COURSE GUIDE

(AGENCY, TRUSTS & PARTNERSHIP)

By: ATTY. MICHAEL I. DANGANAN

COVERAGE

Partnership (Articles 1767-1867)

Chapter 1 (General Provisions) Art 1767-1783

Chapter 2 (Obligations of the Partners) Art 1784-1827
Section 1 (Among themselves) Art 1784-1809
Section 2 (Property rights of a partner) Art 1810-1814
Section 3 (Obligations of partners
with regard to 3rd persons) Art 1815-1827
Chapter 3 (Dissolution and winding up) Art 1828-1842
Chapter 4 (Limited Partnership) Art 1843-1867

Agency (Articles 1868-1932)

Chapter 1 (Nature, Form and Kinds of Agency) Art 1868-1883

Chapter 2 (Obligations of the Agent) Art 1884-1909
Chapter 3 (Obligations of the Principal) Art 1910-1918
Chapter 4 (Modes of Extinguishment of Agency) Art 1919-1932

Trusts (Articles 1440-1457)

Chapter 1 (General Provisions) Art 1440-1442

Chapter 2 (Express Trusts) Art 1443-1446
Chapter 3 (Implied Trusts) Art 1447-1457

PARTNERSHIP
(Arts. 1767-1867)
 
I. General Provisions (Arts. 1767-1783)

Law on Partnership: Arts 1767-1867 of the New Civil Code, supplemented by other
provisions of the New Civil Code on contracts and agency.
Sources: Old Civil Code and two (2) American statutes: Uniform Partnership Act and
the Uniform Limited Partnership Act. Reasons: to fill-in the gaps of present law and they are
more in accord with modern business practices.
Definition under Article 1767 from the point of view of being a contract; includes
joint pursuit or practice of profession
vs. American concept – juridical relation
Does the law allow individuals to practice a profession as a corporate entity?
(Acebedo Optical vs. CA, 329 SCRA 314)
Use of partnership name (Article 1815), Ruling in Petition for Authority to Continue
Use of Firm Name: Sycip Salazar, etc. (G.R. No. X92-1, 30 July 1979) abandoned by Rule
3.02 of the Code of Professional Responsibility (21 June 1988)
Elements; essential features of a partnership contract
Form: No particular form required, subject to Arts 1771-1773, Art 1403 and in case of
Limited Partnership, Art 1844 (No oral Limited Partnership); effects of failure to comply
with required form: Litonjua vs. Litonjua, Sr. (477 SCRA 576 [2005])
Doctine of Delectus Personae; When not applicable?
Who may enter into a contract of partnership?
May a husband and wife enter into a particular partnership or be members thereof?
(Art 1782, correlate with Art 87 Family Code)
May a wife enter into a partnership without her husband’s consent? (Art 73 Family
Code)
May a partnership to be a partner in another partnership?
May a corporation enter into a contract of partnership? (J. M. Tuazon & Co., Inc. vs.
Bolanos, 95 Phil. 106 [1954])
Joint Venture vs. Partnership (Aurbach vs. Sanitary Wares Manufacturing
Corporation, G.R. No. 75875, 15 December 1989)
Purpose of the partnership is to obtain profit. There should be sharing of profits. Not
necessarily in equal shares. Correlate with Art 1799
Partnership is a juridical person (Art 1768 correlate with Arts 44 and 46 of NCC and
Art 1774).
Common Law view of partnership vs. Mercantile View of partnership
Rules in determining the existence of partnership Art 1769
Sharing of gross returns vs. Sharing of profits
Partnership by estoppel under Articles 1825 and 1834 last paragraph
Co-ownership vs. Partnership
Partnership vs Corporation; Similarities

Cases on Art 1769:

Gatchalian vs. The Collector of Internal Revenue (G.R. No. L-45425, 29 April
1939)
Oña vs. Commissioner of Internal Revenue (G.R. No. L-19342, 25 May 1972)
Obillos, Jr. vs. Commissioner of Internal Revenue (G.R. No. L-68118, 29 Oct 1985)
Lim vs Philippine Fishing Gear Industries, Inc. (317 SCRA 728 [1999])

