WWW Partnership EH 402 LLB 3

July 4, 2016
OUTLINE:
Purpose of Registration when capital of P3,000 in money or
property is contributed to partnership for convenience
Co-ownership vs. Partnership
Went back to illustration (on previous session) regarding coownership of apartment.
Classification of Partnership (again)
Universal vs. Particular Partnership
Types of Particular partnership
Types of Partnership at will
Illustration on Particular Partnership (20 hectares, cars,
carabaos)
Illustration on Inheritance of Property
Illustration on the lotto
Presumption that it is a Universal Partnership of all profits if
no stipulation as to what Universal partnership- least
transmission of rights
-DISCUSSIONSir: Going back to the requirement P 3,000 or more should
be registered with SEC, even if we do not register the
partnership still exist because it is consensual. What is the
point of registration?
Student: For CONVENIENCE
Sir: What is convenience?
Sir: You are recorded in the public so the 3rd parties could
determine:
1
Assets
2
Nature of the business conducted
3
Personalities involve
All these records are available if the partnership deals with
the public, the public could easily check.
Once you registered with the SEC you get a Certificate of
Registration which is required to be exhibit or displayed. So,
if you are a public you feel convenient dealing with the
partnership. Thats what it means FOR CONVENIENCE.
If you are registered with the SEC, you get a license and
business permit from the City Hall they would require SEC
REGISTRATION.
It would be more convenient for the city hall to check who
you are if you have a SEC REGISTRATION. Thats the
meaning of for convenience.
But although registration is important, the partnership still
exists even if not registered. They can still deal.
But careful because the public might require you a SEC
Registration.
Illustration: If you are a car dealer, and you heard the City
Hall is buying a fleet of cars to be given to the police officers,
you might offer to sell but City Hall will entertain offers only
from registered companies.

ART. 484: There is co-ownership whenever the ownership of

an undivided thing or right belongs to different persons.
PARTNERSHIP
ART. 1767: By the contract of partnership two or more
persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the
profits among themselves.
Sir: How do you
ownership?

distinguish Partnership from Co-

(1) Creation. Co-ownership is generally created by law. It

may exist even without a contract, but partnership is always
created by a contract, either express or implied;
(2) Juridical personality. A partnership has a juridical
Personality separate and distinct from that of each, while a
co-ownership has none;
(3) Purpose. The purpose of a partnership is the
realization of profits, while in co-ownership, it is the common
enjoyment of a thing or right which does not
Necessarily involve the sharing of profits;
(4) Duration. Under the law, there is no limitation upon
the duration of a partnership while in co-ownership, an
agreement to keep the thing undivided for more than ten
years is not allowed;
(5) Disposal of interests. A partner may not dispose of
his individual interest in the partnership so as to make
the assignee a partner unless agreed upon by all of the
partners, while a co-owner may freely do so;
(6) Power to act with third persons. In the absence of
any stipulation to the contrary (Art. 1803.), a partner may
bind the partnership, while a co-owner cannot represent the
co-ownership; hence, a judgment secured against only one of
the co-owners will not bind the other co-owners; and
(7) Effect of death. The death of a partner results in the
dissolution of the partnership, but the death of a co-owner
does not necessarily dissolve the co-ownership.
Sir: Very well, that is the very exhaustive distinction of coownership and partnership. Now we will apply it to the
problem that we left, what was the problem again?
Student: The grandfather of James and Richard left them
with an apartment. At first, James and Richard shared from
the rentals of the property.
Sir: Very good, happy days are here, we share rentals.
Alright, first question was?
Student: The first question was that, are Richard and James
partners?
Sir: Answer was?
Sir: There was no agreement. Thats the answer. There was
no agreement. It was simple. Do not complicate the question.
Are they partners? No. Why? They are not partners because
there was no agreement. Alright, next phase?

