ATP7057-Q1-Partnership-Group 6

Group 6 Members:
Oyag, Edison A.
Pacho, Maria Isedra Silvestra V.
Palec, Daniela B.
Parayday, Mar Darby G.
Pastera, Mary Elaine Hyacinth B.
Prospero, Paul Sheen D.
Albor, Cresenciano Jr

Question 1: (10 points)

A and B entered into a universal partnership of all present property. At the time of
the execution of the partnership, A owned 5 delivery trucks, a warehouse
building, and 5 cars, while B owned a five-hectare fruit and vegetable farm, a
tractor, and a poultry farm. During the first year of the partnership, the following
transactions took place

1. The delivery trucks earned trucking income.

2. The warehouse earned storage income.

3. The cars realized revenues from their lease.

4. Fruits and vegetables were harvested from the farm.

5. Chickens and eggs were produced from the operations of the poultry farm.

6. Partner A purchased a commercial building from his own funds.

7. Rent was realized from the commercial building.

8. Partner B inherited a rice field.

9. Rice was harvested from the rice field.

Based on the foregoing data, what properties belong and do not belong to the
partnership? Explain.

Answer:
ATP7057-Q1-Partnership-Group 6

According to article 1778 of the new code, a partnership of all present property is that in
which the partners contribute all the property which actually belongs to them to a
common fund, with the intention of dividing the same among themselves, as well as all
the profits they may acquire therewith.

According to article 1779 of the new code that in a universal partnership of all present
property, the property which belonged to each of the partners at the time of the
constitution of the partnership becomes the common property of all the partners, as well
as all the profits which they may acquire therewith.

A provision for the common enjoyment of any other profits may also be made; but the
property which the partners may acquire subsequently by inheritance, legacy, or
donation cannot be included in the stipulation, except the fruits thereof.

In the case at the bar, what properties belong to the partnership are the following:

No.1, 2 3, 4, and 5, as these properties are owned by the partners at the time of the
formation of the partnership. These are the all present property that is deemed
contributed property. Fruits of the present property are included. So use of the tractor.

Profits acquired in the present properties.

Revenue is considered profit

Fruits include the income of the poultry farm

Purchase from his own fund is not included

Commercial lot and building purchased by the partners and rental therefrom since
there was no stipulation that after-acquired property shall belong to the partnership,
shall not be included.

However, if there is a provision that both the commercial lot and building and rental
therefrom which represent their fruit shall belong to the partnership.

Inheritance is not part of the property of the partnership because article 1779 of the new
civil code provides ‘’that property is acquired by each partner after the formation of the
partnership but only if stipulated. The property includes first the property itself except if
the stipulation does not cover property acquired by inheritance, legacy, and donation.

Rice harvested is not included because the rice field is not included in the property of
the partnership.
ATP7057-Q1-Partnership-Group 6

Question 2: (10 points)

A and B entered into a universal partnership of profits. At the time of the

execution of the partnership, A owned 5 delivery trucks and a warehouse
building, while B owned a five-hectare fruit and vegetable farm and a tractor.
During the first year of the partnership, the following transactions took place:

1. The delivery trucks earned trucking income.

2. The warehouse earned storage income.

3. Fruits and vegetables were harvested from the farm.

4. Partner A purchased a commercial lot and building from his own funds.

5. Rent income was realized from the commercial building.

6. Partner B inherited a rice field.

7. Rice was harvested from the rice field.

8. Partner A earned a salary as management consultant of several companies

outside the partnership.

9. Partner B won first prize in the lotto.

Based on the foregoing data, what properties belong and do not belong to the
partnership? Explain.

Only items 1, 2, 3, and 8 shall belong to the partnership. Items 4, 6, 7, and 9 do

not form part as common properties of the partnership.
ATP7057-Q1-Partnership-Group 6

Article 1779 of the Civil Code provides that, in a universal partnership of all present
property, the property which belongs to each of the partners at the time of the
constitution of the partnership, becomes the common property of all the partners, as
well as all the profits which they may acquire therewith.

A stipulation for the common enjoyment of any other profits may also be made; but the
property which the partners may acquire subsequently by inheritance, legacy, or
donation cannot be included in such stipulation, except the fruits thereof. (1674a)

In the case at bar, items 1, 2, and 3 are clearly profits from the properties brought into
the common property of the partnership. Item 8, however, still accrues to the common
property of the partnership since it can be considered as profit earned by a partner out
of industry or work during the existence of the partnership. On the other hand, item 4
cannot be held as common property of the partnership since it was purchased out of the
common fund of A, item 6 because it was out of inheritance, item 7 because there was
no stipulation that it be held as a common property, and item 9 since it was out of
chance or acquired gratuitously falling on the same species as those acquired by legacy
or donation.

