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Art.

1837
(1) Two Aspects of Causes of Dissolution
Dissolution may be caused:
(a) although the partnership contract is NOT VIOLATED
(Example: death, or arrival of term) (The rights of
partners are governed by the FIRST PARAGRAPH of
this article.)
(b) Because the partnership contract is VIOLATED
Example: Deliberate withdrawal of a partner although the
period of the firm has not yet expired, thus causing
damage to the firm.
(NOTE: The rights of the partners here are governed
BUT the SECOND PARAGRAPH of this article.)
(2) Better Rights for Innocent Partners
Note that innocent partners have better rights than guilty
partners, and that the latter are required to indemnify for
the damages caused.
(3) Right of Innocent Partners to Continue
Note also that the innocent partners may continue the
business (but this time, there is really a NEW
partnership). They can even use the same firm name if
they wish to; moreover, they can ask new members to
join, BUT always, the rights granted to the guilty partners
are safeguarded by:
(a) a BOND approved by the court;
(b) a PAYMENT of his interest at the time of dissolution
MINUS damages. (Moreover, the guilty partner who is
excluded will be indemnified against all PRESENT or
FUTURE partnership liabilities. This is because he is no
longer a partner.)
(4) Right to Get Cash
In case of non-continuance of the business, the interest
of the partner should, if he desires, be given in CASH.
(Firm assets may be sold for this purpose.)
[NOTE: The right given to each partner, where no
agreement to the contrary has been made to have his
share of the surplus paid to him in CASH makes certain
an existing (under the old law) uncertainty. At present
(under the old law) it is not certain whether a partner
may or may not insist on a physical partition of the
property remaining after third persons have been paid.
(5) No Share in Goodwill for Guilty Partner
A guilty partner, in ascertaining the value of his interest is
NOT entitled to a proportionate share of the value of the
GOODWILL. (This is a necessary consequence of his
bad faith.)
[NOTE: The deprivation of his share in the goodwill is
not unconstitutional, and cannot be considered as
unlawful taking of property without due process of law.
(6) Partner Wrongfully Excluded
When a partner is excluded wrongfully, he should be
considered as the innocent partner, and the others as
the guilty partners. It is now said that other partners
must account not only for what is due to him at the date
of the dissolution but also for damages or for his share of
the profits realized from the appropriation of the
partnership business and good will. (Of course), it is
otherwise if the excluded partner had substantially
broken the partnership agreement. Indeed, he has a
pecuniary interest in every existing contract that was
incomplete and in the trade name of the co-partnership
and assets at the time he was wrongfully expelled.
(7) Division of Losses
Although such things as depreciation, obsolescence, or
diminished market value of capital assets are not strictly
speaking to be considered losses because they merely
constitute a decrease in capital assets (and not the
result of business transactions), still they should, in
fairness be considered as losses, and the rules on
losses must apply, provided that their real market values
at the time of liquidation are the values considered.
Art. 1838.
(1) Rescission or annulment of Partnership Contract

