Law on Partnership and Corporation Reviewer

ATENEO CENTRAL BAR OPERATIONS 2007 Civil Law SUMMER REVIEWER ves ) to con CHA (General trib PTE Profession ute R 1: al mo GEN Partnership ney ERA , , L Art.1767¶2) pro PRO Two or pert VISI more y, ONS persons may or also form a ind partnership ustr PART for the y to N exercise of a a E profession. co R mm S ELEMENTS on HI OF A fun PPARTNERS d, a HIP: with co There shall the ntr be a inte ac partnership ntio t whenever: n of wh 1. Ther divi er e is din ei a g n mee the tw ting pro o of fits or the am m min ong or ds; the e 2. To ms form pe elv a rs es. com on (se mon s e fund bi Art ; nd . 3. With th 17 inte e 67, ntio m CC n sel

that pro fits (an d loss es) will be divi ded am ong the cont racti ng part ies. ESSENTIA L FEATURES : 1. The re mus t be a VA LID CO NT RA CT. 2. T h e p a rt ie s m u st h a v e

3.

L E G A L C A P A CI T Y to en ter int o th e co ntr ac t. T h e r e m u s t b e a m u t u a l c o n t ri b u ti o

n o f m o n e y , p r o p e r t y , o r i n d u s t r y t o a C O M M O N

4.

FUN D. Ther e mus t be

5.

a LA WF UL OB JE CT. T h e p u r p o s e o r p r i m a r y p u r p o s e m u s t b e t o o

b t a i n

s .

2• It

also requir ed that the article s of partne rship must NOT be kept SECR ET amon g the memb ers; other wise, the associ ation shall have no legal perso nality and shall be gover ned by the

P R O F I T S a n d D I V I D E t h e s a m e a m o n g t h e p a r t i e

is

3•

provisions on COOWNERSH IP (Art. 1775).

"kept secre t amon g the mem bers"

on al lia bili ty of pa rtn er s for pa rtn er CHARACTERISTICS: shi 1. Essentially p contractual de innat ure (Art. 1767, bts are needed to see this picture. FORM 178 OF 4) PART 2. Sep NERS arat HIP e CONT jurid RACT ical = secre cy direct ed not to third perso ns but to some of the partn ers

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3.

4.

5.

per GENERAL son RULE: ality No (Art special . form is 176 require 8) d for Del the ectu validity s of a per contra son ct. ae (Art. Mut 1356) ual Age ncy (Art . 180 3) P er s

CHAPTE R 2: OBLIGA TIONS OF PARTNE RS

Art. 1784. A partner ship begins from the momen t of the executi on of the contrac t, unless it is otherwi se stipulat ed. EXCEPTIO NS: 1. Wh ere imm ova ble pro pert y/re al righ ts are con trib ute d

(Art . 177 1) 1. P u b l i c i n s t r u m e n t i s n e c e s s a r y

2.

I n v e n t o r y o f t h

e p r o p e r t y c o n t ri b u t e d m u s t b e m a d e , s i g n e d b y t h e p a r ti e s a n d

a t t a c h e d t o t h e p u b l i c i n s t r u m e n t o t h e r w i s e i t i s V O

I D

2. Wh

3.

en the con trac t fall s und er the cov era ge of the Stat ute of Fra uds (Art 2. . 140 9) Wh ere cap ital is P3, 000 or mor e, in mo ney or pro pert y (Art . 177 2) NOTE:• 1. P

u b li c i n s t r u m e n t i s n e c e s s a r y M u s t b e r e g i s t e r e d w it h S E C

SEC Opi nio n, 1 Jun e 196 0: For purp ose s of conv enie nce in deal ing with gov ern men t offic es and fina ncial instit utio ns, regi strat ion of part ners hip havi ng a capi tal of less than Php 3,00 0 is reco mm end ed.

SEPA RATE JURI DICA L PERS ONA LITY Art.

crim inal acti ons, in conformity with the laws and regulations of their organization . (See Art. 46)

with the require ments of Article 1772, first paragra ph.

1768. The As a partner JURIDICAL ship PERSON, a has a partnership juridica may: l 1. acqu person ire ality and separat poss e and ess distinct prop form erty that of of all each of kinds the ; partner 2. incur s, even oblig in case ation of s; and failure 3. bring to civil comply or

; He —Advise ads: r: Dean Joy Cynthia Marie Roxas- Ponsar Del an, Castillo Eleano

PRINCI PLE OF DELEC TUS PERSO NARUM DELECTU S PERS ONAE —The selectio n or choice of the person. Implication s: (Dean Villanueva)

r Tajan, John Paul Mateo; Lim; Subje c t He ad: Unde Thea Marie rstudie Jimenez; Ple dg e e s: Joy s: Naealla Rose Steph Bainto, Sandra May anie Maclang—

nt of a partner of his share does not make assignee a partner (Art.

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1•

1• The

assignme

1804 1813)

and

The existence

of the partnershi p is closely tied-up to the particular contractu al relationsh ip of the partners (see instances of dissolutio n of the partnersh ip upon change of contractu al relationsh ip.)

Ortega v. CA, G.R. No. 109248, July 3, 1995 Doctrine of Delectus Personae: The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership.

•

•

1•

2•

(According to Dean Villanueva) In the absence of contractual stipulation, all partners shall be considered agents and whatever any one of them may do alone shall bind the partnership (Art. 1803[1], 1818) Partners can dispose of partnership property even when in partnership name (Art. 1819)

An admission or representation made by any partner concerning partnership affairs is evidence against partnership 1820)

the (Art.

Notice to any partner of any matter relating to partnership affairs is notice to the partnership

1•

(Art. 1821)

2•

(Art. 1822)

•

•

Wrongful act or omission of any partner acting for partnership affairs makes the partnership liable Partnership bound to make good losses for acts or misapplications of partners (Art. 1823) UNLIMITED LIABILITY (According to Dean Villanueva) All partners are liable pro rata with all their properties and after partnership assets have been exhausted, for all partnership debts (Art. 1816) Any stipulation against personal liability of partners for partnership debts is void , except as among them (Art. 1817)

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All partners are partnership for everything MEANING of MUTUAL AGENCY chargeable to •

liable solidarily with the

the partnership when caused by the wrongful act or omission of any partner acting in the ordinary course of business of the partnership or with authority from the other partners and for partner's act or misapplicatio n of properties (Art. 1824)

1• A

2•

3•

newly admitted partner into an existing partnership is liable for all the obligations of the partnership arising before his admission but out of partnership property shares (Art. 1826) Partnership creditors are preferred to those of each of the partners as regards the partnership property 1827)

(Art.

