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CHAPTER 3

DISSOLUTION AND WINDING UP


Art. 1828. The dissolution of a partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business. (n)
Three Separate Stages:
Dissolution
-change in relation of partners caused by any partner ceasing to be associated in
the carrying on of the business
-partners cease to carry on business together
Winding Up
-actual process of settling the business or partnership affairs after dissolution,
involving the collection and distribution of partnership assets, payment of debts,
and determination of value of each partners interest in partnership
Termination
-all partnership affairs are completely wound up and finally settled
-signifies end of partnership life
Art. 1829. On dissolution the partnership is not terminated, but continues until
the winding up of partnership affairs is completed. (n)
Effect of Dissolution:
Does not automatically result in termination of legal personality of partnership or cessation
of his business
Partnership continues but only for limited purpose of winding up its affairs
* on dissolution the partnership is not terminated BUT continues until the winding up of
partnership affairs is completed
*EFFECT on OBLIGATIONS
1. just because a partnership is dissolved this does not necessarily mean that a
partner can evade previous obligations entered into by the partnership
2.

dissolution saves the former partners from new obligations to which they have not
expressly or impliedly consented UNLESS the same be essential for winding up

Art. 1830. Dissolution is caused:


(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular
undertaking specified in the agreement;
(b) By the express will of any partner, who must act in good faith,
when no definite term or particular is specified;

(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, either before or after the termination of any specified term
or particular undertaking;
(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;
(2) In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of
this article, by the express will of any partner at any time;
(3) By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on in
partnership;
(4) When a specific thing which a partner had promised to contribute 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
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;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following article. (1700a and 1701a)
Causes of Dissolution:
Act of Parties Not in Violation of their Agreement
Termination of the definite term or particular undertaking
-automatically dissolved without the partners extending the said term or
continuing the undertaking
-if after said expiration, partners continue the partnership without making
a new agreement, firm becomes partnership at will
By express will of any partner
-partnership at will may be dissolved at any time by any partner without
consent of co-partners as long as it is done in good faith
-if done in bad faith, dissolution is not prevented but withdrawing partner is
liable for damages
By express will of all partners
-agreement to dissolve partnership before termination of specified term or
particular undertaking must be unanimous
By expulsion of any partner
-must be made in good faith and strictly in accordance with the power
conferred by the agreement between the partners
Act of Parties in Violation of their Agreement
by the EXPRESS WILL of ANY PARTNER at any time
Legal Effect: withdrawing partner is liable for damages
Operation of Law
Business becomes Unlawful

-caused when a supervening event makes the business itself unlawful or


makes it unlawful for the partners to carry it on together
Loss of Specific Thing
Ownership
Before delivery dissolution
After delivery no dissolution (partnership becomes owner of thing
and thus bears the loss)
Use
Before delivery dissolution
After delivery dissolution
**Loss of generic thing, whether ownership or use is transferred and
whether before or after delivery, does not result in dissolution because
generic things can be replaced
A) SPECIFIC THING PERISHES before delivery
B) USUFRUCT is lost EXCEPT if ownership had been transferred to the
partnership
Death of any partner
-surviving partners have no authority to continue the business except for
winding up
Insolvency of any partner or partnership
-insolvency must be adjudged by the court
-by insolvency, the credit is impaired
* the insolvency need not be judicially declared, it is enough that the
assets be less than the liabilities
Civil Interdiction of any partner
-a person under civil interdiction cannot validly give consent and is without
capacity to manage his own property
Court Decree
-as discussed in the next article (art 1831)
*** if the cause is not justified or no cause was given, the withdrawing partner is
liable for DAMAGES BUT in no case can he be compelled to remain in the firm

Art. 1831. On application by or for a partner the court shall decree a dissolution
whenever:
(1) A partner has been declared insane in any judicial proceeding or is
shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part
of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect
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 relating to the

