Hizon Notes - Partnership, Lease and Prescription.doc

NOTES ON PARTNERSHIP AGENCY, TRUSTS, LEASE AND PRESCRIPTION Kenneth and King C. Hizon _________________________________________________________________________________________________________________

UNIERSITY O! SANTO TO"AS !a#$%t& o' Ci(i% La) *AR REIE+

NOTES ON CIIL LA+ REIE+ II PARTNERSHIP, AGENCY, TRUSTS LEASE AND PRESCRIPTION TITLE IPARTNERSHIP

NOTE &ersons who a(empt but fail to form a corporaon and who carry on business under the corporate name occupy the posion of

CHAPTER  Gene/a% P/o(i0ion0 A/1#%e 232. *& the #ont/a#t o' 4a/tne/0hi4 t)o o/ 5o/e 4e/0on0 6ind the50e%(e0 to #ont/i6$te 5one&, 4/o4e/t&, o/ ind$0t/& to a #o55on '$nd, )ith the inten1on o' di(iding the 4/o7t0 a5ong the50e%(e0.

partnership inter se. )uch a relaon does not neces sarily exist however for ordinarily persons cannot be made to assume the relaon of partners as between themselves when their purpose is that no partnership shall exist. *o de facto partnership was created among the pares which would entle the peoner to a reimbursement of the supposed losses of the proposed corporaon.

PARTNERSHIP *ET+EEN HUS*AND AND +I!E %he be(er view is T)o o/ 5o/e 4e/0on0 5a& a%0o 'o/5 a 4a/tne/0hi4 'o/ the e8e/#i0e o' a 4/o'e00ion. 933:a;

that they can enter into a partnership, so long as it does not violate the fundamental provisions on con#ugal partnerships, and so long as the partnership is not universal.

< +hat i0 a 9*$0ine00; Pa/tne/0hi4= NATURE O! PARTNERSHIP, A "ERE PRIILEGE It is a contract between 2 or more persons who bind themselves to contribute money, property or industry to a common fund with the intenon of dividing the prots among themselves (Pineda, 2006).

%he organi+aon of a partnership is not a ma(er of absolute right but a privilege which may be en#oyed only under such terms as the )tate may impose (Pineda, 2006).

< +hat i0 a P/o'e00iona% Pa/tne/0hi4= NOTE efore the *--, there are 2 inds of partnerships /! civil1 > It is a contract where two or more persons who do not contribute

and /2 commercial or mercanle partnership. *ow, they are

money or property may also form a partnership for the exercise of a profession (Pineda, 2006).

governed by the (Pineda, 2006) . *--. %here is no more disncons between them

RE
KINDS O! PARTNERSHIPS(Pineda, 2006)

0 !

Mutual contribuon to a common stoc " #oint interest in the prots

A0 to nat$/e

-ommercial &rofessional

NOTE $ithout a common fund, there can be no partnership

rgani+ed for the pursuit of business or trade rgani+ed for the exercise o f profession

(Pineda, 2006).

NOTE %he cons ent to contribute to a common fund cannot be

A0 d$/a1on

to $ith a term

implied from the mere fact that a man and a woman lived together in a state of concubinage

CO""ERCIAL CREDIT "AY ALSO *E CONTRI*UTED &rovided that

"t will

the noce thereof is given the debtor. 'owever, polical credit cannot be contributed to the partnership.

INTENT CONT ROLLING "lthough the fact that pares to an agreement mayentled refer to to their relaonship of a partnership is a circumstance great weight as in one determining whether partnership really exists, it is not conclusive. In determining whether or not a parcular transacon constutes a partnership, their intenon as disclosed by the enre transacon, and as gathered from the facts and from the language employed by them, as well as their conduct should be ascertained.

A0 to %ega%it& 8e o' it0 partnership o/ganiza1on

xed rgani+ed for a specic period. 3pon its expiraon, it is dissolved unless connued by all the partners or by some of them /"rt. !450, !647 rgani+ed without any denite period1 not formed for a specic undertaing and is terminable at anyme by the agreement or consent of the pares.

#ure ne which has complied with all the necessary re9uisites for its lawful establishment. 8e facto ne which has failed to observe partnership the re9uisites for its lawful establishment.


A0 to e8e/#i0e and it0 /e%a1on to thi/d 4e/0on0

:eal partnership

&artnership by estoppel

ne which really exists between and among partners themselves rd and also as to 5 persons. *ot really a partnership but is deemed a partnershipo nly in relaon to transacng third persons. It arises from acts of misrepresentaon which may be oral or wri(en or by conduct. rd

*ASIS %o protect 5 persons who have relied on the misrepresentaon of the alleged partners who are called partners by estoppel.

A0 to 4 $6%i# 4e/#e41on

pen partnership )ecret partnership

newhoseexistenceismade nown to the public ne whose existence is not made nown to the public

A0 to it0 o6?e#t

3niversal

ne which has for its ob#ect all the present property or all the prots /"rt. !664 and !640 ne which has for its ob#ect determinate things, their use or fruits or the exercise of s profession or vocaon or specic undertaing /"rt. !645

&arcular

NATURE O! THE RELATIONSHIP *ET+EEN PARTNERS It is essenally duciary. %hey are re9uired to exercise the highest degree of good faith. ;ach is a condenal agent of the other. %hus, a partner cannot, to the detriment of the other apply to his own benet the results of the nowledge and informaon gained in the character of a partner (Pineda, 2006).

P/in#i4a%

One/o$0 P/e4a/ato/&

Ca4a6%e o' 0$it P/o7t o/iented

Its life does not depend on the existence of another contract unlie a mortgage which depends upon a contract of loan :e9uires consideraon consisng in the contribuon of money, property or industry "
KINDS O! PARTNERSHIP UNDER THE NCC ") % Rea% 4a/tne/ M;M;:)'I&

ne who is really a contribung member of an exisng legal partnership lie a general, limited or industrial partner Pa/tne/ 6& ne who is not really a e0to44e% o/ partner but represents $a0iB4a/tne/ himself as one. 'e is liable as a partner so that innocent third persons who relied on his representaon shall not be pre#udiced

") % Con1n$ing 4a/tne/ -*%I*3"%I* > %';

2ne who connues partnership business the dissoluon of

3)I*;)) ">>"I:) ">%;: 8I))@3%I*

partnership to the reasons stateddue in "rt. !4?0

the a
Di0#on1n$ing 4a/tne/

ne who does not parcipate in the partnership business a
"a?o/it& 4a/tne/

2ne whose contribuon represents the ma#ority or controlling interest 2ne whose contribuon represents o nly a minority interest

PRINCIPLE O! DELECTUS PERSONAE %his means that no one become member of the partnership without the consent of all partners (Pineda, 2006).

@URIDICAL RELATIONS ARISING !RO" THE PARTNERSHIP 0 ! 2 5

etween and among the partners themselves1 etween partners and the rm1 rd etween the rm and 5 persons who may have contracted with it1 and etween the partners and such third persons (Pineda, 2006).

") % A"@3; > -*%:I3%I*

No5ina% 4a/tne/

") % ;B&)3:; Se#/et 4a/tne/ % &3@I&;:-;&%I*

ne who parcipates in the prots and losses of the rm but is not publicly nown as a partner. 'e parcipates in the aCairs of the rm but his involvement is not ostensible

Si%ent 4a/tne/

ne who does not tae any acve part in the partnership although he may be nown to be a partner. 'owever, he shares in the prots and losses ne who publicly taes acve part in the business of the

CHARACTERISTICS O! A CONTRACT O! PARTNERSHIP (Pineda, 2006). !id$#ia/& No5inate

Con0en0$a% *i%ate/a% o/

5$%1%ate/a%

ased on trust and condence It has a specic name &erfected by mere consent although in certain cases, formalies are re9uired for validity /"rt. !66! 2 or more persons must be involved in the contract

O0ten0i6%e 4a/tne/


Do/5ant 4a/tne/

") % *"%3:; O/igina% > M;M;:)'I& 4a/tne/

In#o5ing 4a/tne/

rm and at the same me is publicly nown as a partner ne who does not tae acve part in the partnership business and is not publicly nown as a part. ne who is a member of the partnership from the me of its commencement as a #uridical person ne who is not an srcinal member of the partnership. 'e becomes a member subse9uent to rm orthe establishment of the one who is to be admi(ed by the consent of all the members

") % )%"%; > )3:AIA:)'I&

S$/(i(ing 4a/tne/

De#ea0ed 4a/tne/

ne who remains alive while one of the partners dies or one who connues to be in the partnership a
%'; E84e%%ed > 4a/tne/

ne who is expelled from the partnership by the other

E84e%%ing 4a/tne/

partnerDs for a valid cause &artner who caused the expulsion of a partner for a valid cause

") % %'; Ca4ita%i0t *"%3:; > 4a/tne/ -*%:I3%I*

ne who contributes capital /money or property. 'e cannot engage in other business which competes with the business of the rm unless there is a spulaon to the contrary. 'e is liable for the for the losses ne who does not contribute capital but only his industry or labor. 'e cannot engage in any other business without the express consent of the other partners. 'is industry or labor is supposed to be for

") % ;>>;-% ;B&3@)I*

Ind$0t/ia% 4a/tne/

the rm alone ") % @I"I@I%E

Gene/a% 4a/tne/ o/ /ea% 4a/tne/

Li5ited

ne whose liability to third persons extends to his separate property when the assets of the rm had been exhausted 2ne who is liable to third

4a/tne/ o/ persons only to the extent of 04e#ia% 4a/tne/ his contribuon. 'is liability

Ca4ita%i0tB ind$0t/ia% 4a/tne/ ") % "anaging 4a/tne/ M"*"F;M;*%

Si%ent 4a/tne/

Li$ida1ng 4a/tne/

%';: )&;-I"@ S$64a/tne/ -@"))I>I-"%I*)

is limited to a xed amount, that is, only up to his capital contribuon unlie the general partner ne who contributes both capital and industry

ne who acvely manages the business or aCairs of the rm. 'e may be designated in the arcles or a
partnership itself. 'e may bethe admi(ed only with consent of all the other partners Re1/ing ne who withdraws or 4a/tne/ reres from the partnership <$a0iB4a/tne/0 %hose who represent o/ 4a/tne/0 6& themselves as partners e0to44e% although there is really no organi+ed partnership. *evertheless, they are bound as partners in fact with respect to third persons who deal with them and who relied on the formerGs representaon

TEST O! E-ISTECE O! PARTNERSHIP $hat determines whether the transacon between the pares constutes a partnership is their intenon as manifested by the enre transacon, a(endant facts, language used and conduct of the pares (Pineda, 2006)


PARTNERSHIP (. CORPORATION(Pineda, 2006) PARTNERSHIP

&":%*;:)'I& v. -=$*;:)'I&(Pineda, 2006)

PARTNERSHIP

-:&:"%I* As to creaon or establishment y agreement of the pares y law or by incorporaon under the -orporaon -ode As to commencement of legal personality It becomes a #uridical person It becomes a #uridical person from th e me th e con tract from the date of issuance of begins to exist Cerfcate o Registraon by the );As to Lifeme *o me limit provided by law *ot more than 70 years

-=$*;:)'I& As to creaon or establishment -reated or es tablished by It may be created without contract only whether expressly contract such as by law, other orimpliedlybyconduct generang incidents lie confusion /"rts. ?62, ?65, 2!60 and succession /"rt. !064 As to $ridical personality It has a legal or #uridical It has no legal or #uridical personality from th e me of personality establishment

As to the power to bind &artners, as a rule, are agents of It is the oar d of 8irectors the partnership. %hey can bind /%rustees whic h binds the the partnership and their corporaon. stocholders are not agents of the corporaon partners As to naonality as a jridical person GR It is a naonal of the It is a naonal of the country where established country under whose laws it was incorporated except in me of war where naonality of the controlling stocholders prevails. %he excepon applies also in the ac9uision of land, natural resources and ownership or operaon of public ulies. As to e!tent of liability &artners are liabl e with the ir Incorporators are liable only for private property beyond the the amount of their subscribed amount of their contribuons capital stocs, unless they act except limited partners unless with fraud

As to lifeme %he law does not x a me limit %erm of co=ownership must not exceed !0 years As to e%ect of transfer of interest %ransferee cannot be a partner -o=owner can disp ose of his without the consent of all the share in the property and the partners transfereebecomesaco=owner without need of the consent of the others As to prpose Intendedforprot Intended for collecve en#oyment As to power to represent F: %here is mutual power to F: %here is no mutual power to represent one another represent the co=owners except in e#ectment cases as plainCs As to e%ect of death It dissolves the partnership It does not dissolve the partnership

there is spulaon

As to management $hen management is not &ower to do business and agreed upon, every partner is a n management of its aC airs are agent of the partnership vested in the board of directors As to sit for mismanagement " partner may s ue as a " stocholder cannot sue in his mismanaging partner name members of the 8 who mismanage the corporaon. %he suit must be in the name of the -orporaiton As to "ransferrability of #nterest %ransferee does not become a %ransfer maes the transferee a partner unless all other partners stocholder. -onsent of others is give their consent not re9uired As to cases of dissolon a. 8eath )aidcausesarenotgroundsfor b. Insanity terminaonofthecorporaon c. :erement d. Insolvency

e. f.

g.

-ivil interdicon %erminaon of period or purpose of the partnership ;xpulsion

PARTNERSHIP (. AGENCY "n agent does not act for himself but only for his principal. 'owever, a partner is both a principal and an agent. 'e is a principal for his own interests but an agent for the partnership and for other partners (Pineda, 2006).

PARTNERSHIP (. @OINT ADENTURE %he outs tanding diCerence is that a ?oint ad(ent$/e relates to a single transacon, although it may comprehend a business to be connued over several years, while a partnership relates to a general and connuing business of a parcular ind. (Pineda, 2006)

CORPORATION CANNOT ENTER INTO A PARTNERSHIP

" corporaon cannot enter into a partnership with another person or enty. %he reason is that if it be so allowed, it can be bound by persons who do not constute the 8. -orporaons are bound only by their 8. 'owever, they may engage in #oint ventures with others (Pineda, 2006).

A/1#%e 23. The 4a/tne/0hi4 ha0 a ?$/idi#a% 4e/0ona%it& 0e4a/ate and di01n#t '/o5 that o' ea#h o' the 4a/tne/0, e(en in #a0e o' 'ai%$/e to #o54%& )ith the /e$i/e5ent0 o' a/1#%e 22, 7/0t 4a/ag/a4h. 9n; @URIDICAL PERSONALITY O! PARTNERSHIP In case of suit against a partnership, a partner, being represented by the rm, has no right to appear or be made a party as an individual separate from the rm.


If a partnership commits an act of insolvency, it may be ad#udged insolvent although its members may not be insolvent. It may sue and be sued in its own name.

A/1#%e 22>. A 4a/tne/0hi4 5$0t ha(e a %a)'$% o6?e#t o/ 4$/4o0e, and 5$0t 6e e0ta6%i0hed 'o/ the #o55on 6ene7t o/ inte/e0t o' the 4a/tne/0.

CASES !ILED AGAINST PARTNERSHIP +ILL NOT *E DIS"ISSED *Y REASON O! DEATH O! A PARTNER " case will not be dismissed

+hen an $n%a)'$% 4a/tne/0hi4 i0 di00o%(ed 6& a ?$di#ia% de#/ee, the 4/o7t0 0ha%% 6e #on70#ated in 'a(o/ o' the State, )itho$t 4/e?$di#e to the 4/o(i0ion0 o' the Pena% Code go(e/ning the #on70#a1on o' the in0t/$5ent0 and ee#t0 o' a #/i5e. 9333a;

because of the death of a partner, where a partnership possessing a personality disnct from any of the partners (Pineda, 2006).

ILLEGAL PURPOSE SEPARA*LE $hen a partnership is sought to be

CONTRACT O! PARTNERSHIP IS CONSENSUAL I! ENTERED ORALLY, IT IS AS GOOD AS A +RITTEN ONE &artnership exists as long as its

formed for several purposes, and only one of the purposes of the partnership is illegal, the partnership will be sustained if the illegal ob#ect can be separated from legal ob#ects of the partnership.

re9uisites are present

@URIDICAL DISSOLUTION O! UNLA+!UL PARTNERSHIP 0 !

%wo or more persons bind themselves to contribute money, property or industry to a common fund Intenon on the part of the partners to divide the prots among themselves (Pineda, 2006).

*o conscaon can be lawfully eCected without due process of law. an acon is therefore necessary to give the partners the opportunity to defend themselves (Pineda, 2006).