Upon dissolution of the partnership , the partners hall contribute the amounts necessary to satisfy the partnership liabilities (Art. 1839[4], [7]) PARTN ERSHIP DISTIN GUISHE D

FROM COOWNE RSHIP

AND CORPO RATION

PARTNERS HIP Created by a contract, by mere agreement of the parties Has a juridical personality separate and distinct from that of each partner

Creation

Juridical personal ity

COOWNERS HIP Created by law

None

Purpose

Realization of profits

Duration/ Term of existenc e

No limitation

Disposal / Transfer ability of interest

Partner may not dispose of his individual interest unless agreed upon by all partners

Co-owner may freely do so

Power to act with

In absence of stipulation to contrary, a

Co-owner cannot represent

3rd

Page 158 of 297

Common enjoyment of a thing or right 10 years maximum

CORP Created by law

Has a juridical personality separate and distinct from that of each stockholder Depends on AOI 50 years maximum, extendible to not more than 50 years in any one instance Stockholde r has a right to transfer shares without prior consent of other stockholder s Manageme nt is vested with the

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Effect of death

Dissoluti on

# of incorporators Commen cement of juridical personal ity

A particular partnership is distinguished from joint venture, to wit:

1) a joint (an partner may venture American bind partnership concept similar (each partner to our joint is agent of partnership) account) is a Death of sort of informal partner partnership, results in with no firm dissolution ofname and no partnership legal personality. In joint May be a the dissolved at account, any time by participating the will of anymerchants can or all of the partners transact business Minimum of 2under their persons own name, and can be individually From the moment of liable execution of therefore; and contract of partnership

2) usually, but not necessarily a joint venture is QuickTime ™ and a

Heirs of Tan Eng Kee v. CA, G.R. No. 126881,. October 3, 2000 Particular partnership distinguished from joint venture

limitedTIFF to a single transaction, (Ucompressed)decompressor although the business are nee ded to see this pict ure.

of pursuing to a successful termination may continue for a number of years; a partnership

generally relates to a continuing business of various transactions of a certain kind.

It would seem that under Philippine law, a joint venture is a FORM of PARTNERSHIP , specifically a

particular partnership which has for its object specific undertaking.

Aurbach v. Sanitary Wares, 180 SCRA 130 (1989) The Supreme Court has, however, recognized a distinction between these two business forms and has held that although a corporation cannot enter into a partnership, it may, however, engage in a joint venture with others. WEAKNE SSES OF A PARTNER SHIP (Dean • Villanueva)

Partners are co-owners of the partnership properties and enjoy personal possession (Art.

•

1811)

Partners may individually dispose of real property of the partnership even when in

1•

2•

1•

2•

partnership name (Art. 1819)

Dissolution of the partnership can come about by the change in the relationship of the partners, such as when a partner chosses to cease being

partnership business can only be carried at a loss; other equitable reasons (Art. 1831) NOTE:•

part of the partnership (Art. 1828, 1830[1]b) Expulsion of partner dissolves the partnership (Art. 1830[1]d)

Dissolved by the loss of the thing promised to be contributed to the partnership (Art. 1830[4]) Death, insolvency, or civil interdiction of a partner

3• dissolves the

partnership (Art. 1830 [5], [6],[7]) Petition by partner will dissolve the partnership when a partner has been declared insane; or the partner has become incapable of performing his part of the partnership contract; a partner has been found guilty of such conduct as tends to affect prejudicially the partnership business; partner willfully or persistently commits a breach of partnership agreement; the

1•

SEC Opinion, 28 April 1995: The death of a partner, as a general rule, dissolves the partnershi p by operation of law, except if the articles of partnershi p stipulate for the continuan ce of the partnershi p relations upon the death of any of the partners.

SEC Opinion, 5 August 1997: If the remaining partners of the dissolved partnershi p intended for all legal intents and purposes,

to continue the partnership business even after the death of a partner, there is continuity

of personalit y of the partnershi p as there exists a "partnersh ip at will." Page 159 of 297

by Estoppel under Article 1825

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RULES TO DETERMIN E EXISTENC E OF P A R T N E R S H I P GENERAL RULE: Persons who are NOT partners as between themselves, CANNOT be partners as to third persons. (Art. 1769(1)) EXCEPTION: Partnership

OTHER RULES TO DETERMINE WHETHER A PARTNERSHIP EXISTS: (See Art. 1769) 1. Coownershi p or copossessio n does not of itself establish a partnershi p 2. The sharing of gross returns does not of itself establish a partnershi p, whether or not the persons sharing them have a joint or common right or

3.

interest in any property from which the returns are derived; The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, UNLESS such were received in payment: 1. A s d e bt b y in st al l m e nt s or ot h e r w

2.

3.

4.

5.

is e; A s w a g e s or re nt ; A s a n n ui ty ; A s in te re st o n lo a n; A s c o n s i d e r a t i o n f

o r

s t a l l m e n t s

s a l e o f g o o d w i l l o f b u s i n e s s / o t h e r p r o p e r t y b y i n

Art.

1770. A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners. When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated in favor of the State, without prejudice to the provisions of the Penal Code governing the confiscation of the instruments and effects

of a crime.

EFFECTS OF AN UNLAW FUL PARTNE RSHIP: 1. The contract is void ab initio and the partner ship never existed in the eyes of the law. (Art. 1409[1] ) 2. The profits shall be confiscate d in favor of the governme nt. (Art. 1770) 3. The instruments or tools and proceeds of the

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crime

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4.

governme nt. (Art. 1770, Art. 45RPC) The contributi ons of the partners

shall not be confiscat ed unless they fall under no. 3. (See Arts. 1411 and 1412) NOTE: Judicial decree is not necessary to dissolve an unlawful partnership.

EFFECT OF PARTIAL ILLEGALITY:

1. Where a

2.

part of the business of a partnersh ip is legal and a part illegal, an account of that which is legal may be had. Where, without the knowled ge or participa tion of the partners, the firm's profits in a lawful business have been increase d by wrongful acts, the innocent partners are not preclude d as against the guilty partners

from recoveri ng their share of the profits. (De Leon, p. 65)

W HO MA Y BE PA RT NE RS GENERAL RULE: Any person capacitated to contract may enter into a contract of partnership. EXCEPTIONS: 1. Persons who are prohibite d from giving each other any donation or advantag e cannot enter into a universal partners hip. (Art. 1782) 2. Persons suffering from civil

3.

interdicti on. Persons who cannot give consent to a contract: 1. M in or s 2. in s a n e p er s o n s 3. d e af m ut e s w h o d o n ot k n o w h o w to w rit e

MAY CORPOR ATIONS ENTER INTO P A R T N E R S H I P ? Philippine Corporate Law (2001) by Dean Villanueva• (p. 902) citing various SEC Opinions:

Corporati ons may enter into partnershi p agreemen ts on the following condition s: 1. A ut h or it y to e nt er in to a p a

rt n er s hi p re la ti o n is e x pr e s sl y c o nf er re d b y th e c h a rt er or th e a rti cl e s of in c or p or at

io n ( A oI ), a n d th e n at ur e of th e b u si n e s s v e nt ur e to b e u n d e rt a k e n b y th e p a rt

2.

n er s hi p is in li n e w it h th e b u si n e s s a ut h or iz e d b y th e c h a rt er or A oI . If it is a fo re ig

n c or p or at io n, it m u st o bt ai n a li c e n s e to tr a n s a ct b u si n e s s in th e c o u nt ry in a c c or

d a n c e w it h th e C or p or at io n C o d e of th e P

hi li p pi n e s.

