[Music] [Music] hello guys good evening everyone welcome back to the channel this is the house of law and i'm attorney aljumarani belated happy mother's day to all the mothers out there to the mothers of my students okay so welcome to this live lecture on partnership agency and trusts still part of civilo and hopefully my second to the last topic for my civil law refresher course at the university of the east okay and to those who are watching because they saw the posts on youtube welcome to this live lecture on partnership agency and trusts now you must have observed that in the or noticed in the bar examination syllabus for c below that the partnership topic or the partnership subject has been transferred to commercial law so struggle for commercial reviewers and syllabus because some commercial or reviewers or lecturers would have to lecture on partnership pero i think i mentioned this before in the class in some of the review centers i still lecture on partnership considering it's still part of civil law and as a civil lecturer so yeah like in academics i still lectured on partnership not with static the fact nights already the launch partnership is already part of a commercial so this lecture on partnership is of course part of my lecture today but note that questions and partnership will be asked in your civil as commercial exam so advanced review i know many of you are studying the subjects one at a time you want to study civil munna that was followed by another subject opinion if you want you can reserve partnership as uh later on when you want to or when it's time to study for commercial or pero you know in the coming or in the next bar exams and partnerships below you know justice leonin has been experimenting a lot with the bar exams um he's been trying to make sure that the bar exam will be done in an efficient way and but create outlines whereby the related subjects will be lumped together and we've always been saying ever since the mana and partnership although it's part of civil law but in reality or in practice partnership is really commercial in nature because it's for the purpose of doing business and so when you say business all right so yeah i natalya we are 30. thank you very much i am 35 not satan okay indigenous but i'm playing music in my in a headset parallel vibe not during this live lecture i can't play it because on youtube because of you know possible copyright issues so right now i'm having party i'm having a party in my head so i had to buy the united name but it's a spotify playlist it's a beach playlist all right guys so i'd like to begin now um okay but uh some greetings first okay charisma suggests three oh hi mr jess i love it so everybody if you're interested to try one of the best if not the best gourmet toyo in town try daeda's kitchen yeah and shout out though i'm gonna shout out so just watch out for that and because data is one of the most entrepreneurial people i know murder share the blessings okay all right guys um the last time it's on topic reminiscent one hour periods okay we'll try this much two hours and as always again if you will still uh stay until the end thank you very much and but if you can't if you need to leave and then try to go back or if you want to watch this again and detail onto something youtube channel okay all right guys let's begin all right so we'll start with the law on partnership so we begin with the question what is a partnership and what are its elements so a partnership is a contract where two or more persons bind themselves to contribute money property or industry to a common fund with the intention of dividing the profits among themselves two or more persons may also profit all right i think we can proceed now all right as i was saying the definition of partnership is found under article 1767 of the civil code a partnership is a contract where two or more persons bind themselves to contribute money property or industry to a common fund with the intention of dividing the profits among themselves two or more persons may also form a partnership for the exercise of a profession for purposes of distinguishing the two the first type under this definition is your ordinary partnership which is sometimes called the business partnership because of the intention to earn or gain profits in the meantime the second type is your general professional partnerships the purpose being to exercise a common profession but either way these two types of partnerships have the following common elements so first is an agreement to contribute money property industry to a common fund and next is to in the intent to divide the profits among the parties or the intent to exercise a common profession in the case of a general professional partnership now of course remember that a partnership is a contract so all the elements must be present the elements that are mentioned in the case of arantellia versus sarentilia are the distinguishing elements distinguishing because when these elements are present then this contract is called a partnership as opposed to other associations or relationships because a partnership is quite related to other associations or memberships also in property law we have the concept of co ownership and a partnership is distinguished from a co-ownership when these elements are present all right now speaking of which so our co-ownership co-possession and profit sharing indications of the existence of a partnership well co-ownership or co-possession does not self-establish a partnership whether such co-owners or co-processors do or do not share any profits made by the use of the property okay because what is absent in a co-ownership or co-possession is the intent to divide the profits meaning to say to make use of the property to earn profits and to divide the profits among themselves the intention of co-ownership or co-possession is simply to jointly enjoy rights property rights over a certain property now next next rule is that 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 product in any property from which the returns are derived so when you say gross returns these are the returns of what they put in because this could simply be considered as interest or return of their investment but not necessarily evidence of a partnership however the receipt by a person of a share of the profits of a business is primo fashion evidence that he is a partner in the business but no such inference shall be drawn if such profits were received in payment of the following okay but first let's let's emphasize that the difference between um gross returns is just simply a return of the um the value of a thing but when you say profits it's the result of what it's a process whereby you use money to you know to create more money all right so as stated a return of money cannot be inferred as um receipt of profits in the following situations so first as a debt by installments or otherwise so because clearly the relationship there is a contract of loan and not a contract of partnership also when the money is received as wages of an employee or rent to a landlord because clearly the relationship is either employment or lease also as an annuity to a widow or representative of abc's partner so again because the receipt of the money there is for the purpose of alimony uh or support okay to a widow or to a separated spouse also as interest on a loan though the amount of payment vary with the profits of the business and as the consideration for the sale of a goodwill of a business or other property-based tolerance now how does this um become relevant in case you will be asked the question whether or not a partnership exists and in the facts you will find any of these now so since article 1769 provides that when the money is received as follows or as any of the following then it is not a partnership so you would know so the answer to that question is that it is not a partnership because according to article 1769 if the money is received as payment of the following or any of the following it is not a partnership all right now very similar to partnership is a joint venture in fact a lot of companies or corporations or even individuals