Compiled Partnership Transcriptions (Mid-terms)

June 24, 2010 Thursday

Can you be a partner n a partnershp? Yes. I have the ega capacty to do and I do not possess the
5 dsquacatons as mandated by aw.
If your parents eave you and your sbngs 1 hectare of and, are you now partners? No, each s a
co-her. As a co-her you have an nchoate rght pendng probate proceedngs such that when the
property s earnng Php 5000 pesos and each one w be recevng a share, each of you are co-
hers.
Dstngush Co-ownershp from Partnershp.
As to Partnership Co-ownership
Creaton aways created by a contract, ether
express or mped
generay created by aw, but may exst even
wthout a contract
|urdca
Personaty
has a |urdca personaty separate and
dstnct from that of each partner
Has no |urdca personaty
Purpose reazaton of prots common en|oyment of a thng or rght; does
not necessary nvove sharng of prots
Duraton no mtaton upon the duraton s set by
aw
an agreement to keep the thng undvded
for more than 10 years s not aowed
Transfer of
Interest
a partner may not dspose of hs ndvdua
nterest n the partnershp so as to make
the assgnee a partner wthout unanmous
consent
a co-owner can dspose of hs share wthout
the consent of the others
Power to Act
wth 3
rd
Persons
n the absence of stpuaton to the
contrary, a partner may bnd the
partnershp
a co-owner cannot represent the co-
ownershp
Dssouton death or ncapacty of a partner resuts n
the dssouton of partnershp
death or ncapacty of a co-owner does not
necessary dssove the co-ownershp
Agency of
Representato
n
as a rue, there s mutua agency as a rue, there s no mutua representaton
(athough t s enough for a co-owner to brng
an acton for e|ectment aganst a stranger)
Prots may be stpuated upon must aways depend upon proportonate
shares and any stpuaton to the contrary s
VOID (Art.485)
Form may be n any from except when rea
property s contrbuted (here a pubc
nstrument s requred)
no pubc nstrument s needed even f rea
property s the ob|ect of the co-ownershp
o In Partnershp acqures a separate personaty dstnct from the other partes. There s no
such prvege n co-ownershp.
What then s partnershp? By the contract of partnershp two or more persons bnd themseves to
contrbute money, property, or ndustry to a common fund, wth the ntenton of dvdng the prots
among themseves. Two or more persons may aso form a partnershp for the exercse of a
professon.
o They share prots. When you acqure or receve part of the prots of a partcuar busness,
are you then a partner? No sr. It s ony a prma face evdence that you are a partner but
sub|ect to rebutta to the contrary.
What s requred to become a partner?
1. there must be a vad contract;
2. the partes must have ega capacty to enter nto the contract;
3. there must be mutua contrbuton of money, property and ndustry to a common
fund
4. the ob|ect must be awfu; and
5. the prmary purpose must be to obtan prots and dvdng
o You were hred by a partnershp, "You have 10% of the prot every month and |ust report
everyday and drve out vehces. 10% every month. Here, you are NOT a partner even f
you are recevng 10% of the prot.
Answer: He s not a partner because there MUST be an agreement. There must be
a contract and no consent was gven. Wthout a contract, you cannot cam to be a
partner. He was |ust taken n, no menton, and tod to do somethng and w be
compensated for hs servces. He was not brought n to be a partner. Because to be
a partner requres among others, a contract.
The fact that one receves a share of the prots s never proof that he s aready a
partner. In our ustraton, as a matter of fact, there s an ndcaton as to the
reason why she was sharng the prots, whch s because of the servces he has
rendered. Therefore, there shoud be a contract because the denton of the aw
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says that "by the contract of partnershp two persons bnd themseves", so there
shoud be a contract.
It does not smpy says that when two or more persons contrbute. It says, "By the
contract...", so there shoud be that contract.
To be a vad contract:
1. Consent of the Partes
2. Ob|ect
3. Consderaton
In the exampe, there was no consent. No ndcaton at a that they consented to
be partners.
What knd of a contract s Partnershp? Consensua whch means by mere consent. Is t at a tmes
consensua? NO.
Form: Generay, a contract of partnershp s consensua but there are nstances wheren
formates are requred for ts vadty and exstence, n whch case, the contract of partnershp
w now be consdered as a forma contract.
o Genera rue: No speca form s requred for ts vadty or exstence
Exceptons:
1. Where the contract of partnershp has a capta of 3,000 pesos or more, n
money or property, t sha appear n a pubc nstrument and must be recorded
n the Omce of the Securtes and Exchange Commsson. However, a
partnershp has a |urdca personaty even n case of faure to compy wth
ths requrement.
2. Where mmovabe property or rea rghts are contrbuted (regardess of the
vaue thereof):
a. Must be n wrtng n a pubc nstrument
b. An nventory of the property contrbuted, sgned by the partes s
attached to the pubc nstrument. Otherwse, f there s no nventory -
contract of partnershp s vod
c. Must be recorded wth the Regster of Deeds where the mmovabe s
ocated to bnd thrd persons
3. Where the contract fas wthn the statute of fraud (such as when an
agreement to enter n a partnershp at a future tme, whch "by ts terms s not
to be performed wthn a year from the makng thereof". In whch case, such
agreement s unenforceabe uness the same be n wrtng or at east
evdenced by some note or memorandum thereof subscrbed by the partes)
So when you say an mmovabe property, what s an mmovabe property?
o Rea by nature - t cannot be carred from pace to pace ( pars. 1 & 8, Art. 415, Cv Code)
o Rea by ncorporaton - attached to an mmovabe n a xed manner to be an ntegra part
thereof (pars. 1-3 Art. 415, Cv Code)
o Rea by destnaton - paced n a n mmovabe for the utty t gves to the actvty carred
thereon (pars. 4-7 and 9 Art. 415, Cv Code)
o By anaogy t s so cassed by express provson of aw (par. 10, Art. 415, Cv Code)
Knds of property: (See other knds of property and exampes)
o Consumabe: they are thngs that you have to consume f you want to en|oy them
o Non-consumabe- ncudes a others
o Movabe and Immovabe
o Fungbe and Non-fungbe
What are rea rghts? What are such rghts (especay over a property)? Persona rghts? What then
s a persona rght as dstngushed from a rea rght? Dherence of rea property or persona
property.
o Persona rght s a rght of a person whch can be enforceabe ony aganst a specc or
partcuar person.
o Exampe of persona rght - rght to demand support whch can be enforced ony aganst
the persons who has the obgaton or abty to support you. It cannot be enforced to
anyone. It cannot be enforced aganst the whoe word. But a rea rght s a rght whch can
be enforced aganst the whoe word.
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o Dherences between Rea Rghts and Persona Rghts (taken from revewers):
Kinds of rights considered as property
(a) Rea (jus in re)-power beongng to a person over a specc thng. It
gves drect and mmedate |urdca power over a thng susceptbe of
beng exercsed aganst a determnate person and the whoe word.
(b) Rght of obgaton or Persona (jus ad rem)-rghts beongng to one
person to demand of another as a dente passve sub|ect, the fument
of a prestaton to gve, to do, or not to do.
Rea rghts arses from (OPLUMEPARP)
o 1. Ownershp
o 2. Possesson
o 3. Lease
o 4. Usufruct
o 5. Mortgage
o 6. Easement
o 7. Pedge
o 8. Antchress
o 9. Redempton
o 10. Preempton
Real Rights Personal Rights
(1) One dente actve sub|ect and the rest of
the word as passve
(2) Ob|ect s a corporea thng.
(3) Rea rght ahects the thng drecty.
(4) The creaton of the |urdca reaton s by
mode and tte.
(5) Extngushed by the oss or destructon of
the thng.
(6) Gves rse to rea actons aganst 3rd
persons
(1) There s a dente actve and passve ob|ect.
(2) Ob|ect s an ntangbe thng.
(3) Persona ahects the thng drecty through the
prestaton of the debtor.
(4) Creaton of the |urdca tte s by tte aone.
(5) Not extngushed by the oss or destructon of the
thng.
(6) Produces ony persona actons aganst dente
debtor.
To contrbute property to the ownershp, t need not ony be mmovabe property, you coud aso
even contrbute rea rght over the property.
o If for exampe: I contrbuted my rea rght over a persona property such as a rght to use
my car for the trave agency busness, n whch case, the partnershp s not consensua but
forma.
o On the other hand, what I contrbuted ths tme was a sma parce of and composed of
maybe 3 square meters and I approach you and I want us to be partners and I sad that
ths property s actuay worth 1,500 pesos; t s a sma property but we coud make money
out of ths. In ths case, s the partnershp consensua or not? Do we have to put t n
wrtng?
It s a forma contract snce what s contrbuted s an mmovabe property and what
the aw contempates s that when mmovabe property s contrbuted, regardess
of ts vaue, the contract must necessary appear n a pubc nstrument.
What are the basc forms of busness organzaton:
1. Soe propretorshp
2. Partnershp
3. Corporaton
Why busness organzaton? Why s t reated to busness? What do we expect to earn here?
Because the denton of partnershp tsef nvoves prots and when we tak of prots, then we
tak about busness. So here, we w have to dene the rghts and obgatons of partners, how do
we govern ther reatonshp as we as ther abtes n so far as thrd partes are concerned.
o Soon, they w be deang wth the pubc and they w have to be reguated by the State.
Ther abtes to the pubc w have to be secured so that the deang pubc w be rest
assured and fee secured that they are deang wth someone who cannot run away wth
the busness.
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o That s why as a busness organzaton where the formates are requred, we w have to
regster wth the SEC, whch s the government agency n charge of the montorng,
reguatng and mposng dscpnes on these types of busness organzaton. So here, the
Cv Code provdes for ther rghts, abtes and responsbtes but the State contros
them. The State reguates and montors them. That s why the SEC requres them to submt
perodcay some reports so that the government woud be abe to montor and reguate
ther actvtes to protect thrd partes or the pubc.
By the nature of the contract, t s consensua and necessary they are perfected by mere consent.
But the moment crcumstances woud requre that certan formates woud have to be comped
wth, those formates w have to be satsed.
So n a partnershp, we shoud dstngush ths from a corporaton.
Partnership Corporation
Manner of creation Mere agreement of the partes By aw or operaton of aw
Number of incorporators May be organzed by ony 2 persons Requres at east 5
ncorporators
Commencement of
juridical personalit
From the moment of the executon
of the contract of partnershp
From the date of ssuance of
the certcate of
ncorporaton by the SEC
Powers May exercse any power authorzed
by the partners provded t s not
contrary to aw, moras, good
customs, pubc order or pubc
pocy
Can exercse ony the
powers expressy granted
by aw or mped from
those granted or ncdent to
ts exstence
Management Every partner s an agent of the
partnershp uness the management
s agreed upon to the contrary
Power to do busness and
manage ts ahars s vested
n the board of drectors
!"ect of
mismanagement
A partner as such can sue a co-
partner who msmanages
The sut aganst a member
of the board of drectors
who msmanages must be
n the name of the
corporaton
Right of succession None snce when a partner des, the
partnershp w be dssoved
Has so that even f the
stockhoder w de, the
corporaton w not be
dssoved but the
stockhodngs of the
deceased stockhoder w
be transmtted to hs hers
!#tent of liabilit to third
persons
Partners (except mted partners)
are abe personay (may be
severay abe) for partnershp
debts to thrd persons
Stockhoders are ony abe
to the extent of the shares
subscrbed by them
Transferabilit of
interest
Partner cannot transfer hs nterest
n the partnershp so as to make the
transferee a partner wthout the
consent of a the other partners
Generay, stockhoder has
the rght to transfer hs
shares wthout the pror
consent of the other
stockhoders
Term of e#istence Any perod of tme as stpuated by
the partners
May not be formed for a
term n excess of 50 years
extendbe to not more than
50 years n any one
nstance
$irm name Lmted partnershp s requred by
the aw to add the word "Ltd." to ts
name
May adopt any rm name
provded t s not the same
as or smar to any
regstered rm name.
%issolution At any tme by the w of any or a
of the partners
Can ony be dssoved wth
the consent of the State
&o'erning law Cv Code Corporaton Code
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Both, however, are creatons of the state because both are |urdca persons, both are artca
persons and therefore, anythng granted to them to exst as a busness organzaton s a prvege.
It s not a rght. That s why you w have to regster yoursef wth the SEC ony n so far as those
nstances where regstraton s requred. But we sad, beng consensua, a partnershp can exst
even wthout beng regstered wth the SEC because that regstraton wth the SEC s ony for
admnstratve purposes. But so ong as you do not fa under the provsons whch woud requre
formates, that partnershp w start exstng.
One mportant dstncton between partnershp and corporaton s the consderaton. In a
partnershp, the reatonshp s based absoutey on trust. In other words, you become partners
because a of you have agreed. No one can become a partner uness a the other partners woud
agree. So therefore, the basc consderaton s trust. Not so n a corporaton. In a corporaton,
athough the aw requres that there shoud be ve, there coud be a thousand stockhoders
because the requrement of trust s not there. Not a stockhoders woud know each other. You can
become a stockhoder even wthout the consent or knowedge of a the other stockhoders. In a
partnershp, trust s a must. You cannot become a partner uness a the other partners woud aow
you to become a partner.
Both are |urdca and artca persons as dstngushed from a soe propretorshp whch coud be a
natura person. But that natura person who owns the busness may be known by somethng ese,
not by hs own name. That s why, they usuay ndcate ther busness name n some other ways.
In partnershp, the name of the partners w be there. In a corporaton, the name of the
corporaton s aso ndcated n some other ways, whch s the busness name.
June 26, 2010 Saturday
- And so, we sad, a partnershp so far as ts fe exstence s concerned, has, generay, no
mtatons. It may be a partnershp at w. In other words, t may exst as ong as the partners
ntend to exst.
- So that once a partnershp s formed, for exampe, the partnershp of Esprtu & Gabuya, how
many persons do we now tak about? When Gabuya & Esprtu decded to estabsh a
partnershp, how many persons do we now tak about?
o There are now three persons: Esprtu, Gabuya & the separate |urdca personaty of
the partnershp of Esprtu & Gabuya
o When we estabsh a partnershp and we have created a separate |urdca person, the
person of the partners themseves as natura persons woud reman. It s mportant
that they w reman, otherwse, f a abty may be ncurred by the partnershp and
the partnershp assets coud no onger be enough to satsfy ths abty, what coud
happen? Where may the credtors pursue?
Credtors coud st go after the partners themseves.
- So here, there beng three persons, we now coud tak about certan rghts and obgatons such
as rghts that a |urdca person may en|oy. What coud a |urdca person en|oy?
o May enter nto contracts
o Acqure, own, possess and dspose property of a knds n ts name
o Rght to usufruct
o Incur obgatons
o Brng cv or crmna actons n conformty wth the aws and reguatons of ts
organzatons
o To sue and be sued
In other words, havng been granted the prvege to exst as a |urdca person
as provded by aw, they shoud now be entted to certan rghts.
|urdca persons can en|oy rghts ke any other natura person because that s
precsey the reason why the aw denes the rghts because they are entted
supposedy to en|oy certan rghts such as for exampe, the b of rghts under
the Consttuton. But not a rghts under the b of rghts are en|oyed by a
|urdca person because some of them are not appcabe to |urdca persons.
There are ony some rghts that a |urdca person such as a partnershp can
en|oy. (.e. due process cause snce n any nvestgatons, the partnershp s
entted to be heard; equa protecton cause; rght to property; rght to reman
sent; rght to sef-ncrmnaton because partnershp coud not be compeed to
gve some documents whch mght turn out as sef-ncrmnatng aganst the
partnershp)

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Rght to berty whch means freedom from restrant or restrcton, however, s
not ahorded to |urdca persons because the rght to berty nvoves restrcton
of your movements and you cannot brng the omce of the partnershp and put
the partnershp n |a. Snce partnershp s a |urdca person, therefore, t can
never be entted to rght to berty.
- How do we cassfy partnershp?

o As to the extent of ts sub|ect matter
Unversa partnershp - refers to a the present property or to a prots
Unversa partnershp of a present property - n whch the partners
contrbute a the property whch actuay beongs to them to a
common fund, wth the ntenton of dvdng the same among
themseves, as we as the prots they may acqure therewth.
Unversa partnershp of prots - whch comprses a that the partners
may acqure by ther ndustry or work durng the exstence of
partnershp.