partnership business that it is not reasonably practicable to carry on the


business in partnership with him;
(5) The business of the partnership can only be carried on at a loss;
(6) Other circumstances render a dissolution equitable.
On the application of the purchaser of a partner's interest under Article 1813 or
1814:
(1) After the termination of the specified term or particular undertaking;
(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)
Grounds for Dissolution by Court Decree:
On application by a partner
Insanity
-must be duly proved in court
-insanity must materially affect capacity of partner to perform contractual
duties as partner
Incapacity
-materially affects his ability to discharge the duties imposed by his
partnership contract
-incapacity which is lasting, from which the prospect of recovery is remote
Misconduct
-prejudicial to carrying on of partnership business
Persistent Breach of partnership agreement
-defeat and materially affect and obstruct the purpose of partnership
Business can be Carried on Only at a Loss
-becomes apparent that it is unprofitable with no reasonable prospects of
success
Other Circumstances
-i.e. abandonment of business, fraud in management, refusal without
justifiable cause to render accounting of partnership affairs
On application of purchaser of partners interest
After termination of specified term or particular undertaking
Any time if partnership was a partnership at will when interest was assigned or
charging order issued
* proof as to the existence of the firm must first be given
* even if a partner has not yet been previously declared insane by the court,
dissolution may be asked, as long as the insanity is duly proved in court
* in a suit for dissolution, the court may appoint a RECEIVER at its discretion

Art. 1832. Except so far as may be necessary to wind up partnership affairs or to


complete transactions begun but not then finished, dissolution terminates all
authority of any partner to act for the partnership:
(1) With respect to the partners:
(a) When the dissolution is not by the act, insolvency or death of a
partner; or

(b) When the dissolution is by such act, insolvency or death of a


partner, in cases where article 1833 so requires;
(2) With respect to persons not partners, as declared in article 1834. (n)
Effect of Dissolution on Authority of Partner:
Partnership ceases and partners power of representation is confined only to acts
incident to winding up or completing of transactions begun but not then finished
* when the firm is dissolved, a partner can no longer bind the partnership
* a dissolved partnership still has the personality for the winding up of its affairs
the firm is still allowed to collect previously acquired credits
the firm is still bound to pay of its debts

Art. 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 share of any liability
created by any partner acting for the partnership as if the partnership had not
been dissolved unless:
(1) The dissolution being by act of any partner, the partner acting for the
partnership had knowledge of the dissolution; or
(2) The dissolution being by the death or insolvency of a partner, the
partner acting for the partnership had knowledge or notice of the death
or insolvency.
Rule:
When a partner enters into new contract with third person after dissolution, new contract
will bind partners.
Each is liable for his share of liability created by acting partner as if the partnership has not
been dissolved.
Exception:
Cause of dissolution is the act of partner and acting partner has knowledge of such
dissolution
Cause of dissolution is death or insolvency of a partner and acting partner has knowledge
or notice of death or insolvency
Knowledge: not only actual knowledge but also knowledge of such other facts as in
circumstances that would show bad faith
Notice: person who claims benefit of notice states the fact to such person or delivers
through mail or other means, a written statement of the fact to such person or proper
person at his place of business or residence
Article applies only if contract binds the partnership. If not, only acting partner is
personally liable.
DISSOLUTION CAUSED by A-I-D
RULE: (STILL BOUND) as to each partners

G.R. where the dissolution is caused by the ACT, INSOLVENCY or DEATH of a partner,
each partner is liable to his co-partners for his share of any liability created by any partner
acting for the partnership
EXCEPTION: - individual liabilities
1. if dissolution by ACT
the partner acting for the partnership HAD KNOWLEDGE of the dissolution
OR
2. if dissolution by DEATH or INSOLVENCY
the partner acting for the partnership HAD knowledge or notice of the death or
insolvency
Art. 1834. After dissolution, a partner can bind the partnership, except as
provided in the third paragraph of this article:
(1) By any act appropriate for winding up partnership affairs or
completing transactions unfinished at dissolution;
(2) By any transaction which would bind the partnership if dissolution
had not taken place, provided the other party to the transaction:
(a) Had extended credit to the partnership prior to dissolution and
had no knowledge or notice of the dissolution; or
(b) Though he had not so extended credit, had nevertheless
known of the partnership prior to dissolution, and, having no
knowledge 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 more than one) at which the partnership
business was regularly carried on.
The liability of a partner under the first paragraph, No. 2, shall be satisfied out
of partnership assets alone when such partner had been prior to dissolution:
(1) Unknown as a partner to the person with whom the contract is made;
and
(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.
The partnership is in no case bound by any act of a partner after dissolution:
(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 business. (n)

