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PARTNERSHIP NOTES 8.

Attainment of legal personality


CHAPTER 1 P- firm becomes a juridical personality from the
GENERAL PROVISIONS time the contract begins
C- firm becomes a juridical person from the time
Article 1767. it is registered with the SEC and all requisites have
been complied with
By the contract of partnership two or more persons bind 9. Dissolution
themselves to contribute money, property, or industry to a P- death, retirement, insolvency, civil interdiction,
common fund, with the intention of dividing the profits or insanity of partner dissolves the firm
among themselves. C- such cause do not dissolve the firm

Two or more persons may also form a partnership for the PARTNERSHIP V CPG
exercise of a profession. 1. How created
2. Law that governs
CHARACTERISTICS OF THE CONTRACT 3. Legal personality
1. It is consensual, nominate, principal, bilateral or 4. Commencement of the partnership
multilateral, onerous, and preparatory 5. Dissolution
2. Money, property, and industry must be
contributed to a common fund PARTNERSHIP V CO- OWNERSHIP
(credit and goodwill- economic goodwill or 1. CREATION
commercial credit- may be contributed but not 2. Juridical
political credit) 3. Purpose
3. The object must be lawful 4. Dissolution
4. There must be an intention to divide the profit
among the partners since the firm is for the CAPACITY TO BECOME A PARTNER
common benefit or interest of the partners 1. Generally, person capacitated to enter into
5. There must be affection societas- the desire to contract relations may become a partner
form active union with people among whom 2. Unemancipated minor cannot contract without
there exist mutual confidence and trust (delectus the consent of his parents
personarum) 3. A married woman cannot contribute conjugal
6. A new personality must arise distinct from the funds without her husband’s consent
separate personality of each of the members 4. A partnership can form another partnership
5. A majority view is that a corporation cannot
PARTNERSHIP V CORPORATION become a partner o the grounds of public
1. How created policy, otherwise people other than its officer,
A partnership is created by agreement of the may be able to bind it
parties.
A corporation is created by the state in the form Sevilla v, CA
of a special character or a general enabling law A partnership presupposes generally a parityof
2. How long it exists standing between partners, in which each party has
P- no time limit, except agreement of the parties an equal proprietary interest in the capital or
C- not more than 50 years, may be reduced but property contributed, and where each party
never extended exercises equal rights in the conduct of business.
3. Liability to strangers
P-may be liable with their private property
beyond their contribution to the firm Article 1768.
C- liable only for their payment of their
subscribed stock The partnership has a juridical personality separate and
4. Transferability of interest distinct from that of each of the partners, even in case of
P- the transfer of his interest to another does not failure to comply with the requirements of article 1772,
make the transferee a partner unless all other first paragraph.
partners consent
C- transfer of interest makes the transferee a (Article 1772. Every contract of partnership having a
stockholder, even without the consent of the capital of three thousand pesos or more, in money or
others property, shall appear in a public instrument, which must
5. Ability to bind firm be recorded in the Office of the Securities and Exchange
P- generally, partners acting on behalf of the Commission.)
partnership are agents thereof; consequently
they can bind the firm and the partners The partnership in general can:
C- generally the stockholders cannot bind the 1. Acquire and possess property of all kinds
corporation since they are not agents thereof 2. Incur obligations
6. Mismanagement 3. Bring civil and criminal actions
P- a partner can sue a partner who mismanages 4. Be adjudged insolvent even if the individual
C- a stockholder cannot sue the board of member are financially solvent
director who mismanages: the action must be in
the name of the corporation Unless he is personally sued, a partner has no right to
7. Nationality make a separate appearance in court, if the partnership
P- national of the country it was created being sued is already represented.
C- national of the country under whose laws it
was incorporated, except for wartime purposes If an association is not lawfully organized as a partnership,
or for the acquisition of land, natural resources it possesses no legal personality therefore , it cannot sue
and the operation of public utilities as such.
Article 1771.
One who enters into a contract with a “partnership” as
such cannot when sued later on for recovery of the debt A partnership may be constituted in any form, except
allege the lack of legal personality on the part of the firm, where immovable property or real rights are contributed
even if indeed it has no personality. (borrower as the thereto, in which case a public instrument shall be
case may be is in estoppel) necessary.