Partcuar partnershp - whch has for ts ob|ect determnate thngs, ther use or
fruts, or a specc undertakng, or the exercse of a professon or vocaton.
o As to abty of the partners
Genera partnershp - consstng of genera partners who are abe pro rata
and subsdary and sometmes sodary wth ther separate property for
partnershp debts
Lmted partnershp - formed by 2 or more persons havng as members one or
more genera partners and one or more mted partners, the atter not beng
personay abe for the obgatons of the partnershp
o As to ts duraton
Partnershp at w - whch no tme s speced and s not formed for a
partcuar undertakng or venture and whch may be termnated anytme by
mutua agreement of the partners, or by w of any one partner aone; or one
for a xed term or partcuar undertakng whch s contnued by the partners
after the termnaton of such term or partcuar undertakng wthout express
agreement
Partnershp wth a xed term - whch the term for whch the partnershp s to
exst s xed or agreed upon or formed for a partcuar undertakng, and upon
the expraton of the term or competon of the partcuar enterprse, the
partnershp s dssoved, uness contnued by the partners.
o As to the egaty of ts exstence
De |ure partnershp - whch has comped wth a the ega requrements for ts
estabshment
De facto partnershp - whch has faed to compy wth a the ega
requrements for ts estabshment
o As to representaton to others
Ordnary or rea partnershp - whch actuay exsts among the partners and
aso as to thrd persons
Ostensbe partnershp or partnershp by estoppe - whch n reaty s not a
partnershp but s consdered a partnershp ony n reaton to those who, by
ther conduct or admsson, are precuded to deny or dsprove ts exstence.
o As to pubcty
Secret partnershp - wheren the exstence of certan persons as persons s not
made known to the pubc by any of the partners
Open or notorous partnershp - whose exstence s made known to the pubc
by the members of the rm
o As to purpose
Commerca or tradng partnershp - formed for the transacton of busness
Professona or non-tradng partnershp - formed for the exercse of a
professon
- If, for exampe, Ms. Gungoyon caed you up one ate evenng, and Ms. Gungoyon sad that I
woud ke to propose to you a busness. Can we enter nto a partnershp of a "masao" outet?
And you sad yes. You decded to share the prots n such partnershp. Can you do that?
o No, because partnershp must have a awfu ob|ect or purpose, and n ths case, a
"masao" outet s prohbted by aw, therefore t s unawfu. Consequenty, the
partnershp s vod.
o How about a otto outet?
There can be a partnershp n ths case f you get the requred permts to
operate.
o So f the ob|ect s ega, then there s no such partnershp.
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- What f Ms. Gungoyon and you estabshed a unversa partnershp and Ms. Gungoyon
happens to own 5 horses and you aso own 5 cows, who now owns the 5 horses and 5 cows?
o Ms. Gungoyon st owns the 5 horses and you st own the 5 cows because accordng
to Art. 1781, artces of unversa partnershp, entered nto wthout speccaton of ts
nature, ony consttute a unversa partnershp of prots. In ths case, there s no
speccaton of the nature of the unversa partnershp estabshed by Ms. Gungoyon
and you, therefore, t s presumed that the partnershp consttutes a unversa
partnershp of prots and accordng to Art. 1780, movabe or mmovabe property
whch each of the partners may possess at the tme of ceebraton of the contract of
unversa partnershp of prots sha contnue to pertan excusvey to each, ony the
usufruct passng to the partnershp. Consequenty, therefore, the movabe propertes
of 5 horses and 5 cows st beong excusvey to Ms. Gungoyon and you, respectvey.
- What s the bass of the presumpton n Art. 1781 (presumpton n favor of unversa
partnershp of prots)?
o The reason s because t mposes ess obgatons on the partners snce they preserve
the ownershp of ther separate property.
o Another bass s that accordng to the aw on obgatons and contracts, whch states
that n the nterpretaton of contracts, f t cannot be determned the rea ntenton of
the partes who entered nto the contract, that whch nvoves the east transmsson of
rghts shoud be consdered as the ntenton of the partes. Here, the unversa
partnershp of prots nvoves the east transmsson of rghts for they retan ownershp
of ther propertes. Therefore, the presumpton s n favor of such knd of partnershp.
- So, when we tak of unversa partnershp of prots, what do we reay refer to?
o What t refers to s that what passes to the partnershp are the prots or ncome and
the use or usufruct of the propertes.
o So here, f that partcuar property of the partner, for exampe, consttutes a seres of
apartment houses, the partnershp can use the apartment houses and the fruts of the
same sha beong to the partnershp.
o Fruts, here, refer to prots or ncome acqured by the partners out of ther ndustry or
work or the use of ther propertes, whether movabe or mmovabe.
- And when we tak of fruts, how do we cassfy them (See book as to meanng and exampes)?
o Natura - there are 2 knds of natura fruts:
The spontaneous products of the so (that s, human abor does not ntervene)
Exampes: herbs, common grass
The young and other products of anmas
Exampes: chcken and chcken eggs
o Cv - those produced by ands of any knd thru cutvaton or abor
Exampes: anzones, paay and corn, a knds of cutvated vegetabes, snce
these are no doubt aso produced by the and thru human abor (but not
canned goods or manufactured products)
o Industra - conssts of:
Rent of budngs
Prce of eases (rentas) of ands and other property
The amount of perpetua or fe annutes or other smar ncome such as
dvdends
- Unversa partnershp s dherentated from partcuar partnershp. So what s a partcuar
partnershp?
o A partcuar partnershp s one whch has for ts ob|ect determnate thngs, ther use or
fruts, or a specc undertakng, or the exercse of a professon or vocaton.
o What s the ob|ect then n a partcuar partnershp?
The ob|ects are determnate or partcuar thngs, ther use or fruts. It may aso
refer to specc undertakng, or the exercse of a professon or vocaton.
July 1, 2010
In a unversa partnershp, who owns the property of the partners? It depends. If ts a unversa
partnershp of prots, then the property remans as the excusve property of the partners whe f
ts a unversa partnershp of present property, the property s owned by the partnershp.
In a unversa partnershp of a present property, what s mne s yours. What s yours s mne. I
eat yours, you eat mne. In other words, what beongs to you w now beong to me. What I have,
you have. That s the concept of a unversa partnershp of a present property.
In a unversa partnershp of prots can we say those thngs? No because n a unversa
partnershp of prots what s merey contrbuted s the ncome from a work or ndustry and the
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usufruct of the propertes. You w now say, what s mne s mne and what s yours s yours.
However, you en|oy what s mne and I en|oy what s yours. We en|oy the use. We en|oy the
usufruct.
Never can we enter nto unversa partnershp of prots f we do t "d|a-d|a". In a weddng
recepton and the ceremony of the cake, from now on, what s hs w be yours, what s yours w
be hs, you coud eat them together or you can eat them separatey but everythng beongs to the
2 of you. Thats because there s a unversa partnershp and presumed to be that of prots. There
are now revsons however, you coud now decde what to do wth your assets but n the od aw
that was the presumpton.
If partner A owns an apartment, partner B own 3 passenger buses, partner C own a parce of
and. Who are now the owners of these propertes? Here, snce we do not know what unversa
partnershp they have entered nto, the assumpton s that they have ony entered nto a unversa
partnershp of prots.
o The reason of ths s between the 2 knds of unversa partnershp t s the unversa
partnershp of prots that s presumed because t s of the nterpretaton that t s the
unversa partnershp of prots that w nvove the east transmsson of rghts.
o The ncome of the parces of and, who shoud be entted to t? And the rentas of the
apartment? Snce t s presumed to be a unversa partnershp of a prots, then the
partnershp owns the ncome of the and and the rentas. It beongs to the partnershp now
A, B, and C. We sad earer that the partnershp has a separate personaty; t shoud now
beong to the partnershp even f they entered ony nto a unversa partnershp of prots.
We need not argue because t ony nvoves prots. However, f t nvoved the capta
contrbuton, we shoud dstngush. Now that t nvoves ony prots, we are sure that t
goes to the partnershp whether we nterpret t to the east transmsson of rghts, we are
takng about the fruts and the prots.
1 year, after they executed the partnershp agreement, both parents of C ded. The parents eft
C wth a huge rce and. Who now owns the rce and eft by the parents of C? C owns the rce and
C nherted from hs parents.
o The fruts of the rce and? It beongs to C. Snce t was assumed that the partnershp
was that of prots, then the fruts sha beong to the excusve property of the partners.
We cannot contrbute to the partnershp somethng whch we do not own yet.
o Reason: Why do you thnk that even f they entered nto a unversa partnershp of a
present property, t cannot ncude those whch are nherted by the partners? Because n the
practca sde of t, maybe f you are a chd, and you have respect, you can wat, even your parents
can no onger tak, you have to wat even f you wanted to acqure the property. Others are crazy
enough to want them dead.
o However, f we aow these future propertes to be contrbuted n a unversa
partnershp, what do you thnk coud happen? Whe the chd coud wat, maybe the other partners
w be tempted to actuay k the parents. Ths s the practca reason of the aw.
As a matter of fact, can husband and wfe ever become partners? Yes but ony n a partcuar
partnershp. However, they cannot enter nto a unversa partnershp because there s a prohbton
that a husband and wfe cannot donate propertes to one another. In a unversa partnershp of a
present property s equvaent to donatng property.
o Why can they be not aowed to donate? The ntenton s more on protectng 3
rd
partes.
So that f these partes were aowed to donate to each other, they coud convenenty dspose of
the property to avod or evade any awfu abty or obgaton by smpy donatng. And because
there s an expressy aw that prevents them from donatng, they coud do t ndrecty by makng
or enterng nto a unversa property of a present property. That s the ob|ectve or the reason of
the aw.
We tred to dstngush co-ownershp from partnershp. How dd we dstngush? (See Page1)
So here are 2 credtors, who after demandng payment from a common debtor, were unabe to
coect and therefore the 2 of them agreed that "our common debtor has a condomnum unt so
why dont the two of us go after that condomnum unt of our common debtor". And thats what
they dd. They ed a case aganst the common debtor so 2 cases were ed. And the credtors
were abe to secure now a favorabe |udgment and they are now about to execute. The vaue of the
property was a 100 mon so that credtor A was demandng for 60M and credtor B was
demandng for 40M. So the vaue of the property was |ust enough for the 2 debts. And the two
were abe to execute the condomnum unt. That condomnum unt was attached by the sherh
and therefore taken away from the common debtor. So the debtor was aready deprved of
ownershp of the condomnum unt and the same was turned over or awarded to the credtors A &
B and was aready n ther name. However, that condomnum unt was earnng 10,000 a week. So
every tme the tenant pad the 10,000, how much do you thnk shoud go to credtor A? 60% s t
not? So n ths case, s there partnershp?
o "Prma face" evdence or presumpton means that t can be rebutted by contrary
evdence. It s dstngushed from an absoute presumpton n whch no evdence can be
8
presented and such presumpton s admtted. But when we say "prma face" presumpton,
evdence coud st be presented to rebut that presumpton.
o No partnershp, ony co-ownershp. There was no agreement between the credtors
that they sha convert ther reatonshp as co-owners (by vrtue of the favorabe |udgment
awarded to them as credtors) nto a partnershp. There was never an agreement at a. We
coudve sad that they share n the prots and so the presumpton appes (Art. 1769) but
actuay, the sharng of the prots s merey ncdenta to the co-ownershp whch was
estabshed by beng now co-owners of the property. There was no ntenton at a to
become partners. Athough there were sharng of prots but such sharng was merey
ncdenta. So a tod, they are ony co-owners. However, they can aways agree to become
partners. "You own up to 60% and I own 40% of ths unt. Lets combne them together.
From now on, we w be partners. Therefore, we w be sharng whatever s the ncome".
o In other words, when we ever woud ke to determne whether or not partnershp
exsts, we have to examne cosey the stuaton and nd out whether or not t fas wthn
the denton of what a contract of partnershp s.
CRIPS happen to own now a boardng house. They are oherng ths boardng house to boarders
who are students. If you want to be a member, you w have a bg dscount. CRIPS, however, whe
ther names are a over, we do not know who are ther eaders. Poce are havng dmcuty
dentfyng them. They do not come out n the open. And yet, some, for exampe, are sharng
prots. Are they partners? Is there a partnershp?
o No, snce they are secret assocatons. They cannot be partners. In whch case, they
are treated ony as co-owners. (Art. 1775)
Casscaton of partnershp as to abty:
o Genera Partnershp - composed of two or more genera partners whose abty
extends to ther separate or persona propertes. No mted partners. Everybody s genera
partners.
o Lmted Partnershp - composed of at east one genera partner and at east one mted
partner, the abty of such mted partner s mted ony to hs capta contrbuton.
Partners entered nto a unversa partnershp of prots. One of the partners won n a otto.
Wnnngs, who shoud be entted to?
o In Art. 1780, the aw speaks ony of prots whch the partners may acqure by ther
ndustry or work, t foows that prots acqured by partners through chance such as ottery
or by ucratve tte wthout empoyment of any physca or nteectua ehorts, are not
ncuded. Therefore, the wnnngs sha be consdered as a separate and excusve property
of the partner who won such wnnngs n the otto.
July 3, 2010 Saturday
- Secret assocatons can never estabsh partnershp because by the nature of ther exstence
aone, "secret", they can never be granted |urdca personaty. (.e. BLOODZ and CRIPS).
Therefore, f ever they own a property, they w own such property and the rues governng on co-
ownershp sha appy.
Stuaton: Credtors A & B now co-owned a property by vrtue of a favorabe |udgment awarded to them
aganst ther common debtor. Credtor A owned such property up to 60% and credtor B up to 40%.
Another thrd party happens to be a credtor of credtor A. Ths thrd-party credtor pursued aganst
credtor A. Credtor A dd not pay so the thrd-party credtor s now tryng to go after the property whch
s owned by both credtors A & B. Can that thrd-party credtor go after such property or attach such
property?
- Yes but ony up to the extent owned by credtor A, whch s 60%. However, had credtors A & B
been partners, had they agreed that they w estabsh a partnershp, can that thrd-party credtor
of credtor A go after such property? No because the partnershp owns such property and the
thrd-party credtor s ony a persona credtor of credtor A. So that we can ustrate the dstncton
nay between partnershp and co-ownershp that n co-ownershp, persona credtors can go after
the property co-owned but ony up to the extent of the ownershp of the ther persona debtor
whe n partnershp, persona credtor cannot go after the property owned by such partnershp.
What are the casscatons of partnershp as to duraton?
9
1) Partnershp at w - 2 stuatons:
a. One n whch no tme s speced and s not formed for a partcuar undertakng or
venture and whch may be termnated at anytme by mutua agreement of the partners
or by the w of any one partner aone
b. One for a xed term or partcuar undertakng whch s contnued by the partners after
the termnaton of such term or partcuar undertakng wthout express agreement
2) Partnershp wth a xed term - one n whch the term for whch the partnershp s to exst s
xed or agreed upon or one formed for a partcuar undertakng, and upon the expraton of the
term or competon of the partcuar enterprse, the partnershp s dssoved uness contnued
by the partners.
When does a partnershp begn?
- From the moment of the executon of the contract, uness t s otherwse stpuated.
- Such contract can ether be forma or consensua.
- Generay, partnershp s a consensua contract. However, there are certan crcumstances
wheren partnershp s a forma contract and certan formates have to be comped wth and
weve aready dscussed about that. In whch case, partnershp w start upon the compance of
the formates requred, otherwse, f t s a merey a consensua contract, then partnershp w
start upon agreement by the partes to estabsh a partnershp. Ths s what "from the moment of
the executon of the contract" means dependng f t s a forma or consensua contract.
If today we (Sr Espedds and Cabatngan) agreed to engage n partnershp of a funera busness
because Sr has hs own car and Cabs has her own ower shop. Srs car w be used and Cabs w
suppy for the owers. When woud our partnershp begn to exst?
- The partnershp woud begn to exst upon agreement by the partes.
- Therefore, f we agreed that tomorrow we w make our rst devery to the memora park. We w
now start busness tomorrow and f the day came, Sr was aready drvng hs own car and the
dead was watng for the owers and no owers came. What s Cabs abty?
o Cabs w be abe for nterest and damages from the tme Cabs shoud have devered the
owers.
o Therefore, f the famy of the deceased demanded and was aowed by the court to
recover 10,000 because the owers were not devered, shoud the partnershp be abe
for the 10,000?
