PROPERTY RIGHTS OF PARTNERS
IN GENERAL
The property rights of a partner are:
(1) Rights in specific partnership property;
(2) Interest in the partnership; and
(3) Right to participate in the management
[Article 1810].
PARTNERSHIP PROPERTY AND
PARTNERSHIP CAPITALCapital Property
With constant value Value varies with market
Conditions Includes only actually contributed
and promised capital Includes the contributions
and property acquired by the partnership
OWNERSHIP OF CERTAIN PROPERTY
(1) The ownership of property used by the
partnership depends on the intention of the
parties, which may be drawn from an express
agreement or their conduct.
(a) A partner may allow the property to be
used by the partnership without transfer of
ownership, contributing only the use or
enjoyment thereof.
(b) He may also hold title to partnership
property, without acquiring ownership thereof
[Article 1819].
(2) Property acquired by a partner with
partnership funds is presumed to be
partnership property.
(3) The same presumption also arises when the
property is indicated in the partnership books
as partnership asset.
(4) Other factors may be considered to
determine ownership of the property.
RIGHTS IN SPECIFIC PROPERTY
The partners are co-owners of specific
partnership property. As such:
(1) A partner has an equal right with his
partners to possess such property for
partnership purposes.
For other purposes, the consent of his partners
is necessary. If the partner is excluded, he may
ask for:
(a) Formal accounting [Article 1809]; or
(b) Dissolution by judicial decree [Article 1831].
(2) A partner's right in such property is not
assignable, except when all the partners assign
their rights in the same property.
(3) The right is not subject to attachment or
execution, except on claim against the
partnership. Also, in case of such attachment,
the partners, or any of them, or the
representatives of a deceased partner, cannot
claim any right under the homestead or
exemption laws;
(4) The right is also not subject to legal support
under Article 291 [Article 1811].
A partner's right in specific property cannot be
separately assigned, since it is impossible to
determine the extent of his beneficial interest
in the property until after the liquidation of
partnership affairs.
It is also not subject to support precisely
because it is a property of the partnership and
not of the individual partners.
INTEREST IN THE PARTNERSHIP
A partner's interest in the partnership is his
share of the profits and surplus [Article 1812].
This interest is subject to support and may be
assigned.
RIGHTS OF ASSIGNEE
Assignment by a partner of his whole interest
in the partnership does not, of itself:
(1) Dissolve the partnership; or
(2) Entitle the assignee to:
(a) Interfere in the management or
administration of the partnership business or
affairs;
(b) Require information or account of
partnership; or
(c) Inspect the partnership books.
It merely entitles the assignee to:
(1) Receive the profits to which the assigning
partner was entitled;
(2) In case of fraud in management, avail
himself of the usual remedies;
(3) In case of dissolution:
(a) Receive his assignor's interest; and
(b) Require an accounting from the date only of
the last account agreed to by all the partners
[Article 1813].
CHARGING OF PARTNERSHIP INTEREST BY
PERSONAL CREDITOR OF PARTNERS
Partnership creditors are preferred over the
personal creditors of the partners as regards
partnership property [Article 1827].
However, on due application by any judgment
creditor of a partner, a competent court may:
(1) Charge the interest of the partner for the
satisfaction of the judgment debt;
(2) Appoint a receiver of the share of the profits
and of any other money due or to fall due to
the partner; and
(3) Make all other orders, directions, accounts
and inquiries, which the debtor partner might
have made, or which the circumstances may
require.
The interest charged may be redeemed before
foreclosure or, in case of sale directed by the
court, may be purchased without causing
dissolution:
(1) With separate property, by one or more of
the partners; or
(2) With partnership property, by one or more
of the partners, will consent of all, except the
debtor partner.
The partner debtor is not deprived of his right
under exemption laws. [Article 1814]
CHARGING ORDER
A charging order subjects the interest in the
partnership of the debtor partner with the
payment of an unsatisfied amount of a
judgment debt against him, with the least
interference with the partnership business and
the rights of the partners. By virtue of the
order, any amount or portion thereof which the
partnership would otherwise pay to the debtor
partner is instead given to the judgment
creditor [De Leon (2010)].