(a) Although the law here uses the term rescind, the
proper technical term that should have been used is
annulled, in view of the fraud or misrepresentation.
(b) The fraud or misrepresentation here vitiates the
consent whereby the contract of partnership had been
entered into, hence, it is really dolo causante.
(2) Three Rights
The Article speaks of 3 rights (without prejudice to his
other rights under other legal provisions):
(a) right of LIEN or RETENTION
(b) right of SUBROGATION
(c) right of INDEMNIFICATION
Art. 1839.
(1) Rules for Settling Accounts
(a) Commissioners Comment on No. (1) subdivision (b)
the contributions of the partners necessary for the
payment of all liabilities . . .:
The adoption of this clause will end the present (under
the old law) confusion as to whether the contribution of
the partners toward the losses of the partnership are
partnership assets or not. The Commissioners believe
that the opinion that such contributions are assets is
supported by the better reasoning.
(b) Art. 1839 speaks of the methods of settling the
accounts of the partnership, that is to say its
LIQUIDATION.
[NOTE: Before liquidation is made, no action for
accounting of a partners share in the profit or for a
return of his capital assets can properly be made, since
it is essential to first pay-off the creditors. Thus, a partner
who has retired must first ask for the liquidation before
he can recover his proportionate share of the partnership
assets.
[NOTE: The managing partner of a firm is not a debtor of
the other partners for the capital embarked by them in
the business; thus, he can only be made liable for the
capital, when upon liquidation of the business, there are
found to be assets in his hands applicable to the capital
account.
(c) Art. 1839 can apply only if there is a contrary
agreement.
Of course, such agreement cannot prejudice innocent
third parties.
(2) The Assets of the Partnership
(a) The partnership property (including goodwill).
(b) The contributions of the partners, which are made to
pay off the partnership liabilities.
(3) Order of Payment of Firms Liabilities
(a) First give to creditors (who are strangers), otherwise
they may be prejudiced.
(b) Then give to partners who are also creditors (they
should be placed in a subordinate position to outside
creditors for otherwise they may prefer their own
interests).
[NOTE: Example of credits owing to partners which are
neither capital nor profits, are those for reimbursement of
business expenses.
(c) Then give to the partners their capital.
(NOTE: Capital should be given ahead of profi t for it is
only the surplus profi t over capital that should be
considered as the gain or the profi t of the fi rm.)
[NOTE: An industrial partner, who has not contributed
money or property at all is, in the absence of stipulation,
not entitled to participate in the capital. He shares in the
profi ts, however.
(d) Lastly, the profi ts must be distributed.
[NOTE: If, during the liquidation of a fi rm, the profi ts for
a certain period of time cannot be exactly determined
because no evidence or insuffi cient evidence thereof is
available, the court should determine the profi t for the
period by fi nding the average profi ts during the period
BEFORE and AFTER the period of time in question.
(4) New Contributions

If the partnership assets are insufficient, the other


partners must contribute more money or property. Who
can enforce these contributions?
ANS.:
(a) In general, any assignee for the benefi t of the
creditor; or any person appointed by the court (like a
receiver). (Reason: Said enforced contributions may be
considered as partnership assets, and should therefore
be available to the creditors).
(b) Any partner or his legal representative (to the extent
of the amount which he has paid in excess of the share
of the liability).
(5) Problem
A, B, and C are partners. A died. Is As estate still liable
for the contributions needed to pay off the partnership
obligations?
ANS.: Yes. (Generally, as long as the said obligations
had been incurred prior to his death.)
(6) Preference With Respect to the Assets
Suppose both the partnership property and the individual
properties of the partners are in the possession of the
court for distribution, who should be preferred?
ANS.: It depends:
(a) Regarding partnership property, partnership creditors
have preference.
(b) Regarding individual properties of the partners, the
individual creditors are preferred.
(7) Rule if Partner is Insolvent
If a partner is insolvent, how will his individual properties
be distributed?
ANS.:
(a) First, give to the individual or separate creditors.
(b) Then, to the partnership creditors.
(c) Then, those owing to the other partners by way of
contribution.
(NOTE: Insolvency here of the partner or his estate does
not necessarily mean no more money or property; it is
enough that the assets are less than the liabilities.)
[NOTE: A person who alleges himself to be a partner of
a deceased individual has the right to intervene in the
settlement of the decedents estate, particularly in the
approval of the executors or administrators account for
after all it may be that he (the alleged partner) was
indeed a partner to whom the deceased partner owed
something. Administrators and executors, instead of
opposing the intervention of interested parties, should
welcome the participation of the same for their own
protection. Of course, mere intruders should not be
allowed.
Art. 1840.
(1) Right of Old Creditors to be Creditors of the New
Firm
Reason for the law (in making creditors of the dissolved
firm also creditors of the persons or partnership
continuing the business): So that said creditors will not
lose their preferential rights as creditors to the
partnership property.
(2) Example
A and B are partners. Later, C was admitted as member
or partner and the firms business was continued. The
creditors of the old firm continue to be creditors of the
new partnership but the liability of C shall be satisfied out
of partnership property only. Exception: if there is a
stipulation to the contrary.
Art. 1841.
Retirement or Death of a Partner
(a) This Article speaks of the rights of retiring partners or
of the estate of a deceased partner when the business is
continued without any statement of accounts.
(b) As a general rule when a partner retires from the fi
rm, he is entitled to the payment of what may be due him
after a liquidation. But no liquidation is needed when