General Rule: upon dissolution of partnership, authority of partner is deemed terminated;


act of partner (such as entering into new contracts) after dissolution, partnership is no
longer bound
Exceptions: partnership is still bound (with respect to new transaction):
As to Partners
1. winding up
2. completion of business transactions
3. if dissolution is by act, death, or insolvency of a partner
-provided that acting partner had NO knowledge of act, or had NO knowledge or
notice of death or insolvency
As to Third Persons
1. winding up
2. completion of business transactions
3. third persons who extended credit prior to dissolution and had no knowledge or notice of
the dissolution
4. third persons who had not extended credit prior to dissolution, knew of partnership, but
had no knowledge or notice because no publication or advertisement
* if there was publication of the dissolution it is presumed he already knows,
regardless of actual knowledge on non knowledge
Art. 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 the
partnership by an agreement to that effect between himself, the partnership
creditor and the person or partnership continuing the business; and such
agreement may be inferred from the course of dealing between the creditor
having knowledge of the dissolution and the person or partnership continuing
the business.
The individual property of a deceased partner shall be liable for all obligations of
the partnership incurred while he was a partner, but subject to the prior
payment of his separate debts. (n)
Effect of Dissolution on Partners Existing Liability:
Existing liability of partner is not of itself discharged, UNLESS by an agreement to that
effect between:
1. partner concerned/himself
2. other partners
3. partnership creditors

Liability of Estate of Deceased Partner:


Individual property of deceased partner shall be liable for all obligations of the partnership
incurred while he was still partner
* BUT subject to prior payments of his separate debts
Individual creditors of deceased partner are preferred over partnership creditors with
respect to separate property
* IF there be a NOVATION of the OLD PARTNERSHIP DEBTS and such novation is done
after one of the partners has retired and without the consent of such partner

said partner cannot be held liable by creditors who made the novation with
knowledge of the firms dissolution
Art. 1836. Unless otherwise agreed, the partners who have not wrongfully
dissolved the partnership or the legal representative of the last surviving
partner, not insolvent, has the right to wind up the partnership affairs, provided,
however, that any partner, his legal representative or his assignee, upon cause
shown, may obtain winding up by the court. (n)
Winding Up, may be done either:
A. Judicially: under control and direction of proper court upon cause shown by any
partner, his legal representative, or assignee
JUDICIAL:
under the control and direction of the court, upon proper cause that is shown to the
court
* profits that will actually enter the firm after dissolution as a consequence of
transactions already made before dissolution are included because they are considered as
profits existing at the time of dissolution
* any other income earned after the time, like interest or dividends on stock owned by
the partners or partnership at the time of dissolution should not be distributed as profits
BUT as merely additional income to the capital

B. Extrajudicially: partners themselves without intervention of court


Action for liquidation of partnership: personal action; may be brought in the place of
residence of either plaintiff or defendant
Persons Authorized to Wind Up:
Partners designated by agreement
Absence of agreement, partners who have not wrongfully dissolved partnership
Legal representative (executor or administrator) of last surviving partner (when all partners
are dead), not insolvent
*court may appoint a receiver where such step is shown to be in the best interests of all
persons concerned
*insolvent partner does not have right to wind up
When member of partnership dies, duty of liquidation devolves upon surviving members
and not upon legal representative of deceased partner
Powers of Liquidating Partner:
Make new contracts
-only for purpose of winding up the partnership
Raise money to pay partnership debts
Incur obligations to complete existing contracts or preserve partnership assets

Incur expenses necessary in the conduct of litigation


*in short, surviving partner has full authority to do every thing that may be necessary to
wind up partnership affairs, but power is limited to performance of act which are
indispensable to that end
*estate of deceased partner is not liable for subsequent debts incurred by surviving
partners without consent of the estate
Art. 1837. When dissolution is caused in any way, except in contravention of the
partnership agreement, each partner, as against his co-partners and all persons
claiming through them in respect of their interests in the partnership, unless
otherwise agreed, may have the partnership property applied to discharge its
liabilities, and 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
fide under the partnership agreement and if the expelled partner is discharged
from all partnership liabilities, either by payment or agreement under the
second paragraph of Article 1835, he shall receive in cash only the net amount
due him from the partnership.
When dissolution is caused in contravention of the partnership agreement the
rights of the partners shall be as follows:
(1) Each partner who has not caused dissolution wrongfully shall have:
(a) All the rights specified in the first paragraph of this article, and
(b) The right, as against each partner who has caused the
dissolution wrongfully, to damages breach of the agreement.
(2) The partners who have not caused the dissolution wrongfully, if they
all desire to continue the business in the same name either by
themselves or jointly with others, may do so, during the agreed term for
the partnership and for that purpose may possess the partnership
property, provided they secure the payment by bond approved by the
court, or pay any partner who has caused the dissolution wrongfully, the
value of his interest in the partnership at the dissolution, less any
damages recoverable under the second paragraph, No. 1 (b) of this
article, and in like manner indemnify him against all present or future
partnership liabilities.
(3) A partner who has caused the dissolution wrongfully shall have:
(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, subject to liability for damages in the second
paragraph, No. 1 (b), of this article.
(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 through them in respect of their interests in the
partnership, to have the value of his interest in the partnership,
less any damage caused to 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 released from all existing
liabilities of the partnership; but in ascertaining the value of the
partner's interest the value of the good-will of the business shall
not be considered. (n)
Partners Lien: right of every partner, on a dissolution, against the other partners and
persons claiming through them in respect of their interest as partners, to have partnership

