comparative table _trust,agency,partnership

8/13/2019 Comparative Table _Trust,Agency,Partnership

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Business Organizations I Comparative Matrix

GENERAL PARTNERSHIP LIMITED PARTNERSHIP AGENCY TRUST

PARTIES 1. General Partner

2. Industrial Partner (Article 1867)

1. General Partner

2. Industrial Partner

3. Limited Partner (Article 1843)

1. Principal2. Agent Article 1440 provides for the pin a trust, namely:

1. TrustorThe person whoestablishes a trust.

2. Trustee - The one in whomconfidence is reposed as r

property for the benefit ofanother person. Basically, holds the property in trustthe benefit of the beneficia

3. BeneficiaryThe person fwhose benefit the trust hacreated.

*NB: The trustor may also be tbeneficiary of the trust.

DEFINITION Two or more persons enter into a binding contract

among themselves to contribute money, property,

or industry, to a common fund. The top intention

of such contract is to divide profits amongthemselves. They can also form a partnership to

exercise a profession. (Article 1767)

A form of partnership formed by two or more

persons having as members at least one general

partners and one limited partners. (Article 1843)

Note: The limited partnerships formed under the

old law shall be governed by such unless they

comply with the requisites under Article 1867.

By the contract of agency aperson binds himself torender some service or to dosomething in representationor on behalf of another, withthe consent or authority ofthe latter. Art. 1868

It is the right to the benefienjoyment of property, thetitle to which is vested inanother. (65 C.J. 212)

It is a fiduciary relationshiconcerning property whichobliges the person holdingdeal with the property for benefit of another. (Pachec

Arro, 85 Phil. 505)

The person holding, in viehis equitable title, is alloweexercise certain powersbelonging to the owner of legal title. (54 Am. Jur. 21)

PRINCIPAL

PURPOSE/NATURE

The partnership has a separate and distinct juridical

personality from each of the partners. Even if thepartnership failed to comply with the requirements

of Article 1772 (1). (Article 1768)

Exceptions:

Those partnerships whose:

1. Articles were kept a secret from the public; and

Same Representation

Principles:

A spring cannotrise higher than itssource. All that theagent can do is what

The purpose of the establishm

a trust is to oblige a person to hand manage certain property fobenefit of another person.

The characteristics of a trust inthe following:1. Fiduciary relationship


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2. Members may contract with third persons in his

own name

Have no juridical personality, and will be treated as

a co - ownership. (Article 1775)

the principal hasauthorized.

Acceptance of agentis necessary. Hisconsent is necessarybefore he may beappointed as agent;before that, theprincipal may notcompel him torepresent.

If the principal, byhis acts andcircumstances of hiscausing, makes itappear that a personis his agent, hecannot renouncethat person as hisagent. (Agency byestoppel.)

The contract ofagency may beterminated by theprincipal at will or

when representationis no longernecessary.

2. Created either by law or byagreement (Art. 1441)

3. Legal title is held by one pand the equitable or beneftitle on another.

ELEMENTS 1. Mutual Consent bind themselves in a contract to

contribute money, property, or industry

2. To contribute these to a common fund

3. Intent to divide the profits among themselves.

Same ConsentRepresentation

Authorization

Elements:

Parties to the trust Subject matter of the trust

CONTRIBUTIONS Money, property, services (Article 1767) Only money or property

CONSIDERATION Share in profits and compensation by way of

income. (Articles 1767, 1797, 1798)

Share in profits and compensation by way of

income. (Articles 1850, 1856, 1857)

Compensation is presumeduntil proven otherwise, Art.1875

A trust may either be onerous gratuitous.


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PERSONALITY The partnership has a separate and distinct juridical

personality from eah of the partners. Even if the

partnership failed to comply with the requirements

of Article 1772 (1). (Article 1768)

Exceptions:

Those partnerships whose:

1. Articles were kept a secret from the public; and

2. Members may contract with third persons in his

own name

Have no juridical personality, and will be treated as

a co - ownership. (Article 1775)

TYPES/KINDS As to nature:

Commercial or Trade Partnership

Professional or Non Trade Partnership (Article

1767)

As to duration:

1. Partnership at will2. Partnership with a term or a particularundertaking(Article 1785)

Rule on continuation of partnership when term has expiredor the undertaking is finished:1. If the partnership is continued without any expressagreement, the rights and duties of the parnters remain thesame.2. If there is an express agreement, the rights and duties ofthe parties are in accordance to the agreement.

As to purpose:1. The purpose for which the partnership was

formed must be lawful; and

2. The partnership must be established for the

common benefit or interest of the partners.

Same as General Partnership Express agency, Art. 1869

Implied agency, Art. 1869

General agency, Art.18761877

Special, Art. 18761878

Special powers ofattorney necessary(Art. 1878)

Special power to selldoes not includepower to mortgageand vice versa. Art.1879

Special power tocompromise is notthe same as power

to submit forarbitration. Art.1880

Article 1441 provides that trusbe either express or implied.

Express trustone createthe intention of the trustorthe parties.

Implied trustone createdoperation of law.


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(Article 1770)

As to legality/existence:1. De Facto Partnerhip - A partnership that has

failed to comply with all the legal requirements for

establishment.

2. De Jure Partnership - A partnership that has

complied with all the legal requirements for

establishment.

As to object:The object of a partnership may either be universal

or particular. (Article 1776)

UNIVERSAL PARTNERSHIPS

- A universal partnership refers to all the present

property or to all the profits. (Article 1777)

Kinds of universal partnership:

1. Universal partnership of all properties. (Articles

1776, 1777, 1778, 1779)

2. Universal partnership of all profits. (Articles1777, 1780, 1781)

Important Notes:

1. Only the usufruct of any movable or immovable property

passess to the partnership in a universal partnership of

profits.