From the viewpoint of private international law, whether (Article 1357. If the law requires a document or other
the partnership has juridical personality or not depends special form, as in the acts and contracts enumerated in
on its personal law. The personal law of the partnership is the following article, the contracting parties may compel
the law of the place where the partnership was each other to observe that form, once the contract has
recognized. been perfected. This right may be exercised
simultaneously with the action upon the contract.
Article 1769.
Article 1358. The following must appear in a public
In determining whether a partnership exists, these rules document:
shall apply:
(1) Acts and contracts which have for their object the
(1) Except as provided by article 1825, persons who are creation, transmission, modification or extinguishment of
not partners as to each other are not partners as to third real rights over immovable property; sales of real property
persons; or of an interest therein are governed by articles 1403,
No. 2, and 1405;
(2) Co-ownership or co-possession does not of itself
establish a partnership, whether such-co-owners or co- (2) The cession, repudiation or renunciation of hereditary
possessors do or do not share any profits made by the use rights or of those of the conjugal partnership of gains;
of the property;
(3) The power to administer property, or any other power
(3) The sharing of gross returns does not of itself establish a which has for its object an act appearing or which should
partnership, whether or not the persons sharing them appear in a public document, or should prejudice a third
have a joint or common right or interest in any property person;
from which the returns are derived;
(4) The cession of actions or rights proceeding from an
(4) The receipt by a person of a share of the profits of a act appearing in a public document.
business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such All other contracts where the amount involved exceeds
profits were received in payment: five hundred pesos must appear in writing, even a private
one. But sales of goods, chattels or things in action are
(a) As a debt by installments or otherwise; governed by articles, 1403, No. 2 and 1405.)

(b) As wages of an employee or rent to a landlord; (Article 1403. The following contracts are unenforceable,
unless they are ratified:
(c) As an annuity to a widow or representative of a
deceased partner; (1) Those entered into in the name of another person by
one who has been given no authority or legal
(d) As interest on a loan, though the amount of representation, or who has acted beyond his powers;
payment vary with the profits of the business;
(2) Those that do not comply with the Statute of Frauds as
(e) As the consideration for the sale of a goodwill of a set forth in this number. In the following cases an
business or other property by installments or agreement hereafter made shall be unenforceable by
otherwise. action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party
PROOF NEEDED TO ESTABLISH A PARTNERSHIP charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a
No definite criterion can be set up except that all the secondary evidence of its contents:
characteristics of the contract must be proved as
being present. (a) An agreement that by its terms is not to be performed
within a year from the making thereof;
Article 1770.
(b) A special promise to answer for the debt, default, or
A partnership must have a lawful object or purpose, and miscarriage of another;
must be established for the common benefit or interest of
the partners. (c) An agreement made in consideration of marriage,
other than a mutual promise to marry;
When an unlawful partnership is dissolved by a judicial
decree, the profits shall be confiscated in favor of the (d) An agreement for the sale of goods, chattels or things
State, without prejudice to the provisions of the Penal in action, at a price not less than five hundred pesos,
Code governing the confiscation of the instruments and unless the buyer accept and receive part of such goods
effects of a crime. and chattels, or the evidences, or some of them, of such
things in action or pay at the time some part of the
Unlawful object- void ab initio purchase money; but when a sale is made by auction
and entry is made by the auctioneer in his sales book, at
the time of the sale, of the amount and kind of property
sold, terms of sale, price, names of the purchasers and
person on whose account the sale is made, it is a Article 1775.
sufficient memorandum;
Associations and societies, whose articles are kept secret
(e) An agreement for the leasing for a longer period than among the members, and wherein any one of the
one year, or for the sale of real property or of an interest members may contract in his own name with third
therein; persons, shall have no juridical personality, and shall be
governed by the provisions relating to co-ownership.
( f ) A representation as to the credit of a third person.

(3) Those where both parties are incapable of giving Article 1778.
consent to a contract.
A partnership of all present property is that in which the
Article 1405. Contracts infringing the Statute of Frauds, partners contribute all the property which actually
referred to in No. 2 of article 1403, are ratified by the belongs to them to a common fund, with the intention of
failure to object to the presentation of oral evidence to dividing the same among themselves, as well as all the
prove the same, or by the acceptance of benefit under profits which they may acquire therewith.
them.)
Article 1779.
Article 1772.
In a universal partnership of all present property, the
Every contract of partnership having a capital of three property which belonged to each of the partners at the
thousand pesos or more, in money or property, shall time of the constitution of the partnership, becomes the
appear in a public instrument, which must be recorded in common property of all the partners, as well as all the
the Office of the Securities and Exchange Commission. profits which they may acquire therewith.

EFFECT OF NON-REGISTRATION- A stipulation for the common enjoyment of any other


- partnership is still a valid one, and therefore has profits may also be made; but the property which the
legal personality partners may acquire subsequently by inheritance,
- if registration is needed or desired, any of the legacy, or donation cannot be included in such
partners of a valid partnership can compel he stipulation, except the fruits thereof.
others to execute the needed public instrument
and subsequently cause its registration Article 1780.

