Arellano University School of Law

BUSINESS ORGANIZATION I
(Partnership, Agency and Trusts)
Atty. Joanne L. Ranada
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Week No. 1
I. PARTNERSHIP
A. General Provisions (Art. 1767-1783)
1. What is a contract of partnership? (Art. 1767)
by the contract of partnership, 2 or more persons bind themselves to contribute
money, property or industry to a common fund, with the intention of dividing the
profits among themselves

- Santos vs. Sps. Reyes, 368 SCRA 261

2. Determining factors in the existence of partnership (Art. 1769)
ESSENTIAL FEATURES:
- There must be a valid contract
- The parties must have legal capacity to enter into the contract
- There must be a mutual contribution of money, property, or industry to a
common fund
- The object must be lawful
- The purpose or primary purpose must be to obtain profits and divide the same
among the parties
NO PRESUMPTION OF PARTNERSHIP FROM RECEIPT OF PROFITS:
- As debt by installment
- As wages or rent
- As annuity
- As interest on loan
- As consideration for sale of goodwill of business/other property by installments

-Heirs of Tan Eng Kee vs. CA, 341 SCRA 740 (citing Evangelista vs.
Collector of Internal Revenue, 54 O.G. 996)
-Negado vs. Makabenta, 54 O.G. 4082
-Yulo vs. Yang Chiaco Seng, L-12541, Aug. 28, 1959
3. Distinction between partnership and a private corporation
SIMILARITIES BETWEEN A PARTNERSHIP AND A CORPORATION
- Both have juridical personality separate and distinct from that of the individuals
composing it
- Both can only act through agents
- Both organizations are composed of an aggregate of individuals (except
corporation sole)
- Both distribute profits to those who contribute capital to the business
- Both can only be organized when there is a law authorizing their organization
- Both are taxable as a corporation

- 1 Fletcher, Cyc. Corp., Sec. 20

4. Formalities required by law for the organization/constitution of partnership
(Art. 1771, 1772, 1773, 1843)
GENERAL RULE: No special form is required for the validity of the contract
EXCEPTIONS:
1. Where immovable property/real rights are contributed
a. Public instrument is necessary
b. Inventory of the property contributed must be made, signed by the parties
and attached to the public instrument otherwise it is VOID
2. Where capital is P3,000 or more, in money or property
a. Public instrument is necessary
b. Must be registered with SEC

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Week No. 2
5. Different kinds of partnership
a) As to object (Art. 1777, 1778, 1780, 1783)
i.
Universal Partnership
i. UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY - comprises the following:
a) Property which belonged to each of the partners at the time of the constitution
of the partnership
b) Profits which they may acquire from all property contributed
ii. UNIVERSAL PARTNERSHIP OF PROFITS - comprises all that the partners may
acquire by their industry or work during the existence of the partnership
Note: Persons who are prohibited from giving donations or advantage to each
other cannot enter into a universal partnership
ii.
Particular Partnership - has for its objects:
i. Determinate things
ii. Their use or fruits
iii. Specific undertaking
iv. Exercise of profession or vocation

b) As to liability of the partners

i.
General Partnership - consists of general partners
who are liable pro rata and subsidiarily and sometimes
solidarily with their separate property for partnership
debts
ii.
Limited Partnership - one formed by 2 or more
persons having as members one or more general
partners and one or more limited partners, the latter
not being personally liable for the obligations of the
partnership
c) As to duration
a. PARTNERSHIP AT WILL - one in which no time is specified and is
not formed for a particular undertaking or venture which may be
terminated anytime by mutual agreement
b. PARTNERSHIP WITH A FIXED TERM - the term for which the
partnership is to exist is fixed or agreed upon or one formed for a
particular undertaking
d) As As to representation to others
a. ORDINARY OR REAL PARTNERSHIP - one which actually exists
among the partners and also as to 3rd persons
b. OSTENSIBLE OR PARTNERSHIP BY ESTOPPEL - one which in
reality is not a partnership but is considered a partnership only in
relation to those who, by their conduct or omission, are precluded
to deny or disprove its existence
e) As to legality of existence
a. DE JURE PARTNERSHIP - one which has complied with all the
legal requirements for its establishment
b. DE FACTO - one which has failed to comply with all the legal
requirements for its establishment
f) As to publicity
a. SECRET PARTNERSHIP - one wherein the existence of certain
persons as partners is not avowed or made known to the public by
any of the partners
b. OPEN OF NOTORIOUS PARTNERSHIP - one whose existence is
avowed or made known to the public by the members of the firm
g) As to purpose
a. COMMERCIAL OR TRADING PARTNERSHIP - one formed for the
transaction of business
b. PROFESSIONAL OR NON TRADING PARTNERSHIP - one formed
for the exercise of a profession