2. If the articles of universal partnership is silent, then the

object of the partnership is that of a universal partnership of

profits.

PARTICULAR PARTNERSHIP

A particular partnership may be likened to a joint

venture (Heirs of Tan Eng Kee vs. CA, G.R.

126881)

A particular partnership has for its object


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determinate things, their use or fruits, or a specific

undertaking, or the exercise of a profession or

vocation. (Article 1783)

As to liability:

The liability of a partner may either be general or

limited.

A general partner is has unlimited liability. (Articles1816, 1817, 1824, 1826, 1839)

An industrial partner is not liable for the losses as

among the partners, but is liable as to third

persons. (Articles 1797, 1816, 1817)

MANNER OF

CREATION/FORM

REQUIRED

A general partnership can be constituted in any

form (Article 1771) and begins from the moment

the contract is executed unless otherwise

stipulated. (Article 1784)

Exceptions:1. When immovable properties are contributed.

(Article 1771 & 1773)

a. In this case, there should be an inventory of

the immovables contributed. (Article 1773)

b. The inventory should be signed by the parties.

(Article 1773)

c. The inventory should be attached to the

public instrument. (Article 1773)

2. Real rights are contributed. (Article 1771)

3. If capital is 3000 pesos or more. (Article 1772)

Failure to comply with the requisites in 1772 does

not affect the liability to third persons. (Article

1772)

May be orally constitutedunless form is required bylaw, Art. 1869 (2)

Written form if agency is forconveyance of land, Art.

1874

Special, Art. 187618781. Execute SPA listing

specific authorizedactions that agentmay perform

2. Notarize SPA in thejurisdiction wherehe is

3. Apply notarizedSPA in Philippineconsulate for

authentication

Express Trusts:

Express trusts over 5one5aany interests therein must

written to be enforceable. effect as to validity of thecontract. (Art. 1443)

An express trust over persproperty through an oralagreement is enforceable a

valid between the parties.

No particular words are refor the creation of an exprtrust as long as the intentiocreate a trust is clear. (Art.

The trust is still created evthough the trustee refuses such, unless trustees accepis made a requisite in theinstrument creating the tru(Art. 1445)

*NB: The rationale for thithat the Court will just appanother trustee, unless othstipulated in the trust instr


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(Sec. 3, Rule 98, Rules of C

Acceptance by the beneficnecessary. (Art. 1446)

However, if the trust doesimpose any onerous condithe beneficiary, his acceptashall be presumed, if thereproof to the contrary. (Art

Implied Trusts: Form Required An implied trust may be p

by oral evidence. (Art. 145

Implied Trusts: Manner CreateLaw1. When a property is sold an

legal estate is granted to onparty but the price is paid banother to enjoy beneficialinterest over such propertyformer is the trustee and thlatter the beneficiary. (Art.

*NB: However, if the perswhom title is granted is a cthe one paying the price, thimplied trust is created by is disputably presumed thais a gift in favor of the chil(Art. 1448)

2. When there is a seemingdonation to another persoappears that although the estate is granted to the 6on

done has either no beneficinterest over the property but only to a part thereof. 1449)

3. When the funds used to puproperty are the proceeds loan contracted by one per


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other person holding a fidrelationship uses funds topurchase property and cauconveyance of the same tohimself or to third personstrust is created in favor of owner of the funds. (Art. 1

9. When property is acquiredthrough mistake or fraud. is created in favor of the p

from whom the property iand the acquirer is deemedtrustee. (Art. 1456)

*NB: The fraud contemplahere is committed by a thirperson not a party to thecontract of trust. Otherwistrust is created.

PERFECTION By mere consent (Articles 1767, 1784) Substantial Compliance in good faith of the

requirements laid in Article 1844.

Consent, i.e. acceptance bythe agent.

Express TrustExpress trusts are perfected byconsent of all parties involved.

Implied TrustImplied trusts are perfected upsatisfaction of all the factualcircumstances provided by lawcreating the same.

CONSUMMATION See Dissolution and Winding Up Express TrustAn express trust is consummawhen the undertaking for whicwas created has already beencompleted or when the periodhas already lapsed.

Implied Trust

An implied trust is consummatwhen the party for which the itrust favors acquires the propeheld in trust.

DUTIES/OBLIGATIO

NS OF PARTIES

OBLIGATIONS OF THE PARTNERS

AMONG THEMSELVES:

OBLIGATIONS OF PARTNERS AMONG

THEMSELVES:

OBLIGATIONS OFPRINCIPAL:1. Comply with obligations

OBLIGATIONS OF THETRUSTEE: Rule 98 of the RuCourt


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1. Every partner is a debtor to the partnership for

whatever he promised to contribute.

2. A partner warrants against eviction the

properties he promised to contributes.

3. A partner is liable for the fruits of the property

he promised to contribute if there was delay in the

delivery, without need of demand. (Article 1786)

4. The value of the goods that a partner

contributes must be appraised according to the

stipulations in the contract, or according to

experts, if there are not stipulations thereto. The

appraised price would be the amount he

contributes to the partnership. (Article 1787)

5. If the partner who promised to contribute

money, fails to deliver it on the time promised, he

will be liable for the interest and damages from the

time of delay.

6. A partner is also liable for interest and damages

if he used partnership money for his own use.

(Article 1788)

7. An industrial partner can't engage in a businessfor himself, unless the partnership expressly

permits him. If he does so without permission, the

partnership may expel him or avail of the benefits

he obtained from doing so. However, in both

options, the partnership still has the right to

damages against him. (Article 1789)

8. Partners should contribute equal shares to the

capital, unless a contrary stipulation appears.