No, because t shoud be the partner who faed to contrbute or dever the
property who shoud be hed abe because from the tme such partner faed to
contrbute the property he promsed to contrbute on the tme he shoud have
contrbuted such property, such partner becomes pso |ure a debtor to the
partnershp.
o On the other hand, our partnershp ourshed a year after. Ths tme Cabs promsed as an
addtona contrbuton to dever another funera car. But agan, after the date that she
promsed to dever came, no car was devered. That was aso the tme when we made
commtments to make some devery because we thought that the car was comng so we
made commtments. 2 dead persons were watng. We were not abe to dever unt they
got another funera car from another company for whch they pad 50,000. Do you thnk
the famy can demand 50,000 from our partnershp?
Agan, no because t shoud be Cabs who shoud be made abe to the partnershp
because she becomes a debtor for the faure of deverng the funera car and as
such, she shoud be made abe to answer for the damages caused.
o The car promsed by Cabs, nstead of deverng t to the partnershp, she used t for one
week as a tourst car. Because of ths, Cabs earned 50,000 from the tourst. To whom does
the 50,000 beong to?
Snce a week before, the partnershp s aready entted for the use of the car, f
the car was used for somethng ese, anythng earned durng that unauthorzed
use shoud now beong to the partnershp.
10
o On the other hand, whe t s movng the tourst around the cty, t decded to go to
Baamban but before they coud reach Baamban, the brakes of the car was broken and
the car was destroyed. Now, the car has to be repared. So because the partnershp
needed the use of the car very bady, the partnershp had to pay for the repars. Cabs sad
that "I have aready contrbuted my car to the partnershp. Any repars shoud be born
now by the partnershp". Is she correct?
No, because the car s st owned by Cabs, not by the partnershp, when she faed
to dever the car on the tme t shoud have been devered. And we have earned
n property that the "owner bears the oss". In ths case, Cabs st owned the car,
so she sha bear the cost.
o But what coud had happen f she has devered the car on the day promse but nstead
used t for the tourst and the same thng happened, the car aso got damaged?
The partnershp sha bear the cost because ths tme the partnershp now owns
the car. But then the partnershp s entted to recover from Cabs because she
used the car for her persona purposes. Cabs shoud remburse the partnershp
because at the tme damages were ncurred or osses suhered, t was by the
mproper persona use of Cabs.
Partners decded to contrbute 50,000 each. Partner A n cash and Partner B wth hs car. How woud we
know that party B ndeed contrbuted 50,000 worth?
- In ths case, f a property s contrbuted, there must be an apprasa n the manner prescrbed n
the contract of partnershp, and n the absence of stpuaton, t sha be made by the experts
chosen by the partners, and accordng to current prces, the subsequent change thereof beng for
the account of the partnershp.
o Ths tme, they agreed that partner A w contrbute a parce of and worth a 100,000 and
partner B w contrbute cash 100,000. So that f we want to be sure that the parce of
and contrbuted by A s worth 100,000, there must be an apprasa. So there was aready
an apprasa. Partners aready agreed that the parce of and w now be contrbuted to the
partnershp. Reected n the partnershp agreement was the fact that the parce of and
was contrbuted by partner A worth 100,000 as vered and as determned by the
apprasa commttee or by any expert appraser duy approved by the government.
However, one month after, the parce of and was surveyed by someone ese who s
nterested to buy an ad|acent and and partner A dscovered that the property s now
worth 150,000 so that partner A demanded from partner B the excess of 50,000 because
partner As contrbuton has exceeded the agreed contrbuton. Can the partnershp be
compeed to pay the 50,000?
No because after the property has been contrbuted, the partnershp bears the rsk
or gets the benet of subsequent changes n ther vaue snce subsequent
changes of the property apprased sha be for the account of the partnershp. So
n ths case, the partnershp w get the benet of the ncrease n vaue of the
parce of and from 100,000 to 150,000.
o On the other hand, 2 months after, the vaue of the parce of and from 100,000 apprasa
vaue, because there are now squatters a around, has now become 25,000. Can the
partnershp compe partner A to make addtona contrbuton because partner A promsed
to contrbute 100,000 but now partner A s short of 75,000 for the vaue of the property
owered from 100,000 to 25,000?
No, because agan, after the property has been contrbuted, the partnershp bears
the rsk or gets the benet of subsequent changes n ther vaue snce subsequent
changes of the property apprased sha be for the account of the partnershp. So
n ths case, the partnershp w bear the rsk of the decrease n vaue of the
parce of and from 100,000 to 25,000.
Why do you thnk the partners who faed to contrbute on tme ther propertes, whch they promsed
to contrbute for the partnershp, are abe?
- Because had they contrbuted the propertes on tme or punctuay, the partnershp mght aready
have proted from that contrbuton. Because they faed to contrbute the propertes on tme, the
partnershp was deprved of the proper use of the contrbutons promsed and therefore was
unabe to make prot from such contrbutons. Thus, the partnershp ncurred osses and damages
from such tme, consequenty, the partner who faed to contrbute the property on tme must be
abe for nterest. In the same manner, f he converted partnershp money for persona use.
o In other words, f a partner was assgned to coect money n behaf of the partnershp and
after coectng, he dd not go to the omce mmedatey nstead he passed by SM and
bought cohee and bought otto. Then, he ost n the otto. What happens?
Such partner w aso be abe for nterest and damages from the tme he
converted the partnershp money for hs persona use.
11
What are to be contrbuted n a partnershp?
- Money, property or ndustry.
- In other words, from that part of the denton, how many types of partners do we have?
o Captast partner - one who contrbuted money or property
o Industra partner - one who contrbuted hs ndustry or servces
So that f you are an ndustra partner, what are your mtatons?
- Generay, an ndustra partner cannot engage n any busness for hmsef uness he s expressy
permtted by the partnershp.
o So f Sr Espedds s an auto mechanc and was hred by Cabs to be her partner n an auto-
repar shop. Cabs suppyng capta and the shop tsef. Is Sr a captast partner?
No, Sr s an ndustra partner.
So, can Sr work n another shop somewhere, even f he works on such shop ony
on Saturdays and Sundays?
No, because the aw provdes so. The reason behnd the aw s that an
ndustra partner must fuy devote hs ndustry to the partnershp ony.
|uy 15, 2010 Thursday
Contributions of (ndustrial and Capitalist Partners
If Carobos woud propose to you Bengan that you to enter nto a partnershp busness to
engage n funera parors and she oher hersef as the make-up artst n the funera paror. How
many bodes shoud she make up n a days tme?
Atty. E. sad that they have to agree. She cannot aso work 24/7. But the thng s she
has to extend a hs ndustry.
So that f she says that shes good ony for 5 faces today because ths afternoon, she
w go to her own beauty paror. So, n the afternoon beauty paror, ve customers. In
the mornng, funera paror, sent customers. Is ths aowed? As a matter of fact, she
cannot engage n busness. But ths s not compettve busness, ve customers vs.
sent customers?
Whether compettve busness or not, ndustra partner s supposed to devote
hs entre ndustry to the partnershp busness. So, that s the measure of how
much s she shoud work. The measure s you cannot engage n any other
busness because you are expected that your entre ndustry w be devoted to
the partnershp busness. So, there s no specc voume of hours, no specc
ength of tme, no measure of hs ndustry. The aw provdes as a measure that
prohbton to engage n any other busness. And that s how the aw measures
hs contrbuton.
Otherwse, f she nssts on servng her vng customers. What w happen?
The capta partners w have the rght to excude her from the partnershp or
ava of the benets of her other busness or may obtan damages from her.
If Carobos nssts, what w you demand from Carobos?
Demand payment for damages or excude her from the partnershp or obtan
whatever benets that may have obtaned by her.
How much do partners contrbute?
If the partner s an ndustrast partner, then, the measure of hs contrbuton w
be excusve to hs ndustry. He w contrbute hs ndustry or servce to the
partnershp.
12
How much ndustry?
As much as the busness or the ndustry requres of hm and f the amount of
hs servce s stpuated n the agreement, then, t coud be the measure of hs
contrbuton.
On the other hand, captast partners?
A captast partner contrbutes hs property or hs money to the partnershp.
Pro)ts and *osses
When they enter nto a partnershp busness, what do they expect?
They expect prots. You dont engage n busness to expect osses of course.
How much the partners be entted to the prots?
The dstrbuton of prots w depend on ther agreement.
If there s no agreement, then, they w share the prots n proporton to ther
contrbuton.
However, busness may be not that successfu. In ths case, what coud be the consequence of
ther busness?
They w ncur osses. The ndustra partner w not have to share n the osses
If there s an agreement, such agreement as to the share n osses must be foowed.
If there s no agreement as to the osses but ony as to the prots, then, the sharng
prot rato w aso be appcabe to the osses.
If no agreement as to prots and osses, then, t w be n proporton wth ther
contrbuton.
How about the ndustra partner?
The ndustra partner s exempt from sharng n the osses. He shares ony n the
prots. And how much woud he share n the prots?
The aw requres that he w share n a |ust and equtabe manner.
+bligation of capitalist partner to contribute additional capital
If n the funera busness that we have mentoned, md way n the busness, an accdent
occurred and one boat ed wth 5,000 passengers sank because of a typhoon. 5,000 ded.
Imagne, the funera busness wth 5,000 faces to make-up. So, the partners eventuay
borrowed money from the bank to hre more make-up artsts, to buy more comns and to buy
other funera cars to accommodate because they wanted to bd as the soe devery agents of
the 5,000 passengers. So, they borrowed. But, when they apped to be the soe and excusve
and devery agent from funera paror devery to memora park, they dd not wn the bd.
After borrowng huge amounts of money from the bank. They dd not wn the bd. So, what
coud be the consequence f they borrowed and they dd not get the busness?
The partners w ncur osses.
SITUATION 1: That was what exacty happened. So, before they ncur the osses. After they
earn that they cannot be the soe and excusve devery agent. Immedatey, 2 of the 3
partners decared that they shoud put up addtona contrbutons. Otherwse, f somebody s
not wng to make addtona contrbutons, then, he shoud be compeed to se hs nterest.
So, the 3 partners, A, B, and C. C sad, "Sorry I w not make an addtona contrbuton". What
are the optons of A and B? (compare wth mmedatey succeedng stuaton)
SITUATION 2: Bascay, the same busness and n one transacton, one customer, the famy of
the deceased dd not have the capacty to pay. As a matter of fact, when they got the funera
servces, they tod the management that they do not have the funds but you know, ths guy
13
who ded had a ot of frends. And f you wsh, you can assgn one of your stah every nght
durng the wake to put a box there and ask for donatons. So, the stah took care of the
donaton box. Whatever amount woud be taken from the donaton box that w be a yours.
And so, they agreed. However, on the nght before the bura, they ook at the donaton box
and maybe about 5 frends donated at 50 pesos each. So, ony P250. Tota servces was
P15,000 because P5,000 for the casket, P10,000 for the rack and ghts. In other words, there s
aso a probabe oss n ths case. P15,000 worth of servces ony P250 n the donaton box. And
the same thng, A and B decded, we w have addtona contrbutons. Otherwse, anyone who
refuses s compeed to se hs nterest. What are the optons of A and B? C?
Woud that mmnent oss cause the eventua dssouton of the partnershp? Is the
mmnent oss so grave that t can cause the eventua dssouton of the partnershp?
Because the ntenton ths tme s to save the venture. Even f there s mmnent oss,
but that oss woud not resut to the dssouton of the busness, then, there s no need
to compe the partner who refused. The purpose here of compeng the partner to
contrbute to nd out whether or not the partner s st nterested to proceed wth the
partnershp busness. Now, here (Stuaton 2), oss nvoves one cent ony. Ths does
not make, uness the busness s so sma, but here oss from one cent does not
necessary consttute as enough reason to suspect that the busness venture woud be
dssoved. BUT huge amounts of oans ntended to acqure addtona factes to cater
to the 5,000 bodes, thats a huge amount. So, that f they fa to get what they
wanted, there s a danger that the partnershp w be dssoved. There s a danger.
Whether or not the oss woud eventuay ead nto the dssouton of the partnershp
and to the bankruptcy of the partnershp busness.
Managing Partner
Who manages the partnershp busness?
Generay, every partner s a manager uness there s an agreement or a stpuaton to
that ehect appontng a partner n the artces.
Every partner s a manager. However, f one s desgnated, then, he assumes the
powers and responsbtes and dutes of a manager.
As a managng partner, n case of conct n nterest, what do you thnk s the ncnaton of the
aw?
The aw s ncned towards the partnershp.
As a managng partner, what are you supposed to observe?
As the managng partner, you are to observe good fath, far pay and ntegrty n your
deangs n behaf of the partnershp.
+bligation of managing partner who collects debt
Peno, f Pagador owes you P10,000 and at the same tme he owns the partnershp, of whch
you are the managng partner, P20,000 and he pays you today, P10,000, how woud you appy
the payment? Assumng both debts are due and demandabe.
If Peno ssues a recept n hs own name, then, the payment (P10,000) sha be
apped proportonatey to both debts.
If one debt s more onerous than the other, then, the debtor (Pagador) can choose
whch to appy the payment. More onerous means that the debt, say for exampe,
ncurs a hgher nterest rate than the other.
If ony the partnershp debt s due and demandabe, then the whoe payment (P10,000)
sha be for the partnershp.
+bligation of partner who recei'es share of partnership credit
A, B, C are partners. It was December and they do not have anythng to dstrbute for ther
respectve bonuses. They wanted to en|oy Chrstmas. When they revew ther bank account, t
was zero. But everythng was okay. Ony they do not have cash n the bank. The ony assets
14
that they have were some coectbes, some recevabe. Snce they wanted to en|oy Chrstmas,
A, B, C as partners sad, "a rght, ets try to check on the recevabes. We w try to coect as
much as we coud before December 25." And so, they dented the recevabes. They
dented the bgger ones. There were 3 bg ones, P50,000 due from debtor X, P50,000 due
from debtor Y, and another P50,000 due from debtor Z. Partners A, B, C sad, "why dont we
agree. Let us dstrbute ths. To partner A, go to debtor X; Partner B, go to debtor Y; Partner C,
go to debtor Z". A mmedatey went to X, no deay at a. A was abe to coect the P50,000. B
went to Y, rst tme he went there, Y was not there. Second tme, Y |ust eft. Thrd tme he went
there, Y |ust eft for abroad. Partner C went to Z, rst tme he went there, he got P5,000. 2
nd
tme, he got another P5,000. 3
rd
tme he went there, he was tod by Z that he has no money.
They coected a tota of P60,000. B saw A shoppng aready for the P50K that he was abe to
coect. B aso C n queue n the otto staton. He asked, "why are you here". C sad, "I w bet
the 10,000 for otto". B sad, "brng back the P60,000 to the partnershp funds and we w
share t". Is B correct?
To be abe to demand that everythng shoud be returned to the partnershp funds, the
companant partner must prove that he was not abe to coect from the debtor
because the debtor s nsovent.
Insovent means that the debtor has no capacty to pay or that hs abtes are more
than hs assets. The debtors assets are no onger sumcent to sette hs abtes.
Credit collected after dissolution of the partnership
Lets change the facts a tte bt (mmedatey precedng case). The partners coud no onger
contnue the busness, they have tred the best they coud, but, after 50 years of exstence st
they dd not en|oy substanta prots. They decded to dssove the partnershp. In every
dssouton, however, there s qudaton. And the try to dstrbute ther remanng assets. The
remanng assets that they have are the same coectbes. They dscovered that they have
P150,000 worth of coectbes. They decded to dvde ths nto 3. (Same sharng as mentoned
above). These were a evdenced by promssory notes. A was abe to coect from X, P50,000. B
was not abe to coect from Y because he was nsovent. C was abe to coect P10,000 from Z.
B s now askng A and C to brng back the money that they have coected. Is B correct?
There are two vews.
The rst vew states that the partners have the responsbty to gve shares to
the other partners.
The second vew, aso adopted by Manresa and whch Atty. E. agrees, states
that the credt coected must no onger be brought back n the partnershp
fund. There s no more partnershp, no more funds. The ducary reatonshp
among partners, the trust and condence that once bnds the partners, are no
onger there.
Even f the reason for the faure to coect s the nsovency of the debtor, ths s not
enough to |ustfy that whatever was coected must be brought back.
B was the one who faed to coect. But before the promssory notes were dstrbuted, C and A
knew that Y was nsovent.
