of the person
acting and the persons consenting to the
representation.
=========================================
6
Partnership by Estoppel
Person held liable as partners because of
representing himself to be such, or by allowing
others with their consent and knowledge, to
so hold them out to be partners
Does not create a partnership (partner by
estoppel does not become a partner)
Doctrine only applicable as far as third
persons are concerned
Partner by estoppel incurs partnership
liability to third persons
ELEMENTS for LIABILITY as PARTNER BY ESTOPPEL
1. Proof by plaintiff that he was aware of the
defendants representations as to his being a
partner or that such representation was made by
others and not denied/refuted by the defendant
2. Reliance on such representations by the plaintiff
3. Lack of any denial/refutation of the statements by
the defendant
NOTE: Doctrine of Estoppel is N/A between actual
partners
=========================================
ART. 1826. A person admitted as a partner into an
existing partnership is liable for all the obligations of
the partnership arising before his admission as
though he had been a partner when such
obligations were incurred, except that this liability
shall be satisfied only out of partnership property,
unless there is a stipulation to the contrary.
=========================================
Incoming Partner/New Partner
EXISTING OBLIGATIONS OF PARTNERSHIP
Liable for obligations even prior his
entry to the partnership
Liability limited to only what he has
contributed to the partnership
SUBSEQUENT OBLIGATIONS OF PARTNERSHIP
Refers to obligations that arise after
new partners admission
Liability extends to his separate
property
=========================================
ART. 1827. The creditors of the partnership shall be
preferred to those of each partner as regards the
partnership property. Without prejudice to this right,
the private creditors of each partner may ask the
attachment and public sale of the share of the
latter in the partnership assets.
=========================================
Preference of Partnership Creditors
Partnership creditors entitled to priority of
payment
Partnership property should be applied to
payment of debts in preference to the
claim of any partner or his creditors
Remedy of Private Creditors of a Partner
Creditors of each partner may ask for the
attachment and public sale of the share of
the said partner in the partnership assets
NOTE: Purchaser at the public sale does not
become a partner
DISSOLUTION
AND WINDING UP
=========================================
ART. 1828. The dissolution of a partnership is the
change in the relation of the partners caused by
any partner ceasing to be associated in the
carrying on as distinguished from the winding up of
the business.
=========================================
Dissolution Winding Up Termination
Change in the membership of a
partnership dissolves existing partnership
and forms a new one
No such thing as an INCOMING
PARTNER
DISSOLUTION
Point in time when partners cease to carry
on the business together
Demise of the partnership
WINDING UP
Actual process of settling the business or
partnership affairs after dissolution
Involves collection and distribution of
partnership assets, payment of debts, and
determination of the value of each
partners interest in the partnership
Final step after dissolution
TERMINATION
All partnership affairs are completely wound
up and finally settled
Signifies end of partnership life
Change in the Relation of the Partners
Dissolves partnership
Does not disturb continuance of business by
remaining partners or by existing + new
partners
7
=========================================
ART. 1829. On dissolution the partnership is not
terminated, but continues until the winding up of
partnership affairs is completed.
=========================================
EFFECTS OF DISSOLUTION:
Change in partnership resolution
Not actual cessation of the partnership
business
Partnership not terminated
Does not automatically result in termination
of legal personality or cessation of business
Partners remain co-partners until partnership
is terminated
Partnership continues for a limited purpose
Limited existence for the purpose of making
good all outstanding engagements, settling
of all accounts, etc.
Transaction of new business is prohibited
After dissolution partnership remains only for
purpose of winding up its affairs
No new partnership business should be
undertaking, affairs to be liquidated and
distribution made to those entitled
=========================================
ART. 1830. Dissolution is caused:
(1) Without violation of the agreement
between the partners:
a. By the termination of the definite term or
particular undertaking specified in the
agreement;
b. By the express will of any partner, who
must act in good faith, when no definite
term or particular is specified;
c. 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 specified term or
particular undertaking;
d. By the expulsion of any partner from the
business bona fide in accordance with
such a power conferred by the
agreement between the partners;
(2) In contravention of the agreement between
the partners, where the circumstances do
not permit a dissolution under any other
provision of this article, by the express will of
any partner at any time;
(3) By any event which makes it unlawful for the
business of the partnership to be carried on
or for the members to carry it on in
partnership;
(4) When a specific thing which a partner had
promised to contribute to the partnership,
perishes before the delivery; in any case by
the loss of the thing, when the partner who
contributed it having reserved the
ownership thereof, has only transferred to
the partnership the use or enjoyment of the
same; but the partnership shall not be
dissolved by the loss of the thing when it
occurs after the partnership has acquired
the ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the
partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following
article.
=========================================
Acts of parties not in violation of their
agreement
CAUSES OF Acts of parties in violation of their
DISSOLUTION agreement
Operation of law
Court decree
Dissolution Without Violation of Partnership Agreement
Termination of definite term/particular
undertaking
By express will of any partner/all partners
By expulsion of any partner
o Must be done in good faith
o Expelled partner entitled to
damages
GR: No member/majority members cannot expel
other members of the firm at will
XPN: Power expressly given by agreement of the
parties
Dissolution With Violation of Partnership Agreement
Any partner may cause the dissolution at
any time without consent of other partners
for any reason
Withdrawing partner liable for damages for
unjustified dissolution (unless done in good
faith)
Partner guilty of wrongful dissolution not give
the right to wind up partnership affairs
Business Becomes Unlawful
Supervening event which makes the
business unlawful or makes it unlawful for the
partners to carry it on together
Loss of Specific Thing to be Contributed
Refers to LOSS BEFORE DELIVERY
If loss after delivery, partnership not
dissolved (incurs loss on account of the thing
that was lost after delivery)
Death of Any Partner
Ipso facto dissolution (operation of law)
unless surviving partners and heirs of
deceased partners agree to continue
business (new partnership is formed)
8
Insolvency of Partner/Partnership
Insolvency declared by court
Interest in the partnership of insolvent
partner is subjected to the right of his
creditors
Civil Interdiction of Any Partner
Limitation on ones capacity to act (cannot
validly give consent)
Civil interdiction deprives one the right to
manage/dispose of his property inter vivos
=========================================
ART. 1831. On application by or for a partner the
court shall decree a dissolution whenever:
(1) A partner has been declared insane in any
judicial proceeding or is shown to be of
unsound mind;
(2) A partner becomes in any other way
incapable of performing his part of the
partnership contract;
(3) A partner has been guilty of such conduct
as tends to affect prejudicially the carrying
on of the business;
(4) A partner wilfully or persistently commits a
breach of the partnership agreement, or
otherwise so conducts himself in matters
relating to the partnership business that it is
not reasonably practicable to carry on the
business in partnership with him;
(5) The business of the partnership can only be
carried on at a loss;
(6) Other circumstances render a dissolution
equitable.
On the application of the purchaser of a partner's
interest under Article 1813 or 1814:
(1) After the termination of the specified term
or particular undertaking;
(2) At any time if the partnership was a
partnership at will when the interest was
assigned or when the charging order was
issued.
=========================================
GROUNDS FOR DISSOLUTION BY COURT ORDER
Insanity
Incapacity
Misconduct and persistent
On application
breach of partnership
by a PARTNER agreement
Business can be carried out
only at a loss
Other circumstances
On application by a After termination of the
PURCHASER of a specified term or particular
undertaking
PARTNERS At any time when the
INTEREST
interest was assigned or the
charging order was issued
(if partnership at will)
========================================
Art. 1832. Except so far as may be necessary to
wind up partnership affairs or to complete
transactions begun but not then finished, 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 or death of a
partner; or
b. When the dissolution is by such act,
insolvency or death of a partner in
cases where article 1833 so requires;
(2) With respect to persons not partners, as
declared in article 1834.
========================================
Effect of Dissolution on Authority of Partner
GR: Every partner is considered the agent of the
partnership with authority to bind the
partnership as well as the other partners
with respect to the transaction of its
business.
XPN: Unless otherwise provided
AS TO PARTNERS
The authority of any partner to bind the
partnership by a new contract is
immediately terminated when the
dissolution is NOT by the act, insolvency, or
death of a partner.
When dissolution is by such act, insolvency
or death, the termination of authority
depends upon w/n the partner had
knowledge or notice of the dissolution.
AS TO THIRD PERSONS (Art 1834)
Partnership is bound by new contract
although the authority of the acting partner
as it affects his co-partners is already
deemed terminated under Articles 1832 and
1833.
The innocent partners can always recover
from the acting partner.
GR: The authority of a partner as it affects his co-
partners (not third persons) is not deemed
terminated.
XPNs: Deemed terminated. In two instances:
(1) the cause of the dissolution is the act of a
partner and the acting partner had
knowledge of such dissolution; and
(2) The cause of the dissolution is the death or
insolvency of a partner and the acting
partner had knowledge or notice of the
death or insolvency.
9
========================================
ART. 1833. Where the dissolution is caused by the
act, death or 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 the partnership had not been dissolved unless:
(1) The dissolution being by act of any partner,
the partner acting for the partnership had
knowledge of the dissolution; or
(2) The dissolution being by the death or
insolvency of a partner, the partner acting
for the partnership had knowledge or notice
of the death or insolvency.
========================================
Right of Partner to Contribution from Co-Partners
PARTNER ENTERS INTO A NEW CONTRACT
WITH A THIRD PERSON AFTER DISSOLUTION =
new contract generally will bind the
partners.
Each partner liable for his share of any
liability created by the acting partner as if
the partnership had not been dissolved.
Knowledge or notice of cause of dissolution
Dissolution by death or insolvency
Unjust to hold that acting partners
must assume entire liability, even if
he is ignorant of the death of a
partner
Actual knowledge needed
Same rule applies with bankruptcy of
a partner.
Dissolution by court decree or resulting from
unlawfulness
Already an actual notice of the
dissolution to all the partners
KNOWLEDGE OF FACTS when the person who claims the
benefit of the notice:
1. States the fact to such person
2. Delivers through the mail or by other means of
communication, a written statement of the
fact to such person or to a proper person at his
place of business or residence.
========================================
ART. 1834. After dissolution, a partner can bind the
partnership except as provided in the third
paragraph of this article:
(1) By any act appropriate for winding up
partnership affairs or completing
transactions unfinished at dissolution;
(2) By any transaction which would bind the
partnership if dissolution had not taken
place, provided the other party to the
transaction:
a. Had extended credit to the
partnership prior to dissolution and
had no knowledge or notice of the
dissolution; or
b. Though he had not so extended
credit, had nevertheless known of
the partnership prior to dissolution,
and, having no knowledge or notice
of dissolution, the fact of dissolution
had not been advertised in a
newspaper of general circulation in
the place (or in each place if more
than one) at which the partnership
business was regularly carried on.
The liability of a partner under the first paragraph,
No. 2, shall be satisfied out of partnership assets
alone when such partner had been prior to
dissolution:
(1) Unknown as a partner to the person with
whom the contract is made; and
(2) So far unknown and inactive in partnership
affairs that the business reputation of the
partnership could not be said to have been
in any degree due to his connection with it.
The partnership is in no case bound by any act of
partner after dissolution:
(1) Where the partnership is dissolved because
it is unlawful to carry on the business, unless
the act is appropriate for winding up
partnership affairs; or
(2) Where the partner has become insolvent; or
(3) Where the partner has no authority to wind
up partnership affairs; except by a
transaction with one who
a. Had extended credit to the
partnership prior to dissolution and
had no knowledge or notice of his
want of authority; or
b. Had not extended credit to the
partnership prior to dissolution, and,
having no knowledge or notice of his
want of authority has not been
advertised in the manner provided
for advertising the fact of dissolution
in the first paragraph, No. 2 (b).
Nothing in this article shall affect the liability under
Art. 1825 of any person who after dissolution
represents himself or consents to another
representing him as a partner in a partnership
engaged in carrying on business.
========================================
Power of Partner to Bind Dissolved Partnership
to Third Persons
When there is NO NOTICE to third persons of
dissolution
the power of one partner to act and
bind the others is effectively terminated
may still continue as regard to third
persons on the assumption that the
partnership is still existing.
10

