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SECTION 2: PROPERTY RIGHTS OF A PARTNER (ARTICLES 1810-1814)

SECTION 3: OBLIGATIONS OF THE PARTNERSHIP WITH THE THIRD PERSONS (ARTICLES 1815-1827)
CHAPTER 4: LIMITED PARTNERSHIP CHAPTER 3: DISSOLUTION AND WINDING UP (ART. 1828-1842)

SUBMITTED TO:

MS. CHERRY LORQUE


SUBMITTED BY:

JAY ANN LASTIERRE CHARIZA ANGELINE TORREVILLA NIKKI VENIEGAS ROMELYN BALOYO SHAHANE PORRAS TRIXIE ANNE GIMARINO PAMELA CAMION

SECTION 2: PROPERTY RIGHTS OF A PARTNER (ARTICLES 1810-1814)

1.

Art. 1810. The property rights of a partner are:

1 2 3

His rights in specific partnership property; His interest in the partnership; and His right to participate in the management.

2.

Art.1811. A partner is a co-owner with his partners of specific partnership property.

1. A partner, subject to the provisions of this Title and any agreement between the partners, has an
equal right with his partners to posses specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners. 2. A partners right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property; 3. A partners right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws; 4. A partners right in specific partnership property is not subject to legal support under article 291.

3.

a. Art.1812. A partners interest in the partnership is his share of the profits and surplus.

b. Profit means the excess of returns over expenditure in a transaction or series of transactions; or the net income of the partnership for a given period of time. c. Surplus refers to the assets of the partnership after partnership debts and liabilities are paid and settled and the of the partners among themselves are adjusted. d. This interest is assignable by the partner in the absence of any agreement to the contrary, of being personal property. 4. a. Art.1813. A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitled the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail him of the usual remedies. b. Rights to assignee of partners interest. 1. To receive in accordance with his contract the profits accruing to the assigning partner. 2. To avail himself of the usual remedies provided by law in the event of fraud in the management. 3. To receive the assignors interest in case of dissolution; and

4. To require an account of partnership affairs, but only in case the partnership is dissolved, and such account agreed to by all partners.

5.

a. Art.1814 Without prejudice to the preferred rights of partnership creditors under article 1827, on due application to a competent court by any judgement creditor of a partner, the court which entered the judgement, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgement debt with interest thereon;

Example: A, B and C are partners. A personally indebted to X in the sum of P5,000.00. X filed a complaint against A and obtained from the court a final judgement in his favour.

b. The interest of the debtor-partner so charged may be redeemed with the separate property of any one or more of the partners, or with partnership property but with the consent of all the partners whose interests are not so charged or sold.

SECTION 3: OBLIGATIONS OF THE PARTNERSHIP WITH THE THIRD PERSONS (ARTICLES 1815-1827)

1. a. ART. 1815. Every partnership shall operate under a firm name, which May o may not include the name of one or more of the partners. Those who, not being members of the partnership include there names in the firm name, shall be subject to the liability of a partner b. The word firm is defined as the name, title, or style under which a company transact business; a partnership of two or more persons; a commercial house. In its common acceptation, the term implies a partnership. The term is also used in the synonymous with company. Importance of having a firm c. A partnership must have a firm name under which it will operate. A firm operate is necessary to distinguish the partnership which has a distinct and separate juridical personality (art. 1768) from the individuals composing the partnerships and from the other partnership, and thus, helps to facilitate business transactions by the partnership.

d. Right of partner to choose firm name The firm name of a partnership may be that of an individual partner, the surnames of all the partners, or the surname of one or the surnames of more of the members with the addition of and Company or it may consist of individuals names wholly distinct from the names of any of the members. e. The Supreme court had ruled that a partnership cannot continue to use in its firm name to the names of deceased partners for such used will run counter to art.1815 2. a. Art.1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts w\c may be entered into in the name and for the account of the partnership under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. Example: Facts: X company general partnership, purchased from A, a motor vehicle on instalment basis. Upon failure or the partnership to pay an instalment, A sued it and the five partners, B, C, D and E. B failed to file an answer and was declared in default. Subsequently on motion of A, the complaint was dismissed in so far as F was concerned. The rest of defendants failed to appear at hearing and were declared in default. b. PRO RATA-as used in law must be understood to mean equally or jointly and not proportionately w\c is its literal meaning because the pro-rating is based on the number of partners and not on amount of their contributions to the common fund subject to adjustment among the partners. c. It is subsidiary because the partners become personally liable only after all the partnership assets have been exhausted. d. The exemption of the industrial partner to pay losses relates exclusively to the settlement of the partnership affairs among the partners themselves and has nothing to do with the liabilities of the partners to third persons. An industrial partner is not exempted from liability to third persons of the debts of the partnership.

