Law on Partnership and Corporations: Module 1
Property Rights of a Partner
Article 1810:​ The property rights of a partner are:
1. His rights in specific partnership property (Article 1811)
2. His interest in the partnership (Article 1812)
3. His right to participate in the management (Article 1803)
Article 1811:​ A partner is co-owner with his partners of specific partnership property
● As discussed before, kapag co-ownership, kayong lahat ay magiging may-ari ng specific partnership
property kahit na initially ikaw yung nag-invest ng land or building. Once na i-invest mo yon, hindi na
lang yun sayo. Iyon ay magiging pagmamay-ari niyong lahat at magiging co-owner kayo nun.
The incidents of this co-ownership are such that:
1. A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right
with his partners to possess specific partnership property for partnership purposes; but he has no right to
possess such property for any other purpose without the consent of his partners;
● “has an equal right with his partners to possess specific partnership property”: Kahit na hindi necessarily
pantay pantay ang investment niyo, magiging pantay pantay ang karapatan niyo doon
● “has no right to possess such property for any other purpose without the consent of his partners”: Kung
ano lang yung napag-usapan na gamit ng property sa negosyo niyo ng partnership, yon lang. Kahit na
ikaw yung nag-invest ng property, hindi mo na pwede gamitin for personal use without the consent of
the other partners.
2. A partner’s right in specific partnership property is not assignable except in connection with the assignment of
rights of all the partners in the same property
● Assignment: ililipat o immortgage mo yung certain property just because feeling mo owner ka ng
property na yon dahil part ka ng partnership.
● You cannot assign yung right mo sa isang specific partnership property dahil hindi na lang ikaw ang
nagmamay-ari nun. Kailangan kayong lahat, sabay sabay niyong i-assign yung right sa isang specific
property.
3. A partner’s right in specific partnership property is not subject to attachment or execution, except on a claim
against the partnership. When partnership property is attached for a partnership debt the partners, or any of
them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption
laws.
● Kunyari may utang ka sa iba, hindi pwede basta hilain yung pagmamay-ari ng partnership dahil hindi lang
sa iyo yun. Pagmamay-ari din iyon ng mga kasama mo/ ibang partners.
4. A partner’s right in specific partnership property is not subject to legal support under article 291.
Article 1812​: A partner’s interest in the partnership is his share of the profits and surplus.
● Profit​ means the excess of returns over expenditure in a transaction or series of transactions; or the net income
of the partnership for a given period of time.
● Surplus​ refers to the assets of the partnership after partnership debts and liabilities are paid and settled and the
rights of the partners among themselves are adjusted. It is the excess of assets over liabilities; if the liabilities are
more than the assets, the difference represents the extent of the loss.
○ In accounting, surplus is known as owner’s equity (assets less liabilities).
○ Owner’s partnership interest = profits + surplus
Winona Mae Zuniga | 2A3
Article 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.
● “conveyance by a partner of his whole interest”: ililipat niya yung whole interest niya sa partnership sa ibang tao
● Example: Sa ABC partnership, nagkulang ng pera si A kaya inassign niya yung share niya kay Mr. X as sub partner.
Hindi porket inassign ni A ang kanyang ownership interest sa third person ay maddissolve na ang partnership. It
is still ABC partnership. Ang magiging effect lang ay yung profits na dapat mapupunta kay A ay ibibigay kay Mr. X.
○ Mr. X or a sub partner does not entitle or cannot interfere in the management or administration of the
partnership business or affairs, nor require any information or account of partnership transactions, nor
inspect the partnership books. He is only entitled to receive the profits.
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.
Article 1814​: Without prejudice to the preferred rights of partnership creditors under article 1827, on due application to
a competent court by any judgement creditor of a partner, the court which entered the judgement or any other court,
may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgement 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.
● Example: Sa ABC partnership, si partner B ay may utang na P200,000 kay Mr. J.
○ As a remedy, Mr. B can ask or request the court to charge the interest of the debtor partner. Kung
magkano man ang ownership interest ni partner B sa partnership, pwedeng iyon ang i-request ni Mr. J
na i-charge para don siya makakuha ng payment.
The interest charged may be redeemed at any time before foreclosure, or in case of a sale being directed by the court,
may be purchased without thereby causing a dissolution:
1. With separate property, by any one or more of the partners
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.
Obligations of the Partners with Regard to Third Persons
Article 1815​: Every partnership shall operate under a firm name, which may or may not include the name of one or more
of the partners.
● Kapag 10 kayong partners, hindi kailangan na “A B C D E F G H I J” yung name ng partnership niyo. At least
dalawang names ang nakalagay, pero hindi required na lahat. Hindi naman pwedeng isa lang kasi it will be
assumed na sole proprietorship lang iyon.
● Example: SGV (Sycip Gorres Velayo & Co.)- 3 names lang ang ginamit kahit na 50 or 100 silang 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.
Winona Mae Zuniga | 2A3
●
Partners by estoppel- nagpalagay ng names nila sa name ng partnership kahit hindi naman talaga sila partner,
therefore they will be be subject to the liability of a partner.
Article 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.
● Example: Sa ABC Partnership, ang assets nila ay P1,000,000, at ang liabilities ay P1,300,000. Therefore, ang
kanilang owner’s Equity ay (P300,000). Para mabayaran ang P300,000, pwedeng habulin ang personal properties
ng mga partners.
○ P300,000 / 3 partners = P100,000 each partner
○ Dahil pro rata, P100,000 ang pwedeng habulin sa bawat partner.
● Industrial partners are exempt from losses but not from liabilities.
Nature of individual liability of partners
Article 1816 lays down the rule that the partners, including the industrial partners, are liable to creditors
of the partnership for the obligations contracted in the name and for the account of the partnership.
The debts and obligations of the partnership are, in substance, also the debts and obligations of each
individual member of the firm. The liability to the creditor is pro rata and subsidiary.