COERAGE O! CON!ISCATION "rcle !660 authori+es only the NOTE It may be constuted in any form1 a public instrument is necessary only when immovable property or real rights are contributed thereto.

conscaon of prots but not the contribuons of the partners which constute the capital of the partnership (Pineda, 2006).

RIGHT TO DE"AND CAPITAL nly the fruits of an unlawful A/1#%e 23F. In dete/5ining )hethe/ a 4a/tne/0hi4 e8i0t0, the0e /$%e0 0ha%% a44%&  E8#e4t a0 4/o( ided 6& a/1#%e : , 4e/0on0 )ho a/e not 4a/tne/0 a0 to ea#h othe/ a/e not 4a/tne/0 a0 to thi/d 4e/0on0  CoBo)ne/0hi4 o/ #oB4o00e00ion doe0 not o' it0e%' e0ta6%i0h a 4a/tne/0hi4, )hethe/ 0$#hB#oBo)ne/0 o/ #oB 4o00e00o/0 do o/ do not 0ha/e an& 4/o7t0 5ade 6& the $0e o' the 4/o4e/t& : The 0ha/ing o' g/o00 /et$/n0 doe0 not o' it0e%' e0ta6%i0h a 4a/tne/0hi4, )hethe/ o/ not the 4e/0on0 0ha/ing the5 ha(e a ?oint o/ #o55on /ight o/ inte/e0t in an& 4/o4e/t& '/o5 )hi#h the /et$/n0 a/e de/i(ed 3 The /e#ei4t 6& a 4e/0on o' a 0ha/ e o' the 4/o7t 0 o' a 6$0ine00 i0 4/i5a 'a#ie e(iden#e that he i0 a 4a/tne/ in the 6$0ine00, 6$t no 0$#h in'e/en#e 0ha%% 6e d/a)n i' 0$#h 4/o7t0 )e/e /e#ei(ed in 4a&5ent  A0 a de6t 6& in0ta%%5ent0 o/ othe/)i0e  A0 )age0 o' an e54%o&ee o/ /ent to a %and%o/d : A0 an ann$it& to a )ido) o/ /e4/e0enta1(e o' a de#ea0ed 4a/tne/ 3 A0 inte/e0t on a %oan, tho$gh the a5o$nt o' 4a&5ent (a/& )ith the 4/o7t0 o' the 6$0ine00 2 A0 the #o n0ide/a1on 'o / the 0a%e o' a good)i%% o' a 6$0ine00 o/ othe/ 4/o4e/t& 6& in0ta%%5ent0 o/ othe/)i0e. 9n;

partnership are conscated. %he partners may recover the capital contributed by them because the acon for that purpose does not have to be based on the existence of the partnership.

A/1#%e 22. A 4a/tne/0hi4 5a& 6e #on01t$ted in an& 'o/5, e8#e4t )he/e i55o(a6%e 4/o4e/t& o/ /ea% /ight0 a/e #ont/i6$ted the/eto, in )hi#h #a0e a 4$6%i# in0t/$5ent 0ha%% 6e ne#e00a/&. 9332a; !OR" O! CONTRA CT "n oral contract o partnership is perfectly valid and binding between the pares, if the contribuon of the partners is not in the form of immovables or rights in immovables, even if the amount of the capital contributed is in excess of &700.00.

NOTE If personal property or money is contributed, the partnership is valid even if it is orally agreed or organi+ed (Pineda, 2006)

RE
A/1#%e 22. E(e/& #ont/a#t o' 4a/tne/0hi4 ha(ing a #a4ita% o' th/ee tho$0and 4e0o0 o/ 5o/e, in 5one& o/ 4/o4e/t&, 0ha%% a44ea/ in a 4$6%i# in0t/$5ent, )hi#h 5$0t 6e /e#o/ded in the OJ#e o' the Se#$/i1e0 and E8#hange Co55i00ion.

@OINT O+NERS HIP O! PROPERTY Hoint ownership of business or

!ai%$/e to #o54%& )ith the /e$i/e5ent0 o' the 4/e#eding 4a/ag/a4h 0ha%% not ae#t the %ia6i%it& o' the 4a/tne/0hi4 and the 5e56e/0 the/eo' to thi/d 4e/0on0. 9n;

property, does not itself create a partnership, notwithstanding that prots are shared.

E!!ECT O! !AILURE TO REGISTER &artnerships with a capital of less

SHARING IN PRO!ITS %he presumpon of partnership arising from a

than &5,000.00 because the arcle re9uires only those with capital of &5,000.00 or more to register with the );-.

parcipaon in prots is prima facie, and may be rebu(ed or outweighed by other circumstances, such as evidence that the parcipaon was referable to some other reasons such as compensaon for services rendered as agent, broer, salesman or otherwise.

ut the mere failure to register the contract of partnership does not invalidate the same as among the partners, so long as the contract has the essenal re9uisites, because the main purpose of rd

registraon is to give noce to the 5 pares, and it can be assumed that the members now the contents of the contract.


%heir failure to register does not aCect the liability of the partnership rd and the members to 5 persons. "lso, the partnership sll has #uridical personality even if it fails to register.

A/1#%e 22. A #ont/a#t o' 4a/tne/0hi4 i0 (oid, )hene(e/ i55o(a6%e 4/o4e/t& i0 #ont/i6$ted the/eto, i' an in(ento/& o' 0aid 4/o4e/t& i0 not 5ade, 0igned 6& the 4a/1e0, and aa#hed to the 4$6%i# in0t/$5ent. 933a; E!!ECT O! O"ISSION %he execuon of the public instrument would be useless if there is no inventory of the property contributed, because without its designao n and descripo n, they cannot be sub#ect to inscripon in the :egistry of &roperty, and their contribuon cannot pre#udice third persons. %he contract is declared void by law when no such inventory is made.

ORAL CONTRACT O! PARTNERSHIP "n oral contract of partnership is void if immovable prope rty is contributed to the partnership. eing void, the partners cannot invoe "rcle !576 to compel the others to execute the arcles of partnership (Pineda, 2006)

A/1#%e :2. I' the %a) /e$i/e0 a do#$5ent o/ othe/ 04e#ia% 'o/5, a0 in the a#t0 and #ont/a#t0 en$5e/ated in the 'o%%o)ing a/1#%e, the #ont/a#1ng 4a/1e0 5a& #o54e% ea#h othe/ to o60e/(e that 'o/5, on#e the #ont/a#t ha0 6een 4e/'e#ted. Thi0 /ight 5a& 6e e8e/#i0ed 0i5$%taneo$0%& )ith the a#1on $4on the #ont/a#t. 92Fa; A/1#%e 22. An& i55o(a6%e 4/o4e/t& o/ an inte/e0t the/ein 5a& 6e a#$i/ed in the 4a/tne/0hi4 na5e. Tit%e 0o a#$i/ed #an 6e #on(e&ed on%& in the 4a/tne/0hi4 na5e. 9n;

a partner or some in his or their names, only the e9uitable interest is passed to the buye r or gran tee who acted in good faith (Pineda, 2006).

A/1#%e 22:. A00o#ia1on0 and 0o#ie1e0, )ho0e a/1#%e0 a/e Me4t 0e#/et a5ong the 5e56e/0, and )he/ein an& one o' the 5e56e/0 5a& #ont/a#t in hi0 o)n na5e )ith thi/d 4e/0on0, 0ha%% ha(e no ?$/idi#a% 4e/0ona%it&, and 0ha%% 6e go(e/ned 6& the 4/o(i0ion0 /e%a1ng to #oBo)ne/0hi4. 933F; ASSOCIATIONS AND SOCIETIES, +HOSE ARTICLES ARE KEPT SECRET $here the arcles of such groups are ept secret among the members and where anyone of them may contract in his own name with third persons, the same shall have no legal personality to sue. %he law on co=ownership and not partnership shall govern. (Pineda, 2006). $hile they cannot sue for lac of #udicial personality, they may, however, be sued by third persons under the common nameJ they use (Pineda, 2006).

A/1#%e 223. A0 to it0 o6?e#t, a 4a/tne/0hi4 i0 eithe/ $ni(e/0a% o/ 4a/1#$%a/. A0 /ega/d0 the %ia6i%it& o' the 4a/tne/ 0, a 4a/tne/0hi4 5a& 6e gene/a% o/ %i5ited. 932a; UNIERSAL (. PARTICULAR PARTNERSHIP A0 to o6?e#t 3niversal

ne which has for its ob#ect all the present property or all the prots /"rt. !664 and !640 ne which has for its ob#ect determinate things, their use or fruits or the exercise of s profession or vocaon or specic undertaing /"rt. !645

&arcular

A0 to %ia6i%it& o' 4a/tne/0 Feneral partnership

AC
@imited partnership

NOTE %he present arcle will not apply if the rm has no name. In case of conveyance, it must be in the name of the partnerDs (Pineda, 2006).

I"PLICATION O! RE!ERENCE TO I""OA*LE %he arcle expressly refers to immovable property. Impliedly, personal property need not be conveyed in the name of the partnership (Pineda, 2006). ND

RECONCILIATION *ET+EEN THE  SENTENCE O! ART. 22  ART. F :eal propertyJ should be considered strictly immovable propertyJ. "rt. !4!K /pars. 5, ?L7 recogni+es the possibility that tle to real property may be in the name of the partner, or some of the partners or all of the partn ers. %o reconcile "rt. !4!K with the present "rcle, the rule to follow should be If the immovable propertyJ is in the name of the rm, it must be alienated in the name of the rm1 if it is in the name of the partner or partners, it must be alienated in the name of the said partner or partners. In both, tle is passed to the buye r or grantee. 'owe ver, if the immovable property is in the name of the rm but conveyed by

ne where all the partners are general partners. Feneral partners are liable even with their individual and separate properes to partnership creditors a
A/1#%e 222. A $ni(e/0a% 4a/tne/0hi4 5a& /e'e/ to a%% the 4/e0ent 4/o4e/t& o/ to a%% the 4/o7t0. 932; CLASSI!ICATION O! UNIERSAL PARTNERSHIP 25 2?

3niversal partnership of all the present property of the partners 3niversal partnership of all the prots derived by the partners in their business (Pineda, 2006).

A/1#%e 22. A 4a/tne/0hi4 o' a%% 4/e0ent 4/o4e/t& i0 that in )hi#h the 4a/tne/0 #ont/i6$te a%% the 4/o4e/t& )hi#h a#t$a%%& 6e%ong0 to the5 to a #o55on '$nd, )ith the inten1on o' di(iding the 0a5e a5ong the5 0e%(e0, a0 )e%% a0 a%% the 4/o7 t0 )hi#h the& 5a& a#$i/e the/e)ith. 932;


A/1#%e 22F. In a $ni(e/0a% 4a/tne/0hi4 o' a%% 4/e0ent 4/o4e/t&, the 4/o4e/t& )hi#h 6e%onged to ea#h o' the 4a/tne/0 at the 15e o' the #on01t$1on o' the 4a/tne/0hi4, 6e#o5e0 the #o55on 4/o4e/t& o' a%% the 4a/tne/0, a0 )e%% a0 a%% the 4/o7t0 )hi#h the& 5a& a#$i/e the/e)ith. A 014$%a1on 'o/ the #o55on en?o&5ent o' an& othe/ 4/o7t0 5a& a%0o 6e 5ade 6$t the 4/o4e/t& )hi#h the 4a/tne/0 5a& a#$i/e 0$60e$ent%& by inheritanc e, leg acy, or don ao n #annot 6e in#%$ded in 0$#h 014$%a1on, e8#e4t the '/$it0 the/eo'. 932a; Rea0on0 )h& 0$60e$ent%& a#$i/ed inhe/itan#e, %ega#&, de(i0e, o/ dona1on #annot 6e in#%$ded in the 014$%a1on in $ni(e/0a% 4a/tne/0hi4 o' 4/e0ent 4/o4e/t&  %hey are not present property. %hey are future property at

A/1#%e 2. A/1#%e0 o' $ni(e/0a% 4a/tne/0hi4, ente/ed into )itho$t 04e#i7#a1on o' it0 nat$/e, on%& #on01t$te a $ni(e/0a% 4a/tne/0hi4 o' 4/o7t0. 9323; a o * %here is less obligaon in universal partnership of prots considering that the properes owned by the partners are retained by them in naed ownership. %o consider the partnership as one of the universal partnership of present property would be onerous or more burdensome (Pineda, 2006).

A/1#%e 2. Pe/0on0 )ho a/e 4/ohi6ited '/o5 gi(ing ea#h othe/ an& dona1on o/ ad(antage #annot ente/ into $ni(e/0a% 4a/tne/0hi4. 9322; PERSONS DIS
the me of the constuon of the partnership

 %hings to be contributed to the partnership must be

23

determinate, nown and certain

: " universal partnership of all present property constutes a donaon of property but futur e property cannot be donated.

24 25 26

A/1#%e 2>. A $ni(e/0a% 4a/tne/0hi4 o' 4/o7t0 #o54/i0e0 a%% that the 4a/tne/0 5a& a#$i/e 6& thei/ ind$0t/& o/ )o/M d$/ing the e8i0ten#e o' the 4a/tne/0hi4. "o(a6%e o/ i55o(a6%e 4/o4e/t& )hi#h ea#h o' the 4a/tne/0 5a& 4o00e00 at the 15e o' the #e%e6/a1on o' the #ont/a#t 0ha%% #on1n$e to 4e/tain e8#%$0i(e%& to ea#h, on%& the $0$'/$#t 4a00ing to the 4a/tne/0hi4. 932:; PARTNERS PRIATE PROPERTYIt might happen in partnerships that no one of the partners would have any private property, and that if they did, the usufruct would be inconsiderable. If they have, such connues to be his private property, only the usufruct passing to the partnership.

UNIERSAL PARTNERSHIP O! ALL PRESENT PROPERTY (. UNIERSAL PARTNERSHIP O! ALL PRO!ITS UNI. PARTNERSHIP O! ALL PRESENT PROPERTY

UNI. PARTNERSHIP O! ALL

PRO!ITS &o'erage "ll the present property actually &roperty which the partners belonging to the partners are owned at th e m e of th e contributed to the partnership celebraon of the contract shall which become common connue to pertain to them. property of all the partners and nly the usufruct /use and thepartnership fruits shall become common property. Pro(ts nly the prots derived from "ll prots ac9uired through the the property contributed industry or worJ of the common property but not partners become common

prots arising from other property of the partners. %he la(er prots, however, may by spulaon be considered as common property for the en#oyment of all

property (Pineda, 2006).

2

@egally married spouses /however, spouses may enter into a parcular partnership lie the exercise of a profession or vocaon -ommon law spouses &ares guilty of adultery or concubinage -riminals convicted for the same oCense in consideraon of the same " person and a public ocer /or his wife, descemdants, ascendants by reason of his oce (Pineda, 2006).

PARTICULAR PARTNERSHIPSBone composed of enrely industrial partners, as in the case of 2 or more lawyers associang themselves in the pracce of law. $hen 2 individuals have not formed a general relaon of partnership but they have been #ointly associat ed in various real estate deals, it must be considered as a parcular partnership for each deal. $hen one of them maes a transacon while the other is away, without using any funds of the la(er, and without the la(er having agreed to be a party to such deal, it cannot be said that this parcular deal is for their #oint account but must be held only for the account of the individual who executes it.

A/1#%e 2. A 4a/1#$%a/ 4a/tne/0hi4 ha0 'o/ it0 o6?e#t dete/5inate thing0, thei/ $0e o/ '/$it0, o/ a 04e#i7# $nde/taMing, o/ the e8e/#i0e o' a 4/o'e00ion o/ (o#a1on. 932; !"a#ples$

25

8eterminate thing= to buy and sell a parcular lot and house

2?

&rofession= pracce of law by lawyers1 pracce of medicine by doctors. 'ence, there is a partnership of industrial partners )pecic undertaing= to paint a building or develop a subdivision

27


CHAPTER  O6%iga1on0 o' the Pa/tne/0 SECTION  O6%iga1on0 o' the Pa/tne/0 A5ong The50e%(e0

+ARRANTIES O! A PARTNER 25 2?