RIGHT TO PROFITS AND OBLIGATION FOR
LOSSES
RULES FOR DISTRIBUTION OF PROFITS
AND LOSSES
The distribution of profits and losses shall be in
accordance with the following rules
(1) They shall be distributed in conformity with
the agreement.
(2) If only the share in profits has been
stipulated, the share in the losses shall be in
the same proportion.
(3) In the absence of any stipulation:
(a) The share in the profits of the capitalist
partners shall be in proportion to their
contributions.
(b) The losses shall be borne by the capitalist
partners, also in proportion to the
contributions;
(c) The share of the industrial partners in the
profits is that share as may be just and
equitable. If he also contributed capital, he will
receive a share of the profits in proportion to
his contribution; and
(d) The industrial partner, who did not
contribute capital, is not liable for losses
[Article 1797].
DESIGNATION OF SHARE BY THIRD
PERSONS
The designation of the share of each one in the
profits and losses can be delegated to a third
person, in which case, it cannot be impugned:
(a) Unless it is manifestly inequitable;
(b) The partner impugning it has begun to
execute the designation; or
(c) The partner has not impugned it within 3
months from the time he had knowledge
thereof.
The designation cannot be delegated to one of
the partners [Article 1798].
EXCLUSION OF PARTNER FROM SHARE
A stipulation excluding one or more partners
from any share in the profits or losses is void
[Article 1799].
With reference to the industrial partner, since
the law itself excludes him from losses, a
stipulation exempting him from the losses is
naturally valid since if the partnership fails to
realize profits, he can no longer withdraw his
work or labor. He cannot but share in the loss.
OBLIGATION TO RENDER INFORMATION
Partners shall render on demand true and full
information of all things affecting the
partnership to any partner or the legal
representative of any deceased partner or of
any partner under legal disability [Article
1806].
BASIS OF OBLIGATION
This obligation arises from the mutual trust and
confidence among partners. Thus, there must
be no concealment between them in all
matters affecting the partnership [De Leon
(2010].
OBLIGATION TO ACCOUNT AND ACT AS
TRUSTEE
Every partner must account to the partnership
for any benefit, and hold as a trustee for it any
profits derived by him without the consent of
the other partners from any transaction
connected with the formation, conduct, or
liquidation of the partnership or from any use
by him of its property [Article 1807].
BASIS OF OBLIGATION
This obligation also arises from the fiduciary
nature of the partnership relation, and operates
to prevent a partner from making a secret
profit out of the partnership. Note that the
obligation extends from the formation to the
liquidation of the partnership.
Operation of the Partnership
FIRM NAME
Every partnership shall operate under a firm
name, which may or may not include the name
of one or more of the partners.
Those who, not being members of the
partnership, include their names in the firm
name, shall be subject to the liability of a
partner [Article 1815].
RIGHT TO CHOOSE FIRM NAME
General rule: The partners may adopt any firm
name desired.
Exceptions:
(1) They cannot use a name that is "identical or
deceptively or confusingly similar to an existing
[partnership] or corporation or to any other
name already protected by law or is patently
deceptive, confusing or contrary to existing
laws" [Section 18, Corporation Code].
(2) Use of names of deceased partner in law
firms is "permissible provided that the firm
indicates in all its communications that said
partner is deceased" [Rule 3.02, Code of
Professional Responsibility].

MANAGEMENT OF THE PARTNERSHIP
Management of the partnership is primarily
governed by the agreement of the partners in
the articles of partnership. It may be managed
by:
(1) All the partners; or
(2) A number of partners appointed as
managers, which may be appointed:
(a) In the articles of partnership; or
(b) After constitution of the partnership.
POWERS OF A MANAGING PARTNER
General rule: The partner designated as
manager in the articles may execute all acts of
administration despite opposition by the other
partners.
Exception: He cannot do so when he acts in
bad faith.
REVOCATION OF POWER OF MANAGING
PARTNER
The powers of the managing partner may be
revoked:
(1) If appointed in the articles of partnership,
when:
(a) There is just or lawful cause for revocation;
and
(b) The partners representing the controlling
interest revoke such power.
(2) If appointed after the constitution of the
partnership, at any time and for any cause
[Article 1800].
MANAGEMENT BY TWO OR MORE
PARTNERS
When there are two or more managing
partners appointed, without specification of
their duties or without a stipulation on how
each one will act:
(1) Each one may separately execute all acts of
administration.
