fruits, to possess and to dispose the property.

October 20, 2020 

A: In leasing are you disposing anything?
S: You are disposing the right to possess.
I. MANAGEMENT OF PARTNERSHIP
A: The right to possession, that is the right of an
owner to possess. Therefore if you are conveying this
Art. 1801​. If two or more partners have been entrusted with the right to possess you are conveying not just the right of
management of the partnership without specification of their administration, you are conveying an act of ownership.
respective duties, or without a stipulation that one of them shall not
So leasing is an act of ownership.
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 A: You are a managing partner, John, and you are
case of a tie, the matter shall be decided by the partners owning the
authorized to buy a parcel of land, and instead of
controlling interest.
buying it in cash you decided to buy it in 5
The rules on when acts by a partner may or may installments. Do you think you could do that as a
managing partner instead of paying in cash you
not bind the partnership depends on whether or not the
tried to pay it in installments?
partners have specified what the duties and functions of S: Yes. Because it is in the interest of the partnership
the respective partners are. and if the funds used is from the partnership then it
will benefit the partnership.
IF DUTIES AND FUNCTIONS ARE SPECIFIED
Their respective decision shall prevail as long as A: Let’s reverse the situation. You are the
it is in good faith. managing partner and you have been authorized
to sell a parcel of land owned by the partnership.
Instead of selling it in cash you sold it in 5
IF THERE IS NO SPECIFICATION OF DUTIES
installments. Do you think you could sell it in five
GENERAL RULE: Each partner may separately perform installments?
acts of administration. S: No, because it would deprive the partnership of the
EXCEPTION: ​However if one or more of the managing cash which should have benefitted the partnership if it
partners shall oppose the acts of the others, then the weren’t in installment.
decision of the majority of the managing partners A: We must take note that in buying on installment it is
shall prevail. only an act of administration because the managing
partner is only trying to secure a credit on behalf of the
● In case of a tie, the matter shall have to be
partnership. While selling on installment it is not an act
decided by the vote of the partners owning the of administration anymore for you are extending a
controlling interest, that is, more than 50% of the credit and that is an act of ownership.
capital investment.
A: If nobody is appointed or designated as a
REQUISITES FOR APPLICATION OF ART. 1801​: managing partner what rule did we learn?
● Two or more partners have been appointed as S: (Art. 1803) When the manner of management has
managers; not been agreed upon, all the partners shall be
● There is no specification of their respective duties; considered agents and whatever any one of them may
and do alone shall bind the partnership.
● There is no stipulation that one of them shall not act
without the consent of all the others. Illustration: There are 5 partners who wanted to
buy a car. 2 partners said we want a red car and 3
A: Can the managing partner therefore lease the partners said we want a white car. What is the
property of the partnership? color of the car that they will buy?
S: No. (Art. 1800) A managing partner is limited only S: (Art. 1801) If one or more of the managing partners
in performing acts of administration. A lease is an act shall oppose the acts of the others, the decision of the
of ownership. majority of the managing partners shall prevail. Which
is a red car.
A: You are a partner Edward Yu and you happened ​A: However in case of tie?
to be the managing partner of the partnership. The S: (Art. 1801) In case of a tie, the matter shall be
partnership owned a piece of land do you think decided by the partners owning the controlling
you could just lease that land to anyone else? interest.
S: No. Because it will be an act of ownership. The
rights of an owner include the right to use, the right to A: Here are the 3 managing partners: Managing
AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 1
 Partner A is in charge in Operation, Managing ART. 1803. Art. 1803. When the manner of management has not
Partner B is in charge of Marketing, and Managing been agreed upon, the following rules shall be observed:
Partner C is in charge of Human Resources.
(1) All the partners shall be considered agents and whatever any
Somebody came and applied for work. She was one of them may do alone shall bind the partnership, without
very sexy and partner A wanted to hire the prejudice to the provisions of Article 1801.
applicant. Partner C, however, objected and said
that she was incompetent. Which decision should (2) None of the partners may, without the consent of the others,
make any important alteration in the immovable property of the
prevail? partnership, even if it may be useful to the partnership. But if the
S: Partner C’s decision should prevail as he is refusal of consent by the other partners is manifestly prejudicial to
specifically designated as the Human Resources the interest of the partnership, the court's intervention may be
Manager. sought.