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6. Different kinds of partners

a) Industrial Partner - one who contributes only his industry or
personal service

b) Capitalist Partner - one who contributes money or property to the

common fund

c) General Partner - one whose liability to 3rd persons extends to his

separate property

d) Limited Partner - one whose liability to 3rd persons is limited to

his capital contribution

e) Managing Partner - one who manages the affairs or business of

the partnership

f)

Silent Partner - one who does not take any active part in the
business although he may be known to be a partner

g) Ostensible Partner - one who takes active part and known to the
public as partner in the business

h) Secret Partner - one who takes active part in the business but is
not known to be a partner by outside parties
Partner by Estoppel - one who is not really a partner but is liable
as a partner for the protection of innocent 3rd persons
j) LIQUIDATING - one who takes charge of the winding up of
partnership affairs upon dissolution
k) CONTINUING PARTNER - one who continues the business of a
partnership after it has been dissolved by reason of the admission
of a new partner, retirement, death or expulsion of one of the
partners
l) SURVIVING PARTNER - one who remains after a partnership has
been dissolved by death of any partner
m) SUBPARTNER - one who is not a member of the partnership who
contracts with a partner with reference to the latter's share in the
partnership
n) DORMANT - one who does not take active part in the business and
is not known or held out as a partner
RELATIONS CREATED BY A CONTRACT OF PARTNERSHIP

i)

1. Relations among the partners themselves

2. Relations of the partners with the partnership
3. Relations of the partnership with 3rd persons with whom it contracts
4. Relations of the partners with such 3rd persons

Week No. 3
B. Obligations of the Partners (Art. 1784-1827)
1. Obligations of the partners among themselves (Art. 1784-1809)
a) Distribution of profits and losses of partnership
i.
With agreement
ii.
Without agreement
b) Principle of Delectus Personae (Art. 1804)
-Ortega, et al. v. CA, et al., 245 SCRA 529
-Tocao, et al. v. CA, 342 SCRA 20
-JG Summit Holdings v. CA, Sept. 24, 2003, G.R. No. 124293
c) Management of Partnership (Art. 1800-1803)
d) When partner can demand for a formal accounting of
partnership affairs (Art. 1807, 1809)

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Week No. 4
1. Property rights of a partner (Art. 1810-1814)
a) Incidents of co-ownership (Art. 1811)
b) Partners interest in the partnership (Art. 1812)
c) Effect of conveyance of interest in the partnership to third
persons (Art. 1813)
d) Charging order upon partners interest (Art. 1814)
2. Obligations of the partner with regard to third persons (Art. 1815-1827)
a) Requisites prescribed by law in order that a partnership may be
held liable to third persons for the act of one partner (Art. 1816,
1822, 1823, 1824)
b) Concept of Mutual Agency (Art. 1818)
c) Partners liability for partnership obligation (nature)
(Art. 1816 in rel. to 1824)
-Liwanag vs. Workmens Compenstion Commission, 105 Phil. 741
d) Prohibited acts of partners (unless authorized)
(Art. 1818, par. 3)
Weeks No. 5 and 6
C. Dissolution and Winding Up (Art. 1828-1842)
1. Definition and Effects (Art. 1828, 1829)
-difference between Dissolution and Winding Up
DISSOLUTION - change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on of the business; partnership is not
terminated but continues until the winding up of partnership affairs is completed
WINDING UP - process of settling the business or partnership affairs after
dissolution

