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Suggested  Answers  

(Caveat:  Don’t  take  at  face  value.  Do  your  own  review.)  
 
I.   What   are   the   formalities   required   by   law   for   the   constitution   of   the  
partnership?  
General  Partnership  
•   Greater   than   PHP3000   capital   contribution:   Public   instrument   +   SEC  
registration  
•   If   immovable   are   contributed:   Public   instrument   +   SEC   registration   +  
inventory  of  properties  contributed  
Limited  Partnership:  
•   Sign  and  swear  to  a  certificate  (Articles)  
•   File  with  SEC  
•   Substantial  compliance  in  good  faith  with  the  prior  requirements  
Partnership  by  Estoppel:  No  need  for  formal  requirements;;  formed  as  a  matter  
of  equity  
 
II.   Do   the   formalities   in   the   preceding   question   affect   the   creation   of   the  
juridical  entity  that  is  a  partnership?  Explain.  
General   partnership:   GR:   No;;   Exception:   Immovable   –   affects   validity;;  
therefore,  affects  the  formation  of  a  juridical  person  
Limited   Partnership:   Yes;;   Exception:   Will   be   considered   as   a   general  
partnership  
Partnership  by  Estoppel:  No;;  formed  as  a  matter  of  equity;;  ergo,  no  need  for  
formal  requirements.  
 
III.   What  is  the  doctrine  of  marshalling  of  the  assets?  
Partnership   assets   are   given   to   partnership   creditors;;   individual   assets   to  
individual  creditors.  
However,  under  Art.  1816,  in  case  partnership  assets  have  been  exhausted,  
and   the   individual   partners   have   entered   into   contracts   for   the   partnership  
name,  they  shall  personally  be  liable  pro  rata  with  all  their  property,  as  partners  
are  jointly  and  subsidiarily  liable  with  the  partnership.  
 
IV.   Given   the   doctrine   in   the   preceding   question,   how   may   a   creditor   of   a  
partner  in  a  partnership  satisfy  his  unsatisified  credit?  
Charging   Order   –   Art.   1814   –   is   an   order   by   the   court   upon   application   of   a  
judgment  creditor  of  a  partner,  which  charges  the  interest  of  a  debtor-­partner  
with   payment   of   the   unsatisfied   amount   of   a   judgment   debt.   Instead   of   the  
partner’s  interest  in  the  partnership  being  paid  to  the  partner,  it  will  be  paid  to  
the  partner’s  creditor.  
 
Art.   1814.   Without   prejudice   to   the   preferred   rights   of   partnership   creditors  
under  Article  1827,  on  due  application  to  a  competent  court  by  any  judgment  
creditor  of  a  partner,  the  court  which  entered  the  judgment,  or  any  other  court,  
may  charge  the  interest  of  the  debtor  partner  with  payment  of  the  unsatisfied  
amount   of   such   judgment   debt   with   interest   thereon;;   and   may   then   or   later  
appoint  a  receiver  of  his  share  of  the  profits,  and  of  any  other  money  due  or  to  
fall   due   to   him   in   respect   of   the   partnership,   and   make   all   other   orders,  
directions,  accounts  and  inquiries  which  the  debtor  partner  might  have  made,  
or  which  the  circumstances  of  the  case  may  require.  
 
V.   What  are  the  causes  for  dissolution  of  a  partnership?  
Four   general   causes:   Dissolution   without   violation   of   the   partnership  
agreement;;  dissolution  with  violation  of  the  partnership  agreement;;  dissolution  
by  operation  of  law;;  dissolution  upon  court  order  
 
(Plus   points   if   you   cite   the   article   verbatim,   but   he   said   he’s   just   looking   for  
those  four  general  classes)  
 
VI.   A,  B,  C  formed  a  general  partnership  with  the  following  contributions  to  
the  common  fund:  A,  P2,000.00;;  B,  P4,000.00;;  C,  P6,000.00.  There  was  no  
agreement   as   to   division   of   profits   or   apportionment   of   losses.   After  
some   years   of   business   operations,   the   assets   of   the   partnership  
dwindled  to  P3,000.00,  so  the  partners  agreed  to  stop  their  business.  The  
partnership   is   indebted   to   X   for   a   loan   of   P12,000.   Under   the  
circumstances,  from  whom  can  X  demand  satisfaction  of  his  credit,  and  
to  what  extent?  
 
(1)  The  partnership’s  liability  is  for  12,000  
(2)  Due  to  the  doctrine  of  marshalling  of  assets,  partnership  assets  should  first  
be  liable.  PhP  12,000  –  3,000  =  9,000  
(3)  Due  to  the  joint  and  subsidiary  nature  of  liability  of  the  partners,  and  without  
stipulation  as  to  profits,  the  liability  is  pro  rata:  
a.   Add  A,  B,  and  C’s  liabilities:  total:  12,000  
b.   A’s  ratio:  2,000/12,000  =  1/6.  1/6  of  9,000  =  1,500.  
c.   B’s  ratio:  4,000/12,000  =  1/3.  1/3  of  9,000  =  3,000.  
d.   C’s  ratio:  6,000/12,000  =  ½.  ½  of  9,000  =  4,500.  
 
X  can  demand  3,000  from  the  partnership,  1,500  from  A,  3,000  from  B,  and  
4,500  from  C.  
 