(2) If any of them opposes the acts of the
others, the decision of the majority prevails.
(3) In case of a tie, the partners owning the
controlling interest will decide [Article 1801].
Requisites:
(1) Two or more partners have been appointed
as managers;
(2) There is no specification of their respective
duties; and
(3) There is no stipulation that one of them
shall not act without the consent of all the
others.
STIPULATION ON UNANIMITY OF
MANAGING PARTNERS
In case there is a stipulation that none of the
managing partners shall act without the
consent of others, the concurrence of all is
necessary for the validity of the acts.
The absence or disability of one cannot be
alleged, unless there is imminent danger of
grave or irreparable injury to the partnership.
[Article 1802]
MANAGEMENT WHEN MANNER NOT
AGREED UPON
When there is no agreement as to the manner
of management, the following rules apply:
(1) All the partners are considered agents
(mutual agency). Whatever any one does alone
binds the partnership, unless there is a timely
opposition to the act, under Article 1801.
(2) Any important alteration in the immovable
property of the partnership, even if useful to
the partnership, requires unanimity. If the
alteration is necessary for the preservation of
the property, however, consent of the others is
not required [De Leon (2010)].
If the refusal is manifestly prejudicial to the
partnership, court intervention may be sought
[Article 1803].
INSTANCES OF MUTUAL AGENCY
(1) Partners can dispose of partnership
property even when in partnership name
[Article 1819].
(2) An admission or representation made by
any partner concerning partnership affairs is
evidence against the partnership [Article
1820].
(3) Notice to any partner of any matter relating
to partnership affairs is notice to the
partnership [Article 1821].
(4) Wrongful act or omission of any partner
acting for partnership affairs makes the
partnership liable
[Article 1822].
(5) Partnership is bound to make good losses
for wrongful acts or misapplications of partners
[Article 1823].
Obligations of partnership/
partners to third persons
LIABILITY OF PARTNERS FOR
PARTNERSHIP
CONTRACTS
The partnership is primarily liable for contracts
entered into in its name and for its account,
under its signature and by a person authorized
to act for it.
Upon exhaustion of its assets, all partners are
liable pro rata with all their property.
Any partner may enter into a separate
obligation to perform a partnership contract
[Article 1816].
NATURE OF INDIVIDUAL LIABILITY
The pro-rating should be understood to mean
equally or jointly, not proportionally [De Leon
(2010), citing Article 1839(4); note, however,
that this conclusion does not find textual
support in Article 1816].
The fact that a partner has left the country and
the payment of his share of the liability cannot
be enforced [Co-Pitco v. Yulo (1907)] or his
liability is condoned by the creditor [Island
Sales v. United
Pioneers (1975)] cannot increase the liability of
the other partners.
The liability is subsidiary or secondary. It only
arises upon exhaustion of partnership assets.
However, they may be joined as party
defendants in the action against the
partnership, subject to their right to prior
exhaustion of partnership assets [Cia. Maritima
v. Muoz (1907)].
General rule: The partners are liable pro-rata
and subsidiarily, with all their property.
Exceptions:
(1) A third person who transacted with the
partnership can hold the partners solidarily
liable for the whole obligation if the case falls
under Articles 1822 or 1823 [Muasque v. CA
(1985)].
(2) A person admitted as a partner into an
existing partnership is liable for all the
obligations of the partnership arising before his
admission, except that his liability shall be
satisfied only out of partnership property,
unless there is a stipulation to the contrary.
LIABILITY OF INDUSTRIAL PARTNER
An industrial partner, who is not liable for
losses, is not exempt from this liability.
However, he can recover the amount he has
paid from the capitalist partners, unless there
is a stipulation to the contrary. [Cia. Maritima v.
Muoz (1907)].
STIPULATION AGAINST INDIVIDUAL
LIABILITY
Any stipulation against this liability is void and
does not affect third persons. The stipulation,
however, is valid only as among the partners
[Article 1817].
LIABILITY OF PARTNERS FOR
PARTNERSHIP CONTRACTS
ACTS APPARENTLY FOR THE CARRYING ON
OF USUAL BUSINESS
General rule: Every partner is an agent of the
partnership for the purpose of its business and
any act of a partner which is apparently for the
carrying on of the usual business of the
partnership binds the latter, including the
execution of any instrument in the partnership
name [1st par., Article 1818].
