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Essential features of partnership: Industry – the active cooperation, the work of the
party associated, which may be either personal
1. There must be a valid contract; manual efforts or intellectual, and for which he
2. The parties must have legal capacity to enter receives a share in the profits (not merely salary) of
into the contract; the business
3. There must be a mutual contribution of
money, property or industry to a common A partnership may exist even if it is shown that
fund; (Art. 1767) the partners have not contributed any capital of
4. The object must be lawful (Art. 1770); and their own to a “common fund” for the contribution
5. The primary purpose must be to obtain may be in the form of credit or industry not
profits and to divide the same among the necessarily cash or fixed assets. (Lim Tong Lim
parties. (see also Art. 1775) v. Phil. Fishing Gear Industries, 317 SCRA 728)
(But see Art. 1845)
The contract creating the partnership may be oral
or written, express or implied from the acts and Distinction between a partner contributing industry
declarations of the parties, subject to the and a lessor of services:
provisions of Articles 1771 to 1773 and to the
Statute of Frauds. (Montgomery v. Busyrus
The former is independent of the other
Machine Works, 92 U.S. 257)
partners, that is, he is not subject to the
supervision of the other partners, while the
lessor is under the supervision of the lessee
or employer.
The realization of pecuniary profit by engaging in land and sold the same a few years thereafter,
some business activity through their joint did not thereby make them partners. There must
contributions and efforts need not be the be a clear intent to form a partnership. (Pascual
exclusive aim of a partnership. It is sufficient that v. CIR, 166 SCRA 560)
it is the principal purpose even if there are,
incidentally, moral, social, or spiritual ends. If, after partition, an heir allows his shares to be
(Manresa) held in common with his co-heirs under a single
management to be used with the intent of making
The right to share in the profits carries with it the profit thereby in proportion to his share, there can
duty to contribute to the losses, if any. be no doubt that, even if no document or
instrument were executed for the purpose, for tax
Article 1768. The partnership has a purposes, at least, an unregistered partnership is
formed. (Ona v. CIR, 45 SCRA 74)
juridical personality separate and
distinct from that of each of the partners,
(3) The sharing of gross returns
even in case of failure to comply with the
does not of itself establish a
requirements of article 1772, first
partnership, whether or not the
paragraph. (n)
persons sharing them have a joint
or common right or interest in any
A partnership may be declared insolvent even if
the partners are not. (Campos Rueda & Co. v. property from which the returns
Pacific Commercial & Co., 44 Phil. 916) are derived; (Different from sharing
of profits)
A partnership may enter into contracts and may
sue and be sued, it being sufficient that service of As distinguished from the general rule
summons or other process be served on any recognizing sharing of profits (no. 4) as
partner. (Vargas & Co. v. Chan, 29 Phil. 446) presumptive evidence of partnership, the sharing
of gross returns has been held not to constitute
The death of either partners is not a ground for even prima facie evidence of the relation. (68
dismissal of a pending suit against the C.J.S. 441)
partnership. (Ngo Tian Tek v. Phil. Ed. Co., 78
Phil 275) Where, however, there is further evidence of
mutual management and control, a partnership
The partners cannot be held liable for the may result, even though the agreement call for a
obligations of the partnership unless it is shown portion of “gross returns.”
that the legal fiction of a different juridical
personality is being used for a fraudulent, unfair,
or illegal purpose. (Aguila v. CA, 316 SCRA 246) (4) The receipt by a person of a
share of the profits of a business
Article 1769. In determining whether a is prima facie evidence that he is
partnership exists, these rules shall a partner in the business, but no
apply: such inference shall be drawn if
such profits were received in
(1) Except as provided by article payment:
1825, persons who are not
partners as to each other are not (a) As a debt by
partners as to third persons; installments or otherwise;
Similarities between a corporation and a partnership: A partnership may exist and often exists in the
absence of express agreement, written or verbal,
between the parties. Its existence may be implied
1. Both have juridical personality distinct from
for the acts or conduct of the parties, as well as
their components;
from other declarations, and such implied
2. Both are group of persons;
contract would be as binding as a written and
3. Capitals of both are derived from their
express contract.
