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Navarro, if your name appears in the partnership name, what are
the effects?
Navarro: If I am indeed a partner, I would be bound by the
liabilities of the partnership. Even if I am not a partner, I will
still be bound, but I will not be entitled to the profits.
This falls under the principle of estoppel. If I am not a
partner, but I allowed the partnership to use my name,
then there is a presumption, under that firm name, that I
am part of the partnership, when in fact, I am not.
Do not allow your name to be included in the firm name; otherwise
you will be estopped in denying the liability. You will be liable as a
partner.
What may be included in the partnership name?
Navarro: The partnership may or may not use the names of
the partners. The general rule in choosing a firm name is
anything that the partners desire. They could use all their
names, their surnames, one or more of the partners’
surnames, even a fanciful or fictitious surname.
Three partners agreed to contribute P50,000 each, for a total of
P150,000. A and B fully contributed their P50,000 each. C
advanced half of his contribution, P25,000. There is now P125,000.
The partnership incurred an obligation of P200,000. They can
expect a loss because capital was only P125,000, and the
obligation, P200,000. The creditor is now demanding for the
payment of the P200,000 debt. How much can the creditor
collect?
Honoridez: P125,000.
The creditor can get P125,000 pesos, short by P75,000. Where will
the creditor collect the P75,000?
Honoridez: The creditor can demand payment from the
partners.
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How much should be collected from the partners?
Singh: Upon the commencement of the partnership, C only
advanced P25,000. C still has a liability of P25,000 to the
partnership. So, the creditor can go to C for the 25,000
pesos. The remaining P50,000 will be pro-rated between A,
B, and C. If P75,000 will be divided equally between A, B,
and C, that will be unfair since C promised to contribute
P50,000.
Situation (exhaust all the assets first; pro rata)
A, B, and C agreed to contribute P50,000 each to the partnership
for a total of P150,000. A and B delivered P50,000 each as
promised but C delivered P25,000 only. Later on the partnership
incurred a liability of P200,000. How much will each partner be
liable?
 C will be liable for P25,000 because he owed the
partnership P25,000 and the remaining P50,000 will be
answered by A, B, and C equally.
 The joint or the pro rata liability applies only after all the
assets (partnership) had been exhausted.
Liability v. Losses
When we talk of liabilities, these are liabilities due to third persons.
So what we discussed before is the concept of loss. To reconcile,
although we said that industrial partners are not liable for losses,
they are liable for liabilities due to third persons. So the industrial
partner are allowed to pay for liabilities due to third persons, they
can seek re-imbursement from capitalist partners.
Can the creditor not collect from anyone of the partners the entire
obligation?
 The creditor cannot collect from only one partner the entire
obligation because pro rata means equally and jointly.
When we say jointly, the creditor can only collect the part of the
liability due to that partner.
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Situation (Joint liability and Solidary liability)
A. Joint debtors and joint creditors
 The joint creditor may collect only his share of the entire
obligation and the joint debtor is liable only up to the
extent of his share in the obligation.
 So X can only demand up to P3,000, which is his share in
the entire obligation. However, he can only collect P1,000
each from A, B, and C since they are only liable for their
respective share in their obligation against X.
Joint debtors and solidary creditors
 The solidary creditor can collect the entire amount while
the joint debtor is liable only up to the extent of his share in
the entire obligation.
 So X can demand the entire P9,000. However, A, B, and C
will only be liable to pay up to P3,000 each, which is their
respective share in the entire obligation.
Solidary debtors and joint creditors
 The joint creditor can only demand his share of the entire
obligation from any of the solidary debtors.
 So X can only demand for P3,000 but he can demand the
entire P3,000 from either A, B, or C.
Solidary debtors and solidary creditors
 The solidary creditor may collect the entire obligation from
any of the solidary debtors. The solidary debtor who paid
for the entire obligation may demand reimbursement from
his co-debtors.
 So X can collect the entire P9,000 from either A, B, or C. If A
paid for the entire obligation, He can demand
reimbursement of P3,000 each from B and C.