CO-OWNERSHIP

Student: The next scenario was that, James gave Richard

100 pesos for the reimbursement of delivering James share
of the rentals.
Sir: Ahh, I give you your share of the rentals; the recipient
simply said oh, here is your 100, tip. Were they now
partners? Because, one was receiving already not only his
part of the rentals, but his part of the share of the other. But
we said?
Student: We said that they are still not partners, because
there was still no agreement.
Student: The next scenario was that, we increased the
amount from 100 to 500. The question was that, with the
increase of the amount, did the relationship between James
and Richard become a partnership? We answered again that
no, the increase of the amount from 100 to 500 did not
convert their relationship into partners because they still did
not agree.
Student: So, next was that James and Richard, they shared
the rentals of the apartment, however, after they made use of
the fruits of the apartment, they realized that they havent
paid VECO for the electric bills.
Sir: Ahh. Problem now came. After happy days, problem
came. Okay VECO. What happened?
Student: So they owe VECO 50k. Richard was having
problems so he was forced to ask James to contribute to the
50k that they owe to VECO. So, we then asked whether or not
they are partners.
Sir: After both of them contributed, are they now partners?
Student: They are still not partners. The contribution was for
maintenance.
Sir: To keep up, to keep the building lighted. It is for upkeep
and maintenance. Alright, go ahead.
Student: After that, the next scenario was, the apartment
was destroyed because of fire. Richard and James decided to
rebuild the apartment..( ge cut ni sir)
Sir: Total destruction?
Student: At first, the apartment was not totally destroyed.
So we answered that they are still not partners because they
still did not agree. But finally, the apartment was totally
destroyed. So, we asked whether or not they can now
become partners. That is the question that we need to answer
today.
One of the answers was that, the co-ownership has ceased
because of the destruction of the apartment. So when Richard
and James contributed money to rebuild the apartment, their
relationship is that of partners because in their actions or
conducts, it was apparent that they rebuilt the apartment to
share the profits. Since the co-ownership has been dissolved,
then, at that point when they have shared the profits or
intended to share the profits, a contract of partnership has
already been entered.

Student: Lesson of the story.

In other words, destruction of the subject matter of the coownership relationship terminates their rights as co-owners,
terminates co-ownership. Destruction of the thing, being coowned, terminates the co-ownership. So if ever they decided
once again to restore, rebuild, or come out with a new
structure by contributing, their behavior would now indicate
that there is now a partnership. Okay? Because the thing coowned is gone.
Sir: A little twist of the story. If they did not rebuild, and
therefore did not contribute, the building is totally gone, and
somebody saw the opportunity, tried to rent the parcel of land
where the building was, and said parking lang mi dira boss,
abang lang mi. So it was now a parking lot. Again, the two of
them equally receiving the total proceeds of the parking lot.
Are they now partners again?
Student: They are still co-owners in that scenario. Because,
the property that is being rented is a co-owned property.
Richard and James did not contribute any money, property or
industry to a common fund with the intention to divide the
profits among themselves. There is no partnership. More
importantly, they are not partners because, THERE WAS NO
AGREEMENT.
Sir: alright, no agreement. They are still co-owners, no
longer of the apartment, but they are still co-owners of the
land. Because, the land still exist. Co-ownership remains as to
the land.
Sir: Classification of Partnership?
As to the extent of its subject matter

Universal partnership refers to all the present

property or to all profits.

Universal partnership of all present

property in which the partners
contribute all the property which actually
belongs to them to a common fund, with
the intention of dividing the same among
themselves, as well as the profits they may
acquire therewith.

Universal partnership of profits which

comprises all that the partners may acquire
by their industry or work during the
existence of partnership.

Particular partnership which has for its object

determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or
vocation.
As to liability of the partners

General partnership consisting of general

partners who are liable pro rata and subsidiarily and
sometimes solidarily with their separate property for
partnership debts.

Limited partnership 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
As to its duration

Partnership at will which no time is specified and

is not formed for a particular undertaking or venture
and which may be terminated anytime by mutual
agreement of the partners, or by will of any one
partner alone; or one for a fixed term or particular
undertaking which is continued by the partners after
the termination of such term or particular
undertaking without express agreement.
Partnership with a fixed term which the term
for which the partnership is to exist is fixed or
agreed upon or formed for a particular undertaking,
and upon the expiration of the term or completion of
the particular enterprise, the partnership is
dissolved, unless continued by the partners.

