only delivery

SECTION 2.
Property rights of a partner

Article 1810. The property rights of a partner are:

truck. All
1. His rights in specific partnership property;
2. His interest in the partnership; and
3. His right to participate in the management. (n)

4. Rights in 10. contributions

specific property will be delivered
5 . to the
On-jo, Cheong- partnership
san, and Su- 11. and upon
hyeok delivery is the
6. formed OCS transfer of
partnership. On- ownership.
jo contributed 12. However,
7. cash in the even if all of the
amount of P contributions
300,000, will be
Cheong-san 13. owned by the
8. contributed partnership,
his only parcel having a
of land, and separate
Su- 14. juridical
9. hyeok personality, all
contributed his
 of the partners
have co-
15. ownership
over these
properties for
the
16. operation of
the business of
the partnership.
Rights in specific partnership property
Example:
A, B, and C formed ABC partnership. Partner A contributed cash in the
amount of P500,000. Partner B contributed his only parcel of land. Also,
partner C contributed his only truck. In here, all the contributions will be
delivered to the ABC partnership and delivery will transfer ownership.
However, even if all of the contributions will be directly owned by ABC
partnership having a separate juridical personality, partners A, B, and C have
co-ownership over these properties for the operation of the business of the
partnership.
Interest in the partnership
Example:
A, B, and C formed ABC partnership. Partner A contributed cash in the
amount of P200,000. Partner B contributed his only parcel of land where the
partners agreed that the value is P500,000. Also, partner C contributed his
only truck where the partners agreed that the value is P300,000. In sum, the
total capital contribution to the partnership is P1,000,000 (P200,000+
P500,000+ P300,000). In here, A has an interest of 20%
(P200,000/P1,000,000). B has an interest of 50% (P500,000/P1,000,000). C
has an interest of 30% (P300,000/P1,000,000).
Right to participate in the management
Example:
A, B and C entered into a contract of partnership. In here, all are managers
since there is no stipulation on who will be the manager. Thus, every partner
can perform all acts of administration.
Art. 1811. A partner is co-owner with his partners of specific
partnership property.
The incidents of this co-ownership are such that:
1) A partner, subject to the provisions of this Title and to
any agreement between the partners, has an equal right with
his partners to possess specific partnership property for
partnership purposes; but he has no right to possess such
property for any other purpose without the consent of his
partners;
2) A partner's right in specific partnership property is not
assignable except in connection with the assignment of rights of
all the partners in the same property;
3) A partner's right in specific partnership property is not
subject to attachment or execution, except on a claim against
the partnership. When partnership property is attached for a
partnership debt the partners, or any of them, or the
representatives of a deceased partner, cannot claim any right
under the homestead or exemption laws;
4) A partner's right in specific partnership property is not
subject to legal support under Article 291. (n)
1. A partner has an equal right with his partners to possess
specific partnership property for partnership purposes
Example:
A, B, and C entered into a contract of partnership. Partner A contributed cash
in the amount of P200,000. Partner B contributed his only parcel of land.
Also, partner C contributed his only truck. All of the contributions of the
partners are now owned by the partnership being a juridical person. In here
A, B, or C can use the P200,000 for partnership purposes like purchase of
office supplies, but not for personal purposes. Also, A, B, or C can use the
parcel of land for partnership purposes like for warehouse of the partnerships'
goods. Further, A, B, or C can use the truck for partnership purposes like for
hauling goods of the partnership but not for personal purposes.
2. A partner's right in specific partnership property is not
assignable
ASSIGNMENT
The transfer of rights or property. The rights or property so transferred.
Example:
A, B, and C entered into a contract of partnership. Partner A contributed cash
in the amount of P200,000. Partner B contributed his only parcel of land.
Also, partner C contributed his only truck. A, B, or C cannot assign their
individual rights on any of their contributions. Take note that these properties
are now owned by the partnership which has a separate juridical personality.
3. A partner's right in specific partnership property is not
subject to attachment or execution
Example:
A, B, and C entered into a contract of partnership. Partner A contributed cash
in the amount of P200,000. Partner B contributed his only parcel of land.
Also, partner C contributed his only truck. Their separate creditors cannot ask
the court for attachment or execution of these properties as these are now
owned by the partnership which has a separate juridical personality.
4. A partner's right in specific partnership property is not
subject to legal support
Example:
A, B, and C entered into a contract of partnership. Partner A contributed cash
in the amount of P200,000. Partner B contributed his only parcel of land.
Also, partner C contributed his only truck. The right of A, B, and C to their
contribution is not subject to legal support.
Art. 1812. A partner's interest in the partnership is his share of the
profits and surplus.
PROFIT
The excess of revenues over expenditures in a business transaction.
SURPLUS
The excess of receipts over disbursements. Funds that remain after a
partnership has been dissolved and all its debts paid.
Under the preceding article, as a rule, a partner's right in specific
