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Art. 1824.

All Partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823. To put it simply: *1824 - Solidary Liability of the partners and partnership to third persons for charges under Art. 1822 and 1823. *1822 - Liability for Partners Wrongful Acts or Omissions *1823 - Liability for Breach of Trust acting within the scope of the firm's business or with the authority of the co-partners. -Provisions of the Articles still apply even though the other partners did not participate in or ratify, or had no knowledge of the act or omission. Because the liability of Art. 1824 arises from the civil liability of the partnership for the wrongful acts or omissions of any partner.

Compared to Art. 1816 Liability Art. 1816 Art. 1822-1824 Joint and Subsidiary (Pro Rata) Solidary Partnership Obligations (Contractual Civil liability of the Partnership arising Obligations) from wrongful acts or omissions of any partner (Torts) *when an act or omission does not constitute a crime or felony punishable by law, it is called a tort.(A quasi-delict)

-The reason for the laws imposition of wider liability on the partnership with respect to torts and breach of trust is based on public policy. -The obligation is solidary because the law protects him who, in good faith, relied upon the authority of a partner, whether such authority is real or apparent. This is the reason why under Article 1824 all partners, whether innocent or guilty, as well as the legal entity which is the partnership, are solidarily liable. ( http://www.scribd.com/doc/98916834/Partnership#download) Illustrative example: (using Art. 1823) (1) Rj, Arman, and Kichi are partners in partnership Ang Ganda ko Co. engaged in a pawnshop business. Rj received from Andrea Stefa a gold watch as securtiy for a loan the latter obtained from the partnership.

In case of the misappropriation of the ring by Rj, who received the same or by Arman, all of the partners are solidarily liable for the loss with Ang Ganda Ko Co. to Andrea Stefa. Even the innocent partners are personally liable without prejudice, of course, to their right to recover from the guilty partner. This is supported by the provision of Art. 1824. That All partners are liable solidarily with the partnership for everything chargeable to the partnership under articles 1822 and 1823. Liwanag vs. CA Facts: Petitioner (Liwanag) and a certain Tabligan went to the house of complainant Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales readily agreed. Under their agreement, Rosales would give the money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents, with a corresponding 40% commission to her if the goods are sold; otherwise the money would be returned to Rosales. Consequently, Rosales gave several cash advances to Liwanag and Tabligan amounting to P633,650.00. Believing that the money was misappropriated, Rosales filed an estafa case against Liwanag. Issue: Whether or not the contract between the parties is that of a simple loan? Or a partnership? Ruling: The court did not specifically rule about the issue but held that, even assuming that a contract of partnership was indeed entered into by and between the parties, we have ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it, such partner is guilty of estafa. So, whether there was a contract of partnership between the parties or not, the accused would still be guilty of estafa. Neither can the transaction be considered a loan, since in a contract of loan once the money is received by the debtor; ownership over the same is transferred. Being the owner, the borrower can dispose of it for whatever purpose he may deem proper.

Art. 1825. When a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to anyone, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such persons to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made: (1) When a partnership liability results, he is liable as though he were an actual member of the partnership; (2) When no partnership liability results, he is liable pro rata with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately.

When a person has been thus represented to be a partner in an existing partnership, or with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. When all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation.

Partner by estoppel; partnership by estoppel. (1) Meaning and effect of estoppel - Estoppel is a bar which precludes a person from denying or asserting anything contrary to that which has been established as the truth by his own deed or representation, either express or implied. Through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be denied or disapproved as against the person relying thereon. (Art. 1431.)( http://www.scribd.com/doc/98916834/Partnership#download) (2) When person a partner by estoppel - A person not a partner may become a partner by estoppel, and thus be held liable to third persons as if he were a partner, when by words or by conduct he: (a) Directly represents himself to anyone as partner in an existing partnership or in a nonexisting partnership (with one or more persons not actual partners); (b) Indirectly represents himself by consenting to another representing him as partner in an existing partnership or in a non-existing partnership. (3) When partnership liability results (Partnership by estoppel) - If all the actual partners consented to the representation, then the liability of the person who represented himself to be a partner or who consented to such representation and the actual partners is considered a partnership liability.[Par. 1 (1)] The person becomes an agent of the partnership and his act or obligation that of the partnership. [Part. 2] (4) When liability pro rata - When there is no existing partnership and all those represented as partners consented to the representation, or not all of the partners of an existing partnership consented to the representation, then, the liability of the person who represented himself be a partner or who consented to his being represented as partner, and all those who made and consented to such representation, is joint or pro rata. [Par. 1(2)] (5) When liability separate - When there is no existing partnership and not all but only some of those represented as partners consented to the representation, or none of the partners in an existing partnership consented to such representation, then the liability will separate. (6) Estoppel does not create partnership - Art. 1825 does not create a partnership as between the alleged partners. A contract, express or implied, is essential to the formation of a partnership.