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 Legality of the object and the principle of “community of interest” – Article 1770
Kinds of partnership/kinds of partners
Universal Partnership (Art 1777) vs. Particular Partnership (Art 1783)
Universal partnership of all present property (Art 1778) vs. Universal partnership of
profits (Art 1780)
General Partnership vs. Limited Partnership
Partnership at will (Art 1785) vs Partnership with a fixed term; Ortega vs. Court of
Appeals (245 SCRA 529 [1995])
de jure vs. de Facto Partnership
Ordinary or real vs. Ostensible or partnership by estoppel
Secret vs. Open or notorious
Commercial or trading vs. Professional or non-trading partnership

II. Obligations of the Partners (Arts. 1784-1827)

 
A. Obligations of the Partners Among Themselves (Arts .1784-1809)

Partnership – consensual contract Art 1784 correlate with Art 1315.

Future partnership
Obligations of the partners with respect to contribution of property.
Liability of a partner who fails to perform service stipulated.
Obligations of partners with respect to partnership capital.
Industrial Partner vs. Capitalist Partner (Arts 1789, 1808, 1799, 1816)
Requisites before a capitalist partner may be obliged to sell his interest (Art 1791)
Managing partner (Arts 1792, 1800-1803, 1818, 1932)
Liability of partners for fault or negligence (Art 1794 correlate with Art 1170).
Rules in distribution of profits and losses (Arts 1797-1799) (Ramnani vs. CA, 196
SCRA 731)
Subpartnership (Art 1804) vs. Assignment of partner’s interest in the partnership (Art
1813)

B. Property Rights of Partners (Arts. 1810-1814)

Rights of partners (Arts 1811, 1812, 1803, 1796, 1805, 1806, 1809, 1830, 1831)
Assignment of partner’s interest in the partnership (Arts 1812, 1813)
Charging Order (Art 1814)

C. Obligations of the Partners with Regard to Third Persons (Arts. 1815-

1827)
 
Importance of a firm name (Art 1815)
Pro-rata and subsidiary liability of all partners (Art 1816, 1817)
Solidary liability of partners (Arts 1822-1824)
Every partner considered agent of the partnership (Art 1818)
Partnership by estoppel (Arts 1825 and 1834, last paragraph)

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 Liability of incoming partner for partnership obligations (Art 1826)
Preference to partnership creditors as regards partnership property (Art 1827)

III. Dissolution and Winding Up (Arts. 1828-1842)

Definition (Art 1828)

Effects (Art 1829, 1832-1834) (Sy vs. CA, 313 SCRA 328)
Grounds for extra-judicial dissolution (Art 1830) Ortega vs. Court of Appeals (245
SCRA 529 [1995]) Doctrine of Delectus Personae
Grounds for judicial dissolution (Art 1831)
Other grounds (Art 1838, 1840)
Liquidating partner (Art 1836)
Rights of partners in case of dissolution (Art 1837)
Art 1838 vs. Arts 1380-1381 correlate with Art 1330
Winding-up definition, Art 1842 (Primelink Properties vs. Lazatin-Magat, 493
SCRA 444); Order of payment of liabilities (Art 1839); Doctrine of Marshaling of Assets
Creditors of dissolved partnership are considered creditors of the person or
partnership continuing the business (Art 1840) (Yu vs. NLRC, 224 SCRA 75)
Rights of retiring or of estate of deceased partner when business is continued without
settlement of accounts (Art 1841)

IV. Limited Partnership (Arts. 1843-1867)

Definition, liability of limited partners (Arts 1843, 1858)