This article provides that when the manner of

A: But Partner A insists that his decision should
management is not agreed, all partners are considered
prevail as he is the one looking for employees to
be under him. Is that a valid opposition? managers and agents. All partners shall have equal rights in
S: Yes, it is. In this case, since there is opposition, we the management and conduct of partnership affairs. Whatever
should follow the majority rule. they do will bind the partnership.

A: However, when partner B insists not to meddle But the above rule is subject to rules under Art. 1801,
with the matter between Partner A and C. What do wherein timely objection will be decided by a majority vote and
we do now? in case of tie, it will be decided by the vote of partner/s
S: In this case, we now apply the rule on controlling representing controlling interest.
interests because there is now a tie.
3.1 FOR ALTERATIONS OF IMMOVABLES 
Another Situation:
A: There are 5 partners and none has been
​ nanimous consent is required.
GENERAL RULE:​ U
designated as managing partner. Who prevails?
S: Majority prevails EXCEPTION: ​If the refusal by a partner is manifestly
prejudicial to the interest of the partnership, the
A: Although Majority prevails, there is an court’s intervention will be sought or required.
exception. What is that situation where majority
rule cannot be applied? A: There is a partnership of 5 partners, no one is
S: If Unanimity is required.
designated as managing partner. They decide to
renovate their building. 3 wanted to paint it black
and 2 wanted to paint it lavender. What should be
II. STIPULATION ON UNANIMITY  the color of the building?
S: (Art. 1803) In making alterations of immovable
ART. 1802. ​In case it should have been stipulated that none of the properties, the consent of all partners is required.
managing partners shall act without the consent of others, the
concurrence of all shall be necessary for the validity of the acts, and Absent the unanimous consent, no decision will
the absence or disability of any one of them cannot be alleged, prevail. No change on the color of the building will be
unless there is imminent danger of grave or irreparable injury to the
partnership. made.

GENERAL RULE: If uninamity has been agreed on by

the partners, the unanimous consent of all the IV. SUBPARTNERSHIP/ASSOCIATE
managing partners shall be necessary for the validity
of their acts.
ART. 1804. Every partner may associate another person with him in
EXCEPTION: When there is an IMMINENT DANGER his share, but the associate shall not be admitted into the
partnership without the consent of all the other partners, even if the
OF GRAVE OR IRREPARABLE INJURY ​to the partner having an associate should be a manager.
partnership, in which case, a partner may act alone
without the consent of the partner who is absent or A partner may associate another person with
under disability, without prejudice to his liability for him in his share without the consent of other parties.
damages under art. 1794. Such an associate is sometimes referred to as a
subpartner.

III. NO AGREEMENT AS TO MANAGEMENT

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 2
Nature: Subpartnership is separate and distinct from the main or
principal partnership. It is a partnership between a member of a A: The purpose of maintaining the books or records
partnership and a third person for division of profits coming to and its usage is because it is the best evidence to
the partner. prove every transaction the partnership has entered
Subpartner does not become a partner to the partnership even if
into.
the other members know of the agreement because a partnership  
is based on mutual trust and confidence among the partners.
Inclusion of a new partner will require the unanimous consent of
all.
VI. Render true and full information