3.

ART. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except as among the partners.

A stipulation among the partners contrary to the pro rata and subsidiary liability expressly imposed by Article 1816 is void and of no effect insofar as it affects the rights of third persons. It is valid and enforceable only as among the partners. EXAMPLE: A, B and C are partners in a business. Each of them contributed P10,000.00 each. They stipulated that the liability of A shall not exceed his capital contribution. Thus, if the partnership assets have been exhausted and there still remains an unpaid balance of P9,000.00 in favour of creditor D, the latter can still recover P3,000.00 each from the partners as their stipulation cannot adversely affect him. However, since the agreement is binding among the partners, A is

entitled to credit from B and C for the amount of P3,000.00 paid by him to D. A, however, cannot recover his contribution of P10,000.00.

4. ART. 1818. For apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. b. An act of a partner which is not apparently for the carrying on of business of the partnership in the usual way does not bind the partnership unless authorized by the other partners. Except when authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to: c. 7 acts which require the consent of all of the partners 1. Assign the partnership property in trust for creditors or on the assignees promise to pay the debts of the partnership; 2. Dispose of the goodwill of the business; 3. Do any other ct which would make it impossible to carry on the ordinary business of a partnership; 4. Confess a judgement; 5. Enter into a compromise concerning a partnership claim or liability; 6. Submit a partnership claim or liability to arbitration; 7. Renounce a claim of the partnership. d. Usual way may be interpreted as meaning usual for the particular partnership or usual for similar partnerships. It is obvious that the extent of the implied powers of a partner to bind the partnership will vary with the nature of the business undertaken by the partnership.

5 ART. 1819. Where title to real property is in the partnership name, any partner may convey title to such
property by a conveyance executed in the partnership name; but the partnership may recover such property unless the partners act binds the partnership under the provisions of the first paragraph of article 1818, or unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner, in making the conveyance, has exceed his authority. EXAMPLE: Title in partnership name, conveyance n partnership name: A, B, and C are partners in a partnership known as X & Co. A sold a parcel of land registered in the name of X & Co. to D without express authority. The conveyance passes title to D, but X & Co. can recover the property if (a) the conveyance was not in the usual way of business or (b) D had knowledge of the fact that A had no authority even though the conveyance was made in the usual way of business. In no case may the partnership recover if D had, in turn, conveyed the property to E who had no knowledge of As lack of actual authority in making the conveyance to D. b. Where title to real property is in the name of the partnership, a conveyance executed by a partner, in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of the first paragraph of article 1818. EXAMPLE: Title in partnership name, conveyance in partners name: If the sale was executed by A in his own name to D, the latter does not become the owner of the land. He gets only the equitable interest of X & co., assuming that the selling of the land is in the usual course of business of the partnership. D would not be entitled even to the equitable interest if: (a) X & Co. is not engaged in the buying and selling of lands; or (b) D had knowledge of As lack of authority although the sale was made in the usual course of business. c. Where title to real property is in the name of one or more but not all the partners, and the record does not disclose the right of the partnership, the partners in whose name the title stands ma convey title to such property, but the partnership may recover such property if the partners act does not bind the partnership under the provisions of the first paragraph of article 1818, unless the purchaser of his assignee, is a holder for value, without knowledge. EXAMPLE: Title in name of one or more of partners, conveyance in name of partner or partners in whose name title stands: Although the parcel of land in question really belongs to the partnership X and Co., it is, however, registered in the name of A and the record does not disclose the right of X & Co. In this case, if A sold land in his own name to D, title is conveyed to D. The effect is the same as in paragraph 1.

