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A.

As to Duration

1. Partnership with a fixed term


2. Partnership for a particular undertaking
Note Art 1785
3. Partnership at will 1
Ortega vs Court of Appeals 245 Scra 529 (1995)

Ortega vs. CA

FACTS: On December 19, 1980, respondent Misa associated himself together, as


senior partner with petitioners Ortega, del Castillo, Jr., and Bacorro, as junior partners.
On Feb. 17, 1988, respondent Misa wrote a letter stating that he is withdrawing and
retiring from the firm and asking for a meeting with the petitioners to discuss the
mechanics of the liquidation. On June 30, 1988, petitioner filed a petition to the
Commision's Securities Investigation and Clearing Department for the formal
dissolution and liquidation of the partnership. On March 31, 1989, the hearing officer
rendered a decision ruling that the withdrawal of the petitioner has not dissolved the
partnership. On appeal, the SEC en banc reversed the decision and was affirmed by the
Court of Appeals. Hence, this petition.

ISSUE: Whether or not the Court of Appeals has erred in holding that the partnership is
a partnership at will and whether or not the Court of Appeals has erred in holding that
the withdrawal of private respondent dissolved the partnership regardless of his good or
bad faith

HELD: No. The SC upheld the ruling of the CA regarding the nature of the partnership.
The SC further stated that a partnership that does not fix its term is a partnership at
will. 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. Its continued existence
is, in turn, dependent on the constancy of that mutual resolve, along with each
partner's capability to give it, and the absence of a cause for dissolution provided by
the law itself. Verily, any one of the partners may, at his sole pleasure, dictate a
dissolution of the partnership at will. He must, however, act in good faith, not that the
attendance of bad faith can prevent the dissolution of the partnership but that it can
result in a liability for damages.

B. As to Extent of Partners’ Liabilities

1. General Partnership
Lim Tong Lim vs Philippine Fishing Gear, 317 Scra 728 (1999)
2. Limited Partnership
Lim vs. Philippine Fishing Gear Industries Inc.
[GR 136448, 3 November 1999]

FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial
fishing with him. The three agreed to purchase two fishing boats but since they do not
have the money they borrowed from one Jesus Lim the brother of Lim Tong Lim.
Subsequently, they again borrowed money for the purchase of fishing nets and other 2
fishing equipments. Yao and Chua represented themselves as acting in behalf of “Ocean
Quest Fishing Corporation” (OQFC) and they contracted with Philippine Fishing Gear
Industries (PFGI) for the purchase of fishing nets amounting to more than P500k.
However, they were unable to pay PFGI and hence were sued in their own names as
Ocean Quest Fishing Corporation is a non-existent corporation. Chua admitted his
liability while Lim Tong Lim refused such liability alleging that Chua and Yao acted
without his knowledge and consent in representing themselves as a corporation.

ISSUE: Whether Lim Tong Lim is liable as a partner

HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a
fishing business. Moreover, their Compromise Agreement had revealed their intention
to pay the loan with the proceeds of the sale and to divide equally among them the
excess or loss. The boats and equipment used for their business entails their common
fund. The contribution to such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that any loss or profit from the
sale and operation of the boats would be divided equally among them also shows that
they had indeed formed a partnership. The principle of corporation by estoppel cannot
apply in the case as Lim Tong Lim also benefited from the use of the nets in the boat,
which was an asset of the partnership. Under the law on estoppel, those acting in
behalf of a corporation and those benefited by it, knowing it to be without valid
existence are held liable as general partners. Hence, the question as to whether such
was legally formed for unknown reasons is immaterial to the case.

C. Other Classes of Partners


1. Capitalist Partner vs Industrial Partner
2. Original Partner and Subsequent or Incoming Partners
3. Managing Partner
4. Liquidating Partner
5. Retiring Partner
6. Continuing Partner
7. Partner by Estoppel

I. Special Issues as to WHO may qualify to become partners


1. May Spouses Validly Enter into a Partnership Relation?
A. Spouses cannot enter into a Universal Partnership. Art 1782, 133, 87
Commissioner vs Suter, 27 scra 152 (1969)

Commissioner of Internal Revenue vs.


William j. Suter and the Court of Tax Appeals
G.R. No. L-25532, February 28, 1969
3
Facts: A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed
on 30 September 1947 by William J. Suter as the general partner, and Julia Spirig and
Gustav Carlson, as the limited partners. The partners contributed, respectively,
P20,000.00, P18,000.00 and P2,000.00 to the partnership. On 1 October 1947, the
limited partnership was registered with the Securities and Exchange Commission.

In 1948, general partner Suter and limited partner Spirig got married and, thereafter,
on 18 December 1948, limited partner Carlson sold his share in the partnership to Suter
and his wife. The sale was duly recorded with the Securities and Exchange Commission
on 20 December 1948.

The limited partnership had been filing its income tax returns as a corporation, without
objection by the Commissioner of Internal Revenue, until in 1959 when the latter, in an
assessment, consolidated the income of the firm and the individual incomes of the
partners-spouses Suter and Spirig resulting in a determination of a deficiency income
tax against respondent Suter in the amount of P2,678.06 for 1954 and P4,567.00 for
1955. Partner-Spouses Suter protested the assessment.

Issue: Whether or not the partnership was dissolved after the marriage of the
partners, William J. Suter and Julia Spirig Suter and the subsequent sale to them by the
remaining partner, Gustav Carlson?

Ruling: William J. Suter "Morcoin" Co., Ltd. was not a universal partnership, but a
particular one since the contributions of the partners were fixed sums of money,
P20,000.00 by William Suter and P18,000.00 by Julia Spirig and neither one of them
was an industrial partner. It follows that the firm was not a partnership that spouses
were forbidden to enter by Article 1677 of the Civil Code of 1889 (now Article 1782 of
the New Civil Code).

Nor could the subsequent marriage of the partners operate to dissolve it, such marriage
not being one of the causes provided for that purpose by law. The capital contributions
of partners William J. Suter and Julia Spirig were separately owned and contributed by
them before their marriage; and after they were joined in wedlock, such contributions
remained their respective separate property under the Spanish Civil Code (Article 1396)

B. Spouses are NOT qualified to enter into other forms of partnership for
gain
C. Professional Partnerships- Art 1783
D. May Corporations become Partners?
Tuason vs Bolabos, 95 Phil 106 (1954)
Torres vs Court of Appeals 278 Scra 793
*SEC Rules

TUASON VS. BOLANOS


GR. No. L-4935. May 28, 1954; 95 Phil. 106 4

Facts: Plaintiff’s complaint against defendant was to recover possession of a registered


land. In the complaint, the plaintiff is represented by its Managing Partner,
Gregorio Araneta, Inc., another corporation. Defendant, in his answer, sets up
prescription and title in himself thru "open, continuous, exclusive and public and
notorious possession under claim of ownership, adverse to the entire world by
defendant and his predecessors in interest" from "time immemorial". After
trial, the lower court rendered judgment for plaintiff, declaring defendant to be without
any right to the land in question and ordering him to restore possession thereof to
plaintiff and to pay the latter a monthly rent. Defendant appealed directly to the
Supreme Court and contended, among others, that Gregorio Araneta, Inc. cannot act as
managing partner for plaintiff on the theory that it is illegal for two corporations to
enter into a partnership.