Where there is actual or constructive
knowledge by third persons
Whether they know or should have
known of the fact of dissolution
If they did, the validity if their transaction
is determined whether those
transactions were necessary to liquidate
the partnership
Notice of Dissolution to Creditors
As to persons who extended credit to
partnership prior to dissolution must have
knowledge or notice to relieve partnership
from liability
As to persons who had known of the
partnerships existence publication in
newspaper sufficient
Where acting partner has no authority to
wind up partnership affairs notice
necessary
Where acting partner has become insolvent
o RECOGNIZED: Right of a partner who
has no knowledge of partners
insolvency
o NOT RECOGNIZED: Right of a 3rd person
claiming his contract with
partnership is valid
Where dissolution caused by death of a
partner not considered to be notice per
se whether as to surviving partner or as to
third person
Character of Notice Required
As to prior dealers ACTUAL notice
As to all others ADVERSTISEMENT in a local
newspaper [actual notice
not necessary]
*Dormant partner need
not give notice
Partnership by estoppel after dissolution
Third persons may claim the validity of
contracts made with dissolved partnerships
in disregard of the fact of dissolution.
========================================
ART. 1835. The dissolution of the partnership does
not itself discharge the existing liability of any
partner.
A partner is discharged from any existing liability
upon the dissolution of the partnership by an
agreement to that effect between himself, the
partnership creditor and the person or partnership
continuing the business; and such agreement may
be inferred from the course of dealing between the
creditor having knowledge of the dissolution and
the person or partnership continuing the business.
The individual property of a deceased partner shall
be liable for all obligation of the partnership
incurred while he was a partner, but subject to the
prior payment of his separate debts.
========================================
Dissolution does not discharge the liability of
a partner
Partner may be relieved from all existing
liabilities upon dissolution by an agreement
to that effect between himself, partnership
creditor and other partners.
LIABILITY OF ESTATE OF DECEASED PARTNER
Individual property of a deceased partner
shall be liable for all obligations of the
partnership incurred while he was a partner
Creditors of the deceased partner are to be
preferred
========================================
ART.1836. Unless otherwise agreed, the partners
who have not wrongfully dissolved the partnership
or the legal representative of the last surviving
partner, not insolvent, has the right to wind up the
partnership affairs, provided, however, that any
partner, his legal representative or his assignee,
upon cause shown, may obtain winding up by the
court.
========================================
WINDING UP provision
May be done either:
a.) Judicially under the control and
direction of the proper court upon
cause shown by any partner
b.) Extrajudicially by the partners
themselves without court intervention
Persons AUTHORIZED to wind up:
1. PARTNERS DESIGNATED by the agreement
2. If no agreement, ALL PARTNERS WHO HAVE NOT
WRONGFULLY DISSOLVED THE PARTNERSHIP
3. LEGAL REPRESENTATIVE of the last surviving
partner (executor or administrator if all other
partners are dead)
*Court may appoint a RECEIVER to wind up
partnership affairs
Powers of the Liquidating Partner
1. Make new contracts
2. Raise money to raise partnership debts
3. Incur obligations to complete existing
contracts or preserve partnership assets
4. Incur expenses necessary in the conduct of
litigation
11
========================================
ART. 1837. When dissolution is caused by in any
way, except in contravention of the partnership
agreement, each partner, as against his co-
partners and all persons claiming through them in
respect of their interests in the partnership, unless
otherwise agreed, may have the partnership
property applied to discharge its liabilities, and the
surplus applied to pay in cash the net amount
owing to the respective partners. But if dissolution is
caused by expulsion of a partner, bona fide under
the partnership agreement and if the expelled
partner is discharged from all partnership liabilities,
either by payment or agreement under the second
paragraph of Article 1835, he shall receive in cash
only the net amount due him from the partnership.
When dissolution is caused in contravention of the
partnership agreement, the rights of the partners
shall be as follows:
(1) Each partner who has not caused
dissolution wrongfully shall have:
a. All the rights specified in the first
paragraph of this article, and
b. The right, as against each partner
who has caused the dissolution
wrongfully, to damages for breach
of the agreement.
(2) The partners who have not caused the
dissolution wrongfully, if they all desire to
continue the business in the same name
either by themselves or jointly with others,
may do so, during the agreed term for the
partnership and for that purpose may
possess the partnership property, provided
they secure the payment by bond
approved by the court, or pay to any
partner who has caused the dissolution
wrongfully, the value of his interest in the
partnership at the dissolution, less any
damages recoverable under the second
paragraph, No. 1 (b) of this article, and in
like manner indemnify him against all
present or future partnership liabilities.
(3) A partner who has caused the dissolution
wrongfully shall have:
a. If the business is not continued under
the provisions of the second
paragraph, No.2, all the rights of a
partner under the first paragraph,
subject to liability for damages in the
second paragraph, No. 1 (b), of this
article.
b. If the business is continued under the
second paragraph, No.2 of this
article, the right as against his co-
partners and all claiming through
them in respect of their interests in
the partnership, to have the value of
his interest in the partnership, less any
damage caused to his co-partners
by the dissolution, ascertained and
paid to him in cash, or the payment
secured by bond approved by the
court, and to be released from all
existing liabilities of the partnership;
but in ascertaining the value of the
partners interest the value of the
goodwill of the business shall not be
considered.
========================================
OBJECTIVE: to provide for the payment of the
partner who leaves the firm and to indemnify him
against existing or possible future liability.
RIGHTS of PARTNER in case dissolution is not in
contravention of agreement:
To have partnership property applied to
discharge liabilities of partnership
To have surplus applied to pay in cash the
net amount owing to the respective
partners
RIGHTS of PARTNER in case dissolution in
contravention of agreement:
INNOCENT PARTNERS
To have partnership property
applied for the payment of
liabilities and to receive in cash
his share of the surplus
To be indemnified for damages
caused by the guilty partner
To continue the business in the
same name
To possess partnership property
GUILTY PARTNERS
If business is NOT continued
to have partnership property
applied to discharge its liabilities
to receive in cash his share of
the surplus less damages
If business is CONTINUED
to have the value of his interest
in the partnership less damages
to be released from all existing
and future liabilities
GOODWILL OF A BUSINESS
the advantage which it has from its
establishment or from the patronage of its
customers, over and above the mere value
of its property and capital
========================================
ART. 1838. Where a partnership contract is
rescinded on the ground of the fraud or
misrepresentation of one of the parties thereto, the
party entitled to rescind is, without prejudice to any
other right, entitled:
12
 (1) To a lien on, or right of retention of, the
surplus of the partnership property after
satisfying the partnership liabilities to third
persons for any sum of money paid by him
for the purchase of an interest in the
partnership and for any capital or advances
contributed by him;
(2) To stand, after all liabilities to third persons
have been satisfied, in the place of the
creditors of the partnership for any
payments made by him in respect of the
partnership liabilities; and
(3) To be indemnified by the person guilty of the
fraud or making the representation against
all debts and liabilities of the partnership.
========================================
RIGHTS of PARTNER to rescind:
Contract is voidable or annullable if one is
induced by fraud or misrepresentation
If contract is annulled, the injured partner is
entitled to restitution.
Fraud/misrepresentation vitiates consent.
Until partnership contract is annulled by a
proper court action, partnership relations
exist and defrauded partner is liable for all
obligations to third persons
RIGHTS of INJURED PARTNER where partnership contract
rescinded:
1. Right of a lien on, or retention of the surplus of
partnership property after satisfying the
partnership liabilities for any sum of money paid
or contributed by him;
2. Right to subogation in place of partnership
creditors after payment of partnership liabilities
3. Right of indemnification by the guilty partner
against all debts and liabilities of the partnership
========================================
ART. 1839. In settling accounts between the
partners after dissolution, the following rules shall be
observed, subject to any agreement to the
contrary:
(1) The assets of the partnership are:
a. The partnership property,
b. The contributions of the partners
necessary of the payment of all the
liabilities specified in No.2.
(2) The liabilities of the partnership shall rank in
order of payment, as follows:
a. Those owing to creditors other than
partners,
b. Those owing to partners other than for
capital and profits,
c. Those owing to partners in respect of
capital,
d. Those owing to partners in respect of
profits.
(3) The assets shall be applied in the order of
their declaration in No.1 of this article to the
satisfaction of the liabilities.
(4) The partners shall contribute, as provided by
Article 1797, the amount necessary to satisfy
the liabilities.
(5) An assignee for the benefit of creditors or
any person appointed by the court shall
have the right to enforce the contributions
specified in the preceding number.
(6) Any partner or his legal representative shall
have the right to enforce the contributions
specified in No.4, to the extent of the
amount which he has paid in excess of his
share of the liability.
(7) The individual property of a deceased
partner shall be liable for the contributions
specified in No.4.
(8) When partnership property and the
individual properties of the partners arein
possession of a court for distribution,
partnership creditors shall have priority on
partnership property and separate creditors
on individual property, saving the rights of
lien or secured creditors.
(9) ***Where a partner has become insolvent or
his estate is insolvent, the claims against his
separate shall rank in the following order:
a. Those owing to separate creditors;
b. Those owing to partnership creditors;
c. Those owing to partners by way of
contribution.
========================================
SETTLEMENT OF ACCOUNTS PROVISION
Within the power of the court to order a
distribution of assets in cash, property or a
combination of both.
Property available for distribution includes
partnership property and contributions from
partners, necessary for satisfaction of
obligation to creditors and partners.
Equitable/Quasi Lien
The right of a partner to have debts owing to
the partnership, when the affairs are rounded
up and shares are computed after dissolution
Partners Lien Law
Partners entitled to a share in the surplus
property of the partnership, in proportion to his
interest in the partnership.
13
Rules in Settling Accounts after dissolution
1. Accounts of partnership
Partnership property (including goodwill)
Contributions of partners necessary for
the payment of liabilities
2. Order of application of assets
Those owing to partnership creditors
Those owing to partners other than for
