Law on Partnership Reviewer | ARTICLE 1767 to 1770
I. LAW ON PARTNERSHIP REVIEWER | ARTICLE 1767 – 1770 (NEW CIVIL CODE)
a.
DEFINITION AND ELEMENTS
¾ By
contract of partnership, 2 or more bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the
profits among themselves. (Art. 1767)
¾ 1.
Valid contract;
2. 2 or more persons must have legal capacity
3. mutual contribution of money property, or
industry to a common fund;
4. object must be lawful; and
5. primary purpose must be to carry on a
business for profits and to divide the same among the parties.
SUNGA V. CHUA
(GR 143340, Aug. 15,
2001)
Art.
1768 explicitly provides that the partnership retains its juridical personality
even if it fails to register. Failure to register the contract of partnership
does not invalidate the same as among partners, so long as the contract has the
essential requisites, because the main purpose of registration, is to give
notice to third persons; and it can be assumed that the members themselves knew
of the content of their contract.
In
the case at bar, non-compliance with this directory provision of the law will
not invalidate the partnership considering that the total of the evidence
proves that respondent and Jacinto indeed forged the partnership in question.
b.
DOCTRINE OF DELECTUS PERSONAE AND MUTUAL
AGENCY
Doctrine
of Delectus Personae
¾ “choice of the person”
¾ No one
can become a member of the firm without the consent of the partners.
¾ Principle
of mutual trust and confidence
¾ Because
of this doctrine, the law gives wide
authority to one partner to bind another by contract or otherwise.
Mutual
Agency
¾ The
liability of one partner for the acts of his co-partners.
¾ No one
can be compelled either to become a partner or to remain one.
c.
PARTNERSHIP AS A JURIDICAL ENTITY , RIGHTS
AS SUCH
¾ “firm”
or “company”
¾ It may
enter contracts;
Acquire and possess property of all kinds in its
name;
* Incur
obligations; and
* Bring civil or criminal actions in conformity
with the laws and regulations of its organizations
d.
WHO CAN FORM PARTNERSHIP?
¾ GR: any person may be a partner
who is capable of entering into contractual relations.
* Partnership to another
partnership
* Corporation authorized by
statute / its charter
ETR: the
following cannot be a partner:
1)
Unemancipated minors;
2)
Insane / demented persons;
3)
Deaf-mutes who do not know how to write;
4)
Persons who are suffering from civil interdictions;
5)
Incompetents who are under guardianship; and
6) Any
persons who are prohibited from giving each other any donation/advantage cannot
enter into UNIVERSAL PARTNERSHIP
e.
CAN A CORPORATION BECOME A MEMBER OF A
PARTNERSHIP?
¾ GR: NO (on the grounds of public
policy)
ETR:
- authorized
by statute or by its charter
-
through a contract or agreement if the nature of the venture is authorized by
its charter
- where
all adequate safeguards and conditions are imposed for the protection of the
rights of stockholders and corporate creditors.
¾ JOINT VENTURE
- the
corporation may enter into such
- a
form of partnership with a legal personality separate and distinct from the
parties composing it
- Essentially
a partnership created for a limited purpose
- There
is a community of interest in the business and a mutual right of control and an
agreement to share jointly in profits and losses resulting from the enterprise.
MENDIOLA VS. COURT OF
APPEALS
(GR 159333, Jul. 31,
2006)
A
corporation cannot become a member of a partnership in the absence of express
authorization by statute or charter.
This
doctrine is based on the following considerations:
(1)
that the mutual agency between the partners, whereby the corporation would be
bound by the acts of persons who are not its duly appointed and authorized
agents and officers, would be inconsistent with the policy of the law that the
corporation shall manage its own affairs separately and exclusively; and
(2)
that such an arrangement would improperly allow corporate property to become
subject to risks not contemplated by the stockholders when they originally
invested in the corporation.
f.
TEST AND RULES IN DETERMINING THE EXISTENCE
OF A PARTNERSHIP
¾ In
determining whether a partnership exists, these rules shall apply:
(1) Except as provided by article 1825, persons
who are not partners as to each other are not partners as to third persons;
- (Partnership by estoppel)
(2) Co-ownership or co-possession does not of
itself establish a partnership, whether such co-owners or co-possessors do or
do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of
itself establish a partnership, whether or not the persons sharing them have a
joint or common right or interest in any property from which the returns are
derived;
(4) The receipt by a person of a share of the
profits of a business is prima facie evidence that he is a partner in the
business, but no such inference shall be drawn if such profits were received in
payment:
(a) As a debt by installments
or otherwise;
(b) As wages of an employee or
rent to a landlord;
(c) As an annuity to a widow or
representative of a deceased partner;
(d) As interest on a loan,
though the amount of payment vary with the profits of the business;
(e) As the consideration for
the sale of a goodwill of a business or other property by installments or
otherwise. (Art. 1769)
¾ DOUBT =
1769 applies
¾ GR: all of its essential features
or characteristics must be shown as being present.
-determined from the conduct of the parties, any
documentary evidence bearing thereon, and the testimony of the parties.
-existence of the proprietary interest
-purpose of obtaining pecuniary profit or gain
directly through or as a result of the business to be carried on is the very
reason
g.
EFFECTS OF AN UNLAWFUL PARTNERSHIP
¾ (1)
Void ab initio (1409[1]);
(2) Profits shall be confiscated in favor of the
government;
(3) instruments/tools and proceeds of the crime shall also
be forfeited in favor of the government; and
(4) Contributions of the
partners shall not be confiscated unless they fall under No. 3.
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