A: When you are playing tong-its, you will make a Art. 1806. P​ artners shall render on demand true and full information
bet. Sometimes, someone will help you and will of all things affecting the partnership to any partner or the legal
representative of any deceased partner or of any partner under
chip-in with the bet. Will you consider that person
legal disability.
a “player”? Will that person choose/draw the
cards? Good faith requires that a partner should not make any
S: NO. false statement and abstain from any concealment.
A: And when you win, you will split the earnings with 1. Partner has the duty to render true and full
information of all things that affect the
that person because that person contributed to the bet partnership upon request of demand. The
and it follows that you will share the profits also. information must be used only for partnership
purposes.
2. Partner has the duty to make voluntary disclosure
of material facts.
V. PARTNERSHIP BOOKS
But these duties do not arise with respect to matters
appearing in the partnership books.
ART. 1805. T ​ he 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. VII. DUTY OF PARTNER TO ACCOUNT
The managing or active partner has the duty to keep true
Art. 1807. E​ very partner must account to the partnership for any
and correct books showing the firm’s accounts. It is benefit, and hold as trustee for it any profits derived by him without
presumed that the partners have knowledge of the the consent of the other partners from any transaction connected
contents of the partnership books and the books state with the formation, conduct, or liquidation of the partnership or from
accurately the state of accounts but errors can be any use by him of its property.
corrected.
● Books should be kept at the principal place of Relation between partners is essentially fiduciary
business. involving trust and confidence.
1. Duty to act for common benefit — p ​ artner cannot
PARTNER’S RIGHTS OVER PARTNERSHIP BOOKS: use or apply for his own benefit partnership assets or
the results of the knowledge and information gained in
1.) To ACCESS the books at any REASONABLE
the character of a partner.
HOUR
2. Duty begins during formation — ​principle of utmost
● any REASONABLE HOUR — refers to business days good faith covers dealings and transactions occurring
throughout the year and not merely during some during the partnership and negotiations leading to the
arbitrary period of a few days chosen by managing formation of the partnership.
partner/s. 3. Duty continues even after dissolution —
2.) To ​INSPECT​ the books relationship is terminated after the completion of the
3.) To C​ OPY​ the books “winding up” of partnership affairs
● NOT ABSOLUTE​: partners can be restrained from 4. Duty to account for secret and similar profits —
using information for other than partnership purposes Duty of a partner to account as fiduciary operates to
prevent from making secret profit out of the operation
A: Why are books important? of the partnership and carrying on the business of the
S: they show the firm’s accounts. partnership for his private advantage or business.
5. Duty to account for earnings accruing even after
A: In case of litigation or conflict? termination of partnership — ​if a partner avails
S: The books can be a good source of information to himself of information obtained by him in the course of
the transaction of the partnership, and applies it to his
be used as evidence to support a claim.
own account without consent of his co-partners, he is

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 3

 to account to the partnership for any benefit he may
obtain from the use of such information. S: First, it has to be distinguished if the partner in
6. Duty to make full disclosure of information question refers to an industrial partner or a capitalist
belonging to the partnership — ​“information” partner.
means which can be used for purposes of the Previously in an example about the barbeque
partnership and it follows that such information business, an i​ ndustrial partner is ABSOLUTELY
belongs to the partnership. Information cannot be
prohibited from engaging in ANY kind of business
used by one partner for his own gain.
7. Duty not to acquire interest or right adverse to the that is separate and distinct from partnership business
partnership — A ​ partner may not purchase for his simply because he is obliged to render his entire
own benefit, property of any kind in which the industry to the partnership (UNLESS he is expressly
partnership is interested or lease property when the allowed by other partners).
firm is entitled to it or secure valuable contract for If this is violated, the remedy of the other partners is to
himself which is his duty to secure for the firm or
1.) avail of the industrial partner’s gains from his
obtain secretly any right which should belong to the
partnership. OTHER business, OR
2.) exclude him from the partnership, with damages in
either cases.
VIII. PROHIBITION ON CAPITALIST PARTNER
For a capitalist partner, t​ he prohibition is RELATIVE.​
Art. 1808. The capitalist partners cannot engage for their own A capitalist partner may engage in a business
account in any operation which is of the kind of business in separate from the partnership business PROVIDED
which the partnership is engaged, unless there is a stipulation to
the contrary. that:
1.) such business is not related to and/or competing
Any capitalist partner violating this prohibition shall bring to the
common funds any profits accruing to him from his transactions,
with partnership business and
and shall personally bear all the losses. 2.) all partners expressly give consent or that there is
no agreement prohibiting a partner from engaging in
PROHIBITION AGAINST ENGAGING IN BUSINESS such business.
1. Industrial Partner If this is violated, the remedy of other partners is to
● General Rule: ​The industrial partner is compel the erring partner to bring to the common fund
prohibited to engaged in any kind of business any prots derived by him from such transactions and
whether or not its is of the same kind of in case of losses, he shall bear them alone.
business in which the partnership is engaged in
○ The prohibition is therefore absolute
● Exception: The partnership expressly permits IX. Right to formal accounting
him to do so
○ The permission given must be express
Art. 1809. A ​ ny partner shall have the right to a formal account as
○ Mere toleration by the partnership will
to partnership affairs:
not exempt the industrial partner from (1) If he is wrongfully excluded from the partnership business or
liability possession of its property by his co-partners;
2. Capitalist Partner (2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
● General Rule: The capitalist partner is only
(4) Whenever other circumstances render it just and reasonable.
prohibited to engage for his own account in
business or operation which is of the same or
A: May a partner demand a formal accounting?
similar kind of business in which the partnership
Under what circumstances?
is engaged in
S: Yes, under the *4 instances enumerated in Art.
○ The prohibition is relative
1809 of the Civil Code.​
● Exception: When there is a stipulation to the
contrary GENERAL RULE: ​During the existence of the
partnership, a partner is not entitled to a formal
A: Earlier, we have discussed the right of a partner account of partnership affairs.
to engage in business. Under what circumstances ○ RATIONALE: rights of a partner
may a partner engage in a business? protected in Art. 1805 and 1806 and will