capital and profits such as loans given
by partners or advances for business
expenses
If any partnership assets remain, they are
distributed as profits to the partners in
the proportion in which profits are to be
shared
3. Loans and advances made by partners
These are amounts paid into the
partnership in EXCESS of partners
agreed capital contribution.
Not capital. Capital contributions are
returnable at dissolution but loans are
payable at maturity and accumulated
profits may be withdrawn at anytime by
consent of majority.
4. Capital contributed by partners
Represents the DEBT of the partnership
firm to its contributing partners.
Share of profits/losses is in proportion to
his shares in the partnership.
Industrial partners not entitled to capital
upon dissolution in the absence of
agreement
5. Right of partner where assets insufficient
If assets (#1) are insufficient, the DEFICIT
is a capital loss which requires
contributions like any other loss.
If there are non-paying partners,
remaining partners have to pay, but
they can sue the non-paying partners for
indemnification.
6. Liability of deceased partners individual
property
Individual property shall be liable for his
share of the contribution necessary to
satisfy liabilities of partnership while he
was a partner.
7. Priority to payment of partnership/partners
creditors
GR: Partnership assets to partnership
creditors, individual assets to individual
creditors; anything left from either goes
to the other.
8. Distribution of property of insolvent partner
Those owing to separate creditors
Those owing ot partnership creditors
Those owing to partners by way of
contribution
========================================
ART. 1840. In the following cases, creditors of the
dissolved partnership are also creditors of the
person or partnership continuing the business:
(1) When any new partner is admitted into an
existing partnership, or when any partner retires
and assigns (or the representative of the
deceased partner assigns) his rights in
partnership property to two or more of the
partners, or to one or more of the partners and
one or more third persons, if the business is
continued without liquidation of partnership
affairs;
(2) When all but one partner retire and assign (or
the representative of the deceased partner
assigns) their rights in partnership property to the
remaining partner, who continues the business
without liquidation of partnership affairs, either
alone or with others;
(3) When any partner retires or dies and the business
of the dissolved partnership is continued as set
forth in Nos. 1 and 2 of this article, with the
consent of the retired partners or the
representative of the deceased partner, but
without any assignment of his right in partnership
property;
(4) When all the partners or their representatives
assign their rights in partnership property to one
or more third persons who promise to pay the
debts and who continue the business of the
dissolved partnership.
(5) When any partner wrongfully causes a
dissolution and the remaining partners continue
the business under the provisions of Art. 1837, 2 nd
paragraph, No. 2, either alone or with others,
and without liquidation of the partnership affairs;
(6) When a partner is expelled and the
remaining partners continue the business either
alone or with others without liquidation of the
partnership affairs.
The liability of a third person becoming a partner in
the partnership continuing the business, under this
article, to the creditors of the dissolved partnership
shall be satisfied out of the partnership property
only, unless there is a stipulation to the contrary.
When the business of a partnership after dissolution
is continued under any conditions set forth in this
article the creditors of the dissolved partnership, as
against the separate creditors of the retiring or
deceased partner or the representative of the
deceased partner, have a prior right to any claim
of the retired of the retired partner or the
representative of the deceased partner against the
person or partnership continuing the business, on
account of the retired or deceased partners
interest in the dissolved partnership or on account
of any consideration promised for such interest or
for his right in partnership property.
Nothing in this article shall be held to modify any
right of creditors to set aside any assignment on the
ground of fraud.
The use by the person or partnership continuing the
business of the partnership name, or the name of a
deceased partner as part thereof, shall not of itself
make the individual property of the deceased
partner liable for any debts contracted by such
person or partnership.
========================================
14
Dissolution of partnership by change in membership
May take place when:
NEW PARTNER is admitted
Partner RETIRES
Partner DIES
Partner WITHDRAWS
Partner is EXPELLED from partnership
ASSIGNMENT (other partners assign
their rights in partnership property to
third persons)
Continuation of partnership WITHOUT liquidation
Need not undergo procedure relating to
dissolution and winding up of business affairs
Remaining partners and/or new partners
may continue the business of the old
partnership and use the old partnership
name without interruption by simply taking
over.
Change in the parties = Change in the
contract = New partnership
Rights of Creditors of dissolved partnership which is
continued
EQUAL rights of dissolved and new
partnership creditors
The law makes the creditors of the dissolved
partnership also creditors of the persons or
partnership continuing the business
PURPOSE: to maintain the preferential rights
of the old creditors to the partnership
property as against the separate creditors of
the partners.
Liability of persons continuing the business
The liability of new/incoming partners shall
be satisfied out of partnership property
UNLESS there is a stipulation to the contrary.
Continuing of dissolved partnership business by
Another Company
Corporation is presumed to have assumed
partnership debts and is prima facie liable
therefor.
When obligation is of considerable value
company buying out another
continues the business of the latter and
assume the obligations of it
When obligation is of extraordinary
value company buying out another to
stop operation and eliminate
competition creates no continuation of
business and no assumption of
obligations
Exemption from Liability of
Individual Property of Deceased Partner
1. Debts incurred by person or partnership
continuing the business
2. Commercial partnership continued after
dissolution
Commercial Professional
Partnership Partnership
Reputation is based Reputation is based
on goodwill on qualification of
members
Name as an asset of No goodwill to be
Goodwill - Right to distributed as asset
continue and use old
name if no contrary
stipulation
========================================
ART. 1841. When any partner retires or dies, and the
business is continued under any of the conditions
set forth in the preceding article, or in Art. 1837,
second paragraph, No.2, without any settlement of
accounts as between him or his estate and the
person or partnership continuing the business, unless
otherwise agreed, he or his legal representative as
against such person or partnership continuing the
business, unless otherwise agreed, he or his legal
representative as against such person or
partnership may have the value of his interest at the
date of dissolution ascertained, and shall receive as
an ordinary creditor an amount equal to the value
of his interest in the dissolved partnership with
interest, or at his option, or at the option of his legal
representative, in lieu of interest, the profits
attributable to the use of his right in the property of
the dissolved partnership; provided that the
creditors of the dissolved partnership as against the
separate creditors, or the representative of the
retired or deceased partner, shall have priority on
any claim arising under this article, as provided by
Art. 1840, 3rd paragraph.
========================================
Rights of Retiring, or of estate of deceased partner
when business is continued
1. To have the value of the interest of retiring
partner or deceased partner in the
partnership ascertained as of the date of
dissolution; and
2. To receive thereafter, as an ordinary creditor,
an amount equal to the value of his share in
the dissolved partnership with interest, or, at
his option, in lieu of interest, the profits
attributable to the use of his right.
The creditors of a dissolved partnership have a
prior right as against the separate creditors of
the retired or deceased partner. (Art.1840)
15
 If surviving partners continue the business
without the consent of the deceased partners
estate, they do so without any risk to the estate
If the estate consents, it becomes a new
partner and would be answerable for all debts
and losses after the death but only to the extent
of the decedents share in the partnership
assets
========================================
ART. 1842. The right to an account of his interest
shall accrue to any partner, or his legal
representative as against the winding up partners or
the surviving partners or the person or partnership
continuing the business, at the date of dissolution, in
the absence of any agreement to the contrary.
========================================
Accrual and Prescription of a Partners Right to the
Account of his Interest
Right to demand an accounting accrues to
any partner or his legal representative after
dissolution in the absence of an agreement
to the contrary.
Prescription begins to run only upon
dissolution of partnership when final
accounting is done.
Right to demand an accounting exists as
long as partnership exists
Persons Liable to Render an Account:
(1) Winding up partner; or
(2) Surviving partner; or
(3) Continuing partner.
Liquidation necessary for determination of partners
share
a. Share of the PROFITS
General liquidation necessary before
a member may claim specific sum as
his share of the profits
If profits for a given period of time
cannot be exactly determined, BUT
periods prior and subsequent are
known, get the AVERAGE and
multiply it by the length of time
included between said periods.
b. Share in the PARTNERSHIP
Partners share cannot be returned
without first dissolving and liquidating
the partnership.
The firms outside creditors have
preference over assets of the
enterprise.
The firms property cannot be
diminished to the prejudice of the
creditors.
GR: When a partnership is dissolved, a partner/legal
representative is entitled to the payment of
what may due after liquidation.
XPN: NO LIQUIDATION, when there is already a
settlement/agreement as to what he shall
receive.
LIMITED
PARTNERSHIP
========================================
ART. 1843. A limited partnership is one formed by
two or more persons under the provisions of the
following article, having as members one or more
general partners and one or more limited partners.
The limited partners as such shall not be bound by
the obligations of the partnership.
========================================
Concept of Limited Partnership
to designate joint ventures and partnerships
limited only to the nature and scope of
business to be carried on
Key Characteristic: Liability to third persons is
limited to a fixed amount of their capital
contribution
Characteristics of Limited Partnership
1 Formed by compliance with the statutory
requirements
2 1 general partners control the business and
are personally liable to creditors
3 1 limited partners contribute the capital and
share in the profits
3 Limited partners do not participate in the
management of the business
5 Limited partners are not personally liable for
partnership obligations beyond the amount of
their capital contributions
6 Limited partners may ask for the return of their
capital contributions under the conditions
prescribed by law
7 Partnership debts are paid out of common
fund and the individual properties of the
general partners
GR: All partners, including industrial partners, are liable
pro rata with all their property for partnership debts.
XPN: Limited partners have limited liability to the extent
of their capital contribution.
16
 c. The location of the principal place of
GENERAL PARTNER LIMITED PARTNER business;