2. Causes of dissolution (Art. 1830,1831)

1. Without violation of the agreement between the partners
a. By termination of the definite term/ particular undertaking specified in the
agreement
b. By the express will of any partner, who must act in good faith, when no
definite term or particular undertaking is specified
c. By the express will of all the partners who have not assigned their interest/
charged them for their separate debts, either before or after the termination of any
specified term or particular undertaking
d. By the expulsion of any partner from the business bonafide in accordance with
power conferred by the agreement
2. In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of this article,
by the express will of any partner at any time
3. By any event which makes it unlawful for business to be carried on/for the
members to carry it on for the partnership
4. Loss of specific thing promised by partner before its delivery
5. Death of any partner
6. Insolvency of a partner/partnership
7. Civil interdiction of any partner
8. Decree of court under art 1831
GROUNDS FOR DISSOLUTION BY DECREE OF COURT (art 1831)
1. Partner declared insane in any judicial proceeding or shown to be of
unsound mind
2. Incapacity of partner to perform his part of the partnership contract

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3. Partner guilty of conduct prejudicial to business of partnership

4. Willful or persistent breach of partnership agreement or conduct which
makes it reasonably impracticable to carry on partnership with him
5. Business can only be carried on at a loss
6. Other circumstances which render dissolution equitable
Upon application by purchaser of partner's interest:
1. After termination of specified term/particular undertaking
2. Anytime if partnership at will when interest was assigned/charging order
issued

3. Effect of dissolution caused by act, death or insolvency of a partner (Art. 1833)

EFFECTS OF DISSOLUTION:
A. AUTHORITY OF PARTNER TO BIND PARTNERSHIP
General Rule: Authority of partners to bind partnership is terminated
Exception:
1. Wind up partnership affairs
2. Complete transactions not finished
Qualifications:
1. With respect to partners a. Authority of partners to bind partnership by new contract is immediately
terminated when dissolution is not due to ACT, DEATH or INSOLVENCY (ADI) of a
partner (art 1833);
b. If due to ADI, partners are liable as if partnership not dissolved, when the ff.
concur:
i. If cause is ACT of partner, acting partner must have knowledge of such
dissolution
ii. If cause is DEATH or INSOLVENCY, acting partner must have knowledge/
notice
2. With respect to persons not partners (art 1834) a. Partner continues to bind partnership even after dissolution in ff. cases:
(1) Transactions in connection to winding up partnership affairs/completing
transactions unfinished
(2) Transactions which would bind partnership if not dissolved, when the other
party/obligee:
(a) Situation 1 i. Had extended credit to partnership prior to dissolution &
ii. Had no knowledge/notice of dissolution, or
(b) Situation 2 i. Did not extend credit to partnership
ii. Had known partnership prior to dissolution
iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised
in a newspaper of general circulation in the place where partnership is regularly
carried on
b. Partner cannot bind the partnership anymore after dissolution:
(1) Where dissolution is due to unlawfulness to carry on with business (except:
winding up of partnership affairs)
(2) Where partner has become insolvent
(3) Where partner unauthorized to wind up partnership affairs, except by
transaction with one who:
(a) Situation 1 i. Had extended credit to partnership prior to dissolution &
ii. Had no knowledge/notice of dissolution, or
(b) Situation 2 i. Did not extend credit to partnership prior to dissolution
ii. Had known partnership prior to dissolution
iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised
in a newspaper of general circulation in the place where partnership is regularly
carried on

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4. Residual powers of managing partner and exceptions thereto

