PARTNERSHIP Second Year, Section C

I.

FEATURES AND CHARACTERISTICS Civil Code: Articles 1767 to 1783 A. CONCEPT, DEFINITION AND ESSENTIAL ELEMENTS Civil Code: Articles 1767, 1769, 1818 and 1318 De Leon, Comments and Cases on Partnership, Agency and Trusts, pp. 7 to 13 1.

Contribution to Common Fund Civil Code: Article 1767 in relation to Article 1784 AQUINO- Evangelista vs. Collector of Internal Revenue, 102 Phil 140 (1957) Business for Profit Civil Code: Article 1769(3)(4) BISNAR-Fernandez vs. Dela Rosa, 1 Phil 670 (1903) Community of Interest Civil Code: Articles 1767 and 1770 a. Co-ownership of Capital or Property Civil Code: Article 1769(2) BOMBALES-Navarro vs. Court of Appeals, 222 SCRA 675 (1993) CHING-Gallemit vs. Tabiliran, 20 Phil 241 (1911) b. Joint Management and Control FERNANDEZ-Yulo vs. Yang Chiao Seng, 106 Phil 110 (1959) c. Participation in Profits and Losses Civil Code: Articles 1769(4), 1769(3), 1770 and 1799 4. What is a general partnership? Civil Code: Articles 1767 and 1783 3. 2.

B.

WHO MAY BE A PARTNER? Civil Code: Articles 1327 and 1782 Family Code: Article 73 and 87 Revised Penal Code: Article 34 1.

A Partner, by Consent or Estoppel Civil Code: Articles 1769(1), 1804 and 1825 FORTES-Lyons vs. Rosentock, 56 Phil 632 (1932) GUY-Abong vs. Workmens Compensation Commission, 54 SCRA 379 (1973) 2. Can a corporation be a partner? Villanueva, Philippine Corporate Law, 2001 Ed., pp. 266 to 271

SUBJECT MATTER AND CAUSE Bautista, Treatise on Philippine Partnership Law, pp. 15 to 16 Civil Code: Articles 1306, 1318(2), 1347, 1348, 1350, 1409(1st par.) and 1770 HAUTEA-Arbes vs. Politico, 53 Phil 489 (1929) ITARALDE-Deluao vs. Casteel, 26 SCRA 475 (1968) LEGAL PERSONALITY Civil Code: Articles 1768, 1773 and 1775 in relation to Articles 37, 44 and 46 KUNG-Vargas & Co. vs. Chan Hang Chiu, 29 Phil 446 (1915) E. CONSTITUTION AND DURATION 1. D.

C.

FORMALITIES Civil Code: Articles 1771, 1772 and 1773 MANALAYSAY-Magalona vs. Pesayco, 59 Phil 453 (1934) a. De Facto Partnership Villanueva, Philippine Corporate Law, 2001 Ed., pp. 26 to 30 PABALAN-Pioneer Insurance & Surety Corp. vs. Court of Appeals, 175 SCRA 668 (1989) 2. DURATION Civil Code: Articles 1784, 1785 and 1830(b) a. Partnership with a fixed term b. Partnership for a particular undertaking c. Partnership at will

II.

DISTINGUISHED FROM OTHER RELATIONS AND COMBINATIONS Paras, Civil Code of the Philippine Annotated, Part V, pp. 522 to 529; or Bautista, Treatise on Philippine Partnership Law, pp. 41 to 56; or de Leon and de Leon, Jr., Comments and Cases on Partnership, Agency and Trusts, 2002 edition, pp 29-59 1. Corporation a. Manner of Creation Civil Code: Article 1767; Corporation Code: Section 2 b. Commencement of Juridical Personality Civil Code: Article 1784; Corporation Code: Section 19 c. Management Civil Code: Article 1803; Corporation Code: Section 23 d. Right of Succession Civil Code: Articles. 1830 to1831 and 1860; Corporation Code: Section 2 e. Extent of Liability Civil Code: Articles. 1816 and 1822 to 1824; Corporation Code: Sections 37 and 64 f. Transferability of Interest

g.

Civil Code: Article 1804; Corporation Code: Section 63 Taxability National Internal Revenue Code: Definition of Taxable Corporations

2. 3.