Henceforth, items 1, 2, 3, 8 belong to the partnership while items 4, 6, 7, and 9 do not

form part as common properties of the partnership.

Question 3: (20 points)

IDEAL Automotive Repair Shop is a partnership composed of partners Illustre,

Delima, Encinas, Amores, and Legaspi. Illustre is an industrial partner who
manages the partnership, while the rest are capitalist partners.

a) May Illustre engage for himself in the business of dealing in computers

without the consent of the partnership?

Yes. Illustre may engage for himself in the business of dealing in computers with the
express consent of the partnership.

Article 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, the capitalist
partners may either exclude him from the from or avail themselves of the benefits which
he may have obtained in violation of this provision, with a right to damages in either
case.
ATP7057-Q1-Partnership-Group 6

As a general rule, Illustre as an industrial partner cannot engage in any kind of business
either of the similar nature or character or not of that of the partnership he is rendering
his service. Exception is when the partnership expressly permits him to do so, then
Illustre may engage in a business dealing in computers.

Thus, Illustre can engage in business for himself as long as it is with the express
consent of the partnership.

b) How about Delima?May he engage in the business of dealing in computers

without the consent of the partnership?

Yes. Delima can engage in the business dealing with computers.

Article 1808. The capitalist partners cannot engage for their own account in any
operation which is of the kind of business in which the partnership is engaged, unless
there is a stipulation to the contrary. Any capitalist partner violating this prohibition shall
bring to the common funds and profits accruing to him from his transactions, and shall
personally bear all the losses.

Dilema, a capitalist partner, can engage in a business dealing with computers for the
latter is of a different nature from an automotive repair shop.

Thus, Dilema can engage for her own account in any operation for as long as it is of the
kind of business in which the partnership is not engaged in.

Question 4: (20 points)

MANLY Enterprises is a partnership composed of Mangulad, Alibio, Noble,

Lamiao, and Yatco. Mangulad is the manager who is authorized to collect the
credits of the partnership. Tampes owes Mangulad P20,000.00 and MANLY
Enterprises P30,000.00. Both debts are due. Tampes tenders payment of
P20,000.00 to Mangulad in payment of his debt to the latter.

a) To which credit will the payment be applied if Mangulad issues his own
receipt?

P8,000 pesos are only applied to Mangulad credit, and the remaining P12,000 will be
credited to the partnership as a proportionate amount of the P20,000 paid by Tampes.
ATP7057-Q1-Partnership-Group 6

Article 1792 of the NCC provides that where a person is separately indebted to the
partnership and to the managing partner at the same time, any sum received by
the managing partner shall be applied to the two credits in proportion to their
amount, except where he received it for the account of the partnership, in which case
the whole sum shall be applied to the partnership credit only.

In the case at bar, Mangulad is the manager of the Manly enterprise and is authorized to
collect due and demandable debts. Tampes owes a sum of money to the Manly
enterprise at the same time as to Mangulad. Tampes paid the amount of P20,000 and
issued a receipt in favor of Mangulad. But as expressly provided under the law, even if
the debtor issues a receipt to the effect that it is in payment of Mangulad’s credit, the
P8000 are only applied to his credit, and the P12,000 will be credited to the partnership
as a proportionate amount of the P20,000 paid by Tampes.

Therefore, if Mangulad issues his own receipt, the payment credited to him will be
P8,000 only, and the amount of P12,000 will be credited to the partnership as a
proportionate amount of the P20,000 paid by Tampes.

b) Will your answer be the same if Mangulad issues the receipt of the
partnership?

No, the payment credit will only be applied to the partnership credits.

Article 1792 of the NCC provides that where a person is separately indebted to the
partnership and to the managing partner at the same time, any sum received by the
managing partner shall be applied to the two credits in proportion to their amount,
except where he received it for the account of the partnership, in which case the
whole sum shall be applied to the partnership credit only.

In the case at bar, Mangulad is the manager of the Manly enterprise and is authorized to
collect due and demandable debts. Tampes owes a sum of money to the Manly
enterprise at the same time as to Mangulad. Tampes paid the amount of P20,000 and
issued a receipt in favor of the partnership. Though Mangulad is authorized to collect
the due and demandable amount debts and that debtor is also his personal debtor, any
payment made to the latter if the latter issued receipts to the partnership will not be
credited to Mangulad, and all amounts will apply to the partnership alone. The law
safeguards the interests of the partnership by preventing the possibility that they will be
subordinated by the managing partner to his own interests to the prejudice of the other
partners. Good faith demands that the partner vested with the management of the
partnership attend more to the interest of the partnership than to his own, and he should
ATP7057-Q1-Partnership-Group 6

not intentionally fail to effect the collection of the credit of the partnership in order to
effect the collection of his own.