d. Where the title to real property is in the name of one or more or all the partners, or in the third person in trust for the partnership, a conveyance executed by a partner in the partnership name, or in his name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of the first paragraph of article 1818. EXAMPLE: Title in the name of one or more or all partners or a third person in thrust for partnership, conveyance executed in partnership name or in name of partner: Suppose the parcel of land is in the name of A in trust for the partnership X & Co. or in his (As) name, the conveyance will pass only the equitable interest of X & Co., A, being a mere trustee of the partnership. The rule is the same as in paragraph 2. e. Where the title to real property is in the names of all the partners a conveyance executed by all the partners passes al their rights in such property EXAMPLE: Title in the name of all partners, conveyance in name of all partners: If the parcel of land is registered in the name of A, B and C, conveyance made by all of the partners to D will pass title to the property for the law say conveyance by all the partners passes all their rights in such property. The effect obviously would be the same thought the sale is not in the usual course of business of X & Co. f. Equitable interest or title is one duly recognized by law but in equity alone; it is a right or interest in property which is imperfect and unenforceable at law but which under well-recognized equitable principles should and is convertible into a legal right or title. 6.ART.1820. An admission or representation made by any partner concerning partnership affairs within the scope of his authority in accordance with this Title is evidence against the partnership. The admission of partner made during the existence of the partnership are binding against the partnership (and co-partners) when such admissions refer to a matter concerning partnership affairs and made within the scope of his authority. But when a partner makes admissions for himself only without purporting to act for the partnership he alone shall be chargeable with his admissions. After dissolution, admission made by a partner will bind the partnership only if necessary to wind up partnership affairs. EXAMPLE: 1. A borrowed P1,OOO.OO from B in whose favour the executed a promissory note. A made statement that he was acting for C and that the money was intended for C. C never authorized A to borrow money from B. The declaration of A that he was acting for C and that the money was intended for C is not admissible against C as to make him liable to B. 2. If A was really an agent of C in the transaction, then whatever is said or done by A while acting within the scope of his authority is admissible against C, his principal, the same as if C personally entered into the contract with B. 3. Assuming that A is a partner and C is the partnership, it is clear on the same legal principle, that the statement of A while transacting the business of the partnership within the scope of his authority is evidence against the partnership. 4. Where, however, A acted in his own name and B extended the loan on the personal credit of A, any admission made by A is not binding on C, the partnership. 5. Suppose, in the first example, A said on one occasion in the presence of D that he received the money or that the contract was entered into by A with his (Cs) consent. This statement can be testified to by D in litigation by B against C. 7. ART. 1821. Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership, committed by or with the consent of that partner. b. Three cases of knowledge of a partner.

(a.) (b.) (c.)


EXAMPLE:

knowledge of the partner acting in the particular matter acquired while a partner; knowledge of the partner acting in the particular matter then present to his mind; and

Knowledge of any other partner who reasonably could and should have communicated it to the acting partner. 1. A, B, and C are partners in partnership X & Co. D filed an action against X and Co. on a contract. The service of notice of the complaint made on A only, operates as service to the partnership or to all the partners. 2. A, acting for the partnership, bought a parcel of land from D. Before the sale, A acquired some knowledge that the land is involved in litigation in which E claims to be the owner. Nevertheless, A did not convey the information to the partnership. Later on, E was able to recover the land. In this case, As knowledge of the partnership. Hence, D is not liable.

The knowledge by A may have been acquired before he became a partner provided the same was then present to his mind. This proviso involves a question of fact and it may be difficult to prove that such knowledge was then present in As mind. It is believed, however, that once knowledge by the acting partner is shown, such knowledge must be presumed to be then present to his mind unless the partnership proves otherwise. 3. If B (he is not the acting partner) had the information and it is reasonable to believe that he could and should have communicated it to A (the acting partner), Bs knowledge also operates as knowledge of the partnership. However, if B acquired knowledge or notice before he became a partner, then, there is neither notice to nor knowledge of the partnership. 4. If A, in the second example, deliberately did not inform the partnership regarding the claim of E for a consideration paid or promised by D, the notice to or knowledge of A cannot be imputed to the partnership because the law says except in the case of a fraud on the partnership committed by or with the consent of that partner. c. Effect of notice to, or knowledge of a partner of matter affecting partnership affairs. Notice to or knowledge of any partner of any matter relating to partnership affairs operates as a notice or knowledge of the partnership except in case of fraud.

