ARTICLE 1810 Property acquired by a partner with partnership funds– Unless a

contrary intention appears, property acquired by a partner in his

The property rights of a partner are: own name w/ partnership funds is partnership property. However, if
(1) His rights in specific partnership property the property was acquired after dissolution but before the winding
up of the partnership affairs, it would be his separate property but
(2) His interest in the partnership he would be liable to account to the partnership for the funds used
in its acquisition.
(3) His right to participate in the management.
The DISSOLUTION of a partnership means a change of business
Article 1803. When the manner of management has not relationship between partners whereas the dissolution of a firm
been agreed upon, the following rules shall be observed: means dissolving of the firm along with the relation between
•All the partners shall be considered agents and whatever partners.
any one of them may do alone shall bind the partnership, WINDING UP is the process of liquidating a company. Also, is a
without prejudice to the provisions of article 1801. process in which the existence of a company is brought to an end. its
•None of the partners may, without the consent of the sole purpose is to sell off stock, pay off creditors, and distribute any
others, make any important alteration in the immovable remaining assets to partners or shareholder.
property of the partnership, even if it may be useful to the A MORTGAGE is an agreement between you and a lender that gives
partnership. But if the refusal of consent by the other the lender the right to take your property if you fail to repay the
partners is manifestly prejudicial to the interest of the money you've borrowed plus interest. Mortgage loans are used to
partnership, the court’s intervention may be sought. buy a home or to borrow money against the value of a home you
IMMOVABLE PROPERTY - Simply put, an asset that cannot be moved already
from one place to another is immovable property. (Ex. a residential Right to associate with another person in his share - Article
house, a warehouse, a manufacturing unit or a factory.) 1804. Every partner may associate another person with him in his
RELATED RIGHTS- A partner has other rights which are related to share, but the associate shall not be admitted into the partnership
principal rights, namely: without the consent of all the other partners, even if the partner
having an associate should be a manager.
 The right to reimbursement for amounts advanced to the
Right to inspect and copy partnership books - Article 1805. The
partnership and to indemnification for risks in
partnership books shall be kept, subject to any agreement between
consequence of management.
the partners, at the principal place of business of the partnership,
 The right of access and inspection of partnership.
and every partner shall at any reasonable hour have access to and
 The right to true and full information of all things affecting
may inspect and copy any of them.
the partnership.
 The right to a formal account of partnership affairs under Right to demand a formal account - Article 1809. Any partner shall
certain circumstances have the right to a formal account as to partnership affairs: (1) If he
 The right to have the partnership dissolved also under is wrongfully excluded from the partnership business or possession
certain condition. of its property by his co-partners; (2) If the right exists under the
terms of any agreement; (3) As provided by article 1807; (4)
PARTNERSHIP PROPERTY and PARTNERSHIP CAPITAL DISTINCTIONS
Whenever other circumstances render it just and reasonable.
1. Changes in value – Partnership property is variable. Its
Right to ask for the dissolution of the firm at the proper time - Article
value may vary from day to day with changes in the market
1830. Dissolution is caused: (1) Without violation of the agreement
value of the partnership assets, while partnership capital is
between the partners: (2) In contravention of the agreement
CONSTANT.
between the partners, where the circumstances do not permit a
2. Assets included - Partnership property includes all the
dissolution under any other provision of this article, by the express
property subsequently acquired on account of the
will of any partner at any time; (3) By any event which makes it
partnership or with the partnership funds.
unlawful for the business of the partnership to be carried on or for
CONSTANT - something invariable or unchanging. the members to carry it on in partnership; (4) When a specific thing
which a partner had promised to contribute to the partnership,
OWNERSHIP OF CERTAIN PROPERTY perishes before the delivery; in any case by the loss of the thing,
when the partner who contributed it having reserved the ownership
Property use by the partnership– Where there is no express
thereof, has only transferred to the partnership the use or
agreement that property used by a partnership constitutes
enjoyment of the same; but the partnership shall not be dissolved by
partnership property, such use does not make it partnership
the loss of the thing when it occurs after the partnership has
property, and whether it is so depending on the intention of the
acquired the ownership thereof; (5) By the death of any partner; (6)
parties, w/c may be shown by proving an express agreement or acts
By the insolvency of any partner or of the partnership; (7) By the civil
of particular conduct. The intent of the parties is the controlling
interdiction of any partner; (8) By decree of court under the
factor.
following article.

