1784.

WHEN A PARTNERSHIP BEGINS

GR: A partnership begins from the moment of the EXECUTION OF THE

CONTRACT
ER: unless it is otherwise stipulated

1785. DURATION OF A PARTNERSHIP

a. for a fixed term

b. for a particular undertaking
c. continued

IF CONTINUED, after the fixed term or undertaking without express agreement

Effect: the rights and duties of the partners remain the same as they were at such
termination, so far as consistent with a partnership at will.

PRIMA FACIE EVIDENCE of continuation:

A continuation of the business by the partners or such of them as habitually acted therein
during the term, WITHOUT settlement or liquidation of the partnership affairs.

1786. DUTIES OF EVERY PARTNER

Every partner is:

a. A debtor of the partnership for whatever he may have promised to contribute
thereto
b. Bound for warranty in case of eviction with regard to specific and determinate things
which he may have contributed to the partnership. (as if vendor is bound to the
vendee)
c. Liable for the fruits thereof from the time they should have been delivered, without
need of any demand.

1787. WHEN CONTRIBUTION CONSISTS OF GOODS

When a capital or a part thereof which a partner is bound to contribute CONSISTS OF

GOODS their appraisal must be:
1. In a manner stipulated in the contract of partnership
2. In the absence of stipulation, by experts chosen by the partners
The appraisal is according to the current prices, the subsequent changes thereof being for
the account of partnership.

1788. WHEN A PARTNER FAILS TO CONTRIBUTE AND HIS LIABILITY

FOR CONVERSION
A partner is liable for interest and damages if:
1. He has undertaken to contribute a sum of money and he fails to do so
- Liability begins from the time when he should have complied with the
obligation
2. He took any amount from the partnership coffers
- Liability begins from the time he converted the amount to his own use

1789. OBLIGATION OF AN INDUSTRIAL PARTNER

GR: An industrial partner CANNOT engage in business for himself

ER: partnership EXPRESSLY PERMITS him to do so

Effects if he engaged in business for himself

The capitalist partners may either:
1. Exclude him from the firm, or
2. Avail themselves of the benefits which he may have obtained in violation of this
provision.
Wirh a right to damages in either case.

1790. AMOUNT OF CONTRIBUTION OF PARTNERS

GR: They shall contribute in equal shares to the capital of the partnership
ER: When there is a stipulation to the contrary

1791. A CAPITALIST PARTNER IS OBLIGED TO SELL HIS INTEREST TO

THE OTHER PARTNERS TO SAVE THE VENTURE:

1. In case of an imminent loss of the business of the partnership

2. That partner refuses to contribute an additional share to the capital

Exception:
1. Industrial partners
2. If there exists an agreement to the contrary

1792. RULE IF MANAGING PARTNER COLLECTS A CREDIT

1. If a partner authorized to manage collects a demandable sum

2. Such sum is owed to him in his own name
3. He collects such sum from a person
a. who also owed the partnership another sum
b. such sum is also demandable
Effect: the sum collected shall be applied to the TWO CREDITS in PROPORTION to
their amounts, even though he may have given a receipt for his own credit only.
Exception: If the receipt is given for the account of the PARTNERSHIP credit, it shall be
FULLY applied to the partnership credit.

1793. RULE IF A PARTNER RECEIVED HIS SHARE OF PARTNERSHIP

CREDIT

1. If any partner has received in whole or in part his share of a partnership credit
2. Other partners have not collected theirs
3. The debtor is thereafter insolvent

Effect: The partner is obliged to bring to the partnership capital what he received, even
though he may have given his receipt for his share only.

1794. DAMAGES CANNOT BE OFFSET BY BENEFITS

A partner is responsible to the partnership for the damages suffered by it through his
fault. He cannot compensate it with the profits and benefits he may have earned for the
partnership by his industry.

The courts can lessen his responsibility if:

1. Through the partner’s extraordinary efforts in other activities of the partnership
2. unusual profits have been realized

1795. RISK OF LOSS

 WHO BEARS THE RISK
WHAT IS CONTRIBUTED?
OF LOSS?
Not fungible or determinate things Borne by the partner who owns
(usufruct – use & fruits) them

Fungible

Things that will deteriorate Borne by the partnership

If contributed to be sold

The thing is brought and appraised Borne by the partnership,

in the inventory (in the absence of limited to the value of which
stipulation) they are appraised

1796. OBLIGATION OF THE PARTNERSHIP FOR DISBURSED AMOUNTS

The partnership shall be responsible to every partner:

1. The amounts he may have disbursed on behalf of the partnership
2. Its corresponding interest, from the time the expenses are made
3. Obligation he may have contracted
a. In good faith
b. In the interest of the partnership business
4. Risks in consequence of its management.