VII.   A,  B,  and  C  formed  a  partnership  under  the  following  terms  and  conditions:  
a.   Participation:  A-­40%;;  B-­40%;;  C-­20%  
b.   A  and  B  would  supply  the  entire  capital.  C  would  contribute  his  management  
expertise  and  be  manager  for  the  first  five  years  without  compensation.  
c.   C  shall  not  be  liable  for  losses.  
The  partnership  became  bankrupt.  
 
VII.1.   Could   A   alone,   opposed   by   B   and   C,   have   C   removed   as   manager?  
Explain.  
No.  When  a  partner  has  been  designated  as  a  managing  partner  in  the  articles  
of  partnership  (upon  its  creation),  then  such  partner  can  only  be  removed:  (1)  
upon   just   or   lawful   cause;;   and   (2)   with   the   vote   of   partners   representing   the  
controlling  interest.  There  is  no  just  or  lawful  cause  for  C  to  be  removed  as  a  
managing  partner.  Assuming  arguendo  that  he  does,  then  A  does  not  hold  the  
controlling  interest  of  the  partnership.  (Art.  1800)  
   
VII.2.  Could  C  be  personally  held  liable  for  debts  of  the  partnership  not  
satisfied  with  the  assets  of  the  partnership?  Expound.  
No.  Losses  are  not  the  same  as  liabilities.  Although  an  industrial  partner  may  
be  exempted  from  losses  incurred  by  the  partnership,  an  industrial  partner  shall  
still  be  liable  to  liabilities  of  the  partnership  as  to  third  persons.    
 
VIII.   Discuss  what  interest  is  conveyed  in  the  following  scenarios:  
a.   Title  in  the  partnership  name;;  conveyance  in  partnership  name  
b.   Title  in  partnership  name;;  conveyance  in  the  partner’s  name  
c.   Title  in  the  name  of  one  or  more  partners;;  conveyance  in  name  of  the  
partner  or  partners  in  whose  name  title  stands  
d.   Title  in  the  name  of  one  or  more  or  all  partners  or  a  third  person  in  
trust  for  the  partnership;;  conveyance  executed  in  partnership  name  or  
in  the  name  of  a  partner  
e.   Title  in  the  name  of  all  partners;;  conveyance  in  the  name  of  all  partners  
 
Title  to  Property   Who  conveys  title   Conveyance  is  executed   What  is  conveyed  
In  the  partnership  name   Any  partner   In  the  partnership  name   Title   to   the   Partnership  
Property  
 
May   be   recovered   by  
partnership;;  exceptions:  
+Binds   the   partnership   (Art.  
1818)  
+To   an   IPV   who   has   no  
knowledge   that   partner   has  
exceeded  his  authority  
In   the   name   of   one   of   the   Any  partner   In  the  name  of  the  partner   Equitable   interest   of   the  
partners   partner  
In  the  name  of  one  or  more   Partners   in   whose   In  the  name  of  the  partners   Title   to   the   partnership  
but  not  all  partners  +  record   name  the  title  stands   property  
does   not   disclose   the   right    
of  the  partnership   May   be   recovered   by  
partnership  
 
Exception:   IPV   without  
knowledge  
In  the  name  of  one  or  more   A  partner   In  the  partnership  name  OR  in   Equitable   interest   of   the  
or  all  of  the  partners  or  one   his  own  name   partner  in  the  partnership  
person   in   trust   for   the  
partnership  
In   the   name   of   all   the   All  the  partners   In  the  name  of  all  the  partners   All  the  rights  in  such  property  
partners  
 
 
 
 
BONUS  –  TRUE  OR  FALSE  
 
1.   In  a  limited  partnership,  the  word  “limited”  must  appear  on  the  partnership  name.  
TRUE.  
2.   An  express  trust  on  an  immovable  or  interest  therein  may  not  be  proved  by  parol  
evidence.  TRUE.  
3.   An   implied   trust   concerning   an   immovable   may   be   proved   by   parol   evidence.  
TRUE.  
4.   Is  No.  2  saying  that  for  there  to  be  an  express  trust  (validity),  there  must  be  a  trust  
instrument,  meaning  that  the  trust  must  be  in  writing?  FALSE.  That  the  trust  must  
be  in  writing  is  only  evidentiary  matter,  and  is  not  a  requirement  for  the  validity  of  
a  trust.  
5.   An   express   trust   is   imprescriptible   until   repudiated   and   the   beneficiary   is   made  
known  thereof.  TRUE  
6.   A  trust  is  an  excellent  estate-­planning  device.  TRUE  
7.   A  constructive  trust  prescribes  in  10  years.  TRUE  
8.   In  No.  7,  if  fraud  attended  the  wrongful  holding,  the  prescriptive  period  may  run  
from   the   time   of   constructive   notice,   e.g.   registration   of   title   in   trustee’s   name.  
FALSE  –  Notice  of  actual  fraud  
9.   The   partnership   is   bound   by   the   acts   of   partners   even   though   not   authorized,  
provided  the  acts  are  done  in  the  usual  way  of  the  business.  TRUE.  
10.  Constructive  notice  of  dissolution  suffices  to  absolve  the  partnership  from  liability  
to  a  creditor  who  is  a  prior  dealer  and  who  extended  credit  after  dissolution.  FALSE  
–  must  not  be  a  prior  dealer;;  a  prior  dealer  requires  personal  notice  of  dissolution.