Joint Venture and Joint Account

Joint Account Civil Code: Articles 1806, 1815 and 1836 Code of Commerce: Articles 239 and 241 to 242 PEREZ-Bourns vs. Carman, 7 Phil 117 (1906) Agency Civil Code: Article 1818 TABAG-Sevilla vs. Court of Appeals, 160 SCRA 171 (1988) YAP-Biglangawa and Espiritu vs. Constantino, 109 Phil 168 (1960) Employment Tests of Employer-Employee Relationship Civil Code: Article 1797 AGUINO-Fortis vs. Gutierrez Hermanos, 6 Phil 100 (1906) BISNAR-Bastida vs. Menzi & Co., 58 Phil 188 (1933) Co-ownership a. Purpose Civil Code: Articles 486; 1767; 1769 BOMBALES-Estanislao, Jr. vs. Court of Appeals, 160 SCRA 830 (1988) CHING-Obillos. vs. Commissioner of Internal Revenue, 139 SCRA 436 (1985) b. Creation Civil Code: Article 1767 c. Juridical Personality Civil Code: Article 1768 d. Joint Management/Agency Civil Code: Articles 491 to 492 and 1803 e. Transferability of Interest Civil Code: Articles 493 and 1804 f. Effect of Death Civil Code: Article 1830(5) g. Duration Civil Code: Articles. 494 and 1785 III. CLASSES OF PARTNERSHIPS AND PARTNERS A. KINDS OF PARTNERSHIPS 1. As to Object 6. 5. 4.

Civil Code: Articles 1776 to 1783 in relation to Articles 739, 133, 1347 and 1378 FERNANDEZ-Commissioner of Internal Revenue vs. Suter, 27 SCRA 152 (1969) a. Universal Partnership i. Universal partnership of present property ii. Universal partnership of profits iii. Presumption when kind of universal partnership not specified iv. Persons disqualified from universal partnership b. Particular Partnership 2. As to Liability of Partners Civil Code: Articles 1816, 1822 to 1824 and 1843; Act 1459: Section 191 a. General Partnership b. Limited Partnership c. Anonymous Partnership (Sociedad Anonima) As to Business Code of Commerce: Section 1; Civil Code: Articles 1867 and 1783 Commercial Partnership a. Non-commercial Partnership

3.

B.

KINDS OF PARTNERS 1. As to Liability: General and Limited Partners Civil Code: Articles 1816 and 1843 As to Contribution: Capitalist and Industrial Partners Civil Code: Articles 1767, 1789 and 1845 As to Degree/Manner of Connection: Ostensible, Nominal, and Dormant Partners Civil Code: Articles 1834(2nd par.) and 1815 As to Time of Joining: Original and Incoming Partners Civil Code: Article 1826 As to Special Duties: Managing and Liquidating Partners Civil Code: Articles 1800 and 1836 As to Status at Dissolution: Retiring, Continuing and Surviving Partners Civil Code: Articles 1840 and 1842

2.

3.

4.

5.

6.

IV.

OBLIGATIONS OF PARTNERS TO ONE ANOTHER A. PROMISED CONTRIBUTION

Civil Code: Articles 1784, 1786 to 1791, 1794 to 1795, 1811, 1831(2), 1838 & 1845 Bautista, Treatise on Philippine Partnership Law, pp. 86 to 95 Money Civil Code: Article 1786 in relation to Article 1249 a. Consequences of Default Civil Code: Articles 1788 and 1794 in relation to Articles 1169 and 2209 FORTES-Rojas vs. Maglana, 192 SCRA 110 (1990) Moran vs. Court of Appeals, 133 SCRA 99 (1984) b. Remedies Civil Code: Articles 1831(2) and 1838 2. Property a. Form or Kind b. Time and Manner of Delivery c. Appraisal Civil Code: Articles 1787 and 1773 d. Warranties and Liability for Fruits Civil Code: Article 1786(2nd par.) in relation to Article 1547 e. Risk of Loss Civil Code: Articles 1786, 1794 and 1795 1.

Industry or Service Civil Code: Articles 1789 and 1845 GUY-Evangelista & Co. vs. Abad Santos, 51 SCRA 416 (1973) 4. Amount of Contribution Civil Code: Articles 1790, 1791 and 1811 (1st par.) Civil Code: Articles 1784 to 1809

3.

B. FIDUCIARY DUTY HAUTEA-Harlon vs. Haussermann, 40 Phil 818 (1920) ITARALDE-Lim Tanhu vs. Remolete, 66 SCRA 426 (1975) KUNG-Pang Lim vs. Lo Seng, 42 Phil 282 (1921) MANALAYSAY-Catalan vs. Gatchalian, GR L 11648, 22 April 1959 Secret Benefit or Profits Civil Code: Articles 1807, 1831, 1788 and 1794 PEREZ-Teague vs. Martin, 53 Phil 504 (1929) PABALAN-Tuason & San Pedro vs. Zamora & Sons, 2 Phil 305 (1903) Engaging in Competitive Business Civil Code: Articles 1808, 1789 and 1794 TABAG-Aldecoa & Co. v. Warner, Barnes & Co., 30 Phil. 153 (1910) 2. 1.