there already is a settlement as to what the retiring


partner shall receive.
Art. 1842.
(1) When Right to Account Accrues
(a) See Arts. 1807 and 1809 which also deal with the
duty to account. Under the present Article (1842), the
right to demand the account accrues at the date of
dissolution in the absence of any contrary agreement.
(b) Note that the legal representative of a partner is also,
under Art. 1842, entitled to the accounting.
(2) Possible Defendants
The action can be against:
(a) the winding up partners;
(b) the surviving partners;
(c) the person or partnership continuing the business.
Art. 1843.
Reason for and History of Limited Partnerships
The business reason for the adoption of acts making
provisions for limited or special partners is that men in
business often desire to secure capital from others.
There are at least three classes of contracts which can
be made with those from whom the capital is secured:
One, the ordinary loan on interest; another, the loan
where the lender, in lieu of interest, takes a share in the
profi ts of the business; third, those cases in which the
person advancing the capital secures, besides a share in
the profi ts, some measure of control over the business.
At first, in the absence of statutes, the courts, both in
this country and in England, assumed that one who is
interested in a business is bound by its obligations,
carrying the application of his principle so far that a
contract where the only evidence of interest was a share
in the profits made one who supposed himself a lender,
and who was probably unknown to the creditors at the
time they extended their credits, is unlimitedly liable as a
partner for the obligations of those actually conducting
the business.
Later decisions have much modifi ed the earlier case.
The lender who takes a share in the profi ts, except
possibly in one or two of our jurisdiction, does not by
reason of that fact, run a risk of being held as a partner.
If, however, his contract falls within the third class
mentioned, and he has any measure of control over the
business, he at once runs serious risk of being liable for
the debts of the business as a partner; the risk
increasing as he increase the amount of his control.
The fi rst Limited Partnership Act was adopted by New
York in 1822; the other commercial states, during the
ensuing 30 years, following her example. Most of the
statutes follow the language of the New York statute with
little material alteration. Those statutes were adopted,
and to a considerable degree interpreted by the courts,
during that period when it was generally held that any
interest in a business should make the person holding
the interest liable for its obligations.
As a result the courts usually assume in the
interpretation of those statutes two principles as
fundamental.
First: That a limited (or as he is also called, a special)
partner is a partner in all respects like any other partner,
except that to obtain the privilege of a limitation on his
liability, he has conformed to the statutory requirements
in respect to fi ling a certifi cate and refraining from
participation in the conduct of the business.
Second: The limited partner, on any failure to follow the
requirement in regard to the certifi cate or any
participation in the conduct of his business, loses his
privilege of limited liability and becomes, as far as those
dealing with the business are concerned, in all respects
a partner.
The courts in thus interpreting the statutes, although
they made an American partnership with limited
members something very diffi cult from the French

Societe in Commandite from which the idea of the


original statutes was derived, unquestionably carried out
the intent of those responsible for their adoption. This is
shown by the very wording of the statutes themselves.
For instance, all the statutes require that all partners,
limited and general, shall sign the certifi cate, and nearly
all state that: If any false statement be made in such
certifi cate all the persons interested in such partnership
shall be liable for all the engagements thereof as general
partners.
The practical result of the spirit shown in the language
and in the interpretation of existing statutes, coupled with
the
fact that a man may now lend money to a partnership
and take a share in the profi ts in lieu of interest running
serious danger of becoming bound for partnership
obligations, has, to a very great extent, derived the
existing statutory provisions for limited partners of any
practical usefulness. Indeed, apparently their use is
largely confi ned to associations in which those who
conduct the business have not more than one limited
partner.
One of the causes forcing business into the corporate
form, in spite of the fact that the corporate form is illsuited to money business conditions, is the failure of the
existing limited partnership acts to meet the desire of the
owners of a business to secure necessary capital under
the existing partnership form of business association.
The draft herewith submitted proceeds on the following
assumptions:
First: No public policy requires a person who contributes
the capital of a business, acquires an interest in the profi
ts, and some degree of control over the conduct of
business, provided creditors have no reason to believe
at the times their credits were extended that such person
was so bound.
Second: That persons in business should be able, while
remaining themselves liable without limit for the
obligations contracted in its conduct, to associate with
themselves, others who contribute to the capital and
acquire rights of ownership, provided that such
contributors do not compete with creditors for the assets
of the partnership.
The attempt to carry out these ideas has led to the
incorporation into the draft submitted of certain features,
not found in, or differing from, existing limited partnership
acts.
First: In the draft the person who contributes the capital,
though in accordance with custom called a limited
partner, is not in any sense a partner. He is, however, a
member of the association. (See Sec. 1).
Second: As limited partners are not partners securing a
certificate, the association is formed when substantial
compliance in good faith is had with the requirements of
a certificate. (Sec. 2[2]). This provision eliminates the
difficulties which arise from the recognition of de facto
associations, made necessary by the assumption that
the association is not formed unless a strict compliance
with the requirements of the act is had.
Third: The limited partner not being in any sense a
principal in the business, failure to comply with the
requirements of the act in respect to the certifi cate,
while it may result in the non-formation of the
association, does not make him a partner or liable as
such. The exact nature of his liability in such cases is set
forth in Sec. 11.
Fourth: The limited partner, while not as such in any
sense a partner, may become a partner as any person
not a member of the association may become a partner,
and, becoming a partner, may nevertheless restrain his
rights as limited partner this last provision enabling the
entire capital embraced in the business to be divided
between the limited partners, all the general partners
being also limited partners.
(Sec. 12).