Therefore, the P20,000 payment made by Tampes will not be divided pro rata between
Mangulad and the partnership because of the receipts issued by Tampes, which
indicate that his intention is to pay the partnership first and that it will be credited fully to
the partnership.

Question 5: (10 points)

BEST Company is a partnership composed of Betty, Ellen, Sally, and Terry. Betty
contributed P50,000.00; Ellen, P30,000.00; Sally, P15,000.00; and Terry, P5,000.00.
During the year, BEST Company realized a net profit of P10,000.00.

​ a) Assuming that the partners stipulated in the articles of partnership that

profits would be divided in the ratio of 5:2:2:1. What would be the share of
the partners?

The partners, in this case, will have a share of P5,000 for Betty, P2,000 for
Ellen, P2,000 for Sally, and P1,000 for Terry as agreed upon.
​
​ The law provides that the losses and profits shall be distributed in conformity with
the agreement. If only the share of each partner in the profits has been agreed
upon, the share of each in the losses shall be in the same proportion.
​
​ There is an agreement that profits would be divided in the ratio of 5:2:2:1 which
would mean that 5% of the profit will be given to Betty; 2% to Ellen; 2% to Sally;
and 1% to Terry from the total profit of P10,000.
​
​ Therefore, Betty is entitled to P5,000; Ellen is entitled to P2,000, Sally is entitled
to P2,000; and Terry is entitled to P1,000.
​
​
b) If the partners did not have a profit-sharing agreement. What would be
the share of the partners?
​
​ The partners will be following the ratio of 5:3:1.5:0.5.
​
ATP7057-Q1-Partnership-Group 6

​ The law provides that if the profit sharing is not stipulated it will be divided
according to the capital contributions.
​
​ Betty contributed P50,000.00; Ellen, P30,000.00; Sally, P15,000.00; and Terry,
P5,000.00. With the capital each contributed, Betty is entitled to 5%; Ellen is
entitled to 3%; Sally is entitled to 1.5%, and Terry is entitled to 0.5%.
​
​ Thus, Betty is entitled to P5,000; Ellen is entitled to P3,000; Sally is entitled to
P1,500, and Terry is entitled to P500.
​
​
​

Question 6: (15 points)

If BEST Company instead suffered a loss of P10,000.00:

a) How will the loss be divided if the partners stipulated in the articles of
partnership that loses would be divided in the ratio of 4:3:2:1? How much would
each partner share in the losses?

Each partner shall bare the loss following the distribution in the stipulated articles of
partnership. The proportion will be P10,000 (loss) divided by 10 (parts) = P1,000 per
part.

The law provides in Article 1797 that the losses and profits shall be distributed in
conformity with the agreement.

In the case at bar, Betty shall bare P4,000 (4 parts); Ellen shall bare P3,000 (3 parts);
Sally shall bare P2,000 (2 parts); and Terry shall bare P1,000 (1 part) of the losses.

Hence, the partnership shall follow the distribution of what is stipulated in the articles of
partnership.

b) If the partners did not have any agreement as to the division of losses,but they
have an agreement as to the sharing of profits in the ratio of 5:2:2:1, how much
will be the share of each partner for the losses?

The share of each partner for the losses shall be in proportion to their share of profits.

Article 1797 provides that if only the share of each partner in the profits has been
agreed upon, the share of each in the losses shall be in the same proportion.
ATP7057-Q1-Partnership-Group 6

In the case at bar, the agreement as to the sharing of profits is in the ratio of 5:2:2:1.
Therefore, Betty shall bare P5,000 (5 parts); Ellen shall bare P2,000 (2 parts); Sally
shall bare P2,000 (2 parts); and Terry shall bare P1,000 (1 part) of the losses.

Hence, each partner’s losses shall be in proportion to their share of profits in the
absence of an agreement.

c) If the partners did not have an agreement as to profit sharing, how much will
each partner’s share in the loss?

Each partner’s share of losses shall be in proportion to their individual contributions.

The law provides in Article 1797 that in the absence of a stipulation, the share of each
partner in the losses shall be in proportion to what he may have contributed, but the
industrial partner shall not be liable for the losses.

In the case at bar, the share of losses ratio is 5:3:1.5:0.5 in proportion to their own
capital contributions. Hence, Betty shall bare P5,000 (5 parts); Ellen shall bare P3,000
(3 parts); Shally shall bare P1,500 (1.5 parts); and Terry shall bare P500 (0.5 part).

Therefore, each partner’s share of losses shall be in conformity with their individual
capital contributions.