enter into a joint venture but what law applies to a joint venture well in several cases of the supreme court it is said that a joint venture is actually a partnership so yes a joint venture is considered a partnership according to heirs of dan anki vs court of appeals andrea lubit versus hasso a joint venture is like into a particular partnership for one which has for its object determinate things their use or fruits or a specific undertaking or the exercise of a profession or vocation however both are different in the sense that a joint venture is limited to a single transaction while a partnership generally relates to a continuing business of various transactions of a certain kind so that's the distinguishing feature of a joint venture that it is limited to a single or specific transaction as opposed to a partnership which is usually for a more or less permanent or long-term activity or undertaking all right now explain the following what is the doctrine of the lectures personae doctrine of mutual agency and what is the rule that partners are guarantors of the obligations of the partnership sorry okay you know just motor gas line i just didn't text but anyway you get you get what the question is now so what are these very important doctrines in partnership law as i have always been saying there are certain principles or doctrines that you must be familiar with because every contract every uh legal creation okay has certain features important features and when it comes to partnership it's this the doctrine of the lectures personae doctrine of mutual agency and the rule that the partners are guarantors of the obligations of the partnership so under the doctrine of the electors personae a partner has a right to choose with whom he wishes to associate himself i don't know but i literally translate the lectures personae as the choice of the person choice um like it's delectable so the food is delectable so it's a food of choice and of course personae person now this doctor of directors personae is very important in partnership because partnership is not just any association whereby strangers can just join or that it's an association that can be um you know its membership can be changed but rather partnership is created based on trust based on the belief that you are in a relationship that's convenient and beneficial to you and the other partners or the other people in that organization or association so that's why you cannot expect strangers to join partnerships there must be some personal trust among themselves to create the partnership or to join a partnership and also because of the delegates personae it entitles or allows the partners or the members of a partnership to leave the partnership anytime because the meaning of partnership is that it's only good for as long as it works i know based on that statement you will say it's an older partnership like you can um start and you can end when it when it's not working but unfortunately the director's personality principle does not apply to all partnerships and you know what i mean in the even putting the meeting and the lectures persona in marriages because a marriage is a special contract so hindisha partnership um like like the partnership that we're talking about so interpreting uh the lectures personae so i woke up having this realization but in a business partnership that is an acceptable ground to withdraw from a partnership or even to end the partnership because as i've said earlier the partnership is good for as long as it works for the partners all right now the next is the doctrine of mutual agency and under the doctrine of mutual agency all the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership okay so later on we'll talk about the law on agency and explore or study the consequences of a contract of agency but at this point we should know that in a contract of agency one party rep hires or engages another or appoints another to act as his agent or representative so as such when this agent transacts with third persons his transactions shall bind the principle so in the law on partnership the the partners are agents of the partnership so any transaction or any obligation incurred by the aid by the partners shall bind the partnership well provided of course that um the transaction or the obligation is in relation to the business or the nature of the partnership so this is the extent by which we apply the requirement that the agent must at least in the loan agency you will recall that an agent must act within the scope of his authority so in partnership the partner acts within his scope of authority when the transactions or obligations that he contracts are related to the business or the needs of the partnership so if the transaction or the obligation is personal to the partner then that doesn't bind the partnership now this doctrine of mutual agency may be restricted or limited once the partners elect a managing partner because once a managing partner has been elected or chosen that managing partner has the exclusive right or authority to represent the partnership and so the other partners at least their right to um and uh participate in the management will only be limited now to either concurring or conferring the acts of the managing partner or to remove the managing partner but once the managing partner is appointed then he has the exclusive power and right to represent the partnership all right now next the rule that the partners are guarantors of the obligations of the partnership can be found under article 1803 okay number one of the civil code also under article 1816 of the civil code and here under the rule that partners are guarantors of partnership obligations the partners are liable to the creditors of the partnership with their own property even beyond their control contribution now this is quite controversial because if you look at the civil code polancinas abidon as to the procedure as to how creditors can run after the partners with respect to their subsidiary liability but if we apply the rules on guarantee at least we know now the procedure and this procedure is that the creditor must go after the principal debtor before the guarantor if you remember our lecture on guaranty and surety the guarantor has the benefit of excussion and under the doctrine of excussion before the guarantor can answer to the creditor the creditor must have first exhausted all its remedies against the principal debtor of course there is the obligation on the part of the guarantor to point to the available assets or properties of the debtors now you might ask well isn't that parent speculation or in uh simply just interrelating provisions without any legal basis in the because there is now a decision of the supreme court entitled guy versus gakot whereby the supreme court said that a guarant accreditor of a partnership must first sue okay the partnership before going after the individual partners and once the creditor has obtained a judgment against the partnership and if this judgment was not successfully executed then that's the time that the creditor can run after the partners the individual partners and the supreme court did not stop there because the supreme court said that the partners must be separately sued by the creditor why because these partners despite their liability under article 1803 number one and article 1816 of the civil code may also have defenses okay so for example when they were one of the usual defenses of a partner against a creditor who wants to run after him now for the obligations of the partnership is that this partner was no longer a partner at the time of the uh of the obligation and uh in that situation his contribution to the partnership will be the one that will answer okay for the obligation but not his personal assets because national partner at the time the obligation was incurred all right so okay mcgann the young guy versus gafford that should settle all questions as to another procedure in running after a partner okay when the partnership credit has not been paid or settled all right now when is a partnership required to be in writing okay again uh take note of the general