NATURE OF PARTNER’S INTEREST IN THE PARTNERSHIP

(1812)
CHAPTER 2: SECTION 3 – OBLIGATION OF PARTNERS
 Partner’s interest refers to or consists of: WITH REGARD TO THIRD PERSON (1815 – 1827)
1) Profit – share of proportionate profit during the life of
FIRM NAME (1815)
the partnership.
2) Surplus – leftover assets at dissolution after paying  Definition of “firm”
and settling the debts and liabilities/after liquidation.  Firm refers to the name, title, or style under which a
EFFECTS OF ASSIGNMENT OF PARTNERS WHOLE company transacts business; a partnership of two or
INTEREST (1813) more persons; a commercial house.
 Synonymous with the term company.
 Ways on how to assign:  Importance of having a firm name:
1) Selling interest to a TP  For the purpose of distinction
2) Donating interest to a TP  In accordance to Art. 1768: separate and distinct
3) As a security/collateral for a loan juridical personality.
 The relationship is called an assignment.  Registration of partnership – SEC; registration of firm
 Rights not transferred/given to the assignee: name – DTI
1) No right to manage the partnership/interfere with  Conditions to the firm name:
management. 1) Inclusion of the name of a TP
2) No right to inspect the partnership books. o Makes the TP liable as a partner but not
3) No right to ask information regarding the partnership. acquiring the rights of a partner.
 Rights transferred/given to the assignee: 2) Death of a partner
1) Rights to receive profits and surplus o In Art. 1830, the effect of a death of a partner is
o In case the assignor refuses to give him the profit dissolution.
and the surplus, the assignee has the right to file o General Rule: The name of a deceased partner
necessary case against him. can no longer be used in a firm name for only
2) Right to receive surplus at the time of dissolution. living partner’s name can be put on the firm’s
3) Right to demand in case of fraud. name.
4) Right to require an account of partnership affairs only - Exception: placing of cross/deceased beside
in the case of dissolution and the period agreed by all the dead partner’s name or the use of
the partners. publication to inform the public.
 ASSIGNEE IS NOT A PARTNER - Reason for the law: putting the name of a
 Assignment of interest does not dissolve a partnership. person in a firm name puts them in a liability;
therefore, the names on the firm name
should be after partners/people who is
REMEDIES OF SEPARATE JUDGEMENT CREDITOR OF A subject to the liability of the partnership.
PARTNER (1814) 3) Inclusion of a limited partner’s name
o General Rule: A limited partner’s name cannot be
 General Rule: Separate partner creditor cannot attach to
included in a firm’s name
separate partnership property for his credit.
- Effect: LP becomes a general partner.
 Remedy: The creditor can attach to the interest of the
4) Distinct requirement
debtor-partner – charging order.
o The law requires the firm’s name to be distinct
 Remedies for removal/redemption of charging order
from others and should be similar to another
1) Redeem by separate property of the other partners
name.
2) Redeem by the partnership property
o Using the same name as other firms may be
o Condition: Consent of all the partners.
misleading and breaks Article 1768 of separate
and distinct juridical personality.
 In relation to 1827: Separate creditor has preference to
separate property over partnership creditors. Partnership
creditors has preference to partnership property over
separate creditors.
LIABILITY FOR CONTRACTUAL OBLIGATIONS OF THE managing partner, the other partners who has no duty
PARTNERSHIP (1816) to perform a certain act of administration has no right
to do so.
 Loss v. Liability o Exception: In case a third person with knowledge
 Loss – settlement of partnership affairs among the of the managing partner, transacts with a non-
partners. managing partner and the non-managing partner
 Liability – partnership/partner’s responsibility to a third accepts the transaction, the partnership is not
person. liable/it does not bind the partnership; only the
 In the case of an industrial partner, he is not liable to non-managing partner and the third person.
losses but he is liable to contractual liabilities.  Paragraph 2: Acts of Ownership
 Nature of contractual liability:  The requirement for acts of ownership is consent of
1) Pro-rata all the partners.
o Partners are equally/jointly liable based on the  Seven instances when acts of ownership is required:
number of the partners and not proportionately 1) Assignment of partnership property
liable based on the contribution of the partners. 2) Disposal of goodwill
2) Subsidiary 3) Do any other act which is impossible to do on an
o Partners are only liable after exhaustion of all ordinary course of business – ex: mortgage
partnership assets. 4) Judgement
3) Liability of industrial partner 5) Enter into a compromise
o IP would have to pay for liabilities of the 6) Arbitration
partnership. 7) Renounce a claim
o In the case of loss from the liability, however, he
has the right to recover/reimburse the amount he ADMISSION BY PARTNER (1820)
paid from the partners.  Admission refers to admitting an act
STIPULATION AGAINST LIABILITY (1817)  Admission of one of the partners is admission of all.
 Two (2) kinds of admission:
 The article is about the exception of one of the partners for 1) During the existence of the partnership
liability. o Requisites:
 Effects: a) It concerns partnership affairs
1) With respect to the partners: Stipulation is valid. b) Scope of authority
o Exempted partner can demand reimbursement c) The existence of the partnership must be
from the other partners. proven other than the admission itself.
2) With respect to the TP: Stipulation is void. 2) At the time of dissolution
o All of the partners are responsible for the liability. o Requisite: Must pertain to the winding up
 Case: Island Sales v United Pioneers  If all the requisites are present with respect to the two
 According to court, contractual liability has pro-rata kinds, then the admission is binding to the partnership.
obligations among the partners.
 Therefore, in case of a stipulation among the partners NOTICE TO ONE, NOTICE TO ALL (1821)
excluding one of the partners from a contractual  Notice to or knowledge of any partner of any matter
liability, the exempted partner is still liable, but he can relating to partnership affairs operates as a notice to or
ask reimbursement from the rest of the partners. knowledge of the partnership except on cases of fraud.
 The liability cannot be increased to the remaining  A TP desiring to give notice to a partnership of matter
partners due to the exemption of one. relating to partnership affairs does not need to
POWER OF PARTNERS AS AGENT TO THE PARTNERHSIP communicate with all the partners.
(1818)  Notice to one of the partners is considered as notice
to all of the partners regardless of the knowledgeable
 Paragraph 1: Acts of Administration partner’s failure to communicate such
 General Rule: If there is no assigned managing notice/knowledge.
partner, all of the partners are managing partners for  3 kinds/cases of knowledge of a partner:
they are agents of the partnership and their acts bind 1) Acting in the course of business
the partnership. In case there is an assigned 2)