Partnership Reviewer (D. Sanchez)

Partnership Exam Reviewer – Block C 2016 Prof.
Dionne Sanchez Go/Lagmay/Pabiona/Reodica

Hello Block C! I. Nature; Creation
This reviewer is a product of the hard work of A. Definition; Essential Features –1767
Carlo Go, Martin Lagmay, Arrow Pabiona and
Ron Reodica. Article 1767. By the contract of partnership two or more persons
Two or more persons may also form a partnership for the exercise of
a profession. (1665a)
Cases in italics are the specific cases discussed
in class. Notes are from De Leon or class notes.
Re: annotations, Ma’am uses De Leon, most of her

questions during recitation can be answered by
reading De Leon. Read Casis’ book for a deeper Characteristic Elements of partnership:
analysis. Sir Casis explains the gray areas of the law 1. Consensual – perfected by mere consent
and the nuances of the cases. 2. Nominate – it has a special name/designation
in law
Good luck! J 3. Bilateral – entered into by 2 or more persons
and the rights and obligations arising
Table of Contents: therefrom are always reciprocal
4. Onerous – each party aspires to procure for
himself a benefit
I. Nature; Creation – p.1 5. Commutative – the undertaking of each
II. Kinds of Partnership – p. 15 partner is considered as equivalent of the
III. Kinds of Partners – p. 17 others’
IV. Partner’s Obligations to the 6. Principal – does not depend for its existence
and validity upon some other contracts
partnership – p. 18 7. Preparatory – entered into as a means to an
V. Partner’s Obligations Inter Se end, i.e. to engage in business for profit-
– p. 21 realization
VI. Partner’s Obligations to Essential Features:
personal and partnership 1. There must be a valid contract
creditors; third parties 2. Parties must have legal capacity
VII. Rights of a Partner – p. 23 3. There must be a mutual contribution of
VIII. Partnership’s obligations to money property, or industry to a common
fund
the partners – p. 32 4. Object must be lawful
IX. Rights of assignees – p. 32 5. Purpose must be to obtain profits and to
X. Dissolution and winding up – divide the same among the parties.
p. 33
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Partnership Exam Reviewer – Block C 2016 Prof. Dionne Sanchez Go/Lagmay/Pabiona/Reodica

B. Creation – 1770, 1771, 1772, 1784,
1815, CPR Rule 3.02, 1141
Form of partnership contract
Article 1770. A partnership must have a lawful object or purpose, and GR: No special form is required for the validity or
must be established for the common benefit or interest of the
partners. existence of the contract of partnership.
When an unlawful partnership is dissolved by a judicial decree, the Registration

profits shall be confiscated in favor of the State, without prejudice to
the provisions of the Penal Code governing the confiscation of the
Registration is necessary as a condition for the
instruments and effects of a crime. (1666a) issuance of licenses to engage in business or trade.
Article 1771. A partnership may be constituted in any form, except Agad v. Mabato
where immovable property or real rights are contributed thereto, in
which case a public instrument shall be necessary. (1667a) Doctrine: If immovable property has not been
contributed to the partnership, it is not necessary
Article 1772. Every contract of partnership having a capital of three to include an inventory in the public instrument
thousand pesos or more, in money or property, shall appear in a Facts: Agad and Mabato are partners in a
public instrument, which must be recorded in the Office of the
Securities and Exchange Commission. fishpond business. Agad filed a complaint against
Mabato for his share in the profits and to wind up
Failure to comply with the requirements of the preceding paragraph the business. Mabato denies the existence of the
shall not affect the liability of the partnership and the members
thereof to third persons. (n)
partnership despite the execution of the contract
and that even if there was indeed a partnership, it
Article 1784. A partnership begins from the moment of the execution is void since according to the Civil Code, a
of the contract, unless it is otherwise stipulated. (1679) contract of partnership is void, whenever
Article 1815. Every partnership shall operate under a firm name,
immovable property is contributed thereto, if
which may or may not include the name of one or more of the inventory of said property is not made, signed by
partners. the parties; and attached to the public instrument
Held: The contract says that the partnership was
Those who, not being members of the partnership, include their
names in the firm name, shall be subject to the liability of a partner. established to operate a fishpond and not to
(n) engage in a fishpond business. Also, none of the
partners contributed any real right to any
Rule 3.02 - In the choice of a firm name, no false, misleading or
assumed name shall be used. The continued use of the name of a
fishpond. Their contributions were limited to
deceased partner is permissible provided that the firm indicates in all P1000 each. The contract did not mention that a
its communications that said partner is deceased. fishpond nor a real right thereto was contributed
Article 1141. Real actions over immovables prescribe after thirty
to the partnership or became part of the capital,
years. even if a fishpond or a real right thereto could
become part of its assets
This provision is without prejudice to what is established for the
acquisition of ownership and other real rights by prescription. (1963)
Torres v. CA
Doctrine: Under Article 1767 of the Civil Code, a
partner may contribute not only money or
Effects of an unlawful partnership property, but also industry and must share in the
1. The contract is void ab initio profits and losses
2. The profits shall be confiscated in favor of Facts: 2 sisters entered into a JVA with Torres
the government for the development of a parcel of land into a
3. The instruments or tools and proceeds of subdivision. The sisters would contribute the land
the crime shall also be forfeited in favor of to be developed and Torres would contribute
government industry and amounts for general expenses and
4. The contributions of the partners shall not the profits to be divided 60-40. The project did
be confiscated unless they fall under #3. not push through and then the sisters filed a civil
case against Torres for their share equal to 60%
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Held: A reading of the terms embodied in the so applied, and not the contributions, because this
Agreement indubitably shows the existence of a would be an excessive and unjust sanction for, as
partnership pursuant to Article 1767 of the Civil we have seen, there is no reason, in such a case,
Code. Under the Agreement, petitioners would for depriving the partner of the portion of the
contribute property to the partnership in the form capital that he contributed, the circumstances of
of land which was to be developed into a the two cases being entirely different
subdivision; while respondent would give, in
addition to his industry, the amount needed for Tacao v. CA
general expenses and other costs. Furthermore, Doctrine: A partnership may be constituted in
the income from the said project would be any form; a public instrument is necessary only
divided according to the stipulated where immovable property or real rights are
percentage. Clearly, the contract manifested the contributed thereto. Since a contract of
intention of the parties to form a partnership. partnership is consensual, an oral contract of
Since it is a contract of partnership, each partner partnership is as good as a written one. Therefore,
must share in the profits and losses. where no immovable property or real rights are
involved, what matters is that the parties have
Arbes v. Polistico complied with the requisites of a partnership.
Doctrine: The Code only deals with the Facts: Anay entered into a joint venture with
disposition of the profits; but the fact that said Belo and Tacao. Anay would be the head of
contributions are not included in the disposal marketing, Belo the capitalist, Tacao the general
prescribed profits, shows that in consequences of manager. The parties agreed that Anay would be
said exclusion, the general law must be followed, entitled to 10% of the annual net profits. The
and hence the partners should reimburse the agreement was not reduced to writing. When the
amount of their respective contributions. Any business flourished, Anay was excluded from the
other solution is immoral, and the law will not business and was not given her share of the
consent to the latter remaining in the possession profits or her commission. Belo and Tacao allege
of the manager or administrator who has refused she is a mere employee.
to return them, by denying to the partners the Held: To be considered a juridical personality, a
action to demand them. partnership must fulfill these requisites:
Facts: Arbes et al were members and (1) two or more persons bind themselves to
shareholders of Turnuhan Polistico. Polistico et al contribute money, property or industry to a
were the officers. Trial Court declared “Turnuhan common fund; and
Polistico & Co.” is unlawful and sentenced (2) intention on the part of the partners to divide
officers to return the P24.607.80 capital to the the profits among themselves. The fact that there
members. Officers allege since it is unlawful, appears to be no record in the Securities and
some charitable institution to whom the Exchange Commission of a public instrument
partnership funds may be ordered to be turned embodying the partnership agreement pursuant to
over, should be included, as a party defendant. Article 1772 of the Civil Code did not cause the
Held: According to A.1666, a charitable nullification of the partnership. In the case at bar,
institution is not a necessary party in the present there was indeed a partnership since the requisites
case of determination of the rights of the parties. were present. Anay contributed her industry and
The action which may arise from said article, in the should be entitled to her share in the profits.
case of unlawful partnership, is that for the recovery
of the amounts paid by the member from those in Heirs of Jose Lim v. Juliet Villa Lim
charge of the administration of said partnership, Doctrine: In identifying the partners in a
and it is not necessary for the said parties to base partnership, the best evidence is the contract of
their action to the existence of the partnership, partnership or articles of partnership. In this case,
but on the fact that of having contributed some such evidence was not available, but by applying
money to the partnership capital. The profits are Article 1769CC to the facts of the case, the Court
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may determine who the real partner is, by Sec 22(b) - The term 'corporation' shall include partnerships, no
matter how created or organized, joint-stock companies, joint
preponderance of evidence. accounts (cuentas en participacion), association, or insurance
Facts: three people formed a partnership engaged companies, but does not include general professional partnerships and
in the trucking business. Two of the partners were a joint venture or consortium formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal and
Jimmy Yu and Norberto Uy. This case stems other energy operations pursuant to an operating consortium
from a dispute as to the identity of the third agreement under a service contract with the Government. 'General
partner; whether it was Jose Lim or Jose’s eldest professional partnerships' are partnerships formed by persons for the
sole purpose of exercising their common profession, no part of the
son Elfledo. The petitioners, widow and the other income of which is derived from engaging in any trade or business
children of Jose Lim, claim that Jose was the
partner, and as heirs, demanded respondent to SEC. 26. Tax Liability of Members of General Professional
Partnerships. - A general professional partnership as such shall not
submit an accounting of all income, profits and be subject to the income tax imposed under this Chapter. Persons
rentals received and to surrender administration. engaging in business as partners in a general professional partnership
Held: Elfledo was the real partner. Since Jose was shall be liable for income tax only in their separate and individual
capacities. For purposes of computing the distributive share of the
not a partner, petitioners cannot demand the partners, the net income of the partnership shall be computed in the
partition of the acquired properties from the same manner as a corporation. Each partner shall report as gross
business, nor may they demand an accounting. A income his distributive share, actually or constructively received, in
the net income of the partnership.
partnership exists when two or more persons
agree to place their money, effects, labor, and skill Article 1811. A partner is co-owner with his partners of specific
in lawful commerce or business, with the partnership property. The incidents of this co-ownership are such
that:
understanding that there shall be a proportionate
sharing of the profits and losses among them. A (1) A partner, subject to the provisions of this Title and to any
contract of partnership is defined by the Civil agreement between the partners, has an equal right with his partners
Code as one where two or more persons bind to possess specific partnership property for partnership purposes; but
he has no right to possess such property for any other purpose
themselves to contribute money, property, or without the consent of his partners;
industry to a common fund, with the intention of
dividing the profits among themselves. The (2) A partner's right in specific partnership property is not assignable
except in connection with the assignment of rights of all the partners
deceased husband of respondent is the real in the same property;
partner because (1) he gave money as his share in
the partnership; (2) he ran the partnership with (3) A partner's right in specific partnership property is not subject to
absolute control; (3) all of the properties of the attachment or execution, except on a claim against the partnership.
When partnership property is attached for a partnership debt the
partnership were registered in his name; (4) he did partners, or any of them, or the representatives of a deceased partner,
not receive salary, indicating that received shares cannot claim any right under the homestead or exemption laws;
of the profit instead; and (5) none of the partners
(4) A partner's right in specific partnership property is not subject to
demanded periodic accounting from him. legal support under article 291. (n)
C. Separate Juridical Personality –1768,

1775, NIRC Sec 22(b), Sec 26,
Effect of failure to comply with requirements
1811 (second par) 1. 1772: Even in the case of failure to
comply with the requirements of
Article 1768. The partnership has a juridical personality separate and registration, such partnership still acquires
distinct from that of each of the partners, even in case of failure to
comply with the requirements of article 1772, first paragraph. (n) juridical personality
2. 1773 and 1775: the partnership shall not
Article 1775. Associations and societies, whose articles are kept secret acquire any juridical personality because
among the members, and wherein any one of the members may the contact itself is void. This is also true
contract in his own name with third persons, shall have no juridical
personality, and shall be governed by the provisions relating to co- regarding secret associations or societies.
ownership. (1669)
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Aguila v CA and one who does it through partnership. There is,
Doctrine: A partnership has a juridical then and now, no distinction in income tax
personality separate and distinct from that of each liability between a person who practices his
of the partners. The partners cannot be held liable profession alone or individually and one who does
for the obligations of the partnership unless it is it through partnership (whether registered or not)
shown that the legal fiction of a different juridical with others in the exercise of a common
personality is being used for fraudulent, unfair, or profession. All individuals deriving income from
illegal purposes. any source whatsoever are treated in almost
Facts: Petitioner is the manager of AC Aguila and invariably the same manner and under a common
Sons, a partnership engaged in lending activities set of rules.
and respondents were the owners of the house
and lot. They entered into a Memorandum of Mendiola v. CA
Agreement: P will buy R’s land and R has option Doctrine: In a partnership, the members become
to repurchase the property within 90 days. co-owners of what is contributed to the firm
Respondent failed to redeem the property within capital and of all property that may be acquired
the 90-day period. Hence, petitioner caused the thereby and through the efforts of the members.
cancellation of TCT No. 195101 and the issuance Each partner possesses a joint interest in the
of a new certificate of title in the name of A.C. whole of partnership property. If the relation does
Aguila and Sons, Co. Respondent then filed a not have this feature, it is not one of partnership
petition for declaration of nullity of a deed of sale Facts: Pacfor entered into a "Side Agreement on
against petitioner. She alleged that the signature of Representative Office known as Pacific Forest
her husband on the deed of sale was a forgery. Resources (Phils.), Inc." with Mendiola assuming
Held: Any decision rendered against a person that Pacfor-Phils. is already approved by the SEC.
who is not a real party in interest in the case Pacfor will establish a Pacfor representative office
cannot be executed. Hence, a complaint filed in the Philippines, to be known as Pacfor Phils
against such a person should be dismissed for with Mendiola as President. SEC then granted the
failure to state a cause of action. It is the application. Now, Mendiola wanted to confirm
partnership, not its officers or agents, which his 50% equity of Pacfor Phils. Pacfor denied that
should be impleaded in any litigation involving ATM is a part owner since he is merely Pacfor-
property registered in its name. A violation of USA's representative
this rule will result in the dismissal of the Held: In this case, Pacfor Phils is simply a
complaint. "theoretical company" for the purpose of dividing
the income 50-50. Thus, the parties merely shared
Tan v. Del Rosario profits. This alone does not make a partnership. A
Doctrine: A general professional partnership, corporation cannot become a member of a
unlike an ordinary business partnership is not partnership in the absence of express
itself an income taxpayer. The income tax is authorization by statute or charter. This doctrine
imposed not on the professional partnership, is based on the following considerations: (1) that
which is tax exempt, but on the partners the mutual agency between the partners, whereby
themselves in their individual capacity computed the corporation would be bound by the acts of
on their distributive shares of partnership profits. persons who are not its duly appointed and
Facts: Assailed is the constitutionality of RA authorized agents and officers, would be
7496, also commonly known as the Simplified inconsistent with the policy of the law that the
Net Income Taxation Scheme, amending certain corporation shall manage its own affairs separately
provisions of the National Internal Revenue Code. and exclusively; and, (2) that such an arrangement
Held: General professional partnerships are not would improperly allow corporate property to
subject to the payment of income tax. There is no become subject to risks not contemplated by the
difference in the tax treatment between a person stockholders when they originally invested in the
who practices his profession alone or individually
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corporation. In this case, no such authorization the part of Mercado that induced the Angeles
has been proved in the case at bar. spouses to part with their money. Mercado
satisfactorily explained that the Angeles spouses
Angeles v. Secretary of Justice do not want to be revealed as the financiers.
Doctrine: Mere failure to register the contract of
partnership with the SEC does not invalidate a D. Mutual Agency – 1803, 1818-1822,
contract that has the essential requisites of a 1825, Sec 29 Rule 130, Sec 11 Rule
partnership. Also, partnership may exist even if
14, 1800-1802, 1832-1834, 1769
the partners do not use the words “partner” or
“partnership.”
Facts: Angeles spouses filed a criminal complaint Article 1803. When the manner of management has not been agreed
for estafa against Mercado. They claim that upon, the following rules shall be observed: (1) All the partners shall
Mercado convinced them to enter into a contract be considered agents and whatever any one of them may do alone
shall bind the partnership, without prejudice to the provisions of
of antichresis, covering eight parcels of land article 1801.
planted with fruit-bearing lanzones trees owned
by Juana Suazo. After three years, the Angeles (2) None of the partners may, without the consent of the others, make
spouses asked for an accounting from Mercado any important alteration in the immovable property of the
partnership, even if it may be useful to the partnership. But if the
wherein they discovered that Mercado had put the refusal of consent by the other partners is manifestly prejudicial to the
contract of antichresis over the subject land under interest of the partnership, the court's intervention may be sought.
Mercado and his spouse’s names. Mercado denied (1695a)
the allegations and claimed that there exists an Article 1818. Every partner is an agent of the partnership for the
industrial partnership (colloquially known as sosyo purpose of its business, and the act of every partner, including the
industrial) between him and his spouse as industrial execution in the partnership name of any instrument, for apparently
partners and the Angeles spouses as the financiers carrying on in the usual way the business of the partnership of which
he is a member binds the partnership, unless the partner so acting has
and it was their practice to enter into business in fact no authority to act for the partnership in the particular matter,
transactions with other people under the name of and the person with whom he is dealing has knowledge of the fact
Mercado because the Angeles spouses did not that he has no such authority.
want to be identified as the financiers. An act of a partner which is not apparently for the carrying on of
Held: The Angeles spouses’ position that there is business of the partnership in the usual way does not bind the
no partnership because of the lack of a public partnership unless authorized by the other partners.
instrument indicating the same and a lack of Except when authorized by the other partners or unless they have
registration with the SEC holds no water. First, abandoned the business, one or more but less than all the partners
the Angeles spouses contributed money to the have no authority to:
partnership and not immovable property. Second,
(1) Assign the partnership property in trust for creditors or on the
mere failure to register the contract of partnership assignee's promise to pay the debts of the partnership; (2) Dispose of
with the SEC does not invalidate a contract that the good-will of the business; (3) Do any other act which would make
has the essential requisites of a partnership. The it impossible to carry on the ordinary business of a partnership; (4)
Confess a judgment; (5) Enter into a compromise concerning a
purpose of registration of the contract of partnership claim or liability; (6) Submit a partnership claim or liability
partnership is to give notice to third to arbitration; (7) Renounce a claim of the partnership.
parties. Failure to register the contract of
partnership does not affect the liability of the No act of a partner in contravention of a restriction on authority shall
bind the partnership to persons having knowledge of the restriction.
partnership and of the partners to third (n)
persons. Neither does such failure to register
affect the partnership’s juridical personality. A Article 1819. Where title to real property is in the partnership name,
any partner may convey title to such property by a conveyance
partnership may exist even if the partners do not executed in the partnership name; but the partnership may recover
use the words “partner” or “partnership.” The such property unless the partner's act binds the partnership under the
contract of antichresis alone, which was in the provisions of the first paragraph of article 1818, or unless such
property has been conveyed by the grantee or a person claiming
name Mercado and his spouse, failed to convince through such grantee to a holder for value without knowledge that the
us that there was deceit or false representation on partner, in making the conveyance, has exceeded his authority.
6
Where title to real property is in the name of the partnership, a
conveyance executed by a partner, in his own name, passes the
equitable interest of the partnership, provided the act is one within the
authority of the partner under the provisions of the first paragraph of

