PROPERTY RIGHTS OF A PARTNER

A. CO-OWNERSHIP – 1811
B. Incidents of Co-ownership
1. Equal rights to Possess – 1811(1), 1809 (1), 1831, 1807, 1788(2nd par.)
2. Non-assignability - 1811(2), 1840(1)(2)
3. Not Subject to Attachment or Execution – 1811(3), 1814
4. Not Subject to support – 1811(4)
C. Interest in Partnership
1. What it consists of - 1812
2. Nature and Characteristics; Differentiated from Right in Specific Property – 1813,
1814 (last par.)
3. Assignment - 1813
4. Charging Order – 1814, 1827, 1839, 1830 (1)(c)
D. Participation in Management
1. General Rule – equal right in management and conduct of the partnership business
2. When Agreement Exists – 1800, 1802
3. When No Agreement Made as to manner of management – 1803, 1818, 1801
E. Access to Partnership Books
F. Right to True and Full Information - 1806
G. Right to Formal Account - 1809
H. Reimbursement of Advances and Indemnification for Risks – 1796

Article 1810. The property rights of a partner are: (1) His rights in specific partnership property; (2)
His interest in the partnership; and (3) His right to participate in the management (n)

 Extent of property rights of a partner.

1. Principal rights. — The property rights of a partner enumerated under Article 1810 are
as follows:
a. His rights in specific partnership property (Art. 1811.);
b. His interest in the partnership (Art. 1812.); and
c. His right to participate in the management. (Art. 1803.)
2. Related rights. — A partner has other rights which are related to the above, namely:
a. the right to reimbursement for amounts advanced to the partnership and to
indemnification for risks in consequence of management (Art. 1796.);
b. the right of access and inspection of partnership books (Art. 1805.);
c. the right to true and full information of all things affecting the partnership (Art.
1806.);
d. the right to a formal account of partnership affairs under certain circumstances
(Art. 1809.); and
e. the right to have the partnership dissolved also under certain conditions. (Arts.
1830-1831.)
Article 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.

Co-Ownership in Specific Partnership Property.

 Simply that they are co-owners (tenants in common with proportional, sometimes equal)
right thereto. However, the rules on co-ownership do not necessarily apply; the rules on
“co-ownership in partnership” are applicable. Said rules are detailed in the subsequent
paragraphs.
 Equal right of possession for partnership purposes. — Ordinarily, a partner has an equal
right to possess specific partnership property for partnership purposes. None of the
partners can possess and use the specific partnership property other than for “partnership
purposes.”
o (Example: a car contributed by one of the partners to the partnership)
 In general, he has an equal right with his partners to possess the car but only
for partnership purposes (not for other purposes, except if the others
expressly or impliedly give their consent)
 Right not assignable. — A partner cannot separately assign his right to specific partnership
property but all of them can assign their rights in the same property
o Reason for rule of non-assignability: It is hard to determine how much it exactly is
until after liquidation
o The primary reasons for the non-assignability of a partner’s right in specific
partnership property are that
 it prevents interference by outsiders in partnership affairs;
 it protects the right of other partners and partnership creditors to have
partnership assets applied to firm debts; and
 it is often impossible to measure or value a partner’s beneficial interest in a
particular partnership asset.
 Not Subject to Attachment or Execution - His right in the specific partnership property is
not subject to the attachment or execution (except on a claim against the partnership).
 o If there is a partnership debt, the specific property can be attached. Here, the
partners or any of them or the representatives of a deceased partner cannot claim
any right under the homestead or exemption laws. This is because in a sense, the
property is not considered their individual or separate property.
o Reason why in general, the right of the partner in the specific partnership property
cannot be attached by his separate or individual creditor: If he cannot make a
voluntary assignment, neither should his separate creditors be allowed an
involuntary assignment because “the beneficial rights of the separate creditors of a
partner in specific partnership property should be no greater than the beneficial
rights of their debtor
 The right of the partners to specific partnership property is not subject to legal support
under Article 1953 of the Family Code. The reason is also because the property belongs to
the partnership and not to the partners. But their interest in the partnership (Art. 1812.) is,
of course, subject to legal support. (Art. 1814.)