rule under article 1356 that all contracts are binding in whatever form so whether it is in writing or verbal that contract is binding for as long as the elements of the contract are present okay but in these situations a partnership contract must be in writing so first is article 14032 a of the civil code which is your statute of frauds provides that when by its terms the partnership agreement is not to be performed within a year from the making thereof in other words if the partners came together and they decided to form a partnership but that partnership will only be executed or meaning to say it will only commence after a year then that contract should be in writing okay imagine high school friends and that they decided to you know come together in a reunion coffee shop or milky shop okay so but then they decided nah well let's give each other time to put up the money needed to start this partnership so how about a year again so then that contract should be in writing okay to be to comply with art with uh the statute of frauds now again a review but i've been among the statute of frauds it's it's about the enforceability of the contract the contract is still valid though among themselves but that contract cannot be enforced in court because of a lack of evidence in writing so for purposes of enforceability a contract of partnership which is to be performed after a year of the agreement should be in writing okay another situation where a partnership should be in writing is when immovable property or real rights are contributed there to and that is under article 1771 of the civil code now what are immovable property of course these are uh land buildings now with respect to real rights these are example a contract of police okay over a real property and that lease is of course registered you know so petty contribute okay so not only tangible real property or removable property but also intangible real rights can be contributed so when these immovable properties or real rights of removable properties are contributed then the contract of partnership should also be in writing now aside from being in writing it should also be in a public instrument and this is in compliance with article 1358 okay 1358 of the civil code now also an inventory of the contributed property julie signed by the parties should also be attached to the public instrument now in the case of lithuania versus lithuania the supreme court said that this requirement is indispensable to the validity of the partnership so ethernet validity okay so if it is a partnership with uh real property being contributed partner i'm a contributor real property limbawa young business is a small business and they just needed a commercial space so one of the partners decided to contribute his own commercial building so in writing in a public instrument and also with an inventory and that inventory is essential to the validity of the partnership so inventory and what is this inventory for the inventory is simply just a list of the property being contributed the details of the property as well as the value of the property now the reason an inventory is made is because there is a transfer of ownership from the partner to the partnership so with that inventory and once it is attached to the um contract of partnership or partnership agreement that partner now conveys his rights or ownership over this property that he is contributing okay to the partnership importantly otherwise if there is no inventory then it does not result in a transfer or conveyance of interest over that property all right now the other instance where a partnership agreement should be in writing is when the capital means [Music] stipulated in the contract is at least 3 000 pesos the capital is of course what fuels the partnership to do business okay so your capitalization is let's say at least three thousand meaning to say um similar to ten thousand yeah so that but it should be in writing but if it's less than three thousand then pretty hindi in writing but let's be realistic okay how can you possibly start a partnership with less than 3 000 unless it's a micro business but if the partners foresee a future in the business that requires you know expenditures and all that i think 3 000 sorry not expenditures but expansion i'm sure 3 000 would not be sufficient so if that partnership requires a capitalization of more than 3 000 so it should be in writing so that's basically saying all partnerships should be in writing because the capitalization is more than 3 000. now aside from it being in writing it should also be in a public instrument and lastly it should be recorded in the securities and exchange commission okay now in the case of versus the supreme court said that the failure to register the contract of partnership does not invalidate the same as among the partners so long as the contract has the essential requisites because the main purpose of registration is to give notice to third parties and it can be assumed that the parties or the members themselves know of the contents of the contract after all okay so young registration did not require no the contract would still be valid and binding amongst themselves even if the contract is not registered now speaking of the securities and exchange commission the sec generally has jurisdiction over corporations because that's the mandate of the sec jurisdiction over um i mean back at my own baseline jurisdiction over partnerships when partnerships are governed by the civil code well the answer is that the sec of course by the mandate of the law is only overseeing or recording these these partnerships but the sec does not issue rules and regulations to govern the relations of the partners or to regulate partnerships unlike in the case of corporations now highly regulated among corporations with respect to partnerships civil code paren so the relations of the partners are still governed by the civil code and sec will only accept contracts will accept amendments of partnership contracts for purposes of recording pero hindi neither regulating sec ml partnerships that's why sec one jurisdiction for example gusto tangalen or conguston ibalek among the partners because these are not considered intra-corporate disputes no it's just an intra-partnership disputes and the remedy of the partners is to seek judicial intervention so directional support among partners commercial issues all right okay now what are the rights and obligations of a partnership now a partnership is a juridical person and as a jericho person it's like a person so imagination rights and obligations so let's start as a juridical person the partnership may acquire and possess property of all kinds that's why if it's a real property the partnership can have the property titled in its name okay partnership now also a partnership as a juridical person may incur obligations okay also it may bring civil or criminal actions because a partnership is a juridical person and therefore it is granted rights and obligations as if it were a natural person okay by the way uh the juridical personality of a partnership commences upon the agreement or the execution of the agreement unless of course applicable requirement it should be in writing for purposes of validity which is in the case of a partnership where immovable property or real rights in an immovable property are contributed for purposes of validity rights in writing but it's not the registration in the sec that gives the partnership its juridical personality and like in the case of corporations both public and private corporations which require a positive act other than or after the the law or the agreement before it can acquire juridical personality so for partnerships a partnership becomes a juridical person upon the execution of the agreement between the partners but then third persons may require proof of that partnership so for example when a partnership wants to borrow money from a bank a bank may require proof that in fact this partnership exists so dunang is either an articles of partnership or a registration with the securities and exchange commission okay now this critical personality is