(Art. 1832, 1834)
5. Duty to wind up/ liquidate partnership affairs (Art. 1836)
B. DISCHARGE OF LIABILITY
Dissolution does not discharge existing liability of partner, except by agreement
between:
(1) partner himself
(2) person/partnership continuing the business
(3) partnership creditors
Rights of partner where dissolution not in contravention of agreement
1. Apply partnership property to discharge liabilities of partnership
2. Apply surplus, if any to pay in cash the net amount owed to partners
Rights of partner where dissolution in contravention of agreement
1. Partner who did not cause dissolution wrongfully:
a. Apply partnership property to discharge liabilities of partnership
b. Apply surplus, if any to pay in cash the net amount owed to partners
c. Indemnity for damages caused by partner guilty of wrongful dissolution
d. Continue business in same name during agreed term
e. Posses partnership property if business is continued
2. Partner who wrongly caused dissolution:
a. If business not continued by others - apply partnership property to discharge
liabilities of partnership & receive in cash his share of surplus less damages caused
by his wrongful dissolution
b. If business continued by others - have the value of his interest at time of
dissolution ascertained and paid in cash/secured by bond & be released from all
existing/future partnership liabilities
Rights of injured partner where partnership contract is rescinded on ground of
fraud/misrepresentation by 1 party:
1. Right to lien on surplus of partnership property after satisfying partnership
liabilities
2. Right to subrogation in place of creditors after payment of partnership liabilities
3. Right of indemnification by guilty partner against all partnership debts &
liabilities

-Aldecoa & Co. vs. Warner, Barnes & Co., 16 Phil. 423
-Po Yeng Cheo vs. Lim Ka Yan, 44 Phil. 172
-Guidote vs. Borja, 53 Phil. 900
6. Order of payment in the winding up of partnership liabilities (Art. 1839)
C. SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS
Assets of the partnership:
1. Partnership property (including goodwill)
2. Contributions of the partners
Order of Application of Assets:
1. Partnership creditors
2. Partners as creditors
3. Partners as investors - return of capital contribution
4. Partners as investors - share of profits if any
D. WHEN BUSINESS OF DISSOLVED PARTNERSHIP IS CONTINUED:
1. Creditors of old partnership are also creditors of the new partnership which
continues the business of the old one w/o liquidation of the partnership affairs
2. Creditors have an equitable lien on the consideration paid to the retiring
/deceased partner by the purchaser when retiring/deceased partner sold his
interest w/o final settlement with creditors
3. Rights if retiring/estate of deceased partner:
a. To have the value of his interest ascertained as of the date of dissolution
b. To receive as ordinary creditor the value of his share in the dissolved partnership
with interest or profits attributable to use of his right, at his option
Right to Account - may be exercised by:

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1. Winding up partner
2. Surviving partner
3. Person/partnership continuing the business
Manner of Winding Up
1. Judicially
2. Extrajudicially
Persons Authorized to Wind Up
1. Partners designated by the agreement
2. In absence of agreement, all partners who have not wrongfully dissolved the
partnership
3. Legal representative of last surviving partner

Week No. 7
D. Limited Partnership (Art. 1843-1867)
1. Definition/ Concept/ Nature
2. Power/ Duties/ Rights of a Limited Partner
3. Entitlements of a limited partner after dissolution
CHARACTERISTICS
1. Formed by compliance with statutory requirements
2. One or more general partners control the business
3. One or more general partners contribute to the capital and share in the profits but do
not participate in the management of the business and are not personally liable for
partnership obligations beyond their capital contributions
4. May ask for the return of their capital contributions under conditions prescribed by law
5. Partnership debts are paid out of common fund and the individual properties of general
partners
DIFFERENCES BETWEEN GENERAL AND LIMiTED PARTNER/PARTNERSHIP
GENERAL
Personally liable for partnership obligations
When manner of mgt. not agreed upon, all gen partners have an equal right in the mgt. of
the business
Contribute cash, property or industry
Proper party to proceedings by/against partnership
Interest not assignable w/o consent of other partners
Name may appear in firm name
Prohibition against engaging in business
Retirement, death, insolvency, insanity of gen partner dissolves partnership
LIMITED
Liability extends only to his capital contributions
No participation in management
Contribute cash or property only, not industry
Not proper party to proceedings by/against partnership
Interest is freely assignable
Name must appear in firm name
No prohibition against engaging in business
Does not have same effect; rights transferred to legal representative
REQUIREMENTS FOR FORMATION OF LIMITED PARTNERSHIP
1. Certificate of articles of the limited partnership must state the ff. matters:

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a. Name of partnership + word "ltd."