WHEN IMMOVABL ES OR REAL RIGHTS C O N T R I B U T E D Page 160 of 297

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1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is

not made, signed by the parties, and attached to the public instrument . GENERAL RULE: Failure to comply with the requiremen t of appearance in public instrument and SEC

Registration will not affect the liability of the partnership and the members thereof to third persons. (Art. 1772 ¶ 2) EXCEPTION: When IMMOVABL E PROPERTY / REAL RIGHTS are contributed, *public instrume nt + inventory * made and signed by the parties and attached to the public instrument (Arts. 1771 and 1773) is required for the benefit of third persons.

PROPERTY IS CONTRIBUTED VOID

VOID

With Public Instrument, No Inventory

VOID

VOID

VALID

No Public Instrument, With Inventory

but either party may compel execution of public instrument so it may be registered in the registry of property; nonetheless, partnership agreement may be enforced (cf. Arts. 1356 to

VOID

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With Public Instrument, With Inventory

(Source: Bar Review Notes for Partnership Law by Atty. Villareal) NOTE:•

EFFECT OF ABSENCE OF REQUIREMENT S UNDER ARTICLES 1771 AND 1773 CONDITION OF PARTNERSHIP WHERE REAL

No public Instrument, No Inventory

B

Torres v. CA, 320 SCRA 428 (1999)

VALID

VALID

immovab î Partnershi ps

void

under Art.1773, in relation

le property contribut ed,

in

spite

of

article

Art. 1771

1773

may

declaring

still

be

the

considere

partners

d

either

de

facto

or partnershi ps

vis-à-

vis

third

persons; may even be treated an

ordinary contract from which rights and obligation s

may

validly arise, although not exactly a partnershi p

under

the

Civil

Code. îFailu re

to

prepare an inventory of

would not

estoppel

as

hip void

the

render the partners hip void when:

1. N O T H I R D P A R T Y I N V O L V E D (s in c e A rt. 1

2.

77 3 wa s int en de d for the pr ote cti on of 3r d pa rti es; Pa rtn ers ha ve M AD E A CL AI M O N TH E PA RT NE RS HI P AG RE E M EN T.

CLASSIFIC ATIONS OF PARTNER SHIP AS TO EXTENT OF ITS SUBJECT MATTER

1. UNIVERS AL PARTNE RSHIP 1. U N IV E R S A L P A R T N E R S H IP O F A L L P R E S E N T P R O P E R T Y

co mp ris es the foll ow ing : 1. Pr o p er ty w hi c h b el o n g e d to e a c h of th e p ar tn er s at th e ti m e of th e c o

n s t i t u t i o n o f t h e p a r t n e r s h i p

2. Pr

ofi ts w hi ch th ey m ay ac qu ire fro m all pr op ert y

2. U

c o n tr ib u t e d

NI VE RS AL PA RT NE RS HI P OF PR OF IT S co mp ris es all tha t the pa rtn ers ma y ac qui re by the ir ind ust ry or wo rk

d ur in g th e e xi st e n c e of th e p ar tn er s hi p NOTE: Persons who are prohibited from giving donations or advantage to each other cannot enter into a universal partnership. (Art. 1782) 2. PA RTI CU LA R PA RT NE RS HIP — has for its obj

ects: 1. De ter mi nat e thi ng s 2. Th eir us e or frui ts 3. Sp eci fic un de rta kin g 4. Ex erc ise of pr ofe ssi on or vo cat ion

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2. LIMITED PART NER

AS TO LIABILITY OF PARTNERS 1. GENERAL PART NERS HIP— consi sts of gener al partn ers who are liable pro rata and subsi diarily and somet imes solida rily with their separ ate prope rty for partn ership debts. Page 161 of 297

SHIP —one forme d by 2 or more perso ns havin g as mem bers one

or more gener al partn ers and one or more limite d partn ers, the latter not being perso nally liable for the obliga tions of the partn ershi p AS TO DURATION

1. PARTNE RSHI P AT WILL —one in which no time is speci fied and is not forme d for

2.

a partic ular under taking or ventu re which may be termi nated anyti me by mutu al agree ment PARTNE RSHI P WITH A FIXE D TER M— the term for which the partn ershi p is to exist is fixed or agree d upon or one forme d for a partic

ular under taking

ents for its esta blish men t

AS TO LEGALITY OF EXISTENCE

1. DE JURE

PAR TNE RSH IP— one whic h has com plied with all the legal requ irem ents for its esta blish men t

2. DE

FAC TO — one whic h has faile d to com ply with all the legal requ irem

AS TO PURPOSE

1. COMME

2.

RCIA L OR TRA DING PART NER SHIP —one forme d for the trans action of busin ess PROFES SION AL OR NON TRA DING PART NER SHIP —one forme d for the exerci se of a profe ssion

KINDS OF PARTNERS:

e liabilit y to 3

1. CAPITA

2.

3.

LIST — one who contr ibute s mon ey or prop erty to the com mon fund INDUST RIA L— one who contr ibute s only his indu stry or pers onal servi ce GENERA L— one whos e liabilit y to 3

rd

5.

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or busine ssTIFF(Unc ompressed)

ofthedec ompressorp artners hip

6.

rd

4.

perso ns exten ds to his separ ate prope rty LIMITED —one whos

perso ns is limite d to his capita l contri butio n MANAGI NG—one who manages the affairs

7.

are need ed to see this pictur e.

LIQUI DATI NG— one who takes charg e of the windi ng up of partn ershi p affair s upon dissol ution PART NER S BY ESTO PPEL —one who

is not really a partn er but is liable as a partn er for the prote ction of innoc ent

8. CONTIN

rd

3 perso ns

9.

UING PART NER —one who contin ues the busin ess of a partn ershi p after it has been dissol ved by reaso n of the admis sion of a new partn er, retire ment, death or expul sion of one of the partn ers SURVIVI NG PART NER —one who

10.

