Partnership Property Rights

• No duty to make inquiries as to acting partner's authority. • There is a general presumption that each individual partner is an agent of the firm and that he has authority to bind the firm in carrying on the partnership transactions. Exception: No right to assume that acting partner has unlimited authority. He must inquire if the transaction is mentioned in 1818 (ADIC-CAR)

Are third person required to inquire as to a partners authority? Exception.

A charging order subjects the interest in the partnership of the debtor partner with the payment of an unsatisfied amount of a judgment debt against him, with the least interference with the partnership business and the rights of the partners. By virtue of the order, any amount or portion thereof which the partnership would otherwise pay to the debtor partner is instead given to the judgment creditor

CHARGING ORDER

Exception: They may do so if: (1) Authorized by all the partners; OR (2) The other partners have abandoned the business.

Exception to Rules in partnership for ACTS OF STRICT DOMINION

Article 1815 does not cover the case of a limited partner who allows his name to be included in the firm name (Art. 1846.), or of a person continuing the business of a partnership after dissolution, who uses the name of the dissolved partnership or the name of a deceased partner as part thereof.

Exception to the rule that a person's name appearing in the partnership name will have liability.

The interest charged may be redeemed before foreclosure or, in case of sale directed by the court, may be purchased without causing dissolution: (1) With separate property, by one or more of the partners; or (2) With partnership property, by one or more of the partners, will consent of all, except the debtor partner.

Explain the right of redemption by other partner.

Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. Those who, not being members of the partnership, include their names in the firm name, shall be subject to the liability of a partner [

FIRM NAME. What happens to the non-partner whose name appears in the firm name?

General rule: The partners may adopt any firm name desired. Exceptions: (1) They cannot use a name that is "identical or deceptively or confusingly similar to an existing [partnership] or corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws" [Section 18, Corporation Code]. (2) Use of names of deceased partner in law firms is "permissible provided that the firm indicates in all its communications that said partner is deceased"

General rule on the choice of firm name. Exceptions.

An admission or representation by any partner concerning partnership affairs within the scope of his authority may be used as evidence against the partnership.

LIABILITY OF PARTNERSHIP FOR ADMISSION BY PARTNER

An industrial partner, who is not liable for losses, is not exempt from this liability. However, he can recover the amount he has paid from the capitalist partners, unless there is a stipulation to the contrary.

Liability of the industrial partner.

(1) Charge the interest of the partner for the satisfaction of the judgment debt; (2) Appoint a receiver of the share of the profits and of any other money due or to fall due to the partner; and (3) Make all other orders, directions, accounts and inquiries, which the debtor partner might have made, or which the circumstances may require.

Remedy of the judgment creditor of a partner.

(a) Admissions made BEFORE dissolution are binding only when the partner has authority to act on the particular matter. (b) Admissions made AFTER dissolution are binding only if the admissions were necessary to WIND UP the business. Reason: If the admission is not the "act of the partnership (thru the partner), it should NOT be evidence against it." The words "within the scope of his authority" produce this result.

Restrictions on the Rule before and after the dissolution of the firm.

(a) To interfere in the management; (b) To require any information or account; or (c) To inspect any of the partnership books.

Rights withheld from assignee

X will get the title. Consequently, he becomes the owner, for the law says that "where the title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights in such property." (Art. 1819, par. 5). The phrase "all their rights" includes "ownership" because under Art. 1811 — "A partner is co-owner with his partners of specific partnership property."

Title in name of all partners, conveyance in name of all partners. A, B, C and D were partners in the real estate fi rm of "Edimus." A certain parcel of land was registered, not in the name of the fi rm, but in the name of A, B, C and D. If A, B, C, and D will sell the land to X, will X become the owner, or will he have only the equitable interest?

No. What X gets will only be the equitable interest of the firm. No. What X gets will also be only the equitable interest of the firm. It is clear in both instances that under the registry records A is only the trustee.

Title in name of one or more or all partners or a third person in TRUST for partnership, conveyance executed in partnership name or in name of partner. A, B, C, and D were partners in the real estate firm of "Edimus." A certain parcel of land was in the name of "A, in trust for the firm Edimus." If A sells the land to X in the name of Edimus, will X become the owner? If A sells the land to X in his (A's) own name, will X become the owner?

The legal effect of such a conveyance is the same as that of a partner associating another in his share or interest.

What is the status of the rights of the assignor partner?

A third person who transacted with the partnership can hold the partners solidarily liable for the whole obligation if the case falls under Articles 1822 or 1823 A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission, except that his liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary.

When are partners solidarily liable with the partnership?