(Article 1790)

9. If the partnership is in danger of losing business,

a partner refuses to contribute more capital to save

the venture, must sell his shares to the otherpartners, unless there is a contrary stipulation.

However, this is with the exception of the

industrial partner. (Article 1791)

10. If an authorized partner was able to collect a

Additional obligation / rights of the limited partner:

1. Right to have partnership books kept at principal

place of business

2. Right to inspect/copy books at reasonable hour

3. Right to have on demand true and full info of all

things affecting partnership

4. Right to have formal account of partnership

affairs whenever circumstances render it just and

reasonable

5. Right to ask for dissolution and winding up by

decree of court

6. Right to receive share of profits/other

compensation by way of income

(Article 1851)

7. Right to receive return of contributions, or

demand the return of his contribution provided the

partnership assets are in excess of all its liabilities.

((Articles 1851, 1856, 1857)

8. The limited partner holds as trustee for the

partnership the money, other properties, specific

properties he contributed but was not delivered, hasbeen wrongfully returned, or was wrongfully

conveyed to him.

9. Even a limited partner rightfully received hs share

in whole or in part, he is still liable to the

partnership for any sum required to discharge the

partnership liability if the claim arose before he

received his share. (Article 1858)

10. A limited partner can assign his interest. (Article

1859)

11. A limited partner may also transact business

with the partnership and can receive on account of

resulting claims against the partnership, unless he isa limited partner. However, no limited partner

cannot receive collateral security, nor a payment,

conveyance, or release if at the time of such receipt

the assets of the parrtnership are not enough to

imposed by contractsentered into by hisauthorized agent in hisbehalf Art. 1910

2. Advance to agent sumsnecessary for theexecution of agencyupon the latters request,

Art. 19123. Reimburse agent (with

interest if applicable) ifthe latter had advancesums himself even iftransaction wasunsuccessful, Art. 1912

4. Indemnify agent fordamages the latter mayhave suffered in theexecution of the agency

without fault on thelatters part, Art. 1913

5. Bound to contract firstsigned in a situation

where the object is thesame thing buttransacted to twodifferent people by theprincipal and the agentrespectively, Art. 1916

6. Not revoke agency if:a. bilateral

contractdepends on it

b. it is the meansof fulfilling apre-existingcontractualobligation

c. partner, asagent, isappointed asmanager and hisremoval is

1. File a bond. (Section 5)2. Make an inventory of the r

and personal property in tr(Section 6[a])

3. Manage and dispose of theand faithfully discharge hisin relation thereto, accordilaw or according to the terthe trust instrument as lonthey are legal and possible

(Section 6[b])4. Render a true and clear ac

(Section 6[c])


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demandable sum of money from a person who

both owed him and the partnership, he is obliged

to apply the sum proportionally to his credits and

the partnership's credits. However, there is no

stipulation against applying the entire sum in favor

of the partnership credit.

Qualification: If a partner has multiple debts to

one person, he can declare to which debt shall the

collected amount be credited, but only in cases

where the personal debt of the partner is moreonerous to him than the partnership credit. (Article

1792)

11. If a partner has received his share, in whole or

in part, ahead of the others, shall be obliged to

return it to the partnership capital if the

partnership becomes insolvent. (Article 1793)

12. Every partner is responsible to the parntership

for the damages it suffered through his fault. This

liability is not set - off even if the partnership

profited or benefited through such industry.

However, the Courts may temper his liabili+I13tyif the partnership realized unusual profits through

the extraordinary efforts of the partner in other

activities.

13. If a partner contributes a specific and

determinate thing to the partnership, for purpose is

only for the use of and enjoyment of the fruits, and

such thing is not fungible, the risk shall be borne

by the partner who owns it.

If fungible things, or things that eventually

deteriorates where contributed, or if they were

contributed for the purpose of selling the same,

the risk shall be borne by the partnership.However, if there is no stipulation, the things that

were appraised in the inventory shall be borne by

the partnership as well, and in such case, the claim

shall be limited to the value at the time they were

answer for the liabilities. (Article 1854)

12. If there are several limited partners, they may

agree among themselves who among them may

have priority as to compensation by way of income

or any other matter. This agreement must be written

in the certificate. If there is no agreement, then all

of them shall be on equal footing. (Article 1855)

13. Without the written consent or ratification of all

limited partners, a general partner cannot:

1. Do any act in contravention of the certificate

2. Do any act which would make it impossible to

carry on the ordinary business of the partnership

3. Confess judgment against partnership

4. Possess partnership property/assign rights in

specific partnership property other than for

partnership purposes

5. Admit person as general partner

6. Admit person as limited partnerunless

authorized in certificate

7. Continue business with partnership property on

death, retirement, civil interdiction, insanity or

insolvency of gen partner unless authorized in

certificate. (Article 1850)"

unjustifiableArt. 1927

OBLIGATIONS OFAGENT:1. Act within scope of his

authority, Art. 18812. Carry out the agency as

accepted, Art. 1884

3. Finish the businessalready begun even ondeath of principal, Art.1884

4. Observe ordinarydiligence in custody ofgoods forwarded byprincipal (in case ofdeclining the agency),

Art. 18855. Advance necessary

funds if stipulated,unless principal is

insolvent, Art. 18866. Act in accordance ofprincipals instructionsor with ordinarydiligence as required bynature of business, Art.1887