separate from the um separate and distinct from the personality of the partners thus as a juridical person the personality of the partnership is separate and distinct from that of each of the partners according to aguila versus court of appeals so what's the consequence of this ruling it means that the obligations of the partnership are not the obligations of the partners and obligations of the partners are not the obligations of the partnership but with respect to obligations of the partnership there is a subsidiary liability on the part of the partners but that doesn't mean that these obligations are personal obligations they are still obligations of the partnership it's just that under the law the partners are subsidiary liable to pay the creditor in case the partnership assets or properties are not sufficient okay again as i said guarantor a guarantor after all is not the torah so hindi said that uh so young obligation of principal death or indiana mentally originally dead non-guarantor this is that the guarantor makes a commitment to pay the creditor in case the principal debtor is unable to pay so genuine needs a partnership so a partner the partnership obligations are not the obligations of the partnership or the partners all right okay now what are the rights and obligations to be continued all right so next is that the partnership shall be responsible to every partner for the amounts the partner may have disbursed on behalf of the partnership plus interest and for the obligations a partner may have contracted in good faith in the interest of the partnership business all right so also the amount to be refunded to the partners okay it's necessarily limited to the partnership's total resources okay so uh priority parental again obligations now partnership before the partners can can get or collect their respective shares in the partnership okay now what are the rights and obligations of the partners among themselves okay so rights first is the right to specific partnership property so as a partner you have the right to enjoy and possess partnership property okay so this includes the right to use let's say a company car or the building where the partnership is doing business but take note that this right of the partners to these partnership properties cannot be the subject of attachment cannot be the subject of support or any other obligations in favor of a third person so it's not a right that can be used not to answer for obligations of the partners usually again hopefully by next meeting we can discuss the ppsa personal property securities act now intangible personal rights over property can be a security for an obligation or a debt so that's why for example if you are a buyer in a contract to sell and personal right nominee because indeed i shall sail the laga so you can assign that or you can transfer that now so as a result you can also use that as collateral young intangible right now but in the case of the partner's right to specific partnership property that cannot be transferred that cannot be attached that cannot be used as security or collateral to pay for the obligation of the partner now also speaking of specific partnership property no per no partner can have a better or exclusive right to these partnership properties so if a partner is allowed to make use of a company car the rule is that all other all other partners should be given the same right okay they should also be allowed to make use of the company car for personal uses again uh madeline again if there is an agreement okay among the partners but generally if they just want to be strict about it all company property or all partnership property should be used only for partnership purposes to indicate different personal uses now if they want to make use of this partnership property for their personal use then that should be with the consent of all the partners all right the other right of the partners among themselves is the interest in the partnership and this is the share of the profits and surplus so if the partnership earns income and that income is divided among the partners uh i mean to be in a medical agreement as to how much they'll be getting then that agreement or the shares that they will get out of that profits or income is what we call interest in the partnership okay now this interest in the partnership can be assigned okay or can even be shared okay with other persons whether by gratuity or a security or collateral for the obligation of the partner unlike in the case of the right to specific partisan property telling you an exclusive partner encouraging journal but in the case of interest in the partnership or the shares in the profits then the partners can deal with a third person with respect to this interest or shares in the profits so there are three arrangements or three um agreements whereby a partner may deal or may dispose of his interest or share in the partnership profits and these are your sub agency assignment as well as charging order okay um by sub agent sorry by sub partnership not sub agency sub partnership a partner associates with another person for the enjoyment of his share in the profits so for example a partner is receiving let's say 10 000 pesos every month as his share in the profits of the partnership he can associate with another person with respect to that 10 000 monthly share in the profits so this sub partner or this associate may receive let's say one half of it one third or dependence agreement niton partner partner or associate yeah okay but take note that the sub partner or associate does not become a partner of the partnership he remains to be a stranger to the partnership because his contract or relationship is only with the partner with whom he is associated with okay so now if that partner later on withdraws from the partnership his associate or sub-partner can no longer stay or can no longer get you know anything from the partnership let's say and rightly and sourcing right now partnership okay now this brings me to the case of professional partnerships let's say a law office or a law firm a law firm has partners and also associate lawyers these associate lawyers well theoretically they are associates of specific partners as a following the sub-partnership arrangement okay but then ibaka and set up non-business partnership as a professional partnership so don among associates may come directly from the partnership or from the firm okay so hindi from the partner but as far as the practice of these associates are concerned they are supposed to be assigned to a specific partner okay so katula dean's a business partnership you associate is assigned to a specific partner so but in a partnership in professional partnerships like law offices or law firms human associates are actually receiving uh their share in the income of the partnership or the firm directly from the partnership and not from the partners to whom they are associated with except sigurdun's all right okay um the next uh transaction or dealing with the interest of a partner in a partnership is the assignment of interest in the partnership so here when you say assignment the partner now assigns his rights to the profits okay or his share in the profits to another person so this time meron substitution okay so the assigner partner now steps aside and the assignee steps in okay to receive all the profits pertaining to the assigner partner but just the same this assignee does not become a partner because his right is only with respect to the interest of the partner in the partnership it's a different thing however if the partner is assigning his rights to the partnership so in that case if the other partners agree or accept this new person again the hill miranda young doctrine of the electors personae they should agree indeed they automatically and because in the italka to lead corporation not the stockholders can just sell their shares to just anybody and that will take effect as soon as the sale is recorded in the stock and transfer book but in the case of partnerships or your interest or young rights in all right so that is what that's the difference between assignment of interest as