Question 7: (20 points)

FORTUNE Construction Company is composed of the following partners with

their respective capital contributions: Fermin, P10,000.00; Ortiz, P20,000.00;
Rayos, P30,000.00; Torres, P40,000.00; Ubaldo, P50,000.00; Nervida, P300,000.00;
and Escaler, P500,000.00. Fermin Ortiz, Rayos, Torres, and Ubaldo have been
appointed as managers without any specification as to their respective duties.
Fermin wants to buy 50 pieces of steel from Hercules Steel Corporation, but
Torres opposes it.

a) Supposing that when the matter was put to a vote, Ortiz and Rayos sided with
Fermin, while Ubaldo sided with Torres. Whose group will prevail? The group of
Fermin or the group of Torres?

The group of Fermin will prevail.

ATP7057-Q1-Partnership-Group 6

Under Article 1801 of the Civil Code, it provides that if two or more partners have been
intrusted with the management of the partnership without specification of their
respective duties, or without stipulation that one of them shall not act without the
consent of all the others, each one may separately execute all acts of administration,
but if any of them should oppose the acts of the others, the decision of the majority shall
prevail.

In the case at bar, Fermin, Ortiz, Rayos, Torres, and Ubaldo are appointed as
managers, without specification of their respective duties, and there is no stipulation that
one of them shall not act without the consent of the others. Thus, Fermin may
separately execute all acts of administration. However, Torres opposes Fermin’s
decision in the buying of steel from Hercules Steel Corporation, in which case, the
decision of the majority of the managing partners shall prevail. In this case, three out of
the five managing partners voted in favor of buying steel from Hercules Steel
Corporation.

Hence, the group of Fermin will prevail because they constitute the majority of the
managing partners.

b) Supposing that Rayos abstained from voting thereby creating a tie among the
managing partners (Fermin and Ortiz vs. Torres and Ubaldo), how shall the
conflict be resolved?

It shall be resolved based on the decision of the partners owning the controlling interest.

Under Article 1801 of the Civil Code, it provides that in case of a tie, the matter shall be
decided by the partners owning the controlling interest.

Here, there was a tie among the managing partners since Rayos abstained from the
voting. Thus, the decision of Escaler who owns the controlling interest shall prevail.

Hence, the conflict will be resolved based on the decision of the partners owning the
controlling interest.
ATP7057-Q1-Partnership-Group 6

Question 8: (30 points)

POLARIS Enterprises, a partnership engaged in the trading of sporting goods, is

composed of Pascasio, who contributed P40,000.00; Oropesa, P50,000.00; Liwag,
P60,000.00; Apolto, P70,000.00; Rabino, P80,000.00; Isidro, P200,000.00; and
Samulde, P300,000.00. The partners did not designate who among themselves
shall be the manager. Accordingly, all the partners are considered as agents or
managers of the partnership. Whatever any one of them may do alone shall bind
the partnership.

a) If Pascasio buys baseball equipment from Everlast Company in behalf of

POLARIS Enterprises. Will the purchase bind the partnership?

Yes, the purchase will bind the partnership.

The law provides that when a manner of management has not been agreed upon, all
partners shall be considered agents, and whatever any one of them may do alone shall
bind the partnership, without prejudice to the provisions of article 1801.

Here, since the partners did not designate among themselves who shall be the manager
then, Pascasio is allowed to execute all acts of administration.

Hence, his purchase of baseball equipment binds the partnership. Yes, because
Pascacio is considered an agent of the partnership. In an absence of an agreement
with whoever will be the manager, they shall be agents to each other. As long the
purchase is in line with the usual business of the partnership.

b) Assume that the planned purchase by Pascasio from Everlast Company is

opposed by Rabino. When the matter was put to a vote, Oropesa, Liwag and
Apolto sided with Pascasio, while Isidro and Samulde sided with Rabino. Who will
prevail? The group of Pascasio (4 partners), who constitute the majority, or the
group of Rabino (only 3 partners but) who own the controlling interest?

The group of Pascasio will prevail.

Under article 1801 of the new civil codes that if any of the partners should oppose the
acts of the others, the decision of the majority shall prevail. In case of a tie, the matter
shall be decided by the partners owning the controlling interest.
ATP7057-Q1-Partnership-Group 6

Here, the result of the voting is four (4) versus three (3),Pascasio clearly obtained the
majority vote. Since there was no tie, in this case, the matter shall not be decided by the
partners owning the controlling interest (Note: the majority here refers to the number of
partners, since there was no mention of majority "interest" Controlling interest will only
apply if there is a tie in the vote.)

Hence, Pascasio group shall prevail, since it was no mention of the majority interest, the
majority number of partners shall be the basis in determining the controlling interest
because they don’t have managers and all partners are considered to act the
administration.

c) Suppose Apolto abstained from voting thereby creating a tie between the
group of Pascasio and that of Rabino, who will prevail?