7. Refrain from acts thatwould cause damage orloss to principal, Art.1888

8. Render account oftransactions, Art. 1891

9. Deliver to principalwhat he receivedbecause of the agency,

Art. 189110. If commission agent,

then he is responsible todistinguish and mark


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appraised. (Article 1795)

14. The partnership answers for all the expenses,

including the interests, a partner may have incurred

in the name of the partnership. The partnership

shall also answer for the obligations a partner has

contracted in good faith for the partnership's

interest. Lastly, the partnership shall also answer

for the consequences arising from the management

of the partnership business. (Article 1796)

15. THe losses and profits shall be distributed in

the following manner:

1. According to the agreement stipulated inthe contract

2. If there was no stipulation as to losses,then it shall be distributed proportionately.

3. If there is no stipulation as to profits andlosses, then the same shall be distributed

in proportion to their contribution, but

the industrial partner is not liable for any

losses.4. The share of the industrial partner must be

the most equitable and just under the

circumstances, absent any stipulation; and

if he contributed capital, he shall also

receive a share in proportion to his capital,

on top of the just and equitable share he

received for his industry. (Article 1797)

16. If a third person is designated by the

partnership to distribute the profits among the

partners, they cannot question the judgment of

that person unless the division is manifestly unfair.

If a partner has already carried out the decision of

the third person, or has not impugned the decision

within three months, he cannot complian anymore.

The designation of losses and profits cannot be

goods of the same kindowned by differentprincipals, Art. 1904

11. If commission agent andauthorized to sell oncredit, then he isresponsible to informprincipal, Art. 1906

12. Continue to act as agentuntil principal has

reasonable opportunityto take necessary stepsto meet the situation inthe case of the formers

valid withdrawal, Art.1929

OBLIGATIONS OFAGENTS HEIRS:1. Notify the principal of

agents death and adoptprovisional measures asthe circumstances may

demand in the interestof principal, Art. 1932


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entrusted to any of the partners. (Article 1798)

17. There can be no stipulation that exempts a

partner from sharing in the profits and losses.

(Article 1799)

18. A partner who was appointed as manager in

the articles of partnership may execute all acts of

administration.

No partner can oppose his acts unless the

managing partner is in bad faith.

The managing powers appointed to the managingpartner cannot be revoked without just or lawful

cause.

Should the partners decide to revoke the powers of

the managing partner, they should gather enough

votes as to represent the majority.

A power granted after the partnership is

constituted may be revoked anytime, provided that

a majority vote is cast. (Article 1800)

19. If two or more managing partners are

appointed, the following rules are observed:

1. They will manage according to thespecification agreed upon.

2. If there is no specification of their

respective duties, all of them can execute

all acts of administration.

3. If one of them oppose the acts of

others, the decision of the majority shall

prevail.

4. If there is a tie, the matter shall be

decided by the partners owning the

controlling interest. (Article 1801)

5. In a case where there is a stipulation

that none of the managing partners shallact without the consent of the others, any

act made by any of them is not valid

unless everyone concurred unless there is

imminent danger of grave or irreparable


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injury to the partnership. (Article 1802)

20. If there is no stipulation as to how the

management of the partnership is to be done, the

following rules are observed:

1. All partners are considered agents of the

partnership.

2. Any act of any partners shall bind the

partnership, unless it is opposed by theother managing partners. Further, a

partner cannot bind the partnership for an

act he is not authorized to do so, and the

third person knows the lack of authority

of such partner. (Article 1818)

3. None of the partners may make make

important alterations in the immovable

property of the partnership. However, the

intervention of the Court may be sought if

the refusal to give consent will result to a

manifest prejudice against the interest of

the partnership. (Article 1803)

21. Every partner has the right to include another

person in his share, but the associate is not

admitted into the partnership unless all partners

consent thereto. (Article 1804)

22. With regard to the partnership books, the

following rules are observed:

1. The books shall be kept at the place agreed

upon by the partners.

2. If there is no stipulation, then it shall be kept at

the principal place of the business.

All partners shall have the right to to access,inspect, and copy them at any reasonable hour.

(Article 1805)

23. The relationship of partners between each

other is fiduciary, that is why every partner shall


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render, on demand, true and full information of all

things affecting the partnership, to any partner or

representative thereof. (Article 1806)

24. Every partner must account to the partnership

for any benefit.

A partner who obtained any profit, without the

consent of the others, from any transactions

connected to the partnership, must hold the profit

as a trustee for the other partners. (Article 1807)

25. The capitalist partners can't engage in anotherbusiness which is of the same nature of the

partnership business, unless there is a stipulation to

the contrary.

If a capitalist partner engages in another business

which has the same nature of the partnership

business, and without consent, he must bring all

the profits to the partnership business, but shall

personally bear all the losses. (Article 1808)

26. Any partner can demand a formal accounting

of the partnership affairs. (Article 1809)

OBLIGATIONS WITH REGARD TO THIRDPERSONS:

1. Every partnership shall operate under a firm

name.

Those who include their names in the firm name,

but they themselves are not partners, shall be liable

to third persons as partners. (Article 1815)

2. The liability of all partners, except limited

partners, extend to their personal properties,should the partnership assets fail to cover the

contracts the partnership business entered into.

Any partner may enter into a separate obligation to

OBLIGATIONS WITH REGARD TO THIRD

PARTIES

1. The surname of a limited partner shall not appear

in the firm name. If the surname of a limited

partner appears in the firm name, he is liable as a

general partner to partnership creditors who

extended credit to the partnership provided that

such creditors did not have knowledge the he was a

limited partner.

Exceptions:

1. Unless they have the same surname of a general

partner.