(1) To receive in accordance with his contract the profits accruing to the assigning partner (2) To avail himself of the usual remedies provided by law in the event of fraud in the management; (3) To receive the assignor's interest in case of dissolution; and (4) To require an account of partnership affairs, but only in case the partnership is dissolved, and such account shall cover the period from the date only of the last account agreed to by all the partners

1813. Rights of an assignee of the whole interest of a partner

• General rule: The partners are liable pro-rata and subsidiarily, with all their property. •The liability is subsidiary or secondary. It only arises upon exhaustion of partnership assets. However, they may be joined as party defendants in the action against the partnership, subject to their right to prior exhaustion of partnership assets

1816. NATURE OF INDIVIDUAL LIABILITY of Partners. When can the liability of partner be enforced?

The partnership is primarily liable for contracts entered into in its name and for its account, under its signature and by a person authorized to act for it. Upon exhaustion of its assets, all partners are liable pro rata with all their property. Any partner may enter into a separate obligation to perform a partnership contract.

1816. Who is primarily liable for contracts of the partnership? When will partner be personally liable?

Any stipulation against this liability is void and does not affect third persons. The stipulation, however, is valid only as among the partners.

1817. Is a stipulation against liability valid?

General rule: Acts of a partner which is not apparently for carrying on of the usual business does not bind the partnership. Exception: The partnership is bound if the other partners authorized him to do the act.

1818. ACTS NOT APPARENTLY FOR CARRYING ON OF THE USUAL BUSINESS. Exceptions.

General rule: Every partner is an agent of the partnership for the purpose of its business and any act of a partner which is apparently for the carrying on of the usual business of the partnership binds the latter, including the execution of any instrument in the partnership name Exception: The partnership is not bound when: (1) The partner has in fact no authority to act; AND (2) The person with whom he deals has knowledge of such fact.

1818. General rule: ACTS APPARENTLY FOR THE CARRYING ON OF USUAL BUSINESS. Are there exceptions?

General rule: One or some of the partners have no authority to do the following acts of strict dominion: (a) Assign the partnership property in trust for creditors or on the assignee's promise to pay the debts of the partnership; (b) Dispose of the goodwill of the business; (c) Do any other act which makes it impossible to carry on the ordinary business of the partnership; (d) Confess a judgment; (e) Enter into a compromise concerning a partnership claim or liability;f) Submit a partnership claim or liability to arbitration; (g) Renounce a claim of the partnership.

1818. Rules in partnership for ACTS OF STRICT DOMINION. (ADIC-CAR)

Ordinarily YES, but the firm may get back the land unless: (a) the firm is engaged in the buying and selling of land (consequently, the act of A is "usual"); (b) X had in turn sold the same land to Y for value and Y did not know of A's actual lack of authority. (This is the case even when the selling of the land was not for apparently carrying on the business in the usual ways.) Because the property has in turn been "conveyed by the grantee (X) to a holder for value (Y) without knowledge that the partner, in making the conveyance, has exceeded his authority."

1819 (1). Title in partnership name, conveyance in partnership name (par. 1.). A, B, C, and D are partners of the fi rm "Edimus." A parcel of land registered under the name "Edimus" was sold by A on behalf and in the name of the fi rm "Edimus," but without express authority. The purchaser is X. Does X become the ownership.

The buyer does not become the owner of the land. However, he gets the "equitable interest" of the fi rm insofar as the land is concerned, because after all the selling of land was in the "usual" course of business. Of course, the buyer may later on ask for the reformation of the contract, so that now, the seller's name would appear to be that of Edimus, provided of course that the other partners would not object. In case of unusual transaction/unauthorized partner, the buyer would NOT have even equitable title.

1819 (2). Title in partnership name, conveyance in partner's name (par. 2.). A, B, C, and D are partners of the firm "Edimus" engaged in the buying and selling of land. A parcel of land registered in the name "Edimus" was sold by A in his own name. Does the buyer become the owner of the land? If not, what right does the buyer have? What if transaction was unusual or buyer has knowledge the partner is not authorized?

Since the firm is engaged in the real estate business, the act of selling the land was for carrying on in the usual way the firm's business. So, the firm cannot get back the land, for title thereto has been conveyed to X. If there is no indication at all the property belongs to the partnership, the buyer has the right to rely on what appears in the face of the Torrens title.

1819. Title in name of one or more partners, conveyance in name of partner or partners in whose name title stands (par. 3.). A, B, C and D were partners in the real estate firm of "Edimus." Although a certain parcel of land really belonged to the firm, it was registered in the name of A and B. A and B sold, in their own name, the land to X. May the firm get back the land?

Any act of a partner in contravention of a restriction on authority does not bind the partnership to persons having knowledge of the restriction.

ACTS IN CONTRAVENTION OF RESTRICTION