If your father, Padao, gave to you 10,000 pesos in a check and he
told you, “Monika, this is your 10,000 pesos.” What will you do with
it?
Padao: I can spend it on whatever purpose.
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Whatever purpose… How about go to the karaoke and drink all
day?
Padao: Yes, sir, because when he gave it to me there was
no condition.
But if he gave the check to you, “Hoy, Monika, 2,000 ray gastuha
ana. Ang ocho hipusa.” What will you do?
Padao: So I will only spend the 2,000 pesos because of the
condition.
Alright, in other words, you were authorized. Since you were
authorized, what are you supposed to do?
Padao: I can only use the money within the authority given.
Within the authority given! I like that term. Therefore, if you are
given the instruction to do something or power to do something,
what are the two things that you should remember?
Padao: 1) I have the authority and 2) I am obliged to
exercise that authority within the limits of the authority.
If you are a partner, what did we learn?
Padao: A partner is an agent of the partnership and
whatever he does shall bind the partnership.
Exactly! However, if your partnership was engaged in a grocery
store, and you were a partner, somebody wanted to buy 5 kilos of
rice. Will your buyer ask, “Padao, do you have authority to sell 5
kilos of rice?”
Padao: No, the authority is presumed.
Exactly, I like that again! Presumed authority. Why is it presumed?
Padao: Because it is usual to the business.
Usual! But the moment you sell the motorcycle used for the
delivery of the groceries, do you have the presumed authority?
Padao: No, because it is not usual.
Alright, it’s either actual/express authority or presumed authority.
Either of this will be enough. And again, presumed authority arises
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when? Tig-inum ka’g kape? Nerbyoson man ka. Nerbyoson ka
para muduol pako nimo?
Padao: Presumed authority arises when it is usual to the
business. Either of the two (authorities) shall bind the
partnership.
However, express authority or presumed authority will not be
enough in certain instances. And these instances are?
Padao: Acts of strict ownership such as selling property in
the partnership which would render the business operations
impossible.
For example: A partnership is engaged in a transportation
business and one of the partners sells all the buses that the
partnership own.
In other words, Caballero, what are we trying to drive at? We are
looking for instances which require…
Caballero: In cases provided for under the law, a partner
cannot assign the property of the partnership in trust. He
also cannot enter into a compromise agreement in matters
concerning claims and liabilities. Also, a partner cannot
enter into a confession of judgment. A partner cannot
enter into a contract to dispose the goodwill of the
partnership. (see Article 1818)
In other words, Gocuan, even if there’s express authority or even if
we apply the presumed authority, this will not be sufficient to (bind
the partnership). What could these acts be?
Gocuan: Acts of strict dominion, sir.
Acts referring to strict dominion, as for instance?
Davad: The law provides that the authority is not presumed
when we say that there is disposal of properties, it means
that the partnership property cannot be assigned to
anyone, also that there will be no confession of judgment.
It means that it doesn’t allow admissions as to liability
without presentation of defenses. It also doesn’t allow for
renunciation of claims with regard to the partnership. It
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cannot also enter into a compromise agreement with
regard to affairs of the partnership.
Alright, in other words, Davad, even an express authority might not
be sufficient to perform all these acts, much less a presumed
authority, rather, what is necessary?
Davad: What is necessary here is that there should be
consent of all the partners.
This requires unanimity because the law says,
Davad: The law says with regard to disposal of properties or
acts of ownership, it needs the consent of all the partners
to make the act valid.
Alright! Unanimity is required to be able to perform the acts.
Unanimity- one or more but less than all… one or more but not less
than all nganung dili “ALL” na lang! So here unanimity is required
and one of which is the confession of judgment. What is this?
Davad: Confession of a judgment means there would be
admission of liabilities, but without presentation of any
defenses which is actually done in the court.
So confession of judgment meaning, no contest, we will not
present any evidence in defense. We immediately admit liability.
Compromise agreements? Why is this not allowed?
Davad: It’s not allowed because the partners are acting in