property applied to discharge partnership liabilities and surplus assets, if any, distributed
in cash to the respective partners, after deducting what may be due to the firm from them
as partners
Rights of Partner where Dissolution Not in Violation of Agreement:
Have partnership property applied to discharge liabilities of partnership
Have surplus, if any, applied to pay in cash the net amount owing to respective partners
*if dissolution caused by expulsion of partner, expelled partner may be discharged from
partnership liabilities either by payment or by agreement between him, partnership
creditors, and other partners; his right is only to receive in cash the net amount due him
from the partnership
*if dissolution is proper or rightful, no partner is liable for any loss sustained as result of
dissolution
Rights of Partner where Dissolution in Violation of Agreement:
Rights of Innocent Partner (has not caused dissolution wrongfully):
-Have partnership property applied for payment of its liabilities and receive in cash
his share in surplus
-Indemnified for damages
-Continue business in the same name during agreed term of partnership, by
themselves or jointly with others
-Possess partnership property, if they decide to continue business
Rights of Guilty Partner (wrongfully caused dissolution):
If business is not continued by other partners, have partnership property applied to
discharge its liabilities and receive in cash his share in surplus less damages
If business is continued, have value of his interest in partnership property less any damage
ascertained and paid in cash or secured by bond approved by court, and be released from
all existing and future liabilities of partnership
BETTER RIGHTS of INNOCENT PARTNERS
innocent partners have better rights than guilty partners and that the guilty partners are
required to indemnify for the damages caused

* RIGHT of INOCENT PARTNERS TO CONTINUE the BUSINESS


in essence this is a new partnership
can use the same firm name
can ask new members to join
BUT shall: for protection of guilty partners
1. give a BOND approved by the court
2. to PAY guilty partners his interests at the time of dissolution MINUS DAMAGES
* a guilty partner who is EXCLUDED will be indemnified against all present or future
partnership liabilities

RIGHT TO GET CASH


in case on non-continuance of the business, the interest of the partner should if he
desires be given in cash
assets may be sold
a guilty partner, in ascertaining the value of his interest is not entitled to a proportional
share of the value of GOOD WIL
Art. 1838. Where a partnership contract is rescinded on the ground of the fraud
or misrepresentation of one of the parties thereto, the party entitled to rescind
is, without prejudice to any other right, entitled:
(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
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;
(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 by
him in respect of the partnership liabilities; and
(3) To be indemnified by the person guilty of the fraud or making the
representation against all debts and liabilities of the partnership. (n)
If one is induced by fraud or misrepresentation to become a partner, the contract is
voidable or annullable.
If contract is annulled, injured partner is entitled to restitution.
But, until partnership contract is annulled by proper action in court, partnership relations
exist
Rights of Injured Partner where Partnership Contract is Rescinded (Annulled):
Right of lien or retention of surplus of partnership property after satisfying partnership
liabilities
SURPLUS
CAPITAL
ADVANCES
Right of subrogation in place of partnership creditors
Right of indemnification by guilty partner
Art. 1839. In settling accounts between the partners after dissolution, the
following rules shall be observed, subject to any agreement to the contrary:
(1) The assets of the partnership are:
(a) The partnership property,
(b) The contributions of the partners necessary for the payment of
all the liabilities specified in No. 2.
(2) The liabilities of the partnership shall rank in order of payment, as
follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.

