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Partnership

Corporation
1 Created by mere agreement of the parties Created by law or by operation of law
2 May be organized by only two persons Except for corporation sole, organization
requires at least five incorporators
3 Acquires juridical personality from the Acquire juridical personality from the date of
moment of the execution of the contract issuance of the certificate of incorporation by
the SEC
4 May exercise any power authorized by the Can exercises only the powers expressly
partners provided it is not contrary to law, granted by law or implied from those granted
morals, good customs, public order, or public or incident to its existence
policy
5 Every partner is an agent of partnership Power to do business and management is
vested in the board of directors
6 A partner can sue a co-partner who A suit against a member of the board of
mismanages directors or trustees must be in the name of
corporation
7 No right of succession Has right of succession
8 Partners are liable personally and Stockholders are liable only to the extent of
subsidiarily for partnership debts to third the shares subscribed by them
persons
9 A partner cannot transfer his interest in A stockholder has the right to transfer his
partnership so as to make transferee a shares without prior consent of the other
partner without the consent of the other stockholders
existing partners (principle of delectus
personae)
10 May be established for any period of time May not be formed for a term in excess of 50
stipulated by partners years extendible to not more than 50 years in
any one instance
11 A limited partnership is required by law to May adopt any name provided it is not the
add the word “Ltd.” to its name same as or similar to any registered firm
name
12 May be dissolved any time by the will of any May be dissolved with the consent of the State
or all of the partners
13 Governed by the Civil Code Governed by the Corporation Code


Both partnership and corporation
1 Have juridical personality of its own, separate and distinct from that of the
individuals composing it
2 Can act only through agents
3 Organization composed of an aggregate of individuals
4 Distributes its profits to those who contribute capital to the business
5 Organized only where there is a law authorizing its organization
6 No matter how created or organized is taxable as a corporation subject to
income tax

1770
Object

TAP 7282018

Partnership by estoppel (Art. 1825)
Application of principles of estoppel
§ A partnership liability may be imposed upon a person under principles of estoppel where he holds
himself out, or permits himself to be held out as a partner in an enterprise, directly or indirectly.
§ There is no actual or legal partnership relation but merely a partnership liability imposed by law in
favor of third persons.

Example:
A B C
There is an existing partnership among A, B, C. D introduces himself as partner of of ABC Partnership.

Will it affect the juridical personality of ABC Partnership?
No. Because “another personality” has been created by estoppel.
Specific to the transaction an creation han partnership by estoppel. D is not automatically becomes a part
of the ABC partnership.

Legal capacity of the parties to enter into contract
GR
Any person may be a partner who is capable of entering into contractual relations.

XPN
The following cannot give their consent to a contract:
1. Unemancipated minors
2. Insane or demented persons
3. Deaf-mutes who do not know how to write
4. Persons suffering from civil interdiction
5. Incompetents who are under guardianship
1782 – those who are

A partnership can form another partnership.
What is the effect if an Incapacitated party enters into a contract of partnership?
Voidable. Valid until annulled. Balik la ha basic hit oblicon.

Nawala an kato after partnership? The defect is cured. Waray pa nannull valid, eh di valid. Assuming
gusto mo talaga iannul, entered into a minor, the rule is
Within 4 years from the time nagattain legal age to annul, dire ngani cured an defect
In case of fraud, threat, intimidation within 4 years from the time these FIT ceased to exist, outside
nacucure. So nacucure, inaction or by action.

Emphasis
A partnership can enter into another partnership
But a corporation is without capacity or power to enter into a partnership, unless authorized by statute
or by its charter – kayano nasugad? Kay ha corp it iya powers limited by law
A partnership however can acquire shares of stock ha corporation.

Contribution of Money Property or Industry
Industry meaning – active cooperation, the work of the party associated

1768
X and Co example

1769
Tests in determinding whether a partnership exists or not
1. Persons who are not partners as to each other are not partners as to third partners
2. Co-ownership or co-possession does not of itself establish a partnership whether such coowners
or co-possessors


Principle please take not of 1769
If a person receives shares from net profit, not in gross sale of return presumption is may partnership
The presumption will be disputed if payment was made as
1. As debt by installments or otherwise
2. As wages of an employee of an employee or rent to land
3. As annuty to a widow or representative of a deceased partner
4. As interest on a lonan through the amount of payment vary with the profits of the business
5. As the consideration for the sale of a goodwill of a business or other property by installments or
otherwise


1770

Example of a partnership where part is legal and other part is illegal
ABC Partnership importation of spare parts kas may illegal spare parts of guns
But B, C did not know only A knows
Icoconfiscate la an illegal part by the government

Kelan nagiging void?
When unlawful object
Mayda cases of specific provisions
An whenever immovable object ….
Pero kun partly la an business an illegal à dire void
Pero kun an main business and point of the partnership an illegal importation spare parts of guns à amu
it void

What if nadeclare na void, before before that nakaenter into a contract with a valid obligation? What will
happen?
Kagaya ng art 1773 a ptp is void whenever immovable blah blah
What if immovable is contributed and no chu chu, pero nagenter into contract as partnership
Waray legal personality an partnership, so it kikihaon han individual partners in thiese cases

Considering imporation of spare pars tog fun is criminal act, di ba ha criminal law it criminal liability
personal à so it puydi la kihaon it individual partner nga nagimport illegally kun hir na tulo hira na tulo
gihapon dire an partnership

In n case, delectus personae, puydi ito maging ground pagdissolve han partnership

1771-1773
please highlit 177101773

1774
1775
1776

alayon different kinds of partnership v different kinds of partners
partner
general partner or limited partner
GP – liable up to the extent of his personal property no t just his contribution to the ptp, kun
kinulang halimbawa an partnership, iya na personaly property
LP- iya liability is up to the amount contribution or promised contribution
Halimbawa 500k an actual pero promised by agreement na 1m, bayaran anay niya dapat 500k,
puydi hiya habulun ito
Pag naubos na ito, dire na hiya liable
Industry partner – dire na liable hin kuarta, after liquidation

General partnership
An partenrs puro general partners

Limited partnership
At least one is limited partner but at least one GP also present