a fiduciary relationship, so there is trust and confidence
among the partners.
So why is a compromise agreement not allowed unless all will
consent? What happens in a compromise agreement? It might
involve an assumption of liability or it might involve waiver of rights
which is done in usual compromise agreements, so not just any
party. Not just any party.
Alright! Submission of the partnership claim to an arbitration, why is
it not allowed? What happens in an arbitration?
An arbitrator is not necessarily a court of law and therefore, the
degree of evidence required might be different and the act of the
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arbitrator in appreciating the evidence cannot be of the same
quality as if it were presented in a court of law. So we cannot trust
arbitration, therefore unless everybody, all the partners agreed to
submit the matter to arbitration, no partner by himself or with
others, if not all of them, may submit this to an arbiter. Alright!
Conveyance of Real Property
Gocuan: There are four instances wherein the partnership
property may be named. It may be in the name of
a) the partnership;
b) one or more but not all the partners;
c) one or more or all the partners, or in a third person
in trust for the partnership; or
d) all the partners.
A property may be registered in the name of the partnership, or
the name of some but not all the partners, or in the name of all the
partners, or it may be in the name of a third party as trustee.
While B’s property is in the name of these parties we have
mentioned, it may also be conveyed, in whose name may it be
conveyed?
Caballero: It may be conveyed in the name of the
partnership, or one or more but not all partners, or one or
more and all partners, and all the partners.
Alright! So that it may be conveyed, if it’s in the name of the
partnership, how may it be conveyed? It’s in the name of the
partnership, of course, it should be conveyed in whose name? In
the name of the partnership because in the papers, in the title
perhaps, the name of the partnership is there, so the conveyance
may or the transfer must be in the name of the partnership.
In the name of the partnership, conveyed by the partnership.
What is its effect?
Caballero: It passes the title and ownership.
Because it was in the name of the partnership, conveyed in the
name of the partnership, title is passed. Can it be recovered by the
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partnership and in what way? (partner conveys property under the
partnership name)
 Yes, it can be recovered if any of the following are present:
1) That the conveyance is not done in course of the
usual business of the partnership (no presumed
authority or there is lack of authority)
2) The transferee has the knowledge that the person
conveying has no authority (knowledge of
transferee)
In other words, we go back to the basic rules, where we said that
the basic requirement is presumed authority if it was done in the
usual way of business.
If conveyed in the usual way of business and without the
transferee’s knowledge, you cannot take it back anymore.
On the other hand, there are still instances where it could be
recovered. What would these instances be?
 Partner A transferred the property, under the partnership
name, not in the usual way of business to X, where
transferee had knowledge that A had no authority to
transfer such.
Vergara:
1) In the name of the partnership conveyed under the
partnership name
a. Express or presumed authority (usual way of the
business)
b. No knowledge on the part of the transferee
Recovered how? Only recovered if either no authority of the
partner OR the transferee has knowledge of no authority.
2) Title in the name of the partnership conveyed by one of the
partners (under the name of the partner)
We said the partners are agents of the partnership, they could
have done it. However the effect is?
Vergara: It only passes the equitable title or interest.
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What is that?
 It is a title or right that is not generally recognized under the
law, but eventually it will ripen into an actual right or title.
The transferee can compel the partnership to legitimize the title. He
has that right.
In other words, he has the right to demand from the partnership to
legitimize. Although there is a little defect, he can compel under
the principle that each partner can act in behalf of the
partnership. When can he not compel the partnership to cure the
defect?
Sibay: The transferee cannot compel the partnership to
legitimize the title if the partner who transacts with him has
no presumed authority and he has knowledge that the
partner transacting with him has no authority.
3) Title in name of one or more partners conveyed in the