As to the legality of its existence

De jure partnership which has complied with all

the legal requirements for its establishment

De facto partnership which has failed to comply

with all the legal requirements for its establishment
As to representation to others

Ordinary or real partnership which actually

exists among the partners and also as to third
persons

Ostensible partnership or partnership by

estoppel which in reality is not a partnership but
is considered a partnership only in relation to those
who, by their conduct or admission, are precluded to
deny or disprove its existence.
As to publicity

Secret partnership wherein the existence of

certain persons as persons is not made known to the
public by any of the partners

Open or notorious partnership whose existence

is made known to the public by the members of the
firm
As to purpose

Commercial or trading partnership formed for

the transaction of business

Professional or non-trading partnership

formed for the exercise of a profession
Sir: Again universal partnership. Universal partnership maybe
further classified into:
a) Universal partnership as to all property
b) Universal partnership as to profits

b)

One for a fixed term or particular undertaking which

is continued by the partners after the termination of
such term or particular undertaking

Illustration: If 3 persons agree to form a partnership and

one of the partners contributes 20 hectares property, another
partner contributes 20 carabaos and the last one contributes
20 cars. What type of a partnership do we have?
Student: It is a Particular Partnership which has for its object
determinate things. They specified the properties which they
would contribute into the partnership such as the 20 hectares
of land, 20 carabaos, and 20 cars.
Sir: Why not universal?
Student: It is not universal because in a universal
partnership, it refers to the contribution of all present
property and all its profits. Universal partnership could either
be Universal Partnership of all Present property or Universal
Partnership of profits.
Sir: NOT a Universal Partnership of all present property?
Student: No sir, because in a Universal Partnership of all
present property, the partners contribute all their present
properties to the partnership with the intention to divide it
among themselves, including its fruits and its income.
Sir: All right. Clearly, it is not a Universal Partnership of all
present property BECAUSE I DONT THINK THAT THESE ARE
THE ONLY PROPERTIES OF THESE PEOPLE HAVE, maybe he
has several other hectares but only contribute 20 hectares.
He has some other properties. Because in a UNIVERSAL
PARTNERSHIP OF ALL PRESENT PROPERTY?
Student: Because in a Universal Partnership of all present
property, partners contribute all their present property into a
common fund to divide it among themselves.
Sir: All right. ALL, meaning ALL. Heres all of me. Take all of
me. So, its all. Universal Partnership of all present property
simply means all. ALL? NO EXCEPTION?
Student: The partners may stipulate to exclude some other
things.
Sir: So NO LONGER ALL? I give you all, except. Thats no
longer all. In other words, JUST LIKE IN MARRIAGE, WHAT IS
YOURS IS YOURS, WHAT IS MINE IS MINE IS THAT THE
MEANING of a Universal Partnership of all present property?
Student: No sir. Rather its, what is mine is yours and what is
yours is mine.

How many types of particular partnership do we have?

Sir: Alright, its not universal because they contribute only

particular property.

Student: Three types of Particular partnership:

a) has for its object determinate things, their use or
fruits;
b) one for a specific undertaking; or
c) one for the exercise of a profession or vocation;

Illustration: So that, if the carabaos will now get pregnant

and 3 weeks after, baby carabaos came out. What happens?
Who will now own the baby carabaos? Lets say these
carabaos will have one baby carabao each. There will be 40
carabaos. Who will own the baby carabaos?

Sir: As to duration, we have two types. Partnership at will and

partnership of a fix term. How many types of Partnership
at will do we have?

Student: The Partnership. Because in a particular

partnership, we said that for its object there are determinate
things and its fruits. In that case, the fruits there are the
baby carabaos. They are natural fruits. That is in accordance
with the basic principle again in property that accessory
follows the principal.

Student: Two types of Partnership at will namely:

a) One where no time is specified and is not formed for
a particular undertaking;

