73.

The following statements are presented to you:

I. A limited partnership is one composed of at least one limited partner and
at least one general partner.
II. A limited partner may contribute money or property but not services.
III. The death of a limited partner dissolves the partnership.
In your evaluation of the foregoing statements:
a. I and II are true
b. I and III are true
c. II and III are true
d. All are true

A limited partnership is one formed by two or more persons having as members at least one
general partner and at least one limited partner (Article 1843). Moreover, a limited partner may
contribute cash or other property, but not services (Article 1845).

The death of a limited partner will not automatically dissolve the partnership since the estate of
the said Limited partner will be substituted as the limited partner in accordance with Article
1861 which provides, thus:

“On the death of a limited partner his executor or administrator shall have all the rights of a
limited partner for the purpose of setting his estate, and such power as the deceased had to
constitute his assignee a substituted limited partner.

The estate of a deceased limited partner shall be liable for all his liabilities as a limited
partner.”

Therefore, only statements I and II are true.

74. John, Edward and Thomas are partners in JET Company. John is a general partner,
Edward a limited partner, and Thomas, a general-limited partner. The partnership has
liabilities of P70,000.00 and assets of P40,000.00. In the payment of liabilities:
a. The assets of the partnership amounting to P40,000.00 shall first be exhausted.
Thereafter, John and Thomas shall pay from their separate assets the balance at
P15,000.00 each to the creditors.
b. The assets of the partnership amounting to P40,000.00 shall first be
exhausted. Thereafter, John and Thomas shall pay from their separate assets
the balance at P15,000.00 each to the creditors but Thomas can recover the
amount of P15,000.00 from John.
c. The assets of the partnership amounting to P40,000.00 shall first be exhausted.
Thereafter, the three partners shall pay from their separate assets the balance at
P10,000.00 each to the creditors, but Edward and Thomas can recover P10,000.00
each from John.
d. John and Thomas will pay the liabilities from their separate assets. Thereafter,
Thomas can recover P35,000.00 from John.

A general partner in a limited partnership shall be subject to all the restrictions and
liabilities of a partner in a general partnership. Thus, he can be held liable to the extent of his
separate property after partnership assets have been exhausted. A limited partner shall not
become liable as a general partner unless, in addition to the exercise of his rights and powers as
1 Questions and Answers in Partnership
Answers prepared by Atty. Christopher R. Hernandez
Polytechnic University of the Philippines
a limited partner, he takes part in the control of the business. A general-limited partner shall be
subject to all the restrictions of a general partner. However, in respect to his contribution, he
shall have the rights against other members of the partnership which he would have had if he
were not also a general partner.

Therefore, partnership’s assets amounting to P40,000.00 shall first be exhausted. John,

being the general partner, and Thomas, being the general-limited partner would be liable for
P15,000.00 each, but Thomas can recover what he has paid from the general partner, John.

75. A limited partner is liable as a general partner:

I. If he is also a general partner.
II. If he participates in the management of the partnership.
III. If he allows his surname to be included in the partnership name.
The statement is true with respect to:
a. I and II
b. I and III
c. II and III
d. I, II and III

A limited partner would also be liable if he is also a general partner (limited-general

partner). A limited partner who knowingly allows his surname to be included in the firm name
shall also be liable as a general partner to the partnership’s creditors. Likewise, a limited
partner shall be liable as a general partner if he takes part in the control of the business.
Therefore, statements I, II and III are true.

76. Libro Enterprises, Limited is a partnership engaged in the book store business, with
Lydia,Indira, Blesilda, Romina and Oprah as partners. Lydia is the only limited partner
contributing P200,000.00. Indira contributed her services by managing the firm, while
Blesilda, Romina and Oprah contributed P50,000.00, P100,000.00, P150,000.00,
respectively. The partners have a stipulation that Oprah shall not be liable for any
obligations of the partnership because of the goodwill she brought to the business. Who
among the partners may creditors go against for their separate property after the
partnership assets have been exhausted?
a. All of the partners
b. Blesilda and Romina only
c. Indira, Blesilda and Romina only
d. All of the partners, except Lydia

The creditors cannot go against Lydia because as a rule, a limited partner shall not be liable
as a general partner unless he allows the inclusion of his surname in the partnership name, or if
he takes part in the control of the business.

Oprah cannot be considered as a limited partner because it is not stipulated in the

partnership article. The stipulation that she will not be liable for any obligation of the
partnership is NOT valid as to third person. However, it is valid as between the partners. As
such, although Oprah is liable to the creditors of the partnership, she is entitled to
reimbursements from the other partners of whatever amount that she will be made to pay.

2 Questions and Answers in Partnership

Answers prepared by Atty. Christopher R. Hernandez
Polytechnic University of the Philippines
 Indira, although an Industrial Partner, is also liable to the creditors. However, she can also
ask for reimbursement from the other partners of any amount that she will pay since an
industrial partner shall not share in the loss.

77. Without the written consent or the ratification by all the limited partners, a general
partner or all the general partners, have no authority to perform any of the following acts,
except to:
a. Admit a person as a general partner.
b. Continue the business with partnership property on the death, retirement, insanity,
civil interdiction or insolvency of a general partner.
c. Admit a person as a limited partner.
d. Continue the business with partnership property on the death, retirement,
insanity, civil interdiction or insolvency of a limited partner.