partnership property cannot be assigned, cannot be attached, and is
not subject to legal support. In the above stated article, it provides that
a partner's interest in the partnership (partners' share in the profits and
surplus), as a rule, can be assigned, can be attached, and can be subject
to legal support.
Example:
A, B, and C formed ABC partnership. Partner A contributed cash in the
amount of P200,000. Partner B contributed his only parcel of land where
the partners agreed that the value is P500,000. Also, partner C
contributed his only truck where the partners agreed that the value is
P300,000. In sum, the total capital contribution to the partnership is
P1,000,000 (P200,000+ P500,000+ P300,000). In here, A has an interest
of 20% (P200,000/P1,000,000). B has an interest of 50%
(P500,000/P1,000,000). C has an interest of 30% (P300,000/P1,000,000).
The interest of 20% for A, 50% for B, and 30% for C can be assigned, can
be attached, and can be subject to legal support.
Art. 1813. A conveyance by a partner of his whole interest in the
partnership does not of itself dissolve the partnership, or, as
against the other partners in the absence of agreement, entitle the
assignee, during the continuance of the partnership, to interfere in
the management or administration of the partnership business or
affairs, or to require any information or account of partnership
transactions, or to inspect the partnership books; but it merely
entitles the assignee to receive in accordance with his contract the
profits to which the assigning partner would otherwise be entitled.
However, in case of fraud in the management of the partnership,
the assignee may avail himself of the usual remedies.
In case of a dissolution of the partnership, the assignee is
entitled to receive his assignor's interest and may require an
account from the date only of the last account agreed to by all the respect of the partnership, and make all other orders, directions,
partners. (n) accounts and inquiries which the debtor-partner might have made, or
which the circumstances of the case may require.
CONVEYANCE
The voluntary transfer of a right or of property. Redemption of interest charged
Effects of Conveyance by Partner of His Whole Interest in the 1. Before foreclosure
Partnership The interest charged may be redeemed at any time before
1. If a partner conveys (assigns, sells, donates) his whole interest foreclosure.
in the partnership, it may still subsist (this is the general rule) 2. After foreclosure
or it may be dissolved (this is an exception, for example, if the It may still be purchased without thereby causing a dissolution:
remaining partners do not want to continue the operation of a) With separate property of a partner; or
the business of the partnership). b) With partnership property with the consent of all the partners
2. The assignee: whose interests are not so charged or sold.
a. Cannot interfere in the management of the partnership
business; What is redemption?
b. Cannot require information or accounting of partnership Redemption means the extinguishment of the charge or attachment on
transactions; and the partner's interest in the profits.
c. Cannot inspect partnership books. Example:
A, B and C are partners in a partnership named ABC partnership. A, in his
Rights of the assignee personal capacity, entered into a contract of loan with X where A borrowed
P100,000 from X. When A defaulted on his debt, X sued him for collection. The
1. To receive the profits to which the assigning partner
court rendered judgment in favor of X which became final. X went to court and
would otherwise be entitled; asked that the interest of A in AB partnership be "charged" (attached) for the
2. In case of fraud in the management of the partnership, the payment of his credit together with the interest. The court granted the request
assignee may avail himself of the usual remedies provided of X. In here, the other partners, B or C or both of them may redeem the
by law; interest of A with their separate properties or with the partnership property
3. In case of dissolution, to receive the assignor's interest; provided that it is with the consent of all the partners whose interests are not
and so charged or sold, that is, B and C.
4. In case of dissolution, the assignee may require an account
from the date only of the last account agreed to by all the Right of a partner under exemption laws
partners. A partner shall not be deprived of his right under the
exemption laws, as regards his interest in the partnership.
Art. 1814. Without prejudice to the preferred rights of partnership However, a partner, cannot avail himself of the exemption
creditors under Article 1827, on due application to a competent laws insofar as his right in specific partnership property is
court by any judgment creditor of a partner, the court which concerned.
entered the judgment, or any other court, may charge the interest
of the debtor partner with payment of the unsatisfied amount of
such judgment debt with interest thereon; and may then or later
appoint a receiver of his share of the profits, and of any other
money due or to fall due to him in respect of the partnership, and
make all other orders, directions, accounts and inquiries which the
debtor partner might have made, or which the circumstances of
the case may require.
The interest charged may be redeemed at any time before
foreclosure, or in case of a sale being directed by the court, may be
purchased without thereby causing a dissolution:
1) With separate property, by any one or more of the
partners; or
2) With partnership property, by any one or more of the
partners with the consent of all the partners whose
interests are not so charged or sold.
Nothing in this Title shall be held to deprive a
partner of his right, if any, under the exemption laws, as
regards his interest in the partnership.