Fifth: The limited partner is not debarred from loaning


money or transacting other business with the partnership
as any other non-member; provided he does not, in
respect to such transactions, accept from the partnership
collateral security, or receive from any partner or the
partner of the partnership any payment, conveyance,
release from liability, if at the time the assets of the
partnership are not suffi cient to discharge its obligation
to persons not general or limited partners. (Sec. 13).
Sixth: The substitution of a person as limited partner in
place of an existing limited partner, or the withdrawal of a
limited partner, or the addition of new limited partners,
does not necessarily dissolve the association (Secs.
16[2b]); no limited partner, however, can withdraw his
contribution
until all liabilities to creditors are paid. (Sec. 16[1a]).
Seventh: As limited partners are not principals in
transactions of the partnership, their liability, except, for
known false statements in the certifi cate (Sec. 6), is to
the partnership, not to the creditors of the partnership.
(Sec. 17). The general partners cannot, however, waive
any liability of the limited partners to the prejudice of
such creditors.
Art. 1844.
(1) Requisites in the Formation of a Limited
Partnership
Two important things are needed:
(a) The signing under oath of the required certifi cate
(with all the enumerated items), and
(b) The fi ling for record of the certifi cate in the Offi ce of
the Securities and Exchange Commission.
(2) Non-Fulfi llment of the Requisites
If the proposed limited partnership has not conformed
substantially with the requirements of this article, as
when the name of not one of the general partners
appear in the fi rm name, it is not considered a limited
partnership but a general partnership. This is because a
firm transacting business as a partnership is presumed
to be a general partnership.
(3) Effect if Only Aggregate Contribution Is Stated
The law says that the contribution of each limited partner
must be stated. Therefore if the aggregate sum given by
two or more limited partners is given, the law has not
been complied with.
(4) Effect of Omitting the Term Limited in the Firm
Name
The law requires the firm name to have the word
Limited. If this provision is violated, the name cannot
be considered the firm name of a limited partnership.
Art. 1845.
(1) What the Limited Partner Can Contribute
Note that a limited partner is not allowed to contribute
industry or services alone.
(2) Industrial Partner Can Join
An industrial partner can become a general partner in a
limited partnership, for the article speaks only of a
limited partner.
Art. 1846.
Non-Inclusion of Name of the Limited Partner
Note that a limited partner violating this article is liable as
a general partner to innocent third parties, without
however the rights of a general partner.
Art. 1847.
Liability for a False Statement
This speaks of liability for a false statement. The person
who suffers loss can sue for damages.
Art. 1848.
Effect of Taking Part in the Control of the Business
(a) The following acts do not constitute taking part in the
control of the business:

1) mere dealing with a customer.