2. If the firm name was established before the


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perform a partnership contract. (Article 1816)

3. The partners cannot exempt themselves,

through a stipulation, from liability as to third

person, but they may settle the matter between

themselves. (Article 1817)

4. Every partner is an agent of the partnership and

binds the partnership with every act carried out for

the interest of the partnership business.

Exception:

The partner is not authorized to act for the

partnership in that matter, and the third person

knows of the defect of authority of such partner.

These two conditions must concur, and in such a

case, the partner so acting is liable only in his

personal capacity.

Exception to the Exception:

If the partners ratify the action of the unauthorized

partner, then the act binds the partnership.

Except when authorized, or the partnership

business is abandoned by the partners, no partner

can:

1. Assign partnership property in trust

2. Dispose of the goodwill of the business

3. Do any other act which would make it

impossible for the partnership to carry out

its business in its ordinary course.

4. Confess a judgment.5. Enter into a compromise agreement.

6. Submit a partnership claim or liability to

arbitration.

7. Renounce a partnership claim.

limited partner was admitted.

(Article 1846)

2. If the certificate of limited partnership contains a

false statement, any party to the false statement may

be held liable by the person who suffered loss due

to reliance of the false statement, provided that the

party knew the falsity at the time he signed the

certificate, and that the third person suffered lossbefore the certificate was amended, or there was a

petition to amend the same. (Article 1847)

3. A limited partner and / or a contributor, is not a

proper party to proceedings except when he is

enforcing his right against the partnership. (Article

1866)

PROPERTY RIGHTS

Same


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Any of the acts mentioned above will not

bind the partnership if third persons have

knowledge of the restriction. (Article

1818)

5. Any partner may convey title of any real

property that belongs to the partnership and may

recover such property unless:

1. The conveyance was binding in

accordance to the first paragraph of

Article 1818.

2. The property is now in the hands of a

holder for value through a grantee, and

such person had no knowledge of the

defect in the authority of the grantee.

Important Notes:

1. If title to real property is in the name of

the partnership, a conveyance by a partner

in his own name passes the equitable

interest of the partnership, provided thatthe act was within the authority provided

under Article 1818 (1).

2. If title to real property is under the

name of one or more but not all partners,

and the record does not disclose the rights

of the partnership to such property, the

partners whose names appear in the title

may convey the title of the property.

However, the partnership may recover

such property if the acts of the partners

who conveyed the title does not bind the

partnership under Article 1818 (1), except

when the purchaser of the assignee is a

holder for value and had no knowledge of

the restriction.

3. If title to the real property is under the


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name of one or more, but not all partners,

or in a third person in trust for the

partnership, a conveyance may be

executed by a partner and the equitable

interest is passed, provided that it is within

the authority provided by Article 1818 (1).

4. If the title to real property is under the

name of all the partners, a conveyance by

all all partners passess all their rights to

such property. (Article 1819)

6. Any admission or representation by a partner

concerning the partnership affairs, if done within

his authority, is evidence against the partnership.

(Article 1820)

7. When notice or knowledge operates as notice or

knowledge to the partnership:

1. When notice is sent to a partner while

he was an actual partner in the

partnership.2. When a partner acquires knowledge of

the matter while he was a partner.

3. When any other partner who acquires

knowledge about the matter could and

should have communicated it to the acting

partner.

Exception:

The situations mentioned above does not

operate as notice or knowledge to the

partnership if there was fraud committed

by or with the consent of that partner who

acquired knowledge or received notice.

(Article 1821)

8. The partnership is also liable in the same extent


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of the guilty partner, if a partner has caused loss or

injury to a third person, along with any penalty

incurred, provided that the guilty partner acted

within his authority or under the ordinary course

of the business. (Article 1822)

9. The partnership is liable and bounded to make

good the loss:

1. If a partner misapplies the money orproperty of a third person he recieved

within the scope of his apparent authority.

2. If a partner missapplies the money or

property of a third person that the

partnership acquired in the course of its

business, while it was still in the custody of

the partnership. If the money or property

was misapplied after it was no longer

under the custody of the partnership, the

guilty partner is liable in his personal

capacity and does not bind the

partnership. (Article 1823)

10. All partners are solidarily liable with regard to

loss, injury caused to third persons, or the

misapplication of money and property belonging

to third persons. Provided that the guilty partner

did not act in bad faith. (Article 1824)

11. For both private and public manners, if a

person represents himself, or a consents that

another person represent him to anyone as a

partner to an existing partnership, or a partner with

other person who are not actual partners, he is

liable to any person who extended credit to the

actual or apparent partnership because of the

representation made.


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If a partnership liability results, the person who

misrepresented is liable as if he was an actual

partner.

If no partnership liability results, the person who

misrepresented is liable pro rate with the other

persons who consented to such. If he acted alone,

he is separately liable.

A person who, with authority of his principal,misrepresents to be a partner in a an existing

partnership, he is considered a partner in fact, and

his acts bind his principal with respect to the

persons relying on the misrepresentation. If all

partners consent to the misrepresentation, a

partnership obligation is created. In all other cases,

only those who consented to such

misrepresentation are bounded by the act of the

partner in fact. (Article 1825)

12. The liability of a person admitted into an

existing partnership covers all obligations and

retroacts to the day the obligations were incurred.