What is meant by a "charging order" upon a partner's interest in

the partnership?
A "charging order" upon a partner's interest in the partnership refers to
the remedy available to a judgment creditor of a debtor-partner to
charge the interest of the latter in the partnership by means of a court
order for the purpose of satisfying the amount of the judgment. A
receiver of the debtor-partners' share of the profits may even be
appointed. This charging order, however, is always subject to the
preferred rights or partnership creditors.

Charging the interest of a partner debtor

Example:
A and B are partners in a partnership named AB partnership. A, in his
personal capacity, entered into a contract of loan with X where A borrowed
P100,000 from X. When A defaulted on his debt, X sued him for collection. The
court rendered judgment in favor of X which became final. In here, X may go
to court and ask that the interest of A in AB partnership be "charged"
(attached) for the payment of his credit together with the interest.
Note that the court will issue a charging order after the creditor (X
in the present case) obtained a favorable judgment from the court which
became final.

Appointment of a receiver
The court may then or later appoint a receiver of the partner- debtors'
share of the profits, and of any other money due or to fall due to him in
 in the name and for the account of the partnership, under its
signature and by a person authorized to act for the partnership.
However, any partner may enter into a separate obligation to
perform a partnership contract. (n)

This provision clearly states that, first, the partners' obligation with
respect to the partnership liabilities is subsidiary in nature. It provides
that the partners shall only be liable with their property after all the
partnership assets have been exhausted. To say that one's liability is
subsidiary means that it merely becomes secondary and only arises if
the one primarily liable fails to sufficiently satisfy the obligation.
Resort to the properties of a partner may be made only after efforts in
exhausting partnership assets have failed or that such partnership assets
are insufficient to cover the entire obligation. The subsidiary nature of
the partners' liability with the partnership is one of the valid defenses
against a premature execution of judgment directed to a partner.

Second, Article 1816 provides that the partners' obligation to third

persons with respect to the partnership liability is pro rata or joint.
Liability is joint when a debtor is liable only for the payment of only a
proportionate part of the debt. In contrast, a solidary liability makes a
debtor liable for the payment of the entire debt. In the same vein,
Article 1207 does not presume solidary liability unless: 1) the
obligation expressly so states; or 2) the law or nature requires
solidarity. With regard to partnerships, ordinarily, the liability of the
partners is not solidary. The joint liability of the partners is a defense
that can be raised by a partner impleaded in a complaint against the
partnership.

In other words, only in exceptional circumstances shall the partners'

liability be solidary in nature. Articles 1822, 1823 and 1824 of the
Civil Code provide for these exceptional conditions.
Example:
In the case of Co-Pitco vs. Yulo (8 Phil. 544) this Court held:
The partnership of Mr. Y and Mr. P was engaged in the operation of a sugar
estate. It was, therefore, a civil partnership as distinguished from a mercantile
partnership. Being a civil partnership, by the express provisions of the Civil
Code, the partners are not liable each for the whole debt of the partnership.
The liability is pro rata and in this case, Mr. Y is responsible to plaintiff for
only one-half of the debt. The fact that the other partner, Mr. P, had left the
country cannot increase the liability of Mr. Y.

Example:
In a case, there were 5 general partners when a promissory note in question
was executed for and in behalf of the partnership. Since the liability of the
partners is pro rata, the liability of the appellant Mr. B shall be limited to only
one-fifth (1/5) of the obligations of the defendant company,