According to the new civil code, if any of the partners should oppose the acts of others,
the decision of the majority will prevail. In case of a tie, the matter shall be decided by
the partners owning the controlling interest.

Here, Samulde who owned 37.5% interest and Isidro who owned 25% interest in the
partnership sided with Rabino. Samulde and Isidro are the partners owning the
controlling interest of 62.5%. Having sided with Rabino, the purchase of baseball
equipment cannot push through. ( Note: the partners have the controlling interest)

Question 9: (10 points)

A, a partner in the firm ABC and Company, used the firm’s delivery truck without
the consent of the other partners in hauling the personal effects of X who was
moving to a new subdivision. A received P4,000.00 for the services he rendered.
B and C, his co-partners, claimed that the amount belonged, and must be
accounted by A, to the partnership. A, however, disputed the claim of B and C by
saying that he merely availed himself of his right as co-owner of specific
partnership property. Is A correct?

No, the contention of A is not correct.

Article 1807 of the Civil Code provides that, every partner must account to the
partnership for any benefit, and hold as 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. (n)
ATP7057-Q1-Partnership-Group 6

In the case at bar, although it is true that he is a co-owner as regards to the property he
has brought as a common property to the partnership, the use of the same is subject to
limitation. Where it is used 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, he must account to the partnership for any benefit,
and hold as trustee for it any profits derived by him. In this case, A used the firm’s
delivery truck without the consent of B and C and without connection to the formation,
conduct, or liquidation of the partnership.

Hence, the compensation received by A for his services must belong and be accounted
by him to the partnership.

Question 10: (10 points)

A and B are partners, with A as the managing partner. D is indebted to A in the

amount of P10,000 and to the partnership in the amount of P5,000. Both debts are
due and demandable. D paid A P3,000. A issued to D a receipt in the name of the
partnership. How should the amount of P3,000 be applied?

The amount of P3,000.00 should be applied to the partnership's credit.

Article 1792. If a partner authorized to manage collects a demandable sum, which was
owed to him in his own name, from a person who owed the partnership another sum
also demandable, the sum thus collected shall be applied to their amounts, even though
he may have given a receipt for his own credit only; but should have given it for the
account of the partnership credit, the amount shall be fully applied to the partnership.

In this case, D owed both A and the partnership and the debts due and demandable.
Since, A issued to D a receipt in the name of the partnership, then, the debt should be
fully applied for the account of the partnership credit only.

Question 11: (10 points)

X, Y, and Z were partners. X is an industrial partner. During the first year of

operation, the firm realized a profit of P60,000. During the second year, the firm
sustained a loss P30,000. So, the net profit for the two years of operation was
only P30,000. In the Article of Partnership, it was agreed that X, the industrial
partner would get 1/3 of the profit but would not share in the losses. How much
will X, the industrial partner get?

X will get only P10,000, which is 1/3 of the net profit.

ATP7057-Q1-Partnership-Group 6

Article 1797, par. (1) of the NCC provides that the losses and profits shall be
distributed in conformity with the agreement. If only the share of profits for each
partner has been agreed upon, the share of losses for each shall be in the same
proportion.

In the case at bar, since there is an agreement regarding the share of the industrial
partner with regard to the profit, it shall be distributed in conformity with the agreement.
X will receive 10,000, which is 1/3 of the net profit during the second year and not from
the profit of the first year, which was 60,000, because the profits or losses of the
partnership cannot be determined by taking into account the result of one particular
transaction but of all the transactions.

Therefore, X will get only P10,000, which is 1/3 of the net profit; thus, the above
provision provides that the losses and profits shall be distributed in conformity with the
agreement.

Question 12: (10 points)

A and B are partners, with A as the managing partner. D is indebted to A in the

amount of P10,000 and to the partnership in the amount of P5,000. Both debts are
due and demandable. D paid A P3,000. A issued to D a receipt in his own name.
How should the amount of P3,000 be applied?

The P3,000 payment should be applied to the two credits in proportion to D’s debt.

Art. 1792. If a partner authorized to manage collects a demandable sum which was
owed to him in his own name, from a person who owed the partnership another sum
also demandable, the sum thus collected shall be applied to the two credits in
proportion to their amounts, even though he may have given a receipt for his own credit
only; but should he have given it for the account of the partnership credit, the amount
shall be fully applied to the latter.

In this case, A as the managing partner is authorized to collect the amount due to the
partnership. D is also indebted to A, the P3,000 payment of D with the receipt issued by
A in his own name which will be applied in proportion to the amount of the debt of D to A
and the partnership. Accordingly, the payment should be applied at 66% to the credit of
D to A which will be P1,998, and 33% to the partnership which will be P1,000.
ATP7057-Q1-Partnership-Group 6

Question 13: (10 points)

A, B, and C are partners. Their contributions are as follows: A, P60,000; B,

P40,000; and C, services. The partners agreed to divide profits and losses in the
following proportions: A, 35%; B, 25%; and C, 40%. If there is a loss of P10,000,
how should the said loss of P10,000 be shared by the partners?