1797. HOW PROFITS ARE DISTRIBUTED

Losses and profits shall be distributed:

1. In conformity with the agreement
2. If only the share of profit has been agreed, the share of losses shall be in the same
proportion.
3. If no stipulation:
a. The share of each partner for profit or loss shall be in proportion to what
he may have contributed
b. Industrial partner is not liable for losses

Industrial partner’s share:

1. He shall receive such share as may be just and equitable.
2. If he contributed capital, he shall receive a share in the profit in proportion to his
capital.
1798. DESIGNATION OF THIRD PERSON’S SHARE IN PROFITS AND
LOSSES

Partners may agree to intrust to a third person the designation of the share of each one
in the profits and losses. This may be impugned only when it is manifestly inequitable.

A partner cannot complain (impugn) such decision if:

1. The partner has begun to execute the decision of the third person
2. He failed to impugn it within a period of three months from the time he had
knowledge thereof.

1799. EXCLUSION OF PARTNER TO ANY SHARE IN PROFIT OR LOSSES

Stipulation of which is void.

1800. PARTNERSHIP MANAGER

1. He is appointed in the articles of partnership

2. He executes all acts of administration despite the opposition of his partners, unless
he acted in bad faith.
3. His power:
GR: Is irrevocable without just or lawful cause
ER: can be revoked if:
a. Made by the vote of the partners representing the controlling interest.
b. Power is granted after the partnership has been constituted.

1801. RULE WHEN THERE ARE TWO OR MORE MANAGERS

Two or more partners may SEPARATELY EXECUTE all acts of ADMINISTRATION

if there is no stipulation:
1. Of their respective duties
2. That one of them shall not act without the consent of all the others (unanimity)
-if someone opposes: decision of the majority shall prevail
-if there is a tie: the matter shall be decided by the partners owning the
controlling interest.

1802. STIPULATION OF UNANIMITY FOR THE ACTS OF MANAGING

PARTNERS

- If it is stipulated
- That the managing partners shall act with the consent of the others (there must be
unanimity)
- The concurrence of all shall be necessary for the validity of the act
The absence or disability of any one of them cannot be alleged,
- Unless there is imminent danger of grave or irreparable injury to the partnership.

1803. RULE IF THE MANNER OF MANAGEMENT HAS NOT BEEN

AGREED UPON

1. All the partners shall be considered agents

Effect: - Whatever anyone may do alone shall bind the partnership
- Without prejudice to the provisions of Article 1801 (when there are
two or more managers)
2. Any important alteration in the immovable property made by the partner shall be
with the consent of the others, even if such alteration is useful to the partnership.
- Court’s intervention may be sought:
i. If the partner refused to give consent
ii. Such refusal is manifestly prejudicial to the interest of the
partnership.

1804. ASSOCIATE OF PARTNER (delectus personae)

1. Every partner may associate another person with him in his share.
2. The associate shall be admitted to the partnership with the consent of all the other
partners.
3. This also applies to a partner who is the manager.

1805. PARTNERSHIP BOOKS

1. Shall be kept, subject to the agreement of the parties

2. At the principal place of business of the partnership

Every partner at a reasonable hour:

a. shall have access to
b. may inspect and copy any of them.

1806. DUTY OF PARTNER TO GIVE INFORMATION

Partner shall render on demand true and full information of all things affecting the
partnership:
1. to any partner
2. the legal representative of any deceased partner
3. partner under legal disability
1807. DUTY TO ACCOUNT FOR ANY BENEFIT
Every partner:
1. must account to the partnership for any benefit
2. can be hold as trustee for it any profit derived by him without the consent of the
other partners
 a. from any transaction connected with the formation, conduct, or liquidation
of the partnership
b. from any use by him of its property

1808. BUSINESS PROHIBITION ON CAPITALIST PARTNERS

Capitalist partner
1. cannot engage for their own account in any operation which is of the kind of
business in which the partnership is engaged
ER: if there is a stipulation to the contrary
2. A partner who violates this prohibition:
a. shall bring to the common funds any profits accruing to him from his
transactions
b. shall personally bear all the losses.

1809. RIGHT TO DEMAND FORMAL ACCOUNT

Any partner shall have the right to a formal account as to partnership affairs:
1. if he is wrongfully excluded from the partnership business or possession of its
property by his co-partners;
2. if the right exists under the terms of any agreement;
3. as provided by Article 1807;
4. Whenever other circumstances render it just and reasonable.

1810. PROPERTY RIGHTS OF A PARTNER:

1. Right in a specific partnership property;
2. Interest in the partnership
3. Right to participate in the management

1811. CO-OWNERSHIP IN SPECIFIC PARTNERSHIP PROPERTY

Partners are co-owners, its incidents are such that:
1. A partner has an equal right with his partners to possess specific partnership
properties for partnership purposes,
ER: he has no right to possess such property for any other purpose without the
consent of his partners;
2. His right in the partnership property is not assignable
ER: except in connection with the assignment of rights of all the partners in the
same property

1814. CHARGING ORDER.

Any judgment creditor of a partner, on due application to a competent court which

entered the judgment or any other court may:

1. CHARGE the interest of the debtor partner with payment of the unsatisfied
 amount of such judgment debt with interest thereon.