11.

remai ns after a partn ershi p has been dissol ved by death of any partn er SUBPAR TNE R— one who is not a mem ber of the partn ershi p who contr acts with a partn er with refere nce to the latter' s share in the partn ershi p OSTENSI BLE —one who

12.

13.

takes active part and know n to the public as partn er in the busin ess SECRET —one who takes active part in the busin ess but is not know n to be a partn er by outsid e partie s SILENT —one who does not take any active part in the busin ess altho ugh he

14.

may be know n to be a partn er DORMAN T— one who does not take active part in the busin ess and is not know n or held out as a partn er

OBLIGATION S OF THE PARTNERS TO ONE AN OT HE R

1) OBLIGATION S OF THE PARTNERS AMONG THEMSELV ES 1. PROMISED CONTRIBUT

ION Obligations with respect to contributio n of property: 1. to c o nt ri b ut e at th e b e gi n ni n g of th e p a rt n er s hi p or at th e st ip ul at e d ti m e th

e m o n e y, pr o p e rt y or in d u st ry w hi c h h e m a y h a v e pr o m is e d to c o nt ri b ut e ( A rt . 1

2.

7 8 6) T o a n s w er fo r e vi ct io n in c a s e th e p a rt n er s hi p is d e pr iv e d of th e d et er m in at e

3.

pr o p e rt y c o nt ri b ut e d ( A rt . 1 7 8 6) T o a n s w er to th e p a rt n er s hi p fo r th e fr ui ts of th e

pr o p e rt y th e c o nt ri b ut io n of w hi c h h e d el a y e d, fr o m th e d at e th e y s h o ul d h a v e b

4.

e e n c o nt ri b ut e d u p to th e ti m e of a ct u al d el iv e ry ( A rt . 1 7 8 6) T o pr e s e rv e s ai d pr o

p e rt y w it h th e di li g e n c e of a g o o d fa th er of a fa m il y p e n di n g d el iv e ry to p a rt n er s

5.

hi p ( A rt . 1 1 6 3) T o in d e m ni fy p a rt n er s hi p fo

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o f t h e s a m e o r b

r a n y d a m a g e c a u s e d to it b y th e re te nt io n Page 162 of 297

y th e d el a y in its c o nt ri b ut io n ( A rt s.

1 7 8 8 , 1 1 7 0 ) EFFECT OF FAILURE TO CONTRIBUTE PROPERTY PROMISED: 1. Partners becomes ipso jure a debtor of the partnersh ip even in the absence of any demand (See Art. 1169[1]) 2. Remedy of the other partner is not rescissio n but specific performa nce with damages from defaulting partner (Art. 1788) Obligations with respect to contributio

n of money and money converted to personal use: 1. T o c o nt ri b ut e o n th e d at e fix e d th e a m o u nt h e h a s u n d er ta k e n to c o nt ri b

2.

u t e t o t h e p a rt n e r s hi p T o r ei m b u r s e a n y a m o u n t h e m a y h a v e t a k e n

3.

fr o m th e p ar tn er s hi p c o ff er s a n d c o n v er te d to hi s o w n u s e T o p a y fo r th e a gr e e d

o r le g al in t e r e st , if h e f ai ls t o p a y hi s c o n tr ib u ti o n o n ti m e o r in c a s e h e t a

4.

k e s a n y a m o u nt fr o m th e c o m m o n fu n d a n d c o n v er ts it to hi s o w n u s e T o in d e m

ni fy t h e p a rt n e r s hi p f o r t h e d a m a g e s c a u s e d t o it b y d el a y in t h e c o n tr

ib ut io n or c o n v er si o n of a n y s u m f o r h i s p e r s o n a l b e n e f i t s ( S e

e A r t . 1 7 8 8 ) 2. FIDUCIARY DUTY A partnership is a fiduciary relation—one entered into and to be maintained on the basis of trust and confidence. With that, a partner must observe the utmost good faith, fairness, and integrity in his dealings with the others: 1. h e c a n n o t di r e ct ly o r in di r e

2.

ctl y u s e p ar tn er s hi p a ss et s fo r hi s o w n b e n e fit ; h e c a n n ot c ar ry o n a b u si n e ss of th

3.

e p a rt n e r s hi p f o r hi s p ri v a t e a d v a n t a g e ; h e c a n n o t, in c o n d u ct in g t h

e b u si n e ss of th e p ar tn er s hi p, ta k e a n y pr o fit cl a n d e sti n el y;

4.

he ca nn ot Qui ckTi me

o bt ai nnd ™

a

for hi m se lf th

at h e should have obtained for the

5.

partnership opportunity) h e c a n n o t c a rr y o n a n o t h e r b u si n e s s in c o m p e tit io n w it h t h e p a

6.

rt n er s hi p; h e c a n n ot a v ail hi m s el f of k n o wl e d g e or in fo r m at io n w hi c h m a y b e pr o

p e rl y r e g a r d e d a s t h e p r o p e rt y o f t h e p a rt n e r s hi p ;

PROHIBITION AGAINST COMPETITIVE BUSINESS INDUSTRIAL PARTNER --cannot engage in business (w/n same line of business with the partnership) unless partnership expressly permits him to do so. (Art. 1789)

CONSEQUENCE S IF AN INDUSTRIAL PARTNER ENGAGES IN ANY BUSINESS: (Art. 1789) 1. he can be excluded from the partnershi p; or 2. the capitalist partners can avail of the benefit he obtained from the business , or 3. the capitalist partners have the right to file an action for damage s against

ENGAGING

IN

CAPITALIST PARTNER --cannot engage in business (with same kind of business with the partnership) for his own account, unless there is a stipulation to the contrary. ( Art. 1808)

the industria l partner, in either case. CONSEQUENC ES IF THE CAPITALIST PARTNER ENGAGES IN A BUSINESS (which competes with the business of the partnership): 1. he may be required to bring to the common fund the profits he derived from the other busines s; (Art. 1808) 2. he shall personal ly bear the losses; (Art. 1808) 3. he may be ousted form the partners hip, especiall y if there was a warning.

