SUCCESSION

August 30 2019 Saturday – 1hr

PARTNERSHIP VS CO-OWNERSHIP PARTNERSHIP VS CORPORATION

CJP-PP-DDD CJPIL-DDP-MESG-F
PARTNERSHIP CO-OWNERSHIP PARTNERSHIP CORPORATION
1. Creation Created by Created by law 1. Creation Created by mere Created by law or
agreement of agreement of by operation of
parties parties law
2. Juridical Has juridical No juridical
Personality 2. Commenceme From execution From date of
personality personality nt of Juridical of a contract of issuance of
Personality partnership, Certificate of
3. Purpose Obtain profits Common enjoyment
partners may Incorporation by
of thing
stipulate the Security of
otherwise Exchange
Does not necessarily
Commission
involve sharing of
(SEC)
profits
4. Power to Act May bind Co-owner cannot 3. Incorporators At least 2 persons Requires at least
with 3rd partnership represent the co- 5 incorporators
Persons unless contrary ownership
stipulation 4. Liability Liable personally Liable only to the
and subsidiarily extent of shares
5. Duration No limit Maximum of 10 years for partnership subscribed
rd
debts to 3
6. Disposal of Cannot dispose May dispose interest persons
Interest his interest to even without consent
make the of others XPN: Limited
transferee a partners
partner without
consent of 5. Disposal Needs consent May dispose
others without consent
7. Effect of Dissolves Not necessarily
Death 6. Dissolution Anytime by the Only with consent
partnership dissolves partnership
will of any of the of the State
party
Situation.
A and B were able to inherit from their late father 2 units 7. Duration Any period agreed Max of 50 years,
of apartment. When the father died, they agreed that extendible to
Unit A will belong to Mr. A and Unit B will belong to Mr. another 50 years
B. There was only one power meter, so they decided to
share the power bill. 8. Powers Those authorized Only those
In this case, there exists a co-ownership rather than a by partners expressly granted
partnership because under the law, when heirs receive by law
inheritance from the decedent, a co-ownership is created 9. Management Every partner is Vested with
rather than a partnership. an agent to the Board of
In this instance, they also did not meet the elements for a partnership Directors
contract of partnership – namely the object and
consideration such that they did not contribute any money, 10. Effect of Partner can sue Suit must be
property or industry and they did not take it upon Mismanagement the mismanaging against the name
themselves to share any profit from any rents from the partner of the corporation
apartment although they agreed to share the costs of the
bills. 11. Succession / X
In a contract of partnership, it is not the sharing of expenses 12. Governing law New Civil Code Corporation Code
that is being contemplated but rather, the sharing of profits.
13. Firm name Limited May adopt any
Although expenses are part of a business operation.
However, when you share profits, it is the net profits that Partnership – name as long as
you share and not the gross profits. Gross income involves required by law to not similar to
all the returns from such undertaking while gross income add Ltd. registered firm
entails deducting expenses from your gross receipts to get names
the net profits to be shared by the partners.
Thus, when you agree to share in the net profits and there is
an intent to be bound to be in a partnership, you are
considered as partners.

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ARTICLE 1772. Every contract of partnership having a
capital of three thousand pesos or more, in money or
property, shall appear in a public instrument, which must be
recorded in the Office of the Securities and Exchange
Commission.
Failure to comply with the requirements of the preceding
paragraph shall not affect the liability of the partnership and
the members thereof to third persons.
Comment: The purpose of this is purely for convenience to
the public. Non-registration does not affect the validity of the
partnership. They are partners for all intents and purposes.
Illustration.
Situation 1.
Ms. De Los Angeles proposed to engage in a business
with Mr. Gaspar. She owns a car and proposed that Mr.
Gaspar could be the driver of the car every Sunday.
They entered into a Grab business and shared 50-50 for
the revenue of that day.
In this situation, they are considered partners. First, there is
contribution of property – the car, and industry – the driving
skills. Second, there is division of properties.
However, in this situation, the value of the property
contributed is 1M.
Therefore, they should have complied with the provision
under Article 1772 which states that “Every contract of
partnership having a capital of three thousand pesos or
more, in money or property, shall appear in a public
instrument, which must be recorded in the Office of the
Securities and Exchange Commission.”
BUT, as provided in the second paragraph:
“Failure to comply with the requirements of the preceding
paragraph shall not affect the liability of the partnership and
the members thereof to third persons.”
Thus, if they establish a partnership and present
themselves as partners to third persons in the Grab
business that they have, in case there is an accident,
the customer can actually go after the partnership.
This is purely for the convenience of the public. Non-
registration does not affect the validity of the partnership.
They are partners for all intents and purposes
Situation 2.
Once there is a partnership, can De Los Angeles get
back her car? Who now owns the car?
No. Once the partnership is established, the partnership
now owns the car. De Los Angeles cannot insist on getting it
back. However, the 50-50 arrangement is not fair because
she could have demanded more considering that she
contributed 1M for the value of the car. But that was their
agreement. This is only for purposes of demonstrating the
law.
Situation 3.
Ms. De los Angeles decided to invite Mr. Amores
instead to engage in business with her because Mr.
Amores is engaged in the distribution of flowers. Mr.
Amores agreed. In this case, he will supply the flowers.
What could be a good business?
It could be a bridal car business or a funeral car business.
In a funeral car – we bury the dead
In a bridal car – we bury the living
During the sharing of the profit, Mr. Amores received
only the value of his flowers, with a little profit. Is Mr.
Amores a partner?
We will apply the presumption that they are partners. A
person who receives a share in the profits is prima facie
considered a partner.
Note: Prima facie means rebuttable.
But if the agreement was to only to give him 10% of the
value of his flowers?
This can be rebutted by saying that the amount received is
not a share in the profits but rather an amount received for
his salary.
Thus, we ended our discussion with an introduction of
Article 1769 par 4 which states that:
Article 1769 par 4
The receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in
the business, but no such inference shall be drawn if such
profits were received in payment:
(a) As a debt by installments or otherwise;
(b) As wages of an employee or rent to a landlord;
(c) As an annuity to a widow or representative of a
deceased partner;
(d) As interest on a loan, though the amount of
payment vary with the profits of the business;
(e) As the consideration for the sale of a goodwill of
a business or other property by installments or
otherwise.
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