8. ART.1822.wher, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefore to the same extent as the partner so acting or omitting to act. 9. ART.1823. The partnership is bound to make good the loss: 1. Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and 2. Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership 10. Art. 1824. All the partners are liable solidarily with the partnership for everything chargeable to the partnership. 11. Art. 1825. a. Estoppel- is a bar which precludes a person from denying or asserting anything contrary to that, which has been established as the truth by his own deed or representation, either express or implied. b. Through estoppel, an admission or representation is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. c. A person not a partner may become a partner by estoppel, and thus be held liable to third persons as if he were a partner, when by words or by conduct the: (a) Directly represents himself to anyone as a partner in an existing partnership or in a none existing partnership (with one or more persons not actual partners) (b) Indirectly represents himself by consenting to another representing him as partner in an existing partnership or in a none existing partnership. Examples: A, B, and C are partners in X & Co., D represented him-self as a partner in X and Co. to E who, on the faith of such representation, extended credit to X and Co. D is a partner by estoppel. He is liable to E as though he is an actual member of x and Co.

d. If all the actual partner consented to the representation, then the liability of the person who represented and the actual partners is considered a partnership liability.

Example: If all the partners A, B, and c consented to the representation then a partnership liability results. This is a case of partnership liability results. This is a case of partnership by estoppels. All the partners and D are liable. Note that in this case there is an existing partnership and all the partners consented to the representation.

e. When there is no existing partnership and all those represented as partner consented to the representation, then, the liability of the person who represented himself to be a partner or who consented to such representation, is joint or pro rata.

Example: If only A and B consented to the representation, there is no partnership liability. Only A, B, and d are partners by estoppels. They are liable pro rata to E. f. When there is no existing partnership and not all but only some of those represented as partners consented to the representation or none of the partners in an existing partnership consented to such representation, the liability will be separate.

Example: But if D acted alone without the consent of A, b, and C, then he alone is liable to E. he is liable separately.

g. Estoppel does not create partnership. It must be emphasized that Art. 1825 does not create a partnership as between the alleged partners. A contract, express or implied, is essential to the formation of a partnership. The law considers them as partners and the association as a partnership only in so far as it is favorable to third persons by reason of the equitable principle of estoppels. 12. Art. 1826. A person admitted as a partner into an existing partnership arising before his admission as though he had been a partner a partner when such obligations were. Incurred, except that this liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary.

Example: A, B, and C are partners engaged in a drug store business. Their contribution is 10,000.00 each. D is admitted as a new partner with a contribution of 4,000.00. at the time of his admission, the partnership has an outstanding obligation to e in the amount of 40,000.00. In this case, D is also liable to E for his obligation of 40,000.00. Thus, the assets of the partnership amounting to 34,000.00 will be exhausted thereby leaving a balance of 6,000.00 for which only A, b, and C shall be liable jointly or pro rata, out of their separate property.

13. a. Art. 1827. The creditors of the partnership shall be preferred to those of each partner as regards the partnership property. Without prejudice to this right, the private creditors of each partner may ask for the attachment and public sale of the share of the latter in the partnership assets.

Example: A, B, and C are partners in a partnership known as X and Co. they contributed equally to the partnership. As they have no stipulation regarding the share of each partner in the profits, they share equally in the partnership assets: 1/3. After a year of operation, the assets of the partnership amounted to 40,000.00. it is indebted to D in the amount of 28,000.00. E is a separate creditor of A for 6,000.00.

b. Remedy of private creditors of a partner Without prejudice to the right to preference of partnership creditors, the creditors of each partner may ask for the attachment and public sale of the share of the latter in the partnership assets. Such share really belongs to the partner.

CHAPTER 3: DISSOLUTION AND WINDING UP (ART. 1828-1842)

1. Art. 1828. a. Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business. b. Winding up is the process of setting the business or partnership affairs after dissolution. c. Termination is that point in time when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. 2. a. Art. 1829. On, dissolution, the partnership is not terminated, but continues until the winding up of partnership affairs is completed. b. The principal significance of dissolution is that, thereafter, no new partnership business should be undertaken, but affairs should be liquidated and distribution made to those entitled to the partners interest.