Obligations of partners
Obligation to give his contribution - Article 1786. Every partner is a  A partner who is wrongfully excluded from the possession
debtor of the partnership for whatever he may have promised to of partnership property by his co-partners has a right to
contribute thereto. formal account from the latter, and even apply in the
decree of dissolution.
Obligation not to convert money or property of the partnership for  On the death of the partner, his right in specific
his own use - article 1788. A partner who has undertaken to partnership property is VESTS in the surviving partners, not
contribute a sum of money and fails to do so becomes a debtor for in the legal representative of the deceased partner except
the interest and damages from the time he should have complied he was the last surviving partner. That’s to say, the
with his obligation. The same rule applies to any amount he may surviving partner has the right to wind up the business and
have taken from the partnership coffers, and his liability shall begin the executor of the deceased partner cannot insist in
from the time he converted the amount to his own use. participating in the winding up process.
Obligation not to engage in unfair competition with his own firm -  By agreement, the right to possess specific partnership
Article 1808. The capitalist partners cannot engage for their own property maybe surrendered and this is especially true a
account in any operation which is of the kind of business in which partnership with large membership, where the
the partnership is engaged, unless there is a stipulation to the management and possession are concentrated in the
contrary. managing partner.

Obligation not to account for and hold as trustees unauthorized (2) A partner's right in specific partnership property is not assignable
personal profits - Article 1807. Every partner must account to the except in connection with the assignment of rights of all the partners
partnership for any benefit, and hold as trustee for it any profits in the same property;
derived by him without the consent of the other partners from any
 A right of a partner is not assignable because it is
transaction connected with the formation, conduct, or liquidation of
impossible to determine the extent of his beneficial
the partnership or from any use by him of its property.
interest in the property until after liquidation of
Obligation to pay for damages caused by his fault - Article partnership affairs.
1794. Every partner is responsible to the partnership for damages  The consent of all partners is the source and limit of
suffered by it through his fault, and he cannot compensate them partners right to deal with partnership property for any but
with the profits and benefits which he may have earned for the a partnership purpose.
partnership by his industry. However, the courts may equitably  The primary reason for the non-assignability if partners
lessen this responsibility if through the partner’s extraordinary right in specific partnership property are that it prevents
efforts in other activities of the partnership, unusual profits have interference by outsiders in partnership affairs, it protects
been realized. the right of other partners and partnership creditors to
have partnership assets applied to firm debts, and it is
obligation to credit to the firm payment made by a debtor who often impossible to measure or value a partners beneficial
owes him and the firm - Article 1792. If a partner authorized to interest in a particular partnership assets.
manage collects a demandable sum which was owed to him in his
own name, from a person who owed the partnership another sum (3) A partner's right in specific partnership property is not subject to
also demandable, the sum thus collected shall be applied to the two attachment or execution, except on a claim against the partnership.
credits in proportion to their amounts, even though he may have When partnership property is attached for a partnership debt, the
given a receipt for his own credit only; but should he have given it for partners, or any of them, or the representatives of a deceased
the account of the partnership credit, the amount shall be fully partner, cannot claim any right under the homestead or exemption
applied to the latter. laws;

Obligation to share with the other partners the share of the (4) A partner's right in specific partnership property is not subject to
partnership credit which he has received from an insolvent firm legal support under article 291.
debtor - “Article 1793. A partner who has received, in whole or in
 Art. 195. Subject to the provisions of the succeeding
part, his share of a partnership credit, when the other partners have
articles, the following are obliged to support each other to
not collected theirs, shall be obliged, if the debtor should thereafter
the whole extent set forth in the preceding article: (1) The
become insolvent, to bring to the partnership capital what he
spouses; (2) Legitimate ascendants and descendants; (3)
received even though he may have given receipt for his share only.