3.

Collected Share in Firm Credit Civil Code: Article 1793 Collections from Common Debtor Civil Code: Article 1792 in relation to Article 1252

4.

C.

PARTICIPATION IN LOSSES Civil Code: Articles 1797 to 1799

V.

PROPERTY RIGHTS OF A PARTNER Civil Code: Articles 1810 to 1814 A. SPECIFIC PARTNERSHIP PROPOERTY 1. Co-Ownership Sui Generis Civil Code: Articles 1811 (par.1) in relation to Article 1768 a.

Equal Rights to Possess Civil Code: Articles 1807, 1788, 1811, 1803, 1800 (par.1) & 1818 YAP-US vs. Clarin, 17 Phil 84 (1910) AQUINO-Celino vs. Court of Appeals, 163 SCRA 97 (1988) b. Non-Assignability Civil Code: Articles 1811(par.2), 1819 and 1840 Not Subject to Attachment of Execution Civil Code: Article 1811(par.3) Not Subject to Support Civil Code: Article 1811(par.4)

c.

d.

B. 1.

INTEREST IN PARTNERSHIP Scope of Interest Civil Code: Article 1812 Partnership Interest vs. Rights in Specific Property Civil Code: Article 1813

2.

Assignment Civil Code: Article 1813 BISNAR-Machuca v. Chuidian, Buenaventura & Co., 30 Phil. 153, Aug. 5, 1910 4. Charging Order Civil Code: Article 1814

3.

PARTICIPATION IN MANAGEMENT Civil Code: Articles 1800, 1801, 1803, 1818 BOMBALES-Bachrach v. La Protectora, 37 Phil. 441, January 21, 1918 CHING-Litton v. Hill and Ceron, 67 Phil. 509, April 25, 1939 1. 2. General Rule When Agreement Exists a. b. D. Extent of Authority Revocation of Authority

C.

ACCESS TO PARTNERSHIP BOOKS Civil Code: Article 1805 RIGHT TO TRUE AND FULL INFORMATION Civil Code: Article 1806 RIGHTS TO FORMAL ACCOUNT Civil Code: Article 1809, 1807

F.

G.

REIMBURSEMENT OF ADVANCES AND INDEMNIFICATION FOR RISKS Civil Code: Article 1796 FERNANDEZ-Pabalan v. Velez, 22 Phil. 29, Feb. 24, 1912 VI. RELATIONSHIP AND DEALINGS WITH THIRD PERSONS Civil Code, Articles 1815 to 1827

H.

A. FIRM NAME Civil Code, Articles 1815 and 1846 FORTES-Phil. National Bank v. Lo, et al, 52 Phil 802 (1927) GUY-Sharruf & Co. v. Baloise Fire Insurance Co., 62 Phil 258 (1937) B. PARTNERS AS AGENTS Civil Code, Article 1818 (par 1) 1. Contractual Obligation Civil Code, Articles 1816, 1817, 1818 and 1819 HAUTEAGoquiolay, et al v. SyCip, et al, G.R. No. L-11840, July 26, 1960 a. Acts within Apparent Authority b. Acts Not within Apparent Authority c. Acts Requiring Unanimous Consent 2. Liability for Wrongful Acts or Omissions

Civil Code, Articles 1822, 1823 and 1824 a. Tortious Acts b. Criminal Acts 3. Admissions or Representations Civil Code, Article 1820 Notice of Knowledge Civil Code, Article 1821 Partnership Liability by Estoppel Civil Code, Article 1825

4.

5.

C.

INDIVIDUAL LIABILITY OF PARTNERS FOR PARTNERSHIP ACTS 1.

All Partners a. For Contracts Civil Code: Articles 1816 and 1817 ITARALDE-Pacific Commercial Co. v. Aboitiz & Martinez, et al, 48 Phil 843 (1926) KUNG-Island Sales, Inc. v. United Pioneers General Const. Co., 65 SCRA 554 (1975) For Torts and Delicts Civil Code: Articles 1822, 1823 and 1824 MANALAYSAY-Island Sales, Inc. v. United Pioneers General Const. Co., supra 2. Partner by Estoppel Civil Code, Article 1825 Incoming Partner Civil Code, Article 1826 b.

3.

D.

