RFBT Leo Notes Part 2

• Partnership


  Two or more persons bind themselves to contribute money, property or industry (MPI) to a common fund with the intention to divide profits among themselves, or in order to exercise profession
• Characteristics of a partnership

  • Mutual contribution of MPI to common fund
  • Primary purpose must be to obtain profits divided among parties
  • Desire to formulate an active union
  • Mutual confidence and trust among people
  • Person is free to choose whom he wants to be associated with
  • No one can become member without consent of all members
• Inherent rule in every partnership is that the partnership has a personality separate and distinct from that of each of the partners
• A partnership is automatically acquired despite the failure to register in the Securities and Exchange Commission (SEC)
• Perfection of a partnership

  • Upon execution of the contract (exception: otherwise stipulated)
  • May be constituted in any form, except:
  • If contributed immovable or real rights, must be in public instrument, otherwise VOID
  • If capital of 3000 or more, in money or property, public instrument + registered with SEC, VALID
  • If limited partnership, certificate under oath record by SEC, otherwise GENERAL PARTNERSHIP

  
• Types of partners


  • Capitalist (contributes money or property)
  • Industrial (contributes industry or personal service)
  • General (liability extends to separate or personal property)
  • Limited (liability limited to capital contribution)
  • Managing (manages the affairs or business of the partnership)
  • Liquidation (takes charge of winding up upon dissolution)
  • By estoppel (not really a partner but liable as a partner)
  • Continuing (continues the business after it has been dissolved)
  • Surviving (remains after partnership has been dissolved by death)
  • Sub-partner (not a member but contracts with a partner)
  • Ostensible (takes active part and known to the public as partner)
  • Secret (takes active part but is not known to outside parties)
  • Silent (does not take active part but may be known as partner)
  • Dormant (does not take active part and not known as partner)
• Persons who are not partners to each other are: co-ownership or co-possession, sharing of gross returns, debt by installments, wages of an employee, rent to a landlord, annuity to a widow or representative
• Types of partnerships


  • Universal partnership of all present property (all present properties and profits therein, if stipulated, future property and fruits of future property including industrial property)
  • Universal partnership of all profits (profits of present property through work or industry, usufruct of present property, if stipulated, fruits of future property)
  • Particular partnership (determinate things, their use or fruits)
• There is no partnership in the receipt of a share of profits as: wages of an employee, rent, annuity, or as to object
• Juridical personality of a partnership

  A partnership has a juridical personality separate and distinct from that of each of the partners
• Who may enter into a partnership

  • Individuals with legal capacity
  • Partnerships
• Contract of agency


  Partners are agents of the partnership
• Essential requisites/features of a partnership

  • Valid contract (consent, object, cause)
  • Parties have legal capacity
  • Object must be lawful
• Principles of partnership


  • Affectio Societatis (intention to form a partnership)
  • Delectus personae (choice of partners)
• Types of partnerships


  • Specific undertaking
  • Exercise of profession or occupation
  • General
  • Limited
  • For a fixed term
  • For a particular undertaking
  • Partnership at will
  • Ordinary partnership
  • Partnership by estoppel
  • Partnership by prescription
  • De jure partnership (both fact and law)
  • De facto partnership (in fact but not in law)
  • Commercial partnership
  • General professional partnership
• A general professional partnership (GPP) is guilty of adultery and concubinage, or guilty of the same criminal offense, if the partnership was entered into in consideration of the same
• Creation of a partnership

  • By contract or mere agreement
  • By law
• Organizers of a partnership

  • Two or more
  • Not more than 15
• Duration of a partnership

  • No limitation
  • Perpetual existence
• Purpose of a partnership

  • Profit realization
  • Depends on Articles of Incorporation
• The death of a partner dissolves the partnership, unless otherwise stipulated
• The death of a partner in a corporation does not dissolve the partnership
• Dissolution of a partnership

  • At any time by will
  • Needs consent of the State
• Liability of a partnership

  • General or limited
  • Limited to assets of the corporation
• Transferability of interest in a partnership

  • Needs consent of partner
  • Does not need consent of stockholders
• Ability to bind the firm

  • Partners are agents
  • Official acts through Board of Directors
• Remedies for mismanagement of a partnership


  • Sue the other partner
  • Derivative suit
• Legal personality of a partnership

  • Execution of contract
  • Issuance of certificate/registration
• Profit sharing in a partnership

  If no stipulation, proportion to contribution or equally, on presumption of equal contribution

  Industrial partner to receive just and equitable share

  Capital-industrial partnership, just and equitable share
• Loss sharing in a partnership

  If no stipulation, same as with profit sharing

  Proportion to contribution (industrial partner not liable)

  Or equally, on presumption of equal contribution

  Exclude any partner from share, VOID

  Exclude capitalist partner from share, VOID

  Exclude industrial partner, VALID
• Binding nature of profit and loss sharing stipulations


  Binding when entrusted, impugned when inequitable

  If inequitable, no longer impugned by partner who executes it

  If inequitable, no longer impugned if 3 months has lapsed
• Rights of a partner to the partnership property

  • Equal right with partners to possess

  No right to possess for other purposes without consent

  Not assignable (exception: all of all partners in same property)

  Not subject to attachment or execution

  May be subjected if for a claim against the partnership

  Not subject to legal support

  Conveyance of whole interest does not dissolve partnership

  Deemed dissolved only when there is stipulation

  Conveyee does not become a partner but has rights to:

  • Get profit the assignor would have obtained
  • Avail remedies in case of fraud of management
  • Receive assignor's interest in event of dissolution
• Rights of a partner to the partnership interest

  • Subject to charge or attachment:
  • Only the interest, not the specific properties
  • Priority is still given to creditors of the partnership
  • Interest may be redeemed prior to foreclosure

  Right to participate in the management

  Rules on management below

  Associate with another person in his share

  Inspect and copy partnership books
• Property rights of a partner

  To specific partnership property

  Interest in the partnership
• A partnership is not a universal partnership between husband and wife
• Basis of a partnership


  Contract

  Corporation
• Rights of a partner

  • Ask for dissolution at proper time and right to return of capital and advancements

  Scope covers all acts of administration (exception: bad faith)

  Appointment is irrevocable without just or lawful cause + majority partner vote of controlling interest

  All acts of administration unless opposed by other partners

  Each may separately execute all administrative acts

  If any managers oppose, majority decision shall prevail

  In case of tie, up to manager with controlling interest

  Unanimous consent shall be necessary, exception: Imminent danger of grave injury

  All partners shall be considered agents of the partnership

  None may make important alteration without consent of the others

  If refusal of consent is prejudicial, may seek court intervention
• Contribution of capital by a partner

  Must be provided upon perfection (exception: stipulation)

  Partner becomes debtor if he fails to contribute at time he should have complied

  Deliver fruits without need of demand

  Exercise due diligence in preserving thing promised to be contributed

  Warrant the thing against eviction

  Contribution is specific and determinate, NOT fungible

  There is stipulation that he shall bear the loss

  Thing is fungible; or

  Cannot be kept without deteriorating

  Contributed to be sold

  No stipulation that partner bears the loss

  If partner refuses to contribute, liable to sell interest to other partners
• Absolutely prohibited for a partner to engage in other business (exception: permitted)
• Effect of noncompliance with prohibition to engage in other business

  Bring to partnership all profits illegally obtained

  Liable personally for all the losses

  May be ousted for loss of trust and confidence