3. Art. 1830. Dissolution is caused: 1. Without violation of the agreement between the partners: By the termination of the definite term or particular undertaking specified in the agreement; By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified; By the express will of all the partners who have not assigned their separate debts either before or after the termination of any specified tremor particular undertaking; By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners; 2. In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any partner at any time. 3. By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on partnership. 4. When a specific thing, which a partner had promised to contribute to the partnership, perishes before the delivery; in any case by the loss of the thing, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use of the same; but the partnership shall not be dissolved by the loss of the thing when it occurs after the partnership has acquired the ownership thereof; 5. By the death of any partner; 6. By the insolvency of any partner or of the partnership; 7. By the civil interdiction of any partner 8. By the decree of court under the ff. article. (1700a-1700a)

4. Art.1831. On application by or for a partner, the court shall decree dissolution whenever: A) 1. A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind 2. A partner becomes in any other way incapable of performing his part of the partnership contract 3. A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business 4. A partner willfully or persistently commits breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in the partnership with him 5. The business of the partnership can only be carried on at a loss 6. Other circumstances render dissolution equitable 7. After the termination of the specific term or particular undertaking B) At any time the partnership was a partnership at will when the interest was assigned or when the charging order was issued.

CHAPTER 4: LIMITED PARTNERSHIP

1. a. Article 1843. A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general partners and one or more limited partners. The limited partners such shall not be bound by the obligations of the partnership. Secure capital from others for ones business and still retain control.

Share in profits of a business w\out risk of personal liability.

2. a. Article 1844. Two or more persons desiring to form a limited partnership shall: 1. Sign and swear to a certificate 2. File for record the certificate in the office of the Securities and Exchange Commission b. No, the creation of a limited partnership is a format proceeding and is not mere voluntary agreement as in the case of general partnership. 3. Article 1845. The contributions of a limited partner may be cash or other property, but not services. A) Medium-a limited partner or special partner is not allowed to contribute services. He can contribute only money or property. B) Time-the contributions of each limited partners must be paid before the formation of the limited partnership. 4. a. Article 1846. The surname of limited partner shall not appear in the partnership name unless. B. (1) It is also the surname of general partner (2) Prior to the time when the limited partner became such, the business had been carried on under a name in w\c his surname appeared. C. The limited partner violating this article is liable, as a general rule, to partnership creditors w\out, however, the rights of a general partner. 5. Article 1847. If certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew the statement to be false. (1)At the time he signed the certificate; (2)Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file a petition for its cancellation of amendment as provided in art.1865. 6. Art. 1848. A limited shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as a limited partner, he takes part of the control of the business. 7. Art. 1849. Yes, after a limited has been formed, additional limited partner maybe admitted. The law require that there is proper amendment to the certificate which must be signed and sworn to by all the partners including the new limited partner and filed in the Securities and Exchange Commission pursuant to the requirement of Art. 1865. 8. a. Art. 1850. A general partner shall have the kinds of power and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners. However without written consent or ratification of the specific act by all the limited partners, a general partner or all the general partner have no authority to: 1. Do any act in the contravention of the certificate, 2. Do any act which would make it any impossible to carry on the ordinary business of the partnership; 3. Confess a judgement against the partnership; 4. Possess partnership property or a sign the rights in specific partnership property, for other than a partnership purpose; 5. Admit a person as a general partner; 6. Admit a person as a limited partner, unless the right so to do is given in the certificate;