well and assignment of rights in a partnership all right lastly on the interest in the partnership the shares of the partner in the partnership profits may be the subject or may be subjected to a charging order so what is a charging order a charging order is an order from a court okay in favor of a creditor of the partner allowing the said creditor to receive such what what is necessary okay to pay uh the obligation okay from the profits or shares of the said partner in the profits of the partnership okay through a charging order to receive uh these shares of the said partner debtor okay uh in the profits of the partnership supplements so so those are the three ways by which a partner may deal with or dispose of his interest in the partnership okay so again by sub partnership or association by assignment of interest and also by charging order okay so the next right of a partner in the partnership is the right to participate in the management and the right to participate in the management means to directly be involved in the running of the business of the partnership but as i've said earlier if a managing partner has been appointed then the rights of the other partners with respect to the management would only be to concur or to confirm or to overrule the decisions of the managing partner and also to remove the managing partner because you know the appointment of a managing partner is also for the um effective administration or management of the business and depending on google ibm partners all right and the last uh right is to demand a formal accounting now a formal accounting is of course the process by which the partner who is responsible for making these accounts will make what a statement or um a summary of uh the affairs of the business and also to show kumamokano or mechanical liabilities now partnership now a formal accounting is not something that the partners can demand any time under the civil code and mandatory accounting is done or made during the solution and also in those instances when there is a fear that the partnership business is being mismanaged and also the other instance when an accounting may be made outside of the regular or the mandatory uh instances when accounting can be done is when an assignee okay who is supposed to receive okay the shares of the partner assigner in the profits of the partnership fears receiving let's say ten thousand pesos so there seems to be a mismanagement so for a formal accounting all right so take note of that all right next what are the obligations of the partners among themselves and also with in relation to the partnership so first is to contribute money or property that is one of the essential obligations because again for the equipment or for the machine paid to run then it requires some fuel so the contribution there is required for the partnership to exist and to run now when a partner fails or refuses to contribute money or property the remedy according to the civil code is to compel this partner to make goodies contribution in other words pedestrian demand okay for sum of money or specific performance because in that case the partner becomes a debtor to the partnership the remedy of the solution is discouraged because indeep an axis dissolved because again the partnership was created with some aspirations of the partners to do business to be successful and all that so the law wants to give the partners and this partnership a chance so a hindi remedy and dissolution so instead according to the civil code if a partner fails to contribute then he becomes a debtor therefore the partnership can sue the said partner why force yourself to work with people who have uh again sued you know sofia possibly later on uh the partner after of course being compelled to contribute physical analysis will contribute to a new agreement later on because of strange relations signed in the government partnership he may decide not to proceed so at least so the partnership can after all uh still continue the money even if one partner decides to leave um later on we'll talk we will look at grounds for dissolution of the partnership at isa is when a partner withdraws but it's just a ground it may dissolve but it doesn't mean that the partnership should be dissolved because the partners may just execute an amendment to the articles of partnership by either removing the partner who withdrew or by admitting a new partner all right another business but this time a negative sorry another obligation at business another obligation but this time a negative obligation means an obligation not to do is not to engage in business but uh the obligation not to engage in business varies or depends on the type of partner now speaking of type of partner there are generally two types of partners in a ordinary or even in a general professional partnership and these partners are the capitalist partners and the industrial partners a capitalist partner is a partner who contributes money or property okay on the other hand an industrial partner is a partner who contributes his industry okay to the partnership so there are after all three possible contributions you can contribute your property whether real or personal you can contribute money and also you can contribute your industry by industry and your skills services [Music] okay so an industrial partner who contributes simply his industry is not allowed to engage in any business okay personal business yeah so your sideline sideline in my classes i always use halimbawa it's a computer shop and then the industrial partner is tasked with managing the computer shop so sharing computer shops is 100 well like in all other partnerships an industrial partner should give his 100 time and effort and because of that he disappointing sideline so let's say so that's also considered business and to be strict about it that's not allowed because that is taking away time okay that should have been devoted to the partnership but there is of course an exception and the exception is that when the other partners agree to allow this industrial partner to engage in personal or side business okay now a capitalist partner on the other hand is prohibited only to engage in the same business the idea being that it might compete with uh the business of the partnership all right example could getting data is that let's say it's a coffee shop now uh this capitalist partner is also a supplier of let's say coffee so is there a conflict well the answer is no because your business the money is supplying coffee in the young you know coffee business but let's say the same capitalist partner wants to put up a coffee business in another town would that violate this prohibition well to be strict about it yes because in dinamansina but in the same vicinity or the same city as the partnership it's still the same business but again exception this capitalist partner may engage in the same business if the other partners agree so all right now what are the sanctions what are the sanctions if an industrial partner violates this provision on or this prohibition well an industrial partner may be required to give or to deliver to the partnership everything that he has earned in that side business and also he can be held liable for damages and lastly he can also be removed okay from the partnership in the case of a capitalist partner his liability or his punishment will be to deliver to the partnership whatever he has earned in that other business or similar business and also to pay damages meant to say to suffer the losses pero he cannot be removed hinduism ground for removal of a capitalist partner if this capitalist partner engaged in the same business so he might ask me again my disparity well the simple answer is that an industrial partner has violated a simple issue of trust no so the issue there is you should give your time so with with uh you're doing business you have actually violated the trust of the partnership pero with respect to a capitalist partner manny lancaster that thinks a partnership is a capitalist partner you are needed in this partnership because of your money okay so as a result uh we still need you the partnership still needs