● Pro rata​- As used in the law, the term must be understood to mean equally or jointly, and not
proportionately which is its literal meaning because the pro-rating is based on the number of
partners and not on the among of their contributions to the common fund subject to adjust
among the partners. The facts that a partner has left the country and the payment of his share
of the liability cannot be enforced; or his liability is condoned by the creditor cannot increase the
liability of the other partners.
● Subsidiary or secondary​- It is subsidiary because the partners have become personally liable only
after all the partnership assets have been exhausted, unless a particular partner assumes a
separate obligation to perform a partnership contract or make himself solidarily liable on a
partnership contract.
● Liability of industrial partner​- Even the industrial partner who, ordinarily, is not liable for losses
would have to pay but, of course, he can recover the amount he has paid from the capitalist
partners unless there is an agreement to the contrary. Neither on principle of law or justice can
the industrial partner be relieved from liability to third persons for the debts of the partnership.
Article 1817​: Any stipulation against the liability laid down in the preceding article shall be void, except as among the
partners.
● Example: Sa ABC Partnership, ang assets nila ay P1,000,000, ang liabilities ay P1,300,000, at ang owner’s Equity
ay (P300,000). A and B are capitalist partners while C is an industrial partner.
○ Even industrial partners are liable for the unpaid liabilities of the partnership.
■ Bawal mag set ng any stipulation na nag e-exempt sa isang industrial partner for being liable for
the unpaid liabilities of the partnership.
○ If the partnership is formed with a stipulation that exempts an industrial partner for paying the liabilities
of the partnership, that stipulation shall be void.
■ During the formation stage of ABC partnership, Mr. A and Mr B, invited Mr. C to be the chef and
their industrial partner. However, Mr. C said that he cannot be their partner because he does
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not have enough assets to pay the liabilities of the partnership in case na malugi ang business
nila. Mr. A and Mr. B assured Mr. C that whatever his share in the partnership’s liabilities, they
will be the one to pay for it. Mr. C agreed to be their partner due to this stipulation. However,
according to Article 1817, this stipulation against the liability of a partner, especially an
industrial partner, shall be void.
■ Kahit na may gantong stipulation, walang pakialam si creditor dun at pwede niya pa din habulin
si Mr. C for P100,000. Hindi pwede sabihin ni Mr. C na excuse siya sa pagbabayad dahil may
agreement sila na sasaluhin siya ni Mr. A at Mr. B. Kailangan niyang bayaran muna ang P100,000
kay creditor at tsaka niya na lang sisingilin or i-reimburse kay Mr. A at Mr. B ang binayaran niya.
“except as among the partners”: Void ang stipulation as to the third person (e.g. creditor), pero valid ang
ganitong stipulation among the partners.
Article 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 authorised 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 judgement
5. Enter into a compromise concerning a partnership claim or liability
6. Submit a partnership claim or liability to arbitration
7. Renounce a claim of the partnership
○ A partner cannot do this on his own, dapat lahat ng partners
No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge
of the restriction.
Article 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.
● Ang partnership pwedeng siya yung mag may-ari ng mga properties at sa kanya nakapangalan yun pero syempre
ang mag-convey nun ay yung actual na partners.
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.
Winona Mae Zuniga | 2A3
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.
Article 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.
● Dapat maging mapili ka sa mga kukunin mong partner dahil kung ano man ang aaminin nila sa korte na ginawa
nila ay magiging ebidensya o magagamit against the partnership
Article 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.
● Any time na ma-notify ang isang partner sa kahit anong matter relating to the partnership affairs is considered
to be a notice to or knowledge of the partnership.
○ Example: Sa ABCD partnership, si partner A lang ang nakaalam ng bagay na in relation to the
partnership. Under article 1821, it is considered na nasabihan at alam na din ni partner B, C at D ang
bagay na iyon.
● Obligation ng bawat partner na kapag may nalaman sila na about sa partnership ay sasabihin din nila sa ibang
partners dahil ang knowledge o notice sa isa ay considered na knowledge at notice din sa lahat.
Article 1822​: Where, by any wrongful act or omission of any partner acting in the ordinary course of business of the
partnership or with the authority of his 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.
● May solidary liability ang partnership at kailangan bayaran ang damages based on their wrongful act. However,
this is subject to the reimbursement of the partnership from the guilty partner.
Article 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
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.
○ “Misapplied”- namali ng gamit kaya partnership ang unang abunado doon
Article 1824​: All partners are liable solidarily with the partnership for everything chargeable to the partnership under
articles 1822 and 1823.
Winona Mae Zuniga | 2A3
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Liable solidarily​ — ​liability arising from tort (quasi-delict)
○ It is one wherein a debtor is obliged to pay a portion of the full amount of debt that corresponds only to
his share. Likewise, the joint creditor can only demand a portion of the full amount that corresponds to
his share.
○ Example: A and B contracted a loan amounting to P10 million from X. A received a share amounting to
P6 million while B received an amount equal to P4 million. When the obligation came due, A is only
obliged to pay an amount corresponding to his share of the loan, which is P6 million.
Liable jointly or pro rata​ — ​liability arising from contracts
○ A kind of obligation wherein either one of the creditors has the right to demand full compliance of the
obligation from either one of the solidary debtors.
○ Any solidary debtor may be compelled to pay the whole amount, not only his share, whether or not he
benefited from the said debt. Solidary obligation is never presumed. The main reason for this is that
solidarity gives a huge right to the creditor to demand full compliance of the obligation from any of the
debtors.
○ The use of the term "solidary" is not required by law to make a contract or agreement solidary. It is
enough that the parties include other terms which also mean the same thing, such as "jointly and
severally".
○ The three sources of solidarity are:
1. by law
2. by stipulation of the parties to the contract
3. by the nature of the obligation
○ Example: In a loan contract, A and B borrowed an amount equal to P10 million and agreed to pay the
said amount solidarily to X and Y, who are also solidary creditors. A received P6 million while B received
P4 million. When the contract comes due, either X or Y can compel any of A and B to pay the whole
amount of P10 million, regardless of their share. The one who paid the whole amount will just reimburse
the share received by the other debtor.