When can that happen ito na mga liability up to the extent of your property/partnership debts
ginsesettle?
Example
May transaction nagissue kamo hin bouncing check? Puydi ka magpinannukot na uyy kay general partner
ka, gastusi daw adi kay dire ka macocompel to give additional investment

Inin hiya nangayayri in case of liquidation in case nagdidissolve nah in partnership kun
nagsesettlemnt la kamo saka ito na liability naarise

Partnership at will – waray term or period, open dated
It may be terminated any time under the concept of delectus personae

Ha partnership na may fixed term, puydi ba at will gihap it pag terminated, but it may be for
liability incurred hin damages usually for just cause
Pero puydi dire ka man liable kun may valid ground ka like illegal kasi an iya ginhimo

Bilnga ito na upat
De facto
De jure
Difference

GPP (professional) – amu it exempt ha income tax ha taxation vs Business partnership
(commercial trading)

Stages in creation of partnership
1. choose partner
2. contribute money industry or property

one who contributes MPI, automatic partner ???
an investor na term, ha corporation ito gamit na term
delectus personae – dapat based on trust and confidence, puydi ka maginvest pero dire ka
partner
so an capitalist partner ka anay
puydi k aba capitalist partner at the same time limited partner
oo, which is commonly done

can capitalist partners be industry partners puydi gihap sing ni sir

Subpartner vs partner by estoppel
An example ABC ngan D, an profit la ni C an makukuha ni D, C la gihap it partner delectus
personae

Example
ABC ptp, a, b, c an original partners
After two months, uyy isama na si D as partner, puydi macompel na balyuan an ABC partnership
to ABCD? Dire, pero incoming na hi D kas upat na kam
Pero puydi gad balyuan

How about kun nagwithdraw hi B? dire na puydi gamiton hi ABC partnership unless may pa na
apelydio A à common ini ha law firms

Change of name waray problema
Remember la: death of a partner will dissolve a partnership

Personal act it criminal liability

You cannot be held liabel under concept of conspiracy because you did not consent even with
knowledge

Pag ginagamit mo an income from unlawful act ngaran silent ka --- may knowledge ka gud that is
same as consent

You create a new one kun nadissolve na but macontinue ka la ha registration pero may bago ka na
partnership
Wait wait wait so bagat nadidissolve kun may additional member?

Indutrsial partner k akas waray ka na macocontribute – dire ka na partner so dapat tanggalun na iya
ngaran
Pero puydi ka maging capitalist, contribute hin kwarta nala kun nadisbar hiya
Unless GPP ini kay profession lagi

1777-1779
Universal partnership
Two kinds of all property and of profits
Distinguish
Rule if the problem is silent
What is the presumption?
Universal partnership of profit
If silent an problem, presumption is general partner
Pag waray LTd ha partnership kun may limited partner, kay required ito, kun waray ito pero may
limited partner, treatment sa lahat general
Pag waray general partner, lahat sila magiging nala general partner, purpose to protect the public



APT 8/4/2018
Obligations of the Partners

1. Among themselves

1784. A partnership begins at the moment of the execution of the contract, unless it is otherwise
stipulated.

When a contract or partnership begins? vs Corporation
From the very moment of execution of contract

Is it possible na after the execution of partnership wala ka pang legal personality because the
partnes that it will be on some future date?
Recall 1784 …UNLESS IT IS OTHERWISE STIPULATED? Ano it meaning, an agreement part of it it
will begin legal personality at some future date is possible, parties kan agree to start their legal
personality

GR moment of execution
XPN stipulated otherwise by agreement of partners
No juridical personality before the future date agreed upon by the partners
Another XPN Partnership by estoppel

Question: Is the contribution necessary for the existence of the partnership?
p. 87 what is necessary for the existence of a partnership is the essential requisites of a contract of
partnership are present even when the partners have not yet actually begun carrying on of its business or
given their contributions, oven though its conditions or details, such as participation of the partners in the
profits and losses and the nature of the partnership have yet been fixed, as they pertain to the accidental and
not to the essential parts of the contract

formation pala it question, takay characteristic of partnership is consensual perfected by mere
consent, alam nila that they will contribute, but what if dire magcontribute will it affect the partnership
existence?

Notwithstanding, waray pa nagbayad, dire maapektuhan an existence han partnership

So sano ba talaga nagsstart an pagexist han partnership by estoppel?
Hi Miranda mabaton

1785. When a partnership for a fixed term or particular undertaking is continued after the
termination of such term or particular undertaking without any express agreement the rights and duties
p of the partners remain the same as they were at termination, as long as consistentn with a partnership
at will
A continutatin of the business by the partners of such of them as habitually acted tere dring the
term, without any settlement or liquidation of the partnerhips affairs, is PRIMA FACIE eviedence of a
continutation of the partnership

Partnership v Corpration
No limit as to term vs 50 years fixed by law

Despite being unlimited, but partners may agree kun firxed perion or for a particular undertaking
la an pagform han partnership
Example: 10 years la, fixed duration, or for a particular undertaking, example partnership
intended to managae an activity or event, after that event it is deemed same partnership is already
terminated after the happening, expressly in the articles of the partnership or impliedly
Like the earlier example

15:29
So sano ba talaga nagsstart an pagexist han partnership by estoppel?
Hi Miranda mabaton

Naexist la ba hiya if one person represents himself or pwede dalwang individual nagintroduce sila
as partner pero dire totoong partner sa third person? Pero when talaga naistart, an problem if they
introduce themselves to a third person, they must be present, howewer kun an usa adto ha manila an usa,
automatic ba an usa partner, aadto hiya manila

In that example, amu gud nagintroduce as partner tapos gintawagan an usa ha manila na uyy
partner man ngayan kam ni kuan, ganyan ganyan, bumaton han usa ha manila, na oo, from that moment
naexist na an partnership by estopeel, kasi di kami present at the samte time at the same place.