Without the written consent or the ratification by all the limited partners, a general partner
or all the general partners, have no authority to perform any of the following acts:
(1) do any act in contravention of the certificate;
(2) do any act which would make it impossible to carry on the ordinary business of the
partnership;
(3) confess a judgment against the partnership;
(4) possess partnership property, or assign their rights in specific partnership property, for
other than a partnership purpose;
(5) admit a person as a general partner;
(6) admit a person as a limited partner, unless the right to do so is given in the certificate;
and,
(7) Continue the business with partnership property on the death, retirement, insanity, civil
interdiction or insolvency of a general partner, unless the right to do so is in the certificate.

Therefore, a general partner has the authority continue the business with partnership
property on the death, retirement, insanity, civil interdiction or insolvency of a limited partner,
even without the consent of the limited partners.

78. Which of the following rights of a general partner is/are also the rights of a limited
partner?
a. Right to inspect and copy partnership books at a reasonable hour
b. Right to have on demand true and full information of all things affecting the
partnership
c. Right to have dissolution and winding up by decree of court
d. All of the foregoing

Article 1851 enumerates the rights of a limited partner, such as the right to inspect and copy
partnership books at a reasonable hour; the right to have on demand true and full information of
all things affecting the partnership; and the right to have dissolution and winding up by decree
of court.

Therefore, all of the foregoing statements above are also the rights of a limited partner.

79. Which of the following rights is a limited partner entitled to?

3 Questions and Answers in Partnership

Answers prepared by Atty. Christopher R. Hernandez
Polytechnic University of the Philippines
 a. Grant a loan to the partnership
b. Transact business with the partnership
c. Either (a) or (b), or both (a) and (b)
d. Neither (a) nor (b) because a limited partner is prohibited from any business
dealing with the partnership except as regards the return of his contribution or the
payment of compensation to him by way of income

A limited partner is entitled to loan money to the partnership as well as to transact business
with partnership, as stated in article 1854. Therefore, both (a) and (b) are also the rights of a
limited partner.

80. These statements are presented to you:

I. A limited partner cannot receive or hold as collateral security any partnership
property.
II. A limited partner cannot receive from general partner or the partnership any
conveyance or release from liability, if partnership assets are not sufficient to
discharge partnership liabilities to outside creditors.
In your evaluation of the foregoing statements:
a. Both statements are true
b. Both statements are false
c. Only Statement I is true
d. Only Statement II is true

According to Article 1854, limited partners are prohibited on account of their claims against
the partnership from receiving or holding as collateral security any partnership property. It is
also not allowed to receive from general partner or the partnership any conveyance or release
from liability, if partnership assets are not sufficient to discharge partnership liabilities to
outside creditors.

The receiving of collateral security, or of conveyance, or release from liability in violation

of this provision is a fraud on the partnership creditors who may seek the rescission of the
transaction.

81. Who between a limited partner and a general partner may receive on account of resulting
claims against the partnership, with general creditors, a pro rata share of the partnership
assets?
a. Both limited partner and general partner
b. Limited partner only
c. General partner only
d. Neither general partner nor limited partner

One of the rights of a limited partner is to receive on account of resulting claims against the
partnership, with general creditors, a pro rate share of the partnership assets. His receipt of the
payment should not be prejudicial to partnership creditors. Therefore, only the limited partner
has this right.

82. Which of the following will not cause the automatic dissolution of a limited partnership?
a. Insanity of a general partner

4 Questions and Answers in Partnership

Answers prepared by Atty. Christopher R. Hernandez
Polytechnic University of the Philippines
 b. Civil interdiction of a limited partner
c. Death of a general partner
d. Insolvency of a general partner

The retirement, death, insolvency, insanity, or civil interdiction of a general partner

dissolves the partnership while the retirement, death, insolvency, insanity, or civil interdiction of
a limited partner does not dissolve the partnership except when there is no more limited partner.

83. If there are several limited partners, which of the following may be agreed upon by the
members of the partnership?
a. Priority of one or some of the limited partners over the other limited partners as to
the return of their contributions
b. Priority of one or some of the limited partners over the other limited partners as to
their compensation by way of income
c. Either (a) or (b), or both (a) and (b) or any other priority
d. None of the foregoing since any agreement as to any priority is void because the
limited partners must have equal rights and privileges.

If there are several limited partners, the members may agree that one or more of the limited
partners shall have a priority over other limited partners as to the return of their contributions,
as to their compensation, or as to any other matter. Therefore, both (a) and (b) may be agreed
upon by the members of the partnership, in case of several limited partners.

84. These statements are presented to you:

I. As a rule, a limited partner is not a proper party to proceedings by or against a
partnership
II. A limited partner may, however, be a proper party if the object of the proceeding
is to enforce a limited partner’s right against the partnership or a limited partner’s
liability to the partnership.
In your evaluation of the foregoing statements:
a. Both statements are true
b. Both statements are false
c. Only Statement I is true
d. Only Statement II is true

As a general rule, a limited partner is not a proper party to proceedings by or against a

partnership, however, a limited partner shall be a proper party if he is also a general partner, or
where the object of the proceedings is to enforce a limited partner’s right against the
partnership or a limited partner’s liability to the partnership.

5 Questions and Answers in Partnership

Answers prepared by Atty. Christopher R. Hernandez
Polytechnic University of the Philippines