Liability for contractual obligations

The above article refers to liability and not to loss that is why even an
SECTION 3.
industrial partner is also liable as he is not liable only with respect to
Obligations of the Partners with Regard to Third Persons
loss. Hence, all partners including industrial partners' liability is pro
rata and subsidiary, unless otherwise stipulated.
Art. 1815. Every partnership shall operate under a firm name,
which may or may not include the name of one or more of the
PRO-RATA VS. SUBSIDIARY
partners.
Pro-rata liability means equally or joint, while subsidiary means that
Those who, not being members of the partnership, include
the partners' separate property may be held liable only after the
their names in the firm name, shall be subject to the liability of a
partnership creditors' exhausted the assets of the partnership.
partner. (n)
Example:
A. B, C, D and E form ABCDE partnership. A, B, C, and D, who
General Rule: contributed P50,000 each, are the capitalist partners while E is the
The partners may use any firm name desired and this will be the name industrial partner. Subsequently, the partnership obtained a contractual
of that juridical person. liability in favor of X in the amount of P500,000. What will be the remedy
Exception: of X?
The partnership cannot use an identical or deceptively confusingly
similar to that of any existing partnership or corporation or to any other X can collect from the partnership assets amounting to P200,000 (P50,000
name already protected by law or is patently deceptive or contrary to x 4). X's credit now has a balance of P300,000 so that he can demand from
all of the partners including E, the industrial partner because an industrial
existing laws. partner is liable for liability. The individual liability of every partner is
Note:
P60,000 (P300,000/5). Consequently, after E paid P60,000 to X, he can
Persons who, not being partners, include their names in the firm
demand reimbursement from partners A, B, C, and D their individual
name shall be subject to the liability of a partner, for example, the
share of P15,000 (P60,000/4) because an industrial partner is not liable
subsidiary liability of a partner where he is liable up to the extent of his
for loss.
separate property in favor of third persons who suffered damages because
of such misrepresentation. This is based on the principle of estoppel. The
Note:
purpose of the law is to protect innocent third persons from being misled.
Liability as to third persons Losses = as between the partners
However, that person has no right as a partner because he is in fact
not a partner.
Separate obligation of a partner
Art. 1816. All partners, including industrial ones, shall be liable If a partner, in his own name, enters into a contract with a third person,
pro rata with all their property and after all the partnership assets then it is only that partner who is liable and not the partnership.
have been exhausted, for the contracts which may be entered into
 Art. 1817. Any stipulation against the liability laid down in the
preceding article shall be void, except as among the partners. (n)
Stipulation against liability
A stipulation against liability of all partners for the contracts entered
into in the name of the partnership is void as to third persons.
However, it is valid as among the partners.
Example:
A, B, C, D and E form ABCDE partnership. A, B, C, and D, who
contributed P50,000 each, are the capitalist partners while E is the
industrial partner. Subsequently, the partnership obtained a contractual
liability in favor of X in the amount of P500,000. The partners stipulated
that partner A will not be liable beyond his contribution. What will be the
remedy of X?
X can collect from the partnership assets amounting to P200,000 (P50,000
x 4). X's credit now has a balance of P300,000 so that he can still demand
from all of the partners including partner A (despite their agreement)
because that agreement is void as to X. The individual liability of every
partner is P60,000 (P300,000/5) including the industrial partner.
Even if the agreement is void as to X, such agreement is valid as among
the partners. Thus, partner A who paid P60,000 can ask reimbursement of
P20,000 each only from B, C, and D (excluding partner E being an
industrial partner as he is exempted from loss).
Moreover, partner E, as an industrial partner, can also ask reimbursement
of P20,000 each only from B, C, and D (excluding partner A by virtue of
the stipulation that he is exempt.
By way of analysis, it is only B, C, and D who are ultimately liable in the
amount of P100,000 each (P60,000 individual share + P20,000 absorbed
share of partner A by virtue of stipulation + P20,000 share of E being an
industrial partner)
Art. 1818. Every partner is an agent of the partnership for the
purpose of its business, and the act of every partner, including the
execution in the partnership name of any instrument, for
apparently carrying on in the usual way the business of the
partnership of which he is a member binds the partnership, unless
the partner so acting has in fact no authority to act for the
partnership in the particular matter, and the person with whom he
is dealing has knowledge of the fact that he has no such authority.
An act of a partner which is not apparently for the carrying on of
business of the partnership in the usual way does not bind the
partnership unless authorized by the other partners.
Except when authorized by the other partners or unless they have
abandoned the business, one or more but less than all the partners
have no authority to:
1) Assign the partnership property in trust for creditors or
on the assignee's promise to pay the debts of the
partnership;
2) Dispose of the good-will of the business;
3) Do any other act which would make it impossible to carry
on the ordinary business of a partnership.
II.
4) Confess a judgment;