name of partner/s in whose name title stands (Title in the
name of partners X and Y, conveyed by partners X and Y
also)
Sibay: Title is transferred on the principle that these partners
are the agents of the partnership, acting in behalf of the
partnership.
Can it be recovered by the partnership?
Sibay: Yes. If the partner who transacted has no authority or
that it is not in the usual course of business and that the
transferee has knowledge that the partner who transacted
with him has no authority.
Vergara:
4) Title in the name of all partners conveyed in the name of all
partners
Any defect?
Vergara: No defect. It’s a perfect transfer.
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5) Title is in the name of the 3rd person in trust for the
partnership, conveyance is made by the trustee (Title in
name of one or more or all partners or a third person in trust
for partnership, conveyance executed in partnership name
or in name of partner). Only the equitable interest is
transferred.
However, there is an exception, if it is done not in the usual
course of business and without authority from the partners.
In short, what have we learned today?
Vergara: If there is a defect in the conveyance in the real
property, what is passed is only the equitable interest and
the transferee can compel the partnership to legitimize his
title. The exception is if the transaction is done not in the
usual course of business and with the transferee’s
knowledge that there was no authority from the other
partners.
What is the effect of an admission?
Lim: When you admit as true any statement involving the
partnership.
There was a case in court. The partnership was sued for tax evasion
and accounting related evidence were presented and the
partner testified in court that indeed it was a correct accounting.
What are required for an admission to bind the partnership?
Lim: The person must be a partner at the time he acquired
the information and must be acting within the scope of his
authority.
In our example, if that person is an accountant and he
admitted matters relating to the partnership books or the
accounting of the partnership, then that would mean he is
in the scope of its authority with regard to those matters.
Alright, again, before an admission binds the partnership?
Lim: First, he must be a partner. Next, he must be acting
within the scope of its authority.
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When we say acting within the scope of its authority, what do you
mean?
Lim: He acquired that information in the course of its duties.
That admission must be referring to something within his authority.
On the other hand, knowledge of the partner is knowledge of the
partnership. What would that mean?
Lim: Because of the fiduciary relationship between partners
and consistent with their duty to account and to render full
information to each other, anything that they admit would
be taken against the partnership.
How did we define crime Regalado?
Regalado: Crime is an act or omission punishable under the
law.
As a matter of fact, it is just one source of an obligation. What are
the other sources of an obligation?
Regalado: The sources of obligation are law, contract,
quasi-contracts, delicts, and quasi-delicts.
X is a partner in a partnership. Do you still remember in our
example? P150,000 versus P200,000? The loss of P50,000. In
addition, one of the partners, while on a sales visit, he was running
along the carbon area with a speed of 200KPH. He hit a
pedestrian for which the injury and medical expenses cost P15,000
Again this was claimed against the partnership, what are now our
claims against the partnership?
Regalado: The claims are, P15,000 for medical expenses,
and the P50,000 short of the credit due.
So the claimant for the medical expenses is now demanding from
the partnership, who will be liable?
Regalado: It is the partnership that will be liable since the
incident happened in the ordinary course of business of the
partnership.
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If the father of the victim demands payment, from whom will the
partnership demand payment?
Regalado: From any of the partners, because in this case
the partners are solidarily liable to the acts or omissions
which are committed by the other partners in the ordinary
course of business.
But I thought we said pro rata? Joint?
Gamayon: I think that the victim should go to the
partnership as with regard to the damages. And if the
partnership does not have the money, the victim could go
to any of the partners and collect solidarily. It would not be
pro rata because this is a damage based on torts and so
we cannot apply the pro rata since it applies to
contractual obligations.
Sources of obligations again?
Gamayon: Law, contracts, quasi-contracts, delicts, quasi-
delicts.
Pro rata applies to?