b. Character of business
c. Location of principal place of business
d. Name/place of residence of members
e. Term for partnership is to exist
f. Amount of cash/value of property contributed
g. Additional contributions
h. Time agreed upon to return contribution of limited partner
i. Sharing of profits/other compensation
j. Right of limited partner (if given) to substitute an assignee
k. Right to admit additional partners
l. Right of limited partners (if given) to priority for contributions
m. Right of remaining gen partners (if given) or continue business in case of death,
insanity, retirement, civil interdiction, insolvency
n. Right of limited partner (if given) to demand/receive property/cash in return for
contribution
2. Certificate must be filed with the SEC
WHEN GENERAL PARTNER NEEDS CONSENT/RATIFICATION OF ALL LTD PARTNERS:
1. Do any act in contravention of the certificate
2. Do any act which would make it impossible to carry on the ordinary business of the
partnership
3. Confess judgement against partnership
4. Possess partnership property/assign rights in specific partnership property other than for
partnership purposes
5. Admit person as general partner
6. Admit person as limited partner - unless authorized in certificate
7. Continue business with partnership property on death, retirement, civil interdiction,
insanity or insolvency of gen partner unless authorized in certificate
SPECIFIC RIGHTS OF LIMITED PARTNERS:
1. Right to have partnership books kept at principal place of business
2. Right to inspect/copy books at reasonable hour
3. Right to have on demand true and full info of all things affecting partnership
4. Right to have formal account of partnership affairs whenever circumstances render it
just and reasonable
5. Right to ask for dissolution and winding up by decree of court
6. Right to receive share of profits/other compensation by way of income
7. Right to receive return of contributions provided the partnership assets are in excess of
all its liabilities
LOAN AND OTHER BUSINESS TRANSACTIONS WITH LIMITED PARTNERSHIP
1. Allowed
a. Granting loans to partnership
b. Transacting business with partnership
c. Receiving pro rata share of partnership assets with general creditors if he is not also a
general partner
2. Prohibited
a. Receiving/holding partnership property as collateral security

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b. Receiving any payment, conveyance, release from liability if it will prejudice right of 3rd
persons
REQUITES FOR RETURN OF CONTRIBUTION OF LIMITED PARTNER:
1. All liabilities of partnership have been paid/if not yet paid, at least sufficient to cover
them
2. Consent of all members has been obtained
3. Certificate is cancelled/amended as to set forth withdrawal /reduction of contribution
DISSOLUTION OF LIMITED PARTNERSHIP
Priority in Distribution of Assets:
1. Those due to creditors, including limited partners
2. Those due to limited partners in respect of their share in profits/compensation
3. Those due to limited partners of return of capital contributed
4. Those due to general partner other than capital & profits
5. Those due to general partner in respect to profits
6. Those due to general partner for return of capital contributed
AMENDMENT/CANCELLATION OF CERTIFICATE
Cancelled:
1. Partnership is dissolved other than by reason of expiry of term
2. All limited partners cease to be such
Amended:
1. Change in name of partnership, amount/character of contribution of ltd. partner
2. Substitution of ltd. partner
3. Admission of additional ltd. partner
4. Admission of gen. partner
5. Death, insolvency, insanity, civil interdiction of gen. partner & business is continued
6. Change in character of business
7. False/erroneous statement in certificate
8. Change in time as stated in the certificate for dissolution of partnership/return of
contribution
9. Time is fixed for dissolution of partnership. Return of contribution if no orig. time
specified
10. Change in other statement in certificate

Week No. 8
II. AGENCY
A. Historical Context
1. World Context
2. Philippine Context
-Laws 28 and 32, Title 12, Partida 3
-Spanish Civil Code (Civil Agency)
-Spanish Code of Commerce (Commercial Agency)
-Civil Code Art. 2270 (2)
B. Nature, Concept and Purpose
1. Agency as a contract