Issue: Whether or not a corporation may enter into a joint venture with another
corporation.

Ruling: It is true that the complaint states that the plaintiff is "represented herein by
its Managing Partner Gregorio Araneta, Inc.", another corporation, but there
is nothing against one corporation being represented by another person, natural or
juridical, in a suit in court. The contention that Gregorio Araneta, Inc. cannot act as
managing partner for plaintiff on the theory that it is illegal for two corporations to
enter into a partnership is without merit, for the true rule is that "though a corporation
has no power to enter into a partnership, it may nevertheless enter into a joint venture
with another where the nature of that venture is in line with the business authorized by
its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2.
Fletcher Cyc. of Corp., 1082.). There is nothing in the record to indicate that the
venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing
partner" is not in line with the corporate business of either of them.

Manuel Torres, Jr. vs Court of Appeals


278 SCRA 793
– Business Organization – Corporation Law – Transfer of Shares of Stocks – Corporate
Records

FACTS: Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty
& Development Corporation (TRDC). TRDC is a small family owned corporation and
other stockholders thereof include Judge Torres’ nieces and nephews. However, even
though Judge Torres owns the majority of TRDC and was also the president thereof, he
is only entitled to one vote among the 9-seat Board of Directors, hence, his vote can
be easily overridden by minority stockholders. So in 1987, before the regular election of
TRDC officers, Judge Torres assigned one share (qualifying share) each to 5 “outsiders”
for the purpose of qualifying them to be elected as directors in the board and thereby
strengthen Judge Torres’ power over other family members.

However, the said assignment of shares were not recorded by the corporate secretary,
Ma. Christina Carlos (niece) in the stock and transfer book of TRDC. When the validity
of said assignments were questioned, Judge Torres ratiocinated that it is impractical for 5
him to order Carlos to make the entries because Carlos is one of his opposition. So
what Judge Torres did was to make the entries himself because he was keeping the
stock and transfer book. He further ratiocinated that he can do what a mere secretary
can do because in the first place, he is the president.

Since the other family members were against the inclusion of the five outsiders, they
refused to take part in the election. Judge Torres and his five assignees then decided to
conduct the election among themselves considering that the 6 of them constitute a
quorum.

ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the
subsequent election is valid.

HELD: No. The assignment of the shares of stocks did not comply with procedural
requirements. It did not comply with the by laws of TRDC nor did it comply with Section
74 of the Corporation Code. Section 74 provides that the stock and transfer book
should be kept at the principal office of the corporation. Here, it was Judge Torres who
was keeping it and was bringing it with him. Further, his excuse of not ordering the
secretary to make the entries is flimsy. The proper procedure is to order the secretary
to make the entry of said assignment in the book, and if she refuses, Judge Torres can
come to court and compel her to make the entry. There are judicial remedies for this.
Needless to say, the subsequent election is invalid because the assignment of shares is
invalid by reason of procedural infirmity. The Supreme Court also emphasized: all
corporations, big or small, must abide by the provisions of the Corporation Code. Being
a simple family corporation is not an exemption. Such corporations cannot have rules
and practices other than those established by law.

II. PARTNERSHIP: FORMAL AND REGISTRATION REQUIREMENTS

1. Art 1771, 1784, 1772


Angeles vs Secretary of Justice, 465 Scra 106 (2005)
Rojas vs MAglana, 192 Scra 110 (1990)

ANGELES vs. SECRETARY OF JUSTICE


(July 29, 2005)
Oscar Angeles and Emerita Angeles, petitioners,
v. The Hon. Secretary of Justice and Felino Mercado, respondents
DOCTRINE: The purpose of registration of the contract of partnership with the SEC 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, nor does it
affect the partnership’s juridical personality.

A partnership may exist even if the partners do not use the words “partner” or
“partnership.”
6
NATURE: Special civil action. Certiorari.

FACTS: Angeles spouses filed a criminal complaint for estafa against Mercado, their
brother--‐in--‐law, & claimed that Mercado convinced them to enter into a contract of
antichresis, to last for 5 years, covering 8 parcels of land planted with fruit--‐bearing
lanzones trees in Nagcarlan, Laguna and owned by Juan Sanzo.

The parties agreed that Mercado would administer the lands and complete the
necessary paperwork.

After 3 years, the Angeles spouses asked for an accounting from Mercado, and they
claim that only after this demand for an accounting did they discover that Mercado had
put the contract of antichresis over the subject land under Mercado and his spouse’s
names.

Mercado denied the Angeles spouses’ allegations.

Claimed that there exists an industrial partnership, colloquially known as Sosyo


industrial, between him and his spouse as industrial partners and the Angeles spouses
as financiers, and that this had existed since1991, before the contract of antichresis
over the subject land.

Mercado used his and his spouse’s earnings as part of the capital in the business
transactions which he entered into in behalf of the Angeles spouses. It was their
practice to enter into business transactions with other people under the name of
Mercado because the Angeles spouses did not want to be identified as the financiers.

Attached bank receipts showing deposits in behalf of Emerita Angeles and contracts
under his name for the Angeles spouses.

During the barangay conciliation proceedings, Oscar Angeles stated that there was a
written sosyo industrial agreement: capital would come from the Angeles spouses while
the profit would be divided evenly between Mercado and the Angeles spouses

Provincial Prosecution Office: first recommended the filing of a criminal information


for estafa, but after Mercado filed his counter--‐affidavit and moved for reconsideration,
issued an amended resolution dismissing the complaint.

Angeles spouses appealed to Sec. of Justice, saying that the document evidencing the
contract of antichresis executed in the name of the Mercado spouses, instead of the
Angeles spouses, and that such document alone proves Mercado’s misappropriation of
their P210,000
Sec. of Justice: dismissed the appeal

Angeles spouses failed to show sufficient proof that Mercado deliberately deceived them
in the transaction.

Mercado satisfactorily explained that the Angeles spouses do not want to be revealed as
the financiers.
7
Under the circumstances, it was more likely that the Angeles spouses knew from the
very start that the questioned document was not really in their names

A partnership truly existed between the Angeles spouses and Mercado, which was clear
from the fact that they contributed money to a common fund and
Divided the profits among themselves.

Angeles spouses acknowledged their joint business venture in the barangay conciliation
proceedings although they assailed the manner the business was conducted.

Although the legal formalities for the formation were not adhered to, the partnership
relationship was evident.

There is no estafa where money is delivered by a partner to his co--‐partner on the


latter’s representation that the amount shall be applied to the business of their
partnership.