Obligation s with respect to contributio n to partnershi p capital: 1. P a r t n e r s m u s t c o n t r i b u t e e q u a l s h a r e s t o t h e c a

p i t a l o f t h e

t o

p a r t n e r s h i p u n l e s s t h e r e i s s t i p u l a t i o n

2.

c o n t r a r y ( A r t . 1 7 9 0 ) P a r t n e r s ( c a p it a li s t ) m u s t c o n t r i

b u t e a d d i t i o n a l c a p i t a l I n c a s e o f i m m i n e n t l o s s t o t

h e b u s i n e s s o f t h e p a r t n e r s h i p a n d t h e r e i s n o s ti p u l a

t i o n o t h e r w i s e ; r e f u s a l t o d o s o s h a l l c r e a t e a n o b l

i g a ti o n o n h i s p a r t t o s e ll h i s i n t e r e s t t o t h e o t h e r p ar tn

e r s ( A rt . 1 7 9 0 ) Requisit es: 1. T h e r e i s a n i m m i n e n t l o s s o f t h e b u s i n

e s s o f t h e p a r t n e r s h i p

2. T h e

m a j o r it y o f t h e c a p it a li s t p a r t

n e r s

u ti o n

a r e

t o t h e

o f t h e

c o m m o n

o p i n i o n

f u n d

t h a t a n a d d i t i o n a l c o n t r i b

Civil Law Summer

w o u l d s a v e t h e

Page 163 of 297

Reviewer ATENEO 

b u s i n e s s

o n t r i b u t e

CENTRAL BAR  OPERATIONS 

2007 3. T h e c a p i t a l i s t p a r t n e r r e f u s e s d e l i b e r a t e l y

( n o t d u e t o

4.

f i n a n c i a l i n a b i l i t y ) T h e r e

t o

i s

c

n

o a g r e e m e n t t o t h e c o n t r a r y Obligation of managing partners who collects debt from person who also owed the partnershi p (Art. 1792) 1. A p p l y s u m

c o l l e c t e d t o 2 c r e d i t s i n p r o p o r t i o n t o t h e i r a m o u

n t s

2. I

f h e r e c e i v e d i t f o r t h e a c c o u n t o f p a r t n e r s h i p , t h

e w h o l e s u m s h a l l b e a p p l i e d t o p a r t n e r s h i p c r e d i t Requisite

s:

1. T h e r e e x i s t s a t l e a s t 2 d e b t s , o n e w h e r e t h e c o l l e c t

i n g p a r t n e r i s c r e d i t o r a n d t h e o t h e r , w h e r e t h e p a r t

n e r s h i p i s t h e

2.

3.

c r e d i t o r B ot h d e bt s ar e d e m a n d a bl e T h e p a r t n

e r w h o c o l l e c t s i s a u t h o r i z e d t o m a n a g e a n d a c t u a l

l y m a n a g e s t h e p a r t n e r s h i p

Obligation of partner who receives share of partnershi p credit

1. O b l i g e d t o b r i n

g t o t h e p a r t n e r s h i p c a p i t a l w h a t h e h a s r e c e i v e d e v

e n t h o u g h h e m a y h a v e g i v e n r e c e i p t f o r h i s s h a r e o n

l y ( A r t . 1 7 9 3 ) Requisite s: 1. A p a r t n e r h a s r e c e i v e d i n w h o l e o r i n

p a r t , h i s s h a r e o f t h e p a r t n e r s h i p

2.

c r e d i t T h e o t h e r p

a r t n e r s h a v e n o t c o l l e c t e d t h e i r s h a r e s

3. T h e p a r t n e r s

h i p d e b t o r h a s b e c o m e

RULES FOR DISTRIBUTION OF PROFITS AND LOSSES (See Art. 1797) With agreement Without agreement

i n s o l v e n t BEARING THE RISK OF LOSS OF THINGS CONTRIBUTED (Art. 1795)

1799. A stipulation which excludes Specific and determinate one or which are not fungible where only more the use is contributed Specific and determinate partners the ownership of which isfrom any transferred to the partnership share in the TIFF (Unco press d) decompressor profits and are needed to see this picture. is Things contributed to be sold losses void. Things brought and appraised in the inventory NOTE: Specific and determinate Stipulation which are not fungible where only exempting a the use is contributed partner from Fungible things (consumable )

Art.

PROFITS According to agreement 1. Share of capitalist partner is in proportion to his capital contribution 2. Share of industrial partner is not fixed - as may be just and equitable under the circumstances

LOSSES According to agreement 1. If sharing of profits is stipulated apply to sharing of losses 2. If no profit sharing stipulated losses shall be borne according to capital contribution 3. Purely industrial partner not liable for losses

losses should be allowed. If a person can make a gift to another, there is no sound reason why a person cannot also agree to bear all the losses. Of course, as far as THIRD PERSONS are concerned, any such stipulation may be properly declared void. (De Leon, pp. 124-125, citing Espiritu and Sibal) RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT

Partner is appointed manager in the articles of partnership

Partner is appointed manager after constitution of

Civil Law Summer Reviewer ATENEO  CENTRAL BAR  OPERATIONS 

2007

partnership 2 or more persons entrusted with management of partnership without specification of duties/stipulation that each shall not act w/o the other's consent Stipulated that none of the managing partners shall act w/o the consent of others

Manner of management not agreed upon

Power of managing partner is irrevocable without just/lawful cause; Revocable only when in bad faith Power is revocable any time for any cause

Vote of partners representing controlling interest necessary to revoke power

Page 164 of 297

Other rights and obligations of partners: 1. Right to associa te another person with Each may him in execute all acts his of share administration without consen t of other partner s (subpar Concurrence tnershi of all necessary p) for the validity of 2. Right to acts inspect and copy partner ship books at any 1. reason able hour 2. 3. Right to a formal accoun t as to

partners hip affairs (even during existenc e of partners hip): 1. I f h e

hip bus ine ss or pos ses sio n

i s

o f it s p r o p e r t y Q

ui

w r o n g f u l l y

c k Ti m e ™

b y a n d a

h i s c o p a r t n e r s

e x c l u d e d

T I F F ( U n c o m p r e s s e d ) d e c o m p r e s s o r

f r o m p a r t n e r s

2. If

rig ar ht

enee d

exi d sts tosee this

u

n d e r p i c t u r e .

t h e t e r m s o f a n y

3.

4.

a g r e e m e n t A s pr o vi d e d b y a rt 1 8 0 7 W h e n e v

4.

er oth er circ um sta nce s ren der it just an d rea son abl e Duty to render on deman d true and full informa tion affectin g partner ship to any partner or legal represe ntative of any

PROPE RTY—a partner has an equal right to possess ion which is not assigna ble and such right is limited to the share of what remains after partner ship debts have been paid

deceased partner or of any partner under legal disability

5. Duty

to account to the partnershi p as fiduciary

2) PROPERTY

RIGHTS OF A PARTNER 1. His rights in specific partners hip property 2. His interest in the partnershi p 3. His right to particip ate in the manage ment (Art. 1810) NATURE OF PARTNE R'S RIGHT IN SPECIFI C PARTNE RSHIP

NATURE OF PARTN ER'S RIGHT IN THE PARTN ERSHI P—a share in the profits and surplus

3)

OBLIGATI ON OF PARTNER S WITH REGARD TO THIRD PERSONS 1. Every partner

2.

ship shall operate under a firm name. Persons who include their names in the partners hip name even if they are not member s shall be liable as a partner All partners shall be liable for contract ual obligatio ns of the partners hip with their property, after all partners hip assets have been exhaust ed: 1. P ro ra ta 2. S u b

3.