5) Enter into a compromise concerning a partnership claim
or liability;
6) Submit a partnership claim or liability to arbitration; and
7) Renounce a claim of the partnership.
No act of a partner in contravention of a restriction on
authority shall bind the partnership to persons having
knowledge of the restriction. (n)
Partner as agent of the partnership
It is the nature of a contract of partnership that it is fiduciary, that is,
trust and confidence governed the partners. Hence, every partner is an
agent of the other partners and the partnership. III.
I. Acts Apparently for Carrying on in the Usual Way the
Business of the Partnership
It binds the partnership unless:
a. The partner so acting has in fact no authority to act for the
partnership; and
b. The person with whom he is dealing has knowledge of the
fact that he has no such authority.
Example: IV.
A, B, C and D are partners in ABCD partnership engaged in the selling of
tables, chairs and other furnitures. Subsequently, D sold five tables to X. In
this case, the sale is valid and binding to the partnership ABCD which has
now an obligation to deliver the said five tables to X.
What if D is not authorized to sell and such fact is not known to X? The sale is
still binding to ABCD partnership because the act of D in selling table is an
act which is apparently for carrying on in the usual way of the business of the
partnership. Hence, it is not necessary for X to ascertain if D has been
authorized by A, B, and C to sell him his table.
What if D is not authorized to sell and such fact is known to X? The sale is no
longer binding to ABCD partnership as both D and X are in bad faith, that is,
partner D knows that he has no authority, and the third person X knows that D
has no authority.
Note:
The stipulation in the articles of partnership that any of the two managing
partners may contract and sign in the name of the partnership with the consent
of the other, undoubtedly creates on obligation between the two partners,
which consists in asking the other's consent before contracting for the
partnership. This obligation of course is not imposed upon a third person who
contracts with the partnership. Neither it is necessary for the third person to
ascertain if the managing partner with whom he contracts has previously
obtained the consent of the other. A third person may and has a right to
presume that the partner with whom he contracts has, in the ordinary and
natural course of business, the consent of his co-partner: for otherwise he
would not enter into the contract. The third person would naturally not
presume that the partner with whom he enters into the transaction is violating
the articles of partnership, but on the contrary is acting in accordance
therewith. And this finds support in the legal presumption that the ordinary
course of business has been followed, and that the law has been obeyed. This
last presumption is equally applicable to contracts which have the force of law
between the parties.
It is next urged that the widow, even as a partner, had no authority to sell the
real estate of the firm. This argument is lamentably superficial because it fails
to differentiate between real estate acquired and held as stock-in-trade and
real estate held merely as business site for the partnership. Where the
partnership business is to deal in merchandise and goods, i.e., movable
property, the sale of its real property (immovables) is not within the ordinary
powers of a partner, because it is not in line with the normal business of the
firm. But where the express and avowed purpose of the partnership is to buy
and sell real estate, the immovables thus acquired by the firm form part of its
stock-in-trade, and the sale thereof is in pursuance of partnership purposes,
hence within the ordinary powers of the partner.
The same rule obtains in American law.
In Rosen vs. Rosen, 212 N.Y. Supp. 405, 406, it was held:
A partnership to deal in real estate may be created and either partner
has the legal right to sell the firm's real estate.
In Chester vs. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550:
And hence, when the partnership business is to deal in real estate, one
partner has ample power, as a general agent of the firm, to enter into an
executory contract for the sale of real estate.
And in Revelsky vs. Brown, 92 Ala. 522, 9 South 182, 25 Am. St. Rep. 83:
If the several partners engaged in the business of buying and selling real
estate cannot bind the firm by purchases or sales of such property made
in the regular course of business, then they are incapable of exercising
the essential rights and powers of general partners and their association
is not really a partnership at all, but a several agency.
Acts Not Apparently for the Carrying on in the Usual Way of
Business of the Partnership
It does not bind the partnership, unless authorized by the other
partners.
Example:
A, B. C and D are partners in ABCD partnership engaged in the selling
of tables, chairs and other furniture. Subsequently, without authority from
the other partners, D sold some of the woods and lumbers of the
partnership to X. In this case, the sale is not valid and binding to the
ABCD partnership.
What if D was authorized to sell by the other partners? Then, the
sale is binding to ABCD
Acts of Ownership
Example:
A, B, and C are partners in ABC partnership engaged in the selling of
tables, chairs and other furniture. Subsequently, without authority from
the other partners, C sold the only truck of the partnership to X In this
case, the sale is not valid and binding to the ABC partnership.
What if C was authorized to sell by all of the other partners? Then,
the sale is binding to ABC. Take note that the authority here must come
from all (unanimous) of the other partners.
Acts in contravention of a restriction on authority
The act is not binding to the partnership as to persons having
knowledge of the restriction.