components;
4. There is distribution of profits in stock
corporations and in partnerships; EXCEPTION: Where immovable property
5. They both act only through their agents; and or real rights are contributed thereto, a
6. They can be organized only where there is a public instrument shall be necessary.
law authorizing their organization;
7. A partnership, except a general professional
partnership, is taxable as a corporation, The above exception does not state that if there
subject to income tax. is no execution of a public instrument, the
contract of partnership is void. However, under
Art. 1773, if immovable property is contributed,
Article 1770. A partnership (1) must have an inventory of said property must be attached in
a lawful object or purpose, and (2) must a public instrument; otherwise, the contract of
be established for the common benefit or partnership is void. Thus, non-compliance of the
interest of the partners. requirement makes the partnership void.
Article 1783. A particular partnership has A general partnership may result from oral
contract except those partnerships by the terms
for its object determinate things, their
of the agreement are to be formed by the parties
use or fruits, or a specific undertaking, for more than one year from the making thereof,
or the exercise of a profession or in which case the partnership agreement must be
vocation. (1678) in writing as required by the Statute of Frauds.
Additional obligations:
Article 1788. A partner who has
1. To preserve said property with the diligence undertaken to contribute a sum of
of a good father of a family pending delivery money and fails to do so becomes a
to the partnership; and debtor for the interest and damages from
2. To indemnify the partnership for any damage
the time he should have complied with
caused to it by the retention of the same or
by the delay in its contribution. his obligation.
The money or property contributed by a partner The same rule applies to any amount he
becomes the property of the partnership. It may have taken from the partnership
necessarily follows that the same cannot be
coffers, and his liability shall begin from
withdrawn or disposed of by the contributing
partner without the consent or approval of the the time he converted the amount to his
partnership or of the other partners. (Lozana v. own use.
Depakakibo, 107 Phil. 728)
A partner is guilty of estafa if he misappropriates
Under this Article, the remedy of the other partner partnership money or property received by him
or the partnership is not rescission but an action for a specific purpose of the partnership.
for specific performance with damages and (Liwanag v. CA, 281 SCRA 1225)
interest from the defaulting partner from the time
he should have complied with his obligation. When there is failure on the part of an industrial
(Sancho v. Lizaraga, 55 Phil. 60) partner to return to the capitalist partner the
capital brought by him into the partnership, the
Eviction – takes place whenever by a final judgement money having received by the partnership and
based on a right prior to the sale or an act imputable the business commenced and profits accrued,
to the vendor, the vendee is deprived of the whole or the action that lies with the partner who furnished
a part of the thing purchased capital for the recovery of his money is a civil one
arising from the partnership contract for a
GENERAL RULE: The partners are not entitled to liquidation of the partnership and a levy on its
charge each other, or the partnership of which assets if there should be any. (U.S. v. Clarin, 17
they are members, for their services in the firm Phil. 84)
business.
Article 1789. GENERAL RULE: An 3. The capitalist partner refuses deliberately
industrial partner cannot engage in (not because of his inability to do so) to
contribute an additional share to the capital;
business for himself. and
4. There is no agreement that even in case of
As regards an industrial partner, the prohibition is an imminent loss of the business the
absolute and applies whether the industrial partners are not obliged to contribute.
partner is to engage in the same business in
which the partnership is engaged or in any kind
Article 1792. If a partner authorized to
of business.
manage collects a demandable sum
EXCEPTION: If the partnership expressly which was owed to him in his own name,
permits him to do so. from a person who owed the partnership
another sum also demandable, the sum
Mere toleration by the partnership will not exempt thus collected shall be applied to the two
the industrial partner from liability. credits in proportion to their amounts,
even though he may have given a receipt
Remedies of the capitalist partners if the for his own credit only; but should he
industrial partner violates the prohibition have given it for the account of the
herein: partnership credit, the amount shall be
fully applied to the latter.