They are not compeed to brng back the money coected. But snce there was bad
fath, B can demand from C and A damages. B has to prove bad fath.
Ris, of loss
o Whenever you hod somethng and ose t, the owner bears the rsk of oss. That s the
genera rue.
o Lets say Ms. Vertufo, you have a partner, Ms. Tan and Mr. Santan. Tan and Santan
propose a busness. You have agreed for a partnershp and you were supposed to open
aready your meat shop on Monday. So that Tan vounteered to be n the counter
because she was so good n handng knves. Santan vounteered and ohered hs
cosed van for devery. So that you have aready agreed for a partnershp. You have
aready pubshed n the newspaper so that openng woud be on Monday. However,
Tan dd not trust Santan for hs van. She suspected that t was not n good runnng
condton so she tred to test Santans van. She test-drve the van whch happened on
Saturday. One hour after she started drvng the van, you heard that Tan had an
15
accdent and you coud hardy dentfy the van. Thats how bad the accdent happened.
So the specc van was promsed by Santan but the van was destroyed. In other
words, the devery van that Santan promsed was destroyed. Such van s beyond
repar. And so Monday came, Santan cannot dever the specc van promsed. So
who bears the oss of the van?
If the agreement or ntenton was that the ownershp of the van be contrbuted,
then the partnershp bears the oss. On the other hand, f the ntenton or
agreement was that ony the use and the fruts of the van be contrbuted, then
t s Santan who bears the oss. So that ony f the use was contrbuted, who
do you thnk s duty-bound to ook for a devery van on Monday because the
partnershp has a ot of meat to dever on such day?
Santan has the responsbty to provde for a van to dever the meat.
So that f Santan cannot nd a substtute van and you were forced to
ca a rent car |ust to dever the meat and the rent car s so much, who
w be responsbe for the charge?
o Santan bears the abty of the charge.
On the other hand, f ownershp was transferred?
Partnershp becomes owner so whatever happens to the van sha be
born by the partnershp and f the partnershp cannot nd a new van,
they w have to hre a van on Monday to make the devery and the
partnershp sha pay for the rentas of the van.
Let us assume further that the agreement was for Santan to contrbute that
specc van wth pate no. 367 and to dever t rst busness hour on Monday.
Agan t was test-drve by Tan and same accdent happened. So on Monday,
theres no more van of Santan. Who bears the oss? What happens to Steve
as a partner? What happens to hs obgaton?
Before devery, partner bears the oss but after devery, partnershp
bears the oss. Even f a specc property was promsed to be
contrbuted, f t was ost before devery, Santan bears the oss. If the
oss occurred after devery, then the partnershp bears the oss.
Under the aw on obgatons and contracts, the obgaton to dever a
specc or determnate thng s extngushed f such specc thng or
determnate thng s ost. Santan can no onger be compeed to
dever hs car because he ost such specc car. He dd not promse to
contrbute |ust any car, the generc thng, but he promsed to
contrbute hs specc car. And so, hs obgaton s extngushed snce
one of the modes of extngushng obgatons s oss. Snce the specc
thng was ost, and oss beng a mode of extngushng obgatons,
Santan s no onger obged. On the other hand, snce Santan
cannot anymore dever what he promsed to contrbute, Santan can
no onger be a partner to the partnershp. No contrbuton, no
partnershp. Loss of the thng extngushes obgatons.
What are the other modes of extngushng obgatons?
o Payment
o Loss of the thng
o Remsson of debt
o Condonaton
o Merger
o Confuson
If the property promsed to be contrbuted s a generc thng, any car,
Santan s obged to ook for another car.
What f there was no ndcaton whether or not what Santan contrbuted was
the mere use or the van tsef, what he dd was for the partes to ook for an
apprasa and the apprasers went and nspected the van of Santan and the
van was decared to be worth ony 750T. And so that was what was wrtten,
Santan to contrbute hs van wth pate no. 367 worth or vaued at 750T. Now,
t got ost agan after devery. Santan sad "I am no onger obged to ook for
another van". The other partner sad "Look for another van because we dd not
state that ony the use was contrbuted. Its not cear whether ony the use or
the van tsef. So you have to ook for another van because what you
contrbuted was |ust the use of the van". Who bears the oss?
If there was an apprasa - the vaue was determned, theres no other
ntenton of the partners other than to dever the ownershp of the van
tsef. Theres no other purpose why the partners w have to adopt an
16
apprased vaue. In assgnng the vaue, that w now measure the
extent of the contrbuton of the partner. So that n terms of prot-
sharng and sharng of osses, that woud be the bass because that
was hs contrbuton. So even f they dd not menton that ownershp or
the use was contrbuted, but t s ceary estabshed that the partners
sought the assgnment of vaues for the van tsef, then ths
concusvey presumed that the contrbuton was for the ownershp of
the van. So here, the partnershp becomes the owner and thus, the
partnershp sha bear the oss.
So Santan ohered hs servces as a drver and other than hs van, he
had actuay a pggery so that every Monday, he brngs 10 heads of
pgs to be shopped and sod and thats hs addtona contrbuton.
However, aong the way as he was deverng and pung the pgs from
the pggery aong the road, the other 5 pgs got ost aong the way and
he cannot nd them. And so Santan brought ony 5 pgs. Who bears
the oss of the 5 pgs?
o Santan st bears the oss because there was no devery yet
of the 5 pgs so before devery, Santan remans the owner
and thus, he bears the oss.
o The other 5 pgs arrved at the meat shop but ony to nd out
that one of them had dmcuty n breathng. Eventuay, when
brought to the veternaran, the pg was decared dead on
arrva. Who bears the oss?
It depends. Its stuatona. If the pgs to be sod were
aready receved and accepted by the meat shop and
the partnershp busness, devery was done and
therefore, partnershp bears the oss. On the other
hand, f the pgs are not accepted, then devery was
not perfected, so Santan remans the owner, thus, he
bears the oss. Because when we say devery, ts
acceptance by the partnershp busness.
Same busness, same drver. Ths tme, Santan was nstructed as hs
|ob as the drver by the managng partner to get another 10 heads of
pgs from the pggery n Asturas and brng t to the meat shop. From
Asturas, he was carryng ths 10 heads of pgs passng through the
Transcentra Hghway. At the Transcentra hghway, Santan has to
answer the ca of nature and has to dsembark the van contanng the
pgs and ook for a tree where he coud pea. And as he was peang, the
van moved and the door opened and one pg was abe to run. So he
hred a brgy. tanod to ook for the run-away pg and such brgy. tanod
was abe to nd the pg so Santan pad hm 100. When Santan
arrved at the meat shop, he asked for a refund from the partnershp of
hs payment of 100 to the brgy. tanod. Can he ask for the refund?
o Here Santan, |ust by peang, was not neggent and snce
expenses ncurred n good fath for the benet of the
partnershp busness tsef, the partner who ncur the cost or
the expense sha be entted to rembursement. Thus, he can
ask for the refund.
_________________________________________________________________________________________
|uy 22, 2010 - Partnershp
*osses
What dd we dscuss about osses? Who bears the osses n our ast dscusson?
o The rues on who bears the oss:
Rue No. 1: Specc thng before devery, the owner w bear the oss.
Rue No. 1: For specc thng, before devery, f ony the use w be contrbuted,
partner bears the oss.
Rue No. 2: For specc thng, before devery, even f ownershp s transferred,
partner bears the oss.
17
Rue No. 3: For specc thng, after devery, f ony the use w be contrbuted,
partner bears the oss.
Rue No. 4: Specc thng, after devery, ownershp s transferred, partnershp or
rm bears the oss.
Rue No. 5: For fungbe thngs, partnershp bears the oss.
Rue No. 6: If the thng contrbuted s to be sod, f the partnershp w accept t,
then partnershp bears the oss.
Rue No. 7: If the thng s apprased n the nventory, partnershp bears the oss.
o So that here, we tak of specc thng n rue no. 1. Because n generc, f what was to be
promsed was a generc thng, the partner s st obged to dever because genus does not
persh. Therefore, hs obgaton s never extngushed by the oss because what he
commtted to dever was a generc thng not a specc thng.
Remember the pgs. Wheren the tanod was abe to get back the pg and Mr. Santan had to pay
the tanod Php100 for the servces of such tanod. Can Mr. Santan seek rembursement from the
partnershp for what he has pad the tanod for recoverng that naughty pg because the naughty
pg wanted to take a ook at what Mr. S was hodng?
Your gude n determnng whether or not the partner can be entted to recovery or
rembursement of the expenses w be that whether or not that partner ncurred
such expenses n GOOD FAITH or whether or not that partner ncurred those
expense WITHOUT NEGLIGENCE on hs part or wthout any act whch n ehect
woud be consdered neggence.
o Woud your answer be the same f the purpose of Mr. S for stoppng the truck was not to
answer the ca of nature but rather to tak wth a masao usher, ookng at the numbers?
Whe ookng at the numbers and about to buy a combnaton of numbers, 1 pg got away.
No.
R-*!. +N ./AR(N&0 $(R.T1 ./AR! (N T/! C+NTR(2-T(+N
For Captast Partner:
o Rue No. 1 as to contrbuton n our outne, f there s an agreement, then t shoud be
based on whatever they agreed n ther contrbuton.
o In the absence of an agreement, contrbuton s equa. (No agreement, equa).
For ndustra partner:
o He contrbutes hs ENTIRE INDUSTRY.
R-*!. +N ./AR(N&0 .!C+N%1 ./AR! (N PR+$(T.
What do they expect? They expect to share prots.
How to they share prots?
o CAP(TA*(.T PARTN!R
Frst, accordng to ther agreement.
If no agreement, appy the sharng n proporton to ther contrbuton.
If they contrbute Php 50,000, they share aso Php 50,000 - No. In
proporton s the word not n exact amounts.
o (N%-.TR(A* PARTN!R
The sharng of prots s not xed but whatever s |UST AND EOUITABLE.
R-*!. +N ./AR(N&0 .!C+N%1 ./AR! (N *+..!.
Not a busnesses w be successfu they coud suher osses.
Agan:
o CAP(TA*(.T PARTN!R
18
!"##$#%T S T& '&SS#S( Frst, accordng to ther agreement as to osses.
Maybe they expected to suher osses thats why they made aready an
agreement as to how they w share the osses.
But perhaps they never expected to suher oss thats why they dd not
make an agreement:
!"##$#%T S T& )"&*+T( In the absence of an agreement as to osses, t must be
n accordance wth ther agreement as to prots. Snce they dd not make an
agreement as to osses.
+% )"&)&"T+&% T& T,#+" -&%T"+./T+&%( If they dd not aso agree as to prots
and then appy or share the osses n proporton to ther contrbuton.
o (N%-.TR(A* PARTN!R
EXEMPTED from osses.
./AR(N& +$ PR+$(T.
0#S+!%T+&% &* 3
rd
)#"S&%
So that the sharng of prots and osses may be agreed upon by the partes or partners
themseves. Is there any other way that the sharng of prots and osses may be determned other
than the partners?
o A 3
rd
person may be desgnated.
However, we sad, generay, the partners can agree. So that f partners A, B, C agreed that
o Ther contrbuton shoud be: 50% for A, 40% for B, and 10% for C. As for sharng of prots,
they agreed that: A shoud get 40%, B shoud get 50% and C 10%
How to do you nd that? If you are A, you contrbuted 50% and share at 40%, for
partner B, contrbuted 40% gets 50%. Snce they agreed, that s okay. Snce that s
ther agreement, as to prots, then appy the agreement as to prots.
o Assumng somethng ese, n ther capta, here s A who contrbuted 80%, B 15% and C
5%. In turn, they agreed that C gets 5% n proporton to hs contrbuton but B gets the
80%, A gets the 15%. Okay st?
Inequaty by tsef s not prohbted. There coud be other consderatons possbe.
Lke mas gwapo s B or of hgher standard of educaton then you w have a bgger
share. However, f the nequaty s SO GROSS that t now s borderng now on
excudng any partner from the share of prots, then that s no onger aowed.
Because excudng a partner from the prots, that w be vod.
In the ustraton, whe the partner s not excuded but you coud see the
dherence. Contrbute 80%, get ony 15%, I dont thnk there s not any good
expanaton for that.
In other words, unequa sharng of prots may be toerated unt t becomes so
GROSSLY INEOUITABLE.
So that we sad, generay, the partners among themseves agree, however they coud aso agree
that snce 1 of them, for exampe among A,B, C, C was recognzed to be number 1 n accountng,
he was a Harvard graduate, he took up management courses, he was number 1 n the board of
accountancy. A, B, C sad that C snce you are good, kaw na bahaa, you decde what s our sharng
of prots and osses. So C wth a humty accepted the oher. After 6 months, B fet that, he
thought that C can be trusted, the ways of C were not rght1 This is after 6 months and after they
ha2e complied 3ith the earlier decision of - as to determination of the pro4ts and losses1 Can B
st queston the decson of C?
o Yes. Because a partner cannot desgnate as to dstrbuton of prots n the partnershp. The
6 months s rreevant because n the rst pace, the partner s not aowed to desgnate
what s the sharng as to prots and osses. Ths s to guarantee the mpartaty of the
dstrbuton of the prots and osses.
Whe the aw does not aow the partner to be n charge of the desgnate n the determnaton of
the prots and osses, may therefore anybody ese other than the partner be desgnated by the
partners? Yes. It can be deegated to another person other than a partner. However, when the
desgnaton of the prots and oss sharng s manfesty nequtabe, the partners can queston or
oppose or n the anguage of the aw, they can IMPUGN.
19
o How and when shoud they queston? They shoud queston or mpugn the desgnaton
wthn 3 months, so ong as wthn that perod, they have not started to execute the
decson of the 3
rd
party.
Administration 3 Management
How shoud the partnershp be managed? Or on whom s management vested?
o The management of the partnershp s vested wth the one who s apponted as manager
ether n the artces of the partnershp or after the executon of the artces of partnershp.
o In the absence of any desgnated managng partner, every partner s a manager. Ths s
|ust the genera rue. So that normay a managng partner s desgnated.
So that here, that desgnaton may be done how? The desgnaton of a managng partner may be
done:
o Through the artces. Meanng, when they execute the artces of partnershp, they w
aready desgnate ther as to who sha become the managng partners.
o Or they coud st appont after the executon of the artces of partnershp.
ILLUSTRATION: So that here was Mr. Cesar, whom the partners agreed to manage the busness of
the partnershp. Day 1 Cesar arrved n the omce and they own a budng ncdentay, Cesar
arrved at the obby, Cesar sad that he dd not ke the frame and so asked t to be changed wth
hs pcture on a frame. Then asked the obby to be panted wth back. So that when the customers
come n, 1 out of 10 ma dakn-as daw, kay d kta. They cannot see the door. Do you thnk you
coud change the decson of Cesar?
Does changng the pant an act of admnstraton?
Yes
What s an act of admnstraton?
Act of admnstraton s the act of a partner whch does not nvove acts of ownershp, short
of ownershp. It may refer to acts of management, acts of preservng, acts of protectng
the propertes and other assets of the partnershp. So the ntenton of the act s to protect
and preserve, never ntended to act as an owner because an act of ownershp s not
aowed to be performed by a partner hmsef.
If t nvoves ownershp of the property of the partnershp, then, a the partners must be
nvoved. So here, f you are a manager, you are mted to acts of admnstraton. Acts
whch are ntended to enhance the vaue perhaps, protect or preserve the assets of the
partnershp.
Gong back to our ustraton Cezar, we wanted to change. It was your decson to have t panted
back. Do you thnk your decson can be questoned? It was purey an act of admnstraton. (caed
another person, reterated the stuaton) Cezar was managng partner. Day 1, dd nothng but put
up hs frame, change the entre obby and panted the other obby back. Therefore, some of the
customers met an accdent, drove to the hospta because they cannot see and sometmes, they
stumbe. How do we queston the decson of Cezar? Generay, can the decson be questoned? It
was purey an admnstratve act, changng the coor.
Yes, t can be questoned. The purpose of whch must be to carry out the ob|ectves of the
partnershp. Absence of whch, the partners can queston.
How do we revoke hs decson?
Ma|orty of the (managng) partners shoud oppose.
So despte the opposton, he nssts that back s beautfu. What sha we do?
The decson of the partner who has the controng nterest.
In other words, there must be cause? Shoud there be |ust cause?