Exception: The partnership is not bound when:
(1) The partner has in fact no authority to act;
AND
(2) The person with whom he deals has
knowledge of such fact.
ACTS NOT APPARENTLY FOR CARRYING ON
OF THE USUAL
BUSINESS
General rule: Acts of a partner which is not
apparently for carrying on of the usual business
does not bind the partnership.
Exception: The partnership is bound if the
other partners authorized him to do the act.
ACTS OF STRICT DOMINION
General rule: One or some of the partners have
no authority to do the following acts of strict
dominion:
(a) Assign the partnership property in trust for
creditors or on the assignee's promise to pay
the debts of the partnership;
(b) Dispose of the goodwill of the business;
(c) Do any other act which makes it impossible
to carry on the ordinary business of the
partnership;
(d) Confess a judgment;
(e) Enter into a compromise concerning a
partnership claim or liability;
(f) Submit a partnership claim or liability to
arbitration;
(g) Renounce a claim of the partnership.
Exception: They may do so if:
(1) Authorized by all the partners; OR
(2) The other partners have abandoned the
business.
ACTS IN CONTRAVENTION OF
RESTRICTION
Any act of a partner in contravention of a
restriction on authority does not bind the
partnership to persons having knowledge of
the restriction [Article 1818].
CONVEYANCE OF REAL PROPERTY OF
PARTNERSHIP
TITLE IN THE PARTNERSHIP NAME
Any partner may convey the property in the
name of the partnership.
The partnership can recover it, except when:
(1) The act of the partner binds the partnership
under 1st par., Article 1818 (i.e., for the
carrying on of the usual business of the
partnership); or
(2) If not so authorized, the property has been
conveyed by the grantee, or a person claiming
under him, to a holder for value and without
knowledge that the partner exceeded his
authority.
TITLE IN THE PARTNERSHIP NAME
A partner, authorized to act under 1st par.,
Article 1818, may convey, in his own name, the
equitable interest of the partnership.
TITLE IN THE NAME OF ONE OR MORE
(NOT ALL) OF THE PARTNERS AND THE
RECORD DOES NOT DISCLOSE THE RIGHT
OF THE PARTNERSHIP
The partners having title may convey title.
The partnership may recover it if the act does
not bind it under 1st par., Article 1818, unless
the purchaser or his assignee is:
(1) A holder for value; AND
(2) Without knowledge that the act exceeded
authority.
TITLE IN THE NAME OF ONE OR MORE OR
ALL THE
PARTNERS, OR IN A THIRD PERSON IN
TRUST FOR THE PARTNERSHIP
A partner may convey equitable title in the
partnership name or in his own name, when
the act is authorized under 1st par., Article
1818
. to another representing him as such partner.
TITLE IN THE NAMES OF ALL THE
PARTNERS
The conveyance must be executed by all of
them to pass all their rights in the property
[Article 1819].
LIABILITY OF PARTNERSHIP FOR
ADMISSION BY PARTNER
An admission or representation by any partner
concerning partnership affairs within the scope
of his authority may be used as evidence
against the partnership [Article 1820].
LIABILITY OF PARTNERSHIP FOR
WRONGFUL ACTS OF PARTNER
The partnership is solidarily liable with the
partner who causes loss or injury, or incurs any
penalty through any wrongful act or omission:
(1) In the ordinary course of the business of the
partnership; or
(2) Not in such ordinary course of business, but
with the authority of his co-partners [Article
1822].
LIABILITY OF THE PARTNERSHIP FOR
MISAPPLICATION OF MONEY
OR PROPERTY RECEIVED
The partnership is liable for losses suffered by
a third person whose money or property was:
(1) Received by a partner, acting within the
scope of his apparent authority, who also
misapplied it; or
(2) Received by the partnership, in the course
of its business, but is misapplied by any
partner while it is in the custody of the
partnership [Article 1823].
LIABILITY OF OTHER PARTNERS
FOR WRONGFUL ACTS OR
MISAPPLICATION
All partners are solidarily liable with the
partnership for its liabilities under Articles 1822
and 1823 [Article 1824].