$arranty against evicon $arranty against hidden defects

CONTRI*UTION O! CREDIT %he partner warrants only its existence1 A/1#%e 2 . A 4a/tne/0hi4 6egin0 '/o5 the 5o5ent o' the e8e#$1on o' the #ont/a#t, $n%e00 it i0 othe/)i0e 014$%ated. 932F;

he does not warrant the solvency of the debtor unless expressly so provided

CO""ENCE"ENT O! E-ISTENCE >! A PARTNERSHIPB eing a

REASON !OR +AR RANTY %he obligaon of warranty against

consensual contract, it exists from the declaraon of the celebraon of the contract even if no contribuons had been made yet as long as the elements of a contract are present (Pineda, 2006).

evicon is the necessary conse9uence of the nature of the partnership which is an onerous contact lie a contract of sale. " partner shall not contribute something that he does not own at the me of the delivery. $hen the thing is delivered to the rm, the la(er shall from the me of delivery have the right to en#oy the legal peaceful possession of the thing (Pineda, 2006).

AGREE"ENT TO !OR" PARTNERSHIP " partnership in fact cannot be predicated on an agreement to enter into a co=partnership at a future day unless it is shown that such agreement was actually consummated. )o long as an agreement remains execut or, the partnership is inchoate.

A/1#%e 2:. +hen a 4a/tne/0hi4 'o/ a 78ed te/5 o/ 4a/1#$%a/ $nde/taMing i0 #on1n$ed ae/ the te/5ina1on o' 0$#h te/5 o/ 4a/1#$%a/ $nde/taMing )itho$t an& e84/e00 ag/ee5ent, the /ight0 and d$1e0 o' the 4a/tne/0 /e5ain the 0a5e a0 the& )e/e at 0$#h te/5ina1on, 0o 'a/ a0 i0 #on0i0tent )ith a 4a/tne/0hi4 at )i%%. A #on1n$a1on o' the 6$0ine00 6& the 4a/tne/0 o/ 0$#h o' the5 a0 ha6it$a%%& a#ted the/ein d$/ing the te/5, )itho$t an& 0e%e5ent o/ %i$ida1on o' the 4a/tne/0hi4 aai/0, i0 4/i5a 'a#ie e(iden#e o' a #on1n$a1on o' the 4a/tne/0hi4. 9n;

NOTE %here is sll warranty if the thing delivered only for the useJ of the rm (Pineda, 2006).

RE"EDY !OR *REACH  In case of evicon, the proper remedy is to recover the proper indemnity from the partner

 "nd, if the partners can prove that they would not have entered into the partnership contract, had it not been for the contribuon which has been lost through the evicon, they may as for the dissoluon of the partnership

RULE +HEN CRE DIT IS CONTRI* UTED If what is contributed is NOTE 8issoluon is not terminaon because there is sll a winding up of the partnership aCairs authori+ed by law. "
PARTNERSHIP AT +ILLB%he actual connuaon of the aCairs of the partnership, a
A/1#%e 23 . E(e/& 4a/tne/ i0 a de6to/ o' the 4a/tn e/0hi4 'o/ )hate(e/ he 5a& ha(e 4/o5i0ed to #ont/i6$te the/eto. He 0ha%% a%0o 6e 6o$nd 'o/ )a//ant& in #a0e o' e(i#1on )ith /ega/d to 04e#i7# and dete/5inate thing0 )hi#h he 5a& ha(e #ont/i6$ted to the 4a/tne/0hi4, in the 0a5e #a0e0 and in the 0a5e 5anne/ a0 the (endo/ i0 6o$nd )ith /e04e#t to the (endee. He 0ha%% a%0o 6e %ia6%e 'o/ the '/$it0 the/eo' '/o5 the 15e the& 0ho$%d ha(e 6een de%i(e/ed, )itho$t the need o' an& de5and. 93a;

credit, the contribung partner will only warrant its existence but not the solvency of the debtor unless there is a contrary spulaon (Pineda, 2006).

A/1#%e 22. +hen the #a4ita% o/ a 4a/t the/eo' )hi#h a 4a/tne/ i0 6o$nd to #ont/i6$te #on0i0t0 o' good0, thei/ a44/ai0a% 5$0t 6e 5ade in the 5anne/ 4/e0#/i6ed in the #ont/a#t o' 4a/tne/0hi4, and in the a60en#e o' 014$%a1on, it 0ha%% 6e 5ade 6& e84e/t0 #ho0en 6& the 4a/tne/0, and a##o/ding to #$//ent 4/i#e0, the 0$60e$ ent #hange0 the/eo' 6eing 'o/ a##o$nt o' the 4a/tne/0hi4. 9n; RULE +HEN CONTRI*UTION IS IN GOODS $hen a partner contributes goods as capital, the amount thereof must be determined by proper appraisal of the value thereof at the me of contribuon (Pineda, 2006). If there is a mode of appraisal agreed upon, same must be complied with. If there is none, same must be determined by experts chosen by the partners (Pineda, 2006.

SU*SE
DUTIES O! CONTRI*UTING PARTNERS 23 24 25

%o deliver what he has undertoo to contribute %o answer for his breach of warranty %o answer for the undelivered or delayed fruits (Pineda, 2006)

A/1#%e 2. A 4a/tne/ )ho ha0 $nde/taMen to #ont/i6$te a 0$5 o' 5one& and 'ai%0 to do 0o 6e#o5e0 a de6to/ 'o/ the inte/e0t and da5age0 '/o5 the 15e he 0ho$%d ha(e #o54%ied )ith hi0 o6%iga1on. The 0a5e /$%e a44%ie0 to an& a5o$nt he 5a& ha(e taMen '/o5 the 4a/tne/0hi4 #oe/0, and hi0 %ia6i%it& 0ha%% 6egin '/o5 the 15e he #on(e/ted the a5o$nt to hi0 o)n $0e. 93;


E!!ECT O! !AILURE TO PAY CONTRI*UTION )uch will mae the partner indebted to it, with interest and any damages occasioned thereby, but does not entle the other partner or partner to demand rescission of the partnership contract. !"$ " partner in a construcon venture who failed to stand by his commitment to the partnership will be ordered to reimburse to his co=partner whatever the la(er invested and spent for the pro#ects of the venture.

INDE"NI!ICATION !OR DA"AGESIncludes 0 !

@osses suCered &rots the obligee failed to obtain

A/1#%e 2F>. Un%e00 the/e i0 a 014$%a1on to the #ont/a/&, the 4a/tne/0 0ha%% #ont/i6$te e$a% 0ha/e0 to the #a4ita% o' the 4a/tne/0hi4. 9n; A/1#%e 2F. I' the/e i0 no ag/ee5ent to the #ont/a/&, in #a0e o' an i55inent %o00 o' the 6$0ine00 o' the 4a/tne/0hi4, an& 4a/tne/ )ho /e'$0e0 to #ont/i6$te an addi1ona% 0ha/e to the #a4ita%, e8#e4t an ind$0t/ia% 4a/tne/, to 0a(e the (ent$/e, 0ha%% he o6%iged to 0e%% hi0 inte/e0t to the othe/ 4a/tne/0. 9n; GR CAPITALIST PARTNERS NOT O*LIGED TO CONTRI*UTE ADDITIONAL CAPITAL IN CASE O! I""INENT LOSS O! THE *UISNESS -PN 3nless there is an agreement to the contract. In such case, he

a partner, in without ACCOUN TING !OR !UNDSof$here any authority, taesPARTNERSHIP and use the money the partnership the purchase and ac9uision of property which he later registers in his own name, he will be re9uired, in a suit for the dissoluon of the partnership, to account to his partners for the money which he used in such purchase.

A/1#%e 2F. An ind$0t/ia% 4a/tne/ #annot engage in 6$0ine00 'o/ hi50e%', $n%e00 the 4a/tne/0hi4 e84/e00%& 4e/5it0 hi5 to do 0o and i' he 0ho$%d do 0o, the #a4ita%i0t 4a/tne/0 5a& eithe/ e8#%$de hi5 '/o5 the 7/5 o/ a(ai% the50e%(e0 o' the 6ene7t0 )hi#h he 5a& ha(e o6tained in (io%a1on o' thi0 4/o(i0ion, )ith a /ight to da5age0 in eithe/ #a0e. 9n; PARTNERSHIP O+NS SERIC ES %he indus try partner does not contribute money or property but only his industry. %he partnership, therefore, is considered the owner of his services. %he industrial partner himself cannot exploit his own services for his prot without the express permission of the partnership. Rao or the prohi%ion$ %o prevent any conNict of interest between the industrial partner and the partnership, and to insure faithful compliance by said partner with his prestaon. 'ence, during the existence of the partnership, the industrial partner must devote his full me to such partnership.

is obliged to mae addional contribuon in accordance with the agreement (Pineda, 2006).

NOTE Feneral partners, in case of impending loss of the business are also obliged to mae addional contribuon to save the business. If he un#ustly refuses, he must sell his interest in the partnership to the other partners Rao$ 'is lac of cooperaon and interest should not be rewarded (Pineda, 2006).

A/1#%e 2F. I' a 4a/tne/ a$tho/ized to 5anage #o%%e#t0 a de5anda6%e 0$5 )hi#h )a0 o)ed to hi5 in hi0 o)n na5e, '/o5 a 4e/0on )ho o)ed the 4a/tne/0hi4 anothe/ 0$5 a%0o de5anda6%e, the 0$5 th$0 #o%%e#ted 0ha%% 6e a44%ied to the t)o #/ed it0 in 4/o4o/1on to thei/ a5o$nt0, e(en tho$gh he 5a& ha(e gi(en a /e#ei4t 'o/ hi0 o)n #/edit on%& 6$t 0ho$%d he ha(e gi(en it 'o/ the a##o$nt o' the 4a/tne/0hi4 #/edit, the a5o$nt 0ha%% 6e '$%%& a44%ied to the %ae/. The 4/o(i0ion0 o' thi0 a/1#%e a/e $nde/0tood to 6e )itho$t 4/e?$di#e to the /ight g/anted to the othe/ de6to/ 6& a/1#%e :, 6$t on%& i' the 4e/0ona% #/edit o' the 4a/tne/ 0ho$%d 6e 5o/e one/o$0 to hi5. 93; APPLICATION O! THE ARTICLE:e9uisites

!"cepon$ %he prohibion will not apply if the other partners give the industrial partner express permission to do so (Pineda, 2006).

%@;*%I* &at're o the prohi%ion$ It is absolute and extends to all business outside of the partnership, even if the partnership is engaged in only one trade , because if the indus trial partner is allowed to engage in the other business, the partnership will be pre#udiced because of the reducon of the me or the eCort which he will have for it.

SANCTION AGAINST INDUSTRIAL PARTNER +HO IOLATES THE PROHI*ITION ;xclude the industrial partner from the partnership with damages :ecover the benets which the industrial partner has gained in the business where he had engaged himself without the express consent of the rm or of the partn ers, with damages (Pineda, 2006).

0 + 2

%here are 2 separate credits which are both demandable ne credit is owing to the partnership "nother credit is owing to the collecng partner who must be a managing partner of the rm (Pineda, 2006).

NOTE If the collecng partner is not a managing partner, the lawwill not apply (Pineda, 2006).

A/1#%e 2F. A 4a/tne/ )ho ha0 /e#ei(ed, in )ho%e o/ in 4a/t, hi0 0ha/e o' a 4a/tne/0hi4 #/edit, )hen the othe/ 4a/tne/0 ha(e not #o%%e#ted thei/0, 0ha%% 6e o6%iged, i' the de6to/ 0ho$%d the/eae/ 6e#o5e in0o%(ent, to 6/ing to the 4a/tne/ 0hi4 #a4ita% )hat he /e#ei(ed e(en tho$gh he 5a& ha(e gi(en /e#ei4t 'o/ hi0 0ha/e on%&. 93:a; Rao$ $hen the debtor becomes insolvent, the debt in favor of the partnership becomes a bad debt and is a loss which must be borne by all the partners, including the partner who has already received his share in the partnership credit, because they have a community of interest and a proporonate share in prots and losses.


A/1#%e 2F. E(e/& 4a/tne/ i0 /e04on0i6%e to the 4a/tne/0hi4 'o/ da5age0 0$e/ed 6& it th/o$gh hi0 'a$%t, and he #annot #o54en0ate the5 )ith the 4/o7t0 and 6ene7t0 )hi#h he 5a& ha(e ea/ned 'o/ the 4a/tne/0hi4 6& hi0 ind$0t/&. Ho)e(e/, the #o$/t0 5a& e$ita6%& %e00en thi0 /e04on0i6i%it& i' th/o$gh the 4a/tne/0 e8t/ao/dina/& eo/t0 in othe/ a#1(i1e0 o' the 4a/tne/0hi4, $n$0$a% 4/o7t0 ha(e 6een /ea%ized. 933a; NOTE 8amages caused by the faulng partner cannot be oCset or compensated with the prots and benets which he may have earned for the partnership by his industry. -ompensaon cannot apply because a partner is both a debtor in his duty to secure prots and benets for the partnership and also in his duty to observe diligence in the performance of his obligaons as a partner. In compensaon, it is re9uired that 2 persons in their own rights are creditors and debtors of each other (Pineda, 2006).

Ne#e00it& o' Li$ida1on >or the purpose of ad#udicang to a partner damages alleged to have been suCered by reason of the supposed fraudulent management of the partnership business by another partner, it is rst necessary that a li9uidaon of the business be made so that the prots and the losses may be nown and the causes of the la(er and the responsibility of the managing partner, as well as the damages which each partner may have suCered, may be determined.

the 4a/tne/0hi4 6$0ine00, and 'o/ /i0M0 in #on0e$en#e o' it0 5anage5ent. 93a; Rei56$/0e5ent %he managing partner may be allowed funds borrowed or advanced, and necessary for the compleon of the wor, within the scope of the business and expressly provided for by the agreement among partners. !"a#ple$ $here the land tax levied on real property owned by the partnership is paid by a partner out of his private funds, such partner is entled to be reimbursed therefor.

NOTE %he arcle does not apply where no money other than that contributed as capital is involved.

NOTE ;ven in the case of failure of the business entered into by the partnership with third persons, reimbursement must be made to the paying partner, as long as he is not at fault. %he paying partner should not be liable personally because he is a mere agent of the partnership (Pineda, 2006).

PAYING PARTNER HAS NO RIGHT O! RETENTION %here is a diCerence between an ordinary agent and a paying partner. %he former, if not refunded, may exercise the right of retenon of the things which are the ob#ects of the agency. %he paying partner is not given such authority (Pineda, 2006).

C%ai5 again0t De#ea0ed Pa/tne/ "ny claim against a deceased partner or his estate, for a sum of money due the partnership by reason of any misappropriaon of its fund by him, or for damages resulng from his wrongful acts as manager, should be prosecuted against his estate in administraon as provided for in the :ules of -ourt.

A/1#%e 2F:. The /i0M o' 04e#i7# and dete/5inate thing0, )hi#h a/e not '$ngi6%e, #ont/i6$ted to the 4a/tne/0hi4 0o that on%& thei/ $0e and '/$it0 5a& 6e 'o/ the #o55on 6ene7t, 0ha%% 6e 6o/ne 6& the 4a/tne/ )ho o)n0 the5. I' the thing0 #ont/i6$te a/e '$ngi6%e, o/ #annot 6e Me4t )itho$t dete/io/a1ng, o/ i' the& )e/e #ont/i6$ted to 6e 0o%d, the /i0M 0ha%% 6e 6o/ne 6& the 4a/tne/0hi4. In the a60en#e o' 014$%a1on, the /i0M o' the thing0 6/o$ght and a44/ai0ed in the in(ento/&, 0ha%% a%0o 6e 6o/ne 6& the 4a/tne/0hi4, and in 0$#h #a0e the #%ai5 0ha%% 6e %i5ited to the (a%$e at )hi#h the& )e/e a44/ai0ed. 932; NOTE %he owner bears the ris. %he rule on res perit domino applies to determine who bears the ris of loss of property held by the partnership, except as to fungible things and those under appraisal. "lthough the law refers to appraisal in the inventory, the same soluon applies even when the appraisal is separate from the inventory.