In case of the money received, the co--‐partner’s liability is civil in nature

ISSUES/HELD:
1. W/N the Sec. of Justice committed grave abuse of discretion in dismissing the appeal
--‐ No.
2. W/N a partnership existed between Mercado and the Angeles spouses --‐ Yes.
3. W/N there was misappropriation by Mercado – No.

RATIO/RULING:
1. Angeles spouses fail to convince that the Secretary of Justice committed grave abuse
of discretion whenhe dismissed their appeal. Moreover, they committed a procedural
error when they failed to file a motion for reconsideration of the Sec. of Justice’s
resolution, which is already enough reason to dismiss the case.

2. Angeles spouses allege that they had no partnership with Mercado, relying on Arts.
1771 to 1773 of the Civil Code.

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 SEC holds no
water.

The Angeles spouses contributed money to the partnership and not immovable
property. 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 is to give notice to third parties.
Failure to register does not affect the liability of the partnership and of the partners to
third persons, nor does it affect the partnership’s juridical personality.

The Angeles spouses admit to facts that prove the existence of a Partnership:

A contract showing a sosyo industrial or industrial partnership;

Contribution of money & industry to a common fund 8

Division of profits between the Angeles spouses and Mercado

2. Mercado satisfactorily explained that the Angeles spouses do not want to be


revealed as the financiers, thus the document which was in the name of Mercado
and his spouse fail to convince that there was deceit or false representation that
induced the Angeles spouses to part with their money

Even the RTC of Sta. Cruz, Laguna, which handled the civil case filed by the Angeles
spouses against Mercado and Leo Cerayban stated that it was the practice to have the
contracts secured in Mercado’s name as the Angeles spouses fear being kidnapped by
the NPA or being questioned by the BIR as Oscar Angeles was working with the
government.

Accounting of the proceeds is not a proper subject for the present case.

DISPOSITION:
Petition for certiorari dismissed. Decision of Sec. of Justice affirmed.

VOTE: 1st Division, all concur.

Rojas vs. Maglana

Facts: Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast
Development Enterprises (EDE). It was a partnership with an indefinite term of
existence. Maglana shall manage the business affairs while Rojas shall be the logging
superintendant and shall manage the logging operation. They shall share in all profits
and loss equally. Due to difficulties encountered they decided to avail of the sources of
Pahamatong as industrial partners.

They again executed their Articles of Co-Partnership under EDE. The term is 30 years.
After sometime Pamahatong sold his interest to Maglana and Rojas including equipment
contributed. After withdrawal of Pamahatong, Maglana and Rojas continued the
partnership. After 3 months, Rojas entered into a management contract with another
logging enterprise. He left and abandoned the partnership. He even withdrew his
equipment from the partnership and was transferred to CMS. He never told Maglana
that he will not be able to comply with the promised contributions and he will not work
as logging superintendent. Maglana then told Rojas that the latter share will just be
20% of the net profits. Rojas took funds from the partnership more than his
contribution. Thus, Maglana notified Rojas that he dissolved the partnership.

Issue: What is the nature of the partnership and legal relationship of Maglana and
Rojas after Pahamatong retired from the second partnership

Ruling: It was not the intention of the partners to dissolve the first partnership, upon
the constitution of the second one, which they unmistakably called “additional
agreement.” Otherwise stated even during the existence of the second partnership, all 9
business transactions were carried out under the duly registered articles. No rights and
obligations accrued in the name of the second partnership except in favor of
Pahamatong which was fully paid by the duly registered partnership.

3. When Immovable Property Contributed Art 1771, 1773


Agad vs Mabato, 23 Scra 1223 (1968)
Litonjua Jr. vs Litonjua Sr. 477 Scra 576 (2005)

Agad vs Mabato

Facts: Petitioner Mauricio Agad claims that he and defendant Severino Mabato are
partners in a fishpond business to which they contributed P1000 each. As managing
partner, Mabato yearly rendered the accounts of the operations of the partnership.
However, for the years 1957-1963, defendant failed to render the accounts despite
repeated demands. Petitioner filed a complaint against Mabato to which a copy of the
public instrument evidencing their partnership is attached. Aside from the share of
profits (P14,000) and attorney’s fees (P1000), petitioner prayed for the dissolution of
the partnership and winding up of its affairs.

Mabato denied the existence of the partnership alleging that Agad failed to pay his
P1000 contribution. He then filed a motion to dismiss on the ground of lack of cause of
action. The lower court dismissed the complaint finding a failure to state a cause of
action predicated upon the theory that the contract of partnership is null and void,
pursuant to Art. 1773 of our Civil Code, because an inventory of the fishpond referred
in said instrument had not been attached thereto.

Art. 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall
be necessary.

Art. 1773. A contract of partnership is void, whenever immovable property is


contributed thereto, if inventory of said property is not made, signed by the parties;
and attached to the public instrument.

Issue: Whether or not immovable property or real rights have been contributed to the
partnership.
Held: Based on the copy of the public instrument attached in the complaint, the
partnership was established to operate a fishpond", and not to "engage in a fishpond
business.” Thus, Mabato’s contention that “it is really inconceivable how a partnership
engaged in the fishpond business could exist without said fishpond property (being)
contributed to the partnership” is without merit. Their contributions were limited to
P1000 each and neither a fishpond nor a real right thereto was contributed to the
partnership. Therefore, Article 1773 of the Civil Code finds no application in the case at
bar. Case remanded to the lower court for further proceedings. 10

Aurelio Litonjua Jr vs Eduardo Litonjua Sr. et al


Business Organization – Partnership, Agency, Trust – Partnership, how formed

FACTS: Aurelio and Eduardo are brothers. In 1973, Aurelio alleged that Eduardo
entered into a contract of partnership with him. Aurelio showed as evidence a letter
sent to him by Eduardo that the latter is allowing Aurelio to manage their family
business (if Eduardo’s away) and in exchange thereof he will be giving Aurelio P1
million or 10% equity, whichever is higher. A memorandum was subsequently made for
the said partnership agreement. The memorandum this time stated that in exchange of
Aurelio, who just got married, retaining his share in the family business (movie
theatres, shipping and land development) and some other immovable properties, he
will be given P1 Million or 10% equity in all these businesses and those to be
subsequently acquired by them whichever is greater.

In 1992 however, the relationship between the brothers went sour. And so Aurelio
demanded an accounting and the liquidation of his share in the partnership. Eduardo
did not heed and so Aurelio sued Eduardo.

ISSUE: Whether or not there exists a partnership.

HELD: No. The partnership is void and legally nonexistent. The documentary evidence
presented by Aurelio, i.e. the letter from Eduardo and the Memorandum, did not prove
partnership.