Article 1812. A partner's interest in the partnership is his share of the profits and surplus. (n)

Interest in Partnership

 While in general, a partner’s interest in specific partnership property cannot be assigned,

cannot be attached, and is not subject to legal support, a partner’s interest in the
partnership (his share in the profits and surplus) can in general be assigned, be attached, be
subject to legal support. (See Arts. 1813 and 1814)
 A partner’s right in specific partnership property belonging to the fi rm to be used for
business purposes (supra.) is to be distinguished from a partner’s right to share in the fi
rm’s earned profits.
 Share of the profits and surplus. — The partner’s interest in the partnership consists of his
proportional share in the undistributed profits during the life of the partnership as a going
concern and his share in the undistributed surplus after its dissolution
o Profit means the excess of returns over expenditure in a transaction or series of
transactions; or the net income of the partnership for a given period of time. (see
Webster’s 3rd Int. Dict., p. 1811.)
o Surplus refers to the assets of the partnership after partnership debts and liabilities
are paid and settled and the rights of the partners among themselves are adjusted.
(see Art. 1839.) It is the excess of assets over liabilities. If the liabilities are more than
the assets, the difference represents the extent of the loss.
 Partner’s interest not a debt due from partnership. — A partner is not a creditor of the
partnership for the amount of his share. The interest of a partner in a going partnership
business where there has been no settlement of his account is not a debt due to the partner
by partnership and, therefore, is not subject to attachment or execution on a judgment
recovered against the individual partner.
 Effect of assignment of partner’s whole interest in partnership.
o Rights withheld from assignee. — Article 1813 permits the conveyance by a partner
of his whole interest in the partnership (e.g., sale, donation, as collateral security for
 a loan) without causing dissolution. However, such assignment does not grant the
assignee the right:
 To interfere in the management;
 To require any information or account; or
 To inspect any of the partnership books.
o The only rights of the transferee or assignee are as follows:
 To receive in accordance with his contract the profits accruing to the
assigning partner (see Machuca vs. Chuidian, 2 Phil. 210 [1903].);
 To avail himself of the usual remedies provided by law in the event of fraud
in the management;
 To receive the assignor’s interest in case of dissolution; and
 To require an account of partnership affairs, but only in case the partnership
is dissolved, and such account shall cover the period from the date only of
the last account agreed to by all the partners.
 Application for a “charging order” after securing judgment on his credit. — While a
separate creditor of a partner cannot attach or levy upon specific partnership property for
the satisfaction of his credit (Art. 1811[3].) because partnership assets are reserved for
partnership creditors (Art. 1827.), he can secure a judgment on his credit and then apply to
the proper court for a “charging order,” subjecting the interest of the debtor partner in the
partnership (Art. 1812.) with the payment of the unsatisfied amount of such judgment with
interest thereon with the least interference with the partnership business and the rights of
the other partners.
o By virtue of the charging order, any amount or portion thereof which the
partnership would otherwise pay to the debtor-partner should instead be given to
the judgment creditor.
o This remedy is, however, without prejudice to the preferred rights of partnership
creditors under Article 1827. It means that the claims of partnership creditors must
be satisfied first before the separate creditors of the partners can be paid out of the
interest charged.

Article 1800. The partner who has been appointed manager in the articles of partnership may
execute all acts of administration despite the opposition of his partners, unless he should act in bad
faith; and his power is irrevocable without just or lawful cause. The vote of the partners
representing the controlling interest shall be necessary for such revocation of power. A power
granted after the partnership has been constituted may be revoked at any time. (1692a)

Participation in Management

 The partner appointed by common agreement in the articles of partnership may execute all
acts of administration (not those of strict ownership such as those enumerated in Art. 1818,
par. 3.) notwithstanding the opposition of the other partners, unless he should act in bad
faith. His power is revocable only upon just and lawful cause (see Art. 1920.) and upon the
vote of the partners representing the controlling interest
 Rules when manner of management has not been agreed upon.
 o All partners considered managers and agents. — The partners may fail to designate
who among them shall act as manager, either when their contract is perfected or
subsequently. In such a case, all partners shall have equal rights in the management
and conduct of partnership affairs.
o Unanimous consent required for alteration of immovable property. — Under the
second paragraph, the unanimous consent of all the partners is necessary for any
important alteration in the immovable property of the partnership. The consent
need not be express. It may be presumed from the fact of knowledge of the
alteration without interposing any objection.