If present an duha na partners, na exist an ptp by estoppel from the moment na nagpresent
at least an usa as partenrs, with no denial or consent, an point basta nagintroduce ka

Discussion ni begie and paul may question

Bale ptp for a particular purpose, after accomplishment, an rest nagcontinue, an others umayaw,
as to unang purpose, lahat pa sila, after that the partnership will exist relative to those who continue
Another justification of delectus personae, right to choose right to be associated plus right to be
disassociated, example, ptp at will, kun ayaw nila puydi magwithdraw provided made in good faith, kay
kun bad faith pwede ba? Yes, example an partner na nagwithdraw kay nagunlawful act, magiging liable
hiya for his withdrawal, pero dire ka liable kun may justifiable reason ka han pagwithdraw

Ptp at will VS ptp with a fixed term – remember contract ini, so kan magterminate ka before fixed
term, liable ka for breach of contract, and thus, liable for damages mapili ka ha MENTAL
Moral
Exemplary
Nominal
Temperate
Actual
Liquidated

1786 Obligations wrt CONTRIBUTION OF PROPERTY
1. To contribute at the beginning of the partnership or at the stipulated time the money,
property, or industry which he may have promised to contribute
2. To answer for eviction in case the partnership is deprived of the determinate property
contributed
3. To answer to the partnership for the fruits of the property the contribution of which he
delayed, from the date they should have been contributed up to the time of actual
delivery
4. To preserve said property with the diligence of a good father of a family pending delivery
to the partnership
5. To indemnify the partnership for any damage caused by its retention of the same or
delay in its contribution

1. duty to contribute – what happens if you fail to contribute within the agreed upon period?
What is the liability? – effect is to make the partner ipso jure a debtor of the partnership in
the abswence of demand --- so DUTY requires NO DEMAN para maging debtor ka – kay
essence of the contract of ptp is to contributions to common fund

Pagdelay whatever fruits should be given to the partnership?
Kuha? Kun baga nagpromise ka mahatag ka hin contribution, from that moment na dapat
mahatag ka, pero waray ka nakahatag, may supposed earned interest yun, tapos pa worst
under the law, delay ka na, bisan pa wara bisan fortuitous ka, liable ka. In that case, liable
for damages, api an actual value han nawara

Applicable only to money or property contribution, liable for the fruits which could have
been earned by the partnership within the delay period, so interest plus damages
2. duty to wrrant – property contribution should be free from encumberances, this is because
onerous contract it contract of partnership asya may obligation of warranty
PROBLEM
Rescission is the proper remedy kun dire makahatag?
GR rescission is not proper but an action for specific performance to collect what is owing with
damages and interest from the edfualting partner form the time he should have ocmplied with his
obligation

SURE rescission what is it

However, 1838, allows rescission or annulment of a ptp on the ground of fraud or misrepresentation
committed by one of the parties thereto

This pertains to promise contribute fails to do so, remedy is action for specific performance
Dire ka madissolve an ptp
Waray pa an business magstart

So kun baga make demand anay, pero bottomline kun dire na talaga kaya, delectus personae na apply,
gamita an ground na dire na hiya nacomplay, kayano man hiya dire, eh di an iya fraud or
misrepresentation

Do not use invest word, kay ha partnership dapat tanggapin ka rin nila as partner kun masakob ka dire la
kay nahatag ka hin kuarta

Although possible, an usa na partner nagmisrepresent na riko hiya, pero number one rule, delectus
personae you have to investigate hino imo magiging partner, tell me who your friends are, I will tell you
who you are, amu concept of partnership

Dahil di gud man hiya nakakagbayad kay in the first place asya kam kinuha, tas nagmisrepresent ka na
ngayan, asya puydi magrescind

rECALL
General vs limited partner

Adi pa puydi walang misrepresentation, pero han ptp naform based on agreement, nagpromise an usa
macontribute, pero after that he became insolvent, puydi dissolution kay one of the grounds ito hiya, in
that case bisan demand ka useless kay insolvent, makakarescind ka with ground for dissolution an
insolvency

1787
fro contribution not cash, but movable property

when contrinbute in kind, how do you determine profit sharing, so there is a need for appraisal of
contributed goods
either bu


di ba human instinct man ini, no matter how close kamu ha ptp, first Q is how much is contribution each,
next is how to divide the profit
no problem if nagagree kun ano an iyo contribution 10k
pero kun property an imo contribute, tagi anay ito hin presyo kun magkano iyo ccontribute
valuate you contribution
1. by agreement of parties, tak motor 8k ini contribution ko for 10k
2. by expert chosen

if no stipulation , the share of each partner in the progits and losses is in proportion to what he ma y have
contributed

1788
klaro pagnapromise, from time of delay, debtor ka libale for interest and damages
pero ha quiz can a partner be held liable for estafa – kay co owner ka, debtor ka ngani civilly liable ka la,
sano debtor estafa à nagissue hin cheke, nagbounce

trust and confidence à governing relation la ha ptp
dire ito ha estafa, na hold the propert in trust
the difference à an property na ginhatag ha im amu napaliable ha im
ha ptp, amu ini an basic concept basis han pagform hin ptp

as long as coowner ka dire ka maliable ha estafa, robbery, theft

an case na magiging estafa, kun an kuarta ginhatag ha usa na partner as agent of the partnership

all agents, all akn manage the partnership

example:
managing partner nagmisapproraite liable for estafa
or managing partnership for ginsugo hi diane kas hi diane nagmisappropruate diane is liable for estafa

ano an difference, dapat ibibigay sayo in trust an funds for a purpose something the ptp was created
ha first example, may appointment na managing parter tapos nagagree to entrust money for ptp
operation
duun sa isa dire ka liable, waray designation, kumuha ka la kuarta ha ptp fund tapos ginmisappropriate
estafa

unang rule ha estafa, dapat nareceive mo an ginhatag na property in trust –asya may estafa an
designation
kun waray waray estafa

panu kun duha hira
criminal law –review
liability is personal in nature
pero puydi ka maging principal by indeuction, indispensable cooperation, direct participation or may
conspiracy

begie question, what if from delay waray man actual damages, will he still be liable for damages?
No demand no delay noise ha background
Nayakan ha book, absolute an provision
So paano compute actual damages kun waray actual damages
There is a case Martinez, in the absence of actual damages, liable for interest based for legal interest,
Is actual damage required for to be liable? No, if you cannot prove actual damages
Kadto ha mental, piliia nominal or temperate à pero kun dire la kaya maprove an actual, nominal nala or
temperate
Basta dire hira puydi hira sabay sabay iclaim