Liability Personally liable Liable to the extent d. The name and place of residence of
for partnership of his capital each member, general and limited
obligation contribution partners being respectively designated;
e. The term for which the partnership is to
Management All general No right in the exist;
partners have management
equal right in the f. The amount of cash and a description of
management, if and the agreed value of the other
not agreed upon property contributed by each limited;
g. The additional contributions, if any, to be
Contribution May contribute Must contribute cash made by each limited partner and the
money, property or property, not times at which or events on the
or industry services happening of which they shall be made;

Party to Proper party to Not a proper party h. The time, if agreed upon, when the
Proceedings proceedings to proceedings, contribution of each limited partner is to
UNLESS he is also a be returned;
against
partnership general partner i. The share of the profits or the other
compensation by way of income which
Assignability of NOT assignable to Freely assignable. each limited partner shall receive by
make assignee a Assignee acquiring reason of his contribution;
Interest
new partner, all rights of limited j. The right, if given, of a limited partner to
without consent partner subject to substitute an assignee as contributor in
of other partners, qualification his place, and the terms and conditions
though of the substitution;
subpartnership is
allowed k. The right, if given, of partners to admit
Name Appear in the firm GR: does NOT additional limited partners;
name appear l. The right, if given, of one or more of the
limited partners to priority over other
[But must be limited partners, as to contributions or as
followed by the to compensation by way of income, and
word Limited] the nature of such priority;