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a) Definition (Art. 1868)

i. Critique/ Articles
-Espiritu, XV Lawyers Journal 297
- J.B.L. Reyes, XVI Lawyers Journal 138
ii. Other definitions
b) Essential requisites/ elements (Art. 1318)
-Rallos vs. Felix Go Chan & Sons Realty Corp., 81 SCRA 251
c) Characteristics
d) Purpose
2. Agency as a relation
a) Fiduciary character
b) Representative character
Week No. 9
3. Agency distinguished from/ compared with other relations
a) Partnership (Art. 1767)
b) Lease of Work or Service (Art. 1644)
-Nielson & Company, Inc. v. Lepanto Consolidated Mining
Company, 26 SCRA 540
- De la Cruz v. Northern Theatrical Enterprises, 95 Phil. 739
c) Independent Contractor (Art. 1713)
- Fressel v. Mariano Uy Chaco & Co., 34 Phil 122
- Shell Company of the Phil. V. Firemens Insurance, 100 Phil. 757
- Africa v. Caltex Phil., Inc., 16 SCRA 448
d) Negotiorum Gestio (Art. 2144-2145)
-De la Pea v. Hidalgo, 16 Phil. 450
e) Loan (Art. 1933)
-2 C.J.S. 1030
- Jai Alai Corp. v. BPI, 66 SCRA 29
f) Sale (Art. 1458)
- Quiroga v. Persons Hardware, 38 Phil. 501
- Gonzalo Puyat and Sons v. Arco Amusement Co., 72 Phil. 402
- Velasco v. Universal Trading Co. v. Lim Teck Suan, 97 Phil. 171
- Pearl Island Commercial Corp. v. Lim Tiang Tong, 101 Phil. 789
- Lim v. People, 133 SCRA 333
- Green Valley Poultry & allied Products, Inc. v. IAC
133 SCRA 697
- Bert Osmea & Associates v. CA, 120 SCRA 395
g) Trusteeship (Art. 1440)
- 2 C.J.S. 1034
h) Broker
- Pacific Commercial Co. v. Yatco, 68 Phil. 398
i) Guardianship
- 2 C.J.S. 1027
- 3 AmJur 2d 421
- Fessenden v. Jones, 75 Am. Dec. 445
- McDonald v. spring Valley, 120 N.E. 476, 2 ALR 1355
j) Bailment
- 2 C.J.S. 1027
k) Ship Agent
- Switzerland Genral Insurance Co., Ltd. v. Ramirez, 96 SCRA 297

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Week No.10
C. Kinds, Creation and Existence
1. General Classification
a) Actual Agency (Art. 1868)
b) Apparent or Ostensible Agency (Art. 1873)
-J.B.L. Reyes 16 Lawyers Journal 138
-Rallos v. Yangco, 20 Phil. 269
-Compaia General de Tabacos v. Diaba, 20 Phil. 321
c) Agency by Estoppel
- 2 C.J. 444-445
- 2 C.J. 464-466
- Macke v. Camps, 7 Phil. 553
2. Kinds of Actual Agency
a) As to manner of creation (Art. 1869)
b) As to character (Art. 1875)
c) As to extent (Art. 1876)
d) As to scope of authority (Art. 1877, 1878)
3. Creation and Elements of Actual Agency
a) Consent/ Mandate
i. Manifestation of Mandate
- Express (Art. 1869, 1874)
- Implied
- Conde v. CA, 199 SCRA 245
ii. Manifestation of Acceptance
-Express (Art. 1869, 1870)
-Implied (Art. 1870-1872)
- Jimenez v. Rabot, 38 Phil. 357
- Lian v. Puno, 31 Phil. 259
- Katigbak v. Tai Hing Co., 52 Phil. 622
- Amigo v. Teves, 96 Phil. 252
- Villa v. Garcia Bosque, 49 Phil. 126
- Dir. Of Public Works v. Sing Juco, 53 Phil. 205
- BPI v. De Coster, 47 Phil. 594
- Germann & Co. v. Donaldson, 1 Phil. 63
- Macke v. Camps, 7 Phil. 533
- Municipal Council of Iloilo v. Evangelista, 55 Phil.290
- Yu Chuck v. Kong Li Po, 46 Phil. 608
- Insular Drug v. PNB, 58 Phil. 683
Week No. 11
D. Obligations of the Agent
-Intl Films (China) v. Lyric Films Exchange, 63 Phil. 778
-Nepomuceno, et al. v. Heredia, 7 Phil. 563
-Domingo v. Domingo, 42 SCRA 131
-U.S. vs. Kiene, 7 Phil. 736
-U.S. v. Reyes, 36 Phil. 791
-Ojinaga v. Estate of Perez, 9 Phil. 185
-De Borja v. De Borja, 58 Phil. 811
-PNB v. Welch,Ffairchild, & Co., 44 Phil. 780
-Harry Keeler Electric Co. v. Rodriguez, 44 Phil. 19
-Austria v. CA, 39 SCRA 527
E. Obligations of the Principal