Gamayon: Contractual obligations.
This one? Medical expenses?
Gamayon: Quasi-delicts.
What are quasi-delict?
Gamayon: An act or omission punishable by reason of
negligence.
Failure to observe due diligence. Alright! There is the distinction. If
the liability is that of contractual obligations rule is pro rata. On the
other hand, if it’s quasi-delict, then solidary liability.
Read until Article 1835.
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IMPORTANT POINTS:
 Partner or not, if name is included in the partnership name,
he will be held liable for partnership liabilities – Principle of
Estoppel
 Partnership may choose any firm name the partners may
desire. It may be any of their names or surnames or a
fanciful or fictitious name.
 All partners are liable pro rata with all their property for
contracts entered into in the name and for the account of
the partnership, provided that all the partnership assets
have been exhausted.
o This applies to industrial partners. Although they are
generally exempt from losses, they are not exempt
from liabilities to third persons.
o The exemption from losses – as between the
partners
o Liabilities – as to third persons
o Subject to the right of the industrial partner to claim
reimbursement from the capitalist partners, unless
there is stipulation to the contrary
o Pro-rata – equally and jointly
The creditor cannot collect from only one partner
the entire obligation because pro rata means
equally and jointly.
o See examples on joint and solidary debts and
credits.
 A partner is an agent of the partnership. His acts bind the
partnership.
o Express or Actual Authority
o Presumed Authority – in the usual course of the
partnership business
 Acts which require unanimity (consent of all partners
necessary to bind the partnership, express authority or
presumed authority, not sufficient) – acts of strict dominion
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a. Assign the partnership property in trust for creditors
or on the assignee’s promise to pay the debts of the
partnership
b. Dispose of the goodwill of the business
c. Do any other act which would make it impossible to
carry on the ordinary business of a partnership
d. Confess a judgment
- Without presentation of evidence
e. Enter into a compromise concerning a partnership
claim or liability
- Admission of liability or waiver of rights
f. Submit a partnership claim or liability to arbitration
- Arbitration is not done according the rule of
law. The arbiter is not a court of law. Hence,
the appreciation of evidence is difference
from that done in ordinary judicial
proceedings.
g. Renounce a claim of the partnership
 Conveyance of Real Property
Real properties may be registered owned in the name of
a) the partnership;
b) one or more but not all the partners;
c) one or more or all the partners, or in a third person
in trust for the partnership; or
d) all the partners.
1. TITLE: Partnership name
CONVEYANCE: Partnership name
 Title is passed
2. TITLE: Partnership name
CONVEYANCE: Partner in his own name
 Equitable interest is passed
 Equitable interest is one not recognized under
law, but is based on equity. The transferee has
the right to compel the partnership to legitimize
his claim or title.
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exercise due diligence; they are liable pro-rata if based on

3. TITLE: One or more but not all partners contractual obligations.
CONVEYANCE: Partners in whose name the title stands
 Title is passed.

4. TITLE: One or more or all the partners, or in a third person

in trust for the partnership
CONVEYANCE: By partner in the partnership name or in
his own name
 Equitable interest is passed.

5. TITLE: All the partners

CONVEYANCE: All the partners
 Title is passed.

 When there is no defect in the transfer of the real property,

title is passed. Otherwise, only the equitable interest is
transferred. The transferee has the right to compel the
partnership to legitimize his title.

 Partnership may recover the property

UNLESS the act binds the partnership (express or
presumed authority, in the usual way of the
business), OR
UNLESS the transferee has NO knowledge that the
partner exceeded his authority

Conversely, the partnership can no longer recover the

property if the partner had express or presumed authority,
the act having made in the usual way of the business and if
the transferee has no knowledge that the partner
exceeded his authority.

 Admission - admit as true any statement involving the

partnership affairs. To bind the partnership, the partner
making the admission must be acting within the scope of
his authority.

 Partners are solidarily liable if the source of the obligation is

a quasi-delict or acts or omissions punished for failure to

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