Engagement in Capitalist partner No prohibition m. The right, if given, of the remaining

other Business prohibited to general partner or partners to continue
engage in the the business on the death, retirement,
same business; civil interdiction, insanity, or insolvency of
Industrial partner a general partner; and
prohibited to n. The right, if given, of a limited partner to
engage in any demand and receive property other
business. than cash in return for his contribution.

Dissolution Retirement, Retirement, etc.

(2) File for record the certificate in the Office of
death, does not dissolve
the Securities and Exchange Commission.
insolvency, or partnership because
insanity dissolves his executor/ A limited partnership is formed if there has
partnership (1860, administrator shall been substantial compliance in good faith
1830, 1831) have rights of a with the foregoing requirements.
limited partner for ========================================
the purpose of
selling his estate GR: Promissory notes, checks (postdated), or
bonds, or contribution partly in cash or
Creation of by contract or By members after property and partly in notes or checks are
Partnership conduct of compliance with NOT considered as contribution.
parties requirements of law
XPN: Certified/Managers checks.

======================================== Limited Partnership NOT created by mere voluntary

ART. 1844. Two or more persons desiring to form a
limited partnership shall:
(1) Sign and swear to a certificate, which shall
state
a. The name of the partnership, adding
thereto the word Limited;
b. The character of the business;
agreement
Creation is a formal proceeding.
Substantial compliance with requirements of
law, in good faith.
Purpose: for public notice (actual or
constructive) to inform and protect third
persons (potential creditors)
Law is silent as to time within which to file the
certificate with the SEC
17