7. Continue the business with partnership property on the death, retirement insanity, civil interdiction or insolvency of a general partner, unless the right to do so given certificate b. limitation of a general partner in a limited partnership 1. He may by the partnership by any act of administration, but he has no power to do the specific act enumerated in Art. 1850 without the written consent or at least ratification of all limited partner. 2. The general partners, of course have no power to by the limited partner beyond the latters investment. 3. Neither do they have the power to act for the firm beyond the purpose of the partnership. 9. Art. 1851. 7 specific rights of a limited partner. 1. To require that the partnership books be kept at the principal place of business of the partnership. 2. To inspect and copy at reasonable our partnership books of any of them. 3. To demand true and full information of all things affecting a partnership. 4. To demand a formal account of partnership affairs when ever circumstances render it just and reasonable. 5. To ask dissolution and winding up by decree of court 6. To receive the share of profits or other compensation by way of income. 7. To receive the return of his contribution provided the partnership assets are in excess of all its liabilities. 10. Art. 1852. Without prejudice to the provision of the Art.1848, a person who has contributed to the capital of the business. Conducted by a person or partnership erroneously believing that he has become limited partnership, is not, by reason of his exercise of the rights of a limited partner, a general partner with the person or in the partnership carrying on the business, or bound by the obligations of such person or partnership, provided that on as certaining the mistake he promptly renounces his interest in the profits of the business, or other compensation by way of income. 11. a. Art.1853 a person may be general partner and a limited partner in the same partnership at the same time provided that this fact shall be stated in the certificate provided in Art.1844. A person who is a general, and also at the same time a limited partner shall have all the rights and power and be subject to all the restrictions of a general partner; except that in respect to his contribution, he shall have the rights against other member which he would have had if he were not also a general partner. b. The rights and powers are those of a general partner. Hence, he is liable to his separate property to third person. However, within respect to his contribution as a limited partner, he would have the right of limited partner in so far in other partner are concerned 12. Art. 1854. 3 allowable transactions of a limited partner. 1. Granting loans to the partnership. 2. Transacting other business with it. 3. Receiving a pro rata share of the partnership assets with general creditors is not also a general partner. b. to prohibited transactions 1. Receiving or holding as collateral security any partnership property. 2. Receiving any payment, conveyance, or released from liability if it will prejudice the right of third persons.

13.

14.

15.

Art. 1855. Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority over other limited partners, as to the return of their contributions, as to their compensation by way of income, or as to any other matter. Art. 1856. A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate; provided, that after such payment is made, whether from the property or the partnership or that of the general partner, the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on account of their contributions and to general partners. Art. 1857. A limited partner shall not receive from a general partner or out of partnership property any part of his contribution until: a. 1. All liabilities of the partnership, except liabilities to general partners and limited partners on account of their contributions, have been paid or their remains property of the partnership sufficient to pay them; 2. The consent of all the members is had, unless the return of the contribution may be rightfully demanded under the provisions of the second paragraph. 3. The certificate is cancelled or so amended as set forth the withdrawal or reduction. b. Subject to the provisions of the first paragraph, a limited partner may rightfully demand the return of his contribution: 1. On the dissolution of a partnership; or 2. When the date specified in the certificate for its return has arrived; or

3. After he has given six months notice in writing to all other members, if no time is specified in the certificate, either for the return of the contribution or for the dissolution of the partnership. c.In the absence of any statement in the certificate to the contrary or the consent of all members, a limited partner, irrespective of the nature of his contribution, has only the right to demand and receive cash in return for his contribution. A limited partner may have the partnership dissolved and its affairs wound up when: 1. He rightfully but unsuccessfully demands the return of his contribution; or 2. The other liabilities of the partnership property is insufficient for their payment as required by the first paragraph, No.1 and the limited partner would otherwise be entitled to the return of his contribution. d. When the limited partner may have partnership dissolved. The 4th paragraph provides the grounds for the dissolution of the partnership upon petition of a limited partner. 1. When his demand for the return of his contribution is denied although he has a right to such return; or 2. When his contribution is not paid although he is entitled to its return because the other liabilities of the partnership have not been paid or the partnership property is insufficient for their payment. e. Example: After operating for some time as limited partnership, X & Co., composed of A, B, and C as general partners, who contributed P30,000.00 each, and D and E, as limited partners who contributed P20,000.00 each, has total assets of P150,000.00, and the ff. liabilities: 1. For the return of contributions of limited partners (D and E) P40,000.00 2. Due to third party creditors 50,000.00 3. For loan extended by C 25,000.00 4. For loan extended by D 35,000.00 5. For taxes 15,000.00 6. For indemnity to B for damages suffered in consequences of Management 5,000.00 Total P170, 000.00

May E legally demand the return of his contribution, assuming that all the partners have given their consent and are willing to have their certificate amended as to set forth the withdrawal? Yes. The total assets of P150, 000.00 are well over the amount of P100, 000.00, the total of the liabilities mentioned in nos. 2, 4, and 5.