Art. 1819. Where title to real property is in the partnership name,
any partner may convey title to such property by a conveyance
executed in the partnership name; but the partnership may
recover such property unless the partner's act binds the
partnership under the provisions of the first paragraph of article
1818, or unless such property has been conveyed by the grantee or
a person claiming through such grantee to a holder for value
without knowledge that the partner, in making the conveyance,
has exceeded his authority.
Where title to real property is in the name of the partnership, a
conveyance executed by a partner, in his own name, passes the
equitable interest of the partnership, provided the act is one within the
authority of the partner under the provisions of the first paragraph of
Article 1818.
Where title to real property is in the name of one or more but not all
the partners, and the record does not disclose the right of the
partnership, the partners in whose name the title stands may convey
title to such property, but the partnership may recover such property if
the partners' act does not bind the partnership under the provisions of
the first paragraph of Article 1818, unless the purchaser or his
assignee, is a holder for value, without knowledge.
Where the title to real property is in the name of one or more or all the
partners, or in a third person in trust for the partnership, a conveyance
executed by a partner in the partnership name, or in his own name,
passes the equitable interest of the partnership, provided the act is one
within the authority of the partner under the provisions of the first
paragraph of Article 1818.
Where the title to real property is in the name of all the partners a
conveyance executed by all the partners passes all their rights in such
property. (n)
TITLE
Legal evidence of a person's ownership rights in property; an
instrument (such as deed) that constitutes such evidence.
EQUITABLE INTEREST
An interest held by virtue of an equitable title or claimed on equitable
grounds, such as the interest held by a trust beneficiary.
In the above-stated article, real property may be registered or owned in
the name of:
1. The partnership;
2. One or more or all the partners;
3. One or more or all the partners; or in a third person in trust for
the partnership; and
4. All the partners.
REAL PROPERTY REGISTERED OR OWNED IN THE NAME
OF THE PARTNERSHIP (PAR. 1)
The conveyance here was executed in the partnership name.
Example:
A, B, and C formed ABC partnership. Later, C sold a specific parcel of
land in the name of ABC partnership to X. In here, the sale is valid and
binding to the partnership.
What if C has no authority to convey said land? Then ABC partnership
can recover the land. However, ABC partnership cannot recover the land
if the selling of the land by C is in line with the operations of their business
which is real estate business. Also, ABC partnership cannot recover the
land if X is in good faith, meaning he has no knowledge on the lack of
authority of C.
REAL PROPERTY REGISTERED OR OWNED IN THE NAME
OF THE PARTNERSHIP (PAR. 2)
The conveyance here was executed in the partners' name.
Example:
A, B, and C formed ABC partnership to engage in real estate business.
Later, C was authorized by the other partners to sell a specific parcel of
land registered in the name of ABC partnership to X using his own name
as the seller. In here, the sale is valid and binding to the partnership.
However, it is only the equitable interest which will be transferred to X.
The remedy of X is to ask for the reformation of their contract of sale so as
to change the name of the seller from C to ABC partnership.
Equitable interest will not be transferred to X if ABC partnership is
not engaged in real estate business or if C has no authority and X has
knowledge of C's lack of authority although the sale was made in the usual
course of business.
TITLE TO REAL PROPERTY IS IN THE NAME OF ONE OR
MORE BUT NOT ALL THE PARTNERS (PAR.3)
The partners in whose name the title stands convey the title to such
property.
Example:
A, B, and C formed ABC partnership to engage in real estate business.
Later, C sold a specific parcel of land of the partnership that was
registered in his name to X. In here, the sale is valid and binding to the
partnership.
What if C has no authority to convey said land? ABC partnership cannot
recover the land if X is in good faith, meaning he has no knowledge of the
lack of authority of C; otherwise, it can.
TITLE TO REAL PROPERTY IS IN THE NAME OF ONE OR
MORE OR ALL THE PARTNERS, OR IN A THIRD PERSON
IN TRUST FOR THE PARTNERSHIP (PAR.4)
Conveyance was executed by a partner in the partnership name, or in
his own name.
Example:
A, B, and C formed ABC partnership to engage in real estate business.
Later, C was authorized by the other partners to sell a specific parcel of
land registered in the name of C in trust for ABC partnership to X using
either ABC partnership as the seller or C's name as the seller. In both
cases, regardless of whose name the seller is, what passes only to X is the
equitable interest of the partnership.
Again, the remedy of X is to ask for the reformation of their contract
of sale so as to clearly state the intent of the contracting parties. Equitable
interest will not be transferred to X if ABC partnership is not engaged in
real estate business or if C has no authority and X has knowledge of C's
lack of authority although the sale was made in the usual course of
business.
TITLE TO REAL PROPERTY IS IN THE NAME OF ALL THE
PARTNERS (PAR. 5)
Conveyance executed by all the partners passes all their rights in such
property.
Example:
A, B, and C formed ABC partnership to engage in real estate business.
Later, A, B, and C sold a specific parcel of land registered in their names
(not in the name of ABC partnership) to X. In here, the sale is valid and
binding to the partnership.
Art. 1820. An admission or representation made by any partner
concerning partnership affairs within the scope of his authority in
accordance with this Title is evidence against the partnership. (n)
ADMISSION
A statement in which someone admits that something is true or that he
or she has done something wrong.
An admission by any partner is evidence against the partnership if:
1. The admission must concern partnership affairs; and
2. The admission must be within the scope of his authority.
Note:
An admission by a former partner, made after he has retired from the
partnership, is not evidence against the firm.
Art. 1821. Notice to any partner of any matter relating to
partnership affairs, and the knowledge of the partner acting in the
particular matter, acquired while a partner or then present to his
mind, and the knowledge of any other partner who reasonably
could and should have communicated it to the acting partner,
operate as notice to or knowledge of the partnership, except in the
case of fraud on the partnership, committed by or with the consent
of that partner. (n)
The general rule is that notice to a partner is notice to the partnership.
Example:
A, B, and C are partners in ABC partnership. Later, X sent a demand
letter to ABC partnership which was received by partner B. In this case,
when B received the demand letter, by operation of law, ABC partnership
also received the demand letter.
Instances where knowledge of a partner is considered knowledge
of the partnership:
1. Knowledge of the partner acting in the particular matter acquired