● Reference: ​https://phjuris.blogspot.com/2015/10/joint-obligation-vs-solidary-obligation.html
Article 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:
● Partner by estoppel: nag represent as partner kahit hindi naman talaga siya partner
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.
Winona Mae Zuniga | 2A3
Article 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.
● Ang isang tao na kakapasok pa lang bilang partner sa isang existing partnership ay liable sa mga obligations ng
partnership na na-incur noong panahon na hindi pa siya nakakapasok. It is as if partner na siya simula palang
noong na-incur yung mga obligations na yon.
● Example: Bago pa lang pumasok si A may utang na yung partnership na P200,000. Noong pumasok na si A, liable
na rin siya sa P200,000. It is as if partner na siya noong na-incur yung utang. Pwede siyang singilin o pagkuhanan
yung investment niya para mabayaran ang utang ng partnership.
● Example: Kapag may utang na P200,000 ang partnership bago pa pumasok si Mr. A at P100,000 lang ang
kanyang investment, in effect, kulang ang investment para mabayaran ang utang. As a general rule, hindi siya
pwedeng i-require na magbayad in excess of what he have invested. Hanggang sa amount lang ng investment
niya ang pwedeng kunin para ipang bayad sa utang ng partnership. Parang yun lang yung ina-acknowledge niya
na willing niyang sagutin na utang ng partnership. Knowing na may past utang ang partnership at pinili niya pa
din pumasok at mag-invest dito, it is an admission on his part na okay lang na gamitin ang investment niya
pandagdag sa pambayad ng utang ng partnership. Unless there is a stipulation to the contrary.
Article 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.
● Example: Si ABC Partnership ay may utang kay BDO pero si A may utang kay X, si B may utang kay Y, at si C may
utang kay Z. Therefore, may four creditors in total. Kapag limited na lang ang assets ng partnership, ang creditor
ng partnership, si BDO, ay ang may karapatan na unang makakolekta mula sa natitirang assets ng partnership.
Just in case na may enough assets pa after makakolekta si BDO, pwedeng ipa-attach ng private creditors sa korte
ang share ni A, B at C at hilahin ito para masingil ang kanilang personal utang at mabayaran sina X, Y, at Z.
Dissolution and Winding Up
Article 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: any partner na tumitigil ma-associate sa business
○ Hindi lang kapag may umalis o namatay na partner ang reason para magkaroon ng dissolution. Kapag
may na-admit o pumasok na bagong partner, it is sufficient reason para magkaroon ng dissolution.
■ Example: Sa AB partnership, pumasok si C kaya naging ABC partnership at na-dissolve yung AB
partnership.
Dissolution, winding up, and termination defined.
The terms are often confused. As they are used:
● Dissolution​ is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business. It is that point in time when the partners cease to
carry on the business together. It represents the demise of a partnership.
● Winding up​ (liquidation) is the process of settling the business or partnership affairs after
dissolution.
● Termination​ is that point in time when all partnership affairs are completely wound up and
finally settled. It signifies the end of the partnership life.
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Article 1829​: On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs
is completed.
● Hindi lahat ng naddissolve na partnership ay laging nauuwi sa liquidation dahil may mga partnership na
na-dissolve yet nagsisimula ng panibagong partnership, lalo na kung may nadagdag na bagong partner.
● Question: All dissolution will lead to liquidation and all liquidation came from a valid dissolution?
○ 1st statement- False dahil may ibang dissolution that results in the formation of a new partnership.
○ 2nd statement- True. Specifically, ​retirement​ ang type of dissolution na nauuwi sa liquidation.
■ Retirement lahat ng partner o namatay lahat ng partner. This leads to liquidation dahil kapag
may natirang partner hindi ito mag-lead sa liquidation, babalik lang ulit sa formation ng
panibagong partnership.
Article 1830​: Dissolution is caused:
1. Without violation of the agreement between the partners​:
- Walang problema at walang na-violate sa dating agreement ng mga partners, yet
enough reason para ma-dissolve yung partnership
○ By the termination of the definite term or particular undertaking specified in the agreement
● Nakaka dissolve ng partnership kapag tapos na yung definite term or yung particular
undertaking na napag-usapan ng partners
● Definite term: Kapag napag-usapan niyo na yung partnership niyo is good for 2 years, at ngayong
araw na ito matatapos ang 2 years, after this day dissolved na ang inyong partnership.
○ Example: Ang partnership niyo ay one with a fixed term (5 years) pero kalagitnaan pa
lang (2 years) ay umayaw na yung partner mo. Kahit na 5 years ang usapan niyo at 2
years pa lang, hindi mo siya pwedeng pigilan na umalis dahil kapag pinilit mo ang isang
tao na ayaw niya, that is tantamount or equivalent to involuntary servitude (slavery).
■ The right against involuntary servitude- Involuntary servitude is against our
constitution dahil parang tinatrato na alipin ang isang tao. Bawal pilitin ang sino
man na gawin ang isang bagay na ayaw niyang gawin.
■ Hindi mo siya pwedeng pigilan umalis ngunit kapag umalis siya na hindi pa tapos
ang inyong kontrata, this is tantamount to bad faith which is considered a
breach of contract. Magiging liable yung umalis na partner for damages.
● Particular undertaking: Ang partnership niyo ay binuo para magbenta ng tickets sa Sea games.
After ng sea games, dissolved na rin ang partnership.
○ By the express will of any partner, who must act in good faith, when no definite term or particular
undertaking is specified
● Ang tinutukoy dito ay partnership at will. Sila ay mag partners hanggang pareho pa nilang gusto.
Kapag ang isa ay umayaw na, ma-ddissolve ang partnership by the express will of any partner.
● Sa isang partnership at will, any time pwede kang umalis pero dapat in good faith ang pag-alis
○ Example: Okay lang na mag-initiate ng break-up (dissolution) kung talagang valid (in
good faith) yung rason mo sa pakikipaghiwalay such as pag focus sa sarili.