Article 1805. The partnership books shall be kept, subject to any agreement between the partners,
at the principal place of business of the partnership, and every partner shall at any reasonable hour
have access to and may inspect and copy any of them. (n)

Access to Partnership Books

 A partner is a co-owner of the partnership properties (Art. 1811.), which include the books
of the partnership, and has a right to participate equally in the management of its affairs.
They should not, therefore, be in the exclusive custody or control of any one partner, and
should not be removed from the principal place of business of the partnership without the
consent of all the partners.
 Article 1805 declares that the rights of the partners with respect to partnership books can be
exercised at “any reasonable hour.” This phrase has been interpreted to mean reasonable
hours on business days throughout the year and not merely during some arbitrary period of
a few days chosen by the managing partners (Pardo vs. Lumber Co. and Ferrer, 47 Phil. 964
[1925].), e.g., from December 21 to 31 every year.
 The partners inspection rights are not absolute. He can be restrained from using the
information gathered for other than partnership purpose.

Article 1806. Partners shall render on demand true and full information of all things affecting the
partnership to any partner or the legal representative of any deceased partner or of any partner
under legal disability. (n)

Right to True and Full Information

 Reason for the law — There must be no concealment between partners in all matters
affecting the firm’s interest. This is required by good faith. Thus, this duty to give on
demand “true and full information.”
 Even without the demand, honesty demands the giving of vital information, the refraining
from all kinds of concealment.
o “Good faith not only requires that a partner should not make any false concealment,
but he should abstain from all concealment.
 If partnership books contain errors, but said errors have not been alleged, the books must
be considered entirely correct insofar as the keeper of said books of account is concerned.
 Who Can Demand Information
o any partner
 o legal representative of a dead partner
o legal representative of any partner under legal disability

Article 1809. Any partner shall have the right to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or possession of its property by his
co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by Article 1807;
(4) Whenever other circumstances render it just and reasonable.

Right to Formal Account

 Generally, no formal accounting is demandable till after dissolution. Reason: After all there
is access to the books. (Art. 1805)
 formal accounting can properly and justifiably be asked for thus:
o in No. 1 — he may have access to the books;
o in No. 2 — there is no express stipulation.
 An accounting made cannot be questioned anymore if it was accepted without objection for
this would now be a case of estoppel…
o unless of course, fraud and error are alleged and proved.

Article 1796. The partnership shall be responsible to every partner for the amounts he may have
disbursed on behalf of the partnership and for the corresponding interest, from the time the
expense are made; it shall also answer to each partner for the obligations he may have contracted in
good faith in the interest of the partnership business, and for risks in consequence of its
management.

Reimbursement of Advances and Indemnification for Risks

 In the absence of any stipulation to the contrary, every partner is an agent of the
partnership for the purpose of its business. (Art. 1818.) Hence, the partnership has the
obligation to
o To refund amounts disbursed on behalf of firm plus interest (legal) from the time
expenses were made (and not from demand, since after all, a partner is an agent,
and the rule on agency applies to him)
o To answer to each partner for obligations, he may have entered into in good faith in
the interest of the partnership, as well as for RISKS in consequence of its
management
 Reason: The partner is an AGENT.
 Being a mere agent, the partner is not personally liable, provided, however,
that he is free from all fault (see Art. 1912.) and he acted within the scope of
his authority
 But unlike an ordinary agent, he is not given the right of retention if he is
not reimbursed or indemnified. (see Art. 1914.)
 In the absence of an agreement to the contrary, no partner is entitled to
compensation for his services to the partnership without the consent of all
the partners unless it can be implied from the circumstances that the parties
intended a partner to receive additional compensation where the partner’s
work was beyond normal partnership functions.