Is there a need for a demand for liablility to accrue? No la gihap

1789
PROHIBIITION OF INDUSTRIAL PARTENR TO ENGAGE IN AN OTHER BUSINESS FOR HIMSELF

Take note of this, pero sir dire ba ini deprivation han iya freedom
Ano an rationale: an industrial partner is one who …
He is owner of services an iya time amu iya contributed to the cmmon fund

An effect kun magbusiness hiya or other services à puydi hiya ichugi ni capitalist partner OR pa na iya
narepa na benefits didto han iya pagpractice maaccrue to the partnership

Review of kinds of partners

Kun partial withdrawal pero nangutang ka, nangutang ka lagi la
Puydi partial withdrawal, basta nagagree hira na recude capital contribution pwede
An bawal withdraw tanan, kas partner ka la ghap
Essentce of partnership is contribution to a common fund
Ha ptp can agree on anything as long as no t contrary to law unlike sa corporation
Iya hihimuaon an iya la purpose and secondary purpose for existence

Review of kinds of partners pa

Porbhiit against engaging in business
Industrial
Probihition applicaple to any kind of business

Capitalist
Prohibition applicable to same kind of business

Modify natun
Engr siya construction ptp, industrial hiya
Dire hiya puwede magcontruction gihap ha na business, any profit ikdato ha original ptp

What if engr, kas naghimo liwat for construction of roads
An usa ha building liwat
Ini oki la not of the same kind na hiya

Basta in this case either
Tsugi or ibibigay an profits
Basta dire pareho remedy kun an erring partner is industrial or capitalist

1790
1791
take note of this article

requisites
1. there is imminent loss of the business
2. majority belive adtl contribtion shall save their venture
3. partner refuses deliberately --dapat unjustified refusal, kun justified dire ka matsugi dayun
4. there is no agreement that in case of loss they not ibliged to contribute
EFFECT OBLIGED TO SELL HI SINTEREST TO THE OTHER PARTIES

GR a captialest partner is not bound to contribute to the ptp more thatn what he agreed to
contribute
XPN in case of imminent loss 1791

Reason for sanction
Mere refusal = LACK OF INTEREST sincerity as a partner
Delectus personae = other partners are relived from the burden of ocnitnuting their association with him
in the business
Although equitable man an remedy kay he will be paid to the value of his interest
Besides option man la ha partner na itsugi kamothough obligation nah an usa to sell

Is it possible may imminent loss, the parties will agree that it will really affect the ptp that they decide to
dissolve na lang the ptp, pwede? Yes, kay magaagree man la hira
Pero ha concept of GOING CONCERN ha accounting à DO EVERTYHIGN TO SAVE THE BUSINESS,
habang may buhay may pagasa pero kun waray na talaga pagasa, puydi gad magterminate na han
partnership

MIDTERM REVIEWER
AGENCY, TRUST AND PARTNERSHIP
1st Semester, SY 2018-2019

Define trust. It is a legal arrangement whereby a person transfers his legal title
to property to another to be administered by the latter for the
benefit of a third party.
Define agency. (Art. 1868)
By the contract of agency a person binds himself to render some
service or to something in representation of on behalf of another,
with the consent or authority of the latter.
Define partnership. (Art. 1767)
By the contract of partnership two or more persons bind
themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among
themselves.
Distinguish between partnership Partnership Corporation
v. corporation. 1 Created by mere agreement Created by law or by
of the parties operation of law
2 May be organized by only Except for corporation sole,
two persons organization requires at
least five incorporators
3 Acquires juridical Acquire juridical
personality from the personality from the date of
moment of the execution of issuance of the certificate of
the contract incorporation by the SEC
4 May exercise any power Can exercises only the
authorized by the partners powers expressly granted
provided it is not contrary by law or implied from
to law, morals, good those granted or incident to
customs, public order, or its existence
public policy
5 Every partner is an agent of Power to do business and
partnership management is vested in
the board of directors
6 A partner can sue a co- A suit against a member of
partner who mismanages the board of directors or
trustees must be in the
name of corporation
7 No right of succession Has right of succession
8 Partners are liable Stockholders are liable only
personally and subsidiarily to the extent of the shares
for partnership debts to subscribed by them
third persons
9 A partner cannot transfer A stockholder has the right
his interest in partnership to transfer his shares
so as to make transferee a without prior consent of the
partner without the other stockholders
consent of the other
existing partners (principle
of delectus personae)
10 May be established for any May not be formed for a
period of time stipulated by term in excess of 50 years
partners extendible to not more than
50 years in any one
instance
11 A limited partnership is May adopt any name
required by law to add the provided it is not the same
word “Ltd.” to its name as or similar to any
registered firm name
12 May be dissolved any time May be dissolved with the
by the will of any or all of consent of the State
the partners
13 Governed by the Civil Code Governed by the
Corporation Code



May a partnership be formed for No, a partnership is formed to carry on a business for profit. The
charitable or benevolent purposes? goal of the business is to generate profits and to return these
profits to the partners as owners of the business. Profit motive is
the very reason for the existence of partnership. Where the
organization is not constituted for the purpose of gain, as in a
charitable or religious organization, it does not fall within the
definition of the term partnership under Art. 1767 of the NCC.
May a partner be held liable for No.
estafa if he misappropriates funds
of the partnership? GR No. 5840 US v. Clarin, 1910
“Partners are not liable for estafa of money or property received for
the partnership when business commenced and profits accrued.
Hence, the failure of a partner to account for partnership funds gives
rise to civil obligation only and not estafa.”

The P172 having been received by the partnership, the business
commenced and profits accrued, the action that lies with the
partner who furnished the capital for the recovery of his money is
not a criminal action for estafa, but a civil one arising from the
partnership contract for a liquidation of the partnership and a levy
on its assets if there should be any.

No. 5 of article 535 of the Penal Code, according to which those are
guilty of estafa "who, to the prejudice of another, shall appropriate
or misapply any money, goods, or any kind of personal property
which they may have received as a deposit on commission for
administration or in any other character producing the obligation
to deliver or return the same," (as, for example, in commodatum,
precarium, and other unilateral contracts which require the return
of the same thing received) does not include money received for a
partnership; otherwise the result would be that, if the partnership,
instead of obtaining profits, suffered losses, as it could not be held
liable civilly for the share of the capitalist partner who reserved the
ownership of the money brought in by him, it would have to
answer to the charge of estafa, for which it would be sufficient to
argue that the partnership had received the money under
obligation to return it.