Form; Matters to be stated in the Certificate of Limited Partnership (Art. 1844)
(correlate with Arts 1771-1773)
Characteristics
Limited Partnership vs General Partnership
Limited Partner is a capital contributor (Art 1845)
Instances when a limited partner becomes liable as a general partner (Art 1846, 1848,
1853)
Admission of additional limited partners (Art 1849, 1865) correlate with Art 1850,
Nos. 5 & 6)
Instances when consent or ratification of all limited partners required (Art 1850)
Rights of a limited partner (Arts 1851, 1856, 1857 par 4)
Transactions allowed/prohibited to a limited partner (Art 1854)
Preferred limited partners (Art 1855)
Return of contribution of limited partners (Art 1857)
Substituted limited partner (Art 1859)
Charging Order (Art 1862) compared with Art 1814
Winding up, order of payment of liabilities (Art 1863) compared with Art 1839
Cancellation/Amendment of Certificate of Limited Partnership (Art 1864)
Limited partner not a proper party to proceedings by or against the
partnership/Exception (Art 1866)

AGENCY
(Arts. 1868-1932)
 

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I. Nature, Form and Kinds of Agency (Arts. 1868-1883)

Definition (Art 1868)

Characteristics; distinguishing features of a contract of agency
Que facit per alium facit per se
Capacity of principal and agent
Agency vs. Partnership
Agency classifications (Art 1869)
Express vs. Implied (Art 1870)
Gratuitous vs. Compensated or onerous (Art 1875)
General vs. Special (Art 1876)
Couched in general terms (Art 1877) vs. Couched in specific terms (Art 1878).
Ostensible or representative (Art 1868) vs. Simple or commission
Acceptance of agency (Arts 1870-1872)
Power of Attorney (Letter of Attorney); purpose and construction
Notice of agency (Art 1873):
Form of agency: Art 1874, sale of piece of land thru agent whose authority is not in
writing, void, voidable or unenforceable (Delos Reyes vs. CA, G.R. No. 129103, 03
September 1999, 313 SCRA 632)
Instances when a Special Power of Attorney is required; form (Art 1878)
Instances when the principal bound/not bound by the acts of the agent.
Art 1883 Rural Bank of Bombon vs. CA (212 SCRA 25)

II. Obligations of the Agent (Arts. 1884-1909)

General obligations of an agent

Specific obligations of an agent (Arts 1884-1891, Arts 1895, 1896, 1898, 1909, 1929)
Liabilities of a commission agent (Art 1903-1908)
Instructions vs. Authority (Arts 1887 and 1900)

III. Obligations of the Principal (Arts. 1910-1918)

General Obligations of the Principal 

Specific Obligations of the Principal (Arts 1910, 1912, 1913, 1875)
Ratification of the principal Arts 1901, 1910, 1393 (Delos Reyes vs. CA, 313 SCRA
632)
Art 1910 correlate with Arts 1317 ad 1403 first paragraph
Estoppel (Art 1911) vs. Ratification
Apparent authority vs. Authority by estoppel

IV. Modes of Extinguishment of Agency (Arts. 1919-1932)

Modes of extinguishment of agency (Art 1919)

Other grounds
Doctrine of Unforeseen Event (rebus sic stantibus) Art 1266
Revocation: express or implied (Arts 1923, 1924, 1926)
Manner of revocation Arts 1921-1922 correlate with 1873

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 Art 1927 “irrevocable” agency, agency coupled with an interest (Art. 1930) Lim vs.
Saban (G.R. No. 163720, 16 December 2004, 447 SCRA 232) and Valenzuela vs. CA (G.R.
No. 83122, 19 October 1990, 191 SCRA 1)

TRUSTS
(Arts. 1440-1442)
 
I. General Provisions

Definition (Art 1440)

Classification of trusts
Testamentary trusts vs. Trusts inter vivos (living trusts);
Express trusts (voluntary, Art 1443-1446) vs. Implied trusts (involuntary, Art 1447-
1457) Resulting trust vs Constructive trust, also known as trust ex maleficio, trust ex delicto,
and de son tort (Sumaoang vs Judge, RTC, 215 SCRA 136 [1996]).
Elements of an express trust

Cases on Trusts:
Heirs of Lorenzo Yap vs CA (312 SCRA 603)
Saltiga de Romero vs. CA (319 SCRA 180)