It depends.
o If the desgnaton was done n the artces of ncorporaton of the partnershp, then,
hs appontment as a managng partner may be revoked ony f there s a |ust and
awfu cause wth the concurrence of the partner who owns the controng nterest.
20
o If the desgnaton was done after the creaton of the partnershp, the appontment
may be revoke any tme wth or wthout cause wth the concurrence of the partner
who owns the controng nterest.
If there were 4 partners who wanted to queston the decson. How many partners woud consttute
the controng nterest? What do we mean by controng nterest?
Controng nterest means the partner who owns more than 50% of the entre capta of the
partnershp.
So, we sad that the manager may be desgnated through the artces and afterwards. And, whch
of the two modes of appontment woud nvove a stronger power?
The desgnaton done through the artces of ncorporaton appears to have more power n
so far as the management s concerned.
Management
So that n the absence of desgnaton, who manages the partnershp? If we have 5 partners, and
nobody was desgnated, how many managers do we have?
We have 5 managng partners.
It s expected that there w be no peace f a of the 5 partners woud manage. So, the aw
provdes some rues because there w be expected troube. As they say, one kngdom s not
enough for one queen
Iustraton: Funera Busness. Cezar, Conde, Man. They were the partners. Man s an
expert n make-up. Every tme there s a customer brought to the funera paror, t s
brought rst to the swmmng poo, n charged there s Cezar. That s why every tme a
body s brought, brng hm to the swmmng poo, the feguard s there, Cezar. So the body
s thrown to the swmmng poo, Cezar w sowy scrub. From the swmmng poo, t s
brought to the beauty paror. Then, Man takes over. Man s the manager of the beauty
paror department. Cezar was the manager of the swmmng poo department. When t was
brought to the beauty paror department, Man was there and she started dong her |ob.
She was sowy workng on the face, then, Conde suddeny stood behnd Man. Conde
sad, "Man, ka-baga ra anang kay. Panps na uy. Ang ps kay puwa ra kayo. Kan, mao
n mong gusto, patay nga murag buh?" What happened was, Conde nterfered a the
tme. Every tme Man does her |ob, Conde was there nterferng. And thats were troube
starts. So that, f troube starts. How shoud we resove?
o If your functons and areas are we-dened, then, do whatever you want
nsofar as your respectve area s concerned. To each hs own. Mnd your
own department. Each must decde n hs own sphere of |ursdcton.
But ths does not mean that the other partners cannot make some
ob|ectons to the decson of the other. Because as a partner, he aso
has the authorty and power to nd ways on how to mprove the
busness of the partnershp. In that case for exampe, f Man were
eft aone, she mght not have the experence. She was |ust
accountant before, and now, she was promoted as a make-up artst.
Whe the genera rue, s to each hs own. Let us perform our functon
and mt our acts to our respectve areas of |ursdcton. That does
not mean that the other partners cannot. So that the other partners
can make suggestons. They do not want to ca nterference but
some kay mamugos man. So, how do we resove that?
o If there s a conct, ma|orty decdes.
o If there s no ma|orty, n case of te, he who has the controng nterest
resoves the te.
There are occasons when the partners are not |ust contented wth the ma|orty. Matter of fact, on
many occasons, the partners woud requre that ther decson must be supported. In other words,
unanmty prevas. There are occasons when unanmous decson s requred. How shoud thngs
be decded?
Genera rue: A partners must concur.
21
o Otherwse, t w be nvad and not bndng.
Exceptons:
o Immnent danger of grave or rreparabe n|ury of the partnershp.
From what we have dscussed, et us revew agan the rues.
1. If there s no partner s desgnated as manager, then, a the partners w be managng
partners.
2. Each partner sha decde wthn hs department.
3. If there s conct, ma|orty rues.
4. If there s a te, the decson of the partner havng the controng nterest prevas.
5. In cases were unanmty s needed, everybody must concur.
6. If there s an mmnent danger of grave or rreparabe n|ury of the partnershp,
partners can decde even f they are not compete.
Alteration of immo'ables
If the partners have not desgnated the manner of management, then, each partner s an agent of
the partnershp. And hs act can bnd the partnershp uness t s wth regard to an ateraton of an
mmovabe wheren he must get the concurrence of the partners even f such ateraton s
beneca to the partnershp.
If a partner opposes, and hs opposton s pre|udca to the partnershp, then, they can go to the
courts.
In case of ateraton of mmovabes, even f t s beneca to the partnershp, st, t w requre
unanmty from the partnershp. And f they cannot agree, they can go to court.
Associate
An assocate s a sub-partner. A sub-partner s a 3
rd
person who assocates hmsef to a partner for
the purpose of havng a share n the partnershp
A sub-partner s not a partner n the rea sense. He s not even a partner at a. Because we sad,
that to become a partner of the partnershp, t s requred that a the members consent. Here,
trust and condence s an absoute necessty. Every partner shoud know and trust a the other
partners.
How does he become an assocate?
An assocate approaches any of the partners of the partnershp.
Iustraton: Youre payng cards and somebody approaches you and say, "abay ko ba, pun- mong
pusta ug 5 (P10 ang pusta)." Is he a payer?
No, he s not. If I wn, hs P5 wns. If I ose, he aso oses. But when I pay my card, he
cannot partcpate n the game.
Snce he s now an assocate of your partnershp, you were the accountant of the
partnershp busness. Mr. Dy sad, "Ms. GIngoyon, what s your ce phone number?" And
so, he texted you at 1 ocock n the mornng. He sad that he s an assocate of Ms. Omoon
n the partnershp and he wanted to ook at the books of the partnershp so he woud know
whether or not the busness s dong good. Can you be obged?
o No, Gngoyon cannot be obged to et Dy see the books because he has no
rght at a as an assocate. He does not have that rght of a partner. If he
were a partner, he cannot aso do that because 1 ocock n the mornng s
not a reasonabe tme of the day.
Access to partnership boo,s
Under what crcumstances, can a partner have access to the partnershp books?
A partner can access to the books durng reasonabe busness hours. Reasonabe busness
hour means omce hours.
22
What are the other rghts of the partner n so far as records are concerned? What s ncuded?
A matters descrbng the status of the busness of the partnershp ncudng transactons,
saes, oans and other abtes.
Prohibition against a partner engaging in a business
Industra partner
The prohbton s absoute n the sense that the prohbton appes whether the busness s
n competton or not.
If there s voaton, the other partners can
o excude hm from the partnershp or
o ava for whatever benets he receved arsng from the transacton,
o wth rght to damages n both cases.
Captast partner
The prohbton s reatve n the sense that he cannot engage n a compettve busness
wth the partnershp.
If there s a voaton, the captast partners can:
o Brng to the common funds any prots accrung from hs transactons
o If there are osses, he bears t
Is excuson an avaabe remedy n case of voaton of the prohbton?
o It s not mentoned under the aw. However, f the extent of the voaton s so
gross, hs behavor has become so dsadvantageous to the partnershp
busness, he can be excuded n some other ground, not soey on engagng n
another busness. Perhaps, because of the atttude or he s causng so much
troube to the partnershp. Then, he can be excuded.
o If the ground s purey on engagng n a compettve busness, then, that opton
s not gven to the other partners.
4ul 561 5787 .aturda
- When we tak of property rghts of partners, what woud ths ncude?
o Rghts n specc partnershp property
o Rght to hs nterest n the partnershp
o Rght to partcpate n the management
- In specc partnershp property, the partners are treated as co-owners. So that f the
partnershp owns a and, somewhere n Lahug, can one of the partners te hs drvers to ve on
such and snce he s one of the co-owners?
o No, snce the mtaton of partners n specc partnershp property s that they must
possess specc partnershp property for partnershp purposes and that he has no rght
to possess such property for any other purpose wthout the consent of hs partners. In
ths case, ettng one of the partners drvers ve n the and s not for partnershp
purposes.
o So that f the partners aowed Sr as the partner to use that property and n turn, Sr
tod the drver that "Anyway, they have aready agreed that I coud use that property.
Go ahead. You stay there." Is that rght?
In ths case, the partners rght n specc partnershp property was assgned
to somebody ese whch cannot be aowed snce under the aw, a partners
rght n specc partnershp property s not assgnabe. The prvege or rght to
use the property was gven to the partner as a partner n the partnershp,
whch prvege or rght cannot be assgned. In other words, snce the other
partners aowed Sr to use the property, does that mean that Sr coud go to
the bank and oher such property as a coatera?
NO, snce the rght to use such property s a persona rght as a
partner. Therefore, as a partner, any prvege granted by aw or by the
other partners s persona as a partner. Thus, such prvege can never
be assgned.
23
- When you say rght to partnershp nterest, what s ncuded there?
o Such rght to the partnershp nterest ncudes the partners share n the prots as we
as share n the surpus.
o So that here, as dstngushed from a partners property rghts, t s a partners rght to
be consdered as a co-owner of the property. Can Srs persona credtors go aganst
the partnershp property by sayng that "I, as ther debtor, s a co-owner, and
therefore, they are gong to attach my rght over that property"?
No, snce partners rght n specc partnershp property s not sub|ect to
attachment or executon, except on a cam aganst the partnershp. In ths
case, t s not a cam aganst the partnershp but a cam aganst a partner as a
persona debtor. Therefore, Srs persona credtors cannot go aganst the
partnershp property. In other words, f there s any attempt to nterfere n the
ownershp of any partnershp property, ths shoud not be aowed. So that Srs
rght to use as a co-owner n partnershp property can never be attached.
So that here, f Sr has an egtmate chd and the mother now sues Sr n the
famy court. She was abe to get a decson compeng Sr to support her chd.
Can the mother go aganst any partnershp property and say, "The father of
my chd s a co-owner of ths property and therefore, my chd s a co-owner of
ths property"?
No, snce a partners rght n specc partnershp property can never be
sub|ected for ega support.
If Sr has a persona credtor and that credtor was abe to get a favorabe
|udgment so that the credtor, snce Sr has no money and no other property
except hs nterest n the partnershp, went to the partnershp to execute
aganst Srs nterest? Can the persona credtor do that?
Yes, the |udgment credtor can go after Srs nterest n the partnershp
after appyng to the proper court for a chargng order. Such chargng
order s not a separate remedy but s |ust a contnuaton of the
coecton case ed by the persona credtor. Once the decson s
handed out, part of the executon s to go aganst the partnershp
nterest and charge such nterest. It s |ust a contnuaton of the
executon of the decson secured by the |udgment credtor.
In ths case, the |udgment credtor cannot go aganst partnershp
property but t coud go aganst a partners nterest n the partnershp.
So thats what the |udgment credtor dd. After earnng that each
partner was entted for some drawng rghts for certan amounts every
month, thats what the |udgment credtor dd. Every end of the month,
he w go to the omce of the partnershp and coect the amount whch
shoud have been pad monthy to the partner, the |udgment debtor.
Frst month, the other partners need not mnd. They ready gave the
amount and the |udgment credtor has to sgn an acknowedgment
recept of the amount. However, 4 months after, the |udgment
credtors behavor deterorated. Instead of askng 1 cup of cohee n
the omce, he s now askng 3 cups of cohee n the omce and stays
there n the omce. Now, other than askng for 3 cups of cohee, he
woud nsst that Ymas w be the one to serve hm the cohee because
he wanted the way Ymas prepared the cohee. So that woud you, as a
partner, fee comfortabe of ths guy (|udgment credtor) comng to
Ymas every month? No. The |udgment credtor becomes an rrtant. So
that there s now a need to dspense such |udgment credtor. As a
partner, you w have to nd ways to get rd of hm. Coud you get rd
of hm?
o Yes, the partners are gven the remedy, as provded for by aw,
to redeem or purchase the nterest charged, attached or
executed or perhaps, forecosed.
o How? 2 ways:
Wth separate property, by any one or more of the
partners; or
Wth partnershp property, by any one or more of the
partners wth the consent of a the partners whose
nterests are not so charged or sod.
24
- Dstngush an assgnee from an assocate:
o An assgnee has a better rghts snce an assocate s amost totay a strange. An
assocate cannot nterfere. In so far as the partnershp s concerned, the assocate does
not exst. If the partner deas wth such thrd person assocate, the partnershp has
nothng to do wth such assocate. Once the partner assgns a part or whoe of hs
nterest, then the assgnee now up to a certan extent may be recognzed by the
partnershp n certan nstances. An assgnee s gven better rghts as provded for n
the aw n the foowng nstances:
To receve n accordance wth hs contract the prots accrung to the assgnng
partner
To ava hmsef of the usua remedes provded by aw n the event of fraud n
the management
To receve the assgnors nterest n case of dssouton
To requre an account of partnershp ahars, but ony n case the partnershp s
dssoved, and such account sha cover the perod from the date ony of the
ast account agreed to by a the partners
- So that f a partner, for exampe, assgns a of hs nterest to the assgnee. Is that assgnee
now a partner? What happens to the assgnor partner?
o The assgnee s not consdered a partner but the assgnor partner remans to be a
partner snce he st has 2 property rghts, whch are the rght to use specc
partnershp property and the rght to partcpate n the management. These 2 rghts
cannot be assgned. But n so far as the nterest s concerned, to a ntends and
purposes, the partner s st entted to that but snce he assgned t, the assgnee may
now demand for the devery of any share n the prots and surpus and now entted to
the rghts abovementoned.
- Heres a partner n a funera busness. He had persona guests comng from Mana and snce t
was a Monday, many of the devery cars were avaabe. So to fetch hs guests at the arport,
he caed one drver and sad "Pease use the car. Fetch my guests at the arport". And hs
guests were |ust too happy to board the car wth curtans. The foowng day, the partner
receves a b of coecton from the partnershp. Can he be compeed to pay?
o Yes snce he used the car for persona purposes to fetch hs persona guests. The
partner can ony use specc partnershp property for partnershp purposes ony.
o However, another partner earned that the mother of hs contact at the LTO ded and
ths contact s very hepfu for purposes of gettng back the censes of the drvers,
factatng regstraton, the drvers arrested for overspeedng the funera cars and ther
censes were conscated, ths contact s the one who heps n returnng the censes.
Payback tme, the partner ohered free servces to the mother of ths LTO contract.
However, agan, the foowng day, the partner who made that oher for free servces
got a coecton etter from the management. Can that partner be compeed to pay?
5 #nd1 6e7ll continue ne8t meeting 5
July 29, 2010 THURSDAY
4udgment Creditor
So that we tred to dstngush an assocate from an assgnee. Now, n the prevous assgnment,
there was menton about a |udgment credtor. So what do we mean by a |udgment credtor and
what are the rghts of a |udgment credtor?
So how do we now dstngush for exampe the rghts of a |udgment credtor versus the rghts of an
assgnee?
So that n so far as the source of the reatonshp s concerned, between the partner and the
|udgment credtor on one hand. And an assgnee and the partner on the other, how dd we
dstngush the reatonshp? How dd t arse? Based on an agreement, so vountary?
o On the other hand, may a |udgment credtor become an assgnee nstead? What do you
thnk? There s no prohbton and we coud never prevent them. Even f there s aready a
|udgment aganst the partner, the partner can out rghty oher hs partnershp rghts n so
far hs nterests are concerned. And therefore, oher t as payment and sette the obgaton.
Athough we sad bascay there s a dstncton between an assgnee and a |udgment
credtor n the sense that n so far as the rghts of a |udgment credtor are concerned, t
arses from an nvountary act beng enforced by a court order. Yet, there s nothng that
w prevent both the |udgment credtor and the partner from agreeng where the partner
can vountary oher part or a of hs nterest n the partnershp to sette the obgaton
covered by the court order. And so, nothng coud prevent the partes from agreeng n a
vountary assgnment despte the fact that there aready s a court order aganst the
partner.
25
$irm Name
Why do you thnk a name s mportant? Because t dentes you from the rest.
o There are hazes whch are good grs, there are hazes who are better grs. SO that a
name s mportant to dentfy you from the rest. You are a person by yoursef and f we dd
not have any names then perhaps peope w ca us by our numbers. So, thats why we
sad ts aways mportant that a person shoud bear a name. A descrpton s not enough
even rather a name w be more accurate n dentfyng a certan person. And because a
partnershp a |urdca person, necessary, t must have a name.