1. The capitalist partners may exclude
him from the firm, with a right to Requisites for proportional application of collection:
damages; or
2. The capitalist partners may avail 1. There exist at least two debts, one where the
collecting partner is creditor, and the other,
themselves of the benefits which he where the partnership is the creditor;
may have obtained in violation of this 2. Both debts are demandable; and
provision, with a right to damages. 3. The partner who collects is authorized to
manage and actually manages the
partnership.
An action for specific performance to compel the
partner to perform the promised work or service
is not available as remedy because this will The article does not apply where the partner who
amount to involuntary servitude which, as a rule, collects for his own credit only is not authorized
is prohibited by the Constitution. to manage, for there can be no ground for
suspicion that he may have acted improperly to
create an undue advantage to himself. However,
Although the law mentions only the capitalist
where the manner of management has not been
partners, it is believed that industrial partners are
agreed upon and all the partners participate in
also entitled to the remedy granted since they are
the management of the partnership, then every
equally prejudiced by the act of their co-partner
partner shall be considered a managing partner
engaging in business for himself.
for purposes of Article 1792.
EXCEPTION: However, the courts may Unlike an ordinary agent, a partner is not given
equitably lessen the partner’s the right of retention if he is not reimbursed or
responsibility for damages if through his indemnified.
extraordinary efforts in other activities of
the partnership, unusual profits have Article 1797. Rules that govern the
been realized. distribution of losses and profits (in
order):
The question as to when profits may be
considered “unusual” depends upon the 1. IF THERE IS AN AGREEMENT –
circumstances of the particular case. Primarily, the distribution shall be in
conformity with the agreement.
Article 1795. Who bears the risk of loss a. If only the share of each
of things contributed to the partnership? partner in the profits has been
agreed upon, the share of
1. Upon the partner who owns the thing each in the losses shall be in
– if the thing is not fungible, and only its the same proportion.
use and fruits are contributed (thus, if 2. IN THE ABSENCE OF STIPULATION –
the ownership, not merely the use and The share of each partner in the
the fruits, is transferred to the profits and losses shall be in
partnership, the latter bears the risk); proportion to what he may have
2. Upon the partnership – if the things contributed.
contributed are fungible (WON only their a. The industrial partner shall not
use and fruits are contributed); be liable for the losses.
3. Upon the partnership – if the things b. As for the profits, the
contributed cannot be kept without industrial partner shall receive
deteriorating (WON only their use and such share as may be just and
fruits are contributed);
equitable under the reason why a person cannot also agree to bear
circumstances. all the losses that a partnership may suffer.
The designation of losses and profits Article 1801. When each managing
cannot be intrusted to one of the partner may separately execute all acts
partners. of administration; REQUISITES:
(2) None of the partners may, without the Article 1807. Every partner must account
consent of the others, make any to the partnership for any benefit, and
important alteration in the immovable hold as trustee for it any profits derived
property of the partnership, even if it by him without the consent of the other
may be useful to the partnership. But if partners from any transaction connected
the refusal of consent by the other with the formation, conduct, or
partners is manifestly prejudicial to the liquidation of the partnership or from any
interest of the partnership, the court's use by him of its property. (n)
intervention may be sought.
If a member of a partnership avails himself of
The consent need not be express. It may be information obtained by him in the course of the
presumed from the fact of knowledge of the transaction of partnership business which is
alteration without interposing any objection. within the scope of the firm’s business, and
thereafter applies it to his own account without
Article 1804. Every partner may the consent or knowledge of his co-partners, he
is liable to account to the partnership for any
associate another person with him in his
benefit he may obtain from the use of such
share, but the associate shall not be information.
admitted into the partnership without the
consent of all the other partners, even if Article 1808. The capitalist partners
the partner having an associate should cannot engage for their own account in
be a manager. (1696) any operation which is of the kind of
business in which the partnership is
Subpartnership – the partnership formed between a engaged, unless there is a stipulation to
member of a partnership and a third person for a
the contrary.
division of the profits coming to him from the
partnership enterprise
Any capitalist partner violating this
A subpartnership is a partnership within a prohibition shall bring to the common
partnership and is distinct and separate from the funds any profits accruing to him from
main or principal partnership. his transactions, and shall personally
A subpartnership does not in any manner alter
bear all the losses.
the original contract of partnership.
