V.

PROPERTY RIGHTS OF A PARTNER 1810-14

A. Specific Partnership Property
1. Co-ownership sui generis 1811 in rel to1768
A partner is a co-owner with his partners of specific partnership property, [This is not accurate because
specific partnership property is owned not by the partners in common but by the partnership as a juridical
person. A partnership is a distinct and separate entity from the partners who compose it. (Art. 1768.)]
-but the rules on co-ownership do not necessarily apply. The legal incidents of this tenancy in partnership
are distinctively characteristic of the partnership relation.
a. Equal rights to possess 1807, 1788, 1811, 1803, 1800 &1818
a partner has an equal right to possess specific partnership property for partnership purposes. None of the
partners can possess and use the specific partnership property other than for “partnership purposes”
without the consent of the other partners.
-Should any of them use the property for his own profit or benefit, he must account, like any stranger, to
the others for the profits derived therefrom Arts. 1807, 1788 (2) or the value of his wrongful possession
or occupation.
-By agreement, the right to possess specific partnership property may be surrendered, even in a
partnership with large membership, where the management and possession are concentrated in the
managing partners.
-The possession of partnership property by one partner is the possession of all partners until his
possession becomes adverse.
b. Non-assignability 1811 (2), 1819 & 1840
-partner cannot separately assign his right to specific partnership property but all of them can assign their
rights in the same property.
-partner’s right in specific partnership property is not assignable because it is impossible to determine
the extent of his beneficial interest in the property until after the liquidation of partnership affairs.
-The consent of all the partners, either express or implied, is the source and limit of a partner’s right to
deal with partnership property for any but a partnership purpose.
Primary reason: it prevents interference by outsiders in partnership affairs; it protects the right of other
partners and partnership creditors to have partnership assets applied to fi rm debts; and it is often
impossible to measure or value a partner’s beneficial interest in a particular partnership asset.
c. Not subject to support 1811 (4)
ART. 1811. A partner is co-owner with his partners of specific partnership property. The incidents of
this co-ownership are such that:
(4) A partner’s right in specific partnership property is not subject to legal support under article 291. (n)
B. Interest in Partnership
1. Scope of Interest 1812
Share of the profits and surplus. -The partner’s interest in the partnership consists of his proportionale
share in the undistributed profits during the life of the partnership as a going concern and his share in the
undistributed surplus after its dissolution.
-Profit means the excess of returns over expenditure in a transaction or series of transactions; or the net
income of the partnership for a given period of time. >asked in recit
-Surplus refers to the assets of the partnership after partnership debts and liabilities are paid and settled
and the rights of the partners among themselves are adjusted. (Art. 1839) It is the excess of assets over
liabilities. If the liabilities are more than the assets, the difference represents the extent of the loss. >asked
in recit
2. Partnership interest vs. Rights in Specific Property 1813
Effects of Conveyance By Partner of His Interest in the Partnership
(a) If a partner CONVEYS (assigns, sells, donates) his WHOLE interest in the partnership (his share in
the profits and surplus), either of two things may happen:
1) the partnership may still remain; or
2) the partneship may be dissolved. (NOTE: However, such mere conveyance does NOT of itself
dissolve the firm, therefore in general the partnership remains.)
(b) The assignee (conveyee) does not necessarily become a partner. The assignor is still the partner, with
a right to demand accounting and settlement. >asked in recit
(c) The assignee cannot even interfere in the management or administration of the partnership business
or affairs. >asked in recit
(d) The assignee cannot also demand:
1) information;
2) accounting;
3) inspection of the partnership books. >asked in recit. *only partners have the right to inspect
3. Assignment 1813
Rights of the Assignee >not in recit
(a) To get whatever profits the assignor-partner would have obtained. Question: Is he to be considered
an outside creditor who would be entitled to collect before the partners get their own profits? ANS.: No,
for he merely shares in the profits, the same as the assignor-partner whose share he (the assignee) will
now get. Hence, outside creditors would have to be preferred.
(b) To avail himself of the usual remedies in case of fraud in the management.
(c) To ask for annulment of the contract of assignment if he was induced to enter into it thru any of the
vices of consent (fraud, error, intimidation, force, undue influence) or if he himself was incapacitated to
give consent (minor, insane).