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-Gonzales & Gomez v. Haberer, 47 Phil. 380

-Albaladejo y Cia. Phil. Refining Co., 45 Phil. 556
Week 12
F. Modes of Extinguishment of Agency
-Barretto v. Santa Maria, 26 Phil. 440
-Coleongco v. Claparols, 10 SCRA 577
-De Buncio & Co. v. Ong Guan Gan, 60 Phil. 696
-New Manila Lumber Co., Inc. v. Republic, 107 Phil. 824
-Infante v. Cunanan, 93 Phil. 693
-Valera v. Velasco, 51 Phil. 695
-Buason and Reyes v. Panuyas, 105 Phil. 795
-Herrera, et al. v. Luy Kim Guam, 110 Phil. 1020
-Del Rosario v. Abad, 104 Phil. 648
-Pasno v. Ravina, 54 Phil. 378
-Perez v. PNB, 17 SCRA 834
Week No. 13
III. TRUSTS
A. Definition
B. Parties
C. Different Kinds of Trusts
1. Express Trust (Art. 1443-1446)
-Ramos v. Ramos, 61 SCRA 284
2. Implied Trust (Art. 1447-1457)
-CUAYCONG V. Cuaycong, 21 SCRA 1192
3. Resulting Trust
4. Constructive Trust
Week No. 14
D. Enforcement of Trust
1. In relation to laches
a) Fabian v. Fabian, 21 SCRA 213
b) Sotto v. Teves, 86 SCRA 154
2. In relation to Statute of Limitations
a) Gerona v. De Guzman, 11 SCRA 163
E. Period of Prescription for Reconveyance of Real Property Based on Implied Trust
-Carantes v. CA, 76 SCRA 514
-Alarcon v. Bidin, 120 SCRA 390
-Bueno v. Reyes, 27 SCRA 1179
-Varsity Hills, Inc. v. Navarro, 43 SCRA 503
-Ecsay v. CA, 61 SCRA 369
-Jaramil v. CA, 78 SCRA 420
-Vda. De Nacalaban vs. CA, 80 SCRA 428
-Duque v. Domingo, 80 SCRA 654
-Tongoy v. CA, 123 SCRA 99
-Caragay-Lagno v. CA, 133 SCRA 718
OBLIGATIONS OF THE PARTNERS

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A. OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES

Obligations with respect to 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
partnership
5. To indemnify partnership for any damage caused to it by the retention of the same or by the
delay in its contribution
Effect of Failure to contribute property promised:
1. Partners becomes ipso jure a debtor of the partnership even in the absence of any demand
2. Remedy of the other partner is not rescission but specific performance with damages from
defaulting partner
Obligations with respect to contribution of money and money converted to personal use
1. To contribute on the date fixed the amount he has undertaken to contribute to the partnership
2. To reimburse any amount he may have taken from the partnership coffers and converted to his
own use
3. To pay for the agreed or legal interest, if he fails to pay his contribution on time or in case he
takes any amount from the common fund and converts it to his own use
4. To indemnify the partnership for the damages caused to it by delay in the contribution or
conversion of any sum for his personal benefits
Obligations with respect to contribution to partnership capital
1. Partners must contribute equal shares to the capital of the partnership unless there is
stipulation to contrary
2. Partners (capitalist) must contribute additional capital In case of imminent loss to the business
of the partnership and there is no stipulation otherwise; refusal to do so shall create an obligation
on his part to sell his interest to the other partners
Requisites:
a. There is an imminent loss of the business of the partnership
b. The majority of the capitalist partners are of the opinion that an additional contribution to the
common fund would save the business
c. The capitalist partner refuses deliberately to contribute (not due to financial inability)
d. There is no agreement to the contrary
Obligation of managing partners who collects debt from person who also owed the partnership
1. Apply sum collected to 2 credits in proportion to their amounts
2. If he received it for the account of partnership, the whole sum shall be applied to partnership
credit
Requisites:
a. There exist at least 2 debts, one where the collecting partner is creditor and the other, where
the partnership is the creditor