■ Bad faith- hindi maayos ang dahilan ng pag-alis
➢ Example: Kaya pala humihingi ng space o nakikipaghiwalay dahil may
naka-abang o may kapalit na
Winona Mae Zuniga | 2A3
➢ Example: During the course of your partnership, may nakita ang partner
mo na magandang opportunity. Supposedly, kung magkapartner pa
kayo yung kikitain sa sales niyo ay paghahatian niyo. Porket nalaman
niya mag-isa yung offer, instead na sabihin rin sayo yung transaction,
humingi siya ng dissolution para maging sole proprietorship at masolo
ang kita.
■ Kapag napatunayan sa korte, na ang pag-alis mo sa partnership ay one in bad
faith, you could be liable for damages.
○ 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
● Kapag nagka-ayawan na ang lahat ng partners, dissolved na ang partnership
○ By the expulsion of any partner from the business bona fide in accordance with such a power conferred
by the agreement between the partners
● Naaeexpel ang isang partner dahil may mali o kalokohan na ginawa.
● Example: Sa ABCD partnership, na-expel si D dahil may kalokohan siyang ginawa. Magiging ABC
partnership na lang dahil na-dissolve na ang ABCD partnership.
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.
○ Kinontra yung agreement o yung napag-usapan
● Example: 5 years na partnership ang agreement niyo, pero 2 years palang gusto na umalis ng
partner mo. Pwede siyang umalis pero magiging liable siya for damages.
3. By any event which makes it unlawful for the business of the partnership to be carries on or for the members to
carry it on in partnership
○ Example: Bumuo kayo ng partnership na gumagawa ng motorcycle barrier. Nagsunod-sunod ang mga
aksidente dahil sa motorcycle barrier kaya naglabas bigla ng batas na bawal na magbenta nito.
Involuntarily ma-ddissolve ang inyong partnership dahil pinagbabawal ang produkto ng partnership niyo.
○ Example: Nagbebenta yung partnership niyo ng marijuana noong time na legal pa ito. Noong nasama na
ang marijuana sa listahan ng ipinagbabawal na gamot, ma-ddissolve na ang partnership niyo dahil yung
line of business niyo ay considered unlawful or illegal na.
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
○ Example: Sa ABC partnership, ipinangako ni A na ang investment o contribution niya ay isang specific na
carabao. Bago niya ma-icontribute yung specific carabao niya, tinamaan ito ng kidlat at namatay. Dahil
specific thing ang kanyang ipinangako na investment o contribution, at wala nang maibigay na ganong
carabao, the ABC partnership will be dissolved. Hindi na niya ito pwedeng mapalitan dahil specific thing
ang ipinangako niya, hindi generic. It perished bago pa ma-deliver kaya natapos na ang partnership bago
pa ito magsimula.
● Kapag na-deliver na yung specific carabao sa farm ng partnership at kinabukasan ito tinamaan
ng kidlat at namatay, ang nawalan na ay ang partnership. It is considered as loss of the
partnership but it is not reason to dissolve the partnership.
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5. By the death of any partner
○ Kapag namatay ang isang partner ma-ddissolve ang partnership
● Example: Sa ABCD partnership, namatay si D kaya magiging ABC partnership na lang dahil
na-dissolve na yung ABCD partnership.
6. By the insolvency of any partner or of the partnership
○ Insolvency: ang personal liabilities mo ay mas marami na kaysa sa personal assets mo
○ It is deemed fit na tanggalin na sa partnership ang mga insolvent na partners kasi unfair para sa
partnership, sa partners at sa public na manatili siya doon. It is to protect them.
● Example: Sa ABCD partnership, insolvent na pala si D pero hindi ito alam ng publiko. Si ABCD
uutang sa bangko at ang akala nila maganda pa ang credit standing ni D, kaya kapag nalugi si
ABCD, hahabulin ng bangko ang bawat isang partner lalo na si D dahil ang alam nila mayaman pa
rin siya. Only to find out, wala na pala siyang masyadong personal assets dahil matagal na siyang
insolvent. To protect the public, sabi ng batas na tanggalin muna ang mga insolvent partners sa
partnership. Pwedeng ibalik na lang siya as partner kapag nakaluwag at nakabawi na sa buhay.
7. By the civil interdiction of any partner
○ Civil interdiction: Kawalan ng karapatan ng isang preso na mag-manage ng kanyang mga ari-arian
● Dahil siya ay nasa kulungan, walang siyang paraan para ma-monitor ang negosyo niya sa labas.
● For the benefit of everyone, habang nakakulong siya, pansamantalang tinanggal ng batas ang
kanyang karapatan na i-manage ang kanyang mga assets at negosyo sa labas and this includes
yung share niya sa isang partnership.
8. By decree of court under the following article (1700a and 1701a)
Article 1831​: On application by or for a partner, the court shall decree a dissolution whenever:
- Judicial or may tulong ng korte para masabing dissolved na ang partnership
1. A partner has been declared insane in any judicial proceeding or is shown to to be of unsound mind
● Insanity​- the partner may have been previously declared insane in a judicial proceeding; otherise, the
fact of his being of unsound mind must be duly proved. An insane person is incapacitated to enter into a
contract.
○ Tanging ang judge lang ang legally pwedeng makapagsabi na baliw ang isang tao. Kailangan
dumaan muna ito sa matinding pagsusuri at ippresenta ang ebidensya sa korte. Si judge ang
magdedetermine, sa tulong ng mga experto, na baliw nga ang isang tao.
○ Sa isang partnership, kailangan ng tulong ng isang third person (si judge) para sabihin na ang
isang partner ay baliw na at dapat itigil na yung partnership dahil hindi na siya fit maging
partner. Kailangan ng third person dahil walang tao na aamin na baliw siya at hindi massolve
kapag within partners lang. Mas natatauhan kapag ibang tao mismo ang nagsabi.
2. A partner becomes in any other way incapable of performing his part of the partnership contract
● Incapacity​- the incapacity must be one which affects the ability of a partner to perform his duties as a
partner.