A/1#%e 2F3. The 4a/tne/0hi4 0ha%% 6e /e04on0i6%e to e(e/& 4a/tne/ 'o/ the a5o$nt0 he 5a& ha(e di06$/0ed on 6eha%' o' the 4a/tne/0hi4 and 'o/ the #o//e04onding inte/e0t, '/o5 the 15e the e84en0e a/e 5ade it 0ha%% a%0o an0)e/ to ea#h 4a/tne/ 'o/ the o6%iga1on0 he 5a& ha(e #ont/a#ted in good 'aith in the inte/e0t o'

A/1#%e 2F2. The %o00e0 and 4/o7t0 0ha%% 6e di0t/i6$ted in #on'o/5it& )ith the ag/ee5ent. I' on%& the 0ha/e o' ea#h 4a/tne/ in the 4/o7t0 ha0 6een ag/eed $4on, the 0ha/e o' ea#h in the %o00e0 0ha%% 6e in the 0a5e 4/o4o/1on. In the a60en#e o' 014$%a1on, the 0ha/e o' ea#h 4a/tne/ in the 4/o7t0 and %o00e0 0ha%% 6e in 4/o4o/1on to )hat he 5a& ha(e #ont/i6$ted, 6$t the ind$0t/ia% 4a/tne/ 0ha%% not 6e %ia6%e 'o/ the %o00e0. A0 'o/ the 4/o7t0, the ind$0t/ia% 4a/tne/ 0ha%% /e#ei(e 0$#h 0ha/e a0 5a& 6e ?$0t and e$ita6%e $nde/ the #i/#$50tan#e0. I' 6e0ide0 hi0 0e/(i#e0 he ha0 #ont/i6$ted #a4ita%, he 0ha%% a%0o /e#ei(e a 0ha/e in the 4/o7t0 in 4/o4o/1on to hi0 #a4ita%. 93Fa; SCOPE It relates exclusively to the se(lement of partnership aCairs among the partners themselves and has nothing to do with the liability of the partners to third persons.

P/o7t0 and %o00e0 $here there is an agreement as to the manner of sharing prots, the losses will be divided in the same proporon. %he pares can validly spulate a distribuon of losses diCerent from that of the prots, so long as nobody is excluded from the prots or the losses.

NOTE "n industrial partner cannot claim for himself of any part of the property contributed1 he can shar e only in the prots and benets in conformity with this arcle, if the contr ary is not spulated.

Hi66e/d (. E0tate o' "#E%/o& 9: Phi% 3; $here a partner has paid certain expenses which represent a loss to the partnership and there is no income from the partnership to reimburse him, he has a right to loo to the estate of his other partner for such reimbursement.


LIA*ILITY O! INDUSTRIAL PARTNER !OR LOSSES  "lthough under the provisions the industrial shall not be liable for the losses, he may nevertheless be held liable, if by spulaon, he is specially made to parcipate in the losses /People . enorio, 53 *.+. 5).

A/1#%e >>. The 4a/tne/ )ho ha0 6een a44ointed 5anage/ in the a/1#%e0 o' 4a/tne/0hi4 5a& e8e#$ te a%% a#t0 o' ad5ini0t/a1on de04ite the o44o0i1on o' hi0 4a/tne/0, $n%e00 he 0ho$%d a#t in 6ad 'aith and hi0 4o)e/ i0 i//e(o#a6%e )itho$t ?$0t o/ %a)'$% #a$0e. The (ote o' the 4a/tne/0 /e4/e0en1ng the #ont/o%%ing inte/e0t 0ha%% 6e ne#e00a/& 'o/ 0$#h /e(o#a1on o' 4o)e/.

QPRO!ITS RE!ER TO NET PRO!ITSB %he prots distributable to the partners should be reduced by the amoun ts of the incom e tax assessed against partnership (Pineda, 2006).

A 4o)e/ g/anted ae/ the 4a/tne/0hi4 ha0 6een #on01t$ted 5a& 6e /e(oMed at an& 15e. 93Fa;

A/1#%e 2F. I' the 4a/tne/0 ha(e ag/eed to in t/$0t to a thi/d 4e/0on the de0igna1on o' the 0ha/e o' ea#h one in the 4/o7t0 and %o00e0, 0$#h de0igna1on 5a& 6e i54$gned on%& )hen it i0 5ani'e0t%& ine$ita6%e. In no #a0e 5a& a 4a/tne/ )ho ha0 6eg$n to e8e#$te the de#i0ion o' the thi/d 4e/0on, o/ )ho ha0 not i54$gned the 0a5e )ithin a 4e/iod o' th/ee 5onth0 '/o5 the 15e he had Mno)%edge the/eo', #o54%ain o' 0$#h de#i0ion.

PO+ERS O! "ANAGING PARTNER

The de0igna1on o' %o00e0 and 4/o7t0 #annot 6e int/$0ted to one o' the 4a/tne/0. 93F>; Rao$ " partner will have conNict of interest (Pineda, 2006).

A/1#%e 2FF. A 014$%a1on )hi#h e8#%$de0 one o/ 5o/e 4a/tne/0 '/o5 an& 0ha/e in the 4/o7t0 o/ %o00e0 i0 (oid. 93F; P/ohi6ited 014$%a1on %he essen ce of partnership is that the partners share in the prots and losses. %he law does not prohibit a spulaon in which the distribuon of the losses is not in proporon to that of the prots1 what is prohibited is the exclusion of one or more partners from the prots or losses.

Ee#t o' 0$#h 014$%a1on %he prots and losses will be distributed in accordance with par. 2 of "rt. !6K6

88 In the a60en#e o' 014$%a1on, the 0ha/e o' ea#h 4a/tne/ in the 4/o7 t0 and %o00 e0 0ha%% 6e in 4/o4o/1on to )hat he 5a& ha(e #ont/i6$ted, 6$t the ind$0t/ia% 4a/tne/ 0ha%% not 6e %ia6%e 'o/ the %o00e0. A0 'o/ the 4/o7t0, the ind$0t/ia% 4a/tne/ 0ha%% /e#ei(e 0$#h 0ha/e a0 5a& 6e ?$0t and e$ita6%e $nde/ the #i/#$50tan#e0. I' 6e0ide0 hi0 0e/(i#e0 he ha0 #ont/i6$ted #a4ita%, he 0ha%% a%0o /e#ei(e a 0ha/e in the 4/o7t0 in 4/o4o/1on to hi0 #a4ita%. 93Fa; 88 NOTE >rench #urisprudence and writers consider that a violaon of the present arcle nullies, not only the parcular spulaon of the prots and losses, but the enre contract of partnership. %his conclusion is maintained by analogy to obligaons based on illicit condion, which annuls the obligaon dependent on it. %here is, howev er, no reason why a spulaon to exempt the industrial partner from losses should be void.

" managing partner can be presumed to have all the incidental powers to carry out the ob#ect of the partnership in the transacon of business sub#ect to the excepon, however, that when the powers are specically restricted, he cannot exercise the powers expressly denied him. $hen the arcles of associaon do not specify the powers of a managing partner, he has the powers of a general agent, and even more1 and when the ob#ec t of the compa ny is determined, the manager has all the powers necessary for the a(ainment of such ob#ect.

NOTE &ower of managing partner is generally irrevocable. %he power granted a
THE PO+ER GRANTED A!TER CONSTITUTION O! PARTNERSHIP IS REOCA*LE AT ANY TI"E. It is a simple contract of agency. It may be revoed any me by the partners represenng the controlling interest (Pineda, 2006).

 I0 the 5anaging 4a/tne/ en1t%ed to #o54en0a1on 'o/ hi0 0e/(i#e0 a0 0$#h= > It depends. If there is an agreement spulang that he shall receive compensaon, he shall be so entled to the compensaon agreed upon for his services as managing partner. %he details of the compensaon will be xed in the agreement. If there is no agreement, the manag ing partner, as a rule, is not entled to compensaon. 'e is expected to render free service to the partnership for the common benet of all partners (Pineda, 2006). A/1#%e >. I' t)o o/ 5o/e 4a/tne/0 ha(e 6een int/$0ted )ith the 5anage5ent o' the 4a/tne/0hi4 )itho$t 04e#i7#a1on o' thei/ /e04e#1(e d$1e0, o/ )itho$t a 014$%a1on that one o' the5 0ha%% not a#t )itho$t the #on0 ent o' a%% the othe/0, ea#h one 5a& 0e4a/ate%& e8e#$te a%% a#t0 o' ad5ini0t/a1on, 6$t i' an& o' the5 0ho$%d o44o0e the a#t0 o' the othe/0, the de#i0ion o' the 5a?o/it& 0ha%% 4/e(ai%. In #a0e o' a 1e, the 5ae/ 0ha%% 6e de#ided 6& the 4a/tne/0 o)ning the #ont/o%%ing inte/e0t. 93Fa; RE
NOTE " spulaon exempng the industrial partner from losses is valid because it is #ust an armaon of the law. %he prohibion applies only to capitalist partners (Pineda, 2006).

! In their appointment papers, there is no specicaon of their respecve dues


23

%here is no spul aon that one of them shall not act without the unanimous consent of all the other partners (Pineda, 2006).

the third person acted in good faith and the transacon refers to ma(ers within the business of the partnership, the contract cannot be annulled, without pre#udice to the liability of the guilty partner ot his co=partner.

NOTE If there is a designaon of the resp ecve dues of the appointed managing partners, the arcle nds no applicaon (Pineda, 2006).

Rao$ %he necess ity of protecng third person from fraud and deceit.

SOLIDARY "ANAGE"ENT

A44%i#a1on o' the /e$i/e5ent o' 4/e(io$0 a44/o(a% 6& the othe/ 4a/tne/ It only refers to the execuon of formal contracts in wring,

)ee "rt. !405

OPPOSITION Fenerally, each manager may execute any acts of administraon without asing for the consent of the other managers. ;ach manager, however, has the right to ob#ect to any act or operaon before it is celebrated. )uch opposion by one partner to the pro#ected act by another is sucient to prevent it1 and if the la(er, ignoring such ob#econ, goes ahead and executes the acts, it shall be oid, not only as among the members but also to third persons, who had nowledge, or who could have nown, of such opposion.

NOTE It will be valid with respect to the third person who contracted with a partner, if such third person was not informed of the opposion, and the contract is one within the scope of the administraon of the partnership.

and not to roune transacons, such as ordinary purchases and sales for a rm engaged in the business if buying and selling merchandise of all inds, naturally come within the scope of the general authority of the manager of a business.

A/1#%e >. +hen the 5anne/ o' 5anage5ent ha0 not 6een ag/eed $4on, the 'o%%o)ing /$%e0 0ha%% 6e o60e/(ed > A%% the 4a/tne/0 0ha%% 6e #on0ide/ed agent0 and )hate(e/ an& one o' the5 5a& do a%one 0ha%% 6ind the 4a/tne/0hi4, )itho$t 4/e?$di#e to the 4/o(i0ion0 o' a/1#%e >.  None o' the 4a/tne/0 5a&, )itho$t the #on0ent o' the othe/0, 5aMe an& i54o/tant a%te/a1on in the i55o(a6%e 4/o4e/t& o' the 4a/tne/0hi4, e(en i' it 5a& 6e $0e'$% to the 4a/tne/0hi4. *$t i' the /e'$0a% o' #on0ent 6& the othe/ 4a/tne/0 i0 5ani'e0t%& 4/e?$di#ia% to the inte/e0t o' the 4a/tne/0hi4, the #o$/t0 inte/(en1on 5a& 6e 0o$ght. 93F:a; NOTE %he arcle applies only where the arcles of partnership

Rao$ %he partner contracng is an agent of the partnership, and within the scope of his authority, his contract with an innocent third person binds the principal.

made no provision for the management of the business of the rm (Pineda, 2006).

PARTNERS ARE PARTNERSHIP AGENTS $hen the arcles of Ti5e 'o/ the o44o0i1on It must be made before the parcular act of administraon has become eCecve.

TIE In case of e in the votes, then the controversy shall be decided by the partners owning the controlling interest. %his is a new provision in the -ode. *ote that it is only in case of a e or deadloc that the partner owning the controlling interest will decide in the controversy (Pineda, 2006).

A/1#%e >. In #a0e it 0ho$%d ha(e 6een 014$%ated that none o' the 5anaging 4a/tne/0 0ha%% a#t )itho$t the #on0ent o' the othe/0, the #on#$//en#e o' a%% 0ha%% 6e ne#e00a/& 'o/ the (a%idit& o' the a#t0, and the a60en#e o/ di0a6i%it& o' an& one o' the5 #annot 6e a%%eged, $n%e00 the/e i0 i55inent dange/ o' g/a(e o/ i//e4a/a6%e in?$/& to the 4a/tne/0hi4. 93F; @OINT "ANAGE"ENT %he obligaon to secure the consent of the other partner rests upon the partner entering into the contract. It is not re9uired to verify whether the partner entering into the contract. It is not imposed upon third person who enters into the cont ract and who is not re9uired to verify whether the partner entering into the contract has previously obtained the consent of the other. It is presumed that such consent has been given, unless the contrary has been previously manifested to the third person.

NOTE ut even if the contract entered into by one partner is made, not only without the consent of the other but even against his will, if

partnership mae no provision for the management of the partnership business, one partner is empowered to contract in the name of the partnership, and under such circumstances, all the partners are considered as agents of the partnership.

ACTS REor acts of disposion or any modicaon of the partnership arcles, unanimous consent is re9uired1 even a ma#ority will not suce. !"a#ple$ " partner cannot validly sell or convey the partnership business without the consent of all the other partners forming the partnership.

@UDICIAL INTERENTION, +HEN PROPER $hen an important alteraon of the property is necessary and the unanimous consent cannot be obtained, resort to the court may be pursued to secure the total consent, in order to avoid an impending pre#udice to the partnership (Pineda, 2006).

A/1#%e >. E(e/& 4a/tne/ 5a& a00o#iate anothe/ 4e/0on )ith hi5 in hi0 0ha/e, 6$t the a00o#iate 0ha%% not 6e ad5ied into the 4a/tne/0hi4 )itho$t the #on0ent o' a%% the othe/ 4a/tne/0, e(en i' the 4a/tne/ ha(ing an a00o#iate 0ho$%d 6e a 5anage/. 93F3; SU*PARTNERSHIP"ny partner may form a partnership with another person with respect to his share. %heir associaon is called 0$64a/tne/0hi4. " subpartnership is a sort of partnership within an exisng partnership separate and disnct from the srcinal or main partnership (Pineda, 2006).


NOTE %he terms of the subpartnership are immaterial to the

partners is essenally duciary, each are condenal agent of the other.

srcinal partnership as such terms are mere internal arrangements between the partner and his subpartner (Pineda, 2006).

NOTE %he partners cannot derive a secret prot from partnership transacons unnown to the others.

A/1#%e >:. The 4a/tne/0hi4 6ooM0 0ha%% 6e Me4t, 0$6?e#t to an& ag/ee5ent 6et)een the 4a/tne/0, at the 4/in#i4a% 4%a#e o' 6$0ine00 o' the 4a/tne/0hi4, and e(e/& 4a/tne/ 0ha%% at an& /ea0ona6%e ho$/ ha(e a##e00 to and 5a& in04e#t and #o4& an& o' the5. 9n;

D$/a1on o' the 7d$# ia/& /e%a1on *o duciary relaon exists between persons negoang for the formaon of a partnership contract. )uch duciary relaon exists only during the existence of the partnership.

Kee4ing 6ooM0 in 4%a#e o' 6$0ine00 %his arcle refers to a going partnership, and on dissoluon, in the absence of other agreement, express or implied, the boos to all the partners but no one partner is obliged to connue the place of business to preserve the boos for the benet of the others, nor is there a duty on the part of the purchaser of goodwill and business of a rm to store the boos so that the former partners may inspect them.

RIGHT TO INSPECT GR ;ach partner should have free access to the partnership boos

It ends at the terminaon of the partnership. %erminaon is the stage when all partnership aCairs are wound up or completed. It is diCerent from dissoluon (Pineda, 2006)

A/1#%e >. The #a4ita%i0t 4a/tne/0 #annot engage 'o/ thei/ o)n a##o$nt in an& o4e/a1on )hi#h i0 o' the Mind o' 6$0ine00 in )hi#h the 4a/tne/0hi4 i0 engaged, $n%e00 the/e i0 a 014$%a1on to the #ont/a/&. An& #a4ita%i0t 4a/tne/ (io%a1ng thi0 4/ohi6i1on 0ha%% 6/ing to the #o55on '$nd0 an& 4/o7t0 a##/$ing to hi5 '/o5 hi0 t/an0a#1on0, and 0ha%% 4e/0ona%%& 6ea/ a%% the %o00e0. 9n;

for the purpose of inspecng them

NOTE " capitalist partner cannot engage in the business for his own concealing the boos

account or benet in a business which is si#ilar to the %'siness o the partnership (Pineda, 2006).

QRea0ona6%e Ho$/0B means at reasonable hours on business days

-PN TO THE PROHI*ITION %he other partners may agree to

throughout the year1 and not merely during some arbitrary period fo a few days chosen by the managers.

spulate that the capitalist partners may engage in the same business as that of the partnership if it is perceived that no destrucve compeon will arise such as when the place of operaon is far away from the sphere of inNuence of the partnership, or when the business will enhance healthy compeon with the business of the partnership (Pineda, 2006).