Article 1819. Where title to real property is in the partnership name, Article 1825. When a person, by words spoken or written or by
any partner may convey title to such property by a conveyance conduct, represents himself, or consents to another representing him
executed in the partnership name; but the partnership may recover to anyone, as a partner in an existing partnership or with one or more
such property unless the partner's act binds the partnership under the persons not actual partners, he is liable to any such persons to whom
provisions of the first paragraph of article 1818, or unless such such representation has been made, who has, on the faith of such
property has been conveyed by the grantee or a person claiming representation, given credit to the actual or apparent partnership, and
through such grantee to a holder for value without knowledge that the if he has made such representation or consented to its being made in a
partner, in making the conveyance, has exceeded his authority. public manner he is liable to such person, whether the representation
has or has not been made or communicated to such person so giving
Where title to real property is in the name of the partnership, a credit by or with the knowledge of the apparent partner making the
conveyance executed by a partner, in his own name, passes the representation or consenting to its being made:
equitable interest of the partnership, provided the act is one within the
authority of the partner under the provisions of the first paragraph of (1) When a partnership liability results, he is liable as though he were
article 1818. an actual member of the partnership;
Where title to real property is in the name of one or more but not all (2) When no partnership liability results, he is liable pro rata with the
the partners, and the record does not disclose the right of the other persons, if any, so consenting to the contract or representation
partnership, the partners in whose name the title stands may convey as to incur liability, otherwise separately.
title to such property, but the partnership may recover such property
if the partners' act does not bind the partnership under the provisions When a person has been thus represented to be a partner in an
of the first paragraph of article 1818, unless the purchaser or his existing partnership, or with one or more persons not actual partners,
assignee, is a holder for value, without knowledge. he is an agent of the persons consenting to such representation to
bind them to the same extent and in the same manner as though he
Where the title to real property is in the name of one or more or all were a partner in fact, with respect to persons who rely upon the
the partners, or in a third person in trust for the partnership, a representation. When all the members of the existing partnership
conveyance executed by a partner in the partnership name, or in his consent to the representation, a partnership act or obligation results;
own name, passes the equitable interest of the partnership, provided but in all other cases it is the joint act or obligation of the person
the act is one within the authority of the partner under the provisions acting and the persons consenting to the representation. (n)
of the first paragraph of article 1818.
Section 29. Rule 130 Admission by co-partner or agent. — The act or
Where the title to real property is in the name of all the partners a declaration of a partner or agent of the party within the scope of his
conveyance executed by all the partners passes all their rights in such authority and during the existence of the partnership or agency, may
property. (n) be given in evidence against such party after the partnership or agency
is shown by evidence other than such act or declaration. The same
Article 1820. An admission or representation made by any partner rule applies to the act or declaration of a joint owner, joint debtor, or
concerning partnership affairs within the scope of his authority in other person jointly interested with the party. (26a)
accordance with this Title is evidence against the partnership. (n)
Section 11. Rule 14 Service upon domestic private juridical entity. – When
Article 1821. Notice to any partner of any matter relating to the defendant is a corporation, partnership or association organized
partnership affairs, and the knowledge of the partner acting in the under the laws of the Philippines with a juridical personality, service
particular matter, acquired while a partner or then present to his mind, may be made on the president, managing partner, general manager,
and the knowledge of any other partner who reasonably could and corporate secretary, treasurer, or in-house counsel.
should have communicated it to the acting partner, operate as notice
to or knowledge of the partnership, except in the case of fraud on the Article 1800. The partner who has been appointed manager in the
partnership, committed by or with the consent of that partner. (n) articles of partnership may execute all acts of administration despite
the opposition of his partners, unless he should act in bad faith; and
Article 1822. Where, by any wrongful act or omission of any partner his power is irrevocable without just or lawful cause. The vote of the
acting in the ordinary course of the business of the partnership or partners representing the controlling interest shall be necessary for
with the authority of his co-partners, loss or injury is caused to any such revocation of power.
person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same extent as the A power granted after the partnership has been constituted may be
partner so acting or omitting to act. (n) revoked at any time. (1692a)
Article 1801. If two or more partners have been intrusted with the
management of the partnership without specification of their
respective duties, or without a stipulation that one of them shall not
act without the consent of all the others, each one may separately
execute all acts of administration, but if any of them should oppose
the acts of the others, the decision of the majority shall prevail. In
case of a tie, the matter shall be decided by the partners owning the
controlling interest. (1693a)
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Article 1802. In case it should have been stipulated that none of the Article 1834. After dissolution, a partner can bind the partnership,
managing partners shall act without the consent of the others, the except as provided in the third paragraph of this article: (1) By any act
concurrence of all shall be necessary for the validity of the acts, and appropriate for winding up partnership affairs or completing
the absence or disability of any one of them cannot be alleged, unless transactions unfinished at dissolution;
there is imminent danger of grave or irreparable injury to the
partnership. (1694) (2) By any transaction which would bind the partnership if dissolution
had not taken place, provided the other party to the transaction:
Article 1832. Except so far as may be necessary to wind up
partnership affairs or to complete transactions begun but not then (a) Had extended credit to the partnership prior to dissolution and
finished, dissolution terminates all authority of any partner to act for had no knowledge or notice of the dissolution; or
the partnership:
(b) Though he had not so extended credit, had nevertheless known of
(1) With respect to the partners, (a) When the dissolution is not by the the partnership prior to dissolution, and, having no knowledge or
act, insolvency or death of a partner; or notice of dissolution, the fact of dissolution had not been advertised
in a newspaper of general circulation in the place (or in each place if
(b) When the dissolution is by such act, insolvency or death of a more than one) at which the partnership business was regularly carried
partner, in cases where article 1833 so requires; on.
(2) With respect to persons not partners, as declared in article 1834. The liability of a partner under the first paragraph, No. 2, shall be
(n) satisfied out of partnership assets alone when such partner had been
prior to dissolution:
Article 1833. Where the dissolution is caused by the act, death or
insolvency of a partner, each partner is liable to his co-partners for his (1) Unknown as a partner to the person with whom the contract is
share of any liability created by any partner acting for the partnership made; and
as if the partnership had not been dissolved unless:
(2) So far unknown and inactive in partnership affairs that the
(1) The dissolution being by act of any partner, the partner acting for business reputation of the partnership could not be said to have been
the partnership had knowledge of the dissolution; or in any degree due to his connection with it.
(2) The dissolution being by the death or insolvency of a partner, the The partnership is in no case bound by any act of a partner after
partner acting for the partnership had knowledge or notice of the dissolution:
death or insolvency.
(1) Where the partnership is dissolved because it is unlawful to carry
on the business, unless the act is appropriate for winding up
partnership affairs; or
(2) Where the partner has become insolvent; or (3) Where the partner
has no authority to wind up partnership affairs; except by a
transaction with one who -
(a) Had extended credit to the partnership prior to dissolution and

had no knowledge or notice of his want of authority; or
(b) Had not extended credit to the partnership prior to dissolution,

and, having no knowledge or notice of his want of authority, the fact
of his want of authority has not been advertised in the manner
provided for advertising the fact of dissolution in the first paragraph,
No. 2 (b).
Nothing in this article shall affect the liability under article 1825 of any
person who after dissolution represents himself or consents to
another representing him as a partner in a partnership engaged in
carrying on business. (n)
8

has in fact no authority, and (2) the third
Article 1769. In determining whether a partnership exists, these rules person knows that the acting partner has
shall apply: (1) Except as provided by article 1825, persons who are no authority
not partners as to each other are not partners as to third persons;
b. Acts of strict dominion or ownership –
(2) Co-ownership or co-possession does not of itself establish a for acts which are not apparently carrying
partnership, whether such-co-owners or co-possessors do or do not on in the usual way the business of the
share any profits made by the use of the property; partnership, the partnership is NOT
(3) The sharing of gross returns does not of itself establish a
bound, unless authorized by ALL other
partnership, whether or not the persons sharing them have a joint or partners or unless they have abandoned
common right or interest in any property from which the returns are the business
derived;
c. Acts in contravention of a restriction on
(4) The receipt by a person of a share of the profits of a business is authority – partnership not liable to 3rd
prima facie evidence that he is a partner in the business, but no such persons having actual or presumptive
inference shall be drawn if such profits were received in payment:
knowledge of the restrictions
(a) As a debt by installments or otherwise;
Liability of partner acting without authority =
(b) As wages of an employee or rent to a landlord; personally liable
(c) As an annuity to a widow or representative of a deceased partner;
General rule: person is not bound by the act,
(d) As interest on a loan, though the amount of payment vary with the admission, statement, or agreement of another of
profits of the business; which he has no knowledge to or which he has
not given his consent
(e) As the consideration for the sale of a goodwill of a business or
other property by installments or otherwise. (n)
Before the partnership can be charged with the
admission of a partner under A1820, the
Power of partner as agent of partnership – in
partnership relation must be shown and proof of
the absence of an agreement to the contrary, all that fact must be made by evidence other than the
partners have equal rights in the management admission itself
and conduct of the partnership business
a. As among themselves – when a partner Once the existence of the partnership relation has
performs an act within the scope of his been proven by other independent evidence,
actual, implied or apparent authority, he is statements, admissions made by any partner
not only a principal as to himself, but is speaking for the partnership concerning
also for all purposes, an agent as to his copartnership affairs while acting within the scope
partners or to the partnership of his authority are admissible as evidence
b. As to 3rd persons – limitations upon the
authority of any one of the partners are Partnership in estoppel
not binding upon innocent 2rd person Meaning and effect of estoppel – estoppel is a bar,
dealing with the partnership, who have which precludes a person from denying or
the right to assume that every general asserting anything contrary to what has been
partner has power to bind the partnership established as the truth by his own deed or
especially those acting with ostensible representation
authority When a person a partner by estoppel – a
person may become a partner by estoppels and
Liability of partnership for acts of partners thus be held liable to 3rd persons as if he were a
a. Acts for apparently carrying on in the partner, when by words or conduct he:
usual way of the business of the a. Directly represents himself to anyone as a
partnership – generally, partnership liable; partner in an existing partnership or in a
exception: requisites: (1) partner so acting
9

non-existing partnership; or E. Distinguish Partnership From:
b. Indirectly represents himself by
consenting to another representing him as Co-ownership
a partner in an existing partnership or in a Partnership Co-ownership
non-existing partnership Creation Always by Generally by Law
Contract
When partnership liability results – if all the Juridical Separate and None
Personality distinct
actual partners consented to the representation, Purpose Realization of Common
the liability of the person who represented Profits enjoyment of a
himself to be a partner and the actual partners = thing or right
partnership liability Duration No limitation 10 years
Disposal of Partner may not May freely do so
interests dispose of his
When liability pro rata – when there is no individual interest
existing partnership and all those represented as in the partnership
partners consented to the representation, or not Power to act A partner may A co-owner
all of the partners of an existing partnership with 3rd Persons bind the cannot represent
consented to the representation, the liability of the partnership the co-ownership
person who represented himself as partner, AND Effect of death Dissolution -
all those who made and consented to such
representation, is joint or pro rata. Agency
Agency Partnership
In both cases, the agent or partner can bind the principal or
When liability separate – when there is no his co-partner only by such contracts as entered into within
existing partnership but and not all but only some the scope of his authority. Both fiduciary
of those represented consented, or none of the Control by the principal: not Yet the partnership relation,
partners in an existing partnership consented – applicable to the partnership while having many of the
concept Fundamental: that characteristics of the agency
separate liability of the person who represented
an agent must submit to the relationship, differs from it
himself/consented to represent principal’s tight to control in that a partner’s power to
the agent’s conduct in bind his co-partner is not
Estoppel does not create partnership regard to the subject of subject to the co-partner’s
agency right control, unless there is
Liability as partners may arise contrary to their an agreement to that effect
intention Liability of the agent: the Liability of the agent: a
ordinary agent assumes no partner acting as agent for
Doctrine of estoppel has no application as personal liability where he the partnership binds not
between actual partners acts within the scope of his only the firm members but
authority himself as well.
A partner is both principal
Elements to establish liability as a partner on and agent at the same time
ground of estoppel (1) Proof by plaintiff that he
was individually aware of the defendant’s Sharing of profits
representations as to his being a partner (2)
Reliance on such representations by the
plaintiff (3) Lack of any denial or refutation of the
statements by the defendant
10