while a partner;
2. Knowledge of the partner acting in the particular matter then
present to his mind; and
3. Knowledge of any other partner who reasonably could and should
have communicated it to the acting partner.
Exception:
In the case of fraud on the partnership, committed by or with the
consent of that partner.
Article 1821 of the Civil Code does not state that there is no need to
implead a partner in order to be bound by the partnership liability. It
provides that:
Notice to any partner of any matter relating to partnership affairs, and the
knowledge of the partner acting in the particular matter, acquired while a
partner or then present to his mind, and the knowledge of any other
partner who reasonably could and should have communicated it to the
acting partner, operate as notice to or knowledge of the partnership,
except in the case of fraud on the partnership, committed by or with the
consent of that partner.
A careful reading of the provision shows that notice to any partner,
under certain circumstances, operates as notice to or knowledge to the
partnership only. Evidently, it does not provide for the reverse
situation. or that notice to the partnership is notice to the partners.
Unless there is an unequivocal law which states that a partner is
automatically charged in a complaint against the partnership, the
constitutional right to due process takes precedence and a partner must
first be impleaded before he can be considered as a judgment debtor.
To rule otherwise would be a dangerous precedent, harping in favor of
the deprivation of property without ample notice and hearing, which
the Court certainly cannot countenance.
Art. 1822. Where, by any wrongful act or omission of any partner
acting in the ordinary course of the business of the partnership or
with the authority of co-partners, loss or injury is caused to any
person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same extent as
the partner so acting or omitting to act. (n)
Wrongful act or omission
Example:
A, B, and C formed a partnership. One day, while C was negligently driving
the truck of the partnership to deliver goods to X, one of their customers, C
bumped the gateway of X causing damages to the latter. In this case, the other
partners and the partnership are solidary liable with C. However, the partners
or the partnership can recover from C.
Art. 1823. The partnership is bound to make good the loss:
1) Where one partner acting within the scope of his apparent
authority receives money or property of a third person
and misapplies it; and
2) Where the partnership in the course of its business
receives money or property of a third person and the
money or property so received is misapplied by any
partner while it is in the custody of the partnership. (n)
Liability of partnership for misappropriation
Example 1:
A, B, and C formed ABC partnership engaged in leasing of apartment units.
Subsequently, C received from customer X a deposit in the amount of P20,000.
If C misapplied the amount, then partners A, B and the partnership ABC are
solidarily liable to X. Of course, A, B and the partnership ABC can recover
from C.
Example 2:
A. B, and C formed ABC partnership engaged in the business of buy and sell
of second hand cars. X is a customer who bought a particular car on
installment. X paid P50,000 as down payment to the cashier of ABC
partnership. Subsequently, C misapplied the P50,000. In this case, the
partners A. B and the partnership ABC are solidarily liable to X. of course. A.
B and the partnership ABC can recover from C.
A PARTNER MAY BE HELD LIABLE FOR ESTAFA
In Liwanag v. Court of Appeals, three individuals entered into a
contract of partnership for the business of buying and selling
cigarettes. They agreed that one would contribute money to buy the
cigarettes while the other two would act as agents in selling. When the
capitalist partner demanded from the industrial partners her monetary
contribution because they stopped informing her of business updates,
this me, this Court held the industrial partners liable for estafa.
In Liwanag, the Supreme Court held:
Thus, even assuming that a contract of partnership was indeed entered
into by and between the parties, we have ruled that when money or
property had been received by a partner for a specific purpose and he
later misappropriated it, such partner is guilty of estafa,
Art. 1824. All partners are liable solidarily with the partnership
for everything chargeable to the partnership under Articles 1822
and 1823.
Under Article 1824 of the Civil Code of the Philippines, all partners
are solidarily liable with the partnership for everything chargeable to
the partnership, including loss or injury caused to a third person or
penalties incurred due to any wrongful act or omission of any partner
acting in the ordinary course of the business of the partnership or with
the authority of his co-partners. Whether innocent or guilty, all the
partners are solidarily liable with the partnership itself.
In essence, 1822, 1823, and 1824, articulate that it is the act of a
partner which caused loss or injury to a third person that makes all
other partners solidarily liable with the partnership because of the
words "any wrongful act or omission of any partner acting in the
ordinary course of the business," "one partner acting within the scope
of his apparent authority" and "misapplied by any partner while it is in
the custody of the partnership." The obligation is solidary because the
law protects the third person, who in good faith relied upon the
authority of a partner, whether such authority is real or apparent.
A third person who transacted with said partnership can hold the
partners solidarily liable for the whole obligation if the case of the
third person falls under Articles 1822 or 1823.
Art. 1825. 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 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:
1) When a partnership liability results, he is liable as though
he were an actual member of the partnership;
2) When no partnership liability results, he is liable pro rata
with the other persons, if any, so consenting to the
contract or representation as to incur liability, otherwise
separately.
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the same
manner as though he were a partner in fact, with respect to
persons who rely upon the representation. 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 the persons consenting to the representation. (n)
Partnership by estoppel
Arises if all the partners consented to the misrepresentation of a third
person who is not a real partner. This creates a partnership obligation
Example:
A B, and C formed ABC partnership. Their common friend D represented
to X that they are all partners in the said partnership. A, B, and C
consented to such representation. Consequently, by virtue of the
misrepresentation, X lent credit to D. In this case, a partnership obligation
results. Hence, X can go after the net assets of the partnership.
This is a case of partnership by estoppel because all of the partners
consented to the misrepresentation. Take note that A, B, C and D are all in
bad faith.
Note:
In the above example, A, B, C, and D are all partners by estoppel.
Note:
Still in the same example, assuming that Y is the legitimate creditor
of ABC partnership, who will be preferred in the net assets of the
 partnership, X or Y? It will be Y because Y is the legitimate creditor
of ABC partnership.