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 is not reasonably practicable to carry on the business
in partnership with him
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●
Misconduct and persistent breach of partnership agreement​- like incapacity, conduct prejudicial to the
carrying on of the business and persistent breach of the partnership agreement are grounds for judicial
dissolution, for they defeat and materially affect and obstruct the purpose of the partnership.
5. The business of the partnership can only be carried on at a loss
● Business can be carried on only at a loss- since the purpose of a partnership is the carrying of a business
for profit, it may be dissolved by decree of court when it becomes apparent that the business is
unprofitable with no reasonable prospects of success or it can be carried on only at a loss.
○ Hindi massolve ng magpartners lang. Kailangan sabihin mismo ni judge na itigil na ang
partnership dahil kung hindi, paulit-ulit lang na malulugi ang partnership.
6. Other circumstances render a dissolution equitable
● Other circumstances​- examples of circumstances which render a dissolution equitable are abandonment
of the business, fraud in the management of the business, refusal without justifiable cause to render
accounting of partnership affairs, etc. In a case, it was held that the sale of all real property (lots) of a
partnership did not work the dissolution of the firm which was left without the real property it originally
had because the firm was not organized to exploit the lots sold but to engage in buying and selling real
estate, and “in general real estate agency, and brokerage business”.
On the application of the purchaser of a partner’s interest under Article 1813 or 1814:
1. After the termination of the specific 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
Article 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:
- Kapag na-dissolve ang partnership, nawawala ang lahat ng authority ng mga partner to act for
the partnership. Maliban na lang sa mga transactions to wind up o tapusin lahat ng affairs ng
partnership tulad ng pagbenta ng mga assets at pagtapos ng mga transactions na nasimulan
pero hindi pa natapos.
- Once ma-dissolve ang partnership, bawal na magbenta ng regular items as if nag-ooperate pa rin
normally. Ang dapat na ibenta na lang ay ang inuubos na natitirang assets for liquidation.
1. With respect to the partners
a. When the dissolution is not by the act, insolvency or death of a partner
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
Article 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.
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Article 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 a 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, the fact 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 Article 1825 of any person who, after dissolution, represents
himself or consents to another representing him as a partner in a partnership engaged in carrying business.
Article 1835​: The dissolution of the partnership does not of itself discharge the existing liability of any partner.
A partner is discharged from any existing liability upon 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 obligations of the partnership incurred while he
was a partner, but subject to the prior payment of his separate debts.
Article 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 the court.
● Sino ang may karapatan mamahala sa pagtatapos ng partnership? Yung partner na hindi siya ang dahilan kung
bakit na wrongfully dissolved yung partnership— innocent partner, or yung legal representative ng last surviving
partner (assuming namatay na yung iba)
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Article 1837​: When dissolution is caused 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 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 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 a bond approved by the court, and to
be released from all existing liabilities of the partnership; but in ascertaining the value of the partner's
interest the value of the good-will of the business shall not be considered. (n)
Article 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:
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. (n)
Article 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:
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2.
3.
4.
5.
6.
7.
8.
9.
a. The partnership property,
b. The contributions of the partners necessary for the payment of all the liabilities specified in No. 2
○ Natitirang property plus yung idadagdag
The liabilities of the partnership shall rank in order of payment, as follows:
○ Hierarchy kung paano ibabalik yung natitirang assets ng partnership
○ Sino ang unang makakakuha kapag magsasara na ang partnership?
a. Those owing to creditors other than partners
● Third party creditors such as banks
b. Those owing to partners other than for capital and profits
● Ibabalik kung ano man ang utang ng partnership sa mga partners (loan from the partner) —
umutang yung partnership kay partner
c. Those owing to partners in respect of capital
● Kung ano man yung ininvest ni partner nung simula
d. Those owing to partners in respect of profits
● Share ng partner sa kita ng partnership
The assets shall be applied in order of their declaration in No. 1 of this article to the satisfaction of the liabilities
The partners shall contribute, as provided by Article 1797, the amount necessary to satisfy the liabilities
An assignee for the benefit of the creditors or any person appointed by the court shall have the right to enforce
the contributions specified in the preceding number.
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.
The individual property of a deceased partner shall be liable for the contributions specified in No. 4.
When partnership property and the individual properties of the partners are in 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.
Where a partner has become insolvent or his estate is insolvent, the claims against his separate property 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.
Article 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 the partnership affairs;
2. When all but one partner retire and assign (or the representative of a 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.
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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 article 1837, second 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 partner or the representative of
the deceased partner against the person or partnership continuing the business, on account of the retired or deceased
partner's 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.
Article 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 Article 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 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 Article 1840, third paragraph.
Article 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 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. 一 Dapat mag-compute kung magkano ang matatanggap ng bawat isa
Partner’s right to account of his interest
1. Accrual of right​- the right to demand an accounting of the value of his interest accrues to any partner or
his legal representative after dissolution in the absence of an agreement to the contrary
○ The right to demand an accounting of his interest will commence after the dissolution of
the partnership.
2. Person liable to render an account​- the right of a partner or the one who represents him as owner of his
interest to an account, i.e., to a statement of the partnership affairs, and, in due course of liquidation, to
a payment of the amount of his interest, may be exercised against:
a. The winding up partner
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b. The surviving partner
c. The person or partnership continuing the business
Limited Partnership
Article 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.
● If the problem is silent, the assumption is General Partnership yun
○ Lahat ng kasali sa isang General Partnership ay puro general partners
○ Hindi lahat ng kasali sa isang Limited Partnership ay limited partners, dapat may one or more general
partners and one or more limited partners
● A limited partnership is composed of limited partners with at least one general partner
○ Kailangan may isa man lang na general partner para siya yung sumagot sa posibleng maging liability ng
partnership, just in case hindi enough ang assets nito. Gusto ng batas na may isang tao man lang siya na
matatawag na may unlimited personal liability, kung saan pwede habulin ng mga creditors ang personal
assets ng partner na ito.