Article 1773. A universal partnership of profits comprises all that the


partners may acquire by their industry or work during the
A contract of partnership is void, whenever immovable existence of the partnership.
property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and Movable or immovable property which each of the
attached to the public instrument. partners may possess at the time of the celebration of the
contract shall continue to pertain exclusively to each,
REQUIREMENT WHERE IMMOVABLEPROPERTY IS only the usufruct passing to the partnership.
CONTRIBUTED
DISTINCTION BEWEEN THE TWO KINDS OF UNIVERSAL
1. there must be a public instrument regarding the PARTNERSHIP
partnership
2. the inventory of the realty must be made, signed ALL PROFITS ALL PRESENT PROPERTY
by the parties, and attached to the public
instrument Only the usufruct of the All the property actually
properties of the partners belonging to the partners
The transfer of the land to the partnership must be duly becomes COMMON are CONTRIBUTED – and
recoded in the Registry of Property to make the transfer PROPERTY (owned by them said properties become
effective insofar as the third person is concerned. and the partnership); COMMON PROPERTY
naked ownership is (owned by all the partners
Article 1774. retained by each of the and by the partnership
partners
Any immovable property or an interest therein may be All profits acquired by the As a rule aside from the
acquired in the partnership name. Title so acquired can industry or work of the contributed properties only
be conveyed only in the partnership name. partners become common the profits of said
property (regardless of contributed COMMON
SAME CAN APPLY ALSO TO PERSONALTY. whether or not said profits PROPERTY (not other
were obtained through the profits)
ALIENS CANNOT OWN LANDS, WHETHER PUBLIC OR usufruct contributed)
PRIVATE, EXCEPT THROUGH HEREDITAY SUCCESSION.

LIMITATION IN ACQUISITION:
Article 1781.
A partnership cannot:
1. acquire, lease or hold public agriculutural lands in Articles of universal partnership, entered into without
excess of 1024 hectares specification of its nature, only constitute a universal
2. lease public lands adapted for grazing in excess of
partnership of profits.
2000 hectares
Article 1782. Article 1785.

Persons who are prohibited from giving each other any When a partnership for a fixed term or particular
donation or advantage cannot enter into universal undertaking is continued after the termination of such
partnership. term or particular undertaking without any express
agreement, the rights and duties of the partners remain
PERSONS WHO TOGETHER CANNOT FORM A PARTNERSHIP the same as they were at such termination, so far as is
consistent with a partnership at will.
1. husband and wife (spouses however can enter
into particular partnership and be members A continuation of the business by the partners or such of
therof) them as habitually acted therein during the term, without
2. those guilty of the crime of concubinage and any settlement or liquidation of the partnership affairs, is
adultery prima facie evidence of a continuation of the
3. those guilty of the same criminal offense, if the partnership.
partnership was entered into in consideration of Article 1786.
the same
Every partner is a debtor of the partnership for whatever
A partnership violating this article is null and void. No legal he may have promised to contribute thereto.
personality is acquired.
He shall also be bound for warranty in case of eviction
Article 1783. with regard to specific and determinate things which he
may have contributed to the partnership, in the same
A particular partnership has for its object determinate cases and in the same manner as the vendor is bound
things, their use or fruits, or a specific undertaking, or the with respect to the vendee. He shall also be liable for the
exercise of a profession or vocation. fruits thereof from the time they should have been
delivered, without the need of any demand.
OBJECTOF PARTICULAR PARTNERSHIP
3 IMPORTANT DUTIES OF A PARTNER
1. determinate things 1. to contribute what he had promised
2. their use or fruits 2. to warrant against eviction
3. specific undertaking 3. to deliver the fruits of what should have been
4. exercise of profession or vocation delivered

CHAPTER 2 THERE IS EVICTION WHENEVER by final judgement based


OBLIGATIONS OF THE PARTNERS on a right prior to the sale or an act imputable to the
partner, the partnership is deprived of the whole or the
SECTION 1 part of the thing purchased
OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES

Article 1787.
SOME OBLIGATIONS OF A PARTNER
1. to give his contribution When the capital or a part thereof which a partner is
2. not to convert firm money or property for his own bound to contribute consists of goods, their appraisal
use must be made in the manner prescribed in the contract
3. not to engage in unfair competition with his own of partnership, and in the absence of stipulation, it shall
firm be made by experts chosen by the partners, and
4. to account for and hold as trustee unauthorized according to current prices, the subsequent changes
personal profits thereof being for account of the partnership.
5. pay for damages caused by his fault
6. duty to credit to the firm payment made by a Article 1788.
debtor who owes him and the firm
7. to share with the other partners the share of the A partner who has undertaken to contribute a sum of
partnership credit which he has received from money and fails to do so becomes a debtor for the
and insolvent debtor interest and damages from the time he should have
complied with his obligation.
SOME RIGHTS OF A PARTNER
1. property rights The same rule applies to any amount he may have taken
a. rights in specific partnership property from the partnership coffers, and his liability shall begin
b. interest in the partnership from the time he converted the amount to his own use.
c. right to participate in the management
2. right to associate with another person in his share Article 1789.
3. right to inspect and copy partnership books
4. right to command formal account An industrial partner cannot engage in business for
5. right to ask for the dissolution of the firm at the himself, unless the partnership expressly permits him to do
proper time so; and if he should do so, the capitalist partners may
either exclude him from the firm or avail themselves of the
Article 1784. benefits which he may have obtained in violation of this
provision, with a right to damages in either case.
A partnership begins from the moment of the execution
of the contract, unless it is otherwise stipulated.