you because we need that okay so but then because of your violation then italian government all right now the next obligation is to answer to the partnership where damages the partnership suffered through the partner's fault okay so what are these faults so spreading the reason of negligence by releasing of malice or fraud in relation to third persons that was the partnership was made liable then the partnership may demand damages from the said partners all right so what are the obligations of the partnership and partners okay to third person so number one all partners including industrial ones shall be liable pro rata with all their property after all the partnership assets are exhausted for the contracts entered into in the name and for the account of the partnership so attorneys have become subsidiary liability of the partners okay now another issue in a partnership formula formula in terms of sharing in the profits formula in terms of sharing in the uh losses and lastly formula in the sharing in the liabilities at lyon under article 1816. with respect to the prophets okay the first preference is the agreement of the parties so if they have agreed in their articles of partnership as prophets then that should be followed but agreement as to the specific shares in the profits then the basis of the sharing in the profits will be the contribution of the partners so for example if the capitalization is one million pesos that was there are five capitalist partners that was each of them contributed twenty thousand pesos repeats between one fifth of the capitalization then that same one-fifth will be their share in the profits i am assuming um agreement as to the profit sharing in the profits in the articles of partnership or in the partnership agreement all right now with respect to the losses so they shall follow the sharing in the losses as may be stipulated in their contract or in their articles of partnership or if there is no such stipulation then they shall follow the formula in the sharing of profits okay so wondering sharing elisa profits you know okay now the reason is that well kumitaka you should also shoulder the losses right now speaking of and sharing losses sharing profits here papa's industrial partner nominal contributing capital he didn't contribute on money or property so the law says a capitalist partner sorry an industrial partner should be given a share that is reasonable and that is fair and just okay to the industrial partner so usually based on what i've read in cases and experiences a shared industrial partner in the profits shall be the same as the share of the leased partner or leased capitalist partner okay now they can begin they can start in the distribution of profits by first giving the industrial partner his share the apost capitalist partners all right now but note that the industrial partner is not liable to share in the losses yo manga law says among capitalist partners unliable don the reason is that the industrial partner has already given his time and effort to the partnership so on the other hand capitalist partners may still be able to get back something from the partnership such as share in the partnership assets no because they have contributed okay to the uh partnership and also a return of their capital so dalawam capitalist partners upon the solution an industrial partner however is only entitled to to receive a share in the partnership properties from the capital on a machine and contribute to capital now with respect to liability all partners including industrial ones shall be subsidiary liable but take note the liability here is pro rata so only it's not based on profits it's not based on the formula of the losses but rather based on the person the number of partners so if there are let's say five partners then the liability of the partners shall be one-fifth okay so for example if the unpaid obligation of the partnership is 100 000 pesos then therefore each partner shall shoulder or shall pay one fifth of that obligation all right so young people it's a big number okay by the way any stipulation exempting any partner from this liability shall not bind third persons but may be enforced only between the partners why because this provision is for the purpose of protect protecting third persons and third persons are not privy to the agreement of the partners so third person shall not be bound by uh this agreement between the partners exempting some partners from liability from subsidiary liability but if there is such agreement among themselves like for example a an industrial partner was exempted so and then they wanted this industrial partner or this person to be their industrial partner because of his um what expertise or competence or maybe networks or contacts and hindi liable so that agreement is binding only amongst the partners but not but it will not bind third persons so magbobayan perennial industrial partner or whoever partner is exempted from liability by parenchy is a third person but he can ask for reimbursement from the other partners pursuant to their agreement all right next is that the partnership is solidarily liable with the airing partner for the damages cost to a third person so uh stated differently the partners are solidarily liable for uh damages okay with the partnership so what are these three instances under article 18 22 18 23 and 18 24 let me check on us the next slide okay so 18 22 18 23 18 24 speaks of three situations whereby apart the partnership and the partners are solidarily liable uh to a third person okay number one is when there is a misappropriation of money so for example uh see third person and begin empire partner bombay and san andreas a partnership but this partner who received the money misappropriated okay that money at indiana turnovers a partnership so the third person now is prejudiced so this third person can sue both the partnership and the partner responsible okay or the other all the other partners for for the return of the money and solidarity and liability so any one of the partners or the partnership may be asked to pay also the other instance is if the partnership receives money okay but this money was not used for the business of the partnership or no transaction the third person then uh both the partnership and the partners are liable okay look at the example china like as a is a law firm for example in a lump it's a partnership so normally a partner will be assigned to speak to this client but uh in paracausapin uh aluminum cassonia and then also give legal advice now the client was satisfied that this uh partner or that this lawyer uh is uh or is capable of uh handling the case so in the beginning acceptance fee and acceptance fee let's say the acceptance is 100 000 pesos but this acceptance fee was embezzled or misappropriated by this attorney so uh indianapolis and all that and the partnership was not even aware okay because so the partnership and the other partners thought now okay it did not push through okay this uh case with this client did not push through so there is no follow-up later on this client sues both the partnership as well as the other partners for what that lawyer did okay so that is or that case will prosper because uh the partnership and the partners are solidly reliable to a third person for the misappropriation of the money okay now of course the partnership and the other partners have a right of recourse against the partner against that lawyer who invested the amount okay so the third instance under i think article 1854 is when uh the partner while in um while in the performance of official duties in relation to the business of the partnership causes damage or injury to a third person okay through fault or negligence so bucket familiar because the same as the vicarious liability under article 2180 of the civil code all right which we discussed previously in torts and damages all right so may a partnership be created by estoppel yes the answer is yes no because except as provided art 18-25 persons who are not partners as to each other are not partners as to third persons so what is this article 1825 now the partnership based topple is a