○ Ang limited partners ay may limited liability lang dahil ang pwede lang mawala sa kanila ay kung ano
yung ininvest nila sa partnership at hindi sila pwede pilitin na mag-invest ng additional capital para
mabayaran ang ibang unpaid creditors.
Article 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”
● Example: ABC Partnership Limited - kailangan may salitang “Limited” to remind the public na
may certain partners sa partnership na iyon na limited partner at hindi general partner
○ Sort of a warning sa publiko na huwag ka mag-expect na lahat ng partners dito ay pwede
mong habulin to the extent of their personal assets, dahil ang ibang partners dito ay
hanggang investment lang nila ang pwede mong habulin.
b. The character of the business
c. The location of the principal place of business
d. The name and place of residence of each member, general and limited partners being respectively
designated
● Kailangan nakalagay sa bawat member kung siya ba ay general or limited partner
e. The term for which the partnership is to exist
● Gaano lang katagal ang partnership
f. The amount of cash and a description of and the agreed value of the other property contributed by each
limited partner
g. The additional contributions, if any, to be made by each limited partners and the times at which or
events on the happening of which they shall be made
h. The time, if agreed upon, when the contribution of each limited partner is to be returned
i. The share of the profits or the other compensation by way of income with each limited partner shall
receive by reason of his contribution
● Magkano ang matatanggap ng limited partners in terms of profits
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j.
The right, if given, of a limited partner to substitute an assignee as contributor in his place, and the
terms and conditions of the substitution
k. The right, if given, of the partners to admit additional limited partners
l. The right, if given, of one or more of the limited partners to priority over other limited partners, as to
contributions or as to compensation by way of income, and the nature of such priority
● Kung sinong limited partner ang mas priority in terms of contributions or income
m. The right, if given, of the remaining general partner or partners to continue the business on the death,
retirement, civil interdiction, insanity or insolvency of a general partner
n. The right, if given, of a limited partner to demand and receive property other than cash in return for his
contribution
2. File for record the certificate in the Office of the Securities and Exchange Commission
A limited partnership is formed if there has been substantial compliance in good faith with the foregoing requirements.
Article 1845​: The contributions of a limited partner may be cash or property, but not services.
● Ang pwede lang maibigay ng limited partner ay cash or property, hindi pwedeng industry or services. In other
words, ang limited partner ay pwede lang maging capitalist partner but not industrial partner.
● May ganitong provision ang batas dahil kapag ikaw ay isang industrial partner, hindi maiwasan na ikaw ay may
importanteng role sa business.
a. Example: Sa isang restaurant, ang industrial partner ay yung chef. Minsan nakikilala ang isang restaurant
sa kung sino ang chef niya kaya ang chef ang nagiging mukha ng business. Ang mga industrial partner
tulad ng isang chef ay hindi maaring maging limited partner lamang kasi iniiwasan nila ang sitwasyon na
baka isipin ng publiko na yung industrial partner na iyon ay isang general partner and within comes the
impression na siya ay magiging liable to the extent of his personal assets. Kapag maganda ang credit
standing ni chef, papautangin ang partnership ng mga creditors dahil akala nila pwede nila itong
mahabol hanggang sa sariling ari-arian nito, when in reality siya ay isang limited partner lamang. Unfair
ito sa publiko kaya bawal maging industrial partner ang isang limited partner.
Article 1846​: The surname of a limited partner shall not appear in the partnership name unless:
1. It is also the surname of a general partner
2. Prior to the time when the limited partner became such, the business has 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 first paragraph 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.
● General rule: Ang mga apelyido ng mga limited partners ay hindi dapat lumabas sa pangalan ng partnership
○ Example: Sa isang partnership, si A, B and C ay general partners at si D and E ay limited partners. Hindi
ito dapat tawagin na ABCDE Partnership Limited. Dapat ay ABC Partnership Limited lang dahil kapag
nilagay ang surname ng limited partner sa pangalan ng partnership, hindi pwedeng sisihin ang ibang tao
o ang creditors na maghabol to the extent of the limited partner’s personal assets kasi akala nila general
partner siya.
○ Kung gusto mo talaga na mailagay ang surname mo sa name ng partnership, you should have classified
yourself as a general partner, with the responsibility of unlimited personal liability.
● There are some instances na maaaring malagay ang surname ng limited partner sa name ng partnership:
○ Kapag kapareho ng surname ng limited partner ang isang general partner
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■
○
Example: Acosta Bautista Cruz Partnership Limited. Nagkataon na ang pangalan ng limited
partner ay M. Cruz. Pwedeng maging ganyan ang pangalan ng partnership kung mayroon pang
isang partner na Cruz din ang apelyido (S. Cruz na general partner). In the future, kapag hinabol
si M. Cruz ng creditors to the extent of his personal assets dahil ang assumption nila ay siya yung
general partner, pwede niyang sabihin na hindi siya ang Cruz na general partner at hindi siya
dapat habulin hanggang sa personal assets niya.
Business had been carried on under a name in which his surname appeared- kapag bago pa man
pumasok yung limited partner ay may kapareho na siya ng surname
■ Example: Sa Sycip Gorres Velayo (SGV) Partnership, bagong pasok si J. Velayo sa partnership at
siya ay isang limited partner. Kung habulin man si J. Velayo to the extent of his personal assets,
he could always argue na bago pa lang siya pumasok ay ganoon na ang pangalan ng partnership.
➢ Namatay na yung tunay na SGV pero bakit parang hindi na dissolve ang partnership?
○ General rule: Kailangan tanggalin yung pangalan ng namayapang partner para
hindi ma-deceive yung public at creditors na buhay pa siya.
○ Hindi iniba ang pangalan ng partnership dahil gusto nilang i-maintain yung good
will ng business at dahil hindi naman mangyayari yung iniiwasan na sitwasyon sa
SGV na isipin ng publiko na buhay pa sila at magkamali yung creditors na
pautangin yung entity dahil it is of common public knowledge na silang tatlo ay
namatay na.