Partner by estoppel
A person who represents himself, or consents to another or others
representing him to any one, as a partner either in an existing
partnership or in one that is fictitious or apparent.
Example:
A, B, and C formed ABC partnership. Their common friend D represented
to X that they are all partners in the said partnership. Only A and B
consented to such representation. Consequently, X lent credit to D. In this
case, there is no partnership by estoppel but there are partners by
estoppel, that is, A, B, and D. They are liable jointly or pro rata to X.

What if A, B, and C did not consent? Then, there are no partners by estoppel
as only D is liable.

What if A, B, and C are not partners but D represented to X that they are
partners? In this case, all of them are liable pro rata to X because they are
still partners by estoppel.

Note:
Partnership by estoppel does not apply when the third person is not
deceived. Thus, it is the third person who has the burden of proving
the existence of a partner by estoppel or partnership by estoppel.

Art. 1826. A person admitted as a partner into an existing

partnership is liable for all the obligations of the partnership
arising before his admission as though he had been a partner when
such obligations were incurred, except that this liability shall be
satisfied only out of partnership property, unless there is a
stipulation to the contrary. (n)
Example:
On January 2, 2020 A, B, and C formed ABC partnership with a capital
contribution of P200,000 each. On July 15, 2020, X was admitted as a new
partner with a contribution of P100,000. Meanwhile, ABC incurred a loan
of P900,000 in favor of Y on June 30, 2020.
In this case, the remedy of X is to go against the partnership capital of
P700,000 [(P200,000 x 3)+ P100,000]. Thereafter, X can go against the
separate property of A, B, and C for the balance of P200,000 (P900,00-
700,00)

Note:
After X exhausted the net assets of the partnership, he cannot go after the
separate property of the newly admitted partner as the loan was incurred
before the date of admission.
What if in the above example, the loan of P900,00 in favor of Y was
incurred on August 1, 2020. Then, in this case, after Y exhausted the net
assets of the partnership in the amount of P700,000, he can go against the
separate property of A, B, C and X, the newly admitted partner as the loan
was incurred after the date of admission.

Art. 1827. The creditors of the partnership shall be preferred to

those of each partner as regards the partnership property.
Without prejudice to this right, the private creditors of each
partner may ask the attachment and public sale of the share of the
latter in the partnership assets. (n)
Take note that the creditors of the partnership contracted with the
partnership which is a juridical person having a separate juridical
personality from the partners.

Example:
A (30%), B (40%), C (30%) entered into a contract of partnership. The
firm name is ABC partnership. The total contribution of the partners is
P330,000. Subsequently, D is a creditor of the firm in the amount of
P300,000. X is the private creditor of A in the amount of P200,000. Y is
also a private creditor of B in the amount of P300,000. Further, Z is a
private creditor of C in the amount of P100,000.
In this case, D has preference over the P330,000 net assets of the
partnership. The remedy of X, Y, and Z is to attach the share of partners A,
B, and C in the partnership.