4.

s i d i a r y Admissi on or represe ntation made by any partner concern ing partner ship affairs within scope of his authorit y is evidenc e against the partner ship Notice to partner of any matter relating to partner ship affairs operate s as notice to partner ship, except in case of

fraud:

1. K

2.

n o w le d g e, of p ar tn er a ct in g in th e p ar ti c ul ar m at te r, a c q ui re d w hi le a p ar tn er K n o w

l e d g e o f t h e p a r t n e r a c ti n g i n t h e p a r ti c u l a r m a t t e r t h e

3.

n pr e s e nt to hi s m in d K n o w le d g e of a n y ot h er p ar tn er w h o re a s o n a bl y c o ul d a n d s

h o u l d h a v e c o m m u n i c a t e d i t t o t h e a c ti n g p a r t n e r

5. Partners

and the partners hip are solidary liable to

rd

3 persons for the partner's tort or breach of

trust

6. Liability of incoming partner is limited to:

Page 165 of 297

Civil Law Summer Reviewer

r t y

ATENEO  CENTRAL BAR  OPERATIONS 

f o r

2007

1. H i s s h a r e i n t h e p a r t n e r s h i p p r o p e

e x i s t i n g o b l i g a t i o n s

2. H i s

s e p a r a t e p

r o p e r t y f o r s u b s e q u e n t o b l i g a t i o n s

7. Creditors

of partners hip preferre d in partners hip property & may attach partner' s share in partners

8.

hip assets Every partner is an agent of the partnershi p

POWER OF PARTNER AS AGENT OF PARTNERSHIP Acts for carrying on in the Every partner is an usual way the business agent and may of the partnership execute acts with binding effect even if he has no authority Except: when 3rd person has knowledge of lack of authority 1. Act w/c is not Does not bind apparently for the partnership unless carrying of business authorized by other in the usual way partners 2. Acts of strict dominion or ownership: 3. Assign partnership property in trust for creditors 4. Dispose of good-will of business 5. Do an act w/c would make it impossible to carry on ordinary business of partnership 6. Confess a judgement 7. Enter into compromise concerning a partnership claim or liability 8. Submit partnership claim or liability to QuickTime™ and a decompressor are needed to see this picture.

arbitration TIFF (Uncompressed)

9. Renounce claim of partnership Acts in contravention of a Partnership not liable rd to 3 persons having restriction on authority actual or presumptive knowledge of the restrictions

of the ff.: 1. Directly represent s himself EFFECTS OF to CONVEYANCE anyone OF REAL as a PROPERTY partner in BELONGING TO an PARTNERSHIP existing partnersh Title in partnership name, ip or in a Conveyance in partnership nonname existing partnersh ip 2. Indirectly represent s himself Title in partnership name, by Conveyance in partner's consentin name g to another represent ing him as a partner in an Title in name of 1/ more existing partners, Conveyance partnersh name if partner/partners ip or in a whose name title stands non existing partnersh ip Title in name of 1/more/all rd partners or 3 person in trust for partnership, Conveyance executed partnership name if in name of partners Title in name of all partners, Conveyance in name of all partners PARTNER BY ESTOPPEL — by words or conduct, he does any

Page 166 of 297

Civil Law Summer Reviewer ATENEO  CENTRAL BAR  OPERATIONS 

2007 ELEMENTS TO ESTABLISH LIABILITY AS A PARTNER ON GROUND OF ESTOPPEL: 1. Defenda nt represe nted himself as partner/r epresent ed by others as such and not denied/r efuted by defenda nt 2. Plaintiff relied on such represent ation 3. Statemen t of defendant not refuted LIABILITIES IN ESTOPPEL All partners consented to representation No existing

partnership & all those represented consented; Not all partners of existing partnership consents to representation No existing partnership & not all represented consented; None of partners in existing partnership consented ASSIGNMENT OF INTEREST IN PARTNERSHIP Assignment is subject to three (3) conditions: 1. made in good faith 2. for fair consider ation 3. after a fair and complet e disclos ure of all importa nt informa tion as to its value RIGHTS OF AN ASSIGNEE: 1. Get whatev er assigno rpartner

himself & all those who made representation liable pro-rata/jointly

Person who represented himself liable & those who made/consented to representation separately liable

2.

3.

4.

would have obtained Avail usual remedie s in case of fraud in the manage ment Ask for annulme nt of contract of assignm ent if he was induced to join through any of the vices of consent Demand an accountin g (only in case of dissolutio n) TIF

QuickTime ™ and a

F ( U n c o m p r e s s e d ) d e c o m p r e s s o r a r e n e e d e d

t o s e e

4) RESPON

SIBILITY OF PARTNER SHIP TO PARTNER S 1. To refund the amount s disburse d by partner in behalf of the partners hip + corresp onding interest from the time the expense s are made (loans and advance s made by a partner to the partners hip aside from capital contribu tion)

t h i s p i c t u r e .

2. To answer

3.

for obligations partner may have contracted in good faith in the interest of the partnership business To answer for risks in consequen ce of its manageme nt

CHAPTER 3: DISSOLUTION AND WINDING UP DISSOLUTION— change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business; partnership is not terminated but continues until the winding up of partnership affairs is completed WINDING UP— process of

settling the business or partnership affairs after dissolution TERMINATION— that point when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. CAUSES OF DISSOLUTION: 1. Without violation of the agreement between the partners 1. By termin ation of the definit e term/ partic ular under taking speci fied in the agree ment 2. By the expre ss will of any partn

3.

er, who must act in good faith, when no definite term or particu lar undert aking is specifi ed By the expres s will of all the partner s who have not assign ed their interes t/ charge d them for their separa te debts, either before or after the termin ation of any specifi ed term or particu lar

under taking

4. By

2. In

3.

the bona fide expul sion of any partn er from the busin ess in accor dance with power confer red by the agree ment

contraventi on of the agreement between the partners, where the circumstan ces do not permit a dissolution under any other provision of this article, by the express will of any partner at any time By any event which

4.

makes it unlawful for business to be carried on/for the members to carry it on for the partnership Loss of specific thing promised by partner before its delivery

5. Death 6.

7.

8.

of any partner Insolvency of a partner/par tnership Civil interdiction of any partner Decree of court under art 1831

Page 167 of 297

Civil Law Summer Reviewer ATENEO  CENTRAL  BAR  OPERATIONS 

2.