The 1973 letter from Eduardo on its face, contains typewritten entries, personal in tone,
but is unsigned and undated. As an unsigned document, there can be no quibbling that
said letter does not meet the public instrumentation requirements exacted under Article
1771 (how partnership is constituted) of the Civil Code. Moreover, being unsigned and
doubtless referring to a partnership involving more than P3,000.00 in money or
property, said letter cannot be presented for notarization, let alone registered with the
Securities and Exchange Commission (SEC), as called for under the Article 1772
(capitalization of a partnership) of the Code. And inasmuch as the inventory
requirement under the succeeding Article 1773 goes into the matter of validity when
immovable property is contributed to the partnership, the next logical point of inquiry
turns on the nature of Aurelio’s contribution, if any, to the supposed partnership.

The Memorandum is also not a proof of the partnership for the same is not a public
instrument and again, no inventory was made of the immovable property and no
inventory was attached to the Memorandum. Article 1773 of the Civil Code requires that
if immovable property is contributed to the partnership an inventory shall be had and
attached to the contract

4. The Partnership Name – Art 1815


11
Jo Chung Chang vs Pacific Commercial Co. 45 Phil 142 (1923)
Hung-Man-Yoc vs Kieng-Chiong-Seng 6 Phil 498 (1906
Compania Agricola vs Reyes, 4 Phil 2 (1904)

G.R. No. 19892 September 6, 1923


TECK SEING AND CO., LTD., petitioner-appellee.
SANTIAGO JO CHUNG, ET AL., partners,
vs.
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-appellants.

FACTS:
1. Following the presentation of an application to be adjudged an insolvent by the
"Sociedad Mercantil, Teck Seing & Co., Ltd.," the creditors, the Pacific
Commercial Company, Piñol & Company, Riu Hermanos, and W. H. Anderson &
Company, filed a motion in which the Court was prayed to enter an order:

A. "Declaring the individual partners as described in paragraph 5 parties to this


proceeding;
B. to require each of said partners to file an inventory of his property in the manner
required by section 51 of Act No. 1956; and
C. that each of said partners be adjudicated insolvent debtors in this proceeding."

2. The trial judge first granted the motion, but, subsequently, on opposition being
renewed, denied it. It is from this last order that an appeal was taken in
accordance with section 82 of the Insolvency Law.

ISSUE: Whether or not there was a limited partnership

RULING: NO.

To establish a limited partnership there must be, at least, one general partner and the
name of the least one of the general partners must appear in the firm name. (Code of
Commerce, arts. 122 [2], 146, 148.) But neither of these requirements have been
fulfilled.

The general rule is, that those who seek to avail themselves of the protection of laws
permitting the creation of limited partnerships must show a substantially full
compliance with such laws. A limited partnership that has not complied with the law of
its creation is not considered a limited partnership at all, but a general partnership in
which all the members are liable.
The contention of the creditors and appellants is that the partnership contract
established a general partnership.

Article 125 of the Code of Commerce provides that the articles of general co-
partnership must estate the names, surnames, and domiciles of the partners; the firm
name; the names, and surnames of the partners to whom the management of the firm
and the use of its signature is instrusted; the capital which each partner contributes in
cash, credits, or property, stating the value given the latter or the basis on which their 12
appraisement is to be made; the duration of the co-partnership; and the amounts
which, in a proper case, are to be given to each managing partner annually for his
private expenses.

While the succeeding article of the Code provides that the general co-partnership must
transact business under the name of all its members, of several of them, or of one only.

Turning to the document before us, it will be noted that all of the requirements of the
Code have been met, with the sole exception of that relating to the composition of the
firm name.

What is said in article 126 of the Code of Commerce relating to the general co-
partnership transacting business under the name of all its members or of several of
them or of one only, is wisely included in our commercial law. It would appear,
however, that this provision was inserted more for the protection of the creditors than
of the partners themselves.

A distinction could well be drawn between the right of the alleged partnership to
institute action when failing to live up to the provisions of the law, or even the rights of
the partners as among themselves, and the right of a third person to hold responsible a
general co-partnership which merely lacks a legal firm name in order to make it a
partnership de jure.

The legal intention deducible from the acts of the parties controls in determining the
existence of a partnership. If they intend to do a thing which in law constitutes a
partnership, they are partners, although their purpose was to avoid the creation of such
relation. Here, the intention of the persons making up Teck Seing & co., Ltd. was to
establish a partnership which they erroneously denominated a limited partnership. If
this was their purpose, all subterfuges resorted to in order to evade liability for possible
losses, while assuming their enjoyment of the advantages to be derived from the
relation, must be disregarded. The partners who have disguised their identity under a
designation distinct from that of any of the members of the firm should be penalized,
and not the creditors who presumably have dealt with the partnership in good faith.

Articles 127 and 237 of the Code of Commerce make all the members of the general
co-partnership liable personally and in solidum with all their property for the results of
the transactions made in the name and for the account of the partnership. Section 51 of
the Insolvency Law, likewise, makes all the property of the partnership and also all the
separate property of each of the partners liable. In other words, if a firm be insolvent,
but one or more partners thereof are solvent, the creditors may proceed both against
the firm and against the solvent partner or partners, first exhausting the assets of the
firm before seizing the property of the partners.
We reach the conclusion that the contract of partnership found in the document
hereinbefore quoted established a general partnership or, to be more exact, a
partnership as this word is used in the Insolvency Law.

HUNG-MAN-YOC, in the name of KWONG-WO-SING 13

vs. KIENG-CHO-SENG, ET. AL.

Facts: The court below found that Chu-Che-Co, Yu-Yec-Pin, and Ang-Chu-Keng were
partners of Kiong-Tiao-Eng, under the firm name of Kieng-Chiong-Seng.

It has been not proved that Kieng-Chiong-Seng was the firm name, but rather the
designation of the partnership.

It can not be the firm name of a general partnership because this should contain the
names of all the partners, or some of them, or at least one of them to be, followed in
the two latter cases by the words "and company" (art. 126 of the Code of Commerce),
whereas in this case none of the four names of those it is alleged were members of the
firm appear in the firm name of the partnership. Neither can it be considered as the
firm name of a limited partnership for the reason that this should contain the same
requisites as the firm name of a general partnership, and in addition thereto the word
"limited." (Art. 146.) The firm name in question has absolutely none of these requisites.

Anonymous partnership (corporations) do not require a firm name or signature; a


designation adequate, for the object or objects of the business to which it is dedicated,
is sufficient. (Art. 151 and 152.)

The fact is, as alleged by the plaintiff and appellee in his brief, that "there is no doubt
that the partnership of Kieng-Chiong-Seng was a mercantile partnership organized for
the purpose of engaging in commercial pursuits, although such organization was not
evidenced by any public document as required by article 119 of the Code of Commerce,
nor was it registered as required by article 17 of the said code" (p.5).

Issue: Whether or not Kieng-Chiong-Seng is a partnership.

Ruling: Yes.