Gatchalian v. Collector of Internal Revenue right or interest in the property. There must be a
Doctrine: By putting up money amongst clear intent to form a partnership, the existence of
themselves to buy a single sweepstakes ticket for a juridical personality different from the individual
the sole purpose of dividing equally the prize partners, and the freedom of each party to
which they may win, Gatchalian & Co. formed a transfer or assign the whole property.
partnership. Facts: Petitioners bought two parcels of land
Facts: To buy one sweepstakes ticket, Jose from Santiago Bernardino, et al. and bought
Gatchalian and 14 others contributed varying another three parcels of land from Juan Roque.
amounts for the total purchase price of P2.00. They then sold the parcels of land and realized a
Plaintiffs purchased one ticket from a duly net profit in the sale made in 1968 in the amount
authorized agent of the National Charity of P165,224.70, while they realized a net profit of
Sweepstakes Office. Ticket was registered in the P60,000.00 in the sale made in 1970. Acting BIR
name of “Jose Gatchalian and Company.” The Commissioner assessed and required petitioners
ticket won third prize in the amount of P50,000. to pay a total amount of P107,101.70 as alleged
A check was drawn by sweepstakes office deficiency corporate income taxes for the years
covering the amount of the prize won by 1968 and 1970, to which petitioners protested,
Gatchalian and Company. They were required by saying that they had availed of tax amnesties.
the income tax examiner to file the corresponding Held: In the present case, there is no evidence
income tax return covering the prize won by Jose that petitioners entered into an agreement to
Gatchalian & Company. contribute money, property or industry to a
Gatchalian & Co. argue that what they formed common fund, and that they intended to divide
was a community of property without a the profits among themselves. Respondent
personality of its own and which is exempted commissioner and/ or his representative just
from the payment of the income tax. assumed these conditions to be present on the
Held: According to the stipulation facts, the basis of the fact that petitioners purchased certain
plaintiffs organized a partnership of a civil nature parcels of land and became co-owners thereof. In
because each of them put up money to buy a the instant case, petitioners bought two (2) parcels
sweepstakes ticket for the sole purpose of of land in 1965, without selling nor improving the
dividing equally the prize which they may win, as same. In 1966, they bought another three (3)
they did in fact in the amount of P50,000. The parcels. It was only 1968 when they sold the two
partnership was not only formed, but upon the (2) parcels of land after which they did not make
organization thereof and the winning of the prize, any additional or new purchase. The remaining
Jose Gatchalian personally appeared in the office three (3) were sold in 1970. The transactions were
of the Philippines Charity Sweepstakes, in his isolated. The character of habituality peculiar to
capacity as co-partner, Gatchalian collected the business transactions for the purpose of gain was
prize, and the sweepstakes office issued the check not present. Hence, under the circumstances, they
for P50,000 in favor of Jose Gatchalian and cannot be considered to have formed an
company. All these circumstances repel the idea unregistered partnership which is thereby liable
that the plaintiffs organized and formed a for corporate income tax, as the respondent
community of property only. Having organized commissioner proposes.
and constituted a partnership of a civil nature, the
said entity is the one bound to pay the income tax Obillos v. CIR
which the Collector collected under the Section Doctrine: The sharing of gross returns does not
10 (a) of Act No. 2833. of itself establish a partnership, whether or not
the persons sharing them have a joint or common
Pascual v. CIR right or interest in any property from which the
Doctrine: The sharing of returns does not in returns are derived. There must be an
itself establish a partnership whether or not the unmistakable intention to form a partnership.
persons sharing therein have a joint or common
11

Facts: Jose Obillos, Sr. completed payment to was a balance of P2,072. The account was then
Ortigas & Co., Ltd. on two lots. The next day he transferred to the name of “Edgar Stephenson
transferred his rights to his four children, the and/or Ana Rivera.” At the time of Edgar’s death,
petitioners, to enable them to build their Ana held the deposit book. Ana claimed the P701
residences. After having held the two lots for balance in the account, but the Bank refused to
more than a year, the petitioners resold them to pay her because they believed the survivorship
the Walled City Securities Corporation and Olga agreement was invalid.
Cruz Canda. They treated the profit as a capital Held: The contentions that the survivorship
gain and paid an income tax on one-half thereof. agreement was a mere power of atty, or a gift
Commissioner of Internal Revenue required the mortis causa are premised on the idea that Edgar
four petitioners to pay corporate income tax on the was the sole and exclusive owner of the account.
total profit in addition to individual income tax on It was based on the facts that the account was
their shares thereof. The Commissioner acted on originally opened in the name of Edgar alone and
the theory that the four petitioners had formed an that Ana served only as Edgar’s housekeeper.
unregistered partnership or joint venture However, it frequently happens that a person
Held: It is erroneous to consider the petitioners deposits money in a bank in the name of another.
as having formed a partnership under Article 1767 In this case, Ana served Edgar for 19 years but
of the Civil Code simply because they allegedly never received her salary from him. The fact that
contributed money to buy the two lots, resold the Edgar later transferred the account under both of
same and divided the profit among themselves. their names although they had no kinship rebuts
They had no such intention. They were co-owners the assumption that the account was exclusively
pure and simple. To consider them as partners Edgar’s. In the absence of proof to the contrary,
would obliterate the distinction between a co- we must give faith to the certificate of deposit,
ownership and a partnership. The petitioners were which mentions the same terms as that in the
not engaged in any joint venture by reason of that survivorship agreement.
isolated transaction.
Their original purpose was to divide the lots for Tuason v. Bolanos
residential purposes. If later on they found it not Doctrine: Though a corporation has no power to
feasible to build their residences on the lots enter into a partnership, it may nevertheless enter
because of the high cost of construction, then into a joint venture with another where the nature
they had no choice but to resell the same to of that venture is in line with the business
dissolve the co-ownership. The division of the authorized by its charter.
profit was merely incidental to the dissolution of Facts: Plaintiff’s complaint against defendant was
the co-ownership, which was in the nature of to recover possession of a registered land. In the
things a temporary state. complaint, the plaintiff is represented by its
Managing Partner, Gregorio Araneta, Inc.,
Rivera v. People’s Bank and Trust Co. another corporation. Defendant appealed directly
Doctrine: The survivorship agreement was prima to the Supreme Court and contended, among
facie valid. It is an aleatory contract supported by others, that Gregorio Araneta, Inc. can not act as
law. The lawful consideration is the mutual managing partner for plaintiff on the theory that it
agreement of joint depositors permitting either of is illegal for two corporations to enter into a
them to withdraw the deposit during their lifetime, partnership
and transferring the balance to the survivor upon Held: It is true that the complaint states that the
one’s death. plaintiff is "represented herein by its Managing
Facts: Rivera was employed as Edgar Partner Gregorio Araneta, Inc.", another
Stephenson’s housekeeper from 1920 until corporation, but there is nothing against one
Edgar’s death in 1939. Edgar opened an account corporation being represented by another person,
with People’s Bank by depositing P1,000 and a natural or juridical, in a suit in court The
survivorship agreement was executed when there contention that Gregorio Araneta, Inc. cannot act
12

as managing partner for plaintiff on the theory would seem under Philippine law, a joint venture
that it is illegal for two corporations to enter into is a form of partnership and should thus be
a partnership is without merit, for the true rule is governed by the law on partnerships. However,
that "though a corporation has no power to enter into a the according to Supreme Court, there is a
partnership, it may nevertheless enter into a joint venture distinction between these two business forms, and
with another where the nature of that venture is in line with has held that although a corporation cannot enter
the business authorized by its charter." There is into a partnership contract, it may however
nothing in the record to indicate that the venture engage in a joint venture with others. Moreover,
in which plaintiff is represented by Gregorio the usual rules as regards the construction and
Araneta, Inc. as "its managing partner" is not in operations of contracts generally apply to a
line with the corporate business of either of them. contract of joint venture.
Facts: There was a controversy between the ASI
Heirs of Tan Eng Kee v. CA Group and the Lagdameo group as regards to the
Doctrine: A demand for periodic accounting is election of the members of the Board of
evidence of a partnership. Directors of the company.
Facts: This is a petition for accounting, Held: The Corporation Code, which recognizes
liquidation and winding up of the alleged the right of stock holders to stipulate on voting
partnership between Tan Eng Kee and Tan Eng rights of ASI, a party in a JOINT VENTURE
Lay. Petitioners alleged, that their father, Tan Eng with Saniwares. A Joint venture is actually a form
Kee, together with his brother, Tan Eng Lay of partnership and should be governed by the law
pooled their resources and industry together and on partnership.
entered into a partnership. They named their
enterprise “Benguet Lumber” which they jointly Litonjua v. Litonjua
managed until Tan Eng Kee’s death. They Doctrine: A joint venture is hardly
claimed that in 1981, Tan Eng Lay converted the distinguishable from a partnership since the
partnership into a corporation called “Benguet elements are similar, ie. Community of interests in
Lumber Company” purportedly a ruse to deprive the business and sharing or profits and losses.
Tan Eng Kee of his rightful participation in the Being a form of partnership, it is generally
profits of the business. governed by the law on partnership. Also, a public
Held: The best evidence would have been the instrument shall be necessary hwnever there are
contract of partnership itself, but there is none. immovable properties or real rights contributed in
Moreover, the court held that the essence of a the partnership.
partnership is that the partners share in the profits Facts: Brothers are in dispute and wanted specific
and losses. It is indeed odd, if not unnatural, that performance and accounting. One is claiming that
despite the forty years the partnership was there is no contract of partnership. A
allegedly in existence, Tan Eng Kee never asked memorandum between the brothers contained
for an accounting. In the case at bar, the statements such as “I want you to run this office
deferment had gone on too long to be plausible. everytime I am away” and “Whatever is left in the
A person is presumed to take ordinary care of his corporation, I will make sure that you get P1M or
concerns. A demand for periodic accounting is 10% equity, whichever is greater.”
evidence of a partnership. During his lifetime, Held: No contract of partnership and the
Tan Eng Kee appeared never to have made any memorandum was inadequate to prove its
such demand for accounting from his brother. existence. A public instrument is necessary
whenever immovable property or real rights are
Aurbach v. Sanitary Wares contributed. Their memorandum was never dated,
Doctrine: Whether the parties have established a signed nor recorded in the SEC.
joint venture or some other relation depends on
their actual intention. What the parties intend in
this case is the creation of a joint venture. It
13

Bourns v. Carman Philex Mining Corp. v. BIR
Doctrine: A partnership constituted only verbally, Doctrine: The main distinction cited by most
the existence of which was only known to those opinions in common law jurisdictions is that the
who had an interest in the same, being no mutual partnership contemplates a general business with
agreements between the partners and without a some degree of continuity, while the joint venture
corporate name indicating to the public in some is formed for the execution of a single transaction,
way that there were other people besides the one and is thus of a temporary nature. This
who ostensibly managed and conducted the observation is not entirely accurate in this
business, is exactly the accidental partnership jurisdiction, since under the Civil Code, a
of cuentas en participacion defined in article 239 of partnership may be particular or universal, and a
the Code of Commerce. particular partnership may have for its object a
Facts: The alleged partnership was formed by specific undertaking. It would seem therefore that
verbal agreement only. There is no evidence under Philippine law, a joint venture is a form of
tending to show that the agreement was reduced partnership and should be governed by the law of
to writing. The partnership also had no corporate partnerships.
name. Facts: Two companies Philex and Baguio Gold
Held: Those who contract with the person under entered into an agreement for Philex to manage
whose name the business of such partnership and operate BG’s mining claim. BIR disallowed
of cuentas en participacion is conducted, shall have the deduction of the alleged “bad debt,” as it was
only a right of action against such person and not actually income for the Agreement made.
against the other persons interested, and the latter, Petitioners were alleging there was no partnership;
on the other hand, shall have no right of action there was only a debtor-creditor relationship
against the third person who contracted with the between the two.
manager unless such manager formally transfers Held: The two corporations entered into a joint
his right to them. venture. They established a common fund for the
purpose of profit and loss sharing. The
Sevilla v. CA deductions of bad debt cannot be exempt from
Doctrine: A joint venture, including a partnership, income tax.
presupposes generally a of standing between the
joint co-venturers or partners, in which each party
has an equal proprietary interest in the capital or
property contributed and where each party
exercises equal rights in the conduct of the
business.
Facts: Petitioner was arguing that it was the
Tourist World Service Company was a Joint
Venture. The Company which closed down the
branch where P reported as a branch manager
alleges that Sevilla was a mere employee (control
test).
Held: The contract they executed was not an
employment contract (SC used the Right of
Control Test). However, the Court concluded that
it was a Contract of Agency because Sevilla acted
in representation of the company. Company is
liable for damages for the unwarranted revocation
of their contract.
14

II. Kinds of Partnership
There are two kinds of universal partnerships:
(1) Universal partnership of all present property;
A. Universal – 1776-1782, 739 and (2) Universal partnership of profits.
Article 1776. As to its object, a partnership is either universal or A universal partnership of all present property
particular. As regards the liability of the partners, a partnership may be is one, which the partners contribute all the
general or limited. (1671a) properties, which actually belong to each of them.
Article 1777. A universal partnership may refer to all the present
In this kind of partnership, the property, which
property or to all the profits. (1672) belonged to each of them at the time of the
constitution of the partnership, and the profits
Article 1778. A partnership of all present property is that in which the that they may acquire from the property
partners contribute all the property which actually belongs to them to
a common fund, with the intention of dividing the same among contributed will become the common property of
themselves, as well as all the profits which they may acquire therewith. all the partners. GR: Future properties cannot be
(1673) contributed. E: Profits from other sources if there
Article 1779. In a universal partnership of all present property, the
is a stipulation and those derived from property
property which belonged to each of the partners at the time of the contributed.
constitution of the partnership, becomes the common property of all
the partners, as well as all the profits which they may acquire
therewith.
A universal partnership of profits is one, which
comprises all that the partners may acquire by
A stipulation for the common enjoyment of any other profits may their industry or work during the existence of the
also be made; but the property which the partners may acquire partnership. And the usufruct of movable or
subsequently by inheritance, legacy, or donation cannot be included in
such stipulation, except the fruits thereof. (1674a) immovable property which each of the partners
may possess at the time of the celebration of the
Article 1780. A universal partnership of profits comprises all that the contract. The partners retain their ownership over
partners may acquire by their industry or work during the existence of their present and future property. Profits acquired
the partnership.
through chance are not included. Also, fruits of
Movable or immovable property which each of the partners may property subsequently acquired by the partners do
possess at the time of the celebration of the contract shall continue to not belong to the partnership except if included
pertain exclusively to each, only the usufruct passing to the
partnership. (1675) by express stipulation. An express stipulation is
needed to exclude profits acquired through their
Article 1781. Articles of universal partnership, entered into without industry and work during the existence of the
specification of its nature, only constitute a universal partnership of partnership, and the usufruct of their present
profits. (1676)
properties.
Article 1782. Persons who are prohibited from giving each other any
donation or advantage cannot enter into universal partnership. (1677) 1781 applies only when a universal partnership has
been organized.
Article 739. The following donations shall be void:
(1) Those made between persons who were guilty of adultery or A partnership formed in violation of 1782 is null
concubinage at the time of the donation; (2) Those made between and void.
persons found guilty of the same criminal offense, in consideration
thereof;
B. Particular – 1776 (Supra p. 14),
(3) Those made to a public officer or his wife, descendants and 1783
ascendants, by reason of his office.
Article 1783. A particular partnership has for its object determinate
In the case referred to in No. 1, the action for declaration of nullity things, their use or fruits, or a specific undertaking, or the exercise of
may be brought by the spouse of the donor or donee; and the guilt of a profession or vocation. (1678)
the donor and donee may be proved by preponderance of evidence in
the same action. (n)
15