2. May then later on APPOINT A RECEIVER of his share of the profits, and of any
other money due or to fall due to him in respect of the partnership - he is entitled to
any relief to conserve partnership assets for partnership purposes, thus, he may
nullify efforts to assign specific partnership property

3. Make ALL ORDERS, DIRECTIONS, ACCOUNTS AND INQUIRIES which the

debtor partner might have or which the circumstances of the case may acquire.

This is without prejudice to the preferred rights of partnership creditors under art. 1827

REDEMPTION. May be redeemed at any time before foreclosure, or in case of a sale

being directed by the court, may be purchased without thereby causing dissolution.

Redemption means EXTINGUISHMENT of the charge.

IF AFTER FORECLOSURE:

1. With SEPARATE PROPERTY by any one or more of the partners; or

2. with PARTNERSHIP PROPERTY, by any one or kore of the partners with the
CONSENT OF ALL THE PARTNERS whose interests re not so charged or sold

INTEREST in the partnership may be charged or levied upon, but his INTEREST IN A
SPECIFIC PARTNERSHIP PROPERTY cannot be attached

PREFERENTIAL RIGHTS OF PARTNERSHIP CREDITORS

Partnership creditors (as distinguished from separate creditors of each partner) are
entitled to PRIORITY over partnership assets. On the other hand, individual
SEPARATE CREDITORS have preference over separate or individual properties.

Art. 1827 is preference of credits of partnership creditors.

Section 3

1815. FIRM NAME

Every partnership shall operate under a firm name.

1. May or may not include the name of one or more of the partners

2. Those who, not being, members of partnership, include their names in the firm
name shall be SUBJECT TO THE LIABILITY OF A PARTNER. Liable because
of estoppel, but not subject to the rights of partners.
The firm name shall RETAIN ALL ITS RIGHTS under the old name if:

a. The change is not important

b. It is made in good faith

1816. LIABILITY OF ALL PARTNERS, INCLUDING INDUSTRIAL

PARTNERS

1. Liable PRO RATA this is proportionate to their contribution.

2. With ALL THEIR PROPERTY

3. after all the partnership assets have been exhausted

4. For the contracts which may be entered into

a) In the name and for account of the partnership

b) Under its signature

c) By a person authorized to act for the partnership

Any partner may enter into a SEPARATE OBLIGATION to PERFORM

PARTNERSHIP CONTRACT. Here he acts FOR HIMSELF for the benefit of the
partnership.

Liability is to be distinguished form losses because the INDUSTRIAL PARTNER is

liable for this obligation but not for partnership losses. He can, later on, recover from the
capital partner what he has paid, unless there is a contrary agreement.

The liability of the partners are SUBSIDIARY AND JOINT (after Exhausting the assets)
NOT PRINCIPAL AND SOLIDARY

LIABILITY OF A PARTNER WHO HAS WITHDRAWN. he is not liable for the

obligations incurred after the withdrawal

 The party defendants for a suit in collection of credits are the partnership and the
partners.
 The discharge by a plaintiff of one of the partners dis not mean he is no longer a
partner. They must not be held liable for the discharged partner.

 A stipulation that all the industrial partners and some of the capitalist partners are
exempted from liability in so far as third persons are concerned is NULL AND
VOID

1817. STIPULATION TO EXEMPT LIABILITY IS VOID. This includes an

industrial partner exempting himself to be liable to third parties.

Exception: they can stipulate an exemption on the liability as against each other.

Conflict with article 1799, harmonized.

No stipulation as to exemption from sharing of profit and losses. In 1817. They can
stipulate an exemption from liability as against themselves, the liability is IN EXCESS
OF THE ORIGINAL CAPITAL CONTRIBUTED. THUS, he cannot recover his
capital.

LIABILITY - responsibility to third persons

LOSSES - responsibility among partners.

1818. WHEN A PARTNER CAN BIND OR CANNOT BIND THE

PARTNERSHIP

1. Every partner is an agent of the partnership: (BINDS THE PARTNERSHIP)

a) For the purpose of its business

b) Whose acts, including the execution of an instrument for apparently carrying on

in the usual business of the partnership. He acts in behalf and in the name of
the partnership

DOES NOT BIND THE PARTNERSHIP:

1. If the partner so acting HAS NO AUTHORITY TO ACT for the partnership in the
PARTICULAR MATTER.

2. the person with whom he is dealing HAS KNOWLEDGE of the fact that he has
NO SUCH AUTHORITY

For APPARENTLY carrying the business of the partnership. There must be authority
and third person mist be in good faith to bind the partnership

NOT APPARENTLY

3. ACTS not apparently for the usual business of the partnership (acts which must be
authorized, express or implied, by the other partners. Authority must be
UNANIMOUS):

a) Assign the partnership property in trust for the creditors or on the assignee's
promise to pay the debts of the partnership; an assignment is made on the
condition that the assignee would pay the debt of the partnership.

b) Dispose the goodwill of the business

c) Do any other act which would make it impossible to carry on the business of a
partnership

d) Confess a judgment

e) Enter into a compromise concerning a partnership claim or liability

f) Sub,it a partnership claim or liability to arbitration

g) Renounce a claim of the partnership

These are 7 acts of dominion or ownership

There is MUTUAL AGENCY in partnership: each partner acts as principal on his behalf,
and as agents for his co-partners for the firm.