Parents and their legitimate children and the legitimate
ARTICLE 1811 and illegitimate children of the latter; (4) Parents and their
illegitimate children and the legitimate and illegitimate
Article 1811. A partner is co-owner with his partners of specific children of the latter; and (5) Legitimate brothers and
partnership property. sisters, whether of full or half-blood. (291a)”

The incidents of this co-ownership are such that: Right limited to share of what remains after partnership debts have
(1) A partner, subject to the provisions of this Title and to any been paid – the whole partnership property belongs to the
agreement between the partners, has an equal right with his partnership considered as a juridical person, and partners has no
partners to possess specific partnership property for partnership interest in it but his share of what remains after all partnership debts
purposes; but he has no right to possess such property for any other are paid.
purpose without the consent of his partners.
Art. 1812. either of two things may happen: 1) the partnership may still remain;
or
A partner’s interest in the partnership is his share of the profits and 2) the partnership may be dissolved.
surplus. Share of profits and surplus– The partner’s interest in the
partnership consists of his share in the undistributed profits during Rights withheld from assignee.
the life of the partnership as a going concern and his share in the
undistributed surplus after its dissolution. 1.To interfere in the management.

 Profits: the excess of returns over expenditure in a 2.To require any information or account.
transaction or series of transactions; or the net income of 3.To inspect any of the partnership books
the partnership for a given period.
 Surplus: the assets of the partnership after partnership No one can be compelled to be partners w/someone else. The
debts and liabilities are paid and settled and the rights of assignment does not divest the assignor of his status and rights as a
the partners among themselves are adjusted. It is the partner nor operate as dissolution. The law, however, provides the
excess of assets over liabilities. If the liabilities are more non-assigning collaborates w/ aground for dissolving the partnership
than the assets, the difference represents the extent of the if they so desire.
loss.
 Extent of the partner’s interest. — Nothing is to be Remedy of other partners Dissolution of partnership not intended –
considered as the share of a partner but his proportion of Many partnership agreements are made merely as security for loans,
the residue or balance after an account has been taken of the assigning partner never intending to destroy the partnership
the debts and credits, including the amount paid by the relation. If the assigning partner neglects his duties after assignment,
several partners in liquidating firm debts or in making the other partners may dissolve the partnership under art. 1830.
advances to the partnership, and until that occurs, it is how can a partner convey his interest in the partnership without
impossible to determine the extent of his interest. getting the partnership dissolve.
 This interest in the surplus alone which remains after the
firm’s debts have been paid and the equities between the 1. by selling it to 3rd person
partner and his co-partners have been adjusted and the 2. by donating it to the 3rd person
partner’s share has been ascertained and set apart, is 3. by using it as a security of a loan from a 3rd person
available for the satisfaction of the separate debts of the
partners. This is similar to sub-partnerships. so, the consent of others is not
required for interest to be conveyed.
 Partner’s interest not a debt due from partnership. — A
partner is not a creditor of the partnership for the amount SUBPARTNERSHIP - ARTICLE 1804 Every partner may associate
of his share. another person with him in his share, but the associate shall not be
 The interest of a partner in a going partnership business admitted into the partnership without the consent of all the other
where there has been no settlement of his account is not a partners, even if the partner having an associate should be a
debt due to the partner by partnership and, therefore, is manage.
not subject to attachment or execution on a judgment
recovered against the individual partner.  The assignee however cannot become a partner without
the consent of the other partners because it will entail a
*PARTNERSHIP INTEREST’S IS SUBJECT TO LEGAL SUPPORT* change in the partnership’s composition.