C. General - 1776
A general partnership is one consisting of general G. Commercial - 1767 (Supra p. 1)
partners who are liable pro rata and subsidiarily, It is one formed for the transaction of the
sometimes solidarily, with their separate property business.
for partnership debts.
H. Professional - 1767 (Supra p. 1)
D. Limited - 1776 It is one which is formed for the exercise of a
A limited partnership is one formed by 2 or more profession.
persons having as members one or more general
partners and one or more limited partners, the I. By Estoppel/Apparent – 1825
latter bit being personally liable for the obligations (Supra p. 7)
of the partnership. Estoppel is the bar which precludes a person
from denying or asserting anything contrary to
E. At Will - 1785 that which has been established as the truth by his
own representations. Art 1825’s concept of
Article 1785. When a partnership for a fixed term or particular
undertaking is continued after the termination of such term or estoppel actually does not create a partnership. A
particular undertaking without any express agreement, the rights and contract is essential to the formation of a
duties of the partners remain the same as they were at such partnership. Only the liability (of being in a
termination, so far as is consistent with a partnership at will.
partnership) is created in favor of persons who, in
A continuation of the business by the partners or such of them as good faith, relied on the representation.
habitually acted therein during the term, without any settlement or
liquidation of the partnership affairs, is prima facie evidence of a Ortega v. CA
continuation of the partnership. (n)
Doctrine: A partnership that does not fix its term
is a partnership at will. The birth and life of a
partnership at will is predicated on the mutual
A partnership at will is one which no time is desire and consent of the partners. The right to
specified and is not formed for a particular choose with whom a person wishes to associate
undertaking or venture and which may be himself is the very foundation and essence of that
terminated anytime by mutual agreement of the partnership.
partners or by the will of any one partner alone. It Facts: Atty. Misa wanted to retire from the firm
may also be one for a fixed term or particular and wanted to dissolve and liquidate the
undertaking which is continued by the parties partnership. The SEC ruled that it being a
after the expiration of the period without any partnership at will, it could be dissolved by any
express agreement. partner at any time regardless of good or bad faith.
Held: According to the circumstances, it was a
F. For a Term or Undertaking – 1785 partnership at will.
(Supra)
It is one in which the term for which the
partnership is to exist is fixed or agreed upon or
one which is formed for a particular undertaking.
It is extinguished upon the expiration of the
period or the accomplishment of the undertaking.
It may be agreed upon expressly or impliedly.
16

III. Kinds of Partners C. Managing – 1792, 1800-1802
A. Industrial – 1789, 1797 Article 1792. If a partner authorized to manage collects a demandable
sum which was owed to him in his own name, from a person who
owed the partnership another sum also demandable, the sum thus
Article 1789. An industrial partner cannot engage in business for collected shall be applied to the two credits in proportion to their
himself, unless the partnership expressly permits him to do so; and if amounts, even though he may have given a receipt for his own credit
he should do so, the capitalist partners may either exclude him from only; but should he have given it for the account of the partnership
the firm or avail themselves of the benefits which he may have credit, the amount shall be fully applied to the latter.
obtained in violation of this provision, with a right to damages in
either case. (n) The provisions of this article are understood to be without prejudice
to the right granted to the other debtor by article 1252, but only if the
Article 1797. The losses and profits shall be distributed in conformity personal credit of the partner should be more onerous to him. (1684)
with the agreement. If only the share of each partner in the profits has
been agreed upon, the share of each in the losses shall be in the same The requisites for the application of 1792: (1)
proportion. there exist at least 2 debts, one where the
In the absence of stipulation, the share of each partner in the profits
collecting partner is creditor, and the other, where
and losses shall be in proportion to what he may have contributed, the partnerships is the creditor; (2) both debts are
but the industrial partner shall not be liable for the losses. As for the demandable; and (3) the partner who collects is
profits, the industrial partner shall receive such share as may be just
and equitable under the circumstances. If besides his services he has
authorized to manage and actually manages the
contributed capital, he shall also receive a share in the profits in partnership.
proportion to his capital. (1689a)
Article 1800. The partner who has been appointed manager in the
An industrial partner is one who contributes his articles of partnership may execute all acts of administration despite
industry to the partnership. He/she becomes a the opposition of his partners, unless he should act in bad faith; and
debtor of the partnership for his services from the his power is irrevocable without just or lawful cause. The vote of the
partners representing the controlling interest shall be necessary for
moment of the commencement of the partnership. such revocation of power.
B. Capitalist – 1789 (Supra), 1790, A power granted after the partnership has been constituted may be
revoked at any time. (1692a)
1797 (Supra), 1808
Article 1790. Unless there is a stipulation to the contrary, the partners GR: A partner appointed as manager has all the
shall contribute equal shares to the capital of the partnership. (n) necessary and incidental powers to carry out the
object of the partnership in the transaction of its
Article 1808. The capitalist partners cannot engage for their own business. E: When specifically restricted or
account in any operation which is of the kind of business in which the
partnership is engaged, unless there is a stipulation to the contrary. expressly withheld.
Any capitalist partner violating this prohibition shall bring to the Unless expressly or impliedly agreed upon, a
common funds any profits accruing to him from his transactions, and
shall personally bear all the losses. (n)
partner is generally not entitled to compensation
for his services rendered.
The capitalist partner is only prohibited from Article 1801. If two or more partners have been intrusted with the
engaging for his own account in any operation management of the partnership without specification of their
respective duties, or without a stipulation that one of them shall not
which is the same as or similar to the business in act without the consent of all the others, each one may separately
which the partnership is engaged. execute all acts of administration, but if any of them should oppose
the acts of the others, the decision of the majority shall prevail. In
case of a tie, the matter shall be decided by the partners owning the
controlling interest. (1693a)
17

Each partner may separately perform acts of IV. Partner’s Obligations to the
administration. However, when one or more of Partnership
the managing partners shall oppose the acts of the
others, the decision of the majority of the managing
partners shall prevail. The article only applies only A. To contribute; warrant – 1786-1788,
when the following are present: (1) 2 or more 1790 (Supra p. 17), 1791, 1795
partners have been appointed as managers; (2) Article 1786. Every partner is a debtor of the partnership for
there is no specification of their respective duties; whatever he may have promised to contribute thereto.
and (3) there is no stipulation that one of them
shall not act without the consent of all the others. He shall also be bound for warranty in case of eviction with regard to
specific and determinate things which he may have contributed to the
partnership, in the same cases and in the same manner as the vendor
is bound with respect to the vendee. He shall also be liable for the
Article 1802. In case it should have been stipulated that none of the fruits thereof from the time they should have been delivered, without
managing partners shall act without the consent of the others, the the need of any demand. (1681a)
concurrence of all shall be necessary for the validity of the acts, and
the absence or disability of any one of them cannot be alleged, unless Article 1787. When the capital or a part thereof which a partner is
there is imminent danger of grave or irreparable injury to the bound to contribute consists of goods, their appraisal must be made
partnership. (1694) in the manner prescribed in the contract of partnership, and in the
absence of stipulation, it shall be made by experts chosen by the
Neither the absence nor disability of any one of partners, and according to current prices, the subsequent changes
them may be alleged as an excuse or justification thereof being for account of the partnership. (n)
to dispense with this requirement. The consent, as
Article 1788. A partner who has undertaken to contribute a sum of
an exception, is not necessary in routine money and fails to do so becomes a debtor for the interest and
transactions like purchasing in the regular course damages from the time he should have complied with his obligation.
of business.
The same rule applies to any amount he may have taken from the
partnership coffers, and his liability shall begin from the time he
D. By Estoppel – 1825 (Supra p. 7) converted the amount to his own use. (1682)
A person not a partner may become a partner by
estoppel and may be held liable to third persons Liability of partner for failure to return the
as if he were a partner, when by words or conduct, partnership money received: (1) when fraudulent
he: (a) directly represents himself to anyone as a misappropriation is committed, the partner is
partner; or (b) indirectly represents himself by guilty of estafa (2) when only mere failure to
consenting to another representing him as partner return (ex. Industrial partner return to capitalist
(the 3rd person with whom the partner contracted partner capital brought by him to partnership),
must show that the purported partner represented action for the recovery of money is a civil one.
himself or permitted others to represent him as Reason behind the rule in selling the interest in
partner and that he dealt with the partnership to case of imminent loss of business: the refusal of
his injury in reliance on the representation made). that partner to contribute reflects lack of interest
in the continuance of the partnership; it would be
unjust to reap benefits of partnership while he
himself refuses to help.
Article 1791. If there is no agreement to the contrary, in case of an

imminent loss of the business of the partnership, any partner who
refuses to contribute an additional share to the capital, except an
industrial partner, to save the venture, shall he obliged to sell his
interest to the other partners. (n)
18

Article 1795. The risk of specific and determinate things, which are
not fungible, contributed to the partnership so that only their use and D. To be loyal; fiduciary duty - 1807
fruits may be for the common benefit, shall be borne by the partner
who owns them.
Article 1807. Every partner must account to the partnership for any
benefit, and hold as trustee for it any profits derived by him without
If the things contribute are fungible, or cannot be kept without the consent of the other partners from any transaction connected with
deteriorating, or if they were contributed to be sold, the risk shall be the formation, conduct, or liquidation of the partnership or from any
borne by the partnership. In the absence of stipulation, the risk of the use by him of its property. (n)
things brought and appraised in the inventory, shall also be borne by
the partnership, and in such case the claim shall be limited to the value
at which they were appraised. (1687)
Lim Tanhu v. Remolete

B. To apply sums collected pro rata - Doctrine: Since Po Chuan was in control of the
affairs of the partnership, the more logical
1792
inference is that if defendants had obtained any
Article 1792. If a partner authorized to manage collects a demandable portion of the funds of the partnership for
sum which was owed to him in his own name, from a person who themselves, it must have been with the knowledge
owed the partnership another sum also demandable, the sum thus and consent of Po Chuan, for which reason no
collected shall be applied to the two credits in proportion to their
amounts, even though he may have given a receipt for his own credit accounting could be demanded from them
only; but should he have given it for the account of the partnership therefor, considering that Article 1807 of the Civil
credit, the amount shall be fully applied to the latter.
Code refers only to what is taken by a partner
The provisions of this article are understood to be without prejudice without the consent of the other partner or
to the right granted to the other debtor by article 1252, but only if the partners.
personal credit of the partner should be more onerous to him. (1684) Facts: A widow was claiming that the petitioners,
through fraud and machination, took actual and
active management of the partnership. Petitioners
Requisites to apply: (1) at least 2 debts, one where
argued that she had no capacity to sue since she
collecting partner is creditor and other where
was already paid and she had already signed a
partnership is the creditor (2) both debts
quitclaim.
demandable (3) partner who collects is authorized Held: It was not clearly established that the
to manage and actually manages the partnership
widow was indeed a legitimate widow of one of
The debtor is given the right to prefer payment of
the partners.
the credit of the partner if it should be more
onerous to him in accordance with his right to Liwanag v. CA
application of payment. (Art. 1252)
Doctrine: When money or property has been
received by a partner for a specific purpose and
C. To compensate – 1794 he later misappropriated it, such partner is guilty
of estafa.
Article 1794. Every partner is responsible to the partnership for Facts: Rosales agreed to give money for the
damages suffered by it through his fault, and he cannot compensate
them with the profits and benefits which he may have earned for the business while Liwanag and Tabligan would act as
partnership by his industry. However, the courts may equitably lessen her agents with a corresponding 40% commission.
this responsibility if through the partner's extraordinary efforts in When the business failed, Liwanag was alleging
other activities of the partnership, unusual profits have been realized.
(1686a) that it was a partnership where they would share
in the profits and losses and she should not be
held guilty of estafa.
Held: Liwanag is guilty of estafa. The money
delivered to Liwanag was for a specific purpose,
that is, for the purchase of cigarettes, and in the
event the cigarettes cannot be sold, the money
must be returned to Rosales. Thus, even assuming
that a contract of partnership was indeed entered
19

into by the parties, the SC has ruled that when Catalan v. Gatchalian
money or property have been received by a Doctrine: Under Article 1807 of the NCC every
partner for a specific purpose (such as that partner becomes a trustee for his copartner with
obtaining in the instant case) and he later regard to any benefits or profits derived from his
misappropriated it, such partner is guilty of estafa. act as a partner.
Facts: The parties (partners) mortgaged their lots
US v. Clarin for credit. Mortgaged was foreclosed. Catalan
Doctrine: The action that lies with the partner redeemed the property and contends that the title
who furnished the capital for the recovery of his should be cancelled and a new one must be issued
money is not a criminal action for estafa, but a in his name alone.
civil one arising from the partnership contract for Held: When Catalan redeemed the properties in
a liquidation of the partnership and a levy on its question, he became a trustee and held the same
assets. in trust for his partner. The principle of
Facts: Clarin entered into an agreement that subrogation cannot be applied since the purchaser
Clarin and De Guzman will sell mangoes while he of the property has yet to become the absolute
would deliver capital. They agreed that the profits owner (was within the redemption period when
would be equally divided. Clarin charged them Catalan redeemed)
with Estafa for allegedly misappropriating the
amounts.
Held: Clarin not guilty of estafa. The action that
lies with the aggrieved partner is a civil case for
liquidation and levy on the partnership assets.
Pang Lim v. Lo Seng

Doctrine: Above all other persons in business
relations, partners are required to exhibit towards
each other the highest degree of good faith. The
relation between partners is essentially fiduciary as
he is in fact, the confidential agent of another.
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.
Facts: The partners were engaged in the business
of running a distillery. When the Pang Lim sold to
Lo Seng all of his shares, the land where the
distillery was placed was conveyed to him. Pang
Lim demanded the possession from Lo Seng.
Held: Pang Lim is not in the position to
terminate the contract of lease. When he sold his
interest to Lo Seng, Pang Lim’s interest in the
firm assets included the lease. He cannot be
permitted to destroy the interest derived from
himself. Partners are required to exhibit towards
each other the highest degree of good faith.
20