Requirements for Formation of Limited Partnership:
(1) Certificate or articles must be signed and
sworn to.
Limited partnership cannot be
constituted orally
A person who files a false certificate
thereby renders himself liable as a
general partner (PRESUMPTION OF
GENERAL PARTNERSHIP)
(2) Certificate must be filed for record in the
Office of the Securities and Exchange
Commission.
========================================
ART. 1845. The contributions of a limited partner
may be cash or other property, but not services.
========================================
LIMITED PARTNERS CONTRIBUTION
MEDIUM: cash or property
TIME: the contribution must be paid BEFORE
the formation of a limited partnership.
Additional contributions may be paid AFTER
formation.
A partner may be a general or limited
partner in the same proceeding at the
same time provided that this fact shall be
stated in the certificate
A limited partner may not be an industrial
partner unless he becomes a general
partner.
========================================
ART. 1846. The surname of a limited partner shall
not appear in the partnership name, unless:
(1) It is also a surname of the general partner, or
(2) Prior to the time when the limited partner
became such, the business had been carried on
under a name in which his surname appeared.
A limited partner whose surname appears in a
partnership name contrary to the provisions of the
1st par. is liable as a general partner to partnership
creditors who extend credit to the partnership
without actual knowledge that he is not a general
partner.
========================================
GR: Surname of limited partner shall not appear in
partnership name.
XPNs: Limited Partners surname may APPEAR if:
1. It is also surname of general partner.
2. Prior to formation of limited partnership,
surname of limited partner is already
existent.
EFFECT where surname of limited partner appears in
the partnership name
Limited partners will be liable to partnership
creditors WITHOUT the rights of general
partner
Not liable as a general partner if third
persons have actual knowledge that he is a
limited partner
========================================
ART. 1847. If the certificate contains a false
statement, one who suffers loss by reliance on such
statement may hold liable any party to the
certificate who knew the statement to be false:
(1) At the time he signed the certificate, or
(2) Subsequently, but within a sufficient time
before the statement was relied upon to
enable him to cancel or amend the
certificate, or to file a petition for
cancellation or amendment as provided in
Art. 1865.
========================================
LIABILITY FOR FALSE STATEMENT IN CERTIFICATE
Requisites:
1. He knew the statement to be false at
the time he signed the certificate, or
subsequently, but having sufficient time
to cancel or amend it or file a petition
for its cancellation or amendment, he
failed to do so;
2. The person seeking to enforce liability
has relied upon the false statement in
transacting business with the partnership;
and
3. The person suffered loss as a result of
reliance upon such false statement
A limited partner whose capital contribution
is greater than that specified in the
certificate is NOT thereby liable for making a
false statement no showing of loss.
Nature of Liability: NOT liable as a general
partner. It is only a STATUTORY PENALTY
========================================
ART. 1848. A limited partner shall not become liable
as a general partner, unless, in addition to the
exercise of his rights and powers as a limited
partner, he takes part in the control of the business.
========================================
The limited partner takes part in the
management of the business and is liable for
the firms obligations, where:
1. The business of the partnership is in fact
carried on by a board of directors
chosen by the limited partners;
2. By the terms of the contract between
parties, an appointee of the limited
18
 partner becomes the directing manager
of the firm;
3. The limited partner purchases the entire
property of the partnership, taking title in
himself and then carries on the business
in his own name and for his own name
and for his own exclusive benefit; or
4. He makes or is a party t a contract with
creditors of an insolvent firm with respect
to the disposal of the firms assets in
payment of the firms debts.
========================================
ART. 1849. After the formation of a limited
partnership, additional limited partners may be
admitted upon filing an amendment to the original
certificate in accordance with the requirements of
Art. 1865.
========================================
Admission of Additional Limited Partners
Requisites:
1. Proper amendment to the certificate
signed and sworn to by all partners
2. Certificate filed with the SEC
========================================
ART. 1850. A general partner shall all have the rights
and powers and be subject to all restrictions and
liabilities of a partnership without limited partners.
However, without the written consent or ratification
of the specific act by all the limited partners, a
general partner or all of the general partners have
no authority to:
(1) Do any act in contravention of the
certificate,
(2) Do any act which would make it impossible
to carry on the ordinary business of the
partnership,
(3) Confess a judgment against the partnership,
(4) Possess partnership property, or assign their
rights in specific partnership property, for
other than a partnership purpose,
(5) Admit a person as a general partner,
(6) Admit a person as a limited partner, unless
the right to do so is given in the certificate,
(7) Continue the business with partnership
property on the death, retirement, insanity,
civil interdiction or insolvency of a general
partner, unless the right so to do is given in
the certificate.
========================================
Rights, Powers, and Liabilities
of General Partners
Unlimited personal liability.
Not entitled to compensation for services
beyond his share of profits, UNLESS agreed
upon
GR: General partner may bind the partnership by
any act of administration.
XPNs: Not authorized to do acts enumerated in Art.
1850, (1) to (7). (even if agreed to by all
general partners)
XPN to XPN: Authorized if there is a WRITTEN
CONSENT or at least a RATIFICATION
of all limited partners.
No. (1) violation of agreement of partners in
certificate
Nos. (2) and (4) acts prejudicial to the interest
of limited partners
Nos. (5) and (6) fiduciary nature of
partnership relation
No. 7 results in dissolution of the partnership
GR: No substantial compliance with the
requirements as regards to the formation of
limited partnership will hold limited partners
liable as if they were general partners.
XPN: Not liable as a general partner, if person
erroneously believed that he is a limited
partner and made contribution.
========================================
ART. 1851. A limited partner shall have the same
rights as a general partner to:
(1) Have the partnership books kept at the
principal place of business of the
partnership, and at a reasonable hour to
inspect and copy any of them;
(2) Have on demand true and full information
of all things affecting the partnership, and a
formal account of partnership affairs
whenever circumstance render it just and
reasonable; and
(3) Have dissolution and winding up be decree
of court.
A limited partner shall have the right to receive a
share in the profits or other compensation by way
of income, and to the return of his contribution as
provided in Articles 1856 and 1857.
========================================
RIGHTS OF A LIMITED PARTNER
1. To require that the partnership books be
kept at the principal place of business of the
partnership
2. To inspect and copy at a reasonable hour
partnership books or any of them
3. To demand true and full information of all
things affecting the partnership
19
 4. To demand a formal account of partnership
affairs whenever circumstances render it just
and reasonable
5. To ask for dissolution and winding up by
decree of court
6. To receive a share of profits or other
compensation by way of income
7. To receive the return of his contribution
provided partnership assets are in excess of
all liabilities.
========================================
ART. 1852. Without prejudice to the provisions of Art.
1848, a person who has contributed to the capital
of a business conducted by a person or partnership
erroneously believing that he has become a limited
partner in a limited partnership, is not, by reason of
his exercise of the rights of a limited partner, a
general partner with the person or in the
partnership carrying on the business, or bound by
the obligations of such person or partnership;
provided that in ascertaining the mistake he
promptly renounces his interest in the profits of the
business or other compensation by way of income.
========================================
REQUISITES FOR EXEMPTION TO APPLY:
1. On ascertaining the mistake, he promptly
renounces his interest in the profits of the
business or other compensation by way of
income; must be done before partnership has
become liable to third persons
2. His surname does not appear in
partnership name; and
3. He does not participate in the management
of business.
Status of heirs of a deceased general partner
admitted as partners
Such heirs, ordinarily becomes a limited
partner for his own protection, because he
would prefer to avoid any liability in excess
of the value of the estate inherited so as not
to prejudice his own personal assets
But, right to elect to be a general partner
may be exercised, with all the rights and
privileges arising therefrom. Choice is
exclusive to the heir and does not require
the assent of the surviving partners
A stipulation that deceased partner will be
represented by his heirs may be WAIVED by
the heirs themselves if they refuse to assume
responsibility of obligations.
========================================
ART. 1853. A person may be a general partner and
a limited partner in the same partnership at the
same time, provided this fact shall be stated in the
certificate provided for in Art. 1844.
A person, who is a general, and also at the same
time a limited partner, shall have all the rights and
powers and be subject to all the restrictions of a
general partner; except that, in respect to his
contribution. He shall have the rights against the
other members which he would have had if he
were not also a general partner.
========================================
ONE PERSON: BOTH a General and Limited Partner
REQUISITES:
1. Fact must be stated in the certificate
signed and sworn to
2. Certificate must be filed and
registered with the SEC
RIGHTS AND POWERS are those of a general
partner, thus liable with his separate property to
3rd persons.
With respect to his CONTRIBUTION AS A LIMITED
PARTNER, he would have the right of a limited
partner insofar as the other partners are
concerned.
While he is not relieved from personal liability to
third persons for partnership debts, he is entitled
to recover from general partners the amount he
has paid to such 3rd persons
In SETTLING ACCOUNTS AFTER DISSOLUTION, he
shall have priority over all general partners in
the return of their respective contributions
========================================
ART. 1854. A limited partner also may loan money to
the and transact other business with the partnership,
and, unless he is also a general partner, receive on
account of resulting claims against the partnership,
with general creditors, a pro rata share of the
assets. No limited partner shall in respect to any
such claim:
(1) Receive or hold as collateral any
partnership property; or
(2) Receive from a general partner r the
partnership any payment, conveyance or
release from liability, if at the time the assets
of the partnership are not sufficient to
discharge partnership liabilities to persons
not claiming as general or limited partners.
The receiving of collateral security, or a payment,
conveyance, or release in violation of the foregoing
provisions is a fraud on the creditors of the
partnership.
========================================
Loan and Other Business Transactions
with Limited Partners
A limited partner (NOT ALSO A GENERAL
PARTNER) ALLOWED to:
1. Grant loans to the partnership;
2. Transact other business with it;
3. Receive pro rata share of partnership
assets with general creditors
20
 PROHIBITED transactions:
1. Receive or hold as collateral security
any partnership property;
2. Receive any payment, conveyance,
or release from liability if it will
prejudice the right of third persons.
NOTE: Any violation of the prohibition gives
rise to PRESUMPTION TO DEFRAUD
PARTNERHSIP CREDITORS.
Limited partners are considered non-partner
creditors
Preferential rights of third persons over non-
partner creditors (limited partners) insofar as
partnership assets are concerned
========================================
ART. 1855. Where there are several limited partners,
the members may agree that one or more of the
limited partners shall have a priority over other
limited partners as to the return of their
contributions, as to their compensation by way of
income, or as to any other matter. If such an
agreement is made, it shall be stated in the
certificate, and in the absence of such a
statement, all the limited partners shall stand upon
equal footing.
========================================
PREFERRED LIMITED PARTNERS
Some limited partners preferred over other
limited partners, through an agreement of
all partners, with respect to:
o the return of their contributions;
o their compensation by way of
income; or
o any other matter.
In absence of agreement, all limited
partners shall stand in equal footing.
========================================
ART. 1856. A limited partner may receive from the
partnership the share of the profits or compensation
by way of income stipulated for in the certificate;
provided, that after such payment is made,
whether from the property of the partnership or that
of a general partner, the partnership assets are in
excess of all liabilities of the partnership except
liabilities to limited partners on account of their
contributions and to general partners.
========================================
COMPENSATION OF LIMITED PARTNERS
CONDITION: partnership assets must exceed
partnership liabilities
NOTE: Third party creditors preferred over limited
partners
========================================
ART. 1857. A limited partner shall not receive from a
general partner or out of a partnership property any
part of his contributions until:
(1) All liabilities of the partnership, except liabilities to
general partners and to limited partners on
account of their contributions, have been paid,
or there remains property of the partnership
sufficient to pay them;
(2) The consent of all members is had, unless the
return of the contribution may be rightfully
demanded under the provisions of the second
paragraph; and
(3) The certificate is cancelled or so amended as to
set forth the withdrawal or reduction.
Subject to the provisions of the first paragraph, a
limited partner may rightfully demand the return of
his contribution:
(1) On the dissolution of a partnership, or
(2) When the date specified in the certificate for its
return has arrived, or
(3) After he has given six months notice in writing to
all other members, if no time is specified in the
certificate, either for the return of the
contribution or for the dissolution of the
partnership.
In the absence of any statement in the certificate
to the contrary or the consent of all members, a
limited partner, irrespective of the nature of his
contribution, has only the right to demand and
receive cash in return for his contributions.
A limited partner may have the partnership
dissolved and its affairs wound up when:
(1) He rightfully but unsuccessfully demands the
return of his contribution; or
(2) The other liabilities of the partnership have not
been paid, or the partnership property is
insufficient for their payment as required by the
first paragraph, No.1, and the limited partner
would otherwise be entitled to the return of his
contribution.
========================================
GR: Limited partner, irrespective of the nature of his
contribution, has only the right to demand and
receive cash in return.
XPNs:
(1) There is stipulation to the contrary in the
certificate;
(2) All the partners consent to the return other
than in the form of cash.
Requisites for RETURN of CONTRIBUTION of limited
partners:
1. All liabilities of the partnership have been
paid or if they have not yet been paid, the
assets of the partnership are sufficient to pay
such liabilities.
21
 2. The consent of all partners has been
obtained EXCEPT when the return may be
rightfully demanded.
3. The certificate is cancelled or amended as
to set forth the withdrawal or reduction of
the contribution.
RETURN of CONTRIBUTION as a MATTER OF RIGHT
Limited partner may demand return of his
contribution if any of the requisites are
complied:
On the dissolution of the partnership;
Upon arrival of the date specified in
the certificate for the return;
After the expiration of 6 months
notice in writing, given by him to the
other partners, if no time is fixed.
Right of Limited Partner
to CASH in return of PROPERTY CONTRIBUTION
Limited Partner may DISSOLVE partnership:
DISSOLUTION BY JUDICIAL DECREE
Limited partner files a petition for
dissolution:
i. When his demand for the return of
his contribution is denied although
he has a right to such return; or
ii. When his contribution is not paid
although he is entitled to its return
because the other liabilities of the
partnership have not been paid or
the partnership property is
insufficient.
DISSOLUTION BY THE PARTNERS limited
partners must ask other partners to have
partnership dissolved. If other partners
refuse, he may seek dissolution by
judicial decree
========================================
ART. 1858. A limited partner is liable to the
partnership:
(1) For the difference between his contribution as
actually made and that stated in the certificate
as having been made, and
(2) For any unpaid contribution which he agreed in
the certificate to make in the future at the time
and on the conditions stated in the certificate.
A limited partner holds as trustee for the
partnership:
(1) Specific property stated in the certificate as
contributed by him, but which was not
contributed or which has been wrongfully
returned, and
(2) Money or other property wrongfully paid or
conveyed to him on account of his contribution.
The liabilities of a limited partner as set forth in this
article can be waived or compromised only by the
consent of all members; but a waiver or
compromise shall not affect the right of the creditor
of a partnership who extended credit or whose
claim arose after the filing and before a
cancellation or amendment of the certificate, to
enforce such liabilities.
When a contributor has rightfully received the return
in whole r in part of the capital of his contribution,
he is nevertheless liable to the partnership of any
sum, not in excess of such return with interest,
necessary to discharge of its liabilities to all creditors
who extended credit or whose claims arose before
such return.
========================================
LIABILITIES OF A LIMITED PARTNER
To the partnership Generally, liability is to
the partnership, not to the creditors
To partnership creditors and other partners
liability arises when limited partner:
o contributed services aside or instead
of money/property
o allowed his surname to appear in
the firm name
o failed to have a false statement in
the certificate corrected, knowing it
to be false
o took part in the control of the
business
o received partnership property as
collateral security, payment,
conveyance, or release, in fraud of
partnership creditors
o failed to substantially comply with
the legal requirements governing
formation of limited partnership
To separate creditors creditors of the
limited partner allowed to apply to the
proper court for a CHARGING ORDER
subjecting the interest in the partnership of
the debtor partner for the payment of his
obligation
Liability for Unpaid Contribution
Limited partner liable for the:
o Difference between amount of
actual contribution and that which is
stated in the certificate; and
o Unpaid contribution he agreed to
make at a future time
22
Liability as a Trustee
Limited partner is considered a a trustee for Substituted Limited Partner (SLP)
the partnership for: Person admitted to all the rights of a limited
o Specific property in the certificate as partner who has died or has assigned his
contributed by him which he had interest in a partnership.
not contributed;
o Specific property of the partnership
REQUISITES:
which had been wrongfully returned
(1) All the members must consent, being
to him;
empowered by the certificate
o Money wrongfully paid or conveyed
to him on account of his (2) Certificate must be amended
contribution; and
(3) Amended certificate must be
o Other property wrongfully paid or
registered with the SEC
conveyed to him on account of his
contribution