Implied authorization:

1. Other partners do not object although they have knowledge of the act.

2. He acts for apparently carrying on in the usual way of business

1819. CONVEYANCES OF REAL PROPERTY IN EXCESS OF AUTHORITY

1. The title of the property is in the partnership name.

Conveyance in the partnership name

EFFECT: partnership can recover this. EXCEPT: (absolutely binding, cannot be

recovered by the partnership)

a) the partner's acts bind the partnership under 1818

b) the property has been conveyed by the grantee or the person claiming from such
 grantee is a HOLDER FOR VALUE - has no knowledge that the partner has
exceeded his authority

Conveyance not in the name of the partnership, BUT IN HIS OWN NAME

EFFECT: passes the equitable interest of the partnership provided:

a) act is within the authority of the partner under first par of 1818.

2. The title of the property is in the NAME OF ONE OR MORE BUT NOT ALL,
records does not disclose the right of the partnership

EFFECT: the named partner in the title may convey the property, partnership can
recover if:

a) the partner's act does not bind the partnership according to 1818

EXCEPTION: (where no recovery can be made) Purchaser or assignee is a holder for

value and in good faith.

3. The title to the property is in the name of one or more or all partners, or third
person in trust for the partnership

Conveyance: partnership name or in his own name

EFFECT: passes the equitable interest of the partnership, provided:

a) act is under 1818

4. In the names of all partners.

Conveyance by ALL PARTNERS

EFFECT: passes all the rights in such property

Title Conveyance Binding effect Proviso

Compliance with
Partnership can
Partnership name art. 1818/conveyed
recover
by grantee or HFV
Partnership name
Passes the equitable
In the partner's
interest of the
name
partnership
1818
Name of one or Made by a partner Partnership can
more but not all, which the title recover, no recovery
records does not stands can be made if
disclose the rights
 of a partnership there is HFV

One or more
partners
Partnership name or
All partners Passes equitable title
in his own name
Person in trust for
the partnership

Passes all the rights

All partners All partners
in such property

1820. ADMISSION OR REPRESENTATION OF A PARTNER

is an evidence against the partnership, under the conditions:

1. Admission or representation

2. Made by any partner

3. Within the scope of his authority

4 in accordance with his title

① When admission is made BEFORE dissolution - binding when the partner has
authority to act on PARTICULAR MATTER

② AFTERR DISSOLUTION - binding only if admission were necessary to wind

up the business

----- insert 1821 from office pc -----

1822. WRONGFUL ACT OR OMISSION OF A PARTNER

The partnership is liable to the same extent as the partner so acting or omission to act:

1. By an wrongful act or omission of any partner

a) Acting in the ordinary course of the business of partnership OR

b) With the authority of his co-partners

2. Loss or injury is caused to any person, not a partner

3. Or penalty is incurred.

- Innocent partners are also civilly personally liable subject to their right to recover from the
guilty partner.

- this article also covers an injury caused to the employee because the law speaks of "any
person, not being a partner"

EXCEPTION TO THE RULE:

1. The act or omission is not done within the scope of his authority

2. The act or omission is NOT WRONGFUL

3. Wrongful act or omission did not produce any liability

4. It was committed AFTER the firm has DISSOLVED, provided that it is not in
connection with winding up.

1823. LIABILITY OF PARTNERS FOR MISAPPROPRIATION

Partnership is bound to make good the loss:

1. Partner

a) acting WITHIN THE SCOPE OF HIS APPARENT AUTHORITY

b) receives money or property of a third person

c) and misapplies it.

2. Partnership

a) in the course of its business

b) receives money or property of a third person

c) and the money or property so received is MISAPPLIED BY A PARTNER

while it is in the custody of the partnership.

The third person can sue either the partner alone, who misappropriated the money, or all
the partners, or the partnership. Because the liability is solidary under 1824.
1824. SOLIDARY LIABILITY OF PARTNERS CHARGEABLE TO THE
PARTNERSHIP UNDER ART 1822 and 1823

TORTS and DAMAGES: solidary. Which results from individual acts of the partners

CONTRACTUAL OBLIGATIONS: joint (art. 1816) pro rata. Results from partnership
obligation

 ER: in cases of workmen's compensation where the liability f the partners is SOLIDARY
because of public policy for the full protection of labor.