V. Partner’s Obligations Inter Se D. Not to engage in another business –
1789, 1808
A. To bring to collation – 1793
Article 1789. An industrial partner cannot engage in business for
himself, unless the partnership expressly permits him to do so; and if
Article 1793. A partner who has received, in whole or in part, his he should do so, the capitalist partners may either exclude him from
share of a partnership credit, when the other partners have not the firm or avail themselves of the benefits which he may have
collected theirs, shall be obliged, if the debtor should thereafter obtained in violation of this provision, with a right to damages in
become insolvent, to bring to the partnership capital what he received either case. (n)
even though he may have given receipt for his share only. (1685a)
Article 1808. The capitalist partners cannot engage for their own
account in any operation which is of the kind of business in which the
In this case, only one credit in favor of the partnership is engaged, unless there is a stipulation to the contrary.
partnership, article applies WON partner who Any capitalist partner violating this prohibition shall bring to the
common funds any profits accruing to him from his transactions, and
receives his share of the partnership credit is shall personally bear all the losses. (n)
authorized to manage or not.
Requisites: (1) partner has received in whole or For industrial partners, the prohibition is
in part his share of the partnership credit (2) other absolute and applied WON engaging in the same
partners who have not collected their shares (3) business as the partnership or any kind of
partnership debtor has become insolvent business. For capitalist partners, extends only to
any operation which is of the same kind of
B. To share in the profits/losses – business in which the partnership is engaged
1797(Supra p. 17), 1798-1799 unless there is a stipulation to the contrary.
Article 1798. If the partners have agreed to intrust to a third person Pioneer Insurance v. CA
the designation of the share of each one in the profits and losses, such
designation may be impugned only when it is manifestly inequitable.
Doctrine: One who takes no part except to
In no case may a partner who has begun to execute the decision of the subscribe for stock in a proposed corporation
third person, or who has not impugned the same within a period of which is never legally formed does not become a
three months from the time he had knowledge thereof, complain of
such decision.
partner with other subscribers who engage in
business under the name of the pretended
The designation of losses and profits cannot be intrusted to one of corporation, so as to be liable as such in an action
the partners. (1690) for settlement of the alleged partnership and
Article 1799. A stipulation which excludes one or more partners from
contribution.
any share in the profits or losses is void. (1691) Facts: A mortgage was constituted by a Lim for
Southern Air Lines. Complainants contributed
some funds to purchase Aircraft spare parts.
(1) Agreement (2) if not agreement on share When a case was filed against Lim, the surety
of losses, same as share of profits (3) no wanted to implead the complainants.
agreement, in proportion to contribution, Held: There was no de facto partnership between
[industrial partner not liable for losses Lim and the defendants. They never agreed to
profits as may be just and equitable under share in the losses and profits of the joint venture.
the circumstances] Lim also had no intention to form a corporation
with complainants despite his representations to
C. To render true and full information – them. Pioneer cannot claim from the alleged de
1806 facto partnership.
Article 1806. Partners shall render on demand true and full
information of all things affecting the partnership to any partner or Evangelista v. Abad Santos
the legal representative of any deceased partner or of any partner Doctrine: An industrial partner cannot engage in
under legal disability. (n)
business for himself, unless the partnership
expressly permits him to do so; and if he should
21

do so, the capitalist partners may either exclude Held: We do not consider that article 1688 is
him from the firm or avail themselves of the applicable in this case, in so far as it provides
benefits, which he may have obtained in violation "that the partnership is liable to every partner for
of this provision, with a right to damages in either the amounts he may have disbursed on account of
case. In this case however, the respondent was the same and for the proper interest," for the
not engaged in any business antagonistic to the reason that no other money than that contributed
partnership. as is involved. Nothing appears other than the
Facts: Judge Abad Santos is an industrial partner failure to fulfill an obligation on the part of a
in Evangelista & Co. with 3 petitioners who were partner who acted as agent in receiving money for
the capitalist partners. Abad Santos alleged that a given purpose, for which he has rendered no
the other 3 partners were refusing to let her accounting, such agent is responsible only for the
examine the partnership books and were not losses which, by a violation of the provisions of
paying her share in the profits. Other 3 are the law, he incurred.
arguing that Abad Santos could not be an
industrial partner since she was a City Court judge. Agustin v Inocencio
Held: Abad Santos is not engaged in any business Doctrine: ADVANCES ALLOWED FOR
antagonistic to the partnership as being a judge MANAGING PARTNER. The managing partner
can hardly be characterized as a business. may be allowed funds borrowed or advanced and
necessary to the completion of the work, within
Moran v. CA the scope of the business and expressly provided
Doctrine: Each partner must share in the profits for by agreement among the partners.
and losses of the venture. That is the essence of a Facts: Parties had been conducting a partnership
partnership. And even with an assurance made by as industrial partners without capital. They
one of the partners that they would earn a huge contributed from its profits and borrowed a sum
amount of profits, in the absence of fraud, the from wife of Inocencio to raise 4,300 for the
other partner cannot claim a right to recover the construction of a casco for use in their business.
highly speculative profits. 4,300 was the estimated cost of the casco, but in
Facts: The parties constituted a partnership for the progress of the work Inocencio (managing
magazine and poster projects. The projects failed. partner) found that it called for additional funds,
Pecson wanted to be reimbursed for his which he advanced to the amount of 2,000.
contribution to the partnership and the expected Held: The work done in the casco having been
profits from the failed projects. within the scope of the association and necessary
Held: He cannot be made to pay the expected to carry out its express object, the borrowing of
profits from the failed projects in the absence of the money required to carry it on, with the
fraud. Being a contract of partnership, each acquiescence if not with the affirmative consent
partner must share in the profits and losses of the of his associates, was not outside the powers of
venture. the managing partner and constitutes a debt for
which all the associates are liable.
Martinez v. Ong Pong Co
Doctrine: The respondents failed to fulfill their Soncuya v De Luna
obligation as partners who, acting as Martinez’ Doctrine: For a partner to be able to claim from
agents in receiving money, did not render proper another partner who manages the general
accounting. Such renders them jointly liable for copartnership, damages allegedly suffered by him
the losses, solidarity not having been established. by reason of the fraudulent administration of the
Facts: Respondents received from petitioner an latter, a previous liquidation of said partnership is
amount to be invested in a store, wherein they will necessary.
divide the profits and losses in equal shares. Facts: Soncuya, Avelino and de Luna were
Petitioner demanded the return of the amount or partners in the “Centro Escolar de Senoritas”.
an accounting, but respondents failed to do so. Soncuya (in her own name and as co-
22

administratrix) filed a complaint against Carmen
de Luna of the estate of Avelino (deceased) VI. Partner’s Obligations to
praying for damages (700,432php) alleging that Personal and Partnership
she suffered as a partner by the fraudulent
Creditors; Third Parties
administration and management of the
partnership.
Held: It is necessary that a liquidation of the A. To have his partnership interest
business thereof be made to the end that the charged for personal debts (primary)
profits and losses may be known and the causes – 1814, 1827
of the latter and the responsibility of the
defendant as well as the damages which each Article 1814. Without prejudice to the preferred rights of partnership
partner may have suffered may be determined. It creditors under article 1827, on due application to a competent court
is not alleged in the complaint that such by any judgment creditor of a partner, the court which entered the
judgment, or any other court, may charge the interest of the debtor
liquidation has been effected nor is it prayed that partner with payment of the unsatisfied amount of such judgment
it be made. debt with interest thereon; and may then or later appoint a receiver of
his share of the profits, and of any other money due or to fall due to
him in respect of the partnership, and make all other orders,
Dionne says: When you claim profits, the way directions, accounts and inquiries which the debtor partner might
you prove it is thru accounting or liquidation. It have made, or which the circumstances of the case may require.
should be the first step before you allege fraud
and mismanagement. The interest charged may be redeemed at any time before foreclosure,
or in case of a sale being directed by the court, may be purchased
without thereby causing a dissolution:
(1) With separate property, by any one or more of the partners; or (2)
With partnership property, by any one or more of the partners with
the consent of all the partners whose interests are not so charged or
sold.
Nothing in this Title shall be held to deprive a partner of his right, if

any, under the exemption laws, as regards his interest in the
partnership. (n)
Article 1827. The creditors of the partnership shall be preferred to

those of each partner as regards the partnership property. Without
prejudice to this right, the private creditors of each partner may ask
the attachment and public sale of the share of the latter in the
partnership assets. (n)
Creditor of a partner can secure a judgment on his

credit and then apply to the proper court for a
“charging order” subjecting 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. Any amount or
portion thereof which the partnership would
otherwise pay to the debtor-partner should
instead be given to judgment creditor, without
prejudice to Art. 1827.
23

B. To be liable pro rata for partnership authority of a partner, whether such authority is
debts (subsidiary and joint) – 1816- real or apparent. Also because it is based on tort
and breach of trust.
1817, 1835
Article 1816. All partners, including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have D. Liability in case of estoppel – 1825
been exhausted, for the contracts which may be entered into in the (Supra p. 7), Sec. 21 Corp Code
name and for the account of the partnership, under its signature and
by a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a partnership Section 21. Corporation by estoppel. – All persons who assume to act as a
contract. (n) corporation knowing it to be without authority to do so shall be liable
as general partners for all debts, liabilities and damages incurred or
arising as a result thereof: Provided, however, That when any such
Liability here is joint and subsidiary (only after all ostensible corporation is sued on any transaction entered by it as a
the partnership assets have been exhausted) corporation or on any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate personality.
Article 1817. Any stipulation against the liability laid down in the
preceding article shall be void, except as among the partners. (n) On who assumes an obligation to an ostensible corporation as such,
cannot resist performance thereof on the ground that there was in fact
no corporation. (n)
Article 1835. The dissolution of the partnership does not of itself
discharge the existing liability of any partner.
A partner is discharged from any existing liability upon dissolution of E. Liability of new partners (subsidiary)
the partnership by an agreement to that effect between himself, the
partnership creditor and the person or partnership continuing the
– 1826
business; and such agreement may be inferred from the course of
Article 1826. A person admitted as a partner into an existing
dealing between the creditor having knowledge of the dissolution and
partnership is liable for all the obligations of the partnership arising
the person or partnership continuing the business.
before his admission as though he had been a partner when such
The individual property of a deceased partner shall be liable for all
obligations were incurred, except that this liability shall be satisfied
obligations of the partnership incurred while he was a partner, but
only out of partnership property, unless there is a stipulation to the
subject to the prior payment of his separate debts. (n)
contrary. (n)
C. Tort Liability; breach of trust

Credit of new member of partnership does not
liability – 1822-1824 enter into the consideration of the creditors of the
Article 1822. Where, by any wrongful act or omission of any partner old partnership, and it would be manifestly unjust
acting in the ordinary course of the business of the partnership or to hold the new partner liable unless he, by an
with the authority of his co-partners, loss or injury is caused to any express or implied agreement, assumed the debts
person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same extent as the of the old firm.
partner so acting or omitting to act. (n)
In Re Sycip
Article 1823. The partnership is bound to make good the loss: Doctrine: The names in a firm name of a
partnership must either be those of living partners
(1) Where one partner acting within the scope of his
apparent authority receives money or property of a third
and, in the case of non-partners, should be living
person and misapplies it; and persons who can be subjected to liability
Facts: Partnerships that want to continue using
(2) Where the partnership in the course of its business the names of their deceased partners
receives money or property of a third person and the
money or property so received is misapplied by any partner
Held: Clearly, the names in a firm name of a
while it is in the custody of the partnership. (n) partnership must either be those of living partners
and, in the case of non-partners, should be living
Article 1824. All partners are liable solidarily with the partnership for persons who can be subjected to liability. In fact,
everything chargeable to the partnership under articles 1822 and 1823.
(n)
Article 1825 of the Civil Code prohibits a third
person from including his name in the firm name
Liability here is solidary. It is so because the law under pain of assuming the liability of a partner.
protects him who, in good faith, relied upon the
24

The heirs of a deceased partner in a law firm Held: The managing partner rights conferred
cannot be held liable as the old members to the upon Tan Sin An were personal to him and were
creditors of a firm particularly where they are terminated upon his death, however his wife is
non-lawyers. considered to be a partner in estoppels for she
had gained control of the property from 1942-
Litton v. Hill 1949 and had done acts consistent with that of a
Doctrine: SC ruled that the consent of the other managing partner. She must be held liable for the
partner is necessary to bind the partnership obligations that the partnership may have incurred
through the act of a partner. Third persons, like during the period, thus her sale to Washington
Litton, are not bound in entering into a contract Sycip is valid. (Sycip in this case as stated in the
with any of the two partners to ascertain WON doctrine, has the right to assume regularity in the
this partner with whom the transaction is made business transactions)
has the consent of the other partner. Its
knowledge, is enough that it is contracting with Goquiolay v Sycip (MR)
the partnership which is represented by one of the Doctrine: The stipulation in the articles of
managing partners. partnership that any of the two managing partners
Facts: George Litton sold and delivered to Carlos may contract and sign in the name of the
Ceron, one of the managing partners of partnership with the consent of the other,
Hill&Ceron, a certain number of mining claims undoubtedly creates on obligation between the
(17,000 shares of Big Wedge Company at two partners, which consists in asking the other's
P0.11/share). Ceron paid to Litton the sum of consent before contracting for the partnership.
P1,150, leaving a balance of P720 – which Litton This obligation of course is not imposed upon a
was unable to collect either from Hill&Ceron or third person who contracts with the partnership.
the firm’s surety Neither it is necessary for the third person to
Held: Partnership is bound by the contract of ascertain if the managing partner with whom he
Ceron and Litton contracts has previously obtained the consent of
the other. A third person may and has a right to
Goquiolay v Sycip presume that the partner with whom he contracts
Doctrine: Strangers dealing with a partnership has, in the ordinary and natural course of
have the right to assume, in the absence of business, the consent of his copartner; for
restrictive clauses in the co-partnership otherwise he would not enter into the contract.
agreement, that every general partner has power The third person would naturally presume that
to bind the partnership, specially those partners the partner with whom he enters into the
acting with ostensible authority. Third persons are transaction is acting in accordance with the
not bound in entering into a contract with any of articles of partnership.
the two partners, to ascertain whether or not this Facts: Same facts
partner with whom the transaction is made has Held: Laches applies, because for 7 long years he
the consent of the other partner. The public need has not properly questioned the acts of
not make inquiries as to the agreements had management by the wife. It was also found by the
between the partners. Its knowledge is enough court that Goquiolay has in fact consented to the
that it is contracting with the partnership, which is management by the wife in order to help her as
represented by one of the managing partners. she had no means of income. She is considered to
Facts: Tan Sin An brought in 49 lots to the be a partner in estoppel as held in the previous
partnership. When he died, wife took over as case, and her dealings with third persons bind the
administratix of partnership. Wife filed in the partnership as would any partner.
probate court to gain authority to sell the land to
Sycip. This was questioned by Goquiolay, partner MacDonald v. National City Bank
of Tan Sin An in this case. Doctrine: While an unregistered commercial
partnership has no juridical personality, where 2
25

or more persons attempt to create a partnership partner. They continued dealing with Dy-Sianco
and fail to comply with legal formalities, the law in the same manner as the old partnership had
considers them as partners and the association as dealt with the latter. Dy-Sianco now claims that
rd
a partnership in so far as it favors 3 persons and the balance due from the partnership was 1,638.4
to enforce the 3rd persons’ rights. This is due to pesos and orders judgment against Pedro for the
the principle of estoppel. whole amount.
Facts: Stasikinocey is an unregistered partnership. Held: The partners are not liable each for the
The partnership had liabilities with the bank, thus whole debt of the partnership. The liability is pro
they executed chattel mortgages over 3 motor rata and in this case Pedro Yulo is responsible to
vehicles owned by the partnership. The mortgage plaintiff for only one-half of the debt. The fact
had a clause forbidding the sales of the vehicles to that the other partner had left the country cannot
rd
3 persons. The mortgage is now being impugned increase the liability of Pedro Yulo. (Palacios was
by one of the partners, stating that they are not a out of the country, so he went after Pedro Yulo)
partnership and that the vehicles are their
common property. Pacific Commercial v. Aboitiz
Held: By the principle of estoppel, it is Doctrine: According to Art 127 of the Code of
considered a partnership with regard to 3rd Commerce; all the members of a general
persons. The Bank is entitled to the credit. copartnership are liable with all their property for
the results of the duly authorized transactions
La Compania Maritima v Munoz made in the name and for the account of the
Doctrine: The ruling is in accordance with Article partnership. This includes even industrial
127 of the Code of Commerce which states: partners.
All the members* of the general copartnership, Facts: De Silva, G. Aboitiz, V. Aboitiz, and
be they or be they not managing partners of the Martinez (industrial partner) formed a
same, are liable personally and in solidum with all partnership. Aboitiz, acting on behalf of the
their property for the results of the transactions partnership, obtained a loan from petitioner and
made in the name and for the account of the executed a promissory note (loan secured by a
partnership, under the signature of the latter, and chattel mortgage).Partnership defaulted.
by a person authorized to make use thereof. Foreclosed on the personal property - only for
Facts: Francisco (capitalist partner) Emilio and P2K. Sued partnership for the balance. The
Rafael (industrialist partners). Partnership was judgment provided that the execution should first
sued by petitioner for a sum of money and lost issue against the property of the partnership and
their case. Francisco claims that industrialist that in the event of the insolvency of the
partners are not liable partnership, it might issue against the property of
Held: See Doctrine. Martinez
Held: See doctrine
Co-Pitco v. Yulo
Doctrine: Being a civil partnership, by the Magdusa v. Albaran
express provisions of articles 1698 and 1137 (now Doctrine: A partner’s share cannot be returned
article 1207 NCC) of the Civil Code, the partners without first dissolving and liquidating the
are not liable each for the whole debt of the partnership. The return is dependent on the
partnership. discharge of the creditors, whose claims enjoy
Facts: Florencio and Palacios were partners in the preference over those of the partners; and it is
operation of a sugar estate in Negros and had self-evident that all members of the partnership
commercial dealings with Chinaman, Dy-Sianco are interested in his assets and business, and are
who furnished them with money and goods, and entitled to be heard in the matter of the firm's
used to buy their crop of sugar. In February 1903, liquidation and the distribution of its property.
father of Florencio, Pedro Yulo took charge of his Facts: Albaran and Magdusa formed a
interest in the partnership and became a general partnership for the sale of general merchandise,
26