2007

GROUNDS FOR DISSOLUTION BY DECREE OF COURT (Art. 1831) 1. Partner declare d insane in any judicial procee ding or shown Partner continues to bind partnership even after dissolution in ff. cases: (1) Transactions in connection to winding up partnership to be

3.

of uns oun d min d Inc apa city of part ner to perf orm his part of the part ner ship con trac t Part ner guilt y of con duc t

4.

5.

6.

Upon•

prejudi cial to busine ss of partner ship Willful or persist ent breach of partner ship agree ment or conduc t which makes it reason ably impract icable to carry on partner ship with him Busine ss can only be carried on at a loss Other circum stance s which render dissolu tion equitab le

app licat ion by pur cha ser of part ner' s inte rest : Afte r ter min atio n of spe cifie d ter m/p arti cula r

1•

unde rtakin g

Any tim e if part ner ship at will whe n inte rest was assi gne d/c har gin g ord er issu ed

EF FE CT S OF DIS SO LU TIO N

1.

AUTHORI TY OF PARTNE R TO BIND PARTNE RSHIP

GENERAL RULE: Authority of partners to bind partnership is terminated Exception: 1. Wind up partner ship affairs 2. Comple te transac tions not finishe d QUALIFICATI ONS: 1. With respec t to partne rs— 1. Aut

h o r i t y o f p a r t n e r s t o b i n d p a r t n e r s h i p b y n e w c o n t

rac t is im me dia tel y ter mi nat ed wh en dis sol uti on is not du e to AC T, DE AT H or IN SO LV EN CY (A DI) of 1p a r t n e r ( a r t 1 8 3

3 ) ;

2. I f d u e t o A D I , p a r t n e r s a r e l i a b l e a s i f p a r t n

9.

ers hip not dis sol ve d, wh en the ff. co nc ur: If ca us e is AC T of pa rtn er, act ing pa rtn er mu st ha ve kn ow led ge of s u c h d i s s o l u ti

onQu

ickTime ™ad a

ii.

TIFF (Uncompresse d) decompressor

I f c a u s e r

e n e d e d

i s t

o

s e e

D E A T H t

h i s p i c t u r e .

o r I N S O L V E

NC Y, acti ng par tne r mu st hav e kn owl ed ge/ not ice

2. With respect to persons not partners (Art.

(2)

1834 ) —

a .

(1)

affai rs/c om pleti ng tran sact ions unfi nish ed Tra nsa ctio ns whi ch wo uld bin d part ner shi p if not diss olv ed, wh en the oth er part y/o blig ee: Situ atio n 1 1. H a d e x

t e n d e d c r e d it t o p a r t n e r s h i p p r i o r t o d i s s o l u ti o n &

2. H a

(2) Situ

d n o k n o w l e d g e / n o ti c e o f d i s s o l u ti o n , o r

atio n 2 1. D i d n o t e x t e n d c

r e d i t t o p a r t n e r s h i p

2.

H a d k n o w n p a rt n e r s h i p p ri o r t o d is s o l

u ti o n

3. H a d n o k n o w l e d g e / n o ti c e o f d i s s o l u ti o n /f a c t o f d i s s o l u

ti o n n o t a d v e rt is e d in a n e w s p a p e r o f g e n e r al ci r c ul a ti o n in t h e pl a c e

w h e r e p a rt n e r s h i p i s r e g u l a rl y c a r ri e d o n

2. Partner

cannot bind the partners hip anymor e after dissoluti on: (1) Wh ere diss oluti on is due

(2)

(3)

to unlawf ulness to carry on with busine ss (except : winding up of partner ship affairs) Where partner has becom e insolve nt Where partner unauth orized to wind up partner ship affairs, except by transac tion with one who: (1) Sit uati on 1-

1 . H a d e x t

e n d e d c r e d i t t o p a r t n e r s h i p p r i o r t o d i s s o l u t i o n

&

2

H a d n o k n o w l e d g e / n o t i c e o f d i s s o l u t i o n , o r (2) Sit uati on 21. D i d n o

t e x t e n d c r e d i t t o p a r t n e r s h i p p r i o r t o d i s s o l u t i o n

2. H

3.

a d k n o w n p ar tn er s hi p pr io r to di ss ol ut io n Ha d no kn owl ed ge/ not ice of dis sol uti on/ fac t of dis sol uti on not ad ver tis ed

i n a n e w s p a p e r o f g e n e r a l c i r c u l a t i o n i n t h e p l a c

e wh ere par tne rsh ip is reg ula rly

c a r r i e d o n

Page 168

Civil Law Summer Reviewer ATENEO  CENTRAL BAR  OPERATIONS 

2007

B. DISCHARGE OF LIABILITY Dissolution does not discharge existing liability of partner,

•except by

agreement between: • Partner and himself

•

person/ partners hip continui ng the busines s partners hip creditor s

RIGHTS OF are needed to see this picture.

PARTNER WHERE DISSOLUTION NOT IN CONTRAVENTIO N OF AGREEMENT: 1. Apply

2.

of 297

partnershi p property to discharge liabilities of partnershi p Apply surplus, if any to pay in cash the net amount owed to partners

RIGHTS OF PARTNER WHERE DISSOLUTION IN CONTRAVENTIO N OF AGREEMENT: 1. Partner who did not cause dissolutio n wrongfully : 1. A p pl y

2.

p a rt n er s hi p pr o p e rt y to di s c h ar g e li a bi lit ie s of p a rt n er s hi p A p pl y s ur pl u s, if a n y

3.

to p a y in c a s h th e n et a m o u nt o w e d to p a rt n er s In d e m ni ty fo r d a m a g e s c a u s e d

4.

b y p a rt n er g ui lt y of w ro n gf ul di s s ol ut io n C o nt in u e b u si n e s s in s a m e n a m e d ur in g

5.

2. Partner

a gr e e d te r m P o s s e s p a rt n er s hi p pr o p e rt y if b u si n e s s is c o nt in u e d

who wrongly caused dissolutio n:

1. If

b u si n e s s n ot c o nt in u e d b y ot h er s a p pl y p a rt n er s hi p pr o p e rt y to di s c h ar g e

li a bi lit ie s of p a rt n er s hi p & re c ei v e in c a s h hi s s h ar e of s ur pl u s le s s d a m a g e s c a

2.

u s e d b y hi s w ro n gf ul di s s ol ut io n If b u si n e s s c o nt in u e d b y ot h er s h a v e th e v al

u e of hi s in te re st at ti m e of di s s ol ut io n a s c e rt ai n e d a n d p ai d in c a s h/ s e c ur e d b y b

o n d & b e re le a s e d fr o m al l e xi st in g/ fu tu re p a rt n er s hi p li a bi lit ie s RIGHTS OF INJURED PARTNER WHERE PARTNERSHIP CONTRACT IS RESCINDED ON GROUND OF FRAUD/MISREP RESENTATION BY 1 PARTY:

QuickTime™

and a

1.