However, for the obligations that were incurred

before his admission as a partner, his liability shall

only be satisfied out of partnership properties,

unless otherwise stipulated. (Article 1826)

13. The heirarchy of rights with regard to

partnership properties:

1. Partnership Creditors

2. Private Creditors of each partners(Article 1827)


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RIGHTS/POWERS OF

PARTIES

Acts of administration (Article 1800)

PROPERTY RIGHTS

The property rights of a partner are (Article 1810):

1. His right in a specific partnership property

a. A partner has an equal right to possession which

is not assignable and such right is limited to the

share of what remains after partnership debts have

been paid. (Article 1811)

2. His interest in the partnership

a. A partner's interest in the partnership is his

share of the profits and surplus. (Article 1812)

3. His right to participate in the management

Important Notes:

1. A partner may convey his whole interest in the

partnership and such conveyance does not dissolvethe partnership. It only entitles the assignee to act

in behalf of the assigning partner and to receive the

profits the latter would otherwise be entitled.

2. In cases of fraud in management, the assignee

may avail of the usual remedies available to the

assigning partner.

3. In case a dissolution of partnership occurs, the

assignee is entitled to receive the assignor's

interest. (Article 1813)

PROPERTY RIGHTS

Same

RIGHTS OF AGENT:1. May retain in pledge the

thing put under hiscustody by the principalif the latter fails to paydamages/for sums theformer had advanced,

Art. 19142. May withdraw from

agency but with due

notice to principal. Art.19283. May withdraw without

notice on the basis ofimpossibility ofperformance withoutgrave detriment tohimself, Art. 1928

RIGHTS OF PRINCIPAL:1. No liability if agent

contravenes his actions(exception: if avails ofbenefits derived fromthe contravening actionsof agent), Art. 1918 (1)

2. Not to reimburse agentif expenses were agentsfault, Art. 1918 (2)

3. Not to reimburse agentif agent knew ofunfavorable result of hisexpense and theprincipal was notinformed, Art. 1918 (3)

4. Not to reimburse agentif agreed that agent

would bear expenses orif allowed only a certainsum, Art. 1918 (4)

5. Revoke the agency atwill (expressly orimpliedly), Art. 1920

The trust agreement defines th

rights and powers of the partie

trust. The law did not provide

specific grant of rights or powe


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6. Compel agent to returndocument evidencingthe agency, Art. 1920

7. To be indemnified byagent if the latter

withdraws from agencywithout notice, Art.1928

RIGHTS OF THIRD

PARTIES:1. If specific person to becontracted, then he isnot to be prejudiced byrevocation of agency,

Art. 19212. If general person to be

contracted and in goodfaith, then he is notprejudiced by revocationto which he has noknowledge of, Art. 1922

3. Not to be prejudiced byappointment of differentagent, Art. 1923

4. Demand thecontinuance of agency ifit was constituted for hisinterest (there is astipulation pour autrui),

Art. 19305. Bind the principal by

acts of agent who actedas agent even if he didnot know of principalsdeath, Art. 1931

ASSIGNMENT OF

RIGHTS

No absolute prohibition for th

assignment of rights over a truagreement was provided by lawsuch, the assignability or the abthereof will be determined by tstipulations of the parties.

REIMBURSEMENT In the absence of any express


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FOR EXPENSES stipulation in the trust agreemewherein the trust estate shall bliabilities, the trustee bears theliabilities and expenses in his pcapacity.

MULTIPLE

RELATIONS (I.E,

SUBPARTNERS/LIMI

TED

PARTNERS/MULTIPL

E AGENTS, ETC.)

MULTIPLE AGENTS:1. Bound to the contract

first signed in a situationwhere the object is thesame thing but

transacted to twodifferent people by theprincipal and the agentrespectively, Art. 1916

NB: Art. 1916 may also beapplied to a situation wherethe object is the same buttransacted to two differentthird-parties by two differentagents.

LIABILITY FOR

NEGLIGENCE

LIABILITIES OFPRINCIPAL:1. Solidarily liable with

agent if the latterexceeded his authoritybut the former allowedthe agent to act asthough he had authority,

Art.19112. Solidarily liable with

other principal for thesame agent undertakingthe same business, Art.1915

3. Liable to third partieswho suffer damage byhaving his contractrejected in the situationcontemplated in 1916,

Art. 1917

Unless another degree of diligerequired under the agreement,generally, the trustee is expecteexercise reasonable diligence inmanagement and holding of thsubject trust property for thebeneficiary. In case of negligentrustee may be held personally for the loss suffered by the truestate.


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PERSONAL LIABILITYOF AGENT:4. Liability for non-

performance, Art. 18845. Liable for the acts of

substitute he mayappoint, Art. 1892

6. Liable for fraud ornegligence, to be judgedby courts; rigor depends

on whethercompensation is givento agent or not, Art.1909

PRESCRIPTION

RULES (IF

APPLICABLE)

Express Trusts

- No prescription is appin express trusts as thetrustee does not hold tsubject trust property concept of owner.

- Prescription may set inrepudiates the trustrelationship.

Implied Trusts

- For resulting trusts, asis intention to create ttrust, generally, such dprescribe.

For constructive trusts, they arsubject to prescription.

TERMINATION/EXTI

NGUISHMENT

DissolutionChange in the relation of the

partners caused by any partner ceasing to be

associated in the carrying on of the business;

partnership is not terminated but continues until

the winding up of partnership affairs is completed.

(Article 1828)

WindingUpProcess of settling the business or

partnership affairs after dissolution.