Elements to establish liability as a partner on ground of estoppel. The basic elements in connection with establishment of liability as a partner if based on the doctrine of estoppel must encompass: (1) Proof by plaintiff that he was individually aware of the defendants representations as to his being a partner or that such representations were made by others and not denied or refuted by the defendant; (2) Reliance on such representations by the plaintiff; and (3) Lack of any denial or refutation of the statements by the defendant; such denial need not precede plaintiffs acting thereon if the denial was forthcoming promptly upon hearing of the representations, and if, by prudence and diligence the plaintiff might have learned of the truth or untruth of the representations. Defendant need not be proved to be a man of nancial ability. Sole reliance is not a requisite with respect to dealings involving the one representing or represented to be a partner. (Barrett &Seago, op. cit., pp. 48-49.)( http://www.scribd.com/doc/98916834/Partnership#download)

Illustrative example: (1) Julo, Abel, and Budi are partners in Warning Bros. Co. engaged in making movies. Kevin represented himself as a partner in the said company to Reynil who, on the faith of such representation, extended Warning Bros. Co. Kevin is a partner by estoppel. He is liable to Reynil as though he is an actual member of the company. If all the partners consented to the representation, then a partnership liability results. This is a case of partnership by estoppel. All the partners and Kevin are liable.[Par 1(1)] (2) If only Julo and Abel consented to the representation, there is no partnership liability. Only Julo, Abel, and Kevin are partners by estoppel. They are liable pro rata to Reynil. [Par. 1(2)] (3) But if Kevin acted alone without the consent of all the partners then he alone is liable to Reynil. He is liable separately. (4) Suppose Julo, Abel and Budi are not really partners and Kevin represented himself as a partner of Julo, Abel and Budi to Reynil. *Representation without consent of Julo, Abel, Budi - Kevin alone is liable separately to Reynil. *Representation with consent of Julo, Abel, Budi - All shall be liable pro rata to Reynil. *If only Julo consented to the representation - Separate liability is created only against Julo and Kevin.

In all cases when there is no existing partnership, or there is no consent by all the members of an existing partnership, it is the joint act or obligation of the person acting and the person consenting to the representation. [Par. 2] *Where party was fraudulently induced to subscribe to proposed corporation. Pioneer vs. CA Facts: Jacob S. Lim (petitioner) was engaged in the airline business as owner-operator of Southern Air Lines (SAL) a single proprietorship. At Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and executed a sales contract (Exhibit A) for the sale and purchase of two (2) DC-3A Type aircrafts and one (1) set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in installments. Pioneer Insurance and Surety Corporation (petitioner) as surety executed and issued its Surety Bond in favor of JDA, in behalf of its principal, Lim, for the balance price of the aircrafts and spare parts. It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in both petitions) contributed some funds used in the purchase of the above aircrafts and spare parts. The funds were supposed to be their contributions to a new corporation proposed by Lim to expand his airline business. They executed two (2) separate indemnity agreements in favor of Pioneer. Later on, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. Lim defaulted on his subsequent installment payments prompting JDA to request payments from the surety. Pioneer paid the sum. Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage. The Cervanteses and Maglana, however, filed a third party claim alleging that they are co-owners of the aircrafts. Issue: Whether or not a contract of partnership existed between Lim and Bormaheco, the Cervanteses, and Maglana? Ruling: Petitioner never had the intention to form a corporation with the respondents despite his representations to them. No de facto partnership was created among the parties which would entitle the petitioner to a reimbursement of the supposed losses of the proposed corporation. The record shows that the petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting the sale of the airplanes and spare parts.

Art. 1826. A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred, except that this liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary. Liability of incoming partner for existing obligations.

(1) Limited to his share in partnership property for existing obligations - when a person is admitted as a partner into an existing partnership, he is liable for all obligations existing at the time of his admission as though he was already a partner when such obligations were incurred. Unless there is a contrary stipulation. His separate property will not be reached by partnership creditors. (2) Extends to his separate property for subsequent obligations - Those who were already partners at the time when the obligations were incurred are liable with their separate property. Reason for rule making the new partner liable. Admission of New partner dissolves the old partnership. The dissolution of which is essential for the creation of a new partnership with the new partner as part of the same. Together with the acceptance of the new partner, all partnership properties and existing liabilities are carried to the new partnership. Unfortunately, partnership creditors prior to the creation of the new partnership, loses preferential rights as partnership creditors, hence, it is prejudicial on their part. That is why in Art. 1826, the new partner is established to be liable even to creditors prior to his admission as partner, so that equality among creditors would be established. Old creditors are now recognized as the creditors of the new firm. Also, the new partner partakes of the benefits of the partnership property and an established business. He has every means of obtaining full knowledge of the debts of the partner-ship and protecting himself because he may insist on the liquidation or settlement of existing partnership debts. On the other hand, these means are not afforded the creditor.