GR No. 114398, Liwanag vs. CA, 1997
Carmen Liwanag and Isidora Rosales entered into a contract of
partnership wherein Rosales contributed P536, 650.00 for the
purpose of buying cigarettes to be sold by them. After some time,
Liwanag suddenly stopped informing Rosales of the updates of
their business. Because of this, Rosales filed a case of estafa against
Liwanag. In this case, the Supreme Court held Liwanag liable for
estafa.

What is the Difference Between the Two Cases?
In the first case, US vs. Clarin, the capital contributed by Larin was
for the general purpose of forming a partnership; while in the
second case, Liwanag vs. CA and People of the Philippines, the
money contributed by Rosales was for the specific purpose of
buying cigarettes. It should be noted that as a general rule, if a
partner wants to recover the capital he has contributed to the
partnership, he can only do so by a civil action and not by filing an
estafa case. The exception to this is when the money contributed is
for a specific purpose. In this case, if the money was not applied to
such specific purpose, instead it was misappropriated, then the
partner who misappropriated should be held liable for estafa.
Is the right to organize a No, it is not.
partnership a matter of absolute
right? ANG PUE & COMPANY v SECRETARY OF COMMERCE
It has been held that to organize a partnership to have juridical
personality of its own and transact business ass such is a matter of
privilege which may be enjoyed only under such terms as the State
may deem necessary. Any agreement by the partners in the articles
of partnership does not constitute a property right of which the
partners cannot be deprived without due process or their consent.
An agreement contained therein is deemed subject to law existing
at the time when the partners came to agree regarding on that
provision such as extension of the term of partnership.
Enumerate and discuss the CNBOCPP
characteristics of a partnership.
Consensual – perfected by mere consent, upon express or implied
agreement of the parties
Nominate – it has special name in law
Bilateral – entered into by two or more parties, with reciprocal
rights and obligations
Onerous – each partner gives something to procure for himself
benefit
Commutative – undertaking of each partner is considerd
equivalent that of others
Priniciapl - does not depend on another contract to be valid or
exits
Preparatory – entered into as a means to an end, the creation or
transaction of teorh contracts

Essential elements of partnership = Cause – prestation or promise of the other partners to contribute
essential elements of contract money property industry to a common fund
Object – contributions of the partners and the business or specific
undertaking which the parties have agreed to pursue for profit
(purpose is to carry on a business for profit and divide the same
among the parties)
Consent – partnership is a voluntary relation created by
agreement or consent of the parties
Discuss the concept of delectus Under the concept of delectus personae, each partner in a
personae. partnership has the right to choose his co-partners and has power
to dissolve partnership.

Unless otherwise provided, no one can become a member of the
partnership without consent of all others. The fiduciary nature of
the partnership relation requires that each person be granted right
to choose with whom he will be associated with.

Neither a specified period of its duration or statement of particular
purpose for its creation will prevent the dissolution of partnership
by an act or will of a partner. Any one of the partners may at his
sole pleasure dictate a dissolution of the partnership.

Partnership is a voluntary association or personal relation in which
delectus personae exist, as it does trust and confidence between
the partners, hence fiduciary.

Enumerate and define the different Partners are classified into
kinds of partners. Capitalist one who constributes money or proerpty to the
common fund
Industrial one who contributes only his industry of personal
service
General partner – one whose liability to third persosn extends to
his separate propert
Limited partner – one whose liability to third persons is limited ot
his capital contribution
Managing partner – one who manages the affairs or business of
the partnership may be appointed either in the articles of
partnership (the writtern instrument by which parties neter into
partnership upon the conditions mentioned therein) or after
constitution
Ostensible – one who takes active part and known to the public as
partner
Secret partner – one who takes active part and not known to the
public as partner nor held out as partner by other partenrs
Silent partner – one who does not take any active part in the
business, may be known as partner
Dormant partner – one who does not take any active part in the
business and not known or held out as partner
Enumerate and define the different As to extent of subject matter
kinds of partnership. Universal partnership – one which refers to all present propertt
or to all profits
UPAPP – in which all partners contribute all property which
actually belong to them to a common fund with intention of
dividing the same as well as all profits it may acquire; property
become common property of the partners (ownership to the
partnership)
UPAP – one which comprises all that ht epartnernes may acquire
by their industry or work during the existence of the partnership
and the usufruct of movable or immovable property, what passes
to the partnership are the profits and the use or usufruct of their
property contributions

Particular Partnership one who seobject is determinate things,
their use or fruits, or a specific undertaking or the exercise of a
profession or vocation – partnership neither UPAPP or UPAP

As to liability
General partnership – one consisting of general partners
Limited partnership – one formed by two or more persons,
consisting of one or more general partners and one or more limited
partners

As to duration
Partnership at wil - one in which no time is specified and is not
formed for a particular undertaking or venture, may be terminated
any time by mutual agreement or will of one partner alone

APrternerhip with a fixed term – ibe in which term for which
partnership is to exist is fixed or agreed upon or formed for a
particular undertaking, upon expiration of term the partnership is
dissolved

As to legality
De jure partnership – one which has complied with all legal
requisites for its establishment
De facto ptp – one which has failed to comply with all the leagal
requisites for its establishment

As to representation to others
Ordinary ptp – one which actually exists among partners and to
thir persns
Ostensible ptp – ptp by estoppel, one not reality a ptp but
considred to be on in relation to those who by their conduct or
admission are precluded to deny or disprove its exsitence
How to form a partnership. See notes
What is rescission? Rescission, or the act of rescinding, is where a contract is canceled,
annulled, or abrogated by the parties, or one of them. Rescission
may be made good by ratification or by the silence of the parties;
and neither of the parties can demand it, unless he can prove that
he has received some prejudice or sustained some damage by the
act.

Huibonhoa v. CA, cited in GR No. 157480 Pryce Corp. v.
PAGCOR
To rescind is to declare a contract void in its inception and to put
an end to it as though it never were. It is not merely to terminate it
and release parties from further obligations to each other but to
abrogate it from the beginning and restore the parties to relative
positions which they would have occupied had no contract ever
been made.