The capitalist partner is only prohibited from
A subpartner does not acquire the rights of a engaging for his own account in any operation
partner nor is he liable for its debts. which is the same as or similar to the business in
which the partnership is engaged and which is
competitive with said business.
The law is silent on whether a capitalist partner Related rights:
can engage in the same line of business for the
account of another. It would seem that the 1. The right to reimbursement for amounts
prohibition still applies. advanced to the partnership and to
indemnification for risks in consequence of
Article 1809. Any partner shall have the management;
2. The right of access and inspection of
right to a formal account as to
partnership books;
partnership affairs: 3. The right to true and full information of all
things affecting the partnership;
(1) If he is wrongfully excluded 4. The right to a formal account of partnership
from the partnership business or affairs under certain circumstances; and
5. The right to have the partnership dissolved
possession of its property by his
under certain conditions.
co-partners;
Partnership property and partnership capital
(2) If the right exists under the distinguished:
terms of any agreement;
1. Partnership property is variable, while
(3) As provided by article 1807; partnership capital is constant;
2. Partnership property includes not only the
original capital contributions of the partners,
(4) Whenever other circumstances but all property subsequently acquired on
render it just and reasonable. (n) account of the partnership, or in the
partnership name with partnership funds,
In general, during the existence of the unless a contrary intention is shown,
partnership, a partner is not entitled to a formal including partnership name and the goodwill
account of partnership affairs because the rights of the partnership, while partnership capital
of the partner to know partnership affairs are represents the aggregate of the individual
already amply protected in articles 1805 and contributions made by the partners in
1806. (The exceptions are as provided in article establishing or continuing the partnership.
1809.)
Where there is no express agreement that
Articles 1806, 1807, and 1809 show that the right property used by a partnership constitutes
to demand accounting exists as long as the partnership property, such use does not make it
partnership lasts. Prescription begins to run only partnership property, and whether it is so or not
upon the dissolution of the partnership when the depends on the intention of the parties, which
final accounting is done. (Fue Leung v. IAC, 169 may be shown by proving an express agreement
SCRA 746) or acts of particular conduct.
Article 1810. The property rights of a According to De Leon, this provision is not
partner are: accurate because specific partnership property is
owned not by the partners in common but by the
partnership as a juridical person.
(1) His rights in specific
partnership property;
The incidents of this co-ownership are
such that:
(2) His interest in the partnership;
and
(1) A partner, subject to the
provisions of this Title and to any
(3) His right to participate in the
agreement between the partners,
management (n)
has an equal right with his
partners to possess specific
partnership property for Profit – the excess of returns over expenditure in a
partnership purposes; but he has transaction or series of transactions; or the net
income of the partnership for a given period of time
no right to possess such property
for any other purpose without the Surplus – refers to the assets of the partnership after
consent of his partners; partnership debts and liabilities are paid and settled
and the rights of the partners among themselves are
(2) A partner's right in specific adjusted
partnership property is not
A partner is not a creditor of the partnership for
assignable except in connection
the amount of his share. (The Leyte-Samar Sales
with the assignment of rights of and K. Tomassi v. S. Cea and O. Castrilla, 93
all the partners in the same Phil. 100)
property;
Article 1813. GENERAL RULE: A
Rationale: conveyance by a partner of his whole
interest in the partnership does not of
1. Non-assignability prevents interference by
itself dissolve the partnership.
outsiders in partnership affairs;
2. It protects the right of other partners and
partnership creditors to have partnership EXCEPTION: A partner’s conveyance of his
assets applied to firm debts; interest in the partnership operates as a
3. It is often impossible to measure or value a dissolution of the partnership only when it is clear
partner’s beneficial interest in a particular that the parties contemplated and intended the
partnership asset. entire withdrawal from the partnership of such
partner and the termination of the partnership as
An authorized assignment by a partner of his between the partners. (Johnson v. Munsell, 104
right in specific partnership property is void, but it N.W. 2d 314)
may be regarded as a valid assignment of the
partner’s interest in the partnership. Rights withheld from assignee in case of
conveyance to him, during the
(3) A partner's right in specific continuance of the partnership:
partnership property is not
subject to attachment or 1. To interfere in the management or
execution, except on a claim administration of the partnership
against the partnership. When business or affairs;
partnership property is attached 2. To require any information or
for a partnership debt the account of partnership transactions;
partners, or any of them, or the and
representatives of a deceased 3. To inspect the partnership books.