Article 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
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 its cancellation or amendment as provided in Article 1865.
○ The person who suffers loss by reliance on a false statement, pwede niyang habulin kung sino man ang
nakakaalam na mali ang nakalagay sa certificate
Article 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.
● Hindi magiging liable as a general partner ang isang limited partner unless he takes part in the control. Bawal
para sa isang limited partner na maging isang managing partner, para ma-prevent ang misconception na dahil
siya ay isang managing partner, baka isipin ng publiko na siya ay isang general partner.
Article 1849​: After the formation of a lifted partnership, additional limited partners may be admitted upon filing an
amendment to the original certificate in accordance with the requirements of Article 1865
● Pwedeng dagdagan pa ng mga limited partners even after the formation of a limited partnership, provided that
there is proper amendment to the original certificate.
Admission of additional limited partners
After a limited partnership has been formed, additional limited partners may be admitted. The law
requires that there is proper amendment to the certificate which must be signed and sworn to by all of
the partners including the new limited parts and filed in the Securities and Exchange Commission
pursuant to the requirements of Article 1865.
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Article 1850​: A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of
a partner in 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:
- Kung ano ang kapangyarihan o karapatan ng isang general partner sa isang general partnership,
ganun din ang kanyang karapatan sa isang limited partnership. However, may mga certains
actions na kailangan kunin muna ang consent ng lahat ng limited partners.
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
● Aamin ng isang bagay sa korte na pwedeng maka-affect sa partnership
4. Possess partnership property, or assign their rights in specific partnership property, for other than a partnership
purpose
● Kapag lumalayo sa napag-usapan sa Certificate of Co-Partnership, kailangan kunin ang consent ng
limited partners
5. Admit a person as a general partner
● Kailangan kunin ang consent ng lahat ng limited partners kapag mag-aadmit ng ibang partner
6. Admit a person as a limited partner, unless the right so to do 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 to do so is given in the certificate
Rights, powers, and liabilities of general partner
1. Right of control/ unlimited personal liability​ ー A general partner in a limited partnership is
much like a partner in an ordinary partnership. He is vested with the entire control of the firm’s
business and has all the rights and powers and is subject to all the liabilities and restrictions of a
partner in a partnership without limited partners, i.e., in a general partnership
2. Acts of administration/ acts of strict dominion​ ー As a rule, he may bind the partnership by any
act of administration, but he has no power to do the specific acts enumerated in Article 1850
(even if agreed to by al the general partners) without the written consent or at least ratification
of all the limited partners. The said acts are acts of strict dominion or ownership and are,
therefore, beyond the scope of the authority of a general partner.
a. In No. (1), the act is in violation of the agreement of the partners as contained in the
certificate
b. In Nos. (2) to (4), the acts are prejudicial to the interests of the limited partners
c. In Nos. (5) and (6), the rule is based on the highly fiduciary nature of the partnership
relation
d. In No. (7), any of the events mentioned results in the dissolution of the partnership
3. Other limitations​ ー The general partners, of course, have no power to bind the limited partners
beyond the latter’s investment in the partnership. Neither do they have the power to act for the
firm beyond the purpose and scope of the partnership nor change the nature of the business
without the consent of the limited partners.
Article 1851​: A limited partner have the same right 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
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●
Maaaring i-require ng mga limited partners na ang mga partnership books or accounting books ay nasa
office or place of business ng partnership. Pwede nila itong i-check or kopyahin at a reasonable hour.
2. Have on demand true and full information of all things affecting the partnership, and a formal account of
partnership affairs whenever circumstances render it just and reasonable
3. Have dissolution and winding up by decree of court.
A limited partner shall have the right to receive a share of the profits or other compensation by way of income, and to
the return of his contribution as provided in articles 1856 and 1857.
● Kahit limited partner ka lang, dapat may share ka pa rin sa profits or other compensations
Article 1852​: Without prejudice to the provisions of Article 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 on
ascertaining the mistake he promptly renounces his interest in the profits of the business, or other compensation by
way of income.
Article 1853​: A person may be a general partner and a limited partner in the same partnership at the same time,
provided that this fact shall be stated in the certificate provided for in article 1844.
● A capitalist partner can be an industrial partner at the same time ー capitalist-industrial partner.
● A person can be a general partner and a limited partner at the same time ー general limited partnership
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.
● The person is considered a general partner as to third persons, creditors or the public but he is considered a
limited partner as among the partners. Kung sakaling malugi o magkulang ang assets ng partnership, the third
person creditors can go after the personal assets of that partner dahil ang trato nila sa kanya ay general partner.
○ Pero kung magkano man ang inabono niya mula sa kanyang personal assets to pay the liabilities of the
partnership, pwede niyang ihingi ng reimbursement sa iba pang general partner.
○ Dahil yung inabonohan niya ay pwedeng ipa-reimburse sa ibang general partner, in essence parang wala
siyang inabonohan, parang hindi siya kumuha ng pera sa personal assets niya — in essence, parang
limited partner siya. Sa mata ng publiko at ng creditors, general partner siya pero as among the partners
themselves, siya ay limited partner.
Article 1854​: A limited partner also may loan money to 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 security and partnership property
2. Receive from a general partner or 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 payment, conveyance, or release in violation of the foregoing provisions is a
fraud on the creditors of the partnership.
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Article 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.
● May hierarchy over limited partners. Preference involves return of contribution, compensation by way of
income or other matters. Pero kapag walang naka-indicate sa certificate kung sino ang mas angat sa isa’t isa, all
limited partners will be treated with equal footing.
Article 1856​: A limited partner may receive from the partnership the share of the profits or the compensation by way
of income stipulated for in the certificate; provided that after such payment is made, whether from 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.
Article 1857:​ A limited partner shall not receive from a general partner or out of 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
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
2. When the date specified in the certificate for its return has arrived
3. After he has 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
contribution.
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
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.