Black’s Law dictionary
Rescission has likewise been defined as the "unmaking of a
contract, or its undoing from the beginning, and not merely its
termination." Rescission may be effected by both parties by mutual
agreement; or unilaterally by one of them declaring a rescission of
contract without the consent of the other, if a legally sufficient
ground exists or if a decree of rescission is applied for before the
courts.
Enumerate the instances wherein PN CWC G 2L 3B CARS
Special Power of Attorney is
required. 1. To make such payments as are not usually considered acts of
administration
2. To effect novations which end obligations already existing at
time agency was constituted
3. To compromise, to submit questions to arbitration, to renounce
the right to appeal from a judgment, to waive objection to the
venue of an action, to abandon prescription acquired
4. To waive any obligation gratuitously
5. To enter in to contract by which ownership of an immovable is
transmitted or acquired either gratuitously of or for a valuable
consideration
6. To make gifts, except customary ones for charity or those made
to EEs in the business managed by the agent
7. To loan or borrow money unless the latter is urgent and
indispensable for the preservation of the the things under
administration
8. To lease any real property to another person for more than one
year
9. To bind the principal to render some service without
compensation
10. To bind the principal the principal in a contract of partnership
11. To obligate the principal as a guarantor or surety
12. To create or convey real rights over immovable property
13. To accept or repudiate an inheritance
14. To ratify or recognize obligation s contracted before the agency
15. Any other act of strict dominion
Take note of Article 1791 GR A capitalist partner is not bound to contribute to the
partnership more than what he agreed to contribute
XPN In case of imminent loss, and there is no agreement to the
contrary, he is obliged to contribute an additional share to save the
venture.
Effect if he refuses à he is obliged to sell his interest to the other
partners.

Rationale:
1771 GR A partnership may be constituted in any form, orally or in
writing regardless of value of contribution, except where
immovable propter or real rights are contributed thereto, in which
case a public instrument shall be necessary.
1773 A contract of partnership is void whenever immovable property
is contributed thereto if an inventory of said property is not made,
signed by the parties, and attached to the public instrument.
So 2 requisites:
1. Public instrument
2. Inventory made and signed, attached to public instrument
Effect if not complied
VOID
1772 Every conrtact of ptp having a capital of 3k or more, in money or
property, shall appear in pulic instrument, recorded in SEC

Effect of noncompliance
Does not affect the validity of the ptp, thus does not affect liability
of partner sto third persons.
What is the remedy? To compel each to execute the contract in a
public instrument unless void under 1773
1797 Rules for distribution of profits and losses among partners
Dsitrbution of profits
1. According to their agreement
2. If there is no agreement
a. Share of each capitalist parnert is inproportion to his
capital contribution
b. Industrial partner receiv such share just and
equitable under the circumstances, and satisfied first
before capitalist partners divide the profits
Dsitribution of losses
1. According to agreement
2. If no agreement
a. Provision on share of partners in profit – same ratio
in profit-shairng will apply, except industrial partner
is not liable for lossàalaways determined net
loss/profit
b. If no profit sharing stipulated – losses shall be borne
by partners in proportion to their capital
contribution, except purely industrial are exemt from
such losses





































APT 81118

1792
Obligation of MANAGING PARTNER who collects a debt
GR Any sum received by the managing partner shall be applied to two credits in proportion to their
amounts
XPN Managing partner received it for account of the partnership, in which case the whole sum shall be
applied to the partnership credit only. He cannot anymore collect for himself to application to the debt
owed him

Requisites:
1. There exist at least 2 debts – one owed to the collecting partner, one owed to the partnership
2. Both debts are demandable
3. The collecting partner is a managing partner

Note:
The rule in this article does not apply to a partner who collects for his own credit is not a managing
partner. There is no ground for suspicion that he may have acted improperly to create undue advantage
to himself. HOWEVER, note if no manner management agreed upon, every partner is considered a
managing partner for purposes of 1792.

XPN to the XPN
Right of debtor to application of payment – the debtor is given the right to prefer payment of the credit of
the partner if it should be more onerous to him in accordance with his right to application of payment
(1252)

Question assuming the debtor an nagbuot kanino ibabayad, like ha partner niya utang ibabayad?
Article 1792 par (2), yes only if more onerous an debt ha partner v debt ha partnership. (if payment to
partner is more favorable) what is onerous? à example of interest, basta dapat magbuot nagyakan hiya
na sugad hini ikadi ini na payment, kay kun waray apply it 1792

BAR Q on 1792
Case 1: collector is not managing partner
Case 2: Debt on partnership dire maapply
So banatayi an instances na dire applicable an 1792, kay may problems na an purpose na determine na
dire hiya applicable.

What is the rationale behind 1792? Why is there preference to the partnership?
Because fiduciary in nature it partnership àbased on trust and confidence, so all favor should in the
partnership. Recall Agency problem, kun sobra iya kabaligya, ihahatag niya an sobra ha principal, the
partnership is considered the principal and the managing partner is an agent, actually generally tanan in
general agent of the partnership

1793
Obligation of a partner who receives partnership credit
Illustration by example
D owes A, B,C partnership P4,500. D paid A his share 1,500 ahead of B and C. If D becomes insolvent
before B and C could collect their share, A shall bring back his share to the partnership capital—
He can be required to share the 1,500 with B and C.

Requisites:
1. A partner has received in whole or in part his share of the partnership credit
2. The other partners have not collected their shares
3. The partnership debtor has become insolvent


In the problem, what if D left the country? Applicable ba? No, kay insolvency la an basis, not an inability to
collect.

Rationale: Bad debt it ginkakagawsan, it be unjust or unfair for A not to share in the loss or for him to
obatain more and B and C less in a partnership. There is a community of interest among partners, which
is one of the underlying principles of the contract of partnership.