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 4

 cause much inconvenience and
unnecessary waste of time A: What are the property rights of a partner?
S: His rights in specific partnership property; his
EXCEPTION: ​There are 4 instances that could be made interest in the partnership; and his rights to participate
as exemption. in the management.
1. If he is ​WRONGFULLY EXCLUDED from the
partnership business or possession of its A: When we say interest in the partnership, what
property by his co-partners; do we mean?
S: It means that the partner has a share in the profit,
2. If the right exists under the terms of any
income or other surplus.
AGREEMENT​;
3. As provided by ​ART. 1807 — partners who hold A: When we say his right to participate in the
as trustee prots derived by him from any management, what does this mean?
transaction connected with formation, conduct, S: This refers to the acts of administration, which
or liquidation of the partnership or from any use includes his participation in the operation of the
partnership and his involvement in the decision
of partnership property.
making.
4. Whenever other circumstances render it ​JUST
AND REASONABLE​. ​(i.e., partner assigned A: Exactly. In the absence of designation as who
abroad for a long period of time in the managing partner will be, who will be now the
connection with the partnership business managing partners?
and the partnership books during such S: In the absence of designation, all partners will be
period being in the possession of the the manager. Unless, somebody is appointed or
designated.
other partners)
○ PRESCRIPTIVE PERIOD: right to A: You talked about the rights over a specific
demand accounting exists as long partnership property. Let’s say you are in a funeral
as partnership lasts. Prescription parlor business, one day your relative came from
starts upon dissolution of the US after the Covid, and you wanted to show
partnership when nal accounting is them around and bring them to the resorts of
done Cebu. You needed a car. Since you are a partner in
a funeral business, you borrowed one of the
funeral cars to use it to bring your visitors around
X. PROPERTY RIGHTS OF A PARTNER Cebu. Could you use that funeral car?
S: No. The law provides that you can only use a
ART 1810​ The property rights of a partner are:
specific property of the partnership if it is in line with
(1) His rights in specific partnership property the purpose of the business.
(2) His interest in the partnership; and A: IOW, it is purely for funeral business purposes,
(3) His rights to participate in the management. unless perhaps the other partners agreed that it will be
used for personal purposes.
PRINCIPAL RIGHTS OF A PARTNER (SIP)
1. His rights in ​s​pecic partnership property (Art. A: Your creditors have now made a decision and
1811) are trying to execute. The sheriff stopped the car
2. His ​i​nterest in the partnership (Art. 1812) while it was delivering a cargo to the memorial
3. His right to ​p​articipate in the management (Art. park and the sheriff told you that your partner
1803) owes somebody else. Can the sheriff do that?
○ right to manage is a consequence of S: No. The sheriff cannot execute the specific property
ownership/ of the partnership.
PARTNERSHIP PROPERTY VS. CAPITAL A: What if the sheriff is trying to execute a
Property is a variable and may change from day to judgment against the partnership for its unpaid
day depending on market value of partnership assets debt, may the sheriff attach the car?
while capital is constant from the amount fixed by S: Yes. The property of the firm is leviable only for the
agreement of the partners although it may be increased or debt incurred by the partnership and not by the
decreased by unanimous consent of the partners. individual partner.