2) mere consultation on one occasion with the general
partners.
(b) The following have been held to constitute taking
part in the control of the business:
1) selection of who will be the managing partners.
2) supervision over a superintendent of the business of
the firm.
(c) Participation in the control of the business makes the
limited partner liable as a general partner without
however getting the latters rights
Art. 1849.
(1) When Additional Limited Partners May Be
Admitted
Note that even after a limited partnership has already
been formed, the fi rm may still admit new limited
partners, provided there is a proper amendment to the
certifi cate.
(2) Effect of Failure to Amend
If additional limited partners are taken in, without proper
amendment of certifi cate with the SEC, this does not
necessarily mean the dissolution of the limited
partnership.
Art. 1850.
(1) Acts of Strict Dominion
Note that as a rule, in the instances enumerated, the
general partners (even if already unanimous among
themselves) must still get the written CONSENT or
RATIFICATION of ALL the limited partners.
Reason: In a sense the acts are acts of strict dominion
or ownership, and are not generally essential for the
routine or ordinary conduct of the firms business.
(2) Confl icts Rule Governing Capacity of the Limited
Partner
If a general partner in a limited partnership goes abroad,
his capacity to bind the firm is governed by the law of the
place where the limited partnership was formed.
Art. 1851.
Rights of a Limited Partner
(a) A limited partner necessarily has lesser rights than a
general partner. These rights are enumerated in the
Article.
(b) Note however that among other things he also has
the right to have dissolution and winding up by decree of
the court.
(c) He cannot however bind the fi rm by a contract
Art. 1852.
(1) Contributor Who Erroneously Believes He Has
Become a Limited Partner
Example:
A, B, C, D, and E agreed to form a limited partnership,
with the fi rst two as general partners and the rest as
limited partners, but as recorded in the Securities and
Exchange
Commission and in the certifi cate, A and B were really
named general partners, but only C and D were included
as limited (special) partners. E, who had contributed
money, was LEFT
OUT. If E erroneously believes that he has become a
limited partner (erroneously, for clearly, he is not) and
thereupon exercises the rights of a limited partner, he
should not generally be considered as liable as a
general partner (general because the public cannot be
blamed for not considering him a limited partner).
(2) When He Becomes Liable As a General Partner
In the example given, however, he can still be liable as
a general partner:
(a) unless on ascertaining the mistake, he promptly
renounces his interest in the profi ts of the business, or
other compensation by way of income; or

(b) unless, even if no such renouncing is made,


partnership creditors are NOT prejudiced.
(3) Limited Partner Who Participates in the Control
Cannot
Take Advantage of the Article
The person referred to under Art. 1848 cannot take
advantage, naturally, of Art. 1852.
Art. 1853.
(1) General Limited Partner
Note that a person may be a general and a limited
partner at the same time, provided same is stated in the
certifi cate.
(2) Rights
Generally, his rights are those of a general partner
(hence, third parties can go against his individual
properties).
EXCEPTION: Regarding his contribution (like the right to
have it returned on the proper occasions) he would be
considered a limited partner, with the rights of a limited
partner, insofar as the other partners are concerned.
Art. 1854.
Right of a Limited Partner to Lend Money and
Transact
Other Business With the Firm
(a) Note that 3rd parties are always given preferential
rights insofar as the fi rms assets are concerned.
(b) Note also that while the limited partner, in the case of
a claim referred to in the article, is prohibited to receive
or hold as COLLATERAL SECURITY any partnership
property, still he if not prohibited to purchase
partnership assets which are used to satisfy partnership
obligations towards third parties.
Art. 1855.
(1) Preference to Some Limited Partners
(a) Note that preference can be given to some limited
partners over the other limited partners.
(b) However, the preference must be stated in the
certificate.
(2) Nature of the Preference
This preference may involve:
(a) the return of contributions;
(b) compensation;
(c) other matters.
Art. 1856.
Profi t or Compensation of Limited Partners
(a) Whereas Art. 1856 speaks of profi t or compensation
by way of income, Art. 1857 deals generally with the
return of the contributions.
(b) Note that for Art. 1856 to apply, partnership assets
must be in excess of partnership liabilities to 3rd
persons, not liabilities to partners.
Art. 1857.
(1) When Contributions of Limited Partners Can Be
Returned
(a) The 1st paragraph deals with the CONDITIONS that
must exist before contributions (or part thereof) by a
limited partner can be returned to him.
(b) The second paragraph deals with the TIME when
such contributions can be returned, provided that the
conditions are complied with.
(c) Note that as a rule, even if a limited partner has
contributed property, he has the right to demand and
receive
CASH in return.
(d) If paragraph one is violated, previous creditors can
sue, but they must allege and prove the non-existence of
the CONDITIONS. Among these in the same category
as previous creditor is the assignee in insolvency of a
bankrupt limited partnership.
(2) Liability of a Limited Partner Who Has Withdrawn