Rights of Existing and subsequent creditors. - Existing and subsequent creditors have equal rights as against partnership property, and separate property of the previously existing members of the partnership while only subsequent creditors have rights against the separate estate of the newly admitted partner. Illustrative Example: (1) Arjey, Keche, and Casing are partners engaged in a Beauty Salon business. Their contribution is P10,000 each. Andrea Stefa is admitted as a new partner with a contribution of P4,000. At the time of his admission, the partnership has an outstanding obligation to Armaning in the amount of P40,000. In this case, Andrea Stefa is also liable to Armaning for this obligation of P40,000. Thus, the assets of the partnership amounting to P34,000 will be exhausted thereby leaving a balance of P6,000 for which only Arjey, Keche, and Casing shall be liable jointly or pro rata, out of their separate property. The liability computation between the partners is different if the obligation was after the admission of Andrea Stefa.

Art. 1827. The creditors of the partnership shall be preferred to those of each partner as regards the partnership property. Without prejudice to this right, the private creditors of each partner may ask for the attachment and public sale of the share of the latter in the partnership assets. Preference of partnership creditors in partnership property. - With respect to partnership assets, the partnership creditors are entitled to priority payment. Reason for the rule. - This rule is based upon the theory that the partnership, treated as a legal entity distinct and separate from the members composing it, should apply its property to the payment of its debts in preference to the claim of any partner or his creditors. (http://www.scribd.com/doc/98916834/Partnership#download) Remedy of private creditors of a partner. - Without prejudice to the right to preference of partnership creditors, the creditors of each partner may ask for the attachment and public sale of the share of the latter in the partnership assets. Illustrative Example: Edgar, Acas, and Kyle are partners in a partnership known as Bully Bros. Co. They contributed equally to the partnership. As they have no stipulation regarding the share of each partner in the profits, they share equally in the partnership assets. After a year of operation, the assets of the partnership amounted to P50,000. It is indebted to Budi in the amount of 35,000. Kevin is separate creditor of Edgar for P8,000. As partnership creditor is preferred, Budi shall be paid first the amount of P35,000, thereby leaving the partnership assets to only P15,000. Each partner shall, therefore, get only P5,000 as his share in the assets. Hence, Kevin can collect only P5,000 from the assets of the partnership. His remedy is to recover the balance of P3,000 from the private property of Edgar.

Angeles vs. Mercado Facts: Angeles spouses filed a criminal complaint for estafa against Mercado. Mercado is the brother-inlaw of the Angeles spouses, being married to Emerita Angeles sister Laura. Mercado convinced the spouses to enter into a contract of antichresis covering eight parcels of land. The contract of antichresis was to last for five years with P210,000 as consideration. As the Angeles spouses stay in Manila during weekdays and go to Laguna only on weekends, the parties agreed that Mercado would administer the lands and complete the necessary paperwork. The spouses continued to demand for an accounting and later on discovered that Mercado had the contract executed with the spouses to the name of Mercado's spouse. Mercado denied the allegations

and claimed that there exists an industrial partnership between him and his spouse and the Angeles spouses as financiers. Issue: Whether a partnership existed between the Angeles spouses and Mercado even without any documentary proof to sustain its existence? And whether failure to register a contract of partnership affects liability to third persons? Whether Mercado is guilty of the crime of estafa? Ruling: The Angeles spouses position that there is no partnership because of the lack of a public instrument indicating the same and a lack of registration with the Securities and Exchange Commission (SEC) holds no water. First, the Angeles spouses contributed money to the partnership and not immovable property. Second, mere failure to register the contract of partnership with the SEC does not invalidate a contract that has the essential requisites of a partnership. The purpose of registration of the contract of partnership is to give notice to third parties. Failure to register the contract of partnership does not affect the liability of the partnership and of the partners to third persons. Neither does such failure to register affect the partnerships juridical personality. The parties have contracted a partnership by estoppel. Although the legal formalities for the formation of a partnership were not adhered to, the partnership relationship of the [Angeles spouses] and [Mercado] is evident in this case. Consequently, there is no estafa where money is delivered by a partner to his co-partner on the latters representation that the amount shall be applied to the business of their partnership. In case of misapplication or conversion of the money received, the co-partners liability is civil in nature.