 The assignee (conveyee) does not necessarily become a
ARTICLE 1813 partner. The assignor is still the partner, with a right to
demand accounting and settlement.
A conveyance by a partner of his whole interest in the partnership  The assignee cannot also demand: 1) information; 2)
does not of itself dissolve the partner, or, as against the accounting 3) inspection of the partnership books.
other partners in the absence of agreement, entitle the assignee,  Rights of the Assignee (a) To get whatever profits the
during the continuance of the partnership, to interfere in the assignor-partner would have obtained. Question: Is he to
management or administration of the partnership business or affairs, be considered an outside creditor who would be entitled
or to re)uire any information or account of partnership transactions, to collect before the partners get their own profits? ANS.:
or to inspect the partnership books but it merely entitles the No, for he merely shares in the profits, the same as the
assignee to receive in accordance assignorpartner whose share he (the assignee) will now
with his contract the profits to which the assigning partner would get. Hence, outside creditors would have to be preferred.
otherwise be entitled! ; however, in (b) To avail himself of the usual remedies in case of fraud in
case of fraud in the management of the partnership, the assignee the management. (c) To ask for annulment of the contract
may avail himself of the usual remedies! of assignment if he was induced to enter into it thru any of
n case of dissolution of the partnership, the assignee is entitled to the vices of consent (fraud, error, intimidation, force,
receive his assignors interest and may require an account from the undue influence) or if he himself was incapacitated to give
date only of the last account agreed to by all the partners. consent (minor, insane).
 Case of Mortgages - Does Art. 1813 cover also a case when
If a partner CONVEYS (assigns, sells, donates) his WHOLE the partner merely mortgages his interest in the profits?
interest in the partnership (his share in the profits and surplus), ANS.: Yes, but here said interest is not alienated; it is
 merely given as security, and therefore the rules on -Amount charged must e sufficient to pay the loan plus
securities for loans, etc. can properly apply. illegal interest.
 At common law, the mere assignment of a partner’s  RIGHT TO PARTICIPATE IN THE MANAGEMENT Charging the
interest dissolved the partnership because it was Interest of a Partner Example: A, B and C are partners. A
conceived to give rise to a situation incompatible with the personally owes X a sum of money. X sues A, and obtains a
prosecution of a partnership. The law has been changed final judgment in this favor. But A has no money. What can
under the Uniform Partnership Act from which Article 1813 X do? ANS.: X may go to the same court (or any other court
was taken. (1) Dissolution of partnership not intended. possessed of jurisdiction) and ask that A’s interest in the
 The new rule is preferable for many partnership partnership be “charged” (attached, or levied upon) for the
assignments are made merely as security for loans, the payment to him (X) of whatever has not yet been paid him
assigning partner never intending to destroy the with interest thereon.
partnership relation. Moreover, if the assigning partner  While a partner’s interest in the partnership (his share in
neglects his partnership duties after assignment, the other the profits or surplus) may be charged or levied upon, his
partners may dissolve the partnership under Article 1830. interest in a specific firm property cannot as a rule be
which provides that “Dissolution is caused . . . by the attached.] Preferential Rights of Partnership Creditors The
express will of all the partners who have not assigned their law says “without prejudice to the preferred rights of
interests, or suffered them to be charged for their separate partnership creditors under Art. 1827.” What does this
debts, either before or after the termination of any mean? ANS.: This simply means that partnership creditors
specified term or particular undertaking. are entitled to priority over partnership assets (including
 Dissolution of partnership intended. — A partner’s the partner’s interest in the profits), that is, the separate
conveyance of his interest in the partnership operates as a creditors will get only after the firm creditors have been
dissolution of the partnership only when it is clear that the satisfied. Art. 1827 reads: “The creditors of the partnership
parties contemplated and intended the entire withdrawal shall be preferred to those of each partners as regards the
from the partnership of such partner and the termination partnership property. Without prejudice to this right, the
of the partnership as between the partners. private creditors of such partner may ask the attachment
and public sale of the share of the latter in the partnership
ARTICLE 1814 assets.