Suppose a limited partner withdraws rightfully his


contribution (all conditions being fulfi lled, particularly the
complete solvency of the fi rm as of the time of
withdrawal) and the certifi cate is amended properly,
would he still be liable to previous creditors if later on the
fi rm becomes insolvent?
ANS.: Yes, if by chance, the very next day the
partnership assets are all destroyed by an earthquake,
etc., it is unfair for him to keep the cash, and leave the
creditors with nothing. His contribution (even if already
returned to him) is to be treated as a trust fund for the
discharge of liabilities.
Moreover, the sum should include the interest
presumably earned.
[NOTE: Future creditors cannot make use of the
principle enunciated in the above-cited case in view of
the recorded amended certifi cate, except of course if
the money had been wrongfully returned to the limited
partner.
Art. 1858.
(1) Liabilities of a Limited Partner
(a) This is a new provision of the new Civil Code.
Source: Sec. 17, Uniform Limited Partnership Act.
(b) A and B are limited partners of a partnership. In the
certificate, it was stated that A contributed P1.8 million
when as a matter of fact he had given only P1.5 million.
In the certificate too is a promise made by B to pay
P200,000 additional contribution on Dec. 1, 2004.
Should A and B make good the P300,000 and P200,000
respectively?
ANS.: Yes, A should pay now; B on Dec. 1, 2004.
(c) May the liabilities in the preceding problem be waived
or compromised?
ANS.: Yes, but two conditions must be followed:
(a) All the other partners must agree.
(b) Innocent third party creditors must not be prejudiced.
They are innocent when their claim for extension of
credit was before the cancellation or amendment of the
certifi cate.
(2) Problem Involving Liability to Creditors
A, a limited partner, received the return of his
contribution on the date stated in the certifi cate. It was
discovered that the remaining assets were insuffi cient to
pay two creditors,
X and Y. Xs claim arose before the return; Ys claim
arose after the return. Should A be compelled to give
back what he had received?
ANS.: I distinguish:
(a) Xs claim should be satisfi ed out of what has been
returned to A.
Reason: Xs claim arose before the return. If there is a
balance, it should be returned to A. If there is a defi cit, A
is not liable for this because he is only a limited partner.
(b) Ys claim does not have to be satisfi ed from what
has been returned to A as contribution.
Reason: His claim arose after the return. Ys claim
should be directed against the general partners.
Art. 1859.
(1) Assignment of a Limited Partners Interest
(a) This is a new provision of the new Civil Code.
Source: Sec. 19, Uniform Limited Partnership Act.
(b) May the interest of a limited partner be assigned?
ANS.: Yes. (Par. 1, Art. 1859).
(c) Does the assignee of the interest of the limited
partner become necessarily a substitute partner?
ANS.: No.
1) In some cases, he becomes one.
2) In others, he remains a mere assignee.
2) Some Problems
(a) A, a limited partner, assigned his interest to B. In the
certificate, A was expressly given the right to give the
assignee the right to become a substituted limited
partner.

Is B now a substituted limited partner?