creation of equity again to protect third parties so because it is to protect third parties there must be some damage or prejudice caused to a third person okay so under article 18 25 a partnership by estoppel arises when a person by word spoken or written or by conduct represents himself or consents to another representing him to anyone as partner in the existing partnership or with one or more persons not actual partners he is liable to any such person to whom such representation has been made or who has on the face of such representation giving credit to the actual or apparent partnership when persons who are not partners among themselves misrepresent or do acts okay that suggests that they are partners or that they formed a partnership and by reason of such conduct or misrepresentation a third person was made to believe that there was a partnership and because of that belief this third person parted or gave away his money or property okay to this partnership then there is a partnership by estoppel just so this third person can recover from the said partners alleged partners and the partnership by estoppel whatever that third person has given away okay but take note that there is no partnership relationship among themselves because indiana manta la gasila legal in a partnership now this brings us to the closely related concept of the facto partnership okay by the way de facto partnership is a partnership which is not the hurry okay so it's a partnership de jure when all the requirements of the law have been complied with meaning to say your contract is valid and also they comply with the required form pay or registration if any now a de facto partnership is a partnership that fails or does not meet the requirements also it is a valid partnership amongst themselves all right in dealing the comply doing some formal requirements get de facto partnerships now how is de facto partnership different from partnership based well islam the intention and the fact that there is a partnership relationship it's a de facto partnership that's present but in a partnership by estoppel it's not present all right okay now next is uh so what are the causes of dissolution of a partnership so the following are causes of the solution so number one those without violating the agreement between the partners so it will [Music] this will cause the dissolution of the partnership examples are death of a partner withdrawal of a partner from the partnership okay without violating the agreement between the partners but okay if there is an agreement for example that the partnership will be for a certain term let's say five years okay and then the partnership will and then a partner will withdraw or uh the two or more partners decide to dissolve the partnership but that would be in contravention of the agreement okay because it will be by express will of any partner at any time in violation of what was stipulated in the partnership all right also by any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on the on in partnership for example prohibition against a partnership to operate a fish point where this is an old case now okay so um before uh there were certain businesses that were not um open to partnerships no well learning partner meron parenthema prohibitions janna the practice of law know the practice of law cannot be practiced or cannot be exercised by juridical persons and partnership pero or members or partners of the partner of the law firm it's not the partnership itself okay but what we're saying is that judicial entities like corporations um business partnerships cannot practice uh law in the philippines as it is know as a juridical person all right so in that case then if it's a partnership who has been found to be engaged in an unlawful business or practice then it can be dissolved also also uh when a specific thing which a partner had promised to contribute to the partnership parishes before the delivery or when they think the enjoyment or use of which was transferred to the partnership is lost and also by the death of any partner by the insolvency of any partner or of the partnership by the civil interaction of the partner and by the degree of court in the situations provided under article 1831 of the civil code okay or the discussion account insolvency civil interdiction and decree of court so in the case of insolvency this is a ground for dissolution because if one of the partners or if any of the partners becomes insolvent therefore he cannot fulfill his obligations now um for example mayor obligation to contribute now because the obligation to contribute does not only exist at the time of the commencement of the partnership but by agreement of the partners they can also agree or stipulate that they will make further contributions during the term of the partnership like for example after two years each one will give additional 50 000 and then after another two years uh 100 thousand a month also those obligations should be met so if one of the partners or even if let's say the partnership becomes insolvent then those obligations cannot be met the other instance when insolvency will affect okay the partnership is when uh by risk of insolvency of the partners or the partnership indeed persons okay now next is civil interdiction of the partner because in civil interdiction which is an accessory penalty to certain crimes like murder robbery and all that you are serious crimes then by civil interdiction the accused or the convicted person loses his right to manage his property uh and all that including his money so therefore hinduism complies obligations yeah the partnership so civil interdiction there is a ground for distribution and lastly in decree of course situations at all so these situations are the adversarial situations which can be disputed by the partner concerned for example insanity of the partner or let's say a partner has committed done something that is prejudicial to the interest of the partnership if i'll support you dispute yeah no partner all right now after the solution how do you wind up or liquidate a partnership so the manner of winding up is found under article 1839 of the civil code so first there should be an inventory of the assets of the partnership and then followed by an inventory or an accounting plan of the liabilities of the partnership so in the um asset list or asset column depending on assets of the partnership so what are these assets of the partnership or what properties are deemed to be partnership properties for purposes of liquidation so these are the partnership property meaning to say properties that are in the name of the partnership and also the contributions of the partners necessary for the payment of liabilities okay so these are you know contributions now expected from the partners so that can be collected by the partnership by the way after the solution about winding up so winding up is that stage or process whereby the partnership will collect debts pay its obligations and then you know settle everything yeah indianapolis a new business indianapolis new affairs okay by the way the assets now shall be applied or shall be used to pay for the obligations of the partnership in the following order so order of preference of liabilities of the partnerships this is the hierarchy of the obligations of the partnership so first are those owing to creditors other than partners visa being the patron creditor is a third person or is a complete stranger okay next are those owing to partners other than for capital and profits if except those that the partnership owes to the partners by reason of some advances or by reason of some loans to the partnership made by this or extended by these partners now third is those owing to partners by reason or in respect of capital okay so capital number partners are let's say 50 000 pesos each so partners partners capitalist partners industrial partner will animation all right now lastly those owing to partners in respect of profits and of course uh these shares should be distributed now take note that hierarchy and so ibiza or an assets non-partnership are not enough to cover one or two down the line then hindi