The loss of P10,000 should be shared by the partners in conformity with their
agreement.

Article 1797 provides that the losses and profits shall be distributed in conformity with
the agreement made between the partners.

In the case at bar, the partners agreed to divide the losses in the following proportions:
A, 35%; B, 25%; and C, 40%. Hence, A shall bare P3,500 in the loss whereas B shall
bare P2,500 in the loss and C shall bare P4,000 in the loss.

Hence, the total loss of P10,000 is divided among A, B, and C in conformity with their
share of profits and losses agreement.

Question 14: (10 points)

John, Albert, and Wilfred are partners in JAW Enterprises. Not having established
yet their credit standing, the three partners requested Simon, a well-known
businessman, to help them negotiate a loan from Carlos, a money lender. With the
consent of John, Albert, and Wilfred, Simon represented himself as a partner of
JAW Enterprises. Thereafter, Carlos granted a loan of P150,000.00 to JAW
Enterprises. What kind of partner is Simon?

Simon is a partner by estoppel.

Under the law, a partner by estoppel is one who is not really a partner not being a party
to a partnership agreement but is liable as a partner for the protection of innocent third
persons. Under paragraph 2 of Article 1825, it provides further that when all the
members of the existing partnership consent to the representation, a partnership act or
obligation results; but in all other cases it is the joint act or obligation of the person
acting and persons consenting to the representation.

In the case at bar, Simon helped the partnership secure a loan from Carlos with the
consent of John, Albert and Wilfred. Simon represented himself as a partner of JAW
Enterprises. His representation being with full consent of all the actual partners, thus
ATP7057-Q1-Partnership-Group 6

arise to a partnership by estoppel. It means that in case of liability, the partnership will
be held liable because the law considers them as partners and the association as
partnership only insofar as it is favorable to third persons by reason of equitable
principle of estoppel, and he will be held liable same with the actual partner in case of
liability because of the doctrine of estoppel.

Hence, Simon is a partner by estoppel.

Question 15: (10 points)

Belinda, Ara, Rica, and Klaudia are partners in BARK Enterprises, a pet shop,
with Belinda contributing P50,000.00; Ara, P20,000.00; and Rica, P30,000.00.
Klaudia is an industrial partner and manages the partnership. Based on the
foregoing information, which of the following statements is false? Explain.

a. Belinda may engage in the buying and selling of rice without the consent of
the other partners.

b. Klaudia may engage in the buying and selling of rice without the consent of
the other partners.

c. Klaudia is not liable for the losses of the partnership.

d. Klaudia may be held liable by third persons for partnership debts with her
separate property.

Belinda may engage in the buying and selling9 of rice without the consent of the other
partners.

True statement

b. Klaudia may engage in the buying and selling of rice without the consent of the other
partners.

False statement

C. Klaudia is not liable for the losses of the partnership.

True statement
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d. Klaudia may be held liable by third persons for partnership debts with her separate
property.

True statement

Klaudia is an industrial partner may not engage in the buying and selling of rice without
the consent of the partners.

According to article 1789 of the new civil code that an industrial partner cannot engage
in business for himself unless the partnership expressly permits him to do so; and if he
should do so, the capitalist partners may either exclude him from the firm or avail
themselves of the benefits which he may have obtained in violation of this provision,
with a right to damages in either case.

In the case at bar, statement B is false because the industrial partner cannot engage in
any business unless the partners expressly agreed or permit it. The law prohibits her to
engage in any business because her capital contribution to the partnership is only her
labor and effort.

This prohibition is absolute and applies whether the industrial partner is to engage in the
same business in which the partnership is engaged or in any kind of business. In this
sense, the possibility of a conflict of interest will be avoided.

On other hand, if he engages in business for herself without the express permission of
the partnership, the capitalist has the right to exclude him from the firm.

Question 16: (10 points)

Bettina, Erlinda, Amanda, Ursula, Teresa, and Yolanda are partners in BEAUTY
Enterprises, a dealer in cosmetics and other beauty products, with contributions
of P60,000.00, P50,000.00, P40,000.00, P30,000.00, P20,000.00, and P10,000.00,
respectively. No one was appointed as manager in the articles of partnership.
Who will be the manager/s in the partnership?

All of them will become managers of the partnership.

Article 1803 of the Civil Code provides that, when the manner of management of the
partnership has not been agreed upon, each partner shall have equal rights in the
ATP7057-Q1-Partnership-Group 6

management of the affairs of the latter. Each of the partners are considered as agents
and he or she may act alone, binding the partnership.