-PN ;9uity will intervene to prevent one partner from eeping or

PLACE +HERE THE *OOKS SHOULD *E KEPT  %he boos shall be placed and ept in a place agreed upon by the partners. In the absence of any agreement, the boos shall be ept at the principal place of business of the rm whereat each partner may come, have access, inspect or copy entries in the boos for valid purposes (Pineda, 2006).

LACK O! *OOKS "bsence of any formal boos of the partnership does not aCect the validity of the contract of partnership nor its contracts

A/1#%e > 3. Pa/tne/0 0ha%% /ende/ on de5and t/$e and '$%% in'o/5a1on o' a%% thing0 ae#1ng the 4a/tne/0hi4 to an& 4a/tne/ o/ the %ega% /e4/e0enta1(e o' an& de#ea0ed 4a/tne/ o/ o' an& 4a/tne/ $nde/ %ega% di0a6i%it&. 9n; DUTY TO "AKE DISCLOSURE

AC
A/1#%e >F. An& 4a/tne/ 0ha%% ha(e the /ight to a 'o/5a% a##o$nt a0 to 4a/tne/0hi4 aai/0 > I' he i0 )/ong'$%%& e8#%$ded '/o5 the 4a/tne/0hi4 6$0ine00 o/ 4o00e00ion o' it0 4/o4e/t& 6& hi0 #oB4a/tne/0  I' the /ight e8i0t0 $nde/ the te/50 o' an& ag/ ee5ent  A0 4/o(ided 6& a/1#%e >2  +hene(e/ othe/ #i/#$50tan#e0 /ende/ it ?$0t and /ea0ona6%e. 9n; RIGHT TO !OR"AL ACCOUNT

Food faith not only re9uires that a partner should not mae any false concealment to his partner, but also that he should abstain from all concealment.

GR " partner is not entled to a formal account

A/1#%e >2. E(e/& 4a/tne/ 5$0t a##o$nt to the 4a/tne/0hi4 'o/ an&

-PN 8issoluon

6ene7t, and ho%d a0 t/$0tee 'o/ it an& 4/o7t0 de/i(ed 6& hi5 )itho$t the #on0ent o' the othe/ 4a/tne/0 '/o5 an& t/an0a#1on #onne#ted )ith the 'o/5a1on, #ond$#t, o/ %i$ida1on o' the 4a/tne/0hi4 o/ '/o5 an& $0e 6& hi5 o' it0 4/o4e/t&. 9n; Re%a1on o' Pa/tne/0 &artners are re9uired to exhibit towards each other the highest degree of good faith. %he relaon between the

NOTE %here is no reason why they should constantly render him accounts in the formal sense of the word. $hen, however, he is excluded from the business or the possession of partnership property, without any express agreement authori+ing such exclusion, he should have the right to demand a formal account from his partners, without necessarily re9uiring him to dissolve the partnership.


property %he right to demand an accounng exists as long as the partnership exists.

Ee#t o' a44/o(a% o' a##o$nt %he approval of the last and nal statement of accounts precludes any right on the part of the complaining partners to a further li9uidaon, unless the la(er can show there was fraud, deceit, error or mistae in said approval.

>I0 the/e a d$t& to a##o$nt 'o/ a#$i0i1on o' ea/ning0 and 4/o4e/t& ae/ te/5ina1on o' the 4a/tne/0hi4= 2 It depends. If the earnin gs and ac9ui sions of a partner are obtained from transacons unrelated to the partnership aCairs or business, there is no duty to account. therwise, he has no account. %hus, it is a recogni+ed principle that a former partnerGs duty to share prots with his former co=partner may extend to earnings and ac9uisions accruing a
SECTION  P/o4e/t& Right0 o' a Pa/tne/ A/1#%e >. The 4/o4e/t& /ight0 o' a 4a/tne/ a/e  Hi0 /ight0 in 04e#i7# 4a/tne/0hi4 4/o4e/t&  Hi0 inte/e0t in the 4a/tne/0hi4 and : Hi0 /ight to 4a/1#i4ate in the 5anage5ent 9n; PROPERTY RIGHTS %he prop erty right s of a partner are those enumerated under this arcle. %hey constute property being suscepble of appropriaon or exercise by the owner. %o disnguish these rights from others, they are referred to as 4/in#i4a% /ight0.

PRINCIPAL RIGHTS 0:ight to demand reimbursement for amounts he advanced to the partnership and to indemnity for the burdens arising from riss in management /"rt. !6KO -:ight to have access and to inspect partnership boos /"rt. !407 2:ight to demand true and full informaon of all things aCecng the partnership aCairs /"rt. !40O 3:ight to demand a formal account of partnership aCairs under the circumstances in "rt. !40K 4:ight to dissolve the partnership under certain condions (Pineda, 2006)

ofthepartnershipassets .!tent It includes only actual It includes not only the original contributed and promised to the capital contributed but a lso all partnership propertysubse9uentlyac9uired on account of the partnership (Pineda, 2006).

A/1#%e . A 4a/tne/ i0 #oBo)ne/ )ith hi0 4a/tne/0 o' 04e#i7# 4a/tne/0hi4 4/o4e/t&. The in#ident0 o' thi0 #oBo)ne/0hi4 a/e 0$#h that > A 4a/tne/, 0$6?e#t to the 4/o(i0ion0 o' th i0 Tit%e a nd to an& ag/ee5ent 6et)een the 4a/tne/0, ha0 an e$a% /ight )ith hi0 4a/tne/0 to 4o00e00 04e#i7# 4a/tne/0hi4 4/o4e/t& 'o/ 4$/4o0e0 he ha0)itho$t no /ightthe to #on0ent 4o00e00 0$#h4a/tne/0hi4 4/o4e/t& 'o/ an& othe/6$t 4$/4o0e o' hi0 4a/tne/0  A 4a/tne/0 /ight in 0 4e#i7# 4a/tne/0hi4 4/o4e/t& i0 not a00igna6%e e8#e4t in #onne#1on )ith the a00ign5ent o' /ight0 o' a%% the 4a/tne/0 in the 0a5e 4/o4e/t&  A 4a/tne/0 /ight in 0 4e#i7# 4a/tne/0hi4 4/o4e/t& i0 not 0$6?e#t to aa#h5ent o/ e8e#$1on, e8#e4t on a #%ai5 again0t the 4a/tne/0hi4. +hen 4a/tne/0hi4 4/o4e/t& i0 aa#hed 'o/ a 4a/tne/0hi4 de6t the 4a/tne/0, o/ an& o' the5, o/ the /e4/e0enta1(e0 o' a de#ea0ed 4a/tne/, #annot #%ai5 an& /ight $nde/ the ho5e0tead o/ e8e541on %a)0  A 4a/tne/0 /ight in 0 4e#i7# 4a/tne/0hi4 4/o4e/t& i0 not 0$6?e#t to %ega% 0$44o/t $nde/ a/1#%e F. 9n; PARTNERS INTEREST IN ASSETS " partner has no individual property in any specic assets of the rm, but each partnerGs interest in partnership property is his share in the surplus a
NOTE %he interest of one partner in the assets of a partnership does not entle him to any parcular poron of such assets, but merely confers upon him a right to an accounng with other members of the partnership, and when aCairs of the partnership are se(led, such partner shall receive the share to which he is entled. " partner, however, sub#ect to agreement between the partners, has an e9ual right with his partners to possess specic partnership property for partnership purposes, but has no right to possess such property for his personal or other purposes without the other partnersG consent.

E8tent o' 4/o4e/t& /ight " partnership has 5 disnct interests arising

T/an0'e/ o' /ight0 %he right of a partner as a co=owner in specic

from his partnership 0 'is co=ownership in the specic property of the partnership ! 'is interest in the partnership as such 2 'is right to parcipate in the management

partnership property is not separately assignable or sub#ect to a(achment and execuon. %his peculiarity of tenancy in partnership is a necessary conse9uence of the partnership relaon.

PARTNERSHIP CAPITAL (. PARTNERSHIP PROPERTY PA RT N ER SH IP C A PI TA L PA RT NERS HIP P RO PERT Y -scepbility to change in 'ale Its value is constant. It does not Its value varies from me to change. It is not aCected by me in accordance with the Nuctuaons in the value of the Nuctuaons of the maret value

Raonale$ %his is intended to prevent interference by outsiders in partnership aCairs and to protect the right of other partners and partnership creditors to have partnership assets applied to rm debts (Pineda, 2006) !"a#ple$ If " and  are partners and " a(empts to assign all his right in some partnership property, to -, and the law recog ni+es the possibility of such a transfer -, would pro tanto become a partner with 1 for the rights of " in the cha(el are to possess the cha(el for


a partnership purpose. ut partnership is a voluntary relaon.  cannot have a partner thrust upon him by " without Gs consent. 'ence, a creditor of one of the partners cannot be forced into the partnership by involuntary assignment thru a(achment and execuon.

A/1#%e . A 4a/tne/0 inte/e0t in the 4a/tne/0hi4 i0 hi0 0ha/e o' the 4/o7t0 and 0$/4%$0. 9n; INTEREST O! PARTNER %he interest of a partner in partnership property and business is the net balance found to be due him a
should operate1 but the remaining partners may refuse to recogni+e the right of the assignee to #oin in the conduct of the business, and mae such refusal a ground for dissoluon.

RIGHTS O! ASSIGNEE %he transfer by a partner of his partnership interest does not mae the assignee of such interests a partner in the rm, nor entle the assignee to interfere in the management of the partnership business or to receive anything except the assigneeGs prots. %he assig nment does not purpo rt to transfer an interest in the partnership, but only a future conngent right to a poron of the ulmate residue as the assignor may become entled to receive by virtue of his proporonate interest in the capital. In case of dissoluon of the partnership, the assignee is entled to receive his assignorGs interest and may re9uire an account from the date only of the last account agreed to buy all the partners (Pineda, 2006).

OTHER RIGHTS O! ASSIGNEE OR CONEYANCE %he partnerGs share in the undistributed prots and surplus constutes his interest in the partnership. P/o7t refers to excess of revenues over expenses for a transacon1 somemes used synonymously with net in#o5e for the period. It is gain reali+ed from business or investment over and above expenditures. $hile 0$/4%$0 refers to remains of a fund appropriated for a parcular purpose (Pineda, 2006).

Lo00, on the other hand, is the diCerence that results when the liabilies of the partnership are more than the assets (Pineda, 2006).

NOTE 3nlie the partnerGs interest in specic partnership property, the partnerGs interest in the partnership may be assigned, a(ached and sub#ect to payment of legal support (Pineda, 2006).

NOTE %he interest of a partner in an ongoing partnership business where there has been no se(lement of his account is not a debt due to the partner by the partnership and, therefore, is not sub#ect to a(achment or execuon on a #udgment recovered against the individual partner.

A/1#%e . A #on(e&an#e 6& a 4a/tne/ o' hi0 )ho%e inte/e0t in the 4a/tne/0hi4 doe0 not o' it0e%' di00o%(e the 4a/tne/0hi4, o/, a0 again0t the othe/ 4a/tne/0 in the a60en#e o' ag/ee5ent, en1t%e the a00ignee, d$/ing the #on1n$an#e o' the 4a/tne/0hi4, to inte/'e/e in the 5anage5ent o/ ad5ini0t/a1on o' the 4a/tne/0hi4 6$0ine00 o/ aai/0, o/ to /e$i/e an& in'o/5a1on o/ a##o$nt o' 4a/tne/0hi4 t/an0a#1on0, o/ to in04e#t the 4a/tne/0hi4 6ooM0 6$t it 5e/e%& en1t%e0 the a00ignee to /e#ei(e in a##o/dan#e )ith hi0 #ont/a#t the 4/o7t0 to )hi#h the a00igning 4a/tne/ )o$%d othe/)i0e 6e en1t%ed. Ho)e(e/, in #a0e o' '/a$d in the 5anage5ent o' the 4a/tne/0hi4, the a00ignee 5a& a(ai% hi50e%' o' the $0$a% /e5edie0.

0

%o receive the prots accruing to the assigning partner as per contract

-

%o avail himself of the ordinary remedies provided by law in the event of fraud in the management of the partnership

2

%o demand an accounng of partnership aCairs, 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 (Pineda, 2006).

A/1#%e . +itho$t 4/e?$di#e to the 4/e'e//ed /ight0 o' 4a/tne/0hi4 #/edito/0 $nde/ a/1#%e 2, on d$e a44%i#a1on to a #o54etent #o$/t 6& an& ?$dg5ent #/edito/ o' a 4a/tne/, the #o$/t )hi#h ente/ed the ?$dg5ent, o/ an& othe/ #o$/t, 5a& #ha/ge the inte/e0t o' the de6to/ 4a/tne/ )ith 4a&5ent o' the $n0a10 7ed a5o$nt o' 0$#h ?$dg5ent de6t )ith inte/e0t the/eon and 5a& then o/ %ate/ a44oint a /e#ei(e/ o' hi0 0ha/e o' the 4/o7t0, and o' an& othe/ 5one& d$e o/ to 'a%% d$e to hi5 in /e04e#t o' the 4a/tne/0hi4, and 5aMe a%% othe/ o/de/0, di/e#1on0, a##o$nt0 and in$i/ie0 )hi#h the de6to/ 4a/tne/ 5ight ha(e 5ade, o/ )hi#h the #i/#$50tan#e0 o' the #a0e 5a& /e$i/e.

In #a0e o' a di00o%$1on o' the 4a/tne/0hi4, the a00ignee i0 en1t%ed

The inte/e0t #ha/ged 5a& 6e /edee5ed at an& 15e 6e'o/e 'o/e#%o0$/e, o/ in #a0e o' a 0a%e 6eing di/e#ted 6& the #o$/t, 5a& 6e 4$/#ha0ed )itho$t the/e6& #a$0ing a di00o%$1on  ⠀V⤀VᜀVᜀVᜀVᜀVᜀVᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀV ᜀ> +ith 0e4a/ate 4/o4e/t&, 6& an& one o/ 5o/e o' the 4a/tne/0 o/  ⠀V⤀VᜀVᜀVᜀVᜀVᜀVᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀV ᜀ +ith 4a/tne/0hi4 4/o4e/t&, 6& an& one o/ 5o/e o' the 4a/tne/0 )ith the #on0ent o' a%% the 4a/tne/0 )ho0e inte/e0t0 a/e not 0o #ha/ged o/ 0o%d. Nothing in thi0 Tit%e 0ha%% 6e he%d to de4/i(e a 4a/tne/ o' hi0 /ight, i'

to /e#ei(e hi0 a00igno/0 inte/e0t and 5a& /e$i/e an a##o$nt '/o5 the date on%& o' the %a0t a##o$nt ag/eed to 6& a%% the 4a/tne/0. 9n;

an&, $nde/ the e8e541on %a)0, a0 /ega/d0 hi0 inte/e 0t in the 4a/tne/0hi4. 9n;

Ee#t o' a00ign5ent o' Inte/e0t

En'o/#e5ent o' @$dg5ent

%he assignment or conveyance of a partnerGs interest in the partnership does not act of itself operate as a dissoluon of the partnership, in the absence of any showing of an intent that it

%he proper method of reaching a #udgment debtorGs interest in a partnership is by appl ying for a charging order, and for the appointment of a receiver under this arcle rather than by a(aching any parcular partnership property.

⸀

⸀


PO+ERS O! RECEIER 0

!

'e is en tled to an y relief necessary to co nserve th e partnership assets for partnership purposes and parcularly to a decree nullifying unlawful eCorts of a partner to assign or encumber his interest in specic partnership property 'e may be auth ori+ed to enf orce an y personal liab ility of partners for rm debts because such liability constutes partnership assets.

Ind$0t/ia% Pa/tne/ a%0o Lia6%e "n industrial partner is liable to the same extent and in the same way as a capitalist partner for the debts and obligaons of the partnership /although under "rt. !6K6, industrial partners shall not be liable for loss. $hen he has paid such debts out of his private property during the life of the partn ership, then, when its aCai rs are se(led, he is entled to credit for the amount so paid, and if it results that there is not enough property in the partnership, then the capitalist partners must pay him.

NOTE %he liability of the partners for the partnership debts is pro SECTION 

rata, if their contribuons are une9ual. &ro rata means in proporon or ratably, or a division according to share, interest, or liability of each (Pineda, 2006).

