Composition of Partnerships; Spouses; Corporations (1994)
1) Can a husband and wife form a limited partnership to engage in real estate business,
with the wife being a limited partner?
2) Can two corporations organize a general partnership under the Civil Code of the
Philippines?
3) Can a corporation and an individual form a general partnership?
SUGGESTED ANSWER:
1) a) Yes. The Civil Code prohibits a husband and wife from constituting a universal
partnership. Since a limited partnership is not a universal partnership, a husband and
wife may validly form one.
b) Yes. While spouses cannot enter into a universal partnership, they can enter into
a limited partnership or be members thereof (CIR v. Suter, et. al. , 27 SCRA 152).
SUGGESTED ANSWER:
2) a) No, a corporation is managed by its board of directors. If the corporation
were to become a partner, co-partners would have the power to make the corporation
party to transactions in an irregular manner since the partners are
not agents subject to the control of the Board of Directors. But a corporation may
enter into a joint venture with another corporation as long as the nature of the venture
is in line with the business authorized by its
charter (Tuason & Co., Inc. v. Bolano, 95 Phil. 106).
b) As a general rule a corporation may not form a general partnership with another
corporation or an individual because a corporation may not be bound by persons who
are neither directors nor officers of the corporation.
However, a corporation may form a general partnership with another corporation or
an individual provided the following conditions are met:
1) The Articles of Incorporation of the corporation expressly allows the corporation to
enter into partnerships;
2) The Articles of Partnership must provide that all partners will manage the
partnership, and they shall be jointly and severally liable; and
3) In case of a foreign corporation, it must be licensed to do business in the
Philippines.
c) No. A corporation may not be a general partner because the principle of mutual
agency in general partnership
allowing the other general partner to bind the corporation will violate the corporation
law principle that only the board of directors may bind the corporation.
SUGGESTED ANSWER:
3) No, for the same reasons given in the Answer to Number 2 above.
Conveyance of a Partner’s Share Dissolution (1998)
Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed
equal amounts to the capital, they also agree on equal distribution of whatever net profit
is realized per fiscal period. After two years of operation, however, Una conveys her
whole interest in the partnership to Justine, without the knowledge and consent of
Dielle and Karlo.
1. Is the partnership dissolved?
2. What are the rights of Justine, if any, should she desire to participate in
the management of the partnership and in the distribution of a net profit of
P360.000.00 which was realized after her purchase of Una’s interest?
SUGGESTED ANSWER:
1. No, a conveyance by a partner of his whole interest in a partnership does not of itself
dissolve the partnership in the absence of an agreement. (Art. 1813. Civil Code)
SUGGESTED ANSWER:
2. Justine cannot interfere or participate in the management or administration of the
partnership business or affairs. She may, however, receive the net profits to which
Una would have otherwise been entitled. In this case, P120.000 (Art. 1813, Civil Code)
Dissolution of Partnership (1995)
Pauline, Patricia and Priscilla formed a business partnership for the purpose of engaging
in neon advertising for a term of five (5) years. Pauline subsequently assigned to Philip
her interest in the partnership. When Patricia and Priscilla learned of the
assignment, they decided to dissolve the partnership before the expiration of its term as
they had an unproductive business relationship with Philip in the past. On the other
hand, unaware of the move of Patricia and Priscilla but sensing their negative reaction
to his acquisition of Pauline’s interest, Philip simultaneously petitioned for
the dissolution of the partnership.
1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline or
Philip valid? Explain.
2. Does Philip have any right to petition for the dissolution of the partnership before
the expiration of its specified term? Explain.
SUGGESTED ANSWER:
1, Under Art. 1830 (1) (c) of the NCC, the dissolution by Patricia and Priscilla is valid
and did not violate the contract of partnership even though Pauline and Philip did not
consent thereto. The consent of Pauline is not necessary because she had already
assigned her interest to Philip. The consent of Philip is not also necessary because the
assignment to him of Pauline’s interest did not make him a partner, under Art, 1813 of
the NCC.
ALTERNATIVE ANSWER:
Interpreting Art. 1830 (1) (c) to mean that if one of the partners had assigned his
interest on the partnership to another the remaining partners may not dissolve the
partnership, the dissolution by Patricia and Priscilla without the consent of Pauline or
Philip is not valid.
SUGGESTED ANSWER:
2. No, Philip has no right to petition for dissolution because he does not have the
standing of a partner (Art. 1813 NCC).
Dissolution of Partnership; Termination (1993)
A, B and C formed a partnership for the purpose of contracting with the
Government in the construction of one of its bridges. On June 30, 1992, after
completion of the project, the bridge was turned over by the partners to the
Government. On August 30, 1992, D, a supplier of materials used in the project
sued A for collection of the indebtedness to him. A moved to dismiss the complaint
against him on the ground that it was the ABC partnership that is liable for the debt. D
replied that ABC partnership was dissolved upon completion of the project for which
purpose the partnership was formed.