Property includes all property of the partnership A: In short, while the sheriff may execute his
(original capital contributions, subsequent acquisitions, decision against any partnership property, that
partnership name, goodwill), while capital only includes partnership property may only be executed only
capital contributions from the partners.
AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 5
 Aggrieved partner may exercise his right to
insofar as?
S: Only insofar as the obligation incurred by the formal account and even apply for judicial decree of
partnership itself but if it is the debt of the individual dissolution
partner, the sheriff cannot do anything against the
specific property of the partnership. IF PARTNER DIES
The deceased partner’s right in specic
XII. Rights in a specific partnership property partnership property vests in the surviving partners,
NOT the legal representative of the deceased partner.
○ TAKE NOTE: E ​ xecutor of deceased
Article 1811. A partner is co-owner with his partners of specific
partnership property. partner CANNOT insist on participating
in the winding up process
The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any IF PARTNERS AGREED TO SURRENDER
agreement between the partners, has an equal right with his POSSESSION
partners to possess specific partnership property for partnership
purposes; but he has no right to possess such property for any By agreement, a partner’s right to possess
other purpose without the consent of his partners; specic partnership property may be surrendered. In
(2) A partner's right in specific partnership property is not assignable the absence of such agreement, equal dominion over
except in connection with the assignment of rights of all the partners partnership property applies.
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. 12.1.2 RIGHT TO USE 
When partnership property is attached for a partnership debt the
partners, or any of them, or the representatives of a deceased The partners have equal right to use and
partner, cannot claim any right under the homestead or exemption
laws;
possess the specic partnership property but only limited
to the conduct of partnership business.
(4) A partner's right in specific partnership property is not subject to ○ UNLESS: all the partners consent to the use
legal support under article 291. (n)
of the property other than the partnership’s
business.
A partner is a co-owner with his partners but the rules
of co-ownership do not necessarily apply.
12.2 ASSIGNMENT OF RIGHTS TO SPECIFIC 
PARTNERSHIP PROPERTY 
12.1 PARTNER’S RIGHTS AS CO-OWNER OF 
SPECIFIC PARTNERSHIP PROPERTY 
2. ​Right not assignable — a partner cannot separately
assign his rights to specic property but all of them can
12.1.1 RIGHT TO POSSESS  assign their rights in the same property
a. not assignable because cannot determine
Partners have equal right to possess specic
the extent of benecial interest in the property until
partnership property for partnership purposes
after liquidation
○ IMPORTANT: a ​ partnership possession of
b. partner cannot dispose or mortgage
partnership property is equal to possession
​ HEREFORE, p
of all partners — T ​ artnership without consent or approval of the other partners even if
property cannot acquire by adverse he contributed property
possession c. consent of all the partners, either express
■ UNLESS: he makes an adverse claim of or implied, is the source and limit of a partner's right to
title under such circumstances as will
deal with partnership property for any but a
charge his co-partner with notice of the
adverse claim partnership purpose
d. not assignable so that it prevents interference
IF USED NOT FOR PERSONAL PROFIT OR BENEFIT by outsiders in partnership affairs. Protects right of
He must account to the others for the prots other partners and partnership creditors
derived therefrom e. assignment of specic partnership property
IF PARTNER WRONGFULLY EXCLUDED FROM is void but assignment of partnership interest is valid.
POSSESSION A retiring partner may assign his rights in