partner, cannot claim any right
under the homestead or Rights of assignee of partner’s interest:
exemption laws;
1. To receive in accordance with his
A partner’s interest in the partnership itself may contract the profits to which the
be levied upon by a judgement creditor because
assigning partner would otherwise be
it is actually his property, by means of a “charging
order.” (see Art. 1814) entitled;
2. In case of fraud in the management
(4) A partner's right in specific of the partnership, the assignee may
partnership property is not avail himself of the usual remedies;
subject to legal support under 3. In case of a dissolution of the
article 195 of the Family Code. partnership, the assignee is entitled
to receive his assignor's interest and
Article 1811 contemplates tangible property, such may require an account from the date
as a car, truck, or a piece of land, but not only of the last account agreed to by
intangible things.
all the partners. (n)
Although separate creditors of an individual party
may reach the interest of a partner in the Article 1814. Without prejudice to the
partnership, they cannot go after any specific preferred rights of partnership creditors
partnership property. under article 1827, on due application to
a competent court by any judgment
Article 1812. A partner's interest in the creditor of a partner, the court which
partnership is his share of the profits entered the judgment, or any other court,
and surplus. (n) may charge the interest of the debtor
partner with payment of the unsatisfied Those who, not being members of the
amount of such judgment debt with partnership, include their names in the
interest thereon; and may then or later firm name, shall be subject to the liability
appoint a receiver of his share of the of a partner. (Insofar as third persons
profits, and of any other money due or to without notice are concerned.) (n) (Here,
fall due to him in respect of the the persons who include their names in the
partnership, and make all other orders, firm do not acquire the rights of a partner.)
directions, accounts and inquiries which
the debtor partner might have made, or Article 1816. All partners, including
which the circumstances of the case industrial ones (but they can recover the
may require. amount they have paid from the capitalist
partners unless there is an agreement to the
The interest charged may be redeemed contrary), shall be liable pro rata with all
at any time before foreclosure, or in case their property and after all the
of a sale being directed by the court, partnership assets have been exhausted
may be purchased without thereby (subsidiary liability), for the contracts
causing a dissolution: which may be entered into in the name
and for the account of the partnership,
(1) With separate property, by any under its signature and by a person
one or more of the partners; or authorized to act for the partnership.
However, any partner may enter into a
(2) With partnership property, by separate obligation to perform a
any one or more of the partners partnership contract. (n)
with the consent of all the
partners whose interests are not As used in the law, the term “pro-rata” must be
so charged or sold. understood to mean equally or jointly, ant not
proportionately which is its literal meaning,
because the pro-rating is based on the number of
Nothing in this Title shall be held to partners and not on the amount of their
deprive a partner of his right, if any, contributions to the common fund, subject to
under the exemption laws, as regards his adjustment among the partners.
interest in the partnership. (n)
Article 1816 refers to the extent of the share of
the partners in the partnership liability for its
contractual debts. The share of the other partners
cannot be increased by the fact that a partner
has left the country and payment of his share of
SECTION 3 the liability cannot be enforced, or his liability is is
condoned by the creditor.