O6%iga1on0 o' the Pa/tne/0 )ith Rega/d to Thi/d Pe/0on0 A/1#%e :. E(e/& 4a/tne/0hi4 0ha%% o4e/ate $nde/ a 7/5 na5e, )hi#h 5a& o/ 5a& not in#%$de the na5e o' one o/ 5o/e o' the 4a/tne/0. Tho0e )ho, not 6eing 5e56e/0 o' the 4a/tne/0hi4, in#%$de thei/ na5e0 in the 7/5 na5e, 0ha%% 6e 0$6?e#t to the %ia6i%it& o' a 4a/tne/. 9n;

PARTNER "AY ACT HIS O+N NA"E " partner may enter into a separate obligaon to perform a partnership contract. 'e is then acng in his own name for the benet of the partnership. -onse9uently, he is the only one bound for his own acts (Pineda, 2006).

A/1#%e 2. An& 014$%a1on again0t the %ia6i%it& %aid do)n in the 4/e#eding a/1#%e 0ha%% 6e (oid, e8#e4t a0 a5ong the 4a/tne/0. 9n;

CHANGE O! !IR" NA"E GR "ny spulaon by and among the partners contradicng the pro $here the partners of a general partnership doing business under the rm name of )harruf L-o.J obtained insurance policies issued to said rm, but later the rm name was changed to )harruf L ;sena+iJ which are the names of the same and only partners of the rm )harruf L-o.J connuing the same business, it was held that the new rm retained the rights of the former rm under the same policies, and therefore, had #uridical personality to sue.

!IR"B Implies a partnership of 2 or more persons who bind themselves to contribute money, property, or industry to a common fund, with the intenon of dividing the prots among themselves. It may be formed for the exercise of a profession or vocaon. %he word rmJ is also used to refer to the name, style or tle under which the company or concern transacts its business (Pineda, 2006).

A/1#%e 3. A%% 4a/tne/0, in#%$ding ind$0t/ia% one0, 0ha%% 6e %ia6%e 4/o /ata )ith a%% thei/ 4/o4e/t& and ae/ a%% the 4a/tne/0hi4 a00et0 ha(e 6een e8ha$0ted, 'o/ the #ont/a#t0 )hi#h 5a& 6e ente/ed into in the na5e and 'o/ the a##o$nt o' the 4a/tne/0hi4, $nde/ it0 0ignat$/e and 6& a 4e/0on a$tho/ized to a#t 'o/ the 4a/tne/0hi4. Ho)e(e/, an& 4a/tne/ 5a& ente/ into a 0e4a/ate o6%iga1on to 4e/'o/5 a 4a/tne/0hi4 #ont/a#t. 9n; Again0t )ho5 a#1on 7%ed In order to enforce the liability of the partners for partnership debts and obligaons, both the partnership and the separate partners may be #oined in the same acon, but the private property of the la(er cannot be taen in payment of the partnership debt unl the common property of the concern is exhausted. $here the partnership has no visible assets, the partners individually must respond for its debts.

NOTE " withdrawing partner is not liable for debts and obligaons of the partnership a
rata liability of partners provided in "rt. !4!O is void.

-PN )uch spulaon is valid by and among the partners themselves. A/1#%e . E(e/& 4a/tne/ i0 an agent o' the 4a/tne/0hi4 'o/ the 4$/4o0e o' it0 6$0ine00, and the a#t o' e(e/& 4a/tne/, in#%$ding the e8e#$1on in the 4a/tne/0hi4 na5e o' an& in0t/$5ent, 'o/ a44a/ent%& #a//&ing on in the $0$a% )a& the 6$0in e00 o' the 4a/tne/0hi4 o' )hi#h he i0 a 5e56e/ 6ind0 the 4a/tne/0hi4, $n%e00 the 4a/ tne/ 0o a#1ng ha0 in 'a#t no a$tho /it& to a#t 'o/ the 4a/tne/0hi4 in the 4a/1#$%a/ 5ae/, and the 4e/0on )ith )ho5 he i0 dea%ing ha0 Mno)%edge o' the 'a#t that he ha0 no 0$#h a$tho/it&. An a#t o' a 4a/tne/ )hi#h i0 not a44a/ent%& 'o/ the #a//&ing on o' 6$0ine00 o' the 4a/tne/0hi4 in the $0$a% )a& doe0 not 6ind the 4a/tne/0hi4 $n%e00 a$tho/ized 6& the othe/ 4a/tne/0. E8#e4t )hen a$tho/ized 6& the othe/ 4a/tne/0 o/ $n%e00 the& ha(e a6andoned the 6$0ine00, one o/ 5o/e 6$t %e00 than a%% the 4a/tne/0 ha(e no a$tho/it& to > A00ign the 4a/tne/0hi4 4/o4e/t& in t/ $0t 'o/ #/edito/0 o/ on the a00ignee0 4/o5i0e to 4a& the de6t0 o' the 4a/tne/0hi4  Di04o0e o' the goodB)i%% o' the 6$0ine00  Do an& othe/ a#t )hi#h )o$%d 5aMe it i54o00i6%e to #a//& on the o/dina/& 6$0ine00 o' a 4a/tne/0hi4  Con'e00 a ?$d g5ent  Ente/ into a #o54/o5i0e #on#e/ning a 4a/tne/0hi4 #%ai5 o/ %ia6i%it& : S$65it a 4a/tne/0hi4 #%ai5 o/ %i a6i%it& to a/6it/a1on 3 Reno$n#e a #%ai5 o' the 4a/tne/0hi4. No a#t o' a 4a/tne/ in #ont/a(en1on o' a /e0t/i#1on on a$tho/it& 0ha%% 6ind the 4a/tne/0hi4 to 4e/0on0 ha(ing Mno)%edge o' the /e0t/i#1on. 9n;


AUTHORITY O! PARTNER $here the express and avowed purpose of the partnership is to buy and sell real estate, the immovables ac9uired form part of the stoc= in=trade and thus within the ordinary powers of the partner.

+he/e the 1t%e to /ea% 4/o4e/t& i0 in the na5e o' a%% the 4a/tne/0 a #on(e&an#e e8e#$ted 6& a%% the 4a/tne/0 4a00e0 a%% thei/ /ight0 in 0$#h 4/o4e/t&. 9n; CONEYANCE INCLUDE "ORTGAGE

:"%I>I-"%I* > 3*"3%':IP;8 "-% %he right to mortgage is included in the right to convey. %he principle of agency that one who accepts or retains benets of unauthori+ed acts of agents, with nowledge of material facts surrounding the transaco n, will be deemed to have raed those acts will be applicable to a 9ueson of racaon of unauthori+ed acts of partmer.

APPLICA*ILITY O! THE ARTICL E %he arcl e applies only to real property which refers to immovable lie land or building because of the use of the words tle to real property, e9uitable interest and conveyancesJ (Pineda, 2006).

LA+ ON PARTNERSHIP IS A *RANCH O! THE LA+ ON AGENCY %here is more than #'t'al agenc among the partners. %hey are not agents of one another but they are also of the partnership. ;ach partner is acng as principal on his own behalf and as agent for his co=partners.

"n e9uitable interest or tle is one E
 KINDS O! ACTS O! A PARTNER CONTE"PLATED IN THE ARTICLE

PARTNERSHIP, NOT ITS O!!ICERS OR AGENTS SHOULD *E I"PLEADED IN LITIGATION INOLING PROPERTY REGISTERED IN ITS NA"E %he partners cannot be held liable for the obligaons of

25 2?

"cts which apparently are for the carrying of the business of the partnership "cts which do not apparently for carrying on the business of the partnership in the usual way (Pineda, 2006).

QUSUAL +AYB %he term usual wayJ means it is an ordinary acvity for the parcular partners hip or similar partnership. ;xample, a partnership engaged in real estate is usually involved in the sale and purchase of lands and buildings.

the partnership unless it is shown that the legal con of a diCerent #uridical personality is being used for fraudulent, unfair or illegal purposes (Pineda, 2006).

A/1#%e >. An ad5i00ion o/ /e4/e0enta1on 5ade 6& an& 4a/tne/ #on#e/ning 4a/tne/0hi4 aai/0 )ithin the 0#o4e o' hi0 a$tho/it& in a##o/dan#e )ith thi0 Tit%e i0 e(iden#e again0t the 4a/tne/0hi4. 9n; AD"ISSIONS A!TER DISSOLUTION

A/1#%e F. +he/e 1t%e to /ea% 4/o4e/t& i0 in the 4a/tne/0hi4 na5e, an& 4a/tne/ 5a& #on(e& 1t%e to 0$#h 4/o4e/t& 6& a #on(e&an#e e8e#$ted in the 4a/tne/0hi4 na5e 6$t the 4a/tne/0hi4 5a& /e#o(e/ 0$#h 4/o4e /t& $n%e00 the 4a/tne/ 0 a#t 6ind0 the 4a/tne/0hi4 $nde/ the 4/o(i0ion0 o' the 7/0t 4a/ag/a4h o' a/1#%e , o/ $n%e00 0$#h 4/o4e/t& ha0 6een #on(e&ed 6& the g/antee o/ a 4e/0on #%ai5ing th/o$gh 0$#h g/antee to a ho%de/ 'o/ (a%$e )itho$t Mno)%edge that the 4a/tne/, in 5aMing the #on(e&an#e, ha0 e8#eeded hi0 a$tho/it&. +he/e 1t%e to /ea% 4/o4e/t& i0 in the na5e o' the 4a/tne/0hi4, a #on(e&an#e e8e#$ted 6& a 4a/tne/, in hi0 o)n na5e, 4a00e0 the e$ita6%e inte/e0t o' the 4a/tne/0hi4, 4/o(ided the a#t i0 one )ithin the a$tho /it& o' the 4a/tn e/ $nde/ the 4/o(i0ion0 o' the 7/0t 4a/ag/a4h o' a/1#%e . +he/e 1t%e to /ea% 4/o4e/t& i0 in the na5e o' one o/ 5o/e 6$t not a%% the 4a/tne/0, and the /e#o/d doe0 not di0#%o0e the /ight o' the 4a/tne/0hi4, the 4a/tne/0 in )ho0e na5e the 1t%e 0tand0 5a& #on(e& 1t%e to 0$#h 4/o4e/t&, 6$t the 4a/tne/0hi4 5a& /e#o(e/ 0$#h 4/o4e/t& i' the 4a/tne/0 a#t doe0 not 6ind the 4a/tne/0hi4 $nde/ the 4/o(i0ion0 o' the 7/0t 4a/ag/a4h o' a/1#%e , $n%e00 the 4$/#ha0e/ o/ hi0 a00ignee, i0 a ho%de/ 'o/ (a%$e, )itho$t Mno)%edge. +he/e the 1t%e to /ea% 4/o4e/t& i0 in the na5e o' one o/ 5o/e o/ a%% the 4a/tne/0, o/ in a thi/d 4e/0on in t/$0t 'o/ the 4a/tne/0hi4, a #on(e&an#e e8e#$ted 6& a 4a/tne/ in the 4a/tne/0hi4 na5e, o/ in hi0 o)n na5e, 4a00e0 the e$ita6%e inte/e0t o' the 4a/tne/0hi4, 4/o(ided the a#t i0 one )ithin the a$tho/it& o' the 4a/tne/ $nde/ the 4/o(i0ion0 o' the 7/0t 4a/ag/a4h o' a/1#%e .

&artnership is not bound by admissions or statements made by a former partner a
RE
AD"ISSION A!TER DISSOLUTION "n admission made by a partner a
A/1#%e . No1#e to an& 4a/tne/ o' an& 5ae/ /e%a1ng to 4a/tne/0hi4 aai/0, and the Mno)%edge o' the 4a/tne/ a#1ng in the 4a/1#$%a/ 5ae/, a#$i/ed )hi%e a 4a/tne/ o/ then 4/e0ent to hi0 5ind, and the Mno)%edge o' an& othe/ 4a/tne/ )ho /ea0ona6%& #o$%d and 0ho$%d ha(e #o55$ni#ated it to the a#1ng 4a/tne/, o4e/ate a0 no1#e to o/ Mno)%edge o' the 4a/tne/0hi4, e8#e4t in the #a0e o' '/a$d on the 4a/tne/0hi4, #o55ied 6& o/ )ith the #on0ent o' that 4a/tne/. 9n; NOTICE $hen noce is given to the partner while he is a partner, the eCect is the same as if noce was had by all the partners. $here the


nowledge or noce has been received by one before he became a partner, and his partners are ignorant of this, and he is not the partner acng in the parcular ma(er, there is no doubt that there has been neither nowledge of nor noce to the partnership. Eet, if the partner acng in the parcular ma(er ac9uired nowledge before he became a partner, and the nowledge is then present in his mind, and partnership should be charged with nowledge.

A/1#%e . The 4a/tne/0hi4 i0 6o$nd to 5aMe good the %o00  +he/e one 4a/ tne/ a#1ng )it hin the 0#o 4e o' hi0 a44a/ent a$tho/it& /e#ei(e0 5one& o/ 4/o4e/t& o' a thi/d 4e/0on and 5i0a44%ie0 it and  +he/e the 4a/tne/ 0hi4 in the #o$/0e o' it0 6$0ine 00 /e#ei(e0 5one& o/ 4/o4e/t& o' a thi/d 4e/0on and the 5one& o/ 4/o4e/t& 0o /e#ei(ed i0 5i0a44%ied 6& an& 4a/tne/ )hi%e it i0 in the #$0tod& o' the 4a/tne/0hi4. 9n;

A/1#%e  . +he/e, 6& an& )/ong'$% a#t o/ o5i00ion o' an& 4a/tne/ a#1ng in the o/di na/& #o$/0e o' the 6$0in e00 o' the 4a/tne/0hi4 o/ )ith the a$tho/it& o' hi0 #oB4a/tne/0, %o00 o/ in?$/& i0 #a$0ed to an& 4e/0on, not 6eing a 4a/tne/ in the 4a/tne/0hi4, o/ an& 4ena%t& i0 in#$//ed, the 4a/tne/0hi4 i0 %ia6%e the/e'o/ to the 0a5e e8tent a0 the 4a/tne/ 0o a#1ng o/ o5iWng to a#t. 9n;

A/1#%e . A%% 4a/tne/0 a/e %ia6%e 0o%ida/i%& )ith the 4a/tne/0hi4 'o/ e(e/&thing #ha/gea6%e to the 4a/tne/0hi4 $nde/ a/1#%e0  and . 9n;

LIA*ILITY !OR +RONG!UL ACTS

NATURE O! LIA*ILITY

3nder the principle of mutual agency, the partnership, or every member of a partnership, is liable for torts commi(ed by one of the members acng in the scope of the rm business, although they do not parc ipate in, raf y or have nowledge of such torts. )uch liability is not dependent on the personal wrong of the individual member of the partnership against which the liability is asserted.

%he liability of a partner for the wrongful act of another partner is analogous to that of a principal for the acts of his agent since each partner acts both as principal and as agent of the other as to acts done within the apparent scope of business and purpose of the partnership and for its benet.

SOLIDARY LIA*ILITY "ll partners are liable #ointly and severally for %he test of liability whether the wrong was commi(ed in behalf of and within the reasonable scope of the business of the partnership. If it was so, the partners are liable as #oint tort=feasors.

everything chargeable to the partnership by reason of the partnerGs wrongful act or breach of trust wherein a third person is adversely aCected.

LIA*ILITY !OR +ANTON OR +ILL!UL ACT

$hile the liability of the partners are merely #oint in transacons entered into by the partnership, a third person who transacted with said partnership can hold the partners solidarily for the whole obligaon if the case involves loss or in#ury caused to any person not a partner in the partn ership, and misap plicaon of money or property of a third person received by a partner or the partnership.

GR If the in#ury results from a wanton or willful act of one of the pares commi(ed outside the agency or common business, then the person doing the act and causing the in#ury is alone responsible.

-PN If the act was authori+ed by the members of the partnership or subse9uently raed by them.

RATIONALE %he law protects the la(er who in good faith relied

RE
upon the authority of a partner, whether such authority is real or apparent.