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 6

partnership property to the partner or partners
continuing the business (Art. 1840) A partner is not a creditor of the partnership for the
amount of his share. The interest of a partner is not
Support ​— Right of partners to specic partnership subject to attachment or execution on a judgment
property is not subject to legal support because property recovered against the individual partner.
belongs to the partnership. Partnership interest can be
subject to legal support.
XIII. Assignment of a partner of his interest in the 
3. Right limited to share of what remains after
partnership debts have been paid
partnership
a. The whole partnership property belongs to the
partnership as a juridical person (Art. 1768) and a Article 1813— A ​ conveyance by a partner of his whole interest in
the partnership does not of itself dissolve the partnership, or, as
partner has no interest in it but his share of what remains against the other partners in the absence of agreement, entitle the
after all partnership debts are paid (Art. 1812) assignee, during the continuance of the partnership, to interfere in
b. Specic partnership property is not subject to the management or administration of the partnership business or
affairs, or to require any information or account of partnership
attachment, execution, garnishment or injunction without transactions, or to inspect the partnership books; but it merely
the consent of all partners EXCEPT if it is a claim entitles the assignee to receive in accordance with his contract the
profits to which the assigning partner would otherwise be entitled.
against the partnership itself However, In case of fraud in the management of the partnership,
c. Right of the partners to specic 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
property is not subject to legal support because property assignor's interest and may require an account from the date only of
belongs to the partnership and not to the partners. the last account agreed to by all the partners.
Partnership interest may be subject to legal support.
EFFECT OF ASSIGNMENT OF PARTNER’S WHOLE
INTEREST
XII. Interest in the partnership A partner’s right in specific partnership property is not
assignable but he may assign his interest in the
TN: Not discussed by Atty
partnership to any of his co-partners or to a third person
Art. 1812. A​ Partner’s interest in the partnership is his share of the without the consent of the other partners, in the absence
profits and surplus.
of agreement to the contrary.
1. Right Withheld From Assignee- ​This article
The partner’s interest in the partnership consists of his permits the conveyance by a partner of his
share in the undistributed profits during the life of the whole interest in the partnership without causing
partnership as an ongoing concern and his share in the dissolution. However, such assignment does not
undistributed surplus after its dissolution. grant the assignee the right:
a. To interfere in the management
● PROFIT- ​excess of returns over the expenditure b. To require any information or account;
in a transaction or series of transactions; or the or
net income of the partnership for a given period c. To inspect any of the partnership books
of time. 2. Status and Rights of the Assignor as Partner
Unaffected
● SURPLUS- ​assets of the partnership after ● The assignment does not divest the
partnership debts and liabilities are paid and assignor of his status and rights as a
settled and the rights of the partners among partner nor operates as a dissolution of
themselves are adjusted. In short, whatever is the partnership
left in the partnership less the liabilities. ○ However, the non-assigning
partners has a ground for
Take Note: The extent of partner’s interest is the dissolving the partnership if they
proportion residue or balance after an account has been so desires
taken of debts and credits, including the amount paid by ● Partnership is a relation in which
the several partners in liquidating firm debts or in making delectus personae is an important
advances to the partnership. Until that occurs, it is element. Thus, no one may be
impossible to determine the extent of a partner’s interest. introduced into the firm as a partner
AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 7
 without the unanimous consent of the
baby was a partner of a partnership. One day, your
other partners boyfriend forgot to give money for the milk of the
3. Rights of Assignee of Partner’s Interest- ​The baby and he keeps on forgetting so much that you
only rights of the assignee are: ran out of milk. You went to court to ask your
a. To receive in accordance with his boyfriend to give you money for the milk of your
contract the profits accruing to the baby. You got the decision of the court and you
assigning partner went to the office of the partnership, bringing your
baby, asking that the 100 000 share of your
b. To avail himself of the usual remedies
boyfriend's profit be given to you so you could
provided by law in the event of fraud in use it to buy milk. Do you think you could get his
the management 100 000 shares in the partnership?
c. To receive the assignor’s interest in S: I can get the 100 000 shares because it is my
case of dissolution; and ex-boyfriend’s interest in the partnership. I can enforce
d. To require an account of partnership my rights because the partner’s interest in the
partnership could be subjected to legal support.
affairs, but only in case the partnership
is dissolved, and such account shall A: May a partner borrow money from a bank and
cover the period from the date only of offer as collateral his monthly share in the profits?
the last account agreed to by all the S: Yes, he can offer that as a collateral.
partners.
A: As a matter of fact, a partner can assign all his
REMEDY OF THE OTHER PARTNERS interest in the partnership. Is he still a partner
despite assigning all his interest in the
1. Dissolution of Partnership Not Intended
partnership?
● The reason for many partnership S: Yes, he still remains as a partner.
assignments are made merely as
security for loans where the assigning A: How come when he is not expecting anything
partner never intends to destroy the anymore? He has no more share in the profits, no
partnership relation. more share in the surplus. How can he still remain
● However, if the assigning partner as a partner?
S: He still remains as a partner as there are rights
neglects his partnership duties after
which cannot be assigned by the partner.
assignment, the other partners may
dissolve the partnership assignments. A: What are these rights?
2. Dissolution of Partnership Intended S: The right to interfere with the management, the
● A partner’s conveyance of his interest in right to require any information or account, and the
the partnership operates as a right to inspect any of the partnership books.
A: He has 3 property rights— right to the specific
dissolution of the partnership only when
partnership property, to interest in the partnership, and
it is clear that the parties contemplated to participate in the management. He only assigned 1
and intended the entire withdrawal from of the 3 rights. He did not dispose of the other 2 rights.
the partnership of such partner and the So he is still a partner because he continues to
termination of the partnership as exercise the remaining 2 rights.
between the partners.
​ ot discussed
TN: N A: Once he assigns all his interest in the
partnership, who now can demand for the
payment of the partner’s interest?
S: The assignee.
A: What may constitute the interest of a partner?
S: The interest of a partner comprises his share in the
undistributed profits during the life of the partnership
as an ongoing concern and his share in the
undistributed surplus after its dissolution.