Will you dismiss the complaint against A If you were the Judge?
SUGGESTED ANSWER:
As Judge, I would not dismiss the complaint against A. because A is still liable as a
general partner for his pro rata share of 1/3 (Art. 1816, C. C.J. Dissolution of a
partnership caused by the termination of the particular undertaking specified in the
agreement does not extinguish obligations, which must be liquidated during the
“winding up” of the partnership affairs (Articles 1829 and 1830. par. 1-a, Civil Code).
Effect of Death of Partner (1997)
Stating briefly the thesis to support your answer to each of the following cases, will the
death – of a partner terminate the partnership?
SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by express provision of par.
5, Art. 1830 of the Civil Code.
Obligations of a Partner (1992)
W, X, Y and Z organized a general partnership with W and X as industrial partners and
Y and Z as capitalist partners. Y contributed P50,000.00 and Z contributed P20,000.00
to the common fund. By a unanimous vote of the partners, W and X were appointed
managing partners, without any specification of their respective powers and duties.
A applied for the position of Secretary and B applied for the position of Accountant of
the partnership.
The hiring of A was decided upon by W and X, but was opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was opposed by X and Y.
Who of the applicants should be hired by the partnership? Explain and give your
reasons.
SUGGESTED ANSWER:
A should be hired as Secretary. The decision for the hiring of A prevails because it is an
act of administration which can be performed by the duly appointed managing partners,
W and X.
B cannot be hired, because in case of a tie in the decision of the managing partners, the
deadlock must be decided by the partners owning the controlling interest. In this case,
the opposition of X and Y prevails because Y owns the controlling Interest (Art. 1801,
Civil Code).
Obligations of a Partner; Industrial Partner (2001)
Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe
provided the capital while Rudy contributed his labor and industry. On one side of their
shop, Joe opened and operated a coffee shop, while on the other side, Rudy put up a car
accessories store. May they engage in such separate businesses? Why?
SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the restaurant business because it is not the
same kind of business the partnership is engaged in. On the other hand, Rudy may not
engage in any other business unless their partnership expressly permits him to do so
because as an industrial partner he has to devote his full time to the business of the
partnership (Art. 1789, CC).
Timothy executed a Memorandum of Agreement (MOA) with Kristopher setting up a
business venture covering three (3) fastfood stores known as "Hungry Toppings" that
will be established at Mall Uno, Mall Dos, and Mall Tres.
The pertinent provisions of the MOA provides:
1. Timothy shall be considered a partner with thirty percent (30%) share in all of the
stores to be set up by Kristopher;
2. The proceeds of the business, after deducting expenses, shall be used to pay the
principal amount of P500,000.00 and the interest therein which is to be computed
based on the bank rate, representing the bank loan secured by Timothy;
3. The net profits, if any, after deducting the expenses and payments of the principal and
interest shall be divided as follows: seventy percent (70%) for Kristopher and thirty
percent (30%) for Timothy;
4. Kristopher shall have a free hand in running the business without any interference
from Timothy, his agents, representatives, or assigns , and should such interference
happen, Kristopher has the right to buy back the share of Timothy less the amounts
already paid on the principal and to dissolve the MOA; and
5. Kristopher shall submit his monthly sales report in connection with the business to
Timothy. What is the contractual relationship between Timothy and Kristopher? (4%)
SUGGESTED ANSWER: The contractual relationship between Timothy and Kristopher
is a contract of partnership as defined under Article 1767 of the Civil Code, since they
have bound themselves to contribute money, property or industry to a common fund,
with the intention of dividing the profits of the partnership between them. With a seed
money of P500, 000.00 obtained by Timothy through a bank loan, they agreed to divide
the profits, 70% for Kristopher and 30% for Timothy. However, to be more specific,
theirs is a limited partnership as defined under Article 1843 of the Civil Code because
Timothy does not take part in the control of the business pursuant to Article 1848, Civil
Code. Nevertheless, Timothy is entitled to monthly sales reports in connection with the
business, a right enshrined in Article 1851 of the Civil Code.
A. X and Y are partners in a shop offering portrait painting. Y provided the capital and
the marketing while X was the portrait artist. They accepted the PS0,000.00 payment of
Kyla to do her portrait but X passed away without being able to do it. Can Kyla demand
that Y deliver the portrait she had paid for because she was dealing the with business
establishment and not with the artist personally? Why or why not? (3%)
B. In this jurisdiction, is a joint venture (i.e., a group of corporations contributing
resources for a specific project and sharing the profits therefrom) considered a
partnership? (3%)
SUGGESTED ANSWER:
a) No Kyla cannot demand that Y deliver the portrait. The death of X has the effect of
dissolving the partnership. (Article 1830, Civil Code) Also, while the obligation was
contracted by the partnership, it was X who was supposed to create the portrait for Kyla.