ANS.: Not yet. He has to wait until the certificate is
appropriately amended.
(b) A, a limited partner, assigned his right to X. In the
certificate, A was not given the right to give his assignee
the right to become a substituted limited partner. How
can X acquire said right to become a substituted limited
partner?
ANS.: Only if all the members of the partnership so
consent. If they do consent, X acquires the right to
become a substituted limited partner, BUT is not yet one,
until after the certificate is appropriately amended.
(c) Suppose in problem (b) X was not given the right to
become a substituted limited partner by the partners,
what will be his status and his rights?
ANS.: He will be a mere assignee. He has NO RIGHT.
1) to require any information or account of the
partnership transactions;
2) to inspect the partnership books. BUT, he has the
right to receive the share of the profits or other
compensation by way of income, or the return of his
contribution to which his assignor would otherwise be
entitled.
(3) Substituted Limited Partner
He is a person admitted to all the rights of a limited
partner who has died or has assigned his interest in a
partnership.
(4) Some Problems
(a) Is a substituted limited partner responsible for the
liabilities of his assignor?
ANS.: Yes, except those liabilities of which he was
ignorant at the time he became a limited partner and
which could not be ascertained from the certificate.
(b) A, a limited partner, assigned his interest to X, who
subsequently became a substituted limited partner. Is
A completely relieved of all his liabilities to the partner to
the partnership?
ANS.: No. A is still liable under Art. 1847 to a person who
relies on a false statement in the certificate, and under
Art. 1858 to creditors who extended credit or whose
claims rose before the assignment.
Art. 1860.
Some Causes for the Dissolution of a Limited
Partnership
(a) This is a new provision of the new Civil Code.
Source: Sec. 20, Uniform Limited Partnership Act.
Keyword: DRICI (death, retirement, insolvency, civil
interdiction, insanity of a GENERAL partner)
(b) Example:
A, B, C, D, and E were partners, A and B being
general partners, and the rest, limited partners. A dies.
Is the partnership dissolved?
ANS.: Yes, unless it is continued by the remaining
general partners.
Query: When may the remaining general partners
continue the business?
ANS.:
1) If the right to do so is stated in the certificate; or
2) If all the members consent.
BUT, at any event, there should be an amendment of the
certificate.
[NOTE: The instances set forth in Art. 1860 (retirement,
etc.) do not apply in the case of the limited partner, for in
such a case, the fi rm is not dissolved.
Art. 1861.
(1) Death of a Limited Partner
(a) This is a new provision of the new Civil Code.
Source: Sec. 21, Uniform Limited Partnership
Act.
(b) A, a limited partner, while still alive contracted certain
liabilities as such. Is his estate liable for them?
ANS.: Yes. (2nd par., Art. 1861, Civil Code).
(2) Problem

A, a limited partner, was given the right to constitute his


assignee as a substituted limited partner. On his death,
may his administrator do the same?
ANS.: Yes. Furthermore, said administrator shall have all
the rights of a limited partner for the purpose of settling
the estate of the deceased.
Art. 1862.
(1) Charging the Interest of a Limited Partner
This is a new provision of the new Civil Code.
Source: Sec. 22, Uniform Limited Partnership Act.
(2) Example
A is a limited partner who is indebted to X. X applies to
the court to charge the interest of A in the partnership.
May the interest charged be redeemed by partnership
property?
ANS.: No. The law says that the interest may be
redeemed with the separate property of any general
partner, but cannot be redeemed with partnership
property.
Art. 1863.
Payment of Liabilities of the Limited Partnership
(a) This is a new provision of the new Civil Code.
Source: Sec. 23, Uniform Limited Partnership Act.
(b) Notice that profi ts are given priority over capital.
Art. 1864.
(1) When Certifi cate Is Cancelled or Amended
This is a new provision of the new Civil Code.
Source: Sec. 24, Uniform Limited Partnership Act.
(2) Cancellation
When the partnership is dissolved, or when all the
limited partners cease to be limited partners, the certifi
cate shall be cancelled, not merely amended. This is
obvious for if there be no more limited partners, the
limited partnership cannot exist as such. The writing to
cancel a certifi cate shall be signed by all members. (Art.
1865, 2nd par.).

Art. 1865.
(1) Requisites for Amending or Cancelling the Certifi
cate
This is a new provision of the new Civil Code.
Source: Sec. 25, Uniform Limited Partnership Act.
(2) Problems
(a) X, a limited partner, assigned his interest to Y, who
thereby acquired the right to be a substituted limited
partner. Aside from the others, should X and Y sign the
amendment?
ANS.: Yes.
(b) In the preceding problem, suppose X refuses to sign
the amendment, may Y petition the court to order the
court to order the amendment?
ANS.: Yes.
Art. 1866.
When Contributors (Other Than General Partners)
Should Be Made Parties to Proceedings
The Article is self-explanatory.
Art. 1867.
Transitional Provisions on Limited Partnerships
(a) This is a new provision of the new Civil Code.
Source: Sec. 30, Uniform Limited Partnership
Act.
(b) On June 1, 1946, a limited partnership was formed.
May it become a limited partnership under the new Civil
Code?
ANS.: Yes, by following the conditions in Art.
1867.
(c) Suppose the limited partnership in question (b) does
not want to become one under the new Civil Code, what
laws will govern said partnership?
ANS.: The old law.