Causes of Dissolution Causes of dissolution

EXTINGUISHMENT1. Revocation by principal,

Art. 1919 (1)2. Withdrawal by agent,

Art. 1919 (2)3. Death, civil interdiction,

insanity, or insolvencyof either principal oragent, Art. 1919 (3)

4. Dissolution of firm orcorporation whichentrusted or acceptedagency, Art. 1919 (4)

Express Trusts

Mutual agreement by all thparties

Expiration of the term Fulfillment of the resoluto

condition

Rescission or annulment Loss of subject matter of t

trust (physical loss or legalimpossibility)

Order of the court Merger


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1. Without violation of the agreement between the

partners

a. By termination of the definite term/ particular

undertaking specified in the agreement

b. By the express will of any partner, who must act

in good faith, when no definite term or particular

undertaking is specified

c. By the express will of all the partners who have

not assigned their interest/ charged them for their

separate debts,either before or after thetermination of any specified term or particular

undertaking

d. By the bona fide expulsion of any partner from

the business in accordance with power conferred

by the agreement

2. In contravention of the agreement between the

partners, where the circumstances do not permit a

dissolution under any other provision of this

article, by the express will of any partner at any

time

3. By any event which makes it unlawful for

business to be carried on/for the members to carry

it on for the partnership

4. Loss of specific thing promised by partner

before its delivery

5. Death of any partner

6. Insolvency of a partner/partnership

7. Civil interdiction of any partner

8. Decree of court under art 1831

(Article 1830)

1. Same as the general partnership

2.. Death of a limted partner does not dissolve the

parntership, instead the rights of the deceased

partner is transferred to his assignee. (Article 1861)

5. Accomplishment ofpurpose of agency, Art.1919 (5)

6. Expiration of period ofcontract of agency, Art.1919 (6)

7. Agency automaticallyrevoked when directlymanages the businessentrusted to the agent,dealing directly withthird parties, Art. 1924

8. General power revokedif special one granted toanother agent if andonly in so far as thespecial matter isinvolved in the generalmatter, Art. 1926

Accomplishment of the puof the trust

Implied Trusts


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9. When the partnership is declared unlawful by a

judicial decree. (Article 1770)

Grounds for Dissolution

1. Partner declared insane in any judicial

proceeding or shown to be of unsound mind

2. Incapacity of partner to perform his part of the

partnership contract

3. Partner guilty of conduct prejudicial to business

of partnership

4. Willful or persistent breach of partnership

agreement or conduct which makes it reasonably

impracticable to carry on partnership with him

5. Business can only be carried on at a loss

6. Other circumstances which render dissolution

equitable upon application by purchaser of

partner's interest:

After termination of specified term/particular

undertaking

Anytime if partnership at will when interest wasassigned/charging order issued

(Article 1831)

Effects of Dissolution

Dissolution terminates the authority of the

partners to bind the partnership, except in the

following matters:

1. Wind up partnership affairs

2. Complete transactions not finished

(Article 1832)

Effects of dissolution with respect to partners

1. Authority of partners to bind partnership by

new contract is immediately terminated when

dissolution is not due to ACT, DEATH or

Grounds for dissolution

Same

Effects of dissolution

Same

Effects of dissolution with respect to partners

Same


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INSOLVENCY (ADI) of a partner;

2. If due to ADI, partners are liable as if

partnership not dissolved, when the ff. concur:

i. If cause is ACT of partner, acting partner must

have knowledge of such dissolution

ii. If cause is DEATH or INSOLVENCY, acting

partner must have knowledge/ notice.

(Article 1833)

Effects of dissolution with respect to non-

partners

1. Partner continues to bind partnership even after

dissolution in ff. cases:

(a) Transactions in connection to winding up

partnership affairs/completing transactions

unfinished

(b) Transactions which would bind partnership if

not dissolved, when the other party/obligee:

(1) Situation 1

i. Had extended credit to

partnership prior to dissolution

ii. Had no knowledge/notice of

dissolution, or

(2) Situation 2

i. Did not extend credit to

partnership

ii. Had known partnership prior

to dissolutioniii. Had no knowledge/notice of

dissolution/fact of dissolution not

advertised in a newspaper of

general circulation in the place

Effects of dissolution with respect to not

partners

Same


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where partnership is regularly

carried on

2. Partner cannot bind the partnership anymore

after dissolution:

(a) Where dissolution is due to

unlawfulness to carry on with business

(except: winding up of partnership affairs)

(b) Where partner has become insolvent

(c) Where partner unauthorized to windup

partnership affairs, except by transaction

with one who:

(1) Situation 1

i. Had extended credit to

partnership prior to dissolution&

ii. Had no knowledge/notice of

dissolution, or

(2) Situation 2

i. Did not extend credit to

partnership prior to dissolution

ii. Had known partnership prior

to dissolution

iii. Had no knowledge/notice of

dissolution/fact of dissolution not

advertised in a newspaper of

general circulation in the place

where partnership is regularly

carried on.

(Article 1834)

Discharge of Liability

Dissolution does not discharge existing liability of

a partner, except by agreement between:

1. Partner and himself

Discharge of Liability

Same

2 P / hi i i h b i


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2. Person/partnership continuing the business

3. Partnership creditors

The individual property of a deceased partner is

still liable for all the obligations the partnership

incurred while he was still a partner, however, his

separate debts must be satisfied first. (Article 1835)

Rights of a partner when dissolution not in

contravention of agreement

1. Apply partnership property to discharge

liabilities of partnership (Article 1836)

2. Apply surplus, if any to pay in cash the net

amount owed to partners

3. If dissolution was caused by expulsion of a

partner, the expelled partner shall receive in cash

only the net amount due him from the partnership

credit. (Article 1837)

Rights of a partner when dissolution incontravention of agreement

1. Partner who did not cause dissolution

wrongfully:

a. Apply partnership property to discharge

liabilities of partnership

b. Apply surplus, if any to pay in cash the net

amount owed to partners

c. Indemnity for damages caused by partner guilty

of wrongful dissolution

d. Continue business in same name during agreed

terme. Possess partnership property if business is

continued

2. Partner who wrongly caused dissolution:

Rights of a partner when dissolution not incontravention of agreement

Only applicable to general partners, and not to

limited partners.