How shoud the name be wrtten? What shoud be ncuded n the name? It may or may not ncude
the name of the partners. So that f the partners decded to have ther names ncuded n ther
partnershp name.
o The partnershp of 3 persons coud say "Dumagat-Aton-Escaan Company" so that you ask
De a Cruz, "Do you want your name to be ncuded n our rm name?" De a Cruz says,
"Up to You. But I do not have money and I wont |on the partnershp." So De a Cruz
agreed that her name be ncuded n the partnerhshp. One day Louea earned that the
partnershp went backrupt and there was a |udgment aganst the partnershp and there
was a |udgment worth Php1M, so that Dumagat-Aton-Escaan coud no onger be ocated,
ony De a Cruz was avaabe and thats where the sherh went. The sherh attached a the
propertes of De a Cruz. De a Cruz dscams that she was not part of the partnershp so
why shoud her propertes now be attached? Can she compan?
If her name s ncuded n the partnershp name, she can be abe ke any partner.
So that, uness you want to be abe, never aow your name to be ncuded n the
partnershp name.
So that Dumagat, some customers were companng Dumagat because the partnershp name was
hard to remember. When we are asked of our supper, we are ndng t hard to menton your
partnershp name. So because there was dmcuty, you decded to change your rm name. You
thnk you coud change? Yes.
o What do you do to change your name? You have to amend your artces. Because thats
how mportant a name s. Its not ony for purposes of satsfyng your ego, you know t
sounds very sweet when peope menton our name but there s a responsbty, therefore
you cannot |ust change your name by yoursef. If you have regstered your name n the
Securtes and Exchange Commsson, necessary you have to amend the artces so that
the SEC coud contnue montorng your actvtes as a |urdca person. As a duy regstered
partnershp for exampe. Youre deang wth the pubc through that name.
o So that f the partners eventuay sad that you know we have a ot of debts, maybe peope
are no onger extendng us credt, our suppers are no onger extendng us credt because
our credt has not been good. So perhaps, we have to change our name so that our
suppers woud beeve that actuay we are a new company. The suppers were no onger
extendng them credt because ther credt was no onger good. To nduce ther suppers to
extend them more credt, they change ther name. Do you thnk you coud change that
name? No.
What does the aw requre before you coud change your name? It must be done n
good fath and not necessary to evade obgatons or msead ther suppers. It
must be done n good fath. You must have a reason why. Because f your ntenton
s to msead the suppers perhaps nto beevng that you are a new company, and
therefore evade from your reputaton of beng a partnershp who refuses to pay
awfu obgatons, that cannot be done.
o So thats how mportant a name s. Perhaps dmcuty n rememberng the name or perhaps
they |ust wanted to change the name for no other reason so ong as ths s done n good
fath. Thats how mportant t s.
o So that even a person, a natura person, can they change ther name? Yes of course.
o Name s mportant and you cannot |ust change your name uness you have a good reason
to change t.
Partner *iabilities
Earer, we were dscussng the abty of an ndustra partner. What was the extent of the abty
of an ndustra partner?
o When t nvoves osses, an ndustra partner s exempted.
And so, here was hs company wth A, B, C who were the captast partners and I, as the ndustra
partner, after 1 year of operaton, the nanca statements ndcated that they had a tota asset of
Php3M and tota abtes of Php2M, and so they decded to cose. The credtors, who were entted
to coect the abty of Php2M, went to court and they were abe to get a decson n ther favor.
And so the sherhs went aganst and were ookng for A, B, C, who were no onger around and coud
no onger be found. But the ndustra partner, beevng that he was exempted from osses, dd not
bother to eave. So that when the sherh served them the wrt of executon, the ndustra partner
26
sad ths s a oss. Our assets were ony worth Php3M, they have pad a of the Php4M and the
remanng Php2M, and so ths s a oss and accordng to Atty. D, I am exempted from oss. Can the
sherh compe hm to pay?
o Loss and abty s not one and the same. So each partner shoud be abe pro-rata.
o So here, s the ndustra partner for ths? Yes because ndustra partners are not exempted
from payment of a abtes to 3
rd
persons.
How dd we dstngush then abty from oss? From the facts that we ndcated, ceary, I am not
an accountant, but s that abty aso a oss at the same tme. Thats a oss. Its aready a oss.
There s no way they can recover they can st recover because the assets are gone, as a matter of
fact, they are supposed to dssove aready. That abty has become a oss and the pont was we
have a rue that exempts an ndustra partner from osses, and yet we are sayng that yes, that
ndustra partner can be compeed to pay because, despte the fact that he s exempted from oss.
So how do we expan that?
o Yes, he can be compeed to pay that because the aw aso wanted to protect 3
rd
partes.
But because the ndustra partner s exempted from osses and what he has been
compeed to pay s part of the oss, we reconce t by, he coud seek rembursement from
the captast partners. In that case, we have comped wth both provsons. The provson
whch compes hm to pay hs abty n so far as 3
rd
partes are concerned and the
provson whch grants hm an exempton from osses by gvng hm the RIGHT TO SEEK
REIMBURSEMENT from the other partners.
o So how much shoud he be abe for? V. How come ts V? Because there are 4 partners.
And what s the extent of hs abty to 3
rd
partes? Pro-rata.
Pro-rata means: There s actuay a conct even among the authors, they cannot
agree. Some authors say pro-rata here means equa. Some authors however say,
n proporton to ther contrbuton. Snce the aw uses the word pro-rata, there s no
way t coud mean equa athough some author nsst pro-rata n ths provson
shoud mean equa. It can never be because pro-rata s aways n proporton. Thats
the meanng of pro-rata.
So sr agrees wth some authors who cam that PRO-RATA woud smpy mean n
proporton to ther contrbuton and never equa.
o So here, the ndustra partner s protected and therefore hs rght to be exempted from
osses s st preserved n the sense that he coud seek rembursement from the other
partners.
!#emption from *osses
Another stuaton, A, B, C were partners, now wth a of them as the captast partners. However,
a the partners when they started n the partnershp that C shoud be exempted from osses. So
that agan when there was a court decson where the sherh was now tryng to execute aganst
partnershp property, A and B were gone eavng behnd ony C. So that when C was seen by the
sherh, the sherh wanted to compe C to pay, when sherh sad pease pay, can agan C say that
we have an agreement, I am exempted from osses. Can the sherh compe C to pay? Yes.
o St, partner C can be compeed to pay because a stpuaton exemptng any of the
captast partners from osses s not a vad provson.
Partnership Management
In the absence of any desgnaton as to who manages the partnershp, who w manage the
partnershp?
o A of them. Each partner, therefore coud be a manager, s an agent of the partnershp
busness. So that generay, we sad, who can bnd the partnershp n the absence of any
manager? Anyone of them can bnd the partnershp.
o Do you nd that comfortabe or safe provson? Its not reay accurate to say that each
agent can bnd the partnershp, athough we sad each partner can bnd the partnershp.
Athough, generay each partner s a manager but ts a dherent thng to say each partner
can bnd. He can bnd the partnershp ony under what crcumstances?
***Dd not answer ths but beow are the nstances where the partnershp s bound.
Lets mae ths cearer, Genera Rue: As a genera rue, each partner s a manager. Therefore, we
coud say, each partner can enter nto contracts n behaf of the partnershp and that coud be a
bndng contract. However, the aw cautons us by sayng that athough each partner can bnd the
partnershp, there are nstances when a partner cannot bnd the partnershp. Smper stated, what
are these nstances?
That the transacton entered nto by that partner s not the usua busness of the
partnershp.
That the partner has no authorty.
27
And that the 3
rd
person, to whom that partner s deang wth knew that that
partner has no authorty.
o Under these nstances we sad, the ehect woud be, that that act of the partner does not
bnd the partnershp.
9hen unanimit is re:uired
However, there are aso nstances when, athough we sad that anyone may act n behaf of the
partnershp. But there are nstances where not |ust one but a shoud amrm, otherwse,
wthout the unanmty of the partners, agan, the act w not bnd the partnershp. What are
these nstances?
Instances where unanmty s requred:
o Dsposton of goodw
o Confesson of |udgment
o Dong acts whch makes t mpossbe to carry out the ordnary busness of a
partnershp
o Renuncaton of a cam of partnershp
o Submsson n arbtraton
o Property n trust
o Enter n a compromse concernng a partnershp cam or abty
The common denomnator nvoves acts whch nvove acts of domnon or ownershp.
We sad a manager, whether apponted or not, ony perform acts of management.
Here, these are not acts of mere admnstraton. These nvove act of ownershp-
assgn or dspose of the assets of the corporaton, dspose of goodw.
What do we mean by goodw?
o Goodw of a partnershp means the reputaton of the busness of the
company. A reputaton that was but over the years, the good name that t has
estabshed for years, after years of hard work, after years of deveopng
busness reatons wth ts customers or centee.
o As a matter of fact, you cannot use the good name wthout the permsson of
the owner of the busness. You cannot even mtate. You cannot put up your
own cohee shop and say, "Boos cohee shop". Ths cannot be because 9laro
9ayo na ni59opya 9a sa .o7s, pareha ran a sa e:cient oil1
o In other words, there s vaue n goodw. If you want to use the name of a
busness whch has goodw, you pay. Ths s the reason why the franchse
busness s dong very we because of ther goodw.
Exampe, you buy at |uas Bakeshop. So, theres good name n so far
as bakeres are concerned. So, what do they do? |ua Bakeshop w
se you a franchse. You coud put my name there. The same desgn,
the same font, same coor. You buy your our ony from me. You buy
your margarne ony from me. You buy your utenss ony from me. You
pay P150,000 for the prvege from buyng from me. Thats the
franchse busness. You are |ust buyng the name. The formua, yes.
But who knows you coud have a better formua. You coud have baked
a much better, a much taster tem of bread. But because of the name,
you are constraned sometmes. Ths s the vaue of goodw.
If t makes t mpossbe to carry the busness, you have 10 cars. You
are n a tax busness. If one partner decdes to se 8 of these 10 cars.
If you do ths, you have to get the consent of a the partners.
Confesson of |udgment, what do we mean?
o Confesson of |udgment where a party not ony admt certan facts but aso
admttng abty. Instead of argung n court, you |ust te the court that you are
admttng a the aegatons n the compant and that you are abe. If the partner
does that, that mght be bndng on the partnershp but he must secure the
consent and conformty of a the other partners.
Compromse as dstngushed from arbtraton.
o In arbtraton, we entrust the decson to an arbtrator, who s a 3
rd
party who s not
a a party to the case whe n a compromse agreement, the settement s based
on the partes themseves. That s the basc dstncton.
o In a compromse decson, therefore, t s the decson of the party hmsef. It s the
decson of the protagonsts themseves. But n arbtraton, the partes to the case,
or a protagonst n the conct deegates the authorty to decde to a 3
rd
person.
28
Therefore, that 3
rd
person w have to decde wthout any bas. So here, t s a
vountary conformty of the protagonsts or tgants to aow the 3
rd
party to decde
on ther behaf, nstead of themseves. Ths s a vountary act of the partes.
o Because f t were not vountary, then, we rather brng them n court. Because n
court, very smar to arbtraton, but n the court, the partes do not desgnate the
|udge. The |udge s desgnated under the Rues of Court based on |ursdcton,
based on the authorty granted to the court.
A these 7 nstances, unanmty s requred.
Con'eance of real propert belonging to the partnership
A partnershp may own a rea property. And when a partnershp owns a rea property, t may be
regstered n whose name?
It may be regstered n the partnershps name. It s owned by the partnershp, necessary,
t must be regstered under the partnershps name. However, snce we sad that partners
can aso be managers. Can t aso be regstered under the name of the partners? Yes.
It can be regstered under the name of the partnershp, any of the partners, or of a of the
partners.
It can aso be dsposed n whose name?
The partnershp property can be regstered under the partnershps name, any of the
partners, or a of the partners.
So that here, n a those nstances, what coud be the best thng to do? How shoud we regster
the rea property of the partnershp, the safest way?
The safest way s to regster n the partnershps name. (Note: murag d man cgro n mao,
murag ang safest kay -resgter sa name sa tanan partners.)
If that s the safest way to regster, what s the safest way to dspose? If you had a cent for
exampe who was a buyer of a partnershp property and that cent asks you, "Atty., who do you
thnk shoud we ask to sgn the deed of sae of that partnershp property? I want to protect my
nterest so that there woud be no probems n the future and that I w become the absoute
owner and nobody can queston me anymore". What woud you requre? Who shoud sgn?
The safest way to dspose of a partnershp property s to ask a the partners to sgn the
deed of sae. Thats the ony safest way. No potenta probem n the future. Anyway, a of
them w have to sgn. So, none of them can ater on queston. Thats the ony way that we
can be sure, here, when a of them w sgn we w be abe to transfer to your cent, the
buyer, the absoute ownershp of the property.
There can be nstances when the deed of sae was aready sgn, yet, not absoute ownershp
was transferred, rather, ony the equtabe nterest s transferred. What do we mean when we
say that ony the equtabe nterest s transferred?
Even f an equtabe nterest s transferred, t s not a perfect transfer of ownershp.
Because when we say equtabe nterest, what rght have we acqured?
o The buyer acqures ony a persona rght to compe them to sgn.
What s supposed to be done n order to perfect ones tte, not |ust the equtabe nterest?
o Ask the ratcaton or conformty of a the partners. Perhaps, thats the ony way
were we can perfect my ownershp over the property.
o I w not be satsed wth ony an equtabe nterest. I shoud do somethng to
make my ownershp absoute, a perfect rght. So that, as of now, I do not have fu
ownershp of the property, and as you sad, I shoud do somethng to make my
ownershp absoute. Therefore, what rght do I have aganst the other partners?
I have acqured a persona rght aganst the other partners, to compe the
other partners to sgn. Once a of them sgns, my persona rght aganst
them w now become a rea rght over the thng.
When we say persona rght, t s bndng aganst a specc person whe a
rea rght, I can enforce t aganst anyone, I can enforce t aganst the
whoe word. That means I have acqured fu tte, fu ownershp over the
property. Otherwse, I have ony acqured an equtabe nterest.
As a matter of fact, the aw outnes, under whose name the property may be regstered.
So that, f t s regstered n the name of the partnershp?
o If t s regstered under the partnershps name and conveyed n the partnershps
name, but ony by one partner, then, tte s conveyed.
Athough ony one partner sgned, that partner s presumed to be a
manager or an agent of the partnershp, therefore, t s bndng. However,
29
t s not reay perfect because, appyng the prevous provsons (Art.
1818), f t s not n the usua way of busness or f the partner who sgned
the transfer, the assgnment or deed of sae was not authorzed and the 3
rd
party who bought t knew that there was no authorty, then, the
partnershp can take t back.
o If the tte s regstered under the partnershps name and sod n the name of one
partner, ony equtabe nterest s transferred.
Snce ony equtabe nterest s transferred, the tte to the property s not
perfect. The buyer must perfect hs tte by securng conformty of a the
other partners.
o Regstraton s n the name of one or more of the partners, not a, conveyance s n
the name of partner or partners n whose name the tte stands. Tte s conveyed.
Ths s a vad transfer because t s ther name whch appears n the tte
and t was they who sod, they coud transfer the property. However, the
partnershp coud st recover f the partner or partners who conveyed the
property had no authorty or was not n the usua way of the busness
uness the buyer s n good fath. By good fath, we mean that he dd not
know the ack or absence of authorty. So, that transfer s vad sub|ect to
those nstances whch the partnershp can recover.
o Tte n the name of one or more or a partners or a thrd person n trust for
partnershp, conveyance executed n partnershp name or n the name of the
partner. Equtabe nterest s transferred.
Here t s cear that even though the regstraton s n the name of one or
a, but ony one of them sgned, that transfer can be recognzed but ony
equtabe nterest s transferred.
Agan, when we say equtabe nterest, t coud be perfected upon
ratcaton by a of the partners.
o Tte n the name of a partners, conveyance n the name of a partners. Tte s
conveyed.
Therefore, as we have sad earer, the safest way s to transfer the
partnershp property, nsofar as buyers are concerned, n the name of a of
the partners.
Admission b a partner
Let us go back to the funera busness. A case was ed aganst the partnershp whch has been
dssoved 2 years ago but that cause of acton arose whe the partnershp s st exstng. The
BIR s now ookng for the accountng books of the partnershp were fabrcated. And they saw a
wtness who was a former partner and ths former partner was head of the make-up
department. He had hs authorty wthn the make-up department, he decdes how many shade
sha be used n the make-up, how wde the eyebrow shoud be. That was hs functon, yet, he
was presented by the BIR to prove that the entres n the books are fabrcated and ths partner
sad, "Yes, he was a partner at that tme. That he was the head of the make-up department.
