Law on Partnership, Agency and Trust

Activity : Case Analysis(Problem based approach)

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Learning Objectives :
a) To be able to craft an accurate and logical answer to a given set of questions in a case problem by
spotting the relevant issues and separating them from the irrelevant ones.
b) To draw up meaningful and significant questions from the cases of other groups
c) To integrate ones learnings in the different subjects in the course
Rules :
1. You are given a maximum of 5 minutes to present and answer a given problem. (It is up to you how to
present the problem : either plain reading, skit ,video, voice over or any other creative mode that you can
think of. )
2. You are also given time to ask prepared questions for another group you are assigned to interpellate. You
are given 3 minutes for this.
3. A copy of your answer to your case problem shall be submitted to me together with your crafted questions
for the other group.
4. The group assigned to ask questions must also be ready with their respective answer, if it turns out that the
answer given by a group is not satisfactory.
5. In answering the problem, dont forget to mention the legal provision/articles applicable or legal precept
applicable.
6. The leader is assigned to ensure that everyone participates. He/she will make sure that everyone
participates either in the questioning or in answering the problem.
Case 1
MAROSA Company, is a registered general partnership business engaged in the cosmetics distribution business
with a term of 10 years. It is comprised of May, Rona and Sam. Rona and Sam are both capitalist partners in the
business.
On the sixth year of MAROSA, May, a capitalist-industrial partner was charged by her husband, Dick, for adultery.
She was later on convicted for the crime of adultery with the penalty of prision correccional in its maximum period.
To add to her woes, May also received a charging order for her interest in the partnership from the court in favor of X
Corp. for her unpaid loan. Apparently, she needed much funds to spend for her clandestine trysts and expensive
rendezvous with her paramour. She even misappropriated the collection of P 500,000 received from ABC Inc., one of
their creditors.
When she was already behind bars, her two other partners proceeded with applying for the judicial dissolution of
MAROSE Company despite the non expiry of its ten year term. It cited as basis the conviction by final judgment of
the court in the adultery case.
ABC Inc., a judgment creditor of May also initiated a judicial dissolution of the partnership citing the charging order
issued by the court in his favor.

a)
b)

Do you think Rona and Sam has basis for the judicial dissolution of the partnership? Can they also
proceed with extrajudicial dissolution?
How about ABC Inc., the judgment creditor, is there a legal basis for the application of judicial dissolution?

Case 2

Let us say there are three law partners who started as friends but, as time goes by, two of the partners want nothing
more to do with the third. This third partner is Rody who apparently got a windfall when he received a P15 million
professional fee from a 15 year old expropriation case resolved in his favor. These three law partners used to be
associates of one of the big law firms in Cebu. Rody, at that time was the counsel in charge of an expropriation case
handled by the law firm. When Rody and his two colleagues, decided to put up their own law firm, the client decided
to stick out with Rody as his personal counsel.

Law on Partnership, Agency and Trust

Activity : Case Analysis(Problem based approach)
The partnership agreement provides that Any member may be expelled from the law firm with or without cause by a
majority vote of the partners representing the controlling interest. Among the causes of expulsion mentioned are as
follows :

the partner engaged in wrongful conduct that adversely and materially affected the partnership business

the partner materially and willfully breached the partnership agreement, or

the partners conduct makes it not reasonably practicable to carry on the partnership business with that
partner.

In this case, each of Rodys partners had 30% interest , while the latter had 40% interest.
Unfortunately, there was no agreement among the three regarding the expropriation case that Rody handled. The
other two presumed that since the case continued to be handled by Rody using the facilities and staff of the firm, he
will also share with them the boon according to the profit sharing agreement. Alas, Rody gave them only a million
each.
The two partners voted to expel Rody from the partnership.
a)

Rule of the validity of the expulsion. If you were Rody what are your next legal moves?

b)

Is there a basis also on the part of Rodys partners to resort to judicial dissolution? If so, explain.

Case 3
MAN Company is comprised of Mario, Al and Ned. Mario and Al are active partners while Ned is the silent partner in a
general partnership engaged in running a hardware store. One day, Al informed Mario that he is already insolvent as
a result of mounting bills he had to pay when he had a heart bypass, a year before. His health problems depleted his
resources. Ned did not know of Als insolvency.
After six years of being uninvolved in the management of the partnership business, Ned purporting to act on behalf of
the partnership, purchases on installments 10,000 wheelbarrows for their hardware store from one of the companys
suppliers. He actually implemented one of the plans of MAN a year before as decided during their meeting; but this
was not pushed through because Al became sick. Mario is furious because it will probably take years to sell the
wheelbarrows. Besides, he is very much concerned about Als insolvency and Neds actions just added to his woes.
When the supplier came to collect the payment of the wheelbarrows Mario refused to pay. He claimed that at the time
the transaction was entered into by Ned, there was already a notice of dissolution published in Sunstar Daily as a
result of the insolvency of one of their partners. He also claimed that Ned is merely a silent partner and therefore his
acts will not bind the partnership.
a)
b)

Is Mario correct? May Neds actions bind the partnership considering that at the time of his transaction, there
was already a notice of dissolution published in the newspaper? (Take note that Ned is a silent partner)
Would there be a difference in your answer, if there was no such notice of dissolution published in the
newspaper?

Case IV
Natalie, Dylan and Alex are partners in Charlies Angels Printing Venture. Alex later on withdrew from the partnership,
but no such announcement or publication was done in newspapers. The 3 remaining partners continued the
partnership business under its partnership name and using the properties of the business. In fact the 2 remaining
partners entered into a memorandum of agreement with Alex that undertook to release the latter from any "Charlies
Angels Printing Venture" to third persons. Since Natalie and Dylan owed Alex the amount of P 500,000 prior to her
withdrawal, they executed a chattel mortgage over certain printing equipment. There was later on a judicial
foreclosure proceeding where Alex was the highest bidder. Five creditors filed an action to annul the chattel mortgage
of the properties of the partnership executed by Natalie and Dylan in favor of Alex. The three ladies contended that
the chattel mortgage cannot be annulled by the creditors. Alex also separately invoked good faith.
a)

Do you agree that the withdrawal of Alex from the partnership dissolved and terminated the partnership
Charlies Angels Printing Venture ?

Law on Partnership, Agency and Trust

Activity : Case Analysis(Problem based approach)
b)

Do you think there is merit in the action filed by the five creditors to annul the chattel mortgage? Do you think
Alex is liable to the 5 creditors for the properties of the partnership which were mortgaged to her and
eventually bought in a foreclosure sale?

Case V
Huey, Duey and Louie are partners with the following contributions: P 20,000,P30,000 and P 50,000, respectively. On
dissolution, the assets of the partnership amounted to P P 1,000,000. The partnership owes the following amounts to
these creditors : Harry P 100,000; Ronald- P 200,000 and Hermione P 50,000 and to Louie P 50,000.00. In this
particular case, Louies death caused the dissolution of the partnership
a)
b)

Explain and illustrate how the accounts of the partnership shall be settled detailing the payment to creditors,
the sharing of profits and the return of contributions if any.
What if in the example given above the liabilities of the partnership amounted to P 1.5 million, how will the
partnership accounts be settled?