Composition of Partnerships; Spouses; Corporations (1994)
1) Can a husband and wife form a limited partnership to engage in real estate business, with the wife being a limited partner?
2) Can two corporations organize a general partnership under the Civil Code of the Philippines?
3) Can a corporation and an individual form a general partnership?
SUGGESTED ANSWER:
1) a) Yes. The Civil Code prohibits a husband and wife from constituting a universal partnership. Since a limited partnership is not a universal partnership, a husband and wife may validly form one.
b) Yes. While spouses cannot enter into a universal partnership, they can enter into a limited partnership or be members thereof (CIR v. Suter, et. al. , 27 SCRA 152).
SUGGESTED ANSWER:
2) a) No, a corporation is managed by its board of directors. If the corporation were to become a partner, co-partners would have the power to make the corporation party to transactions in an irregular manner since the partners are not agents subject to the control of the Board of Directors. But a corporation may enter into a joint venture with another corporation as long as the nature of the venture is in line with the business authorized by its charter (Tuason & Co., Inc. v. Bolano, 95 Phil. 106).
b) As a general rule a corporation may not form a general partnership with another corporation or an individual because a corporation may not be bound by persons who are neither directors nor officers of the corporation.
However, a corporation may form a general partnership with another corporation or an individual provided the following conditions are met:
1) The Articles of Incorporation of the corporation expressly allows the corporation to enter into partnerships;
2) The Articles of Partnership must provide that all partners will manage the partnership, and they shall be jointly and severally liable; and
3) In case of a foreign corporation, it must be licensed to do business in the Philippines.
c) No. A corporation may not be a general partner because the principle of mutual agency in general partnership
allowing the other general partner to bind the corporation will violate the corporation law principle that only the board of directors may bind the corporation.
SUGGESTED ANSWER:
3) No, for the same reasons given in the Answer to Number 2 above.
Conveyance of a Partner’s Share Dissolution (1998)
Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed equal amounts to the capital, they also agree on equal distribution of whatever net profit is realized per fiscal period. After two years of operation, however, Una conveys her whole interest in the partnership to Justine, without the knowledge and consent of Dielle and Karlo.
1. Is the partnership dissolved?
2. What are the rights of Justine, if any, should she desire to participate in the management of the partnership and in the distribution of a net profit of P360.000.00 which was realized after her purchase of Una’s interest?
SUGGESTED ANSWER:
1. No, a conveyance by a partner of his whole interest in a partnership does not of itself dissolve the partnership in the absence of an agreement. (Art. 1813. Civil Code)
SUGGESTED ANSWER:
2. Justine cannot interfere or participate in the management or administration of the partnership business or affairs. She may, however, receive the net profits to which Una would have otherwise been entitled. In this case, P120.000 (Art. 1813, Civil Code)
Dissolution of Partnership (1995)
Pauline, Patricia and Priscilla formed a business partnership for the purpose of engaging in neon advertising for a term of five (5) years. Pauline subsequently assigned to Philip her interest in the partnership. When Patricia and Priscilla learned of the assignment, they decided to dissolve the partnership before the expiration of its term as they had an unproductive business relationship with Philip in the past. On the other hand, unaware of the move of Patricia and Priscilla but sensing their negative reaction to his acquisition of Pauline’s interest, Philip simultaneously petitioned for the dissolution of the partnership.
1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline or Philip valid? Explain.
2. Does Philip have any right to petition for the dissolution of the partnership before the expiration of its specified term? Explain.
SUGGESTED ANSWER:
1, Under Art. 1830 (1) (c) of the NCC, the dissolution by Patricia and Priscilla is valid and did not violate the contract of partnership even though Pauline and Philip did not consent thereto. The consent of Pauline is not necessary because she had already assigned her interest to Philip. The consent of Philip is not also necessary because the assignment to him of Pauline’s interest did not make him a partner, under Art, 1813 of the NCC.
ALTERNATIVE ANSWER:
Interpreting Art. 1830 (1) (c) to mean that if one of the partners had assigned his interest on the partnership to another the remaining partners may not dissolve the partnership, the dissolution by Patricia and Priscilla without the consent of Pauline or Philip is not valid.
SUGGESTED ANSWER:
2. No, Philip has no right to petition for dissolution because he does not have the standing of a partner (Art. 1813 NCC).
Dissolution of Partnership; Termination (1993)
A, B and C formed a partnership for the purpose of contracting with the Government in the construction of one of its bridges. On June 30, 1992, after completion of the project, the bridge was turned over by the partners to the Government. On August 30, 1992, D, a supplier of materials used in the project sued A for collection of the indebtedness to him. A moved to dismiss the complaint against him on the ground that it was the ABC partnership that is liable for the debt. D replied that ABC partnership was dissolved upon completion of the project for which purpose the partnership was formed.
Will you dismiss the complaint against A If you were the Judge?
SUGGESTED ANSWER:
As Judge, I would not dismiss the complaint against A. because A is still liable as a general partner for his pro rata share of 1/3 (Art. 1816, C. C.J. Dissolution of a partnership caused by the termination of the particular undertaking specified in the agreement does not extinguish obligations, which must be liquidated during the “winding up” of the partnership affairs (Articles 1829 and 1830. par. 1-a, Civil Code).
Effect of Death of Partner (1997)
Stating briefly the thesis to support your answer to each of the following cases, will the death – of a partner terminate the partnership?
SUGGESTED ANSWER:
Yes. The death of a partner will terminate the partnership, by express provision of par. 5, Art. 1830 of the Civil Code.
Obligations of a Partner (1992)
W, X, Y and Z organized a general partnership with W and X as industrial partners and Y and Z as capitalist partners. Y contributed P50,000.00 and Z contributed P20,000.00 to the common fund. By a unanimous vote of the partners, W and X were appointed managing partners, without any specification of their respective powers and duties.
A applied for the position of Secretary and B applied for the position of Accountant of the partnership.
The hiring of A was decided upon by W and X, but was opposed by Y and Z.
The hiring of B was decided upon by W and Z, but was opposed by X and Y.
Who of the applicants should be hired by the partnership? Explain and give your reasons.
SUGGESTED ANSWER:
A should be hired as Secretary. The decision for the hiring of A prevails because it is an act of administration which can be performed by the duly appointed managing partners, W and X.
B cannot be hired, because in case of a tie in the decision of the managing partners, the deadlock must be decided by the partners owning the controlling interest. In this case, the opposition of X and Y prevails because Y owns the controlling Interest (Art. 1801, Civil Code).
Obligations of a Partner; Industrial Partner (2001)
Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe provided the capital while Rudy contributed his labor and industry. On one side of their shop, Joe opened and operated a coffee shop, while on the other side, Rudy put up a car accessories store. May they engage in such separate businesses? Why?
SUGGESTED ANSWER:
Joe, the capitalist partner, may engage in the restaurant business because it is not the same kind of business the partnership is engaged in. On the other hand, Rudy may not engage in any other business unless their partnership expressly permits him to do so because as an industrial partner he has to devote his full time to the business of the partnership (Art. 1789, CC).
From the ANSWERS TO BAR EXAMINATION QUESTIONS in CIVIL LAW by the UP LAW COMPLEX and PHILIPPINE ASSOCIATION OF LAW SCHOOLS.