Sir: Accessory follows the principal. Of course, we are talking

of general principles because if the parties agreed otherwise,
nothing can prevent the parties from agreeing. But if there
was no agreement, accessory follows the principal.
Illustration: So now if the cars will now stop running and will
need repairs, who will shoulder on the repairs?
Student: The partnership will pay for the repairs of the car
because it was already contributed to the partnership, so the
20 cars are already owned by the partnership.
Illustration: So if the 20 hectares of land are now destroyed
by landslide because of heavy rains. Continuous rains for
hours. It even affected the acquaintance party. So the
partnership now goes back to the contributor or owners of the
land, Oy! You promised to contribute parcels of land. The
land you contributed was already damaged. Can they do
that?
Student: No Sir. Because what he contributed was only the
specific 20 hectares.
Sir: So what happens to the partnership? Theres no more
place for the carabaos to pull the cars around. Where will they
pull the cars now? Because the 20 hectares have been
damaged by the landslide.
Lets simplify the question. Instead of the parcel of land, lets
kill all the 20 carabaos. Hit by lightning. All of the carabaos
are dead. Should the owner be required to contribute another
20 carabaos?
Student: If the carabaos are already delivered and already
deemed as contributed to the partnership, it already formed
part as the contribution of one partner.
Sir: So, can the partner be required to deliver another 20?
Student: I dont think so sir. What happens is that the
partnership must bear the loss. Meaning, if there is no more
carabaos to pull the 20 cars, the business will fail.
Sir: Business stops. Thats part
contribution, I have no obligation.
carabaos, take care of them. I will
another. Thats what I promised
carabaos.

of it. I have done my

I said, these are my 20
not be obliged to deliver
to contributeParticular

On the other hand, if they agreed again to enter to a

universal partnership of all present properties?
Student: The partners will contribute all the properties they
have in a common fund.
Illustration: One of these properties that the partner owned
at the time he entered into the contract is inherited from his
late grandfather and so because it was part of his present
properties, the partners said then that is now owned by the
partnership. But the partner said No no please. I will honor
the memory of my father. Please do not for it was given or I
inherited that from my father This building is earning from
several tenants for 1 million pesos a month. Who shall be
entitled to the 1 million? The contributing partner or the
partnership itself?

Student: In that instance sir, as Universal Partnership of all

Present Property, although there is a stipulation with regards
to inheritance, legacy and donation, as far as the inherited
property is concerned, it is already part of his current
property, it is not SUBSEQUENTLY acquired. In that instance
sir, it means that such building is now in the ownership of the
partnership.
Sir: Subsequently acquired, meaning?
Student: It was acquired after the partnership has been
formed.
Sir: The inheritance must
partnership was formed.

have been made after the

What about the fruits?

Student: as well as the fruits sir.
Sir: If it was subsequently acquired?
Student: If it was subsequently acquired, it is prohibited to
include such property in the Universal Partnership of all
Present Property although they may stipulate that the fruits
may be included. Without such stipulation, the fruits will
remain as their separate property.
Sir: So that going back to our entire discussion now, starting
from the 20 hectares of land, to the 20 carabaos, to the 20
cars, what kind of partnership was entered into?
Student: PARTICULAR PARTNERSHIP.
Sir: However, the partners clearly agreed that they will enter
into a universal partnership. So having agreed of that, what
do you think will be owned by the partnership?
Student: In that instance sir, it will fall under UNIVERSAL
PROPERTY OF PROFITS because there was no agreement as
to what kind of universal partnership it is and the law favors
the LEAST TRANSMISSION OF RIGHTS. Therefore only
those that they may acquire through their labor or industry
during the existence of the partnership will form part of the
partnership.
Illustration: So if one day one of the three partners walked
7 kilometers because there were no jeepneys available
because of the flood, he walked from City Hall to SM Seaside
just to buy a lotto ticket. And then the lotto ticket by divine
intervention because of his industry in going and running
towards SM, that lotto ticket won by 5 million. Question, who
owns the 5M?
Student: It would the partner who bought the ticket sir.
Universal Partnership of Profits requires that it should be
through his work or industry and it that instance it was more
of a chance and not through his work or industry thereby only
that partner is entitled to such profits.
Sir: Running 7 kilometers despite inclement weather, no
industry?
Student: Despite the running, we still wouldnt know whether
or not he will earn the money. So it is still by chance.

Sir: All right. It is still by chance despite running for 7 km.

thats not industry referred to.

CREDITS: Bangis, Barcenas, Canda, Lescabo,

Montecillo, Tatad, Timtim, Omar, and Osorio

Maylon,

Earlier you said that in the absence of any express

agreement, the universal partnership entered into must be
presumed to be only a UNIVERSAL PARTNERSHIP OF
PROFITS. Why?
Student: Because the law favors the least transmission of
rights.
Sir: And we learned that in obligations and contracts. If the
agreement is so vague that it will not be easy to determine
the true intention of the parties, that interpretation which
involves the least transmission of rights must be adopted.
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