SUIT BY OR AGAINST THE PARTNERSHIP Article 46, Article 1827

1. Capacity to Sue or Be Sued PEREZ-Tai Tong Chuache & Co. v. Insurance Commission, 158 SCRA 366 (1988) 2. Joinder of Firm and Partners PABALAN-Sunico v. Chuidian, 9 Phil 625 (1908) 3. Execution Against Partners Separate Property TABAG-De los Reyes v. Lukban and Borja, 35 Phil 757 (1916) YAP-Phil. National Bank vs. Lo, supra VII. DISSOLUTION, WINDING UP AND TERMINATION OF PARTNERSHIP

A.

Concepts and Definition of Dissolution, Winding Up and Termination Civil Code, Articles 1828 and 1829 AQUINO-Testate Estate of Mota v. Serra, 47 Phil 464 (1925) BISNAR-Singsong v. Isabela Saw Mill, 18 SCRA 623 (1979) B. Causes of Dissolution Civil Code, Articles 1830, 1831 and 1840 Voluntary Causes of Dissolution 1. Extrajudicial a. Without Violation of Agreement Civil Code, Article 1830 (1) i. Termination of term or undertaking ii. In a partnership at will, by express will of any partner Civil Code, Article 1785 BOMBALES-Jackson v. Blum et. al, 1 Phil. 4 (1901) iii. In an partnership not at will, by express of all partners iv. Expulsion of a partner in accordance with agreement b. In Contravention of Agreement Civil Code, Articles 1830 (2), 1836 and1837 CHING-Rojas v. Maglana, 192 SCRA 110 (1990) FERNANDEZ-Lichauco, et al. v. Soriano, 26 Phil. 593 (1914) 2. Judicial Civil Code, Articles 1830 (8) and 1831 a. Who may Apply b. Grounds Civil Code, Article 1831, 1st par. i. Declaration of Insanity ii. Other incapacity iii. Misconduct or Breach of Agreement FORTES-Uy v. Puzon, G.R. No. L-19819, October 26, 1977 iv. Operation at loss v. Other circumstances rendering a dissolution equitable Civil Code, Article 1838 GUY-Fue Leung v. IAC, 169 SCRA 746 (1989) 3. On Application by Assignee or Purchaser of Partners Interest Civil Code, Article 1831, 2nd par. in relation to Articles 1813 and 1814

HAUTEA-Jackson v. Blum, et al., supra Dissolution By Operation of Law Civil Code, Article 1830 (3-7) ITARALDE-Eugenia Lichauco et al. v. Faustino Lichauco, 33 Phil. 350 (1916) 1. Supervening Illegality of the Partnership Civil Code, Articles 1770, 1830 (3) 2. Loss of Specific Thing Promised to be Contributed or Contributed for Use Civil Code, Article 1830 (4) 3. Death of Partner Civil Code, Article 1830 (5) KUNG-Bearneza v. Dequilla, 43 Phil. 237 (1922) MANALAYSAY-Guidote v. Borja, 53 Phil. 900 (1928) 4. Insolvency of Partner or Partnership Civil Code, Articles 1830 (6) and 1834, 3rd par., No. 2 Section 32, Insolvency Law 5. Civil Interdiction of Partner Civil Code, Article 1830 (7); Revised Penal Code, Article 34 C. Effects of Dissolution 1. On Agency, Power and Authority of Partner Civil Code, Articles 1821, 1832, 1833 and 1834

On Existing Liabilities Civil Code, Articles 1835, 1816 1824 PEREZ-Yu v. NLRC, 224 SCRA 75 (1993) PABALAN-Singson v. Isabela Sawmill, supra D. Rights of Partners 1. Right to Wind Up Civil Code, Articles 1836 and 1837 (par 1)

2.

2.

Right to Accounting Civil Code, Article 1842 TABAG-Fue Leung v. IAC, L-72906, 31 January 1989 3. Right to Damages for Wrongful Dissolution Civil Code, Article 1837, par. 2

4.

Right to Continue Business on Wrongful Dissolution Civil Code, Article 1837, pars. 2 and 3 When Partnership Dissolved for Fraud or Misrepresentation Civil Code, Article 1838, pars. 1, 2 and 3 Rights of Retiring Partners or Deceased Partners Estate Civil Code, Articles 1840 and 1841 Right of Expelled Partner Civil Code, Article 1837 Liability of person of Partnership Continuing Business to Dissolved Partnerships Creditors Civil Code, Article 1840

5.

6.

7.

8.

E.

Application of Assets to Liabilities 1. Partnership Assets and Order of their Application Civil Code, Article 1839 pars. 1 and 3 Order of Priority of Liabilities Civil Code, Article 1839, par. 2 Contributions of Partners Civil Code, Article 1839, pars. 3, 4, 5 and 6 Priority Between Partnership Creditors and Separate Creditors Civil Code, Articles 1827 and 1839, pars. 8 and 9 -oOo-

2.

3.

4.