Obligations of the Partners with
Regard to Third Persons The partners may be joined as party defendants
in the same action against the partnership
Article 1815. Every partnership shall subject to their right to prior exhaustion of
partnership property. (Compania Maritima v.
operate under a firm name, which may or Munoz, 9 Phil. 326)
may not include the name of one or more
of the partners. So, the process would be:
As a general rule, the partners may adopt any 1. The creditor of the partnership should first go
firm name desired. after the partnership and exhaust the
partnership assets;
The partners cannot use a name that is “identical a. The creditor may join the partners
or deceptively confusingly similar to that of any as defendants, but he must first
existing partnership or corporation or to any other exhaust the partnership assets;
name already protected by law or is patently 2. If the partnership assets are insufficient, then
deceptive, confusing or contrary to existing laws,” the creditor can go after the partners,
as to mislead the public by passing itself off as including the industrial partners;
another partnership or corporation, or its goods a. The partners are liable equally or
or services as those of such other company. jointly;
b. The industrial partners who paid the
The continued use of the name of a deceased creditor may ask for reimbursement
partner is permissible provided that the firm from the capitalist partners unless
indicates in all its communications that said there is an agreement to the
partner is deceased. (Rule 3.02, Code of contrary.
Professional Responsibility)
LIABILITY LOSS (4) Confess a judgment;
Incurred even without
loss
(5) Enter into a compromise
Industrial partners are not Industrial partners are
exempted exempted concerning a partnership claim or
liability;
Article 1817. Any stipulation against the
liability laid down in the preceding article (6) Submit a partnership claim or
shall be void, except as among the liability to arbitration;
partners. (n)
(7) Renounce a claim of the
This means that such stipulation is void insofar partnership.
as the partnership creditors are concerned, but
insofar as the partners are concerned, it is valid. EXCEPTION: No act of a partner in
contravention of a restriction on
Article 1818. GENERAL RULE: Every authority shall bind the partnership to
partner is an agent of the partnership for persons having knowledge of the
the purpose of its business, and the act restriction. (n)
of every partner, including the execution
in the partnership name of any As a general rule, the particular partner who
instrument, for apparently carrying on in undertakes to bind his co-partners by a contract
the usual way the business of the without authority is himself personally liable on
such contract. (This is kung dili ma bind ang
partnership of which he is a member partnership.)
binds the partnership. (BINDING)
Article 1819. Where title to real property
EXCEPTION: (1) The partner so acting is in the partnership name, any partner
has in fact no authority to act for the may convey title to such property by a
partnership in the particular matter, and conveyance executed in the partnership
(2) the person with whom he is dealing name; but the partnership may recover
has knowledge of the fact that he has no such property unless the partner's act
such authority. (Requisites) binds the partnership under the
provisions of the first paragraph of
Third persons are not bound, in entering into a
contract with any of the partners, to ascertain
article 1818, or unless such property has
whether or not the partner with whom the been conveyed by the grantee or a
transaction is made has the consent of the other person claiming through such grantee to
partners. a holder for value without knowledge
that the partner, in making the
EXCEPTION: An act of a partner which is conveyance, has exceeded his authority.
not apparently for the carrying on of
business of the partnership in the usual Where title to real property is in the
way does not bind the partnership name of the partnership, a conveyance
unless authorized by the other partners. executed by a partner, in his own name,
passes the equitable interest of the
EXCEPTION: Except when authorized by partnership, provided the act is one
the other partners or unless they have within the authority of the partner under
abandoned the business, one or more the provisions of the first paragraph of
but less than all the partners have no article 1818.
authority to:
Where title to real property is in the
(1) Assign the partnership name of one or more but not all the
property in trust for creditors or partners, and the record does not
on the assignee's promise to pay disclose the right of the partnership, the
the debts of the partnership; partners in whose name the title stands
may convey title to such property, but
(2) Dispose of the good-will of the the partnership may recover such
business; property if the partners' act does not
bind the partnership under the
(3) Do any other act which would provisions of the first paragraph of
make it impossible to carry on the article 1818, unless the purchaser or his
ordinary business of a
partnership;
assignee, is a holder for value, without Article 1822. Where, by any wrongful act
knowledge. or omission of any partner acting in the
ordinary course of the business of the
Where the title to real property is in the partnership or with the authority of his
name of one or more or all the partners, co-partners, loss or injury is caused to
or in a third person in trust for the any person, not being a partner in the
partnership, a conveyance executed by a partnership, or any penalty is incurred,
partner in the partnership name, or in his the partnership is liable therefor to the
own name, passes the equitable interest same extent as the partner so acting or
of the partnership, provided the act is omitting to act. (n)
one within the authority of the partner
under the provisions of the first Requisites for liability:
paragraph of article 1818.