but Albaran soon wanted to bolt from the asked for the value of the first 2 checks to be
partnership and prompted Magdusa to make an given to him.
accounting of their respective shares. The issue Held: R Tropical had every reason to believe that
was WON his claims for collection should a partnership existed between the petitioner and
prosper. Galan and no fault or error can be imputed
Held: Po Yeong Cheo v Lim Ka Yam – a against it for making payments to "Galan and
partner’s share cannot be returned without first Associates" and delivering the same to Galan
dissolving and liquidating the partnership. Art. because as far as it was concerned, Galan was a
1893, CC true partner with real authority to transact on
behalf of the partnership with which it was
Island Sales v. United dealing. Munasque can however ask for
Doctrine: The dismissal of the complaint to favor reimbursement for Galan for the expenses.
one of the general partners does not increase the
joint and subsidiary liability of each of the Lim Tong Lim v. Philippine Fishing Gear
remaining partners. All partners including Doctrine: Thus, even if the ostensible corporate
industrial ones, shall only be liable pro rata with entity is proven to be legally nonexistent, a party
all their property and after all the partnership may be estopped from denying its corporate
assets have been exhausted. existence. The reason behind this doctrine is
Facts: 5 partners. Sued for the balance of motor obvious - an unincorporated association has no
vehicle on installment basis. The case was personality and would be incompetent to act and
dismissed as to one of the partners, Lumauig. appropriate for itself the power and attributes of a
Issue was if this dismissal increases the joint and corporation as provided by law; it cannot create
subsidiary liability of each of the remaining agents or confer authority on another to act in its
partners. behalf; thus, those who act or purport to act as its
Held: Since the liability of the partners is pro rata, representatives or agents do so without authority
the liability of the appellant Daco shall be limited and at their own risk. And as it is an elementary
to only one-fifth of the obligations of the principle of law that a person who acts as an agent
defendant company. The fact that the complaint without authority or without a principal is himself
against the defendant Lumauig was dismissed, regarded as the principal, possessed of all the right
upon motion of P does not unmake the said and subject to all the liabilities of a principal, a
Lumauig as a general partner in D. In so moving person acting or purporting to act on behalf of a
to dismiss the complaint, the P merely condoned corporation which has no valid existence assumes
Lumauig's individual liability to P. such privileges and obligations and becomes
personally liable for contracts entered into or for
Munasque v. CA other acts performed as such agent.
Doctrine: Art. 1816 should be construed together Facts: Yao and Chua, on behalf of Ocean Quest
with Art. 1824. While the liability of the partners Fishing Corporation, bought fishing nets from the
are merely joint in transactions entered into by the respondent. They failed to pay so the respondent
partnership, a third person who transacted with brought a collection suit. Ocean Quest was found
said partnership can hold the partners solidarily to be a non-existent corporation. Petitioner Lim
liable for the whole obligation if the case of the Tong Lim (allege to be a partner though not a
third person falls under Articles 1822 or 1823. party to the sale of the fishing nets) argues that
Facts: Munasque entered into construction and under the doctrine of corporation by estoppel,
remodeling contract with respondent. Check for liability can be imputed only to Chua and Yao,
the payment from the project was indorsed to and not to him.
Galan, co-partner. Galan, however, spent a Held: Lim Tong Lim benefited from the
fraction of it for his personal use. He was also purchase. Technically, it is true that petitioner did
able to obtain the 2nd check. Petitioner had to not directly act on behalf of the corporation.
personally finance the rest of the project, so he However, having reaped the benefits of the
27

contract entered into by persons with whom he VII. Rights of a Partner
previously had an existing relationship, he is
deemed to be part of said association and is
A. To Associate another in his share –
covered by the scope of the doctrine of
corporation by estoppel. 1804
Article 1804. Every partner may associate another person with him in
Bachrach v. La Protectora his share, but the associate shall not be admitted into the partnership
without the consent of all the other partners, even if the partner
Doctrine: Each partner shall only be liable for the having an associate should be a manager. (1696)
one-fifth part, or their proportionate share, of the
remainder of the debt unpaid.
Fact: Barba, acting as manager, purchased trucks Nature - a partner may associate (sub-partner)
from Bachrach. He further brought various another person with him in his share without the
effects and accessories which increased the consent of the other partners. In effect, a
liability. Bachrach foreclosed a chattel mortgage subpartnership is a partnership within a
over the trucks but only realized P1000 from its partnership but is separate and distinct from the
sale in the public auction. Bachrach filed a case latter.
against La Protectora and its members. 4 of the
partners appealed. Right of subpartner – subpartnership
Held: All the partners are considered agents of agreements do not in any way affect the
the partnership. Barba had the authority to incur composition, existence, or operations of the firm.
all these expenses and there is no doubt that he The subpartners are partners inter se, but, in the
actually had been given the power to do so by the absence of the mutual assent of all the parties, a
partners. Appellants are severally liable for their subpartner does not become a member of the
respective shares of the entire indebtedness found partnership.
to be due. However, any property pertaining to La
Protectora should be first applied to the B. To access, inspect and copy
indebtedness pursuant to the judgment already
entered by the trial court; and each of the four partnership books – 1805
appellants shall be liable only for the one-fifth
part of the remainder unpaid. Article 1805. The partnership books shall be kept, subject to any
agreement between the partners, at the principal place of business of
the partnership, and every partner shall at any reasonable hour have
access to and may inspect and copy any of them.
Duty
(n) to keep partnership books – Duty
primarily rests with the managing or active partner,
or the particular partner given record-keeping
duties. Each partner has a right to free access to
them and to inspect or copy any of them at any
reasonable time even after dissolution. This right
is granted to enable the partners to have true and
full information of all things affecting the
partnership.
28

C. To have a formal Account – 1809, b. His interest in the partnership (1812)
1842 c. His right to participate in the
management (1803)
Article 1809. Any partner shall have the right to a formal account as 2. Related Rights
to partnership affairs: (1) If he is wrongfully excluded from the a. The right to reimbursement for
partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement; (3) As amounts advanced to the partnership
provided by article 1807; (4) Whenever other circumstances render it and to indemnification for risks in
just and reasonable. (n) consequence of management. (1796)
b. The right of access and inspection of
partnership books. (1805)
Right of partner to formal account – In general, c. The right to true and full information
during the existence of the partnership, a partner of all things affecting the partnership
is not entitled to a formal account of partnership (1806)
affairs. Exception: the special and unusual d. The right to a formal account of
situations enumerated under 1809. A formal partnership affairs under certain
account is a necessary incident to the dissolution circumstances (1809)
of the partnership e. The right to have the partnership
dissolved also under certain
Article 1842. The right to an account of his interest shall accrue to circumstances (1830-1831)
any partner, or his legal representative as against the winding up
partners or the surviving partners or the person or partnership
continuing the business, at the date of dissolution, in the absence of Partnership Property and Capital
any agreement to the contrary. (n) Distinguished
Partnership Partnership Capital
Property
Partner’s right to account of his interest
1. Accrual of right – the right to demand an Changes in Variable – value Constant – remains
value may vary from day unchanged as the
accounting of the value of his interest to day with changes amount fixed by
accrues to any partner or his legal in the market value agreement of the
representative after dissolution in the of the partnership partners
assets
absence of an agreement to the contrary.
2. Person liable to render an account –
The right of a partner to an account may Assets included Includes not only Represents the
be exercised against the winding up the original capital aggregate of the
contributions of the individual contributions
partner, the surviving partner or the partners but all made by the partners in
person or partnership continuing the property establishing or
business. subsequently continuing the
acquired on account partnership
of the partnership;
D. Property Rights – 1810 includes partnership
name and goodwill
Article 1810. The property rights of a partner are: (1) His rights in
specific partnership property;
(2) His interest in the partnership; and

Ownership of certain property
(3) His right to participate in the management (n) Property used by the partnership – A partner
may contribute to the partnership only for the use
or enjoyment of property, reserving the
Extent of Property rights of a partner ownership thereof; or he may allow the
1. Principal Rights partnership to use his separate property without
a. His rights in specific partnership having it become part of partnership property.
property (1811)
29

Property acquired by a partner with 3. Attachment or Execution – Land is not
partnership funds – Unless a contrary intention considered the separate or individual
appears, property acquired by a partner in his own property of the partners. It belongs to the
name with partnership funds is presumed to be partnership considered as a juridical
partnership property. person and a partner has no interest in it
but his share of what remains after all
Property carried in partnership books as partnership debts are paid.
partnership asset – Very strong inference that it 4. Legal Support – The right of the
is partnership property. partners to the land is not subject to legal
support under ART 195 of the Family
Other factors – income generated is received by Code.
the partnership, taxes are paid by the partnership
etc… 2. To Convey partnership Interest –
1812, 1813
1. To possess specific partnership
property – 1811 Article 1812. A partner's interest in the partnership is his share of the
profits and surplus. (n)
Article 1811. A partner is co-owner with his partners of specific
partnership property. The incidents of this co-ownership are such Article 1813. A conveyance by a partner of his whole interest in the
that: partnership does not of itself dissolve the partnership, or, as against
the other partners in the absence of agreement, entitle the assignee,
(1) A partner, subject to the provisions of this Title and to any during the continuance of the partnership, to interfere in the
agreement between the partners, has an equal right with his partners management or administration of the partnership business or affairs,
to possess specific partnership property for partnership purposes; but or to require any information or account of partnership transactions,
he has no right to possess such property for any other purpose or to inspect the partnership books; but it merely entitles the assignee
without the consent of his partners; to receive in accordance with his contract the profits to which the
assigning partner would otherwise be entitled. However, in case of
(2) A partner's right in specific partnership property is not assignable fraud in the management of the partnership, the assignee may avail
except in connection with the assignment of rights of all the partners himself of the usual remedies.
in the same property;
In case of a dissolution of the partnership, the assignee is entitled to
(3) A partner's right in specific partnership property is not subject to receive his assignor's interest and may require an account from the
attachment or execution, except on a claim against the partnership. date only of the last account agreed to by all the partners. (n)
When partnership property is attached for a partnership debt the
partners, or any of them, or the representatives of a deceased partner,
cannot claim any right under the homestead or exemption laws;
Nature of partner’s interest in the partnership
(4) A partner's right in specific partnership property is not subject to 1. Share of the profits and surplus – The
legal support under article 291. (n) partner’s interest in the partnership
consists of his proportionate share in the
profits during the life of the partnership as
Nature of partner’s right in specific a going concern and his share in the
partnership property surplus after its dissolution. This interest
1. Equal right of possession of the is assignable by the partner in the absence
property for partnership purposes – of any agreement to the contrary.
Ordinarily, a partner has an equal right to 2. Extent of the partner’s interest – His
possess specific partnership property for proportion of the residue or balance after
partnership purposes. an account has been taken of the debts
2. Assignment of the right to the property and credits, including the amount paid by
– Partners cannot assign his right to the the several partners in liquidating firm
land but all of them can assign their rights debts or in making advances to the
in the same property. partnership. Until that occurs, it is
30

impossible to determine the extent of his by the trial court and Court of Appeals 22% of
interest. the annual profits. Petitioner raises the issue of
prescription, he argues that the complaint was
Effect of assignment of partner’s whole filed 22 years after the receipt showing proof of
interest in partnership the partnership.
Held: Court upheld the decision of the lower
1. Rights withheld from assignee – Such court.
assignment does not grant the assignee the
right: US v. Clarin (Supra p. 20)
a. To interfere in the management
b. To require any information or account, Emnace v. CA (Private Respondent Estate of
or Vicente Tabanao)
c. To inspect any of the partnership Doctrine: For as long as the partnership exists,
books any of the partners may demand an accounting of
2. Status and rights of assignor in the partnership’s business, prescription starts to
partnership unaffected – The legal effect run only upon the dissolution of the partnership
of such a conveyance is the same as that when the final accounting is done. Three final
of a partner associating with another in his stages of a partnership: 1. Dissolution 2. Winding-
share of the interest. up 3. Termination. The partnership, although
dissolved, continues to exist and its legal
Rights of assignee of partner’s interest personality is retained, at which time it completes
1. To receive in accordance with his contract the winding up of affairs, including the
the profits accruing to the assigning partitioning and distributing of net partnership
partner. assets.
2. To avail himself of the usual remedies Facts: Emnace and two others were partners in a
provided by law in the event of fraud in business known as Ma. Nelma Fishing Industry.
the management. They decided to dissolve the partnership and
3. To receive the assignor’s interest in case executed an agreement of partition and
of dissolution. distribution of properties. Throughout the
4. To require an account of partnership partnership, even after Tabanao’s death, the
affairs, but only in case the partnership is petitioner failed to submit to Tabanao’s heirs any
dissolved, and such account shall cover statement of assets and liabilities of the
the period from the date only of the last partnership or render accounts. The respondents
account agreed to by all the partners. filed an action for accounting, to which the
petitioner argued that their cause of action has
E. To ask for dissolution – 1830(2), prescribed.
1831 (Infra p. 34) Held: Prescription will not run until a final
accounting of assets has been conducted.
Dan Fue Leung v. IAC (Private Respondent
Leung Yiu)
Doctrine: The right to demand an accounting
exists as long as the partnership exists.
Prescription begins to run only upon the
dissolution of the partnership when the final
accounting is done
Facts: Leung Yiu adduced evidence that the Sun
Wah Panciteria was a partnership and not solely
owned by Fue Leung. Respondent was awarded
31

VIII. Partnership’s Obligations to the IX. Rights of Assignees
Partners
A. To receive the interest – 1813
To reimburse; to answer for obligations (Supra p. 30)
contracted – 1796 B. To require an account – 1813
Article 1796. The partnership shall be responsible to every partner for
(Supra p. 30)
the amounts he may have disbursed on behalf of the partnership and C. To ask for dissolution – 1831 (Infra
for the corresponding interest, from the time the expense are made; it
shall also answer to each partner for the obligations he may have
p. 34)
contracted in good faith in the interest of the partnership business,
and for risks in consequence of its management. (1688a)
Responsibility of Partnership to partners

1. To refund amounts disbursed by him in
behalf of the partnership for the purpose
of is business.
2. To answer for the obligation he may have
contracted in good faith in the interest of
the partnership business.
3. To answer for risks in consequence of its
management.
Martinez v. Ong Pong (Supra p. 22)
Agustin v. Inocencio (Supra p. 22)
32