Requisites for return of contribution of limited partner
Under the first paragraph, the following conditions must exist before the contribution of a limited
partner can be returned to him:
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. As in Article 1856, liabilities to limited
partners on account of their contributions and to general partnership are not considered
2. The consent of all the members (general and limited partners) has been obtained except
when the return may be rightfully demanded
3. The certificate is cancelled or so amended as to set forth the withdrawal or reduction of the
contribution
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Article 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 a 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 or in part of the capital of his contribution, he is
nevertheless liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its
liabilities to all creditors who extended credit or whose claims arose before such return.
Article 1859​: A limited partner’s interest is assignable.
A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his
interest in a partnership.
● Pwedeng ilipat or i-assign yung interest ng isang limited partner to an assignee called the substituted limited
partner. Siya na ang kukuha ng mga karapatan ng limited partner.
An assignee, who does not become a substituted limited partner, has no right to require any information or account of
the partnership 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 the return of his contribution, to which his assignor would otherwise be
entitled.
An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the
assignor, being thereunto empowered by the certificate, gives the assignee that right.
An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with
article 1865.
The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his
assignor, except those liabilities of which he was ignorant at the time he became a limited partner and which could not
be ascertained from 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.
● Kapag nakuha ng assignee ang consent ng lahat ng partners, he shall be considered a substituted limited
partner. He is subject sa lahat ng liabilities and restrictions ng kanyang assignor, yung limited partner na naglipat
ng interest, except sa liabilities na hindi niya alam at the time he became a limited partner and which could not
be ascertained from the certificate.
● However, kapag hindi nakuha ng assignee ang consent ng lahat ng partners, he does not become a substituted
limited partner. May karapatan pa rin siya makuha ang share niya sa kita and other compensation or return of
contribution pero wala siyang karapatan malaman ang information or transactions ng partnership pati na rin
makita ang accounting books ng partnership.
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Article 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
Article 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 constitute his assignee a substituted
limited partner.
The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner.
● Kapag namatay ang isang limited partner, his executor or administrator shall have all his rights para ma-settle
ang kanyang estates o mga ari-arian at may kapangyarihan din siya i-constitute yung assignee ni limited partner
as substituted limited partner (only if the deceased partner was empowered to do so in the certificate)
Article 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 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
The creditor of a limited partner may apply to the proper court for an order charging the limited partner’s
interest in the partnership for the payment of any unsatisfied amount of his claim.
1. The interest so charged may be redeemed with the separate property of any general partner but not
with partnership property.
2. Under Article 1814, paragraph 2, No. (2), the interest of the debtor-partner charged with the payment
of the unsatisfied amount of the judgement debt may be redeemed with partnership property with
the consent of all the partners whose interests are not so charged or sold.
The limited partner’s right under the exemption laws is also preserved under this article since his interest in
the partnership is actually his property.
Article 1863​: In setting accounts after dissolution the liabilities of the partnership shall be entitled to payment in the
following order:
- Hierarchy o pagkakasunod-sunod ng dapat bayaran kapag nag-liquidation na ang isang limited partnership
1. Those to creditors, in the order of priority as provided by law, except those to limited partners on account of
their contributions, and to general partners;
● Utang to outside creditors: Accounts Payable
● Utang to limited partners: ​Limited Partner Loan
2. Those to limited partners in respect to their share of the profits and other compensation by way of income on
their contributions;
● Share ng limited partners sa profits and other compensations: ​Limited Partner Profits
3. Those to limited partners in respect to the capital of their contributions;
● Limited partners in respect of their capital or investment: ​Limited Partner Capital
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4. Those to general partners other than for capital and profits;
● Utang to general partners: ​General Partner Loan
5. Those to general partners in respect to profits;
● Share ng general partners sa profits and other compensations: ​General Partner Profits
6. Those to general partners in respect to capital.
● General partners in respect of their capital or investment: ​General Partner 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.
Liquidation of a General Partnership
1.
2.
3.
4.
Accounts Payable
General Partner Loan
General Partner Capital
General Partner Profits
Liquidation of a Limited Partnership
1.
2.
3.
4.
5.
6.
Accounts Payable + Limited Partner Loan
Limited Partner Profits
Limited Partner Capital
General Partner Loan
General Partner Profits
General Partner Capital
Similarities:
● In both sides, ang utang sa third person creditors ay laging nasa taas, sila ang una.
● Sa limited partnership, ka-level ng outside creditors ang loans sa limited partners.
● Sa limited partnership, mas priority ang limited partners sa balikan o bayaran kaysa sa general partner dahil
minsan ang trato sa limited partners ay parang creditor
● In both sides, mas prinopriotize ang mga loans kaysa sa capital or profits.
Differences:
● Sa general partnership, ibabalik muna ang capital bago ang profits.
○ Clue: Capital before Profits (C before P ー alphabetical)
● Sa limited partnership, ibabalik muna ang profits bago ang capital.
Article 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 article 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;
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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.
Article 1865​: The writing to amend a certificate shall:
1. Conform to the requirements of article 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 the court to order a cancellation
or amendment thereof.
If the court finds that the petitioner has a right to have the writing executed by a person who refuses to do so, it shall
order the Office 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.
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 first or second paragraph, or
2. A certified copy of the order of court in accordance with the provisions of the fourth paragraph;
3. After the certificate is duly amended in accordance with this article, the amended certificate shall thereafter
be for all purposes the certificate provided for in this Chapter.
Requirements to amendment and cancellation of certificate
1. The following are the requirements to amend a certificate
a. The amendment must be in writing
b. It must be signed and sworn to by all members including the new members, and the
assigning limited partner in case of substitution or addition of a limited or general
partner; and
c. The certificate, as amended, must be filed for record in the Securities and Exchange
Commission
After the certificate has been duly amended, the amended certificate shall thereafter be for
all purposes the certificate of the partnership under Article 1844.
2. The cancellation of a certificate must also be in writing and signed by all the members and
filed with the Office of the Securities and Exchange Commission
The approval by the Commission of the amendment or cancellation is not required.
Article 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 partner’s right against or liability to the partnership.
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Article 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 article 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.
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