The partnership in question was a mercantile one, as it was engaged in the importation
of goods for sale here at a profit. It was so testified to by its manager, Yu-Yec-Pin, and
Kiong-Tiao-Eng. But its organization is not evidenced by any public document. The
agent Yu-Yec-Pin himself and some of his so-called partners have merely noted in the
books of the partnership, which by the way, were not introduced in evidence, the
capital which each had contributed. The agent further testified that the partnership was
not record in the Mercantile Registry but in the Internal Revenue office.

All this being so, the alleged partnership never had any legal existence nor has it
acquired any judicial personality in the acts and contracts executed and made by it.
(Art. 116, par. 2.)
But as the said partnership was a partnership de facto, although it had no legal
standing, and contracted obligations in favor of the plaintiff, the liability arising from
such obligations must enforcible against some one.

The partnership in question not being included in any of the classes of partnership
defined by the Code of Commerce there should be applied to it the general provisions
applicable to all partnerships contained in article 120 of the Code of Commerce, which 14
reads as follows:

The persons in charge of the management of the association who do not comply with
the provisions of the foregoing article (art. 119, which requires that the articles of
partnership be recorded in a public instrument, and that the partnership be registered
in the Mercantile Register) shall be responsible together with the persons not members
of the association with whom they may have transacted business in the name of the
same.

The defendant, Chua-Che-Co, was in charge of the management of the association, nor
did he make any contract at all with the plaintiff, as clearly appears from the testimony
of the various witnesses, the agent of the partnership, Yu-Yec-Pin, being the person
who made all the contracts for the partnership; also Kieng-Tiao-Eng according to two of
the witnesses. It is evident, therefore, that he has incurred no liability and that he can
not be held individually responsible for the payment of plaintiff's claims as the court
below found.

COMPAÑIA AGRICOLA DE ULTRAMAR v. REYES, ET. AL.

Facts:
1. Plaintiff, a partnership legally organized in Spain, domiciled in Manila, filed a
complaint for eviction in Bulacan against defendants which was denied on the
supposition that said plaintiff company was a commercial partnership, and subject to
the provisions of the Code of Commerce, and had not registered in the commercial
registry.

2. On appeal, the judge declared that the plaintiff was a civil partnership, to which are
applicable the provisions of the Code of Commerce in conformity with article 1670 of
the Civil Code, and that said partnership should be registered in the commercial
registry before it could appear and used the name of the association in an action
against the defendants.

3. Among the documents presented by plaintiff was the article of incorporation


executed before a notary in the court of Madrid entitling it as a special civil partnership
with a purpose to exploit the agricultural industry in the Philippine Islands and other
Spanish colonies, and is not therefore under the obligation of registering in the
commercial registry in order to have juridical personality with the power to appear in an
action against the defendants.

Issue:
WON plaintiff was a mercantile or a civil corporation.

Ruling:

The Commercial Code for the Philippines does not attempt anywhere, as some other
codes do, to define what commercial transactions are. In the absence of proof to the
contrary, therefore, we must be governed as to the purposes of the association by the 15
form adopted by its organization and the purposes declared in its articles of association.

Article 1670 provides that civil partnerships, on account of the objects to which they are
devoted, may adopt all the forms recognized by the Commercial Code. In such cases its
(Commercial Code) provisions shall be applicable in so far as they do not conflict with
the provisions of this code.

It will be seen from this provision that whether or not partnerships shall adopt the
forms provided for by the Civil or Commercial Codes is left entirely to their discretion.
And furthermore, that such civil partnerships shall only be governed by the forms and
provisions of the Commercial Code when they expressly adopt them, and then only in
so far as they (rules of the Commercial Code) do not conflict with the provisions of the
Civil Code. In this provision the legislature expressly indicates that there may exist two
classes of commercial associations, depending not upon the business in which they are
engaged but upon the particular form adopted in their organization. The definition of
the partnership found in article 1665 clearly includes associations organized for the
purpose of gain growing out of commercial transactions.

From the articles of association it will be seen that the plaintiff company was
organized expressly under the provisions of the Civil Code.

From the petition of the plaintiff and the bill of exceptions it appears that the
defendants failed and refused to pay the rent for any of the years previous to 1899.
Assuming, without finding it to be a fact, that the defendants had paid the rents for
previous years, then they thereby recognized the plaintiff company as an entity and are
thereby now estopped from setting up the contrary.

Held:

First. That the plaintiff company had statutory authority to organize under the Civil
Code for the purposes indicated in its articles of association.

Second. That it did effect its organization under the Civil Code in force in these Islands.

Third. The defendants having recognized the existence of the plaintiff as an entity
capable of dealing with private persons, they are thereby estopped from denying that
fact.

Fourth. That the plaintiff company, having complied with the forms required for the
organization of associations of its class under the Civil Code, is a juristic person
recognized by law, and has capacity to maintain the present action.
5. Registration
A. Intra-Partnership Relation Art 1771, 1772
B. Dealings with third parties- Art 1815, 1818, 184
Liton vs Hill & Ceron, 67 Phil 509 (1939)
Goquiolay vs Sycip, 108 Phil 947 (1960)

16
GEORGE LITTON
vs. HILL & CERON, ET AL*
G.R. No. L-45624 April 25, 1939

*same case also included under topic “Every partner has a right to manage”

Facts:
1. On February 14, 1934, the plaintiff sold and delivered to Carlos Ceron, one of the
managing partners of Hill & Ceron, a certain number of mining claims who was not able
to pay the whole amount. Unable to collect the balance either from Hill & Ceron or from
its surety, plaintiff filed a complaint against said defendants for the recovery of the said
balance.

2. The court after trial, ordered Carlos Ceron personally to pay the amount claimed and
absolved the partnership Hill & Ceron, Robert Hill and the Visayan Surety & Insurance
Corporation. On appeal to the Court of Appeals, the latter affirmed the decision of the
lower court, having reached the conclusion that Ceron did not intend to represent and
did not act for the firm Hill & Ceron in the transaction involved in this litigation.

Issue: WON the sale was entered individually with the plaintiff.

Held: No. In view of certain regulations of the Code of Commerce, the transaction
made by Ceron with the plaintiff is understood in law as effected by Hill & Ceron and
binding upon it hence, liable jointly and severally.

In the first place, it is an admitted fact by Robert Hill when he testified at the trial that
he and Ceron, during the partnership, had the same power to buy and sell; that in said
partnership Hill as well as Ceron made the transaction as partners in equal parts; that
on the date of the transaction, the partnership between Hill and Ceron was in
existence; and it was neither published in the newspapers nor stated in the commercial
registry that the partnership Hill & Ceron had been dissolved.

Under article 226 of the Code of Commerce, the dissolution of a commercial association
shall not cause any prejudice to third parties until it has been recorded in the
commercial registry. Aside from this, the order of the Bureau of Commerce also
prohibits brokers from buying and selling shares on their own account as was opposed
by the respondents being engaged in brokerage in general.