1825. PARTNER AND PARTNERSHIP BY ESTOPPEL

1. When a person, by words spoken or written or by conduct,

a) represents himself,

b) or consents to another representing him to anyone,

2. as a partner in an existing partnership or with one or more persons not actual

partners,

3. made in a public manner

4. whether the representation

a) has or has not been made or communicated

b) or with the knowledge of the apparent partner making the representation or

consenting to its being made

5. IS LIABLE to any such person, who has on the faith of such representation given
credit to the actual or apparent partnership:

i. When a partnership liability results, he is liable AS THOUGH HE WERE

AN ACTUAL MEMBER of the partnership

ii. When no partnership liability results, he is liable pro rata with the other
persons, if any, so consenting to the contract or representation as to incur
liability, otherwise separately (partner by estoppel)

PARTNERSHIP BY ESTOPPEL

When a person

1. has been thus represented to be a partner in an existing partnership,

2. or represented with one or more persons not actual partners,

EFFECT:

a) he is an agent of the persons consenting to such representation

b) Which will bind them to the same extent and in the same manner as though he
were a partner in fact, with respect to persons who rely upon the representation.

3. When all the members of the existing partnership consent to the representation

EFFECT: a partnership act or obligation results;

but in all other cases it is the joint act or obligation of the person acting and the person
consenting to the representation.

Partner by estoppel is committed by one person only

Partnership by estoppel is committed when representation involves several persons

pretending to be a firm

 the admission or representation must be PLAIN AND CLEAR

ESTOPPEL DOES NOT APPLY IF:

There is misrepresentation and third party IS NOT DECEIVED

REQUISITES TO MAKE A PERSON A PARTNER BY ESTOPPEL:

1. Person must represent himself as a partner when in fact he is NOT A PARTNER,

or consents to another representing him to anyone as a partner in an existing
partnership or with one or more persons not actual partners.

2. Third person relied on the said misrepresentation

3. Third person has given credit to the actual or apparent partnership

4. Alleged partner cannot disallow liability by claiming he is not actually a partner.

NOTE: a partnership wanting of legal formalities may be CONSIDERED AS

PARTNERSHIP BY ESTOPPEL with regard to their contractual obligations.

1826. ENTRY OF A NEW PARTNER INTO AN EXISTING PARTNERSHIP

1. A person admitted as a partner into an existing partnership

2. is liable for all the obligations of the partnership

a) arising before his admission

3. as though he had been a partner when such obligations were incurred,

4. EXCEPT that this liability shall be SATISFIED only out of PARTNERSHIP

PROPERTY

5. unless there is a stipulation to the contrary.

An original partner is liable insofar as his share in the firm is concerned, and with his
own individual property. The newly admitted partner becomes an ORDINARY
ORIGINAL PARTNER for the obligation incurred AFTER his admission

Although the partnership is dissolved because of the admission of the new partner,
partnership assets are also available even to the old creditors including that of the
contribution of the new partner. All creditors, irrespective of the times when they
become creditors of the partnership, SHOULD HAVE EQUAL RIGHTS IN SUCH
PROPERTY.

1827. PREFERENCE OF PARTNERSHIP CREDITORS

1. The creditors of the partnership shall be preferred to those of each partner as

regards the partnership property.

2. Without prejudice to this right, the private creditors of each partner may ask the
attachment and public sale of the share of the latter in the partnership assets.

 Partnership property of the partners cannot be taken as payment for partnership

debts until the partnership property of the firm has been exhausted.

CONFLICT:

1811 provides that specific partnership property is not subject to attachment or

execution. To reconcile this the phrase "share in the latter of the partnership assets" should not
be interpreted as specific partnership property but merely as SHARE IN THE PROFITS
AND LOSSES.
 CHAPTER III

DISSOLUTION AND WINDING UP

1828. DISSOLUTION DEFINED

Dissolution of a partnership

1. is the change in the relation of the partners

2. caused by any partner ceasing to be associated in the carrying on

3. as distinguished from the winding up of the business.

1829. EFFECT OF DISSOLUTION

in dissolution, the partnership is NOT TERMINATED, but continue until the winding
up of partnership affairs is completed.

DEFINITIONS:

WINDING UP is the process of settling business affairs after dissolution.

TERMINATION is the point in time after all the partnership affairs have been wound
up.

 An action for accounting and payment of money allegedly due a partner, a

receiver must be appointed to wind up the dissolved partnership.

 A dissolved partnership cannot evade previous obligations entered into by the

partnership

1830. CAUSES OF DISSOLUTION

1. Without violation of the agreement between the partners:

a) By the termination of the definite term or particular undertaking specified

in the agreement; if the partnership continues after this period PARTNERSHIP
AT WILL.

b) By the express will of any partner, who must act in good faith, when no
definite term or particular undertaking is specified; if in BAD FAITH,
partnership dissolves but liable for damages. Because of the mutual agency that
arises in the partnership. The doctrine of DELECTUS PERSONAE allows the
partners to have the power, although not necessarily the right to dissolve the
partnership.

c) By the express will of all the partners who have not assigned their interests
or suffered them to be charged for their separate debts, either before or after
the termination of any specified term or particular undertaking;

d) By the expulsion of any partner from the business bona fide in accordance
with such power conferred by the agreement between the partners; because the
number of partners decrease. Expulsion in bad faith may effectuate dissolution
because there would be apparent lack of confidence. Without prejudice to
liability

2. In contravention of the agreement if they agree for a definite term or particular

undertaking between the partners, where the circumstances do not permit a
dissolution under any other provision of this article, by the express will of any
partner at any time; with or without justifiable cause.