In the case at bar, having had no stipulation on the manner of management, renders all
of them as managers of the partnership regardless of the amount of contribution
involved.

Question 17: (20 points)

TRIUMPH Company, a partnership engaged in the buying and selling of car spare
parts, has for its partners and their respective contributions the following: Tomas,
P10,000.00; Ramon, P20,000.00; Ignacio, P30,000.00; Urbano, P40,000.00; Marcos,
P100,000.00; Pablo, P200,000.00; and Hilario, P300,000.00. No one was appointed
as manager of the partnership. In the course of the operation of the partnership,
Tomas proposed to buy car spare parts from Dominion Motors, but his proposal
was opposed by Ramon. A voting among the partners took place and Ignacio,
Urbano, and Marcos sided with Tomas, while Pablo and Hilario sided with Ramon.

a) Who will prevail?

The proposal of Tomas will prevail.

Article 1803. When the manner of management has not been agreed upon, the
following rules shall apply:

All the partners shall be considered agents and whatever any one of them may do alone
shall bind the partnership, without prejudice to the provision of Article 1801.

None of the partners may, without the consent of the others, make any important
alteration in the immovable property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other partners is manifestly prejudicial to
the interest of the partnership, the court’s intervention may be sought.

TRIUMPH Company had not appointed any one as manager of the partnership as a
result all the partners shall be considered as agents of the partnership. However, Article
1802 shall not prejudice the provision of Article 1801, wherein in case any one of them
should oppose the acts of the others, the decision of the majority shall prevail. Since,
Ramon opposed the proposal of Tomas, thus the decision shall be decided by majority
votes of the partners. Four out of the seven partners favored Toma’s proposal - attaining
majority votes.

Thus, Tomas’ proposal shall prevail.

ATP7057-Q1-Partnership-Group 6

b) Assuming that when the voting took place, Marcos abstained, Ignacio and
Urbano sided with Tomas, while Pablo and Hilario sided with Ramon. Who will
prevail?

The opposition of Ramon shall prevail.

Article 1803. When the manner of management has not been agreed upon, the
following rules shall apply:

All the partners shall be considered agents and whatever any one of them may do alone
shall bind the partnership, without prejudice to the provision of Article 1801.

None of the partners may, without the consent of the others, make any important
alteration in the immovable property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other partners is manifestly prejudicial to
the interest of the partnership, the court’s intervention may be sought.

TRIUMPH Company had not appointed any one as manager of the partnership as a
result all the partners shall be considered as agents of the partnership. However, Article
1802 shall not prejudice the provision of Article 1801, wherein in case any one of them
should oppose the acts of the others, the decision of the majority shall prevail. In case
of a tie, the matter shall be decided by the partners owning the controlling interest.
Since, the majority of the votes cannot be obtained as votes were equal, the decision
shall be decided by the partners owning the controlling interest, in this case, total the
interest of Ramon, Pablo and Hilario results in them owning the controlling interest.

Thus, Ramon, Pablo and Hilario, owning the controlling interest, their decision to
oppose the proposal of Tomas shall prevail.

c) Assume the same facts except that in the articles of partnership, Tomas,
Ramon, Ignacio, Urbano, and Marcos were appointed managers. In the course of
the operation of the partnership, Tomas proposed to buy car spare parts from
Dominion Motors, but his proposal was opposed by Ramon. A voting among the
managing partners took place and Ignacio and Urbano sided with Tomas, while
Marcos sided with Ramon. Who will prevail?

The proposal of Tomas to buy car spare parts from Dominion Motors will prevail.
ATP7057-Q1-Partnership-Group 6

Article 1801. When two or more partners have been intrusted with the management of
the partnership without specification of their respective duties, or stipulation that one of
them shall not act without the consent of all the others, each one may separately
execute all acts of administration, but if any of them should oppose the acts of the
others, the decision of the majority shall prevail. In case of a tie, the matter shall be
decided by the partners owning the controlling interest.

In this case, there are more than two partners that are appointed as managers without
their respective duties specified and no stipulation that one of them shall not act without
the consent of all the other. However when one opposes the decision of the other
partner, the decision of the majority shall prevail. Ignacio and Urbano voted in favor of
Tomas, then, Tomas obtained the decision of the majority.

Thus, upon majority votes the proposal of Tomas shall prevail.

d) Supposing that when the voting among the managing partners took place,
Ignacio sided with Tomas, Urbano abstained, while Marcos sided with Ramon.
Who will prevail?
The opposition of Ramon for Tomas to buy car spare parts from Dominion Motors will
prevail.