The stipulation in the articles of partnership that any of the two managing partners may
contract and sign in the name of the partnership with the consent of the other,
undoubtedly creates an obligation between the two partners, which consists in asking
the other's consent before contracting for the partnership. This obligation of course is
not imposed upon a third person who contracts with the partnership. Neither is it
necessary for the third person to ascertain if the managing partner with whom he
contracts has previously obtained the consent of the other. A third person may and has
a right to presume that the partner with whom he contracts has, in the ordinary and
natural course of business, the consent of his copartner; for otherwise he would not
enter into the contract. The third person would naturally not presume that the partner
with whom he enters into the transaction is violating the articles of partnership but, on
the contrary, is acting in accordance therewith. And this finds support in the legal 17
presumption that the ordinary course of business has been followed, and that the law
has been obeyed.

Wherefore, unless the contrary is shown, namely, that one of the partners did not
consent to his copartner entering into a contract with a third person, and that the latter
with knowledge thereof entered into said contract, the aforesaid presumption with all its
force and legal effects should be taken into account.

The reason or purpose behind these legal provisions is no other than to protect a third
person who contracts with one of the managing partners of the partnership, thus
avoiding fraud and deceit to which he may easily fall a victim without this protection
which the Code of Commerce wisely provides.

ANTONIO C. GOQUIOLAY and THE PARTNERSHIP "TAN SIN AN and ANTONIO


C. GOQUIOLAY
vs. WASHINGTON Z. SYCIP, ET AL*
G.R. No. L-11840 July 26, 1960

*same case also included under topic “Every partner has a right to manage”

Facts: On May 1940, Tan Sin An and Antonio C. Goquiolay, entered into a general
commercial partnership under the partnership name "Tan Sin An and Antonio C.
Goquiolay", for the purpose of dealing in real state. The agreement lodge upon Tan Sin
An the sole management of the partnership affairs and Antonio C. Goquiolay as co-
partner.

The plaintiff partnership purchased 3 parcels of land assuming the payment of a


mortgage obligation payable to "La Urbana" for a period of ten (10) years. Another 46
parcels were purchased by Tan Sin An in his individual capacity, and he assumed
payment of a mortgage debt. The downpayment and the amortization were advanced
by Yutivo and Co., for the account of the purchasers.

The two separate obligations were consolidated in an instrument executed by the


partnership and Tan Sin An, whereby the lots were mortgaged in favor of the "Banco
Hipotecario de Filipinas" (as successor to "La Urbana") and the covenantors bound
themselves to pay, jointly and severally, the remaining balance of their unpaid
accounts.

On June 1942, Tan Sin An died, leaving as surviving heirs his widow, Kong Chai Pin
(appointed administratrix of the intestate estate of her deceased husband), and four
minor children. In the meantime, repeated demands for payment were made by
the Banco Hipotecario on the partnership and on Tan Sin An. In March 1944, the
defendant Sing Yee and Cuan, Co., Inc., upon request of defendant Yutivo Sans
Hardware Co., paid the remaining balance of the mortgage debt, and the mortgage was
cancelled.

Then in 1946, Yutivo Sons Hardware Co. and Sing Yee and Cuan Co., Inc. filed their
claims in the intestate proceedings of Tan Sin An, as alleged obligations of the 18
partnership "Tan Sin An and Antonio C. Goquiolay" and Tan Sin An, for advances,
interest and taxes paid in amortizing and discharging their obligations to "La Urbana"
and the "Banco Hipotecario."

On March 1949, Kong Chai Pin filed a petition with the probate court for authority to sell
all the 49 parcels of land to Washington Z, Sycip and Betty Y. Lee, for the purpose
preliminary of settling the aforesaid debts of Tan Sin An and the partnership.
Defendants Sycip and Betty Lee then executed in favor of the Insular Development Co.,
Inc. a deed of transfer covering the said parcels of land by virtue of the executed deed
of sale pursuant to the probate court’s order.

Learning about the sale to Sycip and Lee, the surviving partner Antonio Goquiolay filed
a petition in the intestate proceedings seeking to set aside the order of the probate
court approving the sale in so far as his interest over the parcels of land sold was
concerned. The probate court annulled the sale executed by the administratrix with
respect to the 60% interest of Antonio Goquiolay over the properties sold, then
subsequently the orders of the probate court complained of was set aside and the case
was remanded due to the non-inclusion of indispensable parties. Thereafter, new
pleadings were filed.

The second amended complaint in the case at bar prays, among other things, for the
annulment of the sale in favor of Washington Sycip and Betty Lee, and their subsequent
conveyance in favor of Insular Development Co., Inc., in so far as the three (3) lots
owned by the plaintiff partnership are concerned. The answer averred the validity of the
sale by Kong Chai Pin as successor partner, in lieu of the late Tan Sin An. After hearing,
the complaint was dismissed by the lower court, hence the instant direct appeal.

Issue: WON the consent of the other partners was necessary to perfect the sale of the
partnership properties to Washington Sycip and Betty Lee.

Ruling: No. Strangers dealing with a partnership have the right to assume, in the
absence of restrictive clauses in the co-partnership agreement, that every general
partner has power to bind the partnership, specially those partners acting with
ostensible authority. And so, we held in one case:

. . . Third persons, like the plaintiff, are not bound in entering into a contract with any
of the two partners, to ascertain whether or not this partner with whom the transaction
is made has the consent of the other partner. The public need not make inquiries as to
the agreements had between the partners. Its knowledge is enough that it is
contracting with the partnership which is represented by one of the managing partners.

"There is a general presumption that each individual partner is an agent for the firm
and that he has authority to bind the firm in carrying on the partnership transactions."
[Mills vs. Riggle, 112 Pac., 617]

"The presumption is sufficient to permit third persons to hold the firm liable on
transactions entered into by one of the members of the firm acting apparently in its
behalf and within the scope of his authority." [Le Roy vs. Johnson, 7 U.S. Law, Ed.,
391] (George Litton vs. Hill & Ceron, et al., 67 Phil., 513-514).
19
Although the partnership under consideration is a commercial partnership and,
therefore, to be governed by the Code of Commerce, the provisions of the old Civil
Code may give us some light on the right of one partner to bind the partnership. States
Art. 1695 thereof:

Should no agreement have been made with respect to the form of management, the
following rules shall be observed:

1. All the partners shall be considered agents, and whatever any one of the may do
individually shall bind the partnership; but each one may oppose any act of the others
before it has become legally binding.

xxx the widow, Kong Chai Pin, did not succeed her husband, Tan Sin An, in the sole
management of the partnership, upon the latter's death. While the Articles of Co-
Partnership and the power of attorney executed by Antonio Goquiolay, conferred upon
Tan Sin An the exclusive management of the business, such power, premised as it is
upon trust and confidence, was a mere personal right that terminated upon Tan's
demise.

... Upon the other hand, consonant with the articles of co-partnership providing for the
continuation of the firm notwithstanding the death of one of the partners, the heirs of
the deceased, by never repudiating or refusing to be bound under the said provision in
the articles, became individual partners with Antonio Goquiolay upon Tan's demise.