3. By any event which makes it unlawful for the business of the partnership to be
carried on or for the members to carry it on in partnership; if the law or ordinance
declares the transaction o object thereof to be unlawful; if unlawful from the
beginning, there is no juridical personality. All its acts are void

4. Note: this article does not apply to GENERIC THINGS, because genus does not
 perish

a) When a specific thing, which a partner had promised to contribute to the

partnership, perishes before the delivery;

b) In any case by the loss of the thing, when the partner who contributed it having
reserved the ownership thereof, has only transferred to the partnership the use
or enjoyment of the same; naked owner reserves the ownership, the loss is
borne by him, as if he had not contributed anything. Since the thing itself is lost,
the usufruct is also lost

c) but the partnership SHALL NOT BE DISSOLVED by the loss of the thing
when it occurs after the partnership has acquired the ownership thereof - firm
bears the loss because after all he had NOT given his contribution;

5. By the death of any partner; because in the reduction in number

a) PARTIAL - surviving partners continue the business among themselves

b) TOTAL - proceeds to the liquidation (status: partnership in liquidation)

 No profit gained after the dissolution could be collected by heir. He is only entitled
to the profits already obtained at the time of the death of the partner.

6. By the insolvency of any partner or of the partnership; need not be judicially

declared, what is enough is that the assets must be less than the liabilities

7. By the civil interdiction of any partner; incapacity to dispose of his property, inter
vivos

8. By the decree of court under the following article. It must be a final judgment

 The partners cannot agree that the causes for automatic dissolution is limited or
restricted

 Disposition of all real property of a partnership engaged in a real estate brokerage

will not dissolve the partnership

 After dissolution partners become CO-OWNERS. hence, the right to demand

accounting can be transferred.

 The right to dissolve is incidental to partnership and wrongful dissolution would be

a cause for damages.

1831. COURT DECREE OF DISSOLUTION

1. A partner is the one who can file a complaint in court.

a) A partner has been judicially declared insane in any judicial proceeding or

b) is shown to be of unsound mind. Ratio: partner will be incapacitated to

 contract

2. A partner becomes in any other way incapable of performing his part of the
partnership contract if the partner enters into govt. service and would prohibit from
participating

3. A partner has been guilty of such conduct as tends to affect prejudicially the
carrying on of the business.

4. A partner willfully or persistently commits a breach of the partnership

agreement, or otherwise so conducts himself in matters relating to the partnership
business that it is not reasonably practicable to carry on the business of the
partnership with him

5. The business of the partnership can only be carried on at a loss

6. Other circumstances render dissolution equitable.

On the application of the purchaser of a partner's interest under article 1813 or 1814

1. After the termination of a specified term or particular undertaking - can be

filed AFTER THE TERMINATION...

2. At any time if the partnership is a partnership at will when the interest was
assigned or when the charging order was issued can be filed anytime.

Note: A partnership is considered JUDICIALLY DISSOLVED from the time a judicial

decree has become FINAL AND EXECUTORY

 It is not a cause for partnership dissolution if there was neither allegation nor proof
of fraudulent or dishonest practices nor when it is apparent in the partnership
agreement that almost exclusive control was vested in one partner. Neither can it be
dissolved if differences and discord can be settled by the partners themselves.

Appointment of RECEIVER: pending suit for dissolution at the court's discretion.

Except (receiver is not needed):

1. If all the firm assets are in the hands of a sheriff under a writ of replevin

2. When existence of a partnership is denied.

1832. EFFECTS OF DISSOLUTION.

Dissolution terminates all authority of any partner to act for the partnership:

1. With respect to the partner: insofar as the partners themselves

 a) When dissolution is NOT BY the act, insolvency or death of a partner; or

b) When dissolution is by such act, insolvency, or death of a partner, in cases

where art. 1833 so requires. Relations of the firm toward third persons

2. With respect to persons NOT partners, as declared in Article 1834

 With respect to obligations previously entered into whether the partnership is a

creditor or debtor, it STILL HAS PERSONALITY for the winding up of its affairs.