X. Dissolution and Winding up
a. Termination of the definite term or
A. Dissolution; winding up; particular undertaking – After the
termination – 1828, 1829 expiration of the term or particular
undertaking, the partnership is
automatically dissolved without the
Article 1828. The dissolution of a partnership is the change in the
relation of the partners caused by any partner ceasing to be associated
partners extending the said term or
in the carrying on as distinguished from the winding up of the continuing the undertaking.
business. (n) b. By the express will of any partner – A
partnership at will may be dissolved at any
time by the partner without the consent of
Dissolution – change in the relation of the his co-partners without breach of contract
partners caused by any partner ceasing to be provided the said partner acts in good
associated in the carrying on of the business. faith.
Winding up – process of settling the business or c. By the express will of all the partners –
partnership affairs after dissolution. The agreement to dissolve the partnership
Termination – that point in time when all before the termination of the specified
partnership affairs are completely wound up and term or particular undertaking must be
finally settled. It signifies the end of the unanimous.
partnership life. d. By expulsion of any partner – The
expulsion has the effect of decreasing the
number of the partners; hence, the
Article 1829. On dissolution the partnership is not terminated, but dissolution.
continues until the winding up of partnership affairs is completed. (n)
2. In contravention of the agreement –

Partnership not terminated by dissolution 1830(2)
Dissolution of a partnership must not be
understood to mean its extinguishment. Article 1830. Dissolution is caused: (2) In contravention of the
Dissolution is that point in time where no new agreement between the partners, where the circumstances do not
partnership business should be undertaken, but permit a dissolution under any other provision of this article, by the
express will of any partner at any time;
affairs should be liquidated and distribution be
made to those entitled to the partners’ interest.
a. Dissolution may be for any cause or
B. Causes of Dissolution - 1830 reason - Any partner may cause the
1. Without violating the agreement – dissolution of the partnership at any time
1830(1) without the consent of his co-partners at
Article 1830. Dissolution is caused: (1) Without violation of the his sole pleasure.
agreement between the partners: (a) By the termination of the definite b. Power of dissolution always exists –
term or particular undertaking specified in the agreement;
The doctrine of delectus personae allows a
(b) By the express will of any partner, who must act in good faith, partner to have the power, to dissolve a
when no definite term or particular is specified; partnership.
c. Legal effects of dissolution – The
(c) By the express will of all the partners who have not assigned their
interests or suffered them to be charged for their separate debts,
withdrawing partner is liable for damages
either before or after the termination of any specified term or for unjustified dissolution but in no case
particular undertaking; can he be compelled to remain in the
partnership.
(d) By the expulsion of any partner from the business bona fide in
accordance with such a power conferred by the agreement between
the partners;
33

3. By operation of law – 1830(3-7) partnership obligations resulting in their inability
to continue the business.
Article 1830. Dissolution is caused: (3) By any event which makes it
unlawful for the business of the partnership to be carried on or for 4. By court decree – 1830(8), 1831
the members to carry it on in partnership;
Article 1830. Dissolution is caused: (8) By decree of court under the
(4) When a specific thing which a partner had promised to contribute following article. (1700a and 1701a)
to the partnership, perishes before the delivery; in any case by the loss
of the thing, when the partner who contributed it having reserved the
ownership thereof, has only transferred to the partnership the use or Article 1831. On application by or for a partner the court shall decree
a dissolution whenever:
enjoyment of the same; but the partnership shall not be dissolved by
the loss of the thing when it occurs after the partnership has acquired
the ownership thereof; (1) A partner has been declared insane in any judicial proceeding or is
shown to be of unsound mind;
(5) By the death of any partner;
(2) A partner becomes in any other way incapable of performing his
(6) By the insolvency of any partner or of the partnership; part of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect

(7) By the civil interdiction of any partner;
prejudicially the carrying on of the business;
(4) A partner wilfully or persistently commits a breach of the

partnership agreement, or otherwise so conducts himself in matters
Business becomes unlawful – causes relating to the partnership business that it is not reasonably practicable
unvoluntarily when a supervening event makes to carry on the business in partnership with him;
the business itself unlawful.
(5) The business of the partnership can only be carried on at a loss;
Loss of specific thing – refers only to specific (6) Other circumstances render a dissolution equitable.
things.
a. Loss before delivery – the partnership is On the application of the purchaser of a partner's interest under
article 1813 or 1814:
dissolved because there is no contribution
inasmuch as the thing cannot be (1) After the termination of the specified term or particular
substituted. undertaking;
b. Loss after delivery – Partnership is not
dissolved, but assumes the loss of the (2) At any time if the partnership was a partnership at will when the
interest was assigned or when the charging order was issued. (n)
thing having acquired ownership thereof.
c. Loss where only use or enjoyment
contributed – Partnership is dissolved
and the partner bears the loss. Grounds for dissolution by decree of court
1. On application by a partner
Death of any partner – The deceased partner a. Insanity – partner may be previously
ceases to be associated in the carrying of the declared insane in a judicial
business. The surviving partners have no authority proceeding
to continue the business except insofar as it is b. Incapacity – must be one which
necessary to wind-up. However, there may be a affects the ability of the partner to
stipulation to the contrary. perform his duties.
c. Misconduct and persistent breach
Insolvency of any partner – the insolvency of a of partnership agreement – they
partner subjects his interest in the partnership to defeat and materially affect and
the right of his creditors and makes it impossible obstruct the purpose of the
for him to satisfy partnership obligations. It partnership.
renders the property of the partnership in the d. Business can be carried on only at
hands of the partners liable for the satisfaction of a loss – Since the purpose of a
partnership is the carrying of a
34

business for profit, it may be dissolved is already deemed terminated. However,
when it becomes apparent that the the innocent partners can always recover
business is unprofitable with no from the acting partner.
reasonable prospects of success.
e. Other circumstances – Article 1833. Where the dissolution is caused by the act, death or
insolvency of a partner, each partner is liable to his co-partners for his
abandonment, fraud in the share of any liability created by any partner acting for the partnership
management, refusal without as if the partnership had not been dissolved unless:
justifiable cause to accounting
(1) The dissolution being by act of any partner, the partner acting for
2. On application by a purchaser of a the partnership had knowledge of the dissolution; or
partner’s interest – In either of the two
cases in the last paragraph of 1831, a (2) The dissolution being by the death or insolvency of a partner, the
purchaser of a partner’s interest under partner acting for the partnership had knowledge or notice of the
death or insolvency.
ART. 1813 or 1814 may apply for judicial
dissolution.
Right of partner to contribution from co-
C. Effects of Dissolution partners
Where a new partner enters into a new contract
Termination of Mutual agency; exceptions with a third person after dissolution, the new
– 1832, 1833, 1834 contract generally will bind the partners, and each
of them is liable for his share of any liability
created by the acting partner as if the partnership
Article 1832. Except so far as may be necessary to wind up
partnership affairs or to complete transactions begun but not then
has not been dissolved.
finished, dissolution terminates all authority of any partner to act for
the partnership: The authority of a partner as it affects his co-
partners is not deemed terminated EXCEPT:
(1) With respect to the partners, (a) When the dissolution is not by the
act, insolvency or death of a partner; or 1. The cause of the dissolution is the act of
partner and the acting partner had
(b) When the dissolution is by such act, insolvency or death of a knowledge of such dissolution
partner, in cases where article 1833 so requires; 2. The cause of the dissolution is the death
(2) With respect to persons not partners, as declared in article 1834.
or insolvency of a partner and the acting
(n) partner had knowledge or notice of the
Effect of dissolution on authority of partner death or insolvency.
Dissolution terminates the actual authority of a
Article 1834. After dissolution, a partner can bind the partnership,
partner to undertake new business for the except as provided in the third paragraph of this article: (1) By any act
partnership: appropriate for winding up partnership affairs or completing
a. Insofar as the partners themselves are transactions unfinished at dissolution;
concerned: the authority of any partner
(2) By any transaction which would bind the partnership if dissolution
to bind the partnership by a new contract had not taken place, provided the other party to the transaction:
is immediately terminated when the
dissolution is not by the act, insolvency, or (a) Had extended credit to the partnership prior to dissolution and
had no knowledge or notice of the dissolution; or
death of a partner. If it is by the latter acts,
the termination of authority depends upon (b) Though he had not so extended credit, had nevertheless known of
whether or not the partner had knowledge the partnership prior to dissolution, and, having no knowledge or
or notice of the dissolution. notice of dissolution, the fact of dissolution had not been advertised
in a newspaper of general circulation in the place (or in each place if
b. With respect to third persons: The more than one) at which the partnership business was regularly carried
partnership is generally bound by the new on.
contract although the authority of the
acting partner as it affects his co-partners (1) Unknown as a partner to the person with whom the contract is
made; and
35
(2) So far unknown and inactive in partnership affairs that the
business reputation of the partnership could not be said to have been
in any degree due to his connection with it.

Article 1834 Continued - The liability of a partner under the first 4. Where acting partner has become
paragraph, No. 2, shall be satisfied out of partnership assets alone
when such partner had been prior to dissolution: insolvent – the innocent partner is
protected in his continued right to make
(1) Unknown as a partner to the person with whom the contract is binding partnership agreements, but no
made; and
similar protection is extended to a third
(2) So far unknown and inactive in partnership affairs that the party who innocently makes a contract
business reputation of the partnership could not be said to have been with an insolvent partner because it is
in any degree due to his connection with it. incumbent upon him to know the status
The partnership is in no case bound by any act of a partner after
of the insolvent partner.
dissolution:
(1) Where the partnership is dissolved because it is unlawful to carry

D. Right to Wind up – 1836
on the business, unless the act is appropriate for winding up Article 1836. Unless otherwise agreed, the partners who have not
partnership affairs; or wrongfully dissolved the partnership or the legal representative of the
last surviving partner, not insolvent, has the right to wind up the
(2) Where the partner has become insolvent; or partnership affairs, provided, however, that any partner, his legal
representative or his assignee, upon cause shown, may obtain winding
(3) Where the partner has no authority to wind up partnership affairs; up by the court. (n)
except by a transaction with one who -
(a) Had extended credit to the partnership prior to dissolution and Manner of winding up
had no knowledge or notice of his want of authority; or
1. Judicially – under the control and
(b) Had not extended credit to the partnership prior to dissolution, direction of the proper court upon cause
and, having no knowledge or notice of his want of authority, the fact shown by any partner, his legal
of his want of authority has not been advertised in the manner representative, or his assignee
provided for advertising the fact of dissolution in the first paragraph,
No. 2 (b). 2. Extrajudically – by the partners
themselves without court intervention.
Nothing in this article shall affect the liability under article 1825 of any
person who after dissolution represents himself or consents to
another representing him as a partner in a partnership engaged in
Persons authorized to wind up
carrying on business. (n) 1. Partners designated by the agreement
2. In the absence of such agreement, all the
partners who have not wrongfully
Power of partner to bind dissolved dissolved the partnership
partnership to third persons 3. The legal representative of the last
1834 enumerates the cases when a partner surviving partner, not insolvent.
continues to bind the partnership even after
dissolution and the cases when he cannot bind the
partnership after dissolution.
Notice of dissolution to creditors

1. As to persons who extended credit to
partnership prior to dissolution – must
have knowledge of the dissolution to
relieve the partnership from liability.
2. As to person who had known of
partnership’s existence – the fact that the
dissolution had been published in the
newspaper would be sufficient.
3. Where acting partner has no authority to
wind-up partnership affairs – Notice of
dissolution is necessary
36

Right of partner to application of partnership
E. Settling of Accounts/Application of property on dissolution
properties/ sharing of profits and The right depends upon whether the dissolution
is caused:
losses – 1797 (Supra p. 17), 1798
1. without violation of the partnership
(Supra p. 21), 1799 (Supra p. 21), agreement
1827 (Supra p. 23), 1837, 1838 2. in violation of the partnership agreement
Article 1837. When dissolution is caused in any way, except in Rights where dissolution not in contravention
contravention of the partnership agreement, each partner, as against
his co-partners and all persons claiming through them in respect of of agreement
their interests in the partnership, unless otherwise agreed, may have 1. To have the partnership property applied
the partnership property applied to discharge its liabilities, and the to discharge the liabilities of the
surplus applied to pay in cash the net amount owing to the respective
partners. But if dissolution is caused by expulsion of a partner, bona partnership
fide under the partnership agreement and if the expelled partner is 2. To have the surplus applied to pay in cash
discharged from all partnership liabilities, either by payment or the net amount owing to the respective
agreement under the second paragraph of article 1835, he shall receive
in cash only the net amount due him from the partnership. partners.
When dissolution is caused in contravention of the partnership Rights where dissolution in contravention of
agreement the rights of the partners shall be as follows:
agreement
(1) Each partner who has not caused dissolution wrongfully shall 1. Rights of partner who has not caused the
have: wrongful dissolution:
a. To have partnership property applied
(a) All the rights specified in the first paragraph of this article, and
for the payment of its liabilities and
(b) The right, as against each partner who has caused the dissolution to receive in cash his share of the
wrongfully, to damages breach of the agreement. surplus
b. To be indemnified for damages
(2) The partners who have not caused the dissolution wrongfully, if
they all desire to continue the business in the same name either by
caused by the partner guilty of
themselves or jointly with others, may do so, during the agreed term wrongful dissolution
for the partnership and for that purpose may possess the partnership c. To continue the business in the same
property, provided they secure the payment by bond approved by the
court, or pay any partner who has caused the dissolution wrongfully,
name during the agreed term of the
the value of his interest in the partnership at the dissolution, less any partnership, by themselves or jointly
damages recoverable under the second paragraph, No. 1 (b) of this with others
article, and in like manner indemnify him against all present or future
partnership liabilities.
d. To possess partnership property
should they decide to continue the
(3) A partner who has caused the dissolution wrongfully shall have: business.
2. Rights of partner who wrongfully caused
(a) If the business is not continued under the provisions of the second
paragraph, No. 2, all the rights of a partner under the first paragraph,
the dissolution:
subject to liability for damages in the second paragraph, No. 1 (b), of a. If the business is not continued by
this article. the other partners, to have the
partnership property applied to
(b) If the business is continued under the second paragraph, No. 2, of
this article, the right as against his co- partners and all claiming discharge its liabilities and to receive
through them in respect of their interests in the partnership, to have in cash his share of the surplus less
the value of his interest in the partnership, less any damage caused to damages caused by his wrongful
his co-partners by the dissolution, ascertained and paid to him in cash,
or the payment secured by a bond approved by the court, and to be dissolution.
released from all existing liabilities of the partnership; but in b. If the business is continued: To have
ascertaining the value of the partner's interest the value of the good- the value of his interest in the
will of the business shall not be considered. (n)
partnership at the time of the
dissolution paid in cash or secured
by bond and to be released from all
37

existing and future liabilities of the
partnership F. Effects of Rescission – 1838
(Supra), 1839
Article 1838. Where a partnership contract is rescinded on the ground Article 1839. In settling accounts between the partners after
of the fraud or misrepresentation of one of the parties thereto, the dissolution, the following rules shall be observed, subject to any
party entitled to rescind is, without prejudice to any other right, agreement to the contrary:
entitled:
(1) The assets of the partnership are:
(1) To a lien on, or right of retention of, the surplus of the partnership
property after satisfying the partnership liabilities to third persons for (a) The partnership property,
any sum of money paid by him for the purchase of an interest in the
partnership and for any capital or advances contributed by him; (b) The contributions of the partners necessary for the payment of all
the liabilities specified in No. 2.
(2) To stand, after all liabilities to third persons have been satisfied, in
the place of the creditors of the partnership for any payments made (2) The liabilities of the partnership shall rank in order of payment, as
by him in respect of the partnership liabilities; and follows:
(3) To be indemnified by the person guilty of the fraud or making the (a) Those owing to creditors other than partners,
representation against all debts and liabilities of the partnership. (n)
(b) Those owing to partners other than for capital and profits,
Right of partner to rescind contract of (c) Those owing to partners in respect of capital,
partnership
If one is induced by fraud or misrepresentation to (d) Those owing to partners in respect of profits.
become a partner, the contract is voidable.
However, until the partnership contract is (3) The assets shall be applied in the order of their declaration in No.
1 of this article to the satisfaction of the liabilities.
annulled by a proper action in court, the
partnership relation exists. (4) The partners shall contribute, as provided by article 1797, the
amount necessary to satisfy the liabilities.
Rights of injured partner where partnership (5) An assignee for the benefit of creditors or any person appointed
contract is rescinded by the court shall have the right to enforce the contributions specified
1. Lien on the surplus of partnership in the preceding number.
property
(6) Any partner or his legal representative shall have the right to
2. Right of subrogation in place of enforce the contributions specified in No. 4, to the extent of the
partnership creditors after payment of amount which he has paid in excess of his share of the liability.
partnership liabilities
3. Right of indemnification by the guilty (7) The individual property of a deceased partner shall be liable for
the contributions specified in No. 4.
partner against all debts and liabilities of
the partnership (8) When partnership property and the individual properties of the
partners are in possession of a court for distribution, partnership
creditors shall have priority on partnership property and separate
creditors on individual property, saving the rights of lien or secured
creditors.
(9) Where a partner has become insolvent or his estate is insolvent,

the claims against his separate property shall rank in the following
order:
(a) Those owing to separate creditors;
(b) Those owing to partnership creditors;
(c) Those owing to partners by way of contribution. (n)
38

