Ace Santiago:

ARTICLE 1793 - Obligation of partner who receives share of partnership credit

Distinction of Article 1793 and 1792:

Article 1793 Article 1792

Applies to any partner applies to managing partner
(manger or not) only

refers to two credits: credit in

refers only to credit in favor
favor of the partnership and in
of partnership
favor of the managing partner

A partner is obliged to bring to the partnership capital what he has received even though he may have
given receipt for his share only when,

1. A partner has received in whole or in part, his share of the partnership credit

2. The other partners have not collected their shares

3. The partnership debtor has become insolvent

 Collection during the existence of partnership – the rule applies because the fiduciary relationship
still exist
 Collection after the dissolution of the partnership:

Case: Pang Lim and Benito Galvez Vs. Lo Seng

FACTS:

Lo Seng and Pang Lim were partners under the name of Lo Seng and Co. running a distillery in the
Province of Bulacan. The land on which the distillery is located as well as the buildings and improvements
is the property of Lo Yao who resides in Hongkong.

Pang Lim sold all his interest in the distillery to his partner Lo Seng, thus placing the latter in the position
of sole owner, afterwhich Lo Yao executed and acknowledged before a notary public a deed purporting
to convey to Pang Lim and Benito Galvez, the entire distillery plant including the land.

Thereafter Pang Lim and Benito Galvez demanded possession from Lo Seng by filing an action of unlawful
detainer, but the latter refused to yield.

ISSUE:

Whether or not Pang Lim and Benito Galvez, considering prior partnership of Pang Lim and Lo Seng,
deprive Lo Seng of the lease.

HELD:

No. The Supreme Court held that the bad faith of the plaintiffs in seeking to deprive the defendant of
this lease is strikingly revealed in the circumstance that prior to the acquisition of this property Pang
Lim had been partner with Lo Seng and Benito Galvez an employee. Both therefore had been in
relations of confidence with Lo Seng and in that position had acquired knowledge of the possibilities
of the property and possibly an experience which would have enabled them, in case they had
acquired possession, to exploit the distillery with profit. On account of his status as partner in the firm
of Lo Seng and Co., Pang Lim knew that the original lease had been extended for fifteen years; and
he knew the extent of valuable improvements that had been made thereon.

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Above all other persons in business relations, partners are required to exhibit towards each other the
highest degree of good faith. In fact the relation between partners is essentially fiduciary, each being
considered in law, as he is in fact, the confidential agent of the other. It is therefore accepted as
fundamental in equity jurisprudence that one partner cannot, to the detriment of another, apply
exclusively to his own benefit the results of the knowledge and information gained in the character of
partner.

- We may infer from the case that although the partnership was dissolved, a partner
cannot detriment his former partner by gaining benefit from the dissolved partnership.

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