Requisites for Waiver or Compromise of Liabilities

Liabilities of limited partner may be waived
or compromised, provided:
(1) The waiver or compromise is made with Effect of Change in the Relation of Limited Partners
the consent of all partners; and Substitution or addition of limited partners
(2) The waiver or compromise does not does not necessarily dissolve the
prejudice the partnership creditors who partnership.
extended credit or whose claims arose Limited partner CANNOT withdraw his
before the cancellation or amendment
contribution until all liabilities to creditors
of the certificate
have been paid.
Liability for Return of Contribution
LAWFULLY RECEIVED
Liability cannot exceed the sum received by
the limited partner.
Rights of Assignee of Limited Partner:
1. To receive the share of the profits or other
======================================== compensation by way of income or return
ART. 1859. A limited partners interest is assignable. of contribution

A substituted limited partner is a person admitted to 2. No right to require any information or

all the rights of a limited partner who has died or account of partnership transactions or to
has assigned his interest in the partnership. inspect partnership books

An assignee, who dies not become a substituted 3. GR: ASSIGNEE ACQUIRES ALL RIGHTS OF
limited partner, has no right to require any LIMITED PARTNERS, ONLY WHEN HE BECOMES
information or account of the partnership A SLP.
transactions or to inspect the partnership books; he
is only entitled to receive the share of the profits or
other compensation by way of income, or their
return of his contribution, to which his assignor Liability of SLP and assignor
would otherwise be entitled. ASSIGNOR is still LIABLE to:
o Persons who suffered damage by
An assignee shall have the right to become
reliance on a false statement in the
substituted limited partner if all the members
certificate; and
consent thereto or if the assignor, being thereunto
o Creditors who extended credit or
empowered by the certificate, gives the assignee
whose claims arose before
that right.
substitution
An assignee becomes a substituted limited partner
when the certificate is appropriately amended in SLP:
accordance with Art. 1865.
The substituted limited partner has all the rights and GR: SLP is liable for ALL liabilities of assignor
powers, and subject to all the restrictions and
XPN: NOT LIABLE to those which SLP was
liabilities of his assignors, except those liabilities of
ignorant of at the time he became a
which he was ignorant at the time he became a limited partner and which could not be
limited partner and which he could not be ascertained from the certificate.
ascertained for the certificate.
The substitution of the assignee as a limited partner
does not release the assignor from liability to the
partnership under articles 1847 and 1858.
========================================
23
 Assignment of Interest Rights of Executor/Administrator on Death of a
Art. 1813 Art. 1859 Limited Partner
(General Partnership) (Limited Partnership)
1. Executor/administrator shall acquire all rights
Assignee has NO RIGHT: Assignee has NO RIGHT TO for purposes of settling the affairs of the
1. To interfere in MANAGE. limited partner
management
2. Right to constitute the assignee as a SLP only
2. To require any Assignee has no right:
information or 1. To require
of the deceased partner was empowered
account information or to do so in the cert.
3. To inspect any of account of
partnership books partnership NOTE: Estate of the deceased limited partner LIABLE
transaction for all liabilities contracted while he was a
2. To inspect
partnership books limited partner.