1794
GR Any person guilty of negligence or fault in the fulfillment of his obligation shall be liable for damages.
The partner’s fault must be determined in accordance with the nature of the obligation and the
circumstances of the person, the time, and the place

1795
What is fungible? – goods whose individual units are essentially interchangeable, can be replaced by
another thing of same kind or value

Risk of loss of things contributed
5 CASES
1. Specific and determinate things which are not fungible where only the use is contributed – risk of
loss is borne by the partner as he remains the owner of the things
2. Specific and determinate things the ownership of which is transferred to the partnership –risk of
loss is the partnership since owner na hiya
3. Fungible things which cannot be kept without deteriorating even if they are contributed only for
the use – the risk of loss is borne by the partnership for impliedly transferred na an ownership
since the use is impossible without the things being consumed or impaired
4. Things contributed to be sold – risk of loss is borne by the partnership of loss, since no doubt the
partnership is intended to be the owner otherwise partnership cannot make the sale
5. Things brought and appraised in the inventory – the risk of loss is the partnership as partnership
is the owner of the said things, the price appraised is the is the price of deemed sale of things to
the contributed to the partnership

Anay ha an premise ditto an kicontribute han partner dire an thing or oits ownership, an use or benefit la,
dire an mismo an fungible or consumable thing. Yung use not the ownership an contributed, as in a
universal partnership of profits.

Resperit domino – the thing perishes with owner
What if an car, anu it liability it partnership, does the partner in his personal capacity to ask for damages?
Kun naruba an car na pinahuram niya na in general hiya la gihap an mabear han risk of loss or damge kay
owner hiya.
Answer: Determine if may negligence on the part of the partnership, as in iya agent, claim for damages.
An personal na crime an negligent driver, an civil obligation, an habula an ER kun di kaya an EE, an ER an
partnership. Pero kun waray negligence à waray na gud.

1796 Sige dire kuno mapakiana hi sir kay malipong kuno
Responsibility of the partnership to the partners
GR Every partner is an agent of the partnership for the purposes of its business.
XPN Unless may stipulation otherwise (appointed an managing partner)

HENCE
The partnership has obligation to
1. Refund amounts disburse by the partner in behalf if the partnership plus the interest from time
expenses were made (not form date of demand), Here the law refers to loans or advances made by
a partner to the partner other than capital contributed by him
2. Answer for obligations the partner have contracted in good faith in the interest of the partnership
business
3. Answer for riskts in consequence of its management

Being a mere agent, the partner Is not personally liable, provided he is free from all fault and he acted
within scope of his authority.
Pero may GR no partner is entitled to compensation for his services to the partnership without the
consent of all partners
XPN agreement to the contrary

Meaning ba pagmay loss an partnership, automatic ba an partnership liable ha iya partners?
DIRE. Baga daw ito bawal magloss ha partnership.

1797 Kun kaya imemorize IMPORTANTE!!
Follow the order…
1. Profits and losses shall be distributed according to the agreement or articles of partnership
a. If only the share is agreed upon, share of each in losses shall be in the same
proportion.
2. If no agreement, share of each partner


Distribution of Profits and Losses among partners
(1799 – a stipulation which excludes one or more partners from any share in the profits or
losses is void)

1. According to the Agreement or Articles of Partnership subject to 1799
2. If there is no agreement, according to law: 1797
a. Share of each capitalist partner is proportional to his capital contribution based on the
presumed will of the partners
b. The industrial partner shall receive such share which must be satisfied first before capital
partners shall divide the profits, as may be just and equitable under the circumstances.
This is not fixed, an iya share in the profits, kay difficult to ascertain value of the services,
pero ha code of commerce, same position hiy aha partner with smallest interest

XPN à jurisprudence “justice and equity dictate that the two partners share equally
because it was trhought the industry and geniuses of the industraial partner the
partnership was developed into a valuable asset

Note: A partner cannot calim a right to recover the profits promised KAS WARAY
marealize, only actual and realized profits by the partnership may be shared by the
partnesrs

Remember Agreement of parties will PREVAIL.
Is it possible share of profits is equal sharing, kas sharing losses hindi equal an agreement?
Yes pwede, kay agreement an maprevail.

What if parehas capitalist pero an usa at the same time industrial?
So pwede profit share kami, kas ha losses unequal, in the first place exempted ak ha losses being
industrial partner.

An industrial partner naman, kung walang agreement, an problema, an industrial partner must be given
just and equitable share, kay waray man hiya capital contribution.
Sir who will determine just and equitable share? The partners. Ganun lang.
PAg losses, based on agreement. Exempted kuno an partnership from losses, what If the partnership
agreed, even though industrial ka api ka ha losses, puydi ba? Yes, kay agreement is allowed.

Pwede, if may fraud an formulation of agreement, an true intention waray kareflecct, an agreement, anu it
remedy, reformation…!

Based on capital contribution à means an initial or beginning capital, pero dapat updated capital
Related to Kenneth discussion

1:13
Tandaan an sharing of profit or losses, internal
Kas industrial partner, exempted


Advance info
Pag an partnership nalugi, an problema, an partnership asset kulang pambayad han utang ninyo
Later on an industrial is liable to third person sa utang ng partnership, saan siya kukuha? Sa personal
property niya, bahala siya kay duun an agreement kun ginapi hiya ha losses
Ini na liability, upon dissolution, an industrial partner liable hiya muna ha third person, kas pwede niya,
kun fully paid na an third person, ipareimburse from the capitalist partners reimbursement han iya
nagasto
Kay ieestablish anay an protection to third partners
Later, mayda liwat exemtption from liability to third persons, pero an problem actually magbabayad ka la
gihap ha third, pero mapareimburse ka la
Iba liwat an LIMITED partner, dire talaga, established warning ito, na dire talaga hiya pwede mahabol han
third persons


1:22

partnership decisions, voting rights higher if more capital contribution, problema liwat dida, what if hiya
nagdaog kas dire just and equitable? An industrial partner puydi magresort to court action.
The same if partners are in conflict in the management or profit sharing, magvovoting, although naprevail
talaga an dako an capital contribution, called the controlling partner, kay daku an voting weight or rights.