(d) To demand an accounting — (but only if indeed the partnership is dissolved, but even then, the
account can cover the period only from the date of the last accounting which has been agreed to by all
the partners). Art. 1813 (2).
Effect of assignment of partner’s whole interest in partnership.
A partner’s right in specific partnership property is not assignable (Art. 1811[2].) but he may assign his
interest in the partnership (Art. 1812) to any of his co-partners or to a third person without the consent
of the other partners, in the absence of agreement to the contrary.
4. Charging order 1814 >asked in recit
CASE IN RECIT: A, B & C are partners. A owes a sum to X. A has no money. What can X do?
Ans: X can apply to court for a charging order. Under Art. 1814, the charging order will subject the
interest of the debtor partner in the partnership with the payment of the unsatisfied amount of such
judgment with interest thereon with the least interference with the partnership business and the rights of
the other partners. By virtue of the charging order, any amount or portion thereof which the partnership
would otherwise pay to the debtor-partner should instead be given to the judgment creditor.
This however, is without prejudice to the preferred rights of partnership creditors. It means that the claims
of partnership creditors must be satisfied first before the separate creditors of the partners can be paid out
of the interest charged.
>recit, *interest only not the property of partnership
C. Participation in Management 1800, 1801, 1803 1818 >never mentioned in recit
-each partner in a general partnership has a right to an equal voice in the conduct and management of the
partnership business. This is not dependent on the amount/size of the partner’s capital contribution or
services to the business.
2 distinct cases of appointments.
1. Appointment as manager in the articles of partnership.-The partner appointed by common agreement
in the articles of partnership may execute all acts of administration (not those of strict ownership such as
those enumerated in Art. 1818) notwithstanding the opposition of the other partners, unless he should act
in bad faith. His power is revocable only upon just and lawful cause and upon the vote of the partners
representing the controlling interest.
2. Appointment as manager after the constitution of the partnership. -constituted independently of the
articles of partnership may be revoked at any time for any cause whatsoever.
-It should be noted that Art. 1800 refers to a partner, not a stranger, who has been appointed manager.
As a rule, a partner is not entitled to compensation for his services other than his share of the profits.
D. Access to partnership books 1805
-the rights of the partners with respect to partnership books can be exercised at “any reasonable hour.”
-reasonable hours on business days throughout the year and not merely during some arbitrary period of
a few days chosen by the managing partners, e.g., from December 21 to 31 every year.
E. Right to True and Full Information 1806
Under the principle of mutual trust and confidence among partners, there must be no concealment
between them in all matters affecting the partnership. Hence, the duty to render true and full information
of all things affecting the same upon request or demand. The information, to be sure, must be used only
for a partnership purpose.
Not only is a partner bound to give information on demand but in certain circumstances, he is under the
duty of voluntary disclosure of material facts within his knowledge relating to or affecting partnership
affairs. But the duty to render information does not arise with respect to matters appearing in the
partnership books since each partner has the right to inspect the books.
Good faith not only requires that a partner should not make any false statement but also that he should
abstain from any concealment.
F. Right to Formal Account 1809, 1807
GR: during the existence of the partnership, a partner is not entitled to a formal account of partnership
affairs. Reason: the rights of the partner to know partnership affairs are amply protected. Furthermore,
to entitle any partner to the right to constantly demand or ask for a formal accounting will cause much
inconvenience and unnecessary waste of time. --a suit for accounting usually is filed only when the
partnership has been dissolved.
EXCP: where a partner has been assigned abroad for a long period of time in connection with the
partnership business and the partnership books during such period being in the possession of the other
partners.
The right of a partner to demand an accounting without bringing about or seeking a dissolution is a
necessary corollary to his right to share in the profits.
G. Reimbursement of advances and indemnification of risks 1796
-Being a mere agent, the partner is not personally liable, provided, however, that he is free from all fault
(Art. 1912) and he acted within the scope of his authority. (Arts. 1897, 1898, 1910, par. 2.) But unlike
an ordinary agent, he is not given the right of retention if he is not reimbursed or indemnified. (Art. 1914.)