*UNLESS he becomes a SLP ========================================

Assignee entitled to share Assignee entitled to receive
in profits and in surplus share of profits, or
compensation by way of
income, or return of
contribution if assignor is
also entitled
In case of dissolution, Return of contribution upon
assignee is entitled to dissolution
receive assignors interest
and require an account of
partnership
In case of fraud, assignee
may avail of usual
remedies (i.e. dissolution)
========================================
ART. 1860. The retirement, death, insolvency,
insanity or civil interdiction of a general partner
dissolves the partnership, unless the business is
continued by the remaining general partners:
(1) Under a right so to do stated in the
certificate; or
(2) With the consent of all members.
========================================
Effects of Retirement, Insolvency, Death, Insanity,
Civil Interdiction (RIDIC) of Partners
To GENERAL partners dissolution
partnership
To LIMITED partners no dissolution UNLESS
there is only one limited partner
========================================
ART. 1861. On the death of a limited partner, his
executor or administrator shall have all the rights of
a limited partner for the purpose of settling his
estate, and such power as the deceased had to be
constituted his assignee a substituted limited
partner.
The estate of a deceased limited partner shall
be liable for all his liabilities as a limited partner.
========================================
ART. 1862. On due application to a court of
competent jurisdiction by any creditor of a limited
partner, the court may charge the interest of the
indebted limited partner with the payment of the
unsatisfied amount of such claim, and may appoint
a receiver, and make all other orders, directions
and inquiries which the circumstances of the case
may require.
The interest may be redeemed with the separate
property of any general partner, but may not be
redeemed with partnership property.
The remedies conferred by the first paragraph
shall not be deemed exclusive of others which may
exist.
Nothing in this Chapter shall be held to deprive a
limited partner of his statutory exemption.
========================================
RIGHTS OF CREDITORS OF LIMITED PARTNER
Creditor of Limited partner may apply for a
CHARGING ORDER with the proper court in
the interest in the partnership for payment of
unsatisfied claims:
o Interest so charged may be
redeemed with the separate
property of any general partner BUT
NOT with partnership property
o Interest of debtor partner charged
with the payment of unsatisfied
amount of judgment debt may be
redeemed with partnership property,
of WITH CONSENT of all partners whose
interests are not so charged.
========================================
ART. 1863. In settling accounts after dissolution, the
liabilities of the partnership shall be entitled to
payment in the following order:
(1) Those to creditors, in order of priority as
provided by law, except those to limited to
partners on account of their contributions,
and to general partners;
(2) Those to limited partners in respect to their
share of profits and other compensation by
way of income on their contributions;
(3) Those to limited partners in respect to the
capital of their contributions;
24

(4) Those to general partners other than for
capital and profits;
(5) Those to general partners in respect to
profits;
(6) Those to general partners in respect to
capital.
Subject to any statement in the certificate or to
subsequent agreement, limited partners share in
the partnership assets in respect to their claims for
capital, and in respect to their claims for profits or
for compensation by way of income on their
contribution respectively, in proportion to the
respective amounts of such claims.
========================================
Dissolution of a Limited Partnership
CAUSES:
Misconduct of general partner (i.e.
fraud) towards limited partner
RIDIC of general partner
When all limited partners ceased to
be such
Expiration of term for which it was to
exist
Mutual consent of partners before
expiration
Limited partner may bring suit for dissolution,
accounting, and appointment of a receiver
when the misconduct of GP or insolvency of
firm warrants it.
Notice of dissolution need not be given since
it is registered with SEC. It is deemed as notice
to the world.
When the limited partnership has been duly
dissolved, the general partners have the right
and power to wind up its affairs, as in a
general partnership.
NOTE:
Partnership creditors are entitled to 1st
distribution, followed by limited partners who
take priority over general partners.
In general partnership, the claims of general
partners in respect of CAPITAL enjoy
preference over those in respect of profits.
Share of Limited Partners in Partnership Assets
If not stipulated in the cert, share will be
according to the contribution
Priority of Claims Among Limited Partners
Must be stipulated in the certificate
If not stipulated, all limited partners stand on
equal footing
========================================
ART. 1864. The certificate shall be cancelled when
the partnership is dissolved or all limited partners
cease to be such.
A certificate shall be amended when:
(1) There is a change in the name of the partnership
or in the amount or character of the contribution
of any limited partner;
(2) A person is substituted as a limited partner;
(3) An additional limited partner is admitted;
(4) A person is admitted as a general partner;
(5) A general partner retires, dies, becomes insolvent
or insane, or is sentenced to civil interdiction and
the business is continued under Art. 1860;
(6) There is a change in the character of the
business of the partnership;
(7) There is a false or erroneous statement in the
certificate;
(8) There is a change in the time as stated in the
certificate for the dissolution of the partnership or
for the return of a contribution;
(9) A time is fixed for the dissolution of the
partnership, or the return of a contribution, no
time having been specified in the certificate; or
(10) The members desire to make a change in any
other statement in the certificate in order that it
shall accurately represent the agreement among
them.
========================================
When certificate shall be CANCELLED or AMENDED
CANCELLED:
o When the partnership is dissolved
other than by reason of expiration of
term of partnership; or
o When all limited partners ceased to
be as such
AMENDED, in all other cases.
========================================
ART. 1865. The writing to amend a certificate shall:
(1) Conform to the requirements of Art. 1844 as far as
necessary to set forth clearly the change in the
certificate which it is desired to make; and
(2) Be signed and sworn to by all members, and an
amendment substituting a limited partner or
adding a limited or general partner shall be
signed also by the member to be substituted or
added, and when a limited partner is to be
substituted, the amendment shall also be signed
by the assigning limited partner.
The writing to cancel a certificate shall be signed
by all members.
A person desiring the cancellation or amendment
of a certificate, if any person designated in the first
and second paragraphs as a person who must
execute the writing refuses to do so, may petition
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the court to order a cancellation or amendment
thereof. GR: Limited partner NOT PROPER PARTY for proceedings

If the court finds that the petitioner has a right to XPNs:

have the writing executed by a person who refuses
to do so, it shall order the Officer of the Securities
and Exchange Commission where the certificate is
recorded, to record the cancellation or
amendment of the certificate; and when the
certificate is to be amended, the court shall also
cause to be filed for record in said office a certified
copy of its decree setting forth the amendment.
(1) In actions in his own name where object is to
enforce his individual rights against the
partnership and to recover damages for
violation of such right
enforce his liability to the partnership
(2) Action by creditors of the partnership against
limited partner to account for and restore sums
withdrawn by him from the firms capital

A certificate is amended or cancelled when there is

filed for record in the Office of the Securities and
Exchange Commission, where the certificate is
recorded:
(1) A writing in accordance with the provisions of the
1st and 2nd paragraph; or
(2) A certified copy of the order of court in
accordance with the provisions of the 4th
paragraph;
(3) After the certificate is duly amended in
accordance with the article, the amended
certificate shall thereafter be for all purposes the
certificate provided for in this chapter.
========================================
REQUIREMENTS for Amendment or Cancellation of
Certificate
To amend a certificate:
Amendment must be in writing
Must be signed and sworn to by all
members
Must be registered with SEC
To cancel a certificate:
Cancellation must be in writing
Must be signed and sworn to by all
members
Must be registered with SEC
If ordered by court, certified copy of
such order must also be filed with
SEC.
========================================
ART. 1867. A limited partnership formed under the
law prior to the effectivity of this Code, may
become a limited partnership under this Chapter by
complying with the provisions of Art. 1844, provided
the certificate sets forth:
(1) The amount of the original contribution of each
limited partner, and the time when the
contribution was made; and
(2) That the property of the partnership exceeds the
amount sufficient to discharge its liabilities to
persons not claiming as general or limited
partners by an amount greater than the sum of
the contributions of its limited partners.
A limited partnership formed under the law prior to
the effectivity of this Code, until or unless it
becomes a limited partnership under this Chapter,
shall continue to be governed by the provisions of
the old law.
========================================
PROVISIONS FOR EXISTING LIMITED PARTNERSHIP
A limited partnership formed under the old
law may become a limited partnership
under the new law by complying with
provisions of Art. 1844.
Otherwise, it will still be governed by the old
law.

========================================
ART. 1866. A contributor, unless he is a general
partner, is not a proper party to proceedings by or
against a partnership, except where the object is to
enforce a limited partners right against or liability to
the partnership.
========================================
STATUS OF A LIMITED PARTNER
CONTRIBUTOR, practically a stranger
Limited to his interest in the partnership
without any right to manage and control

NO FIDUCIARY RELATIONSHIP
Not imbued with trust and confidence
May engage in other businesses

NOT A PROPER PARTY to the proceedings

No right of action against persons whom
the partnership has any enforceable
claim.

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