1833. EFFECT IF DISSOLUTION IS CAUSED BY A PARTNER's ACT,

INSOLVENCY, OR DEATH

GR: each partner is liable to his co-partners for HIS SHARE OF ANY LIABILITY
created by any partner as if the partnership had not been dissolved

ER: (not bound to share in the liability)

1. The dissolution being by act of any partner, the partner acting for the partnership
had knowledge of the dissolution: or

2. The dissolution being by the death or insolvency of a partner, the partner acting for
the partnership had knowledge or notice of the death or insolvency. Note of
the notice here

Difference between KNOWLEDGE and NOTICE:

Term knowledge presupposes actual awareness of a fact. Mere notice is more of a

presumption like the leaving of a letter in an ordinary business on the table of a
person which he did not open

1834. GENERAL RULE ON EFFECT OF DISSOLUTION; EXCEPTIONS

after dissolution a PARTNER CAN BIND THE PARTNERSHIP, except as provided in

the third paragraph of this article:

1. By any act appropriate for WINDING UP partnership affairs or by

COMPLETING TRANSACTIONS unfinished at dissolution;

2. By any transaction which would bind the partnership if dissolution had not been
taken place, provided the other party to the transaction:

a) Had EXTENDED CREDIT to the partnership prior to dissolution and HAD

NO KNOWLEDGE or NOTICE of the dissolution
 b) Though he had NOT SO EXTENDED CREDIT, had nevertheless known of
the partnership prior to dissolution, and having no knowledge or notice of
dissolution, the fact of dissolution had NOT BEEN ADVERTISED in a
newspaper of general circulation in the place (or in each place if more than one)
at which the partnership business was regularly carried on.

The liability of a partner under the first paragraph, no. 2, shall be satisfied OUT OF
PARTNERSHIP ASSETS alone when such partner had been prior to dissolution:

1. Unknown as a partner to the person with whom the contract is made; and

2. So far unknown and inactive in partnership affairs that the business reputation of
the partnership could not be said to have been in any degree due to his connection
with it.

The partnership is in no case bound by any act of a partner after dissolution:

1. Where the partnership is dissolved because it is unlawful to carry on the business,

unless the act is appropriate for winding up partnership affairs; or

2. When the partner has become insolvent; or

3. Where the partner has NO AUTHORITY to wind up partnership affairs, except by

a transaction with one who:

a) Had extended credit to the partnership prior to dissolution and had no

knowledge or notice of his want of authority; or

b) Had not extended credit to the partnership prior to dissolution, and, having no
knowledge or notice of his want of authority, the fact of his want of authority
has not been advertised in the manner provided for advertising the fact of
dissolution in the first paragraph no. 2(b).

Nothing in this article shall affect the liability under article 1825 of any person who after
dissolution represents himself or consent to another representing him as a partner in a
partnership engaged in carrying on business.

1835. DISSOLUTION DOES NOT DISCHARGE EXISTING LIABILITY OF A

PARTNER; EXCEPTION

The dissolution of the partnership DOES NOT OF ITSELF DISCHARGE the existing
liability of any partner.

A partner is discharged from any existing liability upon the dissolution of the
partnership:

1. By an agreement to that effect between

 a) HIMSELF,

b) THE PARTNERSHIP CREDITOR and

c) THE PERSON OR PARTNERSHIP CONTINUING THE BUSINESS

2. and such agreement CAN BE INFERRED FROM the course of dealing between
the creditor having knowledge of the dissolution and the person or partnership
continuing the business

The INDIVIDUAL PROPERTY of a deceased partner shall be liable for all

obligations of the partnership incurred while he was a partner, but subject to the prior
payment of his separate debts.

Ratio: if it is otherwise, partnership creditor will be prejudiced, particularly if a partner

will just withdraw anytime from the firm.

The liability of a retiring partner as regards partnership obligations incurred before the
dissolution shall continue as that of a principal debtor.

 A partner who has WITHDRAWN from the partnership is RELEASED from

liability only when

 There was liquidation

 And his withdrawal has been duly published.

 An action for accounting against the legal representatives of the deceased managing
or industrial partner will not prosper because upon the latter's death the
responsibility devolves to the other partners.

1836. WINDING UP

Unless otherwise agreed, (extrajudicial)

a. The partners who HAVE NOT WRONGFULLY DISSOLVED the partnership ;

or

b. Legal representatives of the last surviving partner, not insolvent

has the RIGHT TO WIND UP the partnership affairs.

PROVIDED: (judicial)

That any partner, his legal representative or his assignee, upon cause shown, may
OBTAIN WINDING UP BY THE COURT.

Under the control and direction of the court, upon proper cause. The person to wind up
must be APPOINTED by the court. He SHOULD NOT BE the legal representative but
the surviving partner.

PETITIONER: any partner, his legal representative or his assignee.

PROFITS V. CAPITAL

considered as:

1. PROFITS OF THE FIRM: profits earned after dissolution is still considered as

profit when it is a result of a transaction made BEFORE THE DISSOLUTION.

2. CAPITAL to be distributed under the rules of co-ownership: if other income is

earned AFTER THE DISSOLUTION.

capital is computed as to the TIME OF DISSOLUTION, this is after profits and losses
have already been computed.

Powers or prerogatives of the liquidating partner.

1837. CAUSES OF DISSOLUTION and its EFFECTS.

1. if dissolution is caused IN ANY WAY: ie. Death, arrival of the term and
inevitable insolvency

Each partner, as against,

a. His co-partners, and

b. All persons claiming through them in respect of their interests in the

partnership

① May have the partnership property applied to discharge its liabilities

② The surplus applied to pay in cash the net amount owing to the respective
partners.