0 &artner commi(ed a wrongful act or omission /crime or 9uasi= delict - %he guilt y partner is acng in the ordinary course of the business of the partnership or with authority of the co= partners even if the act is not connected with the partnership business 2 @oss or in#ury is suCered by third person as a result of the wrongful act or omission 3 %he aggrieved third person is not a partner in the rm

ART.  IS AN E-CEPTION TO ARTICLE 3 3nder "rt. !4!O, the liability of the partners, includin g industrial partners , is pro rata. 'owever, under "rt. !42?, the liability of all partners is declared to be solidary under "rcles !422 and !425. %he reason being that the violaon of these two arcles constutes torts, hence, the solidary liability of the partners (Pineda, 2006).

partnership and the co=partnerDs must prove that the erring partner

A/1#%e :. +hen a 4e/0on, 6& )o/d0 04oMen o/ )/ien o/ 6& #ond$#t, /e4/e0ent0 hi50e%', o/ #on0ent0 to anothe/ /e4/e0en1ng hi5 to an&one, a0 a 4a/tne/ in an e8i01ng 4a/tne/0hi4 o/ )ith one o/ 5o/e 4e/0on0 not a#t$a % 4a/tne/0, he i0 %ia6%e to an& 0$#h 4e/0on0 to )ho5 0$#h /e4/e0enta1on ha0 6een 5ade, )ho ha0, on the 'aith o' 0$#h /e4/ e0enta1on, gi(en #/edit to the a#t$a% o/ a44a/ent 4a/tne/0hi4, and i' he ha0 5ade 0$#h /e4/e0enta1on o/ #on0ented to it0 6eing 5ade in a 4$6%i# 5anne/ he i0 %ia6%e to 0$#h 4e/0on, )hethe/ the /e4/e0enta1on ha0 o/ ha0 not 6een 5ade o/

commi(ed the complained act while acng for purposes of his own and not for the benet of the partnership, or acted not in the course of the business of the partnership (Pineda, 2006).

#o55$ni#ated to 0$#h 4e/0on 0o gi(ing #/ed it 6& o/ )ith the Mno)%edge o' the a44a/ent 4a/tne/ 5aMing the /e4/e0enta1on o/ #on0en1ng to it0 6eing 5ade

RE"EDY O! INNOCENT PARTNERS%he innocent partners who were

> +hen a 4a/tne/0hi4 %ia6i%it& /e0$%t0, he i0 %ia6%e a0 tho$gh he )e/e an a#t$a% 5e56e/ o' the 4a/tne/0hi4  +hen no 4a/tne/0hi4 %ia6i%it& /e0$%t0, he i0 %ia6%e 4/o /ata )ith the othe/ 4e/0on0, i' an&, 0o #on0en1ng to the

4 %here is no pre=exisng contract between the partnership and the third person1 if there is, but it was grossly and deliberately violated, this itself constutes 9uasi=delict (Pineda, 2006).

DE!ENSES AGAI NST THE SUIT %o be exercised from liability, the

made liable solidary with the oCending partner is to see recovery against the la(er for what they have paid with interest (Pineda, 2006).


#ont/a#t o/ /e4/e0enta1on a0 to in#$/ %ia6i%it&, othe/)i0e 0e4a/ate%&. +hen a 4e/0on ha0 6een th$0 /e4/e0ented to 6e a 4a/tne/ in an e8i01ng 4a/tne /0hi4, o/ )ith one o/ 5o/e 4e/0on0 not a#t$a% 4a/tne/0, he i0 an agent o' the 4e/0 on0 #on0en1ng to 0$#h /e4/e0enta1on to 6ind the5 to the 0a5e e8tent and in the 0a5e 5anne/ a0 tho$gh he )e/e a 4a/tne/ in 'a#t, )ith /e04e#t to 4e/0on0 )ho /e%& $4on the /e4/e0enta1on. +hen a%% the 5e56e/0 o' the e8i01ng 4a/tne/0hi4 #on0ent to the /e4/e0enta1on, a 4a/tne/0hi4 a#t o/ o6%iga1on /e0$%t0 6$t in a%% othe/ #a0e0 it i0 the ?oint a#t o/ o6%iga1on o' the 4e/0on a#1ng and the 4e/0on0 #on0en1ng to the /e4/e0enta1on. 9n; PERSONS PROTECTED %he arcle is for the benet of third persons who are misled by the representaon holding out an individual as a partner, and who act to their detriment1 but it does not create a partnership as between the alleged partners or as respect third persons who have not in facr been misled. $here a former partner entered into an agreement with the remaining partners to connue the business, and third pares were misled into believing that they are dealing with the same old partnership, that partner who has withdrawn is sll liable for partnership liabilies.

DOCTRINE O! PARTNERSHIP *Y ESTOPPEL " partnership, not duly organi+ed, which has been recogni+ed as such in its dealin gs with third persons shall be considered as partnership by estoppelJ as far as third persons are concerned.

ESTOPPELB It may be said that estoppel is a bar which precludes a person from denying or asserng anything contrary to that which has been, in contemplaon of law, established as the truth either by acts of #udicial or legislave ocers, or by his own deed or representaons either express or implied (Pineda, 2006).

"i/a0o% (. "$ni#i4a%it& o' Ta6a#o %he admission or representaon must be plain and clear. ;stoppel cannot be sustained on doubQul or ambiguous inferences (Pineda, 2006).

ESTOPPEL O! THIRD PERSONS 'e who enters or contract with a partnership as such, is stopped in a suit by the partnership against him growing out of such contract, to claim that the partnership was no properly organi+ed (Pineda, 2006).

Re$i0ite0 to 5aMe a 4e/0on a 4a/tne/ 6& e0to44e% 0

%he per son must re present him self as a partner of an exisng partnership, when in fact he is not a partner or consents to another represenng him to anyone as a partner in an exisng partnership or with one or more persons not actual partners

!

%hird person relied on the said misrepresentaon not being aware of the decepon

2

n the faith of such representaon, the third person has given credit to the actual or apparent partnership

0

%he alleged partner cannot disallow liability by claiming he is not actually a partner. 'e is estopped from maing a disclaimer. 'e is bound as a partnerJ, although, he is actually not a partner (Pineda, 2006).

NO REAL PARTNERSHIP IS CREATED *Y ESTOPPEL "rt. !427 does not create or establish a real partnership as between the alleged partners. It must be stressed, a real partnership is formed by virtue of a contract, express or implied, between the pares. It is only insofar as third persons are involved and for the purpose of giving them protecon that the e9uitable principle of estoppel is recogni+ed in the law (Pineda, 2006).

PROO! O! ESTOPPEL $hoever alleges the existence of a partner or partnership by estoppels has the burden of proof. %he existence of the misrepresentaon and the innocent reliance on it must be established (Pineda, 2006).

A/1#%e 3 . A 4e/0on ad5ied a0 a 4a/tne/ into an e8i01ng 4a/tne/0hi4 i0 %ia6%e 'o/ a%% the o6%iga1on0 o' the 4a/tne/0hi4 a/i0ing 6e'o/e hi0 ad5i00ion a0 tho$gh he had 6een a 4a/tne/ )hen 0$#h o6%iga1on0 )e/e in#$//ed, e8#e4t that thi0 %ia6i%it& 0ha%% 6e 0a107ed on%& o$t o' 4a/tne/0hi4 4/o4e/t&, $n%e00 the/e i0 a 014$%a1on to the #ont/a/&. 9n; NOTE %he arcle eliminates the diculty which arises when a new partner is admi(ed without li9uidaon of rm debts . %his is illustrated by the case where all the property of the exisng partnership is taen over, without noce of any brea in the conduct of business, by the new partnership and the incoming partner1 thereby depriving the exisng partnership of all its property. In this case, both the exisng and subse9uent creditors may believe it is one and the same partnership. ;xisng and subse9uent -:s have e9ual rights as against partnership property and the separate property of all the previous exisng members of the partnership, while only the subse9uent -:s have the rights against the separate estate of the newly admi(ed partner.

A/1#%e  >. In the 'o%%o)i ng #a0e0 #/edito/0 o' the di00o%(ed 4a/tne/0hi4 a/e a%0o #/edito/0 o' the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00 > +hen an& ne ) 4a/ tne/ i0 ad5i ed into an e 8i01ng 4a/tne/0hi4, o/ )hen an& 4a/tne/ /e1/e0 and a00ign0 9o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/ a00ign0; hi0 /ight0 in 4a/tne/0hi4 4/o4e/t& to t)o o/ 5o/e o' the 4a/tne/0, o/ to one o/ 5o/e o' the 4a/tne/0 and one o/ 5o/e thi/d 4e/0on0, i' the 6$0ine00 i0 #on1n$ed )itho$t %i$ida1on o' the 4a/tne/0hi4 aai/0  +hen a%% 6$ t one 4a/tne/ /e1/e and a00 ign 9o/ the /e4/e0enta1(e o' a de#ea0ed 4a/tne/ a00ign0; thei/ /ight0 in 4a/tne/0hi4 4/o4e/t& to the /e5aining 4a/tne/, )ho #on1n$e0 the 6$0ine00 )itho$t %i$ida1on o' 4a/tne/0hi4 aai/0, eithe/ a%one o/ )ith othe/0  +hen an& 4a/ tne/ /e1/ e0 o/ die 0 and the 6$0 ine00 o' the di00o%(ed 4a/tne/0hi4 i0 #on1n$ed a0 0et 'o/th in No0.  and  o' thi0 a/1#%e, )ith the #on0ent o' the /e1/ed 4a/tne/0 o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/, 6$t )itho$t an& a00ign5ent o' hi0 /ight in 4a/tne/0hi4 4/o4e/t&  +hen a%% the 4a/tne/0 o/ thei/ /e4/e0enta1(e0 a00ign thei/ /ight0 in 4a/tne/0hi4 4/o4e/t& to one o/ 5o/e thi/d


4e/0on0 )ho 4/o5i0e to 4a& the de6t0 and )ho #on1n$e the 6$0ine00 o' the di00o%(ed 4a/tne/0hi4 > +hen an& 4a/tne/ )/ong'$%%& #a$0e0 a di00o%$1on and the /e5aining 4a/tne/0 #on1n$e the 6$0ine00 $nde/ the 4/o(i0ion0 o' a/1#%e 2, 0e#ond 4a/ag/a4h, No. , eithe/ a%one o/ )ith othe/0, and )itho$t %i$ida1on o' the 4a/tne/0hi4 aai/0  +hen a 4a/tne/ i0 e84e%%ed and the /e5aining 4a/tne/0 #on1n$e the 6$0ine00 eithe/ a%one o/ )ith othe/0 )itho$t %i$ida1on o' the 4a/tne/0hi4 aai/0. The %ia6i%it& o' a thi/d 4e/0on 6e#o5ing a 4a/tne/ in the 4a/tne/0hi4 #on1n$in g the 6$0ine00, $nde/ thi0 a/1#%e, to the #/edito/0 o' the di00o%(ed 4a/tne/0hi4 0ha%% 6e 0a107ed o$t o' the 4a/tne/0hi4 4/o4e/ t& on%&, $n%e00 the/e i0 a 014$%a1on to the #ont/a/&. +hen the 6$0ine00 o' a 4a/tne/0hi4 ae/ di00o%$1on i0 #on1n$ed $nde/ an& #ondi1on0 0et 'o/th in thi0 a/1#%e the #/edito/0 o' the di00o%(ed 4a/tne/0hi4, a0 again0t the 0e4a/ate #/edito/0 o' the /e1/ing o/ de#ea0ed 4a/tne/ o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/, ha(e a 4/io/ /ight to an& #%ai5 o' the /e1/ed 4a/tne/ o/ the /e4/e0enta1(e o' the de#ea0e d 4a/tne/ again0t the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00, on a##o$nt o' the /e1/ed o/ de#ea0ed 4a/tne/ 0 inte/e0t in the di00o%(ed 4a/tne/0hi4 o/ on a##o$nt o' an& #on0ide/a1on 4/o5i0ed 'o/ 0$#h inte/e0t o/ 'o/ hi0 /ight in 4a/tne/0hi4 4/o4e/t&. Nothing in thi0 a/1#%e 0ha%% 6e he%d to 5odi'& an& /ight o' #/edito/0 to 0et a0ide an& a00ign5ent on the g/o$nd o' '/a$d. The $0e 6& the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00 o' the 4a/tne/0hi4 na5e, o/ the na5e o' a de#ea0ed 4a/tne/ a0 4a/t the/eo', 0ha%% not o' it0e%' 5aMe the indi(id$a% 4/o4e/t& o' the de#ea0ed 4a/tne/ %ia6%e 'o/ an& de6t0 #ont/a#ted 6& 0$#h 4e/0on o/ 4a/tne/0hi4. 9n; NOTE "rcle !42O and !4?0 are based on the principle that where there has been one connuous business, the fact that "yel has been admi(ed to the business, or ebeng ceased to be connected with it, should not be allowed to cause endless confusion as to the claims of -:s on the property employed in the business1 but all the -:s of the business, irrespecve of the mes when they became -:s and the exact combinaons of persons then owning the business, should have e9ual rights to the property.

LIA*ILITY O! NE+LY AD"ITTED PARTNER %he incoming partner or newly admi(ed partner is liable for all the obligaons of the rm contracted before his admission. n the surface, this appears to be harsh for the incoming partner. 'owever, his liability is limited. It is only up to his share in the partnership property, unless there is a contrary spulaon. 'is separate property will not be reached by partnership creditors (Pineda, 2006).

E!!ECT OG AD"ISION O! NE+ PARTNER ON THE STATUS O! Y@E E-ISTING PARTNERSHIP%he admission of the new partner dissolves the old partnership (Pineda, 2006). "ll the properes of the exisng partnership are assumed by the new rm without noce of any disconnuance in the conduct of the business, now under the new rm compo sed of all the original members and the newly admi(ed one. In eCect, the old partnership is deprived of all its properes. 3nder "rt. !42O, exisng and subse9uent creditors shall have e9ual rights as against partnership

property of all srcinal partners while only the subse9uent creditors have rights against the separate property of the newly admi(ed partner. 'ence, the old creditors do not lose their preference as partnership creditors because they are recogni+ed as the creditors of the new rm (Pineda, 2006).

Rea0on 'o/ 5aMing ne) 4a/tne/ %ia6%e 'o/ o6%iga1on0 #ont/a#ted 6e'o/e ad5i00ion %o eliminate the diculty which arises when by his admission, the exisng partnership is dissolved and all properes of the said partnership are taen over by the new partnership. ld creditors lose their preference as partnership creditors. y maing the new partner liable even to old creditors, the problem is solved (Pineda, 2006).

A/1#%eo'2. #/edito/0 o' the 4a/tne/0hi4 6e 4/e'e//ed to tho0e ea#hThe 4a/tne/ a0 /ega/ d0 the 4a/tne/0h0ha%% i4 4/o4e/t&. +itho$t 4/e?$di#e to thi0 /ight, the 4/i(ate #/edito/0 o' ea#h 4a/tne/ 5a& a0M the aa#h5ent and 4$6%i# 0a%e o' the 0ha/e o' the %ae/ in the 4a/tne/0hi4 a00et0. 9n; PARTNERSHIP CREDITORS PRE!ERRED TO CREDITORS O! INDIIDUAL PARTNERS %he reas on for this grant of priority of payment is that the partnership has a separate and disnct personality from the individual partners. %he partnership should apply its prop erty to the paym ent rst of its debt s to its own creditors. -onversely, the private property of the partners cannot be taen as payment for partnership debts unl the common property of the rm had been exhausted (Pineda, 2006).

CHAPTER  Di00o%$1on and +inding U4 A/1#%e . The di00o%$1on o' a 4a/tne/0hi4 i0 the #hange in the /e%a1on o' the 4a/tn e/0 #a$0ed 6& an& 4a/tne/ #ea0ing to 6e a00o#iated in the #a//&ing on a0 di01ng$i0hed '/o5 the )inding $4 o' the 6$0ine00. 9n; DISSOLUTION 8esignates the point in me when the partners cease to carry on the business together. %he change in the of relaon the partners caused by any partner ceasing to be associated in the carrying on of the business of the partnership (Pineda, 2006).

TER"INATION

+INDING UP

Is the point in me Is the process of when all the se(ling partners partnership a Cairs aCairs a
It is the state which follows a
8issoluon is descripve of that change in the partnership relaon which ulmately culminates in its terminaon. It is not the terminaon of the partnership or of the right s and powe rs of partners.

E!!ECTS O! DISSOLUTION /n the partners

!. "s

to previous obligaons, the dissoluon does not necessarily mean that a partner can evade previous


2.

/n membership

!.

2.