Rights of a partner when dissolution in

contravention of agreement


limited partners.

If b i t ti d b th r ppl


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a. If business not continued by others -apply

partnership property to discharge liabilities of

partnership &receive in cash his share of surplus

less damages caused by his wrongful dissolution

b. If business continued by others -have the value

of his interest at time of dissolution ascertained

and paid in cash/secured by bond & be released

from all existing/future partnership liabilities

(Article 1837)

Rights of injured partner where partnership

contract was rescinded on the ground of fraud

or misrepresentation by one party.

1. Right to lien on surplus of partnership property

after satisfying partnership liabilities

2. Right to subrogation in place of creditors after

payment of partnership liabilities

3. Right of indemnification by guilty partner

against all partnership debts & liabilities

(Article 1838)

SETTLEMENT OF ACCOUNTS BETWEEN

PARTNERS

With regard to the assets of Partnership

1. Partnership property (including goodwill)

2. Contributions of the partners

The order of the application of partnership assets

1. Partnership creditors

2. Partners as creditors

3. Partners as investorsreturn of capital

contribution4. Partners as investorsshare of profits if any

(Article 1839)

When business of dissolved partnership is

Rights of injured partner where partnership

contract was rescinded on the ground of fraud

or misrepresentation by one party.


limited partners. (See settlement of accounts)

SETTLEMENT OF ACCOUNTS BETWEEN

PARTNERS

With regard to the assets of Partnership

Priority in Distribution of Assets:

1. Those due to creditors, including limited partners.

2. Those due to limited partners in respect of their

share in profits/compensation.

3. Those due to limited partners of return of capital

contributed.

4. Those due to general partner other than capital &

profits.

5. Those due to general partner in respect

toprofits6. Those due to general partner for return

continued of capital contributed (Article 1863)


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continued

1. Creditors of old partnership are also creditors of

the new partnership which continues the business

of the old one w/o liquidation of the partnership

affairs

2. Creditors have an equitable lien on the

consideration paid to the retiring /deceased

partner by the purchaser when retiring/deceased

partner sold his interest without final settlement

with creditors (Article 1840)

3. Rights if retiring/estate of deceased partner:

a. To have the value of his interest ascertained as

of the date of dissolution

b. To receive as ordinary creditor the value of his

share in the dissolved partnership with interest or

profits attributable to use of his right, at his option

(Article 1841)

The liability of a new partner who was admitted

after the business of the dissolved partnership is

continued, with regard to creditors of the dissolvedpartnership, does not extend to his personal

properties unless there is a contrary stipulation.

(Article 1840)

Persons authorized to wind up

1. Persons who were authorized by stipulation

2. Partners designated by the agreement

3. In absence of agreement, all partners who have

not wrongfully dissolved the partnership

4. Legal representative of last surviving partner

(Article 1842)

of capital contributed. (Article 1863)

When business of dissolved partnership is

continued

Same

Persons authorized to wind up

Same


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APPLICABLE LAW 1. Civil Code

2. Special Laws

3. Jurisprudence

4. General Principles of Law that are applicable

5. National Internal Revenue Code

1. Civil Code

2. Special Laws

3. Jurisprudence

4. General Principles of Law that are applicable

5. National Internal Revenue Code

1. Civil Code2. Jurisprudence Under Article 1442, the followthe applicable laws on trusts:

Civil Code Code of Commerce Rules of Court Any special laws Any other principles of th

general law of trusts consiwith the abovementioned

TAXABILITY National Internal Revenue Code

Chapter 3: Tax on Individuals

Section 24. Income Tax Rates:

(2) Cash and/or Property Dividends - A final tax

at the following rates shall be imposed upon the

cash and/or property dividends actually or

constructively received by an individual from a

domestic corporation or from a joint stock

company, insurance or mutual fund companies and

regional operating headquarters of multinational

companies, or on the share of an individual in the

distributable net income after tax of a partnership

(except a general professional partnership) of

which he is a partner, or on the share of an

individual in the net income after tax of an

association, a joint account, or a joint venture or

consortium taxable as a corporation of which he is

a member or co-venturer:

Six percent (6%) beginning January 1, 1998;

Eight percent (8%) beginning January 1, 1999;

Ten percent (10% beginning January 1, 2000.

Provided, however, That the tax on dividends shall

apply only on income earned on or after January 1,

1998. Income forming part of retained earnings as

Irrevocable trusts are treated aentities separate and distinct frtrustor. Thus, an irrevocable trsubject to any applicable taxes investment income as well as itinvestors, if and when the trustincome is subsequently distributhem. (BIR Ruling No. 003-05

Revocable trusts are considerethrough entities and are not, fopurposes, considered separate the owner-trustor. In a revocab

trust, all the income of the truswould be taxed to the trustor-gand is to be included in its taxaincome, except income subjectfinal tax.

of December 31, 1997 shall not, even if declared or


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o Dece be 3 , 997 sha ot, eve i dec a ed o

distributed on or after January 1, 1998, be subject

to this tax.

SEC. 26. Tax Liability of Members of General

Professional Partnerships. - A general professional

partnership as such shall not be subject to the

income tax imposed under this Chapter. Persons

engaging in business as partners in a general

professional partnership shall be liable for incometax only in their separate and individual capacities.

For purposes of computing the distributive share

of the partners, the net income of the partnership

shall be computed in the same manner as a

corporation.

Each partner shall report as gross income his

distributive share, actually or constructively

received, in the net income of the partnership.

comparative table _trust,agency,partnership

Documents