A: Your boyfriend was a partner to a partnership

and every month they share in the profits of up to XIV. Redemption or purchase of interest charged
100 000. One day, there were mistakes committed.
Nine months thereafter, that mistake, Kathleen,
you came out with a baby and the father of that

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 8

 Article 1814. Without prejudice to the preferred rights of partnership the partners can be paid out of
creditors under article 1827, on due application to a competent court the interest charged.
by any judgment creditor of a partner, the court which entered the
judgment, or any other court, may charge the interest of the debtor
● Availability Of Other Remedies
partner with payment of the unsatisfied amount of such judgment ○ The charging order is an exclusive
debt with interest thereon; and may then or later appoint a receiver remedy, thus, a writ of execution will not
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, be proper
directions, accounts and inquiries which the debtor partner might ○ However, the court may resort to other
have made, or which the circumstances of the case may require.
The interest charged may be redeemed at any time before courses of action in case the judgement
foreclosure, or in case of a sale being directed by the court, may be debt remains unsatisfied,
purchased without thereby causing a dissolution:
(1) With separate property, by any one or more of the partners; or 
 notwithstanding the issuance of the
(2) With partnership property, by any one or more of the partners charging order, such as:
with the consent of all the partners whose interests are not so ■ Appointment of receiver
charged or sold.
Nothing in this Title shall be held to deprive a partner of his right, if ■ Sale of interest
any, under the exemption laws, as regards his interest in the ■ All other orders, directions,
partnership.
accounts and inquiries which
the debtor partner might have
TN: Discussed only a bit about charging order and made, or which the
redemption. circumstances of the case may
require
REMEDIES OF SEPARATE JUDGEMENT CREDITOR 2. Redemption or Purchase of Interest Charged
OF A PARTNER ● When: ​The interest charged may be, without
1. Remedies Available to the Separate Judgement causing a dissolution
Creditor of a Partner ○ Redemeed at any time before
● Application For A Charging Order After Securing foreclosure
Judgement On His Credit ○ Purchased
○ A separate creditor of a partner cannot ○ Note: The redemption or purchase is a
attach or levy upon specific partnership ground for other partners to ask for the
property for the satisfaction of his credit dissolution of the partnership (Art.
because partnership assets are 1830[c])
reserved for partnership creditors. ● Redemptioner: The interest of the debtor-partner
○ However, he can secure a judgment on so charged may be redeemed or purchased with
his credit and then apply to the proper －
court for a “charging order” subjecting ○ Separate property of any one or more of
the interest of the debtor partner in the the partners; or
partnership with the payment of the ○ Partnership property with the consent of
unsatisfied amount of such judgment all the partners whose interest are not
with interest thereon with the least so charged or sold
interference with the partnership ● Redemption Price
business and the rights of the other ○ The value of the partner’s interest in the
partners. partnership has no bearing on the
○ By virtue of the charging order, any redemption price which is likely to be
amount or portion thereof which the lower since it will be dependent on the
partnership would otherwise pay to the amount of the unsatisfied judgment
debtor-partner should instead be given debt.
to the judgment creditor. ● Right of Redeeming Non-debtor Partner
○ Remedy of Charging Order Not ○ The redeeming non-debtor partner does
Prejudice to the Preferred Rights of not acquire absolute ownership over the
Partnership Creditor debtor-partner’s interest but holds it in
■ The claims of partnership trust for him consistent with principles of
creditors must be satisfied first fiduciary relationship
before the separate creditors of

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 9

A: This assignee could be a very arrogant guy
which irritates all the other partners. The other
partners will feel uncomfortable with his presence.
They want to get rid of this assignee. (Michelle)
what should the other partners do to get rid of this
assignee?
S: They should pay the debt of the partner by
redemption.

A: How is redemption done?

S: The partners who are left will apply to the court a
charging order. However, the situation would be that
the partner would offer their separate property of each
partner or the partnership property. They can use that
charging order in order to redeem the debt of the other
partner.
A: I​ n other words, to get rid of this arrogant assignee
we offer to pay off the entire obligation with either the
personal property of the partners or with the
partnership property.

A.What is needed if ever they choose to use the

partnership property?
S: If partnership property will be used, it will require
the consent of all the partners.

READ UNTIL ARTICLE 1820

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 10