That as head of the make-up department that the body eaves happy and contented". And so
he was asked, "Are you teng us, woud you admt therefore that the accountng records are
not true and correct." That partner sad, "Yes, I stand by my grave that those records are
naccurate. Those records are fabrcated." That was hs testmony. If you were the awyer of the
partnershp woud you aow that admsson to stay n the record?
If I were the counse, I woud not aow that admsson to stay because, whe he s a
partner, hs knowedge on the ssue rased are not enough to quafy hm to testfy on
those thngs.
Because to be abe to testfy n those thngs and for hs admsson to be admssbe,
what does the aw requre?
o He must testfy on somethng that s wthn the scope of hs authorty. In our
case, these were nanca matters, how coud the make-up artst be competent
to testfy on accountng works whe n fact, he ony reports to the paror. He
has no access at a to the accountng department. Hs scope of authorty s
conned to the make-up department. Hs admsson there coud never be
aowed to stay n the record.
Notice to partner
Notce to partner s notce to the partnershp.
Knowedge acqured by a partner s presumed to have been conveyed to the partnershp.
Because f you are a partner, we sad that you are an agent of the partnershp. And therefore,
t does not ony refer to your authorty to act n behaf of the partnershp, t shoud aso nvove
certan responsbtes. As a partner, because you are an agent of the partnershp, you are
30
supposed to be responsbe enough n conveyng or communcatng to the partnershp any
notce, knowedge or nformaton that you may have acqured.
If the partner receve notce, then, t w be sumcent to be consdered as a notce to the
partnershp. If the partner has acqured knowedge or nformaton about a matter of whch he
s nvoved or concerned, then, he s presumed to have conveyed that knowedge or
nformaton. Therefore, knowedge by partner sha bnd the partnershp.
Crime
What s a crme?
These are acts or omssons punshed by aw.
And snce a partnershp s a person, can she be made guty of a crme? Why or why not?
No, because t s a |urdca person.
Why do you thnk are |urdca persons not abe crmnay?
It cannot be abe crmnay because t cannot be sent to |a. Other than that, crme s
based on ntenton. As a matter of fact, when there s no ntenton to commt the
crme, t cannot be guty.
A |urdca person does not have a mnd of ts own rather hs decsons are based on
the decsons of the managers, then, t can never be.
However, when a crme s commtted by a partner n a partnershp, who can be made abe?
Athough the partnershp can never be guty of a crme, the partnershp can be made
abe nsofar as the cv abty s concerned.
What s the nature of ther cv abty? We sad that a person crmnay abe s aso cvy
abe.
The nature of ther abty s sodary.
When we say |ont abty, t means to each hs own. It s mted to ther share.
When we say sodary, t means one for a, a for one.
However, that (sodary) abty w arse ony when?
They w ony be abe n the crcumstances mentoned under Art. 1822 and 1823.
________________________________________________________________________________________________________
July 31, 2010 Saturday
- Acts or omssons
o For the wrongfu acts or omssons of a partner, the partnershp and the partners w
be sodary abe. So that here was a partner of the ABC partnershp and a good
customer of the partnershp busness was havng a baptsma party of hs chd and
requested that one of the partners shoud stand as one of the sponsors for hs chd.
And so partner A agreed snce the one who requested s a good customer of the
partnershp. After the baptsma ceremony, partner A proceeded to the house where
the party started. Party started at 11 am |ust before unchtme. But at 11 pm, partner
A, who was the godfather, was st drnkng. Somebody came whom partner A dd not
want so that he got a botte and ht that somebody n the head wth a botte and
stabbed the same. So that somebody ded. Partner A was sued for murder and the
famy was askng for damages. Partner A was sent to |a but the cv abty for the
damages, he cannot pay and because the case was ed separatey for the damages,
so the other partners were made to pay for the death of one of the guests of the party.
Do you thnk the other partners be abe?
The partners and the partnershp are not abe for partner A dd the crmna
act not n the usua way of the busness of the partnershp and aso t was not
consented to by the other partners or the partnershp.
Exampe where partners and the partnershp are sodary abe:
When a partner s drvng a car owned by the partnershp on hs way to
meet a cent and whe dong such, he ht another person. So what s
the source of the abty?
o The aw provdes for such abty to the partnershp and ths s
what we ca vcarous abty. So that up to what extent woud
the partners be abe?
31
Sodary abe - ths means that the party aggreved
can go aganst any one of the partners or the
partnershp tsef or a of them for the entre amount of
the obgaton.
o How do we reconce the provson of the aw statng the
partners |ont abty (pro rata) to thrd partes? So wheres
the dstncton between the partners sodary abty and ther
|ont abty (pro rata) wth regards to thrd partes?
If the abty arses from contractua obgatons or a
contract, then the extent of the partners abty to
thrd partes sha be |ont or pro rata. However, f the
abty arses from a quas-dect or tort or acts or
omssons punshed by aw, then the extent of the
partners abty to thrd partes sha be sodary. Ths
s because we have earned that the sources of
obgatons are aw, contracts, quas-contracts, dects
or quas-dects.

- Partners by estoppe and partnershp by estoppes
o What do you mean by estoppe?
Estoppe means a bar that precudes someone from denyng or assertng
contrary to somethng that has been estabshed as a fact by hs own act,
conduct, behavor, anguage or deed.
o What do you mean by partnershp by estoppe?
There s partnershp by estoppe when a person who represents hmsef to thrd
partes as a partner of an exstng partnershp and a the partners of such
exstng partnershp admtted that ndeed the person who cams to be a
partner s a partner.
There s aso a partnershp by estoppe when there s no exstng partnershp
but some group of persons msrepresent themseves to the pubc as a
partnershp. However, n ths nstance, they coud be abe but they cannot
en|oy the prveges granted by aw to a partnershp even f there s a
partnershp by estoppe because here, the aw s ony after the protecton of
thrd partes. Thats why ths group of partners who are ony partners by
estoppe, whe they cannot en|oy the prveges granted by aw, they coud be
made abe, not strcty as a partnershp, but they are abe pro rata.
o What do you mean by a partner by estoppe?
A partner by estoppe happens when a person who represents hmsef to thrd
partes as a partner of an exstng partnershp and a the partners of such
exstng partnershp dd not consent to such msrepresentaton.
- What s requred before a new partner s admtted?
o Snce reatonshp of partners s that of mutua trust and condence, therefore, new
partners can be admtted ony wth the consent of a the other partners.
o Generay, what s the extent of the abty of the partners?
If abty arses from a contract, ther abty s |ont or pro rata but f abty
arses from a quas-dect or tort, ther abty s sodary.
o What s the extent of abty of new partners?
For abtes ncurred before hs admsson, the new partners abty s up to
the extent of hs contrbuton n the partnershp or up to hs share n the
partnershp assets. So that f A and B contrbuted 100K each. As they went
aong, C came n as a new partner and aso contrbuted 100K. When C came n,
abtes were worth aready 400K. So f those 400K w demand for payment,
w the 300K be sumcent? No. So there w be a short of 100K. And because
there s a short of 100K, who sha pay the baance of 100K?
It s ony A and B who sha be abe for 100K at 50K each. C s not
abe snce he s a new partner and as such, he s ony abe for
32
abtes ncurred before hs admsson up to the extent of hs
contrbuton of 100K and not up to the extent of hs separate or
persona property. C s abe even up to the extent of hs persona
property ony for abtes ncurred after hs admsson.
Can A and B say that "Lets spt ths nto three because our
contrbutons are equa and accordng to our agreement, f we
contrbuted equay then we share to the osses equay"?
o GR: New partners can ony be made abe for abtes
ncurred before hs admsson up to the extent of hs
contrbuton or to hs share n the partnershp assets, uness
there s a stpuaton to the contrary.
If another 100K was ncurred by the partnershp after C came n and
the 100K coud no onger be pad by the partnershp, so how much
coud each be abe for?
o C s now abe for the 100K and w have to partcpate n the
settement of such abty even up to the extent of hs
separate or persona property or assets. The 100K abty,
therefore, n ths case, sha be dvded nto 3 to compute for
the abty of each partners A, B and C.
o Do you nd ths far?
Its far to et the new partner be abe up to the extent
of hs contrbuton for obgatons ncurred before hs
admsson snce he receves benets from an
estabshed partnershp. Its aso far to et the new
partner be not abe up to the extent of hs persona
propertes for obgatons ncurred before hs admsson
(snce abty ony extends to hs contrbuton n the
partnershp) because durng the negotatons, n whch
the obgatons arose, the new partner wasnt there.
Thus, he dd not consent to enter nto such obgatons
made by the partnershp before hs admsson. The new
partner dd not take the rsk at such tme. Athough a
partner takes the rsk n the sense that he s abe not
ony to the extent of hs contrbuton but aso to hs
persona property but such assumpton of rsk shoud
start ony when the new partner s admtted n the
partnershp. The new partner was not n the poston to
take such rsk for obgatons ncurred before hs
admsson. The new partner was aso not n the
poston to determne whether or not that obgaton s
far or whether or not t s worth takng the rsk snce
he was not there to partcpate n makng the decson.
However, for obgatons ncurred after the new partner
came n, then the new partner aready assumed such
rsk and responsbty.
- Preference of credts
o Partnershp credtors sha rst proceed to partnershp assets and f the same are no
onger enough then they can proceed to the persona or ndvdua propertes of the
partners. So that once partnershp credtors have exhausted partnershp assets, then
they can go after the persona assets of ndvdua partners. However, n so far as
ndvdua partners are concerned, they may aso, n ther own rght, have ther own
credtors. So that here, there may be a conct between the credtors of the
partnershp and the credtors of the ndvdua partners. Whe the credtors of the
partnershp can proceed aganst partnershp assets, the credtors of the ndvdua
partners may aso proceed aganst partnershp assets n certan nstances such as
when the prvate credtors ask for the attachment and pubc sae of the share of the
debtor-partner n the partnershp assets. How do we sette the conct?
For partnershp property, preferenta rght s gven to partnershp credtors. If
there woud st be remanng or excess after satsfyng the cams of
partnershp credtors, then the prvate credtors of the ndvdua partners can
go after such excess to satsfy ther cams.
For partners ndvdua or persona property, preferenta rght s gven to the
prvate credtors of the ndvdua partners. If there are st remanng or excess
33
after satsfyng cams of the prvate credtors of the ndvdua partners, then
such excess sha be used to satsfy the cams of partnershp credtors snce
partners are abe for obgatons even up to the extent of ther persona
propertes.

August 5, 2010 Thursday
PARTN!R./(P 2; !.T+PP!*
What agan was the meanng or how dd we dene partnershp by estoppes?
o In an exstng partnershp when a person who represents hmsef to thrd partes as a
partner of an exstng partnershp and a the partners of such exstng partnershp
admtted that ndeed the person who cams to be a partner s a partner.
o In a non-exstng partnershp when there s no exstng partnershp but some group of
persons msrepresent themseves to the pubc as a partnershp. However, n ths nstance,
they coud be abe but they cannot en|oy the prveges granted by aw to a partnershp
even f there s a partnershp by estoppe because here, the aw s ony after the protecton
of thrd partes. Thats why ths group of partners who are ony partners by estoppe, whe
they cannot en|oy the prveges granted by aw, they coud be made abe, not strcty as
a partnershp, but they are abe pro rata.
Partner by estoppe on the other hand happens when a person who represents hmsef to thrd
partes as a partner of an exstng partnershp and a the partners of such exstng partnershp dd
not consent to such msrepresentaton.
*(A2(*(T; +$ N!9*; A%M(TT!% PARTN!R
So that earer, we dscussed the extent of abty of a newy admtted partner. How dd we dene
the extent of hs abty?
So that f we were to descrbe the extent of hs abty. If we were to descrbe that partner n
reaton to the extent of hs abty, how do we cassfy hm? What knd of a new partner s he?
o The new partner, as to transactons ncurred before hs admsson, he coud we be
consdered as a mted partner. On the other hand, so far as abtes ncurred after hs
admsson, he coud we be consdered as a genera partner.
So that, f today, Mr. S s admtted as a partner and ast |uy 30, the partnershp borrowed money
from the bank, whch s to be due and payabe on August 15, what s the extent of that new
partners abty who s admtted today, August 5, 2010? Take note, he was aready there when
the oan was to be pad, what s the extent of hs abty?
o The aw does not dstngush.
o Where s the ne drawn? The ne s drawn on the date of hs admsson and the aw does
not ook at the due date. The aw ooks nto not the due date but the DATE IT WAS
INCURRED. It has nothng to do at a on the due date. Rather the date when t was
ncurred.
o So theres the ne, f t s ncurred before admsson, hs abty s ony up to the extent of
hs contrbuton. Incurred after admsson, hs abty s up to hs persona propertes even
f due and payabe after retirement ;di masa<tan last 3ord used murag incurring pero
murag dilig=1
o Why s the aw so? Ths s the mdde ground. Whe he cannot be totay be requred to
assume the responsbtes of a genera partner, he coud not aso say he coud not be
totay abe at a. Theres no extreme. Because f he says he shoud not be abe at a,
then n that case, he shoud not en|oy anythng at a. But here, any prots earned before
hs admsson, on transactons entered nto before hs admsson, he s aready entted, for
the benets, he aready en|oys. So he cannot aso say he shoud not be made abe at a.
However, n farness, because whe t s true that you were not there to be abe to
partcpate, nterfere or perhaps revew the transacton, but you aso saw when you came
n, you aso saw that. I mean you saw that abty. It was up to you whether you wanted to
come n or you wanted to stay out. Because you decded to come n, then you shoud aso
assume a certan degree of rsk. You shoud aso a porton of that abty.
C/APT!R <0 %(..+*-T(+N AN% 9(N%(N&
In other words, we have created a monster, we w now sue the monster. We have created a
person, we w now try to dssove a person.
Is dssouton the death of the partnershp? No.
o Cause even f there s aready dssouton, s the partnershp st ave? ;es=
34
How come? Why shoud he be ave? Because t st has to perform acts for t to
competey wnd up. (Answered by Mr. Santan).
Because dssouton does not cause the death of the partnershp, ths partnershp
woud st act as a partnershp. It woud st reman as a partnershp. However hs
task woud be mted to perform acts of makng good a outstandng
engagements, of takng and settng of accounts and coectng a property means
and assets of the partnershp exstng at the tme of dssouton.
Thus, whe t s st ave, t coud no onger make moves as freey as t was used
to. So that here, hs days are numbered and so hs act w not be very mted.
!>T(N&-(./M!NT +$ PARTN!R?. A-T/+R(T; -P+N %(..+*-T(+N
As a matter of fact, whe we sad before that a partner generay s an agent of a partnershp, s
ths st true at ths pont of tme?
o So that generay, the partners authorty s extngushed. Generay, he cannot bnd the
partnershp anymore. As a genera rue, the partnershp can no onger enter nto contracts.
o Athough generay, he coud no onger bnd, there are EXCEPTIONS as we sad. Under what
nstances woud t st bnd? BY WAY OF EXCEPTION, except when:
1. To wnd up the partnershp busness
What contract for exampe can they enter nto a new contract? Can they
enter nto a new contract? We sad yes. What new contracts for exampe?
To be engaged n the servces of professonas or experts. We therefore
engage the servces of a recever. And a recever can be a person whom
the partners w authorze to coect some recevabe or sette some
abtes. That can be the functon of a recever. And you have to engage
the servces of ths person. And to engage hs servces, you mght have to
enter nto a new contract.
2. To nsh or to compete unnshed busnesses. Or to nsh those whch were not
competed.
These are the ony contracts or thngs or transactons that a partnershp
can enter nto.
Or how ese? There were some orders made before the dssouton and the
partnershp busness has not made the devery yet. Then they coud
proceed, they coud engage the servces of some truckng or haung
companes to make the devery. Those are ntended to nsh or to
compete unnshed busness.
So at east 2 thngs coud st be performed by way of excepton by the
partnershp tsef.
R(&/T +$ /!(R. +$ T/! %!A% PARTN!R
So here, whe t s aready dssoved, the partnershp contnues to exst. The dssouton therefore
smpy refers to the pont of tme when the reatonshp among the partners has changed. So that
when the partner des, what happens to the hers? What are the rghts of the hers? The
partnershp s dssoved. In other words, when the partnershp s dssoved, the reatonshp has
changed. SO that after her husband ded, can the wfe now report every meetng of the partners
and now cam that she s now the new partner? She cannot. Not because she has ked her
husband but even under the aw she has no authorty to represent her husband. The death of her
husband does not make her automatcay a partner. There s no such thng.