Since X died before creating the portrait, the obligation can no longer be complied
because of impossibility of performance. (Article 1266) In obligations to do, the debtor
shall be released when the prestation becomes legally or physically impossible without
the debtor’s fault.
b) Yes, under Philippine law, a joint venture is understood to mean an organization
formed for some temporary purpose and is hardly distinguishable form a partnership
since its elements are similar which are: community of interest in business, sharing of
profits, and losses, and a mutual right of control. (Primelink Properties v. Lazatin June
27, 2006 citing Blackner v. Mcdermott, 176 F. 2d 498[1949])
PARTNERSHIP
Composition of Partnerships; Spouses; Corporations (1994)
1) Can a husband and wife form a limited partnership
to engage in real estate business, with the wife being a limited
partner?
2) Can two corporations organize a general partnership under
the Civil Code of the Philippines? 3) Can a corporation and
an individual form a general partnership?
SUGGESTED ANSWER:
1) a) Yes. The Civil Code prohibits a husband and wife from
constituting a universal partnership. Since a limited
partnership is not a universal partnership, a husband and wife
may validly form one. b) Yes. While spouses cannot enter
into a universal partnership, they can enter into a limited
partnership or be members thereof (CIR u. Suter, etal. 27
SCRA 152).
SUGGESTED ANSWER:
2) a) No, A corporation is managed by its board of
directors. If the corporation were to become a partner,
co-partners would have the power to make the corporation
party to transactions in an irregular manner since the partners
are not agents subject to the control of the Board of
Directors. But a corporation may enter into a joint venture
with another corporation as long as the nature of the venture
is in line with the business authorized by its charter. (Tuason
& Co., Inc. v. Bolano, 95 Phil. 106).
b) As a general rule a corporation may not form a general
partnership with another corporation or an individual because
a corporation may not be bound by persons who are neither
directors nor officers of the corporation.
However, a corporation may form a general partnership with
another corporation or an individual provided the following
conditions are met:
1) The Articles of Incorporation of the
corporation expressly allows the corporation to enter
into partnerships;
2) The Articles of Partnership must provide that
all partners will manage the partnership, and they shall be
jointly and severally liable; and
3) In case of a foreign corporation, it must be
licensed to do business in the Philippines.
c) No. A corporation may not be a general partner because
the principle of mutual agency in general partnership
will violate the corporation law principle that only the board
of directors may bind the corporation.
SUGGESTED ANSWER:
3) No, for the same reasons given in the Answer to Number
2 above.
Conveyance of a Partner’s Share Dissolution (1998)
Dielle, Karlo and Una are general partners in a merchandising
firm. Having contributed equal amounts to the capital, they
also agree on equal distribution of whatever net profit is
realized per fiscal period. After two years of operation,
however, Una conveys her whole interest in the partnership to
Justine, without the knowledge and consent of Dielle and
Karlo.
1. Is the partnership dissolved?
12%]
2. What are the rights of Justine, if any, should she desire to
participate in the management of the partnership and in the
distribution of a net profit of P360.000.00 which was realized
after her purchase of Una's interest? [3%]
SUGGESTED ANSWER:
1. No, a conveyance by a partner of his whole interest in a
partnership does not of itself dissolve the partnership in the
absence of an agreement. (Art. 1813. Civil Code)
SUGGESTED ANSWER:
2. Justine cannot interfere or participate in the management or
administration of the partnership business or affairs. She may,
however, receive the net profits to which Una would have
otherwise been entitled. In this case, P120.000 (Art. 1813,
Civil Code)
Dissolution of Partnership (1995)
Pauline, Patricia and Priscilla formed a business partnership
for the purpose of engaging in neon advertising for a term of
five (5) years. Pauline subsequently assigned to Philip her
interest in the partnership. When Patricia and Priscilla learned
of the assignment, they decided to dissolve the partnership
before the expiration of its term as they had an unproductive
business relationship with Philip in the past. On the other
hand, unaware of the move of Patricia and Priscilla but
sensing their negative reaction to his acquisition of Pauline's
interest, Philip simultaneously petitioned for the dissolution
of the partnership.
1. Is the dissolution done by Patricia and Priscilla without
the consent of Pauline or Philip valid? Explain.
2. Does Philip have any right to petition for the
dissolution of the partnership before the expiration of its
specified term? Explain.
SUGGESTED ANSWER:
1, Under Art. 1830 (1) (c) of the NCC, the dissolution by
Patricia and Priscilla is valid and did not violate the contract
of partnership even though Pauline and Philip did not
consent thereto. The consent of Pauline is not necessary
because she had already assigned her interest to Philip. The
consent of Philip is not also necessary because the assignment
to him of Pauline's interest did not make him a partner, under
Art, 1813 of the NCC.