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b. Both debts are demandable

c. The partner who collects is authorized to manage and actually manages the partnership
Obligation of partner who receives share of partnership credit
1. Obliged to bring to the partnership capital what he has received even though he may have given
receipt for his share only
Requisites:
a. A partner has received in whole or in part, his share of the partnership credit
b. The other partners have not collected their shares
c. The partnership debtor has become insolvent
Other rights and obligations of partners:
1. Right to associate another person with him in his share without consent of other partners
(subpartnership)
2. Right to inspect and copy partnership books at any reasonable hour
3. Right to a formal account as to partnership affairs (even during existence of partnership):
a. If he is wrongfully excluded from partnership business or possession of its property by his
copartners
b. If right exists under the terms of any agreement
c. As provided by art 1807
d. Whenever other circumstances render it just and reasonable
4. Duty to render on demand true and full information affecting partnership to any partner or legal
representative of any deceased partner or of any partner under legal disability
5. Duty to account to the partnership as fiduciary
B. PROPERTY RIGHTS OF A PARTNER
1. His rights in specific partnership property
2. His interest in the partnership
3. His right to participate in the management
Nature of partner's right in specific partnership property
1. Equal right to possession
2. Right not assignable
3. Right limited to share of what remains after partnership debts have been paid
Nature of partner's right in the partnership
1. Share of profits and surplus

C.

OBLIGATION OF PARTNERS WITH REGARD TO 3RD PERSONS

1. Every partnership shall operate under a firm name. Persons who include their names in
the partnership name even if they are not members shall be liable as a partner
2. All partners shall be liable for contractual obligations of the partnership with their
property, after all partnership assets have been exhausted
a. Pro rata
b. Subsidiary
3. Admission or representation made by any partner concerning partnership affairs within
scope of his authority is evidence against the partnership
4. Notice to partner of any matter relating to partnership affairs operates as notice to
partnership except in case of fraud:

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a. Knowledge of partner acting in the particular matter acquired while a partner

b. Knowledge of the partner acting in the particular matter then present to his mind
c. Knowledge of any other partner who reasonably could and should have communicated it
to the acting partner
5. Partners and the partnership are solidary liable to 3rd persons for the partner's tort or
breach of trust
6. Liability of incoming partner is limited to:
a. His share in the partnership property for existing obligations
b. His separate property for subsequent obligations
7. Creditors of partnership preferred in partnership property & may attach partner's share
in partnership assets
8. Every partner is an agent of the partnership
D. PARTNER BY ESTOPPEL; PARTNERSHIP BY ESTOPPEL
Partner by estoppel - by words or conduct, he does any of the ff.:
1. Directly represents himself to anyone as a partner in an existing partnership or in a nonexisting partnership
2. Indirectly represents himself by consenting to another representing him as a partner in
an existing partnership or in a non existing partnership
Elements to establish liability as a partner on ground of estoppel:
1. Defendant represented himself as partner/represented by others as such and not
denied/refuted by defendant
2. Plaintiff relied on such representation
3. Statement of defendant not refuted
D. RESPONSIBILITY OF PARTNERSHIP TO PARTNERS
1. To refund the amounts disbursed by partner in behalf of the partnership +
corresponding interest from the time the expenses are made (loans and advances made by
a partner to the partnership aside from capital contribution)
2. To answer for obligations partner may have contracted in good faith in the interest of
the partnership business
3. To answer for risks in consequence of its management

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