namo babayan one or two down the line mixer behind partnership assets were only sufficient to pay for the first in this list then in the number number two three and four so again partnership assets were exhausted but the things are number two for number three and number four so after the exhaustion of piracy property the partners will now contribute pro rata with their own property pursuant to article 1816 of the civil code you substitute reliability all right now what is the effect of a continuing of continuing a dissolved partnership ebik sabihin if there is a ground for the solution but the partners did not decide to dissolve or to liquidate it then the the rule says the partnership can continue but that the creditors of the old partnership are also the creditors of the new partnership so hangar indeep first creditors then they will have a claim okay against the partnership assets of the new partnership and that is the case of benjamin u versus nlrc although in this case employees eventually menu although the supreme court said that an employee of an old partnership is deemed a creditor of that old partnership and therefore he can claim from the new partnership all right now what is a limited partnership okay it's a civil conquest lasting in disgust and limited partnership although limited partnership has become very frequent no because as you can see a limited partnership has its benefits and particularly its limited character it becomes an attractive proposition to business people so number one well first let's define it it is formed by two or more persons having as members one or more general partners and one or more limited partners so all it takes is just one general partner that was all the rest can be limited partners an important issuance general partner the reason is that a general partner that's why he's called a general partner is because he shall assume all right all obligations okay in the partnership so meaning to say it's the general partner who will be liable to answer for the partnership creditors in case the partnership assets are insufficient again pursue one to article 1816 of the civil code limited partners are not liable with their personal assets hindi sila covered casa article 1816 so exception shadows article 1816 all partners include the industrial ones shall be liable all partners including industrial ones are only those partners who are general partners but if it's a limited partner the limited partner does not answer with his personal property only his contribution to the partnership shall answer okay to the creditors of the partnership now why is it limited well it's limited because of the following number one it is limited to us to liability the limited partner is liable only up to his contribution he is not liable with his own property to answer for the obligations of the partnership that's article 1843 second paragraph of the civil code also he is not a party a proper party to proceedings by or against a partnership except for the action is to enforce his right or its liability to the partnership for example indiana contribution to the partnership and therefore he can be a defendant in that case now also if he is liable under 18 22 18 23 and 18 24 of the civil code regarding solidarity liability of partners in partnership to third persons okay solidarity liability and for damages you know 1816 that's liability for unpaid obligations contractual obligations here like negligent quasi daily or obligations arising from negligence that's uh liable dunamis limited partners okay now it's also limited in the management because a limited partner cannot participate in the management only general partners can participate in the management of the partnership if a limited partner takes part in the control of the business he becomes liable as a general partner so that's article 1848 now lastly is it last it is limited as to the choice of contribution so a limited partner may contribute only money or property and not industry so all industrial partners are general partners okay also a capitalist partner may be a general partner or limited partner all right now also it is limited in the matter of firm name the surname of a limited partner shall not appear in the partnership name unless number one it is also the surname of a general partner okay or prior to the time when the limited partner became such the business has been created on under the name in which his surname appeared so a limited partner whose surname appears in a partnership named contrary to this provision shall be liable as a general partner okay so notice now it's a limited partnership because of the existence of a limited partner but if this limited partner or partners violate this limited character or nature of the limited partnership then said limited partner or partners become general partners so that limited partnership ceases to be a limited partnership because a novel and an unlimited partner again if you look at this list simply well if the limited partner insists that his name be found in the or be included in the firm name marine general partner so general partnership okay also if this limited partner insists on participating in the management by running or by offering himself as managing partner then he ceases to be a limited partner again general partnership general partnership neon okay so same thing with a contribution as well as if he offers his personal property to answer for obligations of the partnership to third person smoking general partnership and the partnership becomes a general partnership all right okay now what are the rights and obligations of a limited partnership so again halos para hastilang knows the rights of a general partner sabinated apati india right specific partnership interest in the partnership right to management as well as right to formal accounting anguilla alan is young right to management okay because a limited partner cannot participate in the management of the business but in addition to 1851 uh 1854 of the civil code so inspection of the partnership books through and full information and formal accounting of partnership affairs also to demand the solution and winding up by decree of the court also to receive his share in the profits and to demand return of his contribution and to receive a prorated share of the partnership properties so basically that also these are also the rights applicable to general partners all right and what are the liabilities or obligations of a limited partner to the partnership so of course to pay or deliver the contribution promise and also to hold interest specific property or money which are to be contributed or delivered to the partnership all right okay uh that's the end of the partnership lecture okay guys uh the thing is it's already eight o'clock and it's been more than an hour uh we can't continue this sorry like i have to apologize so don't worry i will uh make a separate recording for agency and trust no again so the indicator uh let's give ourselves a break okay i will end this live lecture on this note this is a partnership now because the next topic supposedly is the loan agency but i'll just make a separate recording for agency that was of course trust so in the meantime i will uh say goodbye uh but before saying goodbye i'd like to check who's here and so thank you appiah and thank you jesse for asking if come on okay but but i hope uh you're able to listen but you you try to replay it later malina but anyway so thank you very much we are 54 in this live lecture thank you very much everybody for watching um again my promise is i will record a separate lecture on agency and trust okay but you will still find this lecture on partnership i will just title it as a lecture on partnership at least okay normally this mod can take anything joe anyway but uh okay anyway thank you very much for for listening for joining me and thank you very much guys i'll see you in my next video if you're if you haven't subscribed yet please subscribe to my channel and please click that notification bell so that you will be able to get notification when i put up a new video and good night guys thank you love you guys