Without preJudice to the preferred rights of apartnership creditor un  Receivership (a) When the charging order is applied for
der Article 1827, on due application to a competent court by any and granted, the court MAY (discretionary) at the same
judgment time or later appoint a receiver of the partner’s share in
creditor of a partner, the court which entered the (judgment, or any the PROFITS or other MONEY due him.
other court, may charge the interest  Exemption Laws - Regarding a partner’s interest in the
of the debtor partner with payment of the unsatisfied amount of partnership, may the partner still avail himself of the
such (judgment debt with interest thereon2and may then or later exemption laws? ANS.: Yes, because in a sense, this is his
appoint a receiver of his share of the profits, and of any other money private property. [NOTE: He cannot however avail himself
due or to fall due to him in respect of the partnership, and made all of the exemption laws insofar as his interest in specific
other orders, directions, accounts and Inquiries which the partnership property is concerned. (Art. 1811, No. 3).
debtor partner might have made, or which the circumstances of the  The receiver appointed is entitled to any RELIEF necessary
case may require! “he interest charged may be redeemed at any to conserve the partnership assets for partnership
time before foreclosure, or in case of a sale being directed by the purposes. Thus, he may nullify all efforts to assign specific
court, may be purchased without thereby Causing dissolution- partnership property. Unless the partnership agreement
$1&4ith separate property, by any one or more of the provides otherwise, each partner in a general partnership
partners$*&4ith partnership property, by any one or more of the has a right to an equal voice in the conduct and
partners with the consent of all the partners whose interests are not management of the partnership business.
so charged or sold nothing in this "title shall be held to deprive a  Suppose the other partners owe the firm some money,
partner of his right, if any, under the exemption laws, arrears his may the receiver be authorized to demand that such
interest in the partnership! amount be collected? HELD: Yes, for such credit forms part
of the partnership assets.
 refers to a partner who obtained$ a loan from a 3 rd person  This right is not dependent on the amount or size of the
and was 'unable to repay such. partner’s capital contribution or services to the business.
 for e8ample. PARTNE& A failed$ to pay CREDITOR C a sum Of course, the partners may select a managing partner or
of P49.999*99. so, C files against A. knowing that A being a make such allocation of functions as the needs of the
partner will receive his interest. C wins the case but A is business dictate especially in a large partnership.
still unable to pay. so C asks that A’s interest be attached$  Redemption of the Interest Charged (a) “Redemption” here
so that it goes to C and cancels out A’s debt merely means the extinguishment of the charge or
-done to protect C’s interest attachment on the partner’s interest in the profits. (b) How
-Attached interest can be redeemed using the property is this “redemption” made? ANS.: 1. The “charge” may be
of the partners or the partnerships property as long as all “redeemed” or bought at any- time BEFORE foreclosure. 2.
partners consent to this and are given reimbursement AFTER foreclosure, it may still be “bought,” with separate
from the defaulting partner. property (by any one or more of the partners); or with
 partnership property (with consent of all the other services. (40 Am. Jur. 213.) In the absence of any
partners). (NOTE: The consent of the delinquent partner is prohibition in the articles of partnership for the payment
not needed. of salaries to general partners, there is nothing to prevent
 Article 1800 speaks of two distinct cases of appointments. the partners to enter into a collateral verbal agreement to
(1) Appointment as manager in the articles of partnership. that effect. (2) Exceptions. — In proper cases, however, the
— The partner appointed by common agreement in the law may imply a contract for compensation.