This is without prejudice to the guilty partner
being liable to the other partners. However, as
far as third persons are concerned, the
partnership is answerable.
LIABILITY IN CASE OF PARTNERSHIP BY
ESTOPPEL
PARTNER BY ESTOPPEL
A person, not a partner, may become a partner
by estoppel, and be liable as a partner, when,
by words, spoken or written, or conduct, he:
(1) Directly represents himself to anyone as a
partner in an existing or non-existing
partnership; or
(2) Indirectly represents himself by consenting
[Article 1825]
LIABILITY OF PARTNER BY ESTOPPEL
A partner by estoppel is liable:
(1) To any person who extended credit to the
partnership, actual or apparent, relying on his
representation; and
(2) In case the representation was made
publicly, to any person, who extended such
credit, whether or not the communication to
said creditor was made with the knowledge of
the partner.
NATURE OF LIABILITY
He is liable in the following manner:
(1) When there is an existing partnership and
all the partners consented to the
representation, a partnership liability results,
and the partner by
estoppel is liable as though he were a partner;
(2) When there is an existing partnership and
not all the partners consented, or when there is
no existing partnership and all those
represented as partners consented to the
representation, he is liable jointly and pro rata
with those who consented to the
representation;
(3) When there is an existing partnership but
none of the partners consented, or when there
is no existing partnership and not all of those
represented as partners consented to the
representation, he is liable separately.
EFFECTS OF ACTS OF PARTNER BY
ESTOPPEL
The acts of a partner by estoppel have the
following effects:
(1) A person, thus representing himself as a
partner of other persons, becomes an agent of
the latter, in the same manner as though he
were a partner in fact, with respect to persons
who rely upon the representation.
(2) When all the members of the existing
partnership consent to the representation, a
partnership act or obligation results.
(3) In all other cases, only a joint act or
obligation results. [Article 1825]
No real partnership is created by estoppel. It is
only with respect to third persons that
partnership by
estoppel is recognized.
ESTABLISHING LIABILITY
The basic elements in connection with
establishment of liability as a partner if based
on the doctrine of
estoppel must encompass:
(1) Proof by plaintiff that he was individually
aware of the defendant's representations as to
his being a partner or that such
representations were made by others and not
denied or refuted by the defendant;
(2) Reliance on such representations by the
plaintiff; and
(3) Lack of any denial or refutation of the
statements by the defendant; such denial need
not precede plaintiff's acting therein if the
denial wa forthcoming promptly upon hearing
of the representations, and if, by prudence and
diligence the plaintiff might have learned of the
truth or untruth of the representations.
Persons who knowingly assume to act as a
corporation without authority to do so are liable
as general partners for all debts, liabilities and
damages incurred. [Section 21, Corporation
Code] A partnership de facto is created.
LIABILITY OF INCOMING PARTNER
A person admitted as a partner is liable as the
other
partners for obligations subsequent to his
admission.
He is also liable for obligations incurred before
his admission, but will be satisfied only out of
the partnership property, unless otherwise
stipulated. (Article 1826)
Ratio:
(1) The new partner partakes of the benefits of
the partnership property and an already
established business.
(2) He has every means of obtaining full
knowledge of the debts of the partnership and
remedies that amply protect his interest [De
Leon (2010)].
However, an incoming partner may fully
assume the obligations of a retiring partner.
NOTICE TO OR KNOWLEDGE OF THE
PARTNERSHIP
The following operate as notice to or
knowledge of the partnership:
(1) Notice to any partner of any matter relating
to partnership affairs;
(2) Knowledge of the partner acting in the
particular matter acquired while a partner;
(3) Knowledge of the partner acting in the
particular matter then present to his mind; and
(4) Knowledge of any other partner who
reasonably could and should have
communicated it to the acting partner.
These do not apply in case of fraud on the
partnership committed by or with the consent
of the partner [Article 1821].
PREFERENCE OF PARTNERSHIP
CREDITORS
Partnership creditors are preferred over
personal creditors of the partners with respect
to partnership property.
However, personal creditors may ask the
attachment and public sale of the share of the
partner debtor in the partnership assets.
[Article 1827]
Ratio: The partnership, as a legal entity distinct
from its members, should apply its property to
the payment of its debts in preference to the
claim of any partner or his individual creditors.