Liquidation and Distribution of Assets of G. Effects of Continuation of the
Dissolved partnership Business – 1840, 1841
The process of winding up consists in reducing
the property to cash and distributing the proceeds.
Article 1840. In the following cases creditors of the dissolved
partnership are also creditors of the person or partnership continuing
Rules in settling accounts between partners the business:
after dissolution
1. Assets of the partnership – partnership (1) When any new partner is admitted into an existing partnership, or
when any partner retires and assigns (or the representative of the
property and contributions of partners deceased partner assigns) his rights in partnership property to two or
necessary for the payment of all liabilities. more of the partners, or to one or more of the partners and one or
2. Order of application of the assets: more third persons, if the business is continued without liquidation of
the partnership affairs;
1st Owing partnership creditors
2nd Owing partners other than for capital and (2) When all but one partner retire and assign (or the representative of
profits a deceased partner assigns) their rights in partnership property to the
3rd Owing for the return of the capital contributed remaining partner, who continues the business without liquidation of
partnership affairs, either alone or with others;
by the partners
Lastly, share in profits due to each partner (3) When any partner retires or dies and the business of the dissolved
partnership is continued as set forth in Nos. 1 and 2 of this article,
with the consent of the retired partners or the representative of the
3. Right of a partner where assets deceased partner, but without any assignment of his right in
insufficient – the deficit is a capital loss partnership property;
which requires contribution like any other
loss. (4) When all the partners or their representatives assign their rights in
partnership property to one or more third persons who promise to
4. Liability of deceased partner’s individual pay the debts and who continue the business of the dissolved
property – share of the contributions partnership;
necessary to satisfy the liabilities of the
(5) When any partner wrongfully causes a dissolution and the
partnership incurred while he was a remaining partners continue the business under the provisions of
partner. article 1837, second paragraph, No. 2, either alone or with others, and
5. Priority to payment of partnership without liquidation of the partnership affairs;
creditors/partners’ creditors – When
(6) When a partner is expelled and the remaining partners continue
partnership property and the individual the business either alone or with others without liquidation of the
properties of the partners are in partnership affairs.
possession of the court for distribution,
The liability of a third person becoming a partner in the partnership
partnership creditors shall first be paid continuing the business, under this article, to the creditors of the
from partnership property and separate dissolved partnership shall be satisfied out of the partnership property
creditors from individual properties of the only, unless there is a stipulation to the contrary.
partners
When the business of a partnership after dissolution is continued
6. Distribution of property of insolvent under any conditions set forth in this article the creditors of the
partner – distributed as follows: dissolved partnership, as against the separate creditors of the retiring
1st to those owing to his separate creditors or deceased partner or the representative of the deceased partner,
have a prior right to any claim of the retired partner or the
2nd to those owing to partnership creditors representative of the deceased partner against the person or
Lastly, to those owing to partners by way partnership continuing the business, on account of the retired or
of contribution. deceased partner's interest in the dissolved partnership or on account
of any consideration promised for such interest or for his right in
partnership property.
Nothing in this article shall be held to modify any right of creditors to

set aside any assignment on the ground of fraud. The use by the
person or partnership continuing the business of the partnership
name, or the name of a deceased partner as part thereof, shall not of
itself make the individual property of the deceased partner liable for
any debts contracted by such person or partnership. (n)
39

Rights of creditors of dissolved partnership Idos v. CA (Private Respondents People of the
which is continued Philippines)
Law makes the creditors of the dissolved Doctrine: The final stages of a partnership are:
partnership, also creditors of the persons or 1. Dissolution – change in the relation of the
partnership continuing the business. The purpose partners caused by any partner ceasing to
of the law is to maintain the preferential rights of be associated in the business. It is that
old creditors. point of time the partners cease to carry
on the business together.
Liability of persons continuing business of 2. Winding up – process of settling business
dissolved partnership affairs after dissolution (eg. Paying of
1. Liability of the new partners shall be previous obligations, collecting of assets
satisfied out of partnership property only, previously demandable, etc…)
unless there is a stipulation to the contrary. 3. Termination – point in time after all the
2. No. 4 applies only when the third person partnership affairs have been wound up.
promises to pay the debts of the Facts: Idos is a businesswoman engaged in
partnership, otherwise creditors of the leather tanning. Her partner Arilla accused her of
dissolved partnership have no claim on violating BP 22. Arilla supplied the chemicals used
the partnership continuing the business in the business. The partnership was short lived
unless the assignment can be set aside as a and Idos issued postdated checks to pay Arilla.
fraud on creditors. The third check bounced and she was found
guilty of estafa. She claims that the check is part
Article 1841. When any partner retires or dies, and the business is of a buy-out of Arilla’s interest in the partnership,
continued under any of the conditions set forth in the preceding and not a commitment to return any profit.
article, or in article 1837, second paragraph, No. 2, without any
settlement of accounts as between him or his estate and the person or Held: Such agreement to dissolve the partnership
partnership continuing the business, unless otherwise agreed, he or his did not automatically put an end to the
legal representative as against such person or partnership may have partnership. They were still in the process of
the value of his interest at the date of dissolution ascertained, and shall
receive as an ordinary creditor an amount equal to the value of his winding-up when the check was issued. The check
interest in the dissolved partnership with interest, or, at his option or was issued as a partner to another, not as a debtor
at the option of his legal representative, in lieu of interest, the profits to a creditor.
attributable to the use of his right in the property of the dissolved
partnership; provided that the creditors of the dissolved partnership as
against the separate creditors, or the representative of the retired or Ortega v. CA (Private Respondents SEC and
deceased partner, shall have priority on any claim arising under this Misa)
article, as provided article 1840, third paragraph. (n)
Doctrine: The birth and life of a partnership at
will is predicated on the mutual desire and
Rights of retiring or of legal representative of consent of the partners. Any one of the partners
deceased partner when business is continued may dissolve at will. Even the presence of a
1. To have the value of the interest of the period will not prevent dissolution. Mutual agency
retiring partner ascertained as of the date arises and the doctrine of delectus personae allows
of dissolution them to have the power, to dissolve the
2. To receive as an ordinary creditor an partnership. An unjustified dissolution can
amount equal to the value of his share in subjected the partner to a possible action for
the dissolved partnership with interest or damages.
in lieu of interest, the profits attributable Facts: Petitioner Ortega wanted to withdraw
to the use of his right. from the law firm Bito, Misa and Lozada as a
junior partner. He filed dissolution with the SEC
but the remaining partners refused. SEC ruled
that the partnership is dissolved. CA: Misa’s
withdrawal dissolved the partnership and his
withdrawal was in good faith.
40

Held: Dissolution of the firm is affirmed. Held: Court rules for the plaintiff, the
partnership may be dissolved.
Rojas v. Maglana
Doctrine: Withdrawing partner is liable for Bearneza v. Dequilla
damages if the cause of withdrawal is not justified Doctrine: A partnership is dissolved by the death
or no cause was given but in no case can he be of any of its partners. After the dissolution of a
compelled to remain in the firm. partnership, its legal status is that of a partnership
Facts: Maglana and Rojas executed their articles in liquidation. The only rights and interests are
of co-partnership with an indefinite term. One of transmitted to the legal successor are those
the purposes was to secure concessions over resulting from the liquidation.
forestlands. Due to the difficulties in acquiring Facts: Dequilla and Bearneza formed a
concessions, they decided to include Pahamotang partnership for the purpose of exploiting a
as an industrial partner. Eventually, the business fishpond situated in Talisay. Bearneza obligated
profited and the two bought Pahamotang’s share. herself to contribute to the payment of the
Rojas entered into another partnership and expenses of the business, which they have been
transferred his equipment. Maglana reminded him doing until her death. Bearneza left a will
of his obligations in the previous partnership. appointing the petitioner as her heir to succeed to
Maglana then informed Rojas about the all her rights and interests in the fishpond.
dissolution of the partnership. Rojas filed a case Petitioner demanded from Dequilla the delivery
for the recovery of property. of the part of the fishpond belonging to Bearneza.
Held: The first partnership was not dissolved, Dequilla countered that the formation of the
while the second one was dissolved by consent. partnership was not carried into effect.
After the withdrawal, the relationship was a de Held: Petitioner has not sufficiently shown his
facto partnership. right of action. Before liquidation is made, it is
impossible to determine what rights or interests,
Lichauco v. Lichauco the deceased had in the partnership.
Doctrine: A provision of the articles of
partnership, which prohibits the dissolution of the Singsong v. Isabela Sawmill
partnership except by the consent and agreement Doctrine: The partnership continues until
of 2/3rds of the partners, denies the right of a less winding up. Properties mortgaged and judicially
number of partners to effect a dissolution of the foreclosed then sold at public auction to the
partnership through judicial intervention or partner, who had withdrawn, still belong to the
otherwise; but in no case limits or restricts the partnership. The said properties as well as of the
rights of the individual partners in the event that withdrawn partner are answerable to the liabilities
the dissolution of the partnership is effected, by of the partnership and to innocent third persons.
the express mandate of law. A partner who withdrew from the partnership is
Facts: A notarial instrument was executed in relieved from partnership liability only when there
Manila, by the terms of which a partnership was is liquidation of the assets of the partnership and
duly organized for the purpose of carrying on a his withdrawal has been published.
rice-cleaning business. The association cannot be Facts: Petitioner sold a motor truck and two
dissolved except by the consent and agreement of tractors to the defendant partnership. The
2/3rds of its partners and in he event of the death defendants executed a chattel mortgage on the
of any of the partners. The business was said property. Eventually, the partnership was
organized until it was found to be unprofitable by dissolved. They did not divide assets but
the defendant, and thereafter the machinery was continued under the name of Isabela Sawmill.
dismantled and offered for sale. No accounting Unable to pay their debts, the truck was
was made to his associates until the present action. foreclosed. Sandejano, a former partner,
Defendant contends that the partnership may be purchased the property and it was eventually
dissolved only by 2/3rds vote.
41

mortgaged to her. Oppen, the creditor of the Doctrine: The continuance of the business by the
partnership, filed a case for payment of debts. petitioners against the will of the respondent gave
Held: As a former partner, Sandejano is liable to rise to a solidary obligation. The absolute
pay since the partnership was not fully dissolved. community property shall be liable for debts and
obligations contracted during the marriage by one
Bonnevie v. Hernandez spouse with the consent of the other.
Doctrine: General Rule: When a partner retires, Facts: Chua and Sunga formed a partnership to
he is entitled to a payment of what may be due engage in the marketing of LPG. After Sunga’s
him after liquidation. But no liquidation is death, his widow continued the business without
necessary where there is already a settlement or an Chua’s consent. Chua’s subsequent demands for
agreement as to what the partner shall receive. accounting and winding up went unheeded,
Facts: Plaintiffs with other associates formed a prompting him to file a complaint. RTC and CA
secret partnership, which acquired plants of ruled in favor of Chua.
MERALCO. No formal articles were drawn for it Held: Decision of the CA in favor of Chua is
was the purpose to incorporate once the deal was affirmed.
concluded. Negotiations went underway but were
fruitless. Defendant was taken as a partner to Primelink Properties v. Lazatin-Magat
negotiate the deal and was eventually able to buy Doctrine: The partnership is not terminated
the plants using funds of the partnership. upon dissolution, but continues until the winding
Members proceeded to form a corporation. up of the partnership affairs is completed. Unless
Before it was formally incorporated, some otherwise agreed, the parties who have not
partners wanted to withdraw. Two years after wrongfully dissolved the partnership have the
their withdrawal, they brought suit to share in the right to wind up the partnership affairs. Until the
profits of the company. partnership accounts are determined, it cannot be
Held: A settlement was agreed the very day the ascertained how much any of the parties are
partnership was dissolved. The withdrawing entitled to.
partners have no right to future profits. Facts: The Lazatins and Primelink entered into a
Joint venture agreement (JVA) for the
Yu v. NLRC (Private Respondents Jade development of the properties of the Lazatins.
Mountain Products and Willy Co) Under the JVA, the Lazatin siblings obliged
Doctrine: A change in the membership of the themselves to contribute the two parcels of land
partnership dissolves the old partnership. The as their share. Primelink undertook to contribute
legal personality of the expiring partnership money, labor, and capital for the development of
persists for the limited purpose of winding up and the property. Primelink failed to immediately
closing of the affairs of the partnership. A secure a development permit The Lazatins
withdrawing partner remains liable to a third party demanded that Primelink comply with its
creditor of the old partnership. obligations under the JVA. Eventually, the
Facts: Petitioner Yu was the former general Lazatins informed Primelink that they decided to
manager of Jade Mountain. The partnership was rescind the JVA. The RTC rescinded the JVA.
sold and his salaries remained unpaid. The new Primelink demanded indemnification for the
partnership refused to pay the salaries of Yu and improvements made upon the property.
eventually discharged him of his duties as general Held: It was premature for the petitioner to
manager. demand indemnification on the value of
Held: The new partnership need not retain Yu improvements made upon the land.
but must pay his unpaid wages.
Sunga-Chan v. CA (Private Respondents

Lamberto Chua)
42

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Partnership Exam Reviewer – Block C 2016 Prof.

Dionne Sanchez Go/Lagmay/Pabiona/Reodica

Re: annotations, Ma’am uses De Leon, most of her

When an unlawful partnership is dissolved by a judicial decree, the Registration

C. Separate Juridical Personality –1768,

(a) Had extended credit to the partnership prior to dissolution and

(b) Had not extended credit to the partnership prior to dissolution,

Article 1791. If there is no agreement to the contrary, in case of an

Lim Tanhu v. Remolete

Pang Lim v. Lo Seng

Nothing in this Title shall be held to deprive a partner of his right, if

Article 1827. The creditors of the partnership shall be preferred to

Creditor of a partner can secure a judgment on his

C. Tort Liability; breach of trust

(2) His interest in the partnership; and

Responsibility of Partnership to partners

Martinez v. Ong Pong (Supra p. 22)

Agustin v. Inocencio (Supra p. 22)

2. In contravention of the agreement –

(3) A partner has been guilty of such conduct as tends to affect

(4) A partner wilfully or persistently commits a breach of the

(1) Where the partnership is dissolved because it is unlawful to carry

Notice of dissolution to creditors

(9) Where a partner has become insolvent or his estate is insolvent,

(a) Those owing to separate creditors;

(b) Those owing to partnership creditors;

(c) Those owing to partners by way of contribution. (n)

Nothing in this article shall be held to modify any right of creditors to

Sunga-Chan v. CA (Private Respondents

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