RFBT - Partnership

Void partnerships
1. Non-conformation to required form → Contributed REAL properties should be in:
a. Public instrument
b. Inventory of said property is made, signed by parties, and attached to the public instrument

Void stipulations
1. Stipulation which excludes one or more partners in profits
2. Stipulation entrusting the sharing of profits and losses to one of the partners
3. Void only as to third persons, but valid amongst the partners → stipulation exempting a partner from pro-rata
and subsidiary liability after the exhaustion of partnership assets.

Voting Requirements of Partners

Instances Controlling Interest Majority All partners
Revocation of appointed Y
manager position (MP in bad
faith or w/ just cause)
Revocation of appointed Y
manager position (MP in
good faith or without just
cause)
If no MP designated, all Y
partners are managers. Rule
in case of opposition by
other partners:

In case of TIE Y

Voting Requirements for Managing Partners (MPs)

Instances Controlling MPs’ interests Majority of MPs All MPs
There is stipulation that Y
none of the MPs shall act
w/o the consent of others.
Concurrence for validity
needed:
Rule in case of opposition by Y
other MPs

In case of TIE Y

Liability to third persons for acts of partners

Instances Partnership is bound Partnership not bound
As to authority With authority Y
Without authority Y Y Y
As to business activity Ordinary course of business Y Y
Not ordinary course of business Y
Knowledge of 3rd With Y
Persons as to authority Without Y

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RFBT - Partnership
Rules on Conveyance of Real Property by a Partner or Partners
Scenarios Business Activity Knowledge of 3rd Persons Effect
as to Authority rd
Transferred to 3 Party Retained by Partnership
Ordinary Not With Without w/o w/ Equitable Equitable
course Ordinary Recovery Recovery interest interest
(unusual) passes to does not
3rd Party pass to 3rd
Party
1. Title is under Partnership; conveyance Y y Y
made by partner in name of partnership Y Y Y
(w/o authority) y y Y
2. Title under one or more but not all Y y Y
partners but record does not disclose the Y Y Y
right of partnership and conveyance is y y Y
executed in the name of partner/s in
whose name the title stands (w/o
authority)
3. Title is in name of Partnership and Y Y Y
conveyance is made by a partner in his Y Y Y
own name (w/o authority)
4. Title under one or more or all Y Y Y
partners, or in a 3rd person in trust for Y Y Y
the partnership and conveyance is
executed in the name of partner in name
of partnership or in his name (w/o
authority)
5. Title to real property is in the name of Y
all the partners and conveyance is
executed by all the partners (w/
authority)
*Equitable interest – beneficial interests like usufruct and fruit

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RFBT - Partnership
DISSOLUTION

*Dissolution terminates all authority of any partner to act for partnership except to:
1. Acts to wind-up
2. Acts to complete on-going transactions before the dissolution
3.
Rules if a partner to enter into new transactions after dissolution -
Partners notified or Has knowledge of Dissolution Effect as to authority
Causes of Dissolution Notice Knowledge No Notice or Terminated Not
Knowledge Terminated
Dissolution is caused by Y Y
Acts Y Y
Insolvency, or Death Y Y Y
Y Y
Other Causes Immaterial Immaterial Y Y

Effect as to authority Partnership is Effect

Terminated Not Bound Not Bound
Terminated
Y Y a. Third Person can go after partnership assets
b. If partnership assets are insufficient, go after partners’
separate assets
c. Partners can thereafter recover from acting partner
Y Y a. Third Person can go after partnership assets
b. If partnership assets are insufficient, go after partners’
separate assets
c. Partners can’t recover from acting partner
Y Y a. 3rd person can’t go after partnership assets
b. Acting partner alone is liable. 3rd person to go after
acting partner alone.
Y Y Instance wherein acting partner doesn’t know that
partnership is dissolve but the 3rd party has knowledge
but
→Third person in bad faith hence not protected by law
→Partnership, partners, and acting partner are not
bound