Remember the 3 property rghts of a partner?
o Use the specc property of a partnershp
o Partnershp Interest
o Partcpate n the Management
Can the wfe now acqure the rght of her husband to partcpate n the management? Cannot.
Because that rght s a persona rght. It s a rght acqured by hm as a partner. And ony he can
demand for that rght. It s a persona rght granted to hm by the other partners. And that rght
was granted because of the trust and condence. So can the wfe assume that rght? No.
Second rght s the rght to the use of the partnershp property. Can the wfe aso 1 day go to the
omce of the partnershp and use the car of the partnershp to brng around her new husband? No.
Thrd rght, partnershp nterest. Agan, what s ncuded n ths rght s the rght to share n the
prots. So that can the wfe now attend the meetng and demand for hs share n the prots or the
prots of her ate husband? Can the wfe now demand wth ths? There s no opton. Ths s part of
35
the husbands or the deceaseds estate. Ths s part of the deceaseds estate. Any awfu her or
any egtmate her w now be entted to cam for ths. Otherwse, f we do not gve that rght to
the hers, who w be entted? No one. Can partners |ust dstrbute among themseves? No. Ths s
part of the deceaseds estate and therefore shoud form part of the nhertance that the hers
woud be entted.
o Because when do hers become entted? At the tme of death of a partner. Successon
takes rght after the moment of death. So automatcay, these hers, athough they cannot
be partners, they are aready entted smar rghts gven to an assgnee. Remember the
rghts of an assgnee? Very smar rghts.
So dssouton, wndng up, what happens next? Ths s the pont of death of the partnershp,
termnaton. Ths s the pont where we coud say the partnershp ceases to exst.
&R+-N%. $+R %(..+*-T(+N
So how, under what grounds may a partnershp be dssoved?
(1) Wthout voaton of the agreement between the partners:
(a) By the termnaton of the dente term or partcuar undertakng speced n the
agreement;
(b) By the express w of any partner, who must act n good fath, when no dente
term or partcuar s speced;
(c) By the express w of a the partners who have not assgned ther nterests or
suhered them to be charged for ther separate debts, ether before or after the
termnaton of any speced term or partcuar undertakng;
(d) By the expuson of any partner from the busness bona de n accordance wth
such a power conferred by the agreement between the partners;
(2) In contraventon of the agreement between the partners, where the crcumstances do not
permt a dssouton under any other provson of ths artce, by the express w of any partner
at any tme;
(3) By any event whch makes t unawfu for the busness of the partnershp to be carred on or
for the members to carry t on n partnershp;
(4) When a specc thng whch a partner had promsed to contrbute to the partnershp,
pershes before the devery; n any case by the oss of the thng, when the partner who
contrbuted t havng reserved the ownershp thereof, has ony transferred to the partnershp
the use or en|oyment of the same; but the partnershp sha not be dssoved by the oss of the
thng when t occurs after the partnershp has acqured the ownershp thereof;
(5) By the death of any partner;
(6) By the nsovency of any partner or of the partnershp;
(7) By the cv nterdcton of any partner;
(8) By decree of court under the foowng artce.
The aw smpy casses the causes. There are causes for dssouton, where we do not have to
voate the agreement. What agreement s ths a about? It refers to the document, the artces of
partnershp tsef. The partnershp agreement tsef. So t casses nto 2:
o Frst group are nstances or causes where we do not voate the agreement. In other words,
t s n accordance wth the agreement.
Frst, taks of the expraton of term or the arrva of the perod. Or the performance
of a partcuar undertakng.
It taks aso of an e#pulsion of a partner. How coud ths arse? Maybe 1 partner,
everytme he reports to the omce of the partnershp goes drunk and every tme he
goes drunk, he nterferes n the operatons of the partnershp. If that behavor has
come up to the pont where t aready nterrupts or dsrupts the operatons of the
company, then the rest of the partners can expe the partner.
And so ths s a dssouton because once a partner s expeed the
reatonshp has changed. Whereas before there were 5 of them, now there
are aready 4 of them. Techncay t s dssoved and techncay the
remanng partners have |ust decded to pursue the partnershp busness.
But techncay an expuson woud cause the dssouton of a partnershp.
However t MUST BE WITH A CAUSE. Otherwse, f they do wthout cause,
the other partners coud be abe for damages. So they shoud be ooked
nto.
o Two, where these causes run counter to the provsons of the agreement tsef.
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On the other hand f the stuaton s the compete reverse(to the expuson
exampe). Meanng 1 partner coud no onger wthstand the behavor of a the
other partners. That partcuar partner coud wthdraw. Wheren the rst stuaton,
the partners coud expe, here, the partner coud aso wthdraw because you can
never be compeed to be wth a group whom you coud no onger work wth. You
coud no onger be at peace wth them, theres no pont., no matter how much
prot you receve, f t w ony cause you heart attack, thats never worth
becomng a partner. In whch case, that partner coud wthdraw and that
wthdrawa must be n GOOD FAITH. Otherwse, he coud be hed abe for damages
by the other partners.
In good fath. Wthdrawa or expuson, ths must be done aways n GOOD FAITH.
Another cause for dssouton s the oss of a specc thng.
o Specc thng
Ownershp
Before devery - partner bears the oss - dssouton
After devery - partnershp bears the oss - no dssouton
Use
Before devery - partner bears the oss - dssouton
After devery - partner bears the oss - dssouton
o Generc thng
Ownershp
Before devery - partner bears the oss - no dssouton
After devery - partnershp bears the oss - no dssouton
Use
Before devery - partner bears the oss - no dssouton
After devery - partner bears the oss - no dssouton
o The oss of a generc thng does not resut nto a dssouton
because genus never pershes, therefore, f partner bears the
oss, then such partner must gve another generc thng to
fu hs obgaton to the partnershp.
Death of a partner resuts to a dssouton of the partnershp because t changes the reatonshp of
the partes.
Insovency. Why shoud nsovency be a cause for a dssouton of the partnershp?
o Snce when a partner s nsovent, hs abtes are more than hs assets, so therefore, hs
assets are no onger enough to satsfy hs abtes and thus, theres a danger that he
mght not be abe to carry out hs dutes as a partner especay on nstances when the
assets of the partnershp woud be exhausted and t w now be requred that a hs
persona assets w have to answer for the abtes of the partnershp. To protect the
partnershp from further ncurrng unsecured debts or to protect the partnershp from a
stuaton where one of them or some of them coud no onger be abe to satsfy cams and
abtes due to thrd persons, then, they shoud mmedatey dssove, otherwse, t w
ony gve fase beef that mght |eopardze thrd party credtors.
Cv nterdcton
o In other words, the partner s deprved of hs cv rghts. He can no onger have the
capacty to enter nto contracts. He can no onger admnster hs own propertes and woud
not have any dscreton as to how hs propertes w be dstrbuted. And f the partner s
suherng from ths, agan, he coud no onger fu hs dutes as a partner n so far as rghts
n favor of thrd partes are concerned.
%(..+*-T(+N T/R+-&/ C+-RT +R%!R
- So those are the nstances where dssouton can be done even wthout court order, n other words,
the extra|udca modes of dssovng a partnershp. On the other hand, there can aso be nstances
when the authorty of the court s requred. Instances where a court order s necessary to decare
the dssouton of the partnershp. What coud these nstances be?
o 1. A partner wfuy or persstenty commts a breach of the partnershp agreement, or
otherwse conducts hmsef n matters reatng to the partnershp busness that t s not
reasonaby practcabe to carry on the busness n partnershp wth hm
o 2. A partners has been decared nsane n any |udca proceedng or s shown to be of
unsound mnd
Why shoud a court order be requred to decare a person nsane?
37
It s because ts not easy to determne and |ust cam that a person s
nsane snce some of the partners mght |ust be consprng. Therefore,
there s a need of a court order.
o 3. A partner becomes n any other way ncapabe of performng hs part of the partnershp
contract
Incapacty - ths means that a partner as a busness partner s unabe to perform
hs obgatons and dutes as a partner, such as for exampe, when the partner s
ncapactated or ncapabe of deverng what he has promsed to contrbute. So n
ths case, t s as f he was not abe to make a contrbuton.
o 4. The busness of the partnershp can ony be carred on at a oss
For exampe, today your busness s dong very we. Prot eve s hgh and peope
are happy because your busness s youre one of the caterers. You are engaged n
a caterng busness provdng food for the arne companes. Snce the ghts are
nternatona, then the food you provde shoud be for 3 meas. So thats a bg
busness unt the arne showed some probems. Some of ther pots have eft the
arne wthout permsson. The pots have resgned. So by next year, 2011, the
arne company mght no onger be renewng your contract. So there w be an
expected oss on the next year. Today, whe you are st en|oyng bg prots, coud
you aready dssove the partnershp?
Yes, snce when we speak of "the partnershp busness can ony be carred
on at a oss", the oss referred to here s apparent or potenta oss, not
actua oss. So ts up to you now how to prove. Thats why you go to court
f you coud estabsh. In other words, ts not for the partnershp to say
that there s potenta or apparent oss. Its for the court to decare. And f
the court s convnced, then there coud be a dssouton. If the court s not
convnced, as the other partners woud say (there are st reasonabe
prospects for success), then there coud be no dssouton. So that ts a
matter of estabshng before the court that under the present
crcumstances, there coud be an apparent or potenta oss n the future.
Its not actua oss or present oss, but rather, present crcumstances woud
show that the busness can ony be carred on at a oss.
o 5. A partner has been guty of such msconduct as tends to ahect pre|udcay the carryng
on of the busness
o 6. Other crcumstances render dssouton equtabe
!$$!CT. +$ %(..+*-T(+N
- GR: Dssouton termnates the authorty of any partner to act for the partnershp
o E:
Acts necessary for the wndng up of partnershp ahars
Acts necessary for the competon of unnshed transactons/busness
When dssouton s caused by the act, nsovency or death of a partner, each
partner s st bound as f there s no dssouton, uness:
E to E:
o Actng partner had knowedge of the fact of dssouton caused by
the act of a partner
o Actng partner had knowedge or notce of the fact of dssouton
caused by the nsovency or death of a partner

________________________________________________________________________________________________________
August 7, 2010
Here what happens?
We aso started to dscuss possbe transactons entered nto wth thrd partes.
We go to the rues (persona note- ths s a better ustraton of the rues than the one paced above)
GR the authorty of the partners are termnated
-pshp not bound
1EXPT for wndng up
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For competon of unnshed busness
-pshp s bound
2EXPT Dssouton s due the act of the partner
Actng partner has no knowedge
Dssouton s due to nsovency or death of the partner
Actng partner has no knowedge or notce
-pshp bound
EXPT2 actng partner has knowedge or notce
-pshp not bound
The second nstance refers to death or nsovency whe the rst nstance refers to act of the partner.
Lets |ust try to check t.
The act of the partner that coud dssove, what coud be an exampe?
Wthdrawa. If one partner wthdrew and the other partner entered nto a new transacton
wthout knowedge of hs wthdrawa, the partnershp s bound because he dd not know.
Insovency of a partner. If another partner enters nto a new transacton and he has no knowedge of
such, partnershp remans bound.
Im |ust curous why n the rst nstance, act of the partner, t requres knowedge. In the second
nstance, nsovency or death, refers to knowedge or notce.
That second nstance that there s a dstncton between knowedge and notce.
What w that dstncton be?
Notce s when you earn about the fact from someone ese or through other means.
Knowedge, he personay knows about the facts. He saw the deceased; he attended the
wake. thats knowedge.
But f he |ust read t n the papers or he was |ust tod by someone ese, thats mere notce.
In the rst nstance, notce s not sumcent. He must have persona knowedge about the wthdrawa.
But f ts nsovency or death, t s enough that someone tod hm. Because f someone tod hm and
despte the nformaton reayed to hm, he st entered nto a new transacton, partnershp s not
anymore bound.
So when you say, I dd not know. I ony receved a message but I dd not actuay know. Woud that be
an excuse?
Not n case of nsovency. Not n case of death.
But for the act, t s not sumcent that he has notce.
39
But n nsovency or death, the fact that he receved nformaton, the fact that he was noted, the
partnershp shoud no onger be bound. Because the partner who receved the notce or to whom the
nformaton was conveyed or reayed shoud be bound by that notce.
Athough we sad aso that on those nstances, the partnershp remans bound, st we have another
group of excepton. And ths excepton refers to the extenson of credt.
IOU n these nstances, there has become or there has been estabshed that a speca reatonshp
between the partnershp and a thrd party credtor.
So t becomes a queston of whether or not that credtor s a stranger to the partnershp.
The aw therefore dstngushes between a thrd party who s a tota stranger and a thrd party who s
somehow mantaned or estabshed reatonshp wth the partnershp.
What are the rues?
Frst nstance, the stuaton s where credtor has extended credt before the dssouton to the
partnershp and he had no knowedge of the dssouton. - the partnershp s st bound
The dssouton occurred |uy 31. He extended credt |uy 15. On |uy 30, the partnershp s to be sod.
W the partnershp be bound?
Yes.
Credt was extended before dssouton.
But here, on |uy 30 dssouton occurred after extenson of credt.
But s that the stuaton consdered referred to here?
What coud not be cear woud be a stuaton where credt was extended after |uy 30, after the
dssouton.
If credt was extended after the dssouton, normay, n the rues that we have earned. Ths s a new
transacton not ntended to wnd up, not ntended to nsh busness, but ths s a totay new
transacton extended after the dssouton. Is the partnershp st bound?
Not anymore. Because we sad a authorty are termnated after dssouton.
Here, the rue seems to mpy that there s st a possbty that that thrd party credtor coud st
demand and therefore the partnershp coud st demand.
Under what crcumstances do you thnk?
Are we sayng that the partnershp shoud pubsh?
Here s a partnershp of ABC engaged n the aundry busness. X has been suppyng the materas for
the aundry for ve years. The partnershp was dssoved |u 31. And even after |u 31, S contnued to
suppy on credt. However Sept 15 when S demanded for payment, the partnershp says that they have
been dssoved and they shoud not pay.
Is the partnershp bound?
Yes.
In that case, we shoud not bame the supper. The aw does not bame the supper.
40
Even f the supper contnued suppyng and the partnershp whch has been dssoved
contnued to receve, the partnershp shoud be requred to sette that abty, because there has been
a reatonshp between the supper and the partnershp busness. And that reatonshp has been there
for some tme. And t s ths reatonshp that the aw ntends to recognze.
(persona note: to not make the partnershp abe to credtors who had prory extended credt,
persona notce or knowedge s to be gven.
to not make the partnershp abe to credtors who had not prory extended credt, notce through
pubcaton s to be sumcent.)
So that the ony way that the partnershp shoud no onger be bound for suppes devered after
dssouton, what shoud have been done?
There shoud be notce.
And how shoud ths notce be sent?
There shoud be pubcaton.
Thats what the aw requres f you want to avod abty nsofar as thrd party credtors as concerned
wth whom partnershp busness has been deang n the past.
The aw recognzes that reatonshp
Because of the dssouton, the busness of the partnershp mght have been assgned to another party.
Heres a new party wng to proceed wth the busness of the party and he must have
acqured the busness. And part of the arrangement mght have been, - you get a of our assets and
you pay a our abtes - whch s very possbe.
Here, f the partnershp sod the busness to a thrd party and there remans to be unpad abtes,
who shoud be abe? Who shoud be requred to pay the abtes?
If the transfer, as he s assumng the abtes, he knew the new busness w assume the abtes.
So that n the absence of that agreement, the od debtor remans abe.
Ths refers to what knd of mode of extngushng an obgaton?
Novaton
And when we say novaton, there s a change n ob|ect or sub|ect matter of the contract or
change of the partes.
Thats why we have rea novaton as dstngushed from persona novaton.
In rea novaton, we change the thng to be devered. The sub|ect matter
In persona novaton, we change the persons, ether the debtor or credtor.
Here, what knd of novaton has occurred?
Persona. Because we now have a new credtor.
And therefore we change the person of the credtor. Or perhaps we coud aso change the person of the
debtor.
In changng these partes, whose consent s necessary?
Consent of a the debtors and the credtors.
41

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