1. The partner must be guilty of a wrongful act
or omission; and
Where the title to real property is in the 2. He must be acting in the ordinary course of
name of all the partners a conveyance business, or with the authority of his co-
executed by all the partners passes all partners even if the act is unconnected with
their rights in such property. (n) the business.
(8) By decree of court under the (2) At any time if the partnership
following article. (1700a and 1701a) was a partnership at will when the
interest was assigned or when the
The sale or assignment (conveyance) by one
charging order was issued. (n)
partner of his entire interest in the partnership to
a third person does not ipso facto bring about the
dissolution of the partnership. (Article 1813) That For the purpose of adjudicating damages to a
it produces dissolution may be inferred, however, partner who alleges to have suffered losses as a
from the definition of dissolution under Article result of the fraudulent management of the
1828. But the dissolution created in such case is partnership, it is first necessary that a liquidation
only technical, and not actual, i.e., only in the of the business thereof be made to the end that
sense that his connection with the partnership is the profits and losses may be known, and the
terminated. causes of the latter and the responsibility of the
managing partner, as well as the damages which
No person can be compelled either to become a each partner may have suffered, may be
partner or to remain one against his will. determined. (Soncuya v. De Luna, 67 Phil. 646)
(1) A partner has been declared EXCEPTION: The partners may still act
insane in any judicial proceeding for the partnership insofar as may be
or is shown to be of unsound necessary to wind up partnership affairs
mind; or to complete transactions begun but
not then finished.
(2) A partner becomes in any
other way incapable of performing Article 1833. EXCEPTION: Where the
his part of the partnership dissolution is caused by the act of a
contract; partner, each partner is liable to his co-
partners for his share of any liability
The incapacity contemplated by law is incapacity created by any partner acting for the
which is lasting, from which the prospect of
recovery is remote.
partnership as if the partnership had not of general circulation in the
been dissolved. place (or in each place if
more than one) at which
Exception to the EXCEPTION: The the partnership business
dissolution being by act of any partner, was regularly carried on.
the partner acting for the partnership
had knowledge of the dissolution The liability of a partner under the first
paragraph, No. 2, shall be satisfied out of
EXCEPTION: Where the dissolution is partnership assets alone when such
caused by the death of a partner, each partner had been prior to dissolution:
partner is liable to his co-partners for his
share of any liability created by any (1) Unknown as a partner to the
partner acting for the partnership as if person with whom the contract is
the partnership had not been dissolved. made; and
(2) File for record the certificate in The interference contemplated by Article 1848 is
the Office of the Securities and with respect to an existing limited partnership.
Accordingly, a limited partner is not subject to
Exchange Commission. general liability for taking part in the management
of the firm because he settles its affairs after
A limited partnership is formed if dissolution. (Silvola v. Reulett, 272 P.d. 287)
there has been substantial
compliance in good faith with the Article 1849. After the formation of a
foregoing requirements. lifted partnership, additional limited
partners may be admitted upon filing an
Article 1845. The contributions of a amendment to the original certificate in
limited partner may be cash or property, accordance with the requirements of
but not services. article 1865.
Article 1846. The surname of a limited Article 1850. A general partner shall have
partner shall not appear in the all the rights and powers and be subject
partnership name unless: to all the restrictions and liabilities of a
partner in a partnership without limited
(1) It is also the surname of a partners. However, without the written
general partner, or consent or ratification of the specific act
by all the limited partners, a general
(2) Prior to the time when the partner or all of the general partners
limited partner became such, the have no authority to:
business has been carried on
under a name in which his (1) Do any act in contravention of
surname appeared. the certificate;
A limited partner whose surname (2) Do any act which would make
appears in a partnership name contrary it impossible to carry on the
to the provisions of the first paragraph is ordinary business of the
liable as a general partner to partnership partnership;
creditors who extend credit to the
partnership without actual knowledge (3) Confess a judgment against
that he is not a general partner. the partnership;
(4) Possess partnership property, renounces his interest in the profits of
or assign their rights in specific the business, or other compensation by
partnership property, for other way of income.