LIQUIDATION
 Partnership Assets
1. Partnership property
2. Contribution of partners
 Industrial partner is not entitled to any share in firm capital on dissolution and is limited only to his share in profits as
compensation for his services
 When new partner is admitted/retires/expelled/dies, and the business continued w/o liquidation of the debts of the
dissolved partnership → the creditors of the dissolved partnership are creditors of the person or partnership
continuing the business
 If the business of dissolved partnership is continued w/o liquidation, the retired partner or legal rep may ask for the
payment of interest with interest, or in lieu of interest, the profits attributable to the use of his right in the property
of the dissolved partnership as an ordinary creditor.
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RFBT - Partnership
 The right to accounting accrues on the date of dissolution

LIMITED PARTNERSHIP
 Name of partnership has the word “Limited” → if omitted, classified as general partnership
 A limited partnership is formed if there has been substantial compliance in good faith or requirements. Otherwise,
treated as general partnership
 A limited partner is not allowed to contribute industry/services. It must be cash or property.
 A limited partner does NOT take part in control and management of partnership → otherwise, general partner
 GR: A limited partner whose name appears in firm name is liable as a general partner
Exceptions:
a. When surname of limited partner is the same as surname of general partner
b. When before limited
 Should there be a false statement in the Articles of partnership, persons who relied on the false statement and
suffer loss can sue for damages.
 Additional limited partners may be admitted by filing an amendment to the original certificate. However, such right
must be stated in the original certificate
 GR: General Partner (GP) has all the rights and powers and subject to all restrictions and liabilities even in a
partnership without limited partners (LP)
Restrictions:
a. Do any act in contravention of certificate
b. Do any act which would make it impossible to carry on the business of the partnership
c. Confess judgment against the partnership
d. Possess partnership property, or assign their rights in specific property, for other than a partnership purpose
e. Admit a person as a GP
f. Admit a person as LP, unless the right to do so is given in the certificate
g. Continue the business with partnership property on the death, retirement, civil interdiction, or insolvency of a
GP unless the right to do so is given in the certificate.
 A person may be a GP and a LP at the same time provided that this fact is stated in the certificate. He shall/has:
 Right to participate in management
 Pay off creditors for his pro-rata share but may ask for reimbursement from other partners
 Separate properties may be attached for payment of liabilities
 On his contribution → right to have it returned on proper occasion like a LP
 When LP may rightfully demand return of his contribution:
a. Upon dissolution
b. When date specified in certificate for its return has arrived
c. After 6 mos notice in writing to all members if there is no time specified in certificate, either for return of
contribution or dissolution of partnership
 GR: contribution of LP is to be returned in cash
Exceptions: In other forms aside from cash
a. As specified in certificate
b. Agreement of partners
 LP may dissolve and wound up partnership if:
a. He is rightfully but unsuccessfully demands return of his contribution
b. He is not paid for his contribution because other liabilities of partnership have not been paid or property of
partnership is insufficient
 GR: A LP’s interest is assignable
a. Substituted limited partner – a person admitted to all the rights of a LP; Effect: as if he becomes a LP himself
b. Assignee – entitled only to share of profits, other compensation from income, and return of contribution

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RFBT - Partnership
 Retirement, death, civil interdiction, insanity or insolvency of a partner
a. GP – partnership is dissolved
b. LP – partnership is not dissolved; Except: there will be no more LP and thus fails the requirement that there
must be at least 1 LP in a limited partnership.
 The LP’s interest in the partnership may, by order of the court, be attached and executed by his separate creditors.
The interest charged may be redeemed by the separate property of any GP, but not with partnership property.
 Order of preference, liquidation of a limited partnership
1. Outside creditors and LP, If partnership is solvent → LP enjoys the same preference as an outside creditor
provided that the partnership is solvent
2. LP’s share in profit
3. LP’s return of capital contribution
4. GP share aside from profits and capital
5. GP’s profit
6. GP’s return of capital contributions
 GR: LP is not a party to an action by or against the partnership → All action by or against the partnership must be
prosecuted and defended in the name of the partnership.
Except: object of proceeding is to enforce a LP’s right or liability to the partnership

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