Article 1801. When two or more partners have been intrusted with the management of
the partnership without specification of their respective duties, or stipulation that one of
them shall not act without the consent of all the others, each one may separately
execute all acts of administration, but if any of them should oppose the acts of the
others, the decision of the majority shall prevail. In case of a tie, the matter shall be
decided by the partners owning the controlling interest.

In this case, there are more than two partners that are appointed as managers without
their respective duties specified and no stipulation that one of them shall not act without
the consent of all the other. However when one opposes the decision of the other
partner, the decision of the majority shall prevail. However, in this case there is a tie
decision, thus, the matter shall be decided by the partners owning the controlling
interest. Ramon and Marcos own the controlling interest.

Thus, Ramon’s opposition against Tomas’ proposal shall prevail.

Question 18: (10 points)

Ornussa, the owner of a vacant lot, leased the same to Florida under an
agreement that the rental shall be paid by Florida at the rate of 10% of the annual
ATP7057-Q1-Partnership-Group 6

net income of the flower business that she would put up on the lot. A private
agreement was signed by the parties. In the first year of operations, Ornussa
received from Florida the amount of P20,000.00 representing 10% of the net
income of the flower shop business. What contract have they entered into?

The parties entered into a lease contract.

Article 1767 of the NCC provides that a contract of partnership exists when two or
more persons bind themselves to contribute money, property, or industry to a
common fund with the intention of dividing the profits among themselves.

Article 1769, par. 4 (b), of the NCC further provides that, in determining whether a
partnership exists, the receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner in the business, but no such inference shall
be drawn if such profits were received in payment as wages to an employee or
rent to a landlord.

In the case at bar, the receipt by Ornussa of the 10% annual net income from the
flowershop of Florida is merely rent. Here, Ornussa did not bind himself to contribute
money, property, or industry. Ornussa only bound himself to lend his land for the use of
Florida in her business. The 10% annual net income may represent a share in profit, but
it is merely a payment of rent from the lessee to the landlord. It is impossible to
conclude that Ornussa intended to share in any losses incurred by the Florida business.

Therefore, there is only a lease contract rather than a partnership contract.

Question 19: (10 points)

Barranda wrote Salvador a letter wherein he placed an order for a laptop

computer worth P80,000.00. In writing the letter, Barranda used a stationery which
had for its letterhead “Barranda and Bermudez, Real Estate Agents.” Bermudez is
not really a partner of Barranda but they agreed to use the said letterhead to give
a semblance of bigness by making it appear that the two of them are partners.
Salvador delivered the laptop computer but Barranda defaulted in his payment of
its price. Against whom may Salvador proceed?

Salvador may proceed to Bermudez since Barranda defaulted in his payment to

Salvador.

The law considers this as a partnership by estoppel. Under the law, when a person, by
words spoken or written or by conduct, represents himself, or consents to another
representing him to anyone, as a partner in an existing partnership or with one or more
ATP7057-Q1-Partnership-Group 6

persons not actual partners, he is liable to any such persons to whom such
representation has been made, who has, on the faith of such representation, given
credit to the actual or apparent partnership, and if he has made such representation or
consented to its being made in a public manner he is liable to such person, whether the
representation has or has not been made or communicated to such person so giving
credit by or with the knowledge of the apparent partner making the representation or
consenting to its being made when a partnership liability results, he is liable as though
he were an actual member of the partnership.

Accordingly, a person who, not being partners, include their names in the firm name do
not acquire rights of a partner, but they shall be subject to the liability of a partner
insofar as third persons without notice are concerned.

In this case, Bermudez and Barranda named the firm as if they are partners when they
are really not. Salvador does not know about such an agreement between Bermudez
and Barranda. Salvaddor already delivered the laptops without being paid by Barranda.
In this case, Bermudez is estopped and should be held liable as partners for
representing themselves as such.

Question 20: (10 points)

MACK’s Restaurant is a partnership composed of Manalo, Alferez, Cancio, and

Kilayco, with Manalo as the manager whose contribution is 80% if the firm’s
capital. Manalo made Ongpauco his associate by assigning one-half of his share
in the firm to the latter. Did Ongpauco become a partner in the firm?

No, Ongpauco did not become partner in the firm.

The law provides in Article 1804 that every partner may associate another person with
him in his share of the partnership, but the associate shall not be admitted into the
partnership without the consent of all the partners, even if the partner having an
associate should be a manager.

In the case at bar, Alferez, Cancio, and Kilayco did not consent to Ongpauco becoming
a partner in their partnership. Therefore, the latter is not a partner of the firm. The
association made by Manalo, as the manager, is immaterial as the law provides that all
partners must consent to Ongpauco’s admission to the firm as a partner.

Hence, Ongpauco did not become a partner of the firm despite Manalo assigning
one-half of his share of the firm to the latter as the manager.