... Appellants argue, however, that since the "new" members' liability in the partnership
was limited merely to the value of the share or estate left by the deceased Tan Sin An,
they became no more than limited partners and, as such, were disqualified from the
management of the business under Article 148 of the Code of Commerce. Although
ordinarily, this effect follows from the continuance of the heirs in the partnership, it was
not so with respect to the widow Kong Chai Pin, who, by her affirmative actions,
manifested her intent to be bound by the partnership agreement not only as a limited
but as a general partner.

6. Value of Form and Registration


Thunga Chui vs Que Bentec, 2 Phil 561 (1903)
Singson vs Isabela Sawmill 88 Scra 623 (1979)
SINGSON v. ISABELA SAWMILL

Facts: Isabela Sawmill was formed by partners Saldajeno, Lon and Timoteo. S
withdrew from the partnership and after dissolution, L and T continued the business still
under the name Isabela Sawmill. The partnership is indebted to various creditors and
that Sheriff sold the assets of Isabela Sawmill to S and was subsequently sold to a 20
separate company.

Issue: Whether or not Isabela Sawmill ceased to be a partnership and that creditors
could no longer demand payment.

Ruling: On dissolution, the partnership is not terminated but continues until the
winding up of the business. It does not appear that the withdrawal of S from the
partnership was published in the newspapers. The appellee and the public had a right to
expect that whatever credit they extended to L and T doing business in the name of
Isabela Sawmill could be enforced against the properties of said partnership. The
judicial foreclosure of the chattel mortgage executed in favor of S did not relieve her
from liability to the creditors of the partnership.

It may be presumed that S acted in good faith, the appellees also acted in good faith in
extending credit to the partnership. Where one of the 2 innocent persons must suffer,
that person who gave occasion for the damages to be caused must bear the
consequences.

III. RIGHTS AND POWERS OF PARTNERS


ART 1810
Rights of Partners

1. Right to Manage the Partnership


A. General Rule on Partnership Management
Art 1818: Doctrine of Apparent Authority
Munasque vs Court of Appeals, 139 Scra 533 (1985)
Council of Red Men vs Veterans Army 7 Phil 685 (1907)
Litton vs Hill & Ceron 67 Phil 509 (1935)
Smith, Bell, & Co. vs Aznar 40 O.G. 1881 (1941)
Goquiolay vs Sycip 108 Phil 947 (1960)

Art 1820, 1821, 1822, 1823

B. Transactions NOT in the Ordinary Course of Partnership Business


Art 1818
Goquiolay vs Sycip ibid.
C. Specific Modification on the Power of Management
Art 1800
Smith, Bell vs Aznar 40 O.G. 1881 (1941)
Garcia Ron vs La Compania 12 Phil 130 (1908)
Martinez vs Cordoba & Conde 5 Phil 545 (1906)
Fortis vs Gutierrez Hermanos, 6 Phil 100 (1906)
Tai Tong Chuache vs Insurance Commission, 158 Scra 366 (1988) 21
Teague vs Martin 54 Phil 504 (1929)

Art 1801
Art 1802

2. Power of Alteration – Art 1803 (2)


3. Power over Real Properties of the Partnership – Art 1774, 1819
i. Where title is in the Partnership Name
ii. Where title is not in the Partnership Name
iii. Where title is in the Name of One or More but not All the
Partners
iv. Where title is in the name of all of the Partners

4. Partner’s Right to Specific Partnership Property Art 1811


CAtlan vs Gatchalian 105 Phil 270 (1959)

5. Equity Rights of Partners Art 1812


i. Profits vs Surplus
ii. Assignability of Partner’s Equity Right- Art 1813, 1814, 1827
Goquiolay vs Sycip 108Phil 947 (1960)
iii. Right to Participate in Profits; the Obligation to Participate in
losses
Art 1797, 1798, 1769, 1767, 1770, 1799

6. Right to Inspect Art 1805

7. Right to Demand True and Full Information Art 1806

8. Right to Demand Accounting- Art 1807, 1809


Fue Leung vs IAC, 169 Scra 746 (1989)
Hanlon vs Haussermann and Beam, 40 Phil 796 (1920)
Lim Tanhu vs Ramolete, 66 Scra 425 (1975)

9. Right to Dissolve Partnership


Rojas vs Maglana, 192 Scra 110 (1990)
REalubit v. Jaso GR 178782 (Sep 21 2011)
Obligations of the Partnership

1. Obligations TO the Partners


A. Amounts disbursed for and in Behalf of the Partnership- Art 1796
B. Contracts Entered into for and In behalf of the Partnership- Art 1797
C. Keeping of the Books- Art 1805
22
2. Obligations to Third Persons
A. Liability Arising from the Firm Name- Art 1815
B. Liability Arising from the Acts of the Agent- Art 1818

IV. Duties and Obligations of Partners

1. Obligation To Contribute to the Common Fund


Art 1786
Art 1826

Why is it then necessary for Partnership Law to declare expressly that a


partner is a debtor of the partnership for whatever he may have promised
to contribute thereto?
Art 1788, Art 1790
Uy vs Puzon, 79 Scra 598 (1977)
Moran vs Court of Appeals, 133 Scra 88 (1986)
Sancho vs Lizarraga, 55 Phil 601 (1930)
Lozana vs Depakakibo, 107 Phil 728 (1960)

A. When Promised Contribution is a Sum of Money- Art 1788


B. When Promised Contribution is Property- In General – Art 1795, Art
1829(4)
C. Contribution is Goods- Art 1787
D. Contribution is Real Property- Art 1773, 1771, 1772
E. Contribution of Service or Industry: The Industrial Partner
Art 1797
F. Obligation for “Additional Contribution”
Art 1791
G. Remedies When there is Default in Obligation to Contribute
Sancho vs Lizarraga, 55 Phil 601 (1931)
Art 1786, 1788
H. Personal Obligations for Partnership Debts; Doctrine of Unlimited
Liability
Art 1816

2. Fiduciary Duties of Partners


Hanlon vs Haussermann, 40 Phil 796 (1920)
Lim Tanhu vs Remolete, 66 Scra 425 (1975)

A. Duty to Account – Art 1806, 1808


B. Duty of Diligence – Art 1794, Art 1800
C. Duty of Loyalty- Art 1789, 1793
Catalan vs Gatchalian, 105 Phil 1270 (1959)
D. Specific Fiduciary Duties of Industrial Partner- Art 1789 23
Evangelista vs Abad Santos 51 Scra 416 (1973)
E. Specific Fiduciary Duties of Capitalist Partners- Art 1808

3. Obligation of Subsequently Admitted Partners- Art 1826


4. Obligations of Non-partners: Art 1815, 1825

V. DISSOLUTION, WINDING-UP, AND TERMINATION OF THE


PARTNERSHIP

A. Introduction and Definition of Terms


1. Dissolution- Art 1828, 1829
Idos vs CA, 296 Scra 194 (1998)

2. “Winding Up of Partnership Affairs”