ALTERNATIVE ANSWER:
Interpreting Art. 1830 (1) (c) to mean that if one of the
partners had assigned his interest on the partnership to
CIVIL LAW Answers to the BAR as Arranged by Topics (Year 1990-2006)
another the remaining partners may not dissolve the A should be hired as Secretary. The
decision for the hiring
partnership, the dissolution by Patricia and Priscilla without
the consent of Pauline or Philip is not valid.
SUGGESTED ANSWER:
2. No, Philip has no right to petition for dissolution because
he does not have the standing of a partner (Art. 1813 NCC).
Dissolution of Partnership; Termination (1993)
A, B and C formed a partnership for the purpose of
contracting with the Government in the construction of one
of its bridges. On June 30, 1992, after completion of the
project, the bridge was turned over by the partners to the
Government. On August 30, 1992, D, a supplier of materials
used in the project sued A for collection of the indebtedness
to him. A moved to dismiss the complaint against him on the
ground that it was the ABC partnership that is liable for the
debt. D replied that ABC partnership was dissolved upon
completion of the project for which purpose the partnership
was formed. Will you dismiss the complaint against A If you
were the Judge?
SUGGESTED ANSWER:
As Judge, I would not dismiss the complaint against A.
because A is still liable as a general partner for his pro rata
share of 1/3 (Art. 1816, C. C.J. Dissolution of a partnership
caused by the termination of the particular undertaking
specified in the agreement does not extinguish obligations,
which must be liquidated during the "winding up" of the
partnership affairs (Articles 1829 and 1830. par. 1-a, Civil
Code).
Effect of Death of Partner (1997)
Stating briefly the thesis to support your answer to each of
the following cases, will the death - of a partner terminate the
partnership?
SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by
express provision of par. 5, Art. 1830 of the Civil Code.
Obligations of a Partner (1992)
W, X, Y and Z organized a general partnership with W and X
as industrial partners and Y and Z as capitalist partners. Y
contributed P50,000.00 and Z contributed P20,000.00 to the
common fund. By a unanimous vote of the partners, W and
X were appointed managing partners, without any
specification of their respective powers and duties.
A applied for the position of Secretary and B applied for the
position of Accountant of the partnership.
The hiring of A was decided upon by W and X, but was
opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was
opposed by X and Y.
Who of the applicants should be hired by the partnership?
Explain and give your reasons.
SUGGESTED ANSWER:
of A prevails because it is an act of administration which can
be performed by the duly appointed managing partners, W
and X.
B cannot be hired, because in case of a tie in the decision of
the managing partners, the deadlock must be decided by the
partners owning the controlling interest. In this case, the
opposition of X and Y prevails because Y owns the
controlling Interest (Art. 1801, Civil Code).
Obligations of a Partner; Industrial Partner (2001)
Joe and Rudy formed a partnership to operate a car repair
shop in Quezon City. Joe provided the capital while Rudy
contributed his labor and industry. On one side of their shop,
Joe opened and operated a coffee shop, while on the other
side, Rudy put up a car accessories store. May they engage in
such separate businesses? Why? [5%]
SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the restaurant
business because it is not the same kind of business the
partnership is engaged in. On the other hand, Rudy may not
engage in any other business unless their partnership
expressly permits him to do so because as an industrial
partner he has to devote his full time to the business of the
partnership [Art. 1789, CC).
Commodatum & Mutuum
Commodatum (1993)
A, upon request, loaned his passenger Jeepney to B to enable
B to bring his sick wife from Paniqui. Tarlac to the Philippine
General Hospital in Manila for treatment. On the way back to
Paniqui, after leaving his wife at the hospital, people stopped
the passenger Jeepney. B stopped for them and allowed them
to ride on board, accepting payment from them just as in the
case of ordinary passenger Jeepneys plying their route. As B
was crossing Bamban, there was an onrush of Lahar from Mt
Pinatubo, the Jeep that was loaned to him was wrecked. 1)
What do you call the contract that was entered into by
A and B with respect to the passenger Jeepney that was
loaned by A to B to transport the latter's sick wife to
Manila? 2) Is B obliged to pay A for the use of the passenger
jeepney? 3) Is B liable to A for the loss of the
Jeepney?
SUGGESTED ANSWER:
1) The contract is called "commodatum". [Art. 1933. Civil
Code). COMMODATUM is a contract by which one of the
parties (bailor) delivers to another (bailee) something not
consumable so that the latter may use it for a certain time
and return it.
2) No, B is not obliged to pay A for the use of the passenger
Jeepney because commodatum is essentially gratuitous. (Art.
1933. Civil Code]
3) Yes, because B devoted the thing to a purpose different
from that