1:24

meaning of just and equitable share = that of partner with smallest capital
this rule applies to pure industrial partner
if capitalist and industrial, balik han original na
how will you share?
An una just and equitable as industrial partner, an iba na mabibilin
Mafollow an rule or order:
If may agreement, follow
Kun waray, according to provision of law

1798
remember an selling price pwede to be determined by a third person
sharing of profit and losses, the parties can agree third will decide the distribution.
(recall contract fulfillment cannot be left to the will of one of the conrtacting parties)

who will appoint? Hira gihap by voting
binding an designation han third person unless manifestly inequitable
kun nagdecide na hiya na third person? Puydi questionun
RULE: it may be impugned within 3 months from the time e had knowledge of it, beyond that estopeed or
deemed ratified or give consent


1799
Stipulation is void, but the partnership subsists. Still exists
Otherwise, defeats the very purpose of a partnership contract that is profit sharing

1:38:54
a capitalist partner kan withdraw any time their capital, industrial cannot do that, kay services man iya
contribution

problem
whether or not, when is the reckoning point
is the stipulation valid?
Two stipulations
Profit sharing valid
Exemption on losses valid

Year 1 3M profit
Year 2 1.5M loss
How much will industrial? Ha net profit 1.5M
It premise dinhi, han 1st year waray declaration of profit sharing or waray nagsharing ha 1st year
Kay waray hiya share ha losses
Take note, under the law, owner of that profit in year 1 is the partnership having a juridical personality

What if distribute on year 1, can you withdraw an hatag na profit?

Operational loss à iba la na story ha ???

1800
important when a manaing partner is part of the articles or named in the articles of partnership à his
appointment cannot be revoked without just and valid cause, bisan nagpipinasaway hiya

two modes of appointing
1. Stipulation appointment in the articles of the partnership
2. Appointment as manager after the partnership
-Some other document after partnership has been constituted even orally
the managing partner is appointed after the execution of the articles of partnership, may be
revoked any time, even without just and valid cause
so anu yun? Amu iton it tinatawag na principal relationship, baga hi managing partner is an
agent na yana, so agency can be revoked any time, unless agency coupled with interest,
priniciapl is the partnership, removal gihap not necessarily unanimous, bisan an controlling la

as long as he remains manager, he can perform all acts of administration dire
absolute it hiya power, pag may opposition dire hiya puydi magproceed kailangan magagree at least the
controlling interest ha partnership

1.
Claruha
Just and valid cause/lawful cause anay
Saka mag voting pa, dapat unanimous à Article 19/20, puydi makarecover damages kun waray just and
valid cause an pagremove

Can his name be removed in the articles of partnership without just and valid cause?
The managing partner name may be removed without just and valid cause, if he is removed by all the
partners including the managing partner. This implies a novation of the contract, an annotation na
tatanggalun na iya name.

Managing partner in no. 1, he can act as he pleases despite some opppsition, acts of administration
provided he acts in good faith
Otherwise, bad faith, na babalik sa unang rule, na just and valid cause
Unless expressly restricted


Acts of administration = all acts not requiring SPA (1878)
Acts of strict dominion = acts that require SPA

1801
requisites for application of 1801
1. two or more partners have been appointed as managers
2. there is no specification of their respective duties
3. there is no stipulation that one of them shall not act without the consent of all others (other
managing partners)

RULE:
They can act separately of each other acts of administration
If one or more managing partners shall oppose the decision of majority prevailes
In case of a ties, by vote of partners owning controlling interest, that is more than 40% of the
capital investment/contribution à naapply la ini, kun waray ka makakuha hin majority
Controlling interest of partnership àconsists of ownership of more thatn 50% of the profits interest or
the capital interest of partnership.

Kun equal la gihap, an partners kan agree an how to break the tie or kadto ha court, basta magaaggree
hira on how to break the tie

Limited partners dire api
Opposition must be done before nagtransact na hira ha third persons

Isorya ni sir, industrial partner na makulit ha drafting ha partnership contract

1802
Concurrence necessary for validity of acts of managing partners
GR the partners may stipulate that none of the managing partners shall act without the consent of others

unanimity required, if absent an usa na managing partner dahil may physical disability, then the
managing partners cannot decide, unless the concern will put the partnership in imminent danger
like in case of perishable goods na kailangan na iabligya (the right term à imminent danger of grave of
irreparable injury to the partnerhship)

panu kun nagtransact na with third person?
Rule: opposition ngani before pa transactin with third person, or the third person liwat dapat
nagexervise ng diligence ng authority ng agent, na kailangan ngayan may consent of all managing
partners

Question: basic presumption is to protect third persons di ba? Kay ano kailangna inquiry
Copra selling
Kun nagbaligya hin copra, you can presume na may authority
Kun in case an managing partner dire na copra, nga usual transaction is copra, now instead copra truck
na, an trhid person dire na makasiring na good faith, dapat naginquire na hiya

That is consent of managing partners is not necessary in routine transactions an third persons protected,
puydi massume na avlid an authority

1803 eto maganada daw sabi ni sir
GR if waray agreement, all partners shall be considered agetns of the partnership and whatever any one
one of them may do along shall bind the partnership (all partners shall have equal rights in the
management and conduct of partnership affairs) regardless of capital contributions

Meaning: all are managers and agents

When 1803 will apply, after nah an duha na instances
1. waray ha articles of partnership
2. waray nagaapoint after execution of partnership

GR whatever they do alone shall be binding to the partnership but subject to 1801
in case of timely opposition ay nany matter of any partner, it shall be decided by majority vote first and
incase of tie, by partner with controlling interest
inin na acts nganhi ay limited to acts of administration , for apparanty carrying on in the usual way the
business of partnership – routinary transaction

XPN unanimous consent required for alteration of immovable property
Ano nga alteration it gintutukoy?
An useful la na alterations, is painting the building new color an alteration kailangan ha
unanimous ? yes kay it will entail cost, so kailangan unanimous

Delectus personae – make sure na makikipagpartner ka ha mga pareho ha imo

1804 pamatia ini
yung partner an ira share ginbaligya ginassign ha iba na dire partner pwede yun pero dire iton
binding ha partnership itself à an third party assignee, iya katungod every time may share of
profits, hiya la mashare, pero dire hiya part ha partnership lalo na ha management of its affairs

subpartner=associate assignee nala it gamita, kay yakan ni sir waray kuno subpartner
subpartnerhsip – is a partnership and is distint and separate from the main or principal partnership

Coverage
From the beginning
Agency partnership trust