articles of partnership may execute all acts of  A partner engaged by his co-partners to perform services
administration (not those of strict ownership such as those not required of him in fulfillment of the duties which the
enumerated in Art. 1818, par. 3.) notwithstanding the partnership relation imposes and in a capacity other than
opposition of the other partners, unless he should act in that of a partner (e.g., to perform clerical services in
bad faith. His power is revocable only upon just and lawful carrying on the business of the firm) is entitled to receive
cause (see Art. 1920.) and upon the vote of the partners the compensation agreed upon therefor. (b) A contract for
representing the controlling interest. compensation may be implied where there is extraordinary
The reason for this principle is that the revocation neglect on the part of one partner to perform his duties
represents a change in the terms of the contract. The law toward the firm’s business, thereby imposing the entire
presumes that the appointment thus constituted is, in burden on the remaining partner. (c) One partner may
effect, one of the conditions of the contract and it is only employ his co-partner to do work for him outside of and
logical that such appointment should not be revoked independent of the co-partnership, and become personally
without the consent of all the partners, including the liable therefor. (d) Partners exempted by the terms of
partner thus appointed. It is an elementary rule that no partnership from rendering services to the firm may
party to a contract can violate the law of the contract demand pay for services rendered. (e) Where one partner
without the consent of the others. (11 Manresa 380.) In is entrusted with the management of the partnership
case of mismanagement, the other partners may avail of business and devotes his whole time and attention thereto,
the usual remedies allowed by law, including an application at the instance of the other partners who are attending to
for dissolution of the partnership by a judicial decree. (see their individual business and giving no time or attention to
Art. 1831.) (2) Appointment as manager after the the business of the firm, the case presents unusual
constitution of the partnership. — But the management conditions, is taken out of the general rule as to
granted by the partners after the partnership has been compensation and warrants the implication of an
constituted independently of the articles of partnership agreement to make compensation. In such cases, the
may be revoked at any time for any cause whatsoever. The amount of the compensation depends, of course, upon the
reason for this provision is that in such case, the revocation agreement of the parties, express or implied, as well as
is not founded on a change of will on the part of the upon the particular circumstances of the case. (40 Am. Jur.
partners, the appointment not being a condition of the 213-216.) It has also been held that the way to deal with
contract. It is merely a simple contract of agency, which such a situation or where a partner willfully fails to
may be revoked at any time. (Art. 1920.) It is believed that perform the services which he agreed to perform, as a
the vote for revocation must also represent the controlling result of which the other partners are burdened with
interest. It should be noted that Article 1800 refers to a greater work, is to calculate the value of the unperformed
partner, not a stranger, who has been appointed manager. services, make it an asset of the partnership chargeable
As a rule, a partner is not entitled to compensation for his against the defaulting partner, and divide among all the
services other than his share of the profits. partners (including the defaulting partner) as any other
 Compensation for services rendered. (1) Partner generally partnership profit. (Teller, op. cit., p. 77, citing Olivier vs.
not entitled to compensation. — In the absence of an Uleberg, [N.D.] 23 N.W. [2d] 39.) (f) The rule requiring
agreement to the contrary, each member of the services of partners without compensation does not also
partnership assumes the duty to give his time, attention, apply where, by the contract of partnership, one partner is
and skill to the management of its affairs, so far, at least, as exempted from the duty of rendering personal services to
may be reasonably necessary to the success of the the concerned, if he afterwards does render such service at
common enterprise; and for this service a share of the the instance and request of his co-partners (Ibid., citing
profits is his only compensation. Each partner in taking Lewis vs. Moffett, 11 Ill. 392.), or where the services
care of the joint property, managing the partnership rendered are extraordinary. Thus, in a case, the surviving
affairs, and directing the partnership business is practically partner who discovered a firm claim more than thirteen
taking care of his own interest or managing his own years after the liquidating partner’s death, and prosecuted
business. He is not, in the absence of a contract, express or it for four years to a successful conclusion was allowed,
implied, entitled to compensation beyond his share of the because of the exceptional situation, extra compensation.
profits for services rendered by him to the partnership
business, although the services rendered by him may be
greater in proportion than the services rendered by other
members of the partnership, by reason of having assumed
the position of managing partner, or even by reason of
extra services necessitated by his partner’s illness and
consequent inability to render his own just share of the