16.

a. Art. 1858. A limited partner is liable to the partnership: 1. For the difference between his contribution as actually made and that stated in the certificate as having been made, and 2. For any unpaid contribution which he agreed in the certificate to make in the future of the time and on the conditions stated in the certificate.

Example: A and B are limited partners in a partnership. In the certificate of partnership, it appears that A contributed P10, 000.00. Actually, he contributed only P8, 000.00. In the certificate too, B promised to give an additional contribution of P4, 000.00 at a specified date. So, A should pay the difference of P2, 000.00 and B, the amount of P4, 000.00 on the date specified or now, if the date has arrived. b. A limited partner holds as trustee for the partnership: 1. Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned, and 2. Money or other property wrongfully paid or conveyed to him on account of his contribution. Requisites for waiver or compromise of liabilities. Under the 3rd paragraph, the liabilities of a limited partner may be waived or compromised provided: 1. The waiver or compromised is made with the consent of all the partners; and 2. The waiver or compromise does not prejudice partnership creditors who extended credit or whose claims arose before the cancellation or amendment of the certificate.

c.

Example: In the example suppose the liabilities of A and B were waived or compromised, with the consent of all the partners, X extended credit to the partnership. Later on, the certificate was amended to set forth the necessary change. Here, the credit was extended after the filing but before the amendment of the certificate. If the remaining assets are insufficient, X can still enforce the liabilities of A and B. d. Liability for the return of contribution lawfully received. Under the 4th paragraph, the limited partner is liable to the partnership for the return of contribution lawfully received by him to pay creditors who extended credit or whose claim arose before such return. His liability, of course, cannot exceed the sum received by him with interest.

Example: Suppose that A received the return of his contribution in the amount of P10,000.00 on the date specified in the certificate. Subsequently, the partnership became liable to X. In this case, if the assets of the partnership are insufficient, the claim of X should be directed against the general partners. But if X extended credit or his claim arose before A received the return of his contribution, then, A is liable to the partnership. Thus, if the partnership needs P7,000.00 to discharge the liabilities to X, then A is liable for the said amount plus interest. But in no case is A liable beyond P10,000.00 plus interest because he is only limited partner.

17.

a. Art. 1859. A limited partners interest is assignable. b. A substituted limited partner is a person admitted to all rights of a limited partner who has died or has assigned his interest in a partnership. c. An assignee, who does not become a substituted limited partner, has no right to require any information or account of the partnership transactions or to inspect the partnership books; he is only entitled to receive the share of the profits or other compensation by way of income, or return of his contribution, to which his assignor would otherwise be entitled. An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor, being thereunto empowered by the certificates, gives the assignee that right. An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with art. 1865. d. The following are the requisites in order that the assignee may become a substituted limited partner: 1. All the members must consent the assignee becoming a substituted limited partner or the limited partner, being empowered by the certificate, must give the assignee the right to become a limited partner; 2. The certificate must be amended in accordance with Art. 1865; and 3. The certificate as amended must be registered in the Securities and Exchange Commission. e. The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, 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. f. The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under articles 1847 and 1858.

18.

a. Art. 1860. The retirement, death, insolvency, insanity, or civil interdiction of a general partner dissolves the partnership, unless the business is continued by the remaining general partners: b. 1.Under a right so to do stated in the certificate, or 2. with the consent of all the members.