than a partnership purpose;
Article 1853. A person may be a general
(5) Admit a person as a general partner and a limited partner in the same
partner; partnership at the same time, provided
that this fact shall be stated in the
(6) Admit a person as a limited certificate provided for in article 1844.
partner, unless the right so to do
is given in the certificate; A person who is a general, and also at
the same time a limited partner, shall
(7) Continue the business with have all the rights and powers and be
partnership property on the death, subject to all the restrictions of a general
retirement, insanity, civil partner; except that, in respect to his
interdiction or insolvency of a contribution, he shall have the rights
general partner, unless the right against the other members which he
so to do is given in the certificate. would have had if he were not also a
general partner.
Article 1851. A limited partner shall have
the same rights as a general partner to: Article 1854. A limited partner also may
loan money to and transact other
(1) Have the partnership books business with the partnership, and,
kept at the principal place of unless he is also a general partner,
business of the partnership, and receive on account of resulting claims
at a reasonable hour to inspect against the partnership, with general
and copy any of them; creditors, a pro rata share of the assets.
No limited partner shall in respect to any
(2) Have on demand true and full such claim:
information of all things affecting
the partnership, and a formal (1) Receive or hold as collateral
account of partnership affairs security any partnership property,
whenever circumstances render it or
just and reasonable; and
(2) Receive from a general partner
(3) Have dissolution and winding or the partnership any payment,
up by decree of court. conveyance, or release from
liability if at the time the assets of
A limited partner shall have the the partnership are not sufficient
right to receive a share of the to discharge partnership liabilities
profits or other compensation by to persons not claiming as
way of income, and to the return general or limited partners.
of his contribution as provided in
articles 1856 and 1857. The receiving of collateral security, or
payment, conveyance, or release in
Article 1852. Without prejudice to the violation of the foregoing provisions is a
provisions of article 1848, a person who fraud on the creditors of the partnership.
has contributed to the capital of a
business conducted by a person or Article 1855. Where there are several
partnership erroneously believing that limited partners the members may agree
he has become a limited partner in a that one or more of the limited partners
limited partnership, is not, by reason of shall have a priority over other limited
his exercise of the rights of a limited partners as to the return of their
partner, a general partner with the contributions, as to their compensation
person or in the partnership carrying on by way of income, or as to any other
the business, or bound by the matter. If such an agreement is made it
obligations of such person or shall be stated in the certificate, and in
partnership, provided that on the absence of such a statement all the
ascertaining the mistake he promptly
limited partners shall stand upon equal dissolution of the
footing. partnership.
Article 1856. A limited partner may In the absence of any statement in the
receive from the partnership the share of certificate to the contrary or the consent
the profits or the compensation by way of all members, a limited partner,
of income stipulated for in the certificate; irrespective of the nature of his
provided, that after such payment is contribution, has only the right to
made, whether from property of the demand and receive cash in return for
partnership or that of a general partner, his contribution.
the partnership assets are in excess of
all liabilities of the partnership except A limited partner may have the
liabilities to limited partners on account partnership dissolved and its affairs
of their contributions and to general wound up when:
partners.
(1) He rightfully but
Article 1857. A limited partner shall not unsuccessfully demands the
receive from a general partner or out of return of his contribution, or
partnership property any part of his
contributions until: (2) The other liabilities of the
partnership have not been paid,
(1) All liabilities of the or the partnership property is
partnership, except liabilities to insufficient for their payment as
general partners and to limited required by the first paragraph,
partners on account of their No. 1, and the limited partner
contributions, have been paid or would otherwise be entitled to the
there remains property of the return of his contribution.
partnership sufficient to pay
them; Article 1858. A limited partner is liable to
the partnership:
(2) The consent of all members is
had, unless the return of the (1) For the difference between his
contribution may be rightfully contribution as actually made and
demanded under the provisions that stated in the certificate as
of the second paragraph; and having been made, and