(3) The assets shall be applied in the order of their declaration in No. 1 of
this article to the satisfaction of the liabilities.
(4) The partners shall contribute, as provided by article 1797, the amount
necessary to satisfy the liabilities.
(5) An assignee for the benefit of creditors or any person appointed by
the court shall have the right to enforce the contributions specified in the
preceding number.
(6) Any partner or his legal representative shall have the right to enforce
the contributions specified in No. 4, to the extent of the amount which he
has paid in excess of his share of the liability.
(7) The individual property of a deceased partner shall be liable for the
contributions specified in No. 4.
(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)
* IF the partnership assets are insufficient, the other partners must contribute more
money or property
Equitable Lien or Quasi-Lien: partner has right to have debts owing to the partnership from
his co-partners deducted from their respective shares
Partners Lien: each partner is entitled to a share in the surplus property of the partnership,
if any, in proportion to his interest in the partnership
Rules in Settling Accounts between partners After Dissolution:
Assets of Partnership, include:
Partnership property, including goodwill
Contributions of partners necessary for payment of all liabilities
Order of Application of Assets
Owing to partnership creditors
Owing to partners other than for capital and profits
Owing for return of capital
If any partnership assets remain, distributed as profits to the partners in the
proportion in which profits are to be shared
PREFERENCE with RESPECT to the ASSETS
1. regarding partnership property
partnership creditors have preference
2. regarding individual properties of partners
individual creditors are preferred

RULE if PARTNER is INSOLVENT


- How INDIVIDUAL PROPERTY is DISTRIBUTED
ORDER OF PREFERENCE:
1. INDIVIDUAL or SEPARATE CREDITORS
2. PARTNERSHIP CREDITORS
3. those owing to other partners by way of contribution

Art. 1840. In the following cases creditors of the dissolved partnership are also
creditors of the person or partnership continuing the business:
(1) When any new partner is admitted into an existing partnership, or
when any partner retires and assigns (or the representative of the
deceased partner assigns) his rights in partnership property to two or
more of the partners, or to one or more of the partners and one or more
third persons, if the business is continued without liquidation of the
partnership affairs;
(2) When all but one partner retire and assign (or the representative of a
deceased partner assigns) their rights in partnership property to the
remaining partner, who continues the business without liquidation of
partnership affairs, either alone or with others;
(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 deceased
partner, but without any assignment of his right in partnership property;
(4) When all the partners or their representatives assign their rights in
partnership property to one or more third persons who promise to pay
the debts and who continue the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution and the remaining
partners continue the business under the provisions of article 1837,
second paragraph, No. 2, either alone or with others, and without
liquidation of the partnership affairs;
(6) When a partner is expelled and the remaining partners continue the
business either alone or with others without liquidation of the
partnership affairs.
The liability of a third person becoming a partner in the partnership continuing
the business, under this article, to the creditors of the dissolved partnership
shall be satisfied out of the partnership property only, unless there is a
stipulation to the contrary.
When the business of a partnership after dissolution is continued under any
conditions set forth in this article the creditors of the dissolved partnership, as
against the separate creditors of the retiring or deceased partner or the
representative of the deceased partner, have a prior right to any claim of the
retired partner or the representative of the deceased partner against the person
or partnership continuing the business, on account of the retired or 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)
Art. 1841. When any partner retires or dies, and the business is continued under
any of the conditions set forth in the preceding article, or in Article 1837, second
paragraph, No. 2, without any settlement of accounts as between him or his
estate and the person or partnership continuing the business, unless otherwise
agreed, he or his legal representative as against such person or partnership may
have 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 interest in
the dissolved partnership with interest, or, at his option or at the option of his
legal representative, in lieu of interest, the profits 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 deceased partner, shall have priority on any
claim arising under this article, as provided Article 1840, third paragraph. (n)
Art. 1842. The right to an account of his interest shall accrue to 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 any agreement to the contrary. (n)
*When creditors of the dissolved partnership are also creditors
partnership continuing business:
1. new partner is admitted without liquidation
2. a partner retires and assigns his rights IF the business is continued
liquidation of the partnership affairs
3. all but one partner retire without liquidation
4. when all partner assign their right to a person who will assume their debt
5. after wrongful dissolution, remaining partners continue the business
liquidation
6. when partner expelled and remaining partners continue the business
liquidation

of the

without

without
without

* liability of third person becoming a partner in the partnership continuing the business
to the creditors of the dissolved partnership shall be satisfied out of the partnership
property ONLY
G.R. when a partner retires, he is entitled what is due him after liquidation BUT no
liquidation is needed if there is already a settlement at the date of dissolution