19. a. Art. 1861. On the death of a limited his executor or administrator shall have the rights of a limited partner for the purpose of settling his estate, and such power as the deceased had to constitute his assignee a substitute limited partner. b. The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner. 20. ART. 1862. A. On due application to a court of competent jurisdiction by any creditor of a limited partner , the court may charge the interest of the indebted limited partner with payment of the unsatisfied amount of such claim, and may appoint to a receiver and make all other orders, direction and inquires which the circumstances of the case may require. B. The interest may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property. The remedies conferred by the first paragraph shall not be deemed exclusive of others which may exist. Nothing on this chapter shall be held to deprive a limited partner of his statutory exemption. 21. ART.1863. In setting accounts after dissolution the liabilities of the partnership shall be entitled to payment in the ff. order. 1). those to creditors, in the order in the priority as provided by law, except those to limited partners on account of their contributions, and to general partners, 2). those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions. 3). those to limited partners in respect to the capital of their contributions. 4). those to general partners other than for capital and profits. 5). those to general partners in respect to profits. 6). those to general partner in respect to capital. Subject to any statement in the certificate or to subsequent agreement, limited partners share in the partnership assets in respects to their claims for capital, and in respect to their claims for capital, and in respect to their claims for profits or for compensation by way of income on their contributions respectively, in proportion to their respective amounts of such claims. 22. ART. 1864. The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such.

A-1. A certificate shall be amended A-2. When certificate shall be cancelled or amended B-1). There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner B-2). A person is a substituted as a limited partner B-3). An additional limited partner is admitted B-4). A person is admitted as a general partner B-5). A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued under art. 1860 B-6). There is a change in the character of the business of the partnership B-7). There is a fault or erroneous statement ion the certificate B-8). There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution. B-9). A time is fixed for the dissolution of the partnership, or the return of the contribution, no time having been specified in the certificates B-10). the members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them. 23. ART.1865. The writing to amend a certificate shall A.-1. Conform to the requirements of art.1844. As far as necessary to set forth clearly the change in the certificate which it is desired to make. A.-2. be signed and sworn to by all members, and B. A certificate is amended or cancelled when there is filed for record in the office of the Securities and Exchange Commission where the certificate is recorded. B-1). A writing in accordance with the provision of the first or second paragraph. B-2). A certified copy of the order of the court in accordance with the provisions of the fourth paragraph B-3). After the certificates are duly amended in accordance with this article, the amended certificate shall thereafter be for all purposes the certificate provided for in this chapter. 24). ART.1866. A contributor, unless he is a general partner, is not a proper party to proceeding by or against a partnership, except where the object is to enforce limited partners rights against or liability to the partnership. 25. 5 Characteristics of a Limited Partner 1. A limited partnership is formed by compliance with the statutory requirement. 2. One or more general partners control the business and are personally liable to creditor. 3. One or more limited 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 contributions. 4. The limited partners may ask for the return of their capital contributions under the conditions prescribed by law. 5. The partnership debts are paid out of the common fund and the individual properties of the general partners. 26. Differences between a General and a Limited partner/partnership 1. A general partner is personally liable for partnership obligations while a limited partners liability extends only to his capital contribution. 2. When the manner of a management has not been agreed upon, all the general partners have an equal rights in the management of the business. Whether or not the general partner has made any capital contribution, while the limited partner has no share in the management of limited partnership, his rights being limited to those enumerated in Art. 1851, such that the renders himself liable to creditors as a general partner if he take part in the control of the business. 3. A general partner may contribute money, property or industry to the partnership while a limited partner must contribute cash or property to the partnership but not services. 4. Unlike the general partner, a limited partner is not a proper party to proceedings by or against a partnership, unless he is also a general partner. 5. A general partners interest in the partnership may not be assigned as to make the assignee a new partner without the consent of the other partners. Although he may associate a third person with him in his share, while a limited partners interest is freely assignable, with the assignee acquiring all the rights of the limited partner subject to certain qualifications.

6.

The name of a general partner may appear in the firm name, while as a general rule, that of limited partner must not.

7. A general partner is prohibited from engaging in a business in which the partnership engaged, if he is a capitalist partner or in any business for himself if he is an industrial partner, while there is no such prohibitions the case of limited partner who is considered as a mere contributor to the partnership. 8. The retirement, death, insolvency or insanity of a general partner dissolves the partnership, while the retirement of a limited partner does not have the same effect, for his executor or administrator shall have the rights of a limited partner for the purpose of selling his estate. 9. A general partnership may as a general rule be constituted in any form by contract or conduct of the parties while a limited partnership is created by members after compliance with the requirements set forth by law, it is composed only of general partnership, it must cooperate under a firm name which in the case a limited partnership must be followed by the word limited.