Except:

a. in contravention of the partnership agreement

b. There is an agreement to the contrary.

2. If dissolution is caused in CONTRAVENTION OF THE PARTNERSHIP

AGREEMENT

The rights of the partners shall be: ie. Deliberate withdrawal before the arrival of
 the term

① All the rights specified in the first paragraph

② The right, as against each partner who has caused the dissolution wrongfully, to
damages for breach of the agreement.

Partners who HAVE NOT CAUSED THE DISSOLUTION WRONGFULLY

(innocent partners)

May:

① If they all desire: CONTINUATION OF PARTNERSHIP

i. continue the business in the same name either by themselves or jointly with
others,

ii. during the agreed term for the partnership and for that purpose may
possess the partnership property, provided they secure the payment by
bond approved by the court, or

② pay to any partner who has caused the dissolution wrongfully:

i. the value of his interest in the partnership at the dissolution,

ii. less any damages recoverable under the second paragraph, No. 1(b) of this
article,

iii. and in like manner indemnify him against all present or future partnership
liabilities.

Partner who HAS CAUSED THE DISSOLUTION WRONGFULLY SHALL HAVE:

(guilty partner)

a) If the business is NOT CONTINUED under the provisions of the second

paragraph, No. 2

① All the rights of a partner under the first paragraph, subject to liability for
damages in the second paragraph, No. 1(b) of this article.

b) If the business is CONTINUED under the second paragraph, No. 2, of this

article,

① the right as against his co-partners and all claiming through them in respect of
their interests in the partnership,

i. to have the value of his interest in the partnership, less any damage caused
to his co-partners by the dissolution, ascertained and paid to him in cash,

ii. or the payment secured by a bond approved by the court,

 iii. and to be released from all existing liabilities of the partnership;

iv. but in ascertaining the value of the partner's interest the value of the
goodwill of the business shall not be considered

Contemplates:

a. Rights of innocent partners

b. Rights of guilty partners required to indemnify the innocent partners for the
damages caused.

 A guilty partner, in ascertaining the value of his interest is NOT ENTITLED to a

proportionate share of the value of the goodwill.

 Goodwill consists largely of reputation for competence, honesty and fair-dealing,

but its value is in attracting customers and NOT IN SECURING CREDIT.

 Depreciation, obsolescence, or diminished market value of capital assets are NOT

CONSIDERED AS LOSSES, but they should be considered as losses at the time of
the liquidation provided that their REAL MARKET VALUES are considered.

1838. RESCISSION OR ANNULMENT OF PARTNERSHIP CONTRACT

where partnership contract is rescinded on the ground of FRAUD or

MISREPRESENTATION of one of the parties thereto, the party entitled to rescind is,
without prejudice to any other right, ENTITLED TO:

1. To a lien on, or right of retention of, the surplus of the partnership property | after
satisfying the partnership liabilities to third persons | for any sum of money paid by
him for the purchase of an interest in the partnership and for any capital or
advances contributed by him; RIGHT OF OIEN OR RETENTION

2. To stand, after all liabilities to third persons have been satisfied, in the place of the
creditors of the partnership for any payments made by him in respect of the
partnership liabilities; and RIGHT OF SUBROGATION

3. To be indemnified by the person guilty of the fraud or making representation

against all debts and liabilities of the partnership. RIGHT OF
INDEMNIFICATION

1839. LIQUIDATION OF A GENERAL PARTNERSHIP

In settling accounts BETWEEN THE PARTNERS after dissolution, the following rules
shall be observed, subject to any agreement to the contrary:
1. The ASSETS of the partnership are:

a) The partnership property

b) The contributions of the partners necessary for the payment of all the liabilities
specified in No. 2

2. The liabilities of the partnership shall RANK IN ORDER OF PAYMENTS as

follows:

a) Those owing the CREDITORS OTHER THAN PARTNERS

b) Those owing the partners OTHER THAN CAPITAL AND PROFITS

c) Those owing to partners in respect of capital

d) Those owing to partners in respect of profits

3. The assets shall be applied in the order of their declaration in No. 1 of this article to
the satisfaction of the liabilities.

4. The partners shall contribute as provided by article 1797, the amount necessary to
satisfy the liabilities.

5. An assignee for the benefit of the creditors or any person appointed by the court
shall have the right to enforce the contributions specified in the preceding number.

6. Any partner or his legal representative shall have the right to enforce the
contributions specified in No. 4, to the extent of the amount which he has paid in
excess of his share of the liability

7. The individual property of the deceased partner shall be LIABLE for the
contributions specified in No. 4

8. When partnership property and the individual properties of the partners are in
possession of a court for distribution, partnership creditors shall have PRIORITY
on partnership property and separate creditors on individual property, saving the
right of lien or secured creditors.

9. Where a partner has become insolvent or his estate is insolvent, the claims against
his separate property shall rank in the following order:

a) Those owing to separate creditors;

b) Those owing to partnership creditors;

c) Those owing to partners by way of contribution.