B. Legal Effects of Dissolution

1. Effect on the Partnership Contract and Juridical Personality


Republic vs TAncinco, 349 Scra 386 (2002)
Alhambra Cigar vs SEC 24 Scra 269 (1968)
PNB vs CFI Pasig 209 Scra 294 (1992)

Art 1832

2. Effect on the Partnership Business Enterprise- Art 1832


3. Effect on Contracts Entered into with third parties
Singson vs Isabela Sawmill, 88 Scra 623 (1979)
Tocao vs Court of Appeals 342 Scra 20 (2000)
4. Effects on Determining Liability of Partners for Damages to one
Another
Soncuya vs De Luna, 67 Phil 646 (1939)

C. Causes of Dissolution- Art 1830


1. Causes which Legally Dissolve IPSO JURE withOUT need of Court
Decree:

i. Dissolution Effected Without Violation of The Partnership


Agreement
Art 1830
24
ii. Dissolution Effected in Contravention of the Partnership
Agreement, Effected by the Will of Any Partner
Art 1830
Tocao vs Couty of Appeals 342 Scra 20 (2000)

iii. Dissolution Caused by force majeure or outside the will of the


Partners
Fernandez vs dela Rosa, 1 Phil 671 (1902)

2. Dissolution by Court Decree- ART 1831


Rojas vs Maglana 192 Scra 110 (1990)

D. Effects of Dissolution Among the Partners Inter se

1. When Dissolution is Caused in Any way, except in Contravention of the


Partnership Agreement- ART 1837
2. When Dissolution is Caused by the Bona Fide Expulsion of A Partner-
Art 1837
3. When Dissolution is Caused in Contravention of the Partnership
Agreement – Art 1837
4. When Dissolution is Caused by the Rescission of the Partnership
Agreement because of fraud or misrepresentation (i.e. by judicial
decree) – Art 1838

E. Effects of Dissolution on Partnership Liabilities Existing or Accrued


at that Time

1. General Rule on Existing Partnership Liabilities- Art 1835


2. Discharge of a Partner from Existing Partnership Liabilities- Art 1835
3. Effect of Dissolution on Partnership Liabilities Contracted After
Dissolution

i. Liabilities incurred pursuant to winding-up proceedings


Art 1832
Art 1834
ii. Liabilities incurred Constituting “New Business” during winding-
up process
Art 1832
a. When Dissolution is by the act, insolvency, or death of a
partner
Art 1833
b. When Dissolution is NOT by the act, insolvency, or death
of a partner
Art 1832, 1833 25
c. As to Third Party Creditors
Art 1834

C1. Particular Rule of Limited Liability- Art 1834


C2. When Creditors not deemed to be in good faith- art
1834
C3. Partnership by Estoppel- Art 1825

F. WINDING-UP of PARTNERSHIP AFFAIRS


1. Who has the Authority to Wind-up? Art 1836
2. Rules and Procedures for Winding-up and Liquidation of Partnership
affairs
ART 1839

i. What constitutes partnership property?


ii. What are the Priority Rules Against Partnership Property?
a. Enforcing contributions from Partners to Cover Partnership
debts
b. Priority rules between partners’ creditors and partnership
creditors
ART 1829 (8)
c. Priority Rules When Partner is Insolvent
iii. Partner may demand Share in Net assets only after liquidation
and settlement of claims of partnership creditors

Villareal vs Ramirez, 406 Scra 145 (2003)


Martinez vs Ong Pong Co, 14 Phil 726 (1910)
Uy vs Puzon, 79 Scra 598 (1977)

G. CONTINUANCE OF PARTNERSHIP BUSINESS INSTEAD OF


WINDING-UP

1. Who may continue Partnership business and obligations assumed?


ART 1837
2. Disposition of Liabilities when partnership business continued
Art 1840
Singson vs Isabela Sawmill, 88 SCRA 623 (1979)
3. Disposition of Liabilities when Dissolution is caused by Retirement or
Death of a partner- ART 1841, 1840, 1837 (2)

H. PARTNER’S RIGHT TO DEMAND AN ACCOUNTING


Art 1842
Feu Leung vs IAC, 169 SCRA 746 (1989)
26
VI. LIMITED PARTNERSHIPS

A. NATURE, FORM, REGISTRATION

1. Essence of the Medium of Limited Partnership


ART 1843
2. Requirements for the Formation of a Limited Partnership
Art 1844

i. Sign and swear to a certificate of LTd Partnership


ii. File Certificate with SEC
ART 1846
Jo Chung Cang vs Pacific Commercial, 45 Phil 142 (1923),

a. False Statement in the SEC Certificate- Art 1847


iii. Name of Limited Partnership
Art 1844, 1846
iv. Contributions to the Limited Partnership- Art 1846, 1844(1)

3. When Certificate Cancelled or Amended


i. When Certificate Cancelled- Art 1864, 1865
ii. When Certificate Amended- Art 1864
iii. Procedure to Amend Certificate- Art 1865

B. THE GENERAL AND LIMITED PARTNERS

1. GENERAL PARTNER
i. Who is a general partner in a limited partnership? Art 1844
ii. Rights and Powers of General Partners in a Limited Partnership-
Art 1850
iii. Duties and Obligations of General Partner- Art 1850, 1789

2. LIMITED PARTNER

i. Who is a limited partner? Art 1844, 1845, 1846

ii. Erroneous but in good faith limited partner- Art 1852


iii. When Limited and General Partner at the Same Time – Art 1853

iv. Rights and Powers of Limited Partner


a. Right to Limited Liability- Art 1843 and 1848
b. Right to the Return of his Contribution- Art 1851
c. Right to receive his share in the profits and compensation by 27
way of income – Art 1851
d. Right to assign his equity interest- Art 1859
*heirs of deceased general partner succeed generally as
limited partners
e. Right to have the partnership books kept at the principal
place of business of the partnership, and at a reasonable
hour to inspect and copy any of them- Art 1851(1)
f. Right to have on Demand true and full information of things
affecting the partnership, and a formal account of
partnership affairs whenever circumstances render it just
and reasonable- Art 1851 (2), 1854
g. Right to have the dissolution and winding-up by decree of
court – Art 1851(3), 1857

v. Obligations of Limited Partners


a. ON original contributions to the partnership- Art 1845, 1858
b. On Additional contributions- Art 1844 (1)(g)
c. On returned contributions- Art 1858
d. Liable as trustee of Partnership- Art 1858

vi. Fiduciary Duties of Limited Partners


Art 1866

C. DISSOLUTION and Winding-up of Limited Partnership


1. Causes of Dissolution
Art 1860, 1861, 1862
2. Settling of Accounts
Art 1863

- END OF PARTNERSHIP LECTURE. PART II- AGENCY -