Right to TIFF lien(Ucompressed)onsurplus decompreor of partnership property

after satisfying partnership liabilities

2. Right

to subrogati on in place of creditors after payment of partnershi p liabilities 3. Right of indemnific ation by guilty partner against all partnershi p debts & liabilities 3. SETTLEMEN T OF ACCOUNTS BETWEEN PARTNERS ASSETS OF THE PARTNERSHIP:

1. Partnersh

2.

ip property (including goodwill) Contributi ons of the partners

2. ORDER OF APPLICATION OF ASSETS: 1. Partners hip creditors 2. Partners as creditors 3. Partner s as investor s— return of capital contribut ion 4. Partner s as investor s— share of profits if any D. WHEN BUSINESS OF DISSOLVED PARTNERSHIP IS CONTINUED: 1. Creditors of old partnershi p are also creditors of the new

3.

partnershi p which continues the business of the old one w/o liquidatio n of the partnershi p affairs Creditors have an equitable lien on the considera tion paid to the retiring /decease d partner by the purchaser when retiring/de ceased partner sold his interest w/o final settlemen t with creditors Rights if retiring/est ate of deceased partner: 1. To have the value of his intere st ascer taine d as

2.

of the date of dissol ution To receiv e as ordin ary credit or the value of his share in the dissol ved partn ershi p with intere st or profit s attrib utabl e to use of his right, at his optio n

PERSONS AUTHORIZED TO WIND UP 1. Partners designate d by the agreemen t 2. In absence of agreemen t, all partners who have

3.

not wrongfully dissolved the partnershi p Legal represent ative of last surviving partner CHAPTER 4: LIMITED PARTNER SHIP

CHARACTERIST ICS: 1. Formed by complian ce with statutory requireme nts 2. One or more general partners control the business 3. One or more general partners contribute to the capital and share in the profits but do not participat e in the managem

4.

ent of the business and are not personall y liable for partnershi p obligation s beyond their capital contributi ons May ask for the return of

5.

their capital contributi ons under condition s prescribe d by law Partnersh ip debts are paid out of common fund and the individual properties of general partners

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2007

partners Name may appear in firm name Prohibition against engaging in business Retirement, death, insolvency, insanity of gen partner dissolves partnership

REQUIREMENT S FOR FORMATION OF LIMITED PARTNERSHIP: 1. Certifica te of articles GENERAL of the Personally liable for limited partnership obligations partners When manner of mgt. not hip agreed upon, all gen must partners have an equal state right in the mgt. of the the ff. business Contribute cash, property matters: or industry 1. N a Proper party to m proceedings by/against partnership e Interest not assignable of w/o consent of other p

DIFFERENCES BETWEEN GENERAL AND LIMITED PARTNER/PART NERSHIP

Name must appear in firm name No prohibition against engaging in business Does not have same effect; rights transferred to legal representative

2.

3.

art ne rs hi p + wo rd "lt d." Ch ar ac ter of bu sin es s L o c a ti o n o f p ri n c i p a l p l a c e o f b u s i n e s

s

4. N

a m e / p l a c e o f r e s i d e n c e o f m e m b e r s

5. Te r m fo r p ar tn er sh ip is to ex ist

6. A

7.

8.

m o u n t o f c a s h / v a l u e o f p r o p e rt y c o n tr i b u t e d Ad diti on al co ntr ib uti on s Ti m e

i.

a gr e e d u p o n to re tu rn co nt ri b uti o n of li mi te d p ar tn er

Sharing of profits/ot her T I F F ( U n c o m p r e s s e d ) d e c o m p r e s s o r

c o m p e n s a t i

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g ht to a d mi t a d dit io n al p ar tn er s 12. R i g h t o f li m it e d p a r t n e r s ( i

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n e r s ( i f g i v e n ) o r c o n t i n u e b u s i n e s s i n c a s e

of de at h, ins an ity, ret ire m en t, civ il int er dic tio n, ins olv en cy

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gh t of lim ite d pa rtn er (if giv en ) to de m an d/r ec eiv e pr

2.

o p er ty/ ca sh in re tu rn fo r co nt ri b uti o n Certificat e must be filed with the SEC

WHEN GENERA L PARTNER NEEDS CONSENT /RATIFICA TION OF ALL LIMITED PARTNER S: 1. Do any act in contravent ion of the certificate 2. Do any act which would make it impossibl e to carry on the ordinary

3.

4.

5.

6.

7.

business of the partnershi p Confess judgment against partnershi p Possess partnershi p property/a ssign rights in specific partnershi p property other than for partnershi p purposes Admit person as general partner Admit person as limited partner unless authorized in certificate Continue business with partnershi p property on death, retirement, civil interdiction , insanity or insolvency of gen partner unless

authorized in certificate SPECIFIC RIGHTS OF LIMITED PARTNERS: 1. Right to have partnershi p books kept at principal place of business 2. Right to inspect/co py books at reasonabl e hour 3. Right to have on demand true and full info of all things affecting partnershi p 4. Right to have formal account of partnershi p affairs whenever circumsta nces render it just and reasonabl e 5. Right to ask for dissolutio n and winding up by

6.

7.

decree of court Right to receive share of profits/oth er compensat ion by way of income Right to receive return of contributio ns provided the partnershi p assets are in excess of all its liabilities

REQUISITES FOR RETURN OF CONTRIBUTION OF LIMITED PARTNER: 1. All liabilities of

2.

3.

partnershi p have been paid/if not yet paid, at least sufficient to cover them Consent of all members has been obtained Certificate is cancelled/ amended as to set forth withdrawal /reduction of contributio n LIABILITIE S OF A LIMITED PARTNER

To the partnership Page 170 of 297

Civil Law Summer Reviewer ATENEO CENTRAL BAR OPERATIONS 2007 1. for the difference between his contribution as 2.

actually made and that stated in the certificate as having been made, and for any unpaid contribution which he agreed in the certificate to make in the future time

As a trustee for the partnership 1. for the specific property stated in the certificate as contributed by him but which he had not contributed; 2. for the specific property of the partnership which had been wrongfully returned to him; and 3. Money or other property wrongfully paid or conveyed to him on account of his contribution. DISSOLUTION OF LIMITED PARTNERSHIP (Priority in Distribution of Assets): 1. Those due to creditors, including limited partners 2. Those due to limited partners in respect of their share in profits/compensation 3. Those due to limited partners of return of capital contributed 4. Those due to general partner other than capital & profits 5. Those due to general partner in respect to profits 6. Those due to general partner for return of capital contributed

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