5.

obligaons entered into by the partnership "s to new obligaons GR 8issoluon spares the former partners from new obligaons entered into by the partnership to which they did not consent either expressly or impliedly -PN %hese new obligaons are essenal for the winding up of the partnership aCairs "ny change in th e membership of the partnership will result in its dissoluon and in the formaon of a new partnership so long as the course of its business is materially interrupted "ll partners constung new partnership are considered incoming partners if there is admission of the new partner even if the business had been theretofore conducted by the through previous others the partnership " change in the relaon of the partners will cause the dissoluon of the partnership but this will not disturb the connuance of the business of the partnership under the srcinal arcles of partnership by the remaining partners or by them and the new partners

the5 to 6e #ha/ged 'o/ thei/ 0e4a/ate de6t0, eithe/ 6e'o/e o/ ae/ the te/5ina1on o' an& 04e#i7ed te/5 o/ 4a/1#$%a/ $nde/taMing *& the e84$%0ion o' an& 4a/tne/ '/o5 the 6$0ine00 6ona 7de in a##o/dan#e )ith 0$#h a 4o)e/ #on'e//ed 6& the ag/ee5ent 6et)een the 4a/tne/0 > In #ont/a(en1on o' the ag/ee5ent 6et)een the 4a/tne/0, )he/e the #i/#$50tan#e0 do not 4e/5it a di00o%$1on $nde/ an& othe/ 4/o(i0ion o' thi0 a/1#%e, 6& the e84/e00 )i%% o' an& 4a/tne/ at an& 15e  *& an& e(ent )hi#h 5aMe0 it $n%a)'$% 'o/ the 6$0ine00 o' the 4a/tne/0hi4 to 6e #a//ied on o/ 'o/ the 5e56e/0 to #a//& it on in 4a/tne/0hi4  +hen a 04e#i 7# thi ng )hi #h a 4a/t ne/ had 4/o 5i0ed to #ont/i6$te to the 4a/tne/0hi4, 4e/i0he0 6e'o/e the de%i(e/& in an& #a0e 6& the %o00 o' the thing, )hen the 4a/tne/ )ho #ont/i6$ted it ha(ing /e0e/(ed the o)ne/0hi4 the/eo', ha0 on%& t/an0'e//ed to the 4a/tne/0hi4 the $0e o/ en?o&5ent o' the 0a5e 6$t the 4a/tne/0hi4 0ha%% not 6e di00o%(ed 6& the %o00 o' the thing )hen it o##$/0 ae/ the 4a/tne/0hi4 ha0 a#$i/ed the o)ne/0hi4 the/eo'  *& the death o' an& 4a/tne/  *& the in0o%(en#& o' an& 4a/tne/ o/ o' th e 4a/tne/0hi4 : *& the #i(i% inte/di#1on o' an& 4a/tne/ 3 *& de#/ee o' #o$/t $nde/ the 'o%%o)ing a/1#%e. 92>>a and 2>a; AUTHORITY AND PO+ERS O! PARTNERS TER"INATION O! TER" OR PURPOSE

A/1#%e F. On di00o%$1on the 4a/tne/0hi4 i0 not te/5inated, 6$t #on1n$e0 $n1% the )inding $4 o' 4a/tne/0hi4 aai/0 i0 #o54%eted. 9n; PARTNERSHIP IS NOT TER"INATED 8issoluon aCects only future obligaons of the business, and as to past transacons the partnership connues unl it sases all its pre=exisng obligaons. 8issoluon does not abrogate its contracts which connue unl performed or otherwise become inoperave. It has no eCect on debts due from the partnership to third pares except that partners may not act for each other any further than may #oint debtors. 8uring dissoluon, the partnership will be reputed as exisng unl the #uridical relaons arising out of the contract are dissolved.

A/1#%e >. Di00o%$1on i0 #a$0ed +itho$t (io%a1on o' the ag/ee5ent 6et)een the 4a/tne/0 *& the te/5 ina1on o' the de7n ite te/5 o/ 4a/1#$%a/ $nde/taMing 04e#i7ed in the ag/ee5ent *& the e84/e00 )i%% o' an& 4a/tne/, )ho 5$0t a#t in good 'aith, )hen no de7nite te/5 o/ 4a/1#$%a/ i0 04e#i7ed *& the e84/e00 )i%% o' a%% the 4a/tne/0 )ho ha(e not a00igned thei/ inte/e0t0 o/ 0$e/ed

If a xed duraon is agreed on, partnership is dissolved by the lapse of me on the expiraon of such period. Irrespecve of any agreement as to the period of duraon of a partnership, it is dissolved on the compl eon of the enter prise for which it was formed.

E-PRESS +ILL O! ANY PARTNER If no me prescribed by the agreement for the duraon of a general partnership, it may be dissolved totally by the express will of any partner. " partnership may be dissolved by one partner une9uivocally bringing home noce to the other partners that he no longer intends to be a partner.

In #ont/a(en1on o' ag/ee5ent "ny partnership, whether under the arcles of partnership it is to exist for a denite period of me or for the accomplishment of a parcular purpose, or whether those arcles contain any spulaon as to the me of existence, may be dissolved by the act of any partner alone in accordance with his own pleasure and will. %he diCerence between a partnership for an indenite period and one for a specied term is that in case of a partnership for a denite term, a dissoluon before the expiraon of the spulated me is a breach of agreement which sub#ects such partner to a claim for damages for breach of contract if the dissoluon is not #used. n the other hand, the dissoluon of partnership at will aCords the


other partner no ground for complaint. In either case the acon is of one partner actually dissolves the partnership. %his is because a contract of partnership is a contract of agency based on the assent of each of the partners, which may be retracted at any me as to future dealings although the term of the partnership may not have expired. "ll that is re9uired is that noce of the dissoluon must be communicated forthwith to the other members of the rm. y such noce the partnership is dissolved. %he rights of the pares upon dissoluon are safeguarded by "rt. !456, subdivision /2.

A/1#%e . On a44%i#a1on 6& o/ 'o/ a 4a/tne/ the #o$/t 0ha%% de#/ee a di00o%$1on )hene(e/ VᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀVᜀV ⠀⤀VᜀVᜀVᜀVᜀVᜀ > A 4a/tne/ ha0 6een de#%a/ed in0ane in an& ?$di#ia% 4/o#eeding o/ i0 0ho)n to 6e o' $n0o$nd 5ind ᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀVᜀV ⠀⤀VᜀVᜀVᜀVᜀVᜀ  A 4a/tne/ 6e#o5e0 in an& othe/ )a& in#a4a6%e o' 4e/'o/5ing hi0 4a/t o' the 4a/tne/0hi4 #ont/a#t ᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀVᜀV ⠀⤀VᜀVᜀVᜀVᜀVᜀ  A 4a/tne/ ha0 6een g$i%t& o' 0$#h #ond$#t a0 tend0 to ae#t 4/e?$di#ia%%& the #a//&ing on o' the 6$0ine00 ᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀVᜀV ⠀⤀VᜀVᜀVᜀVᜀVᜀ  A 4a/tne/ )i%'$%%& o/ 4e/0i0tent%& #o55it0 a 6/ea#h o' the 4a/tne/0hi4 ag/ee5ent, o/ othe/)i0e 0o #ond$#t0 hi50e%' in 5ae/0 /e%a1ng to the 4a/tne/0hi4 6$0ine00 that it i0 not /ea0ona6%& 4/a#1#a6%e to #a//& on the 6$0ine00 in 4a/tne/0hi4 )ith hi5 ᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀVᜀV ⠀⤀VᜀVᜀVᜀVᜀVᜀ  The 6$0ine00 o' the 4a/tne/0hi4 #an on%& 6e #a//ied on at a %o00 ᜀVᜀVV VᜀVᜀVᜀVᜀVᜀVᜀVᜀVᜀV ⠀⤀VᜀVᜀVᜀVᜀVᜀ ᜀ

⸀

⸀

⸀

⸀

⸀

⸀

: Othe/ #i/#$50tan#e0 /ende/ a di00 o%$1on e$ita6%e. On the a44%i#a1on o' the 4$/#ha0e/ o' a 4a/tne/0 inte/e0t $nde/ a/1#%e  o/  > Ae/ the te/5ina1on o' the 04e#i7ed te/5 o/ 4a/1#$%a/ $nde/taMing  At an& 15 e i' the 4a /tne/0hi4 )a0 a 4a/ tne/0hi4 at )i%% )hen the inte/e0t )a0 a00igned o/ )hen the #ha/ging o/de/ )a0 i00$ed. 9n; "i0#ond$#t, g/o00 neg%e#t, o/ 6/ea#h o' d$t& GR Fross misconduct, want of good faith, willful neglect of partnership obligaons, and such other causes as are producve of serious and permanent in#ury to the partnership concern, or which render it impraccable to carry on the partnership business, are proper grounds for the dissoluon of the partnership by a court of e9uity at the instance of the innocent partner. "lso, habitual drunenness, great extravagance or unwarranted negligence on the part of the partner in conducng the business of the partnership #uses a #udicial dissoluon of the partnership at the instance of the other partner, although such facts do not authori+e the other, of his own moon, to treat the partnership as ended and tae to himself all the benets of the #oint labors and property.

DISSENSION, LACK O! CON!IDENCE

$here the purpose of the partnership can no longer be accomplished harmoniously or protably because of serious dissensions, personal ill=will, irreconcilable diCerences, and lac of

condence between partners, courts of e9uity can consider these grounds for the dissoluon of the partnership. Eet, the partner who caused the want of condence or is the author of the ill=f eeling between himself and his partners will not be permi(ed to mae the strained relaon he has induced the ground for the dissoluon of the partnership. %he complaining partner must show that the things relied upon are of serious and permanen t character as to prevent the protable connuance of the partnership business.

Not g/o$nd0 'o/ di00o%$1on 0

!

triNing and minor grievances involving no permanent mischief1 :emedy In#uncon >ricon among the partners

A/1#%e . E8#e4t 0o 'a/ a0 5a& 6e ne#e0 0a/& to )ind $4 4a/tne/0hi4 aai/0 o/ to #o54%ete t/an0a#1on0 6eg$n 6$t not then 7ni0hed, di00o%$1on te/5inate0 a%% a$tho/it& o' an& 4a/tne/ to a#t 'o/ the 4a/tne/0hi4 > +ith /e04e#t to th e 4a/tne/0, +hen the di00o%$1on i0 not 6& the a#t, in0o%(en#& o/ death o' a 4a/tne/ o/ +hen the di00o%$1on i0 6& 0$#h a#t, in0o%(en#& o/ death o' a 4a/tne/, in #a0e0 )he/e a/1#%e  0o /e$i/e0  +ith /e04e#t to 4e/0on0 not 4a/tne/0, a0 de#%a/ed in a/1#%e . 9n; AUTHORITY AND PO+ERS O! PARTNERS %he disso luon of a partnership terminates the general agency of one partner for his co= partners, but leaves each of the partners with an e9ual duty and an e9ual power to do whatever is necessary to collect the debts due the partnership, and to ad#ust, se(le and pay its debts, including authority as before to represent his rm in all acts necessary to complete partnership contracts. $hen the conversion of property into cash is necessary for the compleon of the winding=up process, each partner is deemed to have power a
NOTE " member of a dissolved partnership cannot, however, by borrowing money, bind his co=partners, except when such power has been expressly or impliedly conferred upon him, inasmuch as such borrowing, whether to meet pre=exisng obligaons or not, is generally considered as a new contract.

A/1#%e . +he/e the di00o%$1on i0 #a$0ed 6& the a#t, death o/ in0o%(en#& o' a 4a/tne/, ea#h 4a/tne/ i0 %ia6%e to hi0 #oB4a/tne/0 'o/ hi0 0ha/e o' an& %ia6i%i t& #/eated 6& an& 4a/tne/ a#1ng 'o/ the 4a/tne/0hi4 a0 i' the 4a/tne/0hi4 had not 6een di00o%(ed $n%e00 > The di00o%$1on 6eing 6& a#t o' an & 4a/tne/, the 4a/tne/ a#1ng 'o/ the 4a/tne/0hi4 had Mno)%edge o' the di00o%$1on o/  The di 00o%$1on 6ei ng 6& the de ath o/ in 0o%(en#& o' a 4a/tne/, the 4a/tne/ a#1ng 'o/ the 4a/tne/0hi4 had Mno)%edge o/ no1#e o' the death o/ in0o%(en#&.


SCOPE O! THIS ARTICLE $here the dissoluon has been caused by the act of one of the pares, if the partner acng is sub#ect to a liability to third persons, he can call on his co=partners to contribute towards this liability to the same extent as if there has been no dissoluon, provided he had no nowledge of the dissoluon, at the me of the act. !"a#ple$ ", , and - are partners. ", in accordance with his right, or in contravenon of the partnership. , subse9uently, maes a contract for the partnership in ignorance of the dissoluon.  under this arcle would have the right to call upon " and - to assume their share of the burden. %he same principle applies when the dissoluon is caused by the death or insolvency of a partner, and that fact was unnown to the partner who subse9uently maes a contract of partnership.

NOTE %he arcle applies when the partnership is dissolved by "ct 8eath Insolvency of a partner In such case, despite dissoluon, a partner remains liable to his co= partners for his share of any liability incurred by any partner acng for the partnership as if there is no dissoluon

-PN0 0

%he dissoluon being by an act of the partner, the represenng partner had nowledge of the dissoluon

!

%he dissoluon is cau sed by the d eath or in solvency of a partner, the represenng partner who acts for the partnership, had nowledge or noce of such death or insolvency and sll transacts business for the partnership, he alone is responsible for the liability incurr ed (Pineda, 2006).

UNI!OR" PARTNERSHIP ACT 0

!

" person has /noledge of a fact within the meaning of the "ct not only when he has actual nowledge thereof, but also when he has nowledge of such other facts as in the circumstances shows bad faith " person has noce of a fact within the meaning of this "ct when the person who claims the benet of the noce, states the fact to such person, or delivers through the mail, or by other means of communicaon, a wri(en statement of the fact to such persons or to a proper person at his place of business or residence.

o' di00o%$1on, the 'a#t o' di00o%$1on had not 6een ad(e/10ed in a ne)04a4e/ o' gene/a% #i/#$%a1on in the 4%a#e 9o/ in ea#h 4%a#e i' 5o/e than one; at )hi#h the 4a/tne/0hi4 6$0ine00 )a0 /eg$%a/%& #a//ied on. The %ia6i%it& o' a 4a/tne/ $nde/ the 7/0t 4a/ag/a4h, No. , 0ha%% 6e 0a107ed o$t o' 4a/tne/0hi4 a00et0 a%one )hen 0$#h 4a/tne/ had 6een 4/io/ to di00o%$1on > UnMno)n a0 a 4a/tne/ to the 4e/0on )ith )ho5 the #ont/a#t i0 5ade and  So 'a/ $nMno)n and ina#1(e in 4a/tne/0hi4 aai/0 that the 6$0ine00 /e4$ta1on o' the 4a/tne/0hi4 #o$%d not 6e 0aid to ha(e 6een in an& deg/ee d$e to hi0 #onne#1on )ith it. The 4a/tne/0hi4 i0 in no #a0e 6o$nd 6& an& a#t o' a 4a/tne/ ae/ di00o%$1on : +he/e th e 4a/tne/0hi4 i 0 di 00o%(ed 6e #a$0e it i0 $n%a)'$% to #a//& on the 6$0i ne00, $n%e00 the a#t i0 a44/o4/iate 'o/ )inding $4 4a/tne/0hi4 aai/0 o/ :F +he/e the 4a/tne/ ha0 6e#o5e in0o%(ent o / :F> +he/e the 4a/tne/ ha0 no a$tho/it& to )ind $4 4a/tne/0hi4 aai/0 e8#e4t 6& a t/an0a#1on )ith one )ho B VV VᜀVᜀVᜀVᜀVᜀVᜀVᜀXZV㨀 VᜀVᜀVᜀVᜀV ᜀVᜀVᜀVᜀ23 Had e8 tended #/ edit to t he 4a/tne/0hi4 4/io/ to di00o%$1on and had no Mno)%edge o/ no1#e o' hi0 )ant o' a$tho/it& o/ VV VᜀVᜀVᜀVᜀVᜀVᜀVᜀXZV㨀 VᜀVᜀVᜀVᜀV ᜀVᜀVᜀVᜀ23F Had no t e 8tended #/ edit t o the 4a/tne/0hi4 4/io/ to di00o%$1on, and, ha(ing no Mno)%edge o/ no1#e o' hi0 )ant o' a$tho/it&, the 'a#t o' hi0 )ant o' a$tho/it& ha0 not 6een ad(e/10ed in the 5anne/ 4/o(ided 'o/ ad(e/10ing the 'a#t o' di00o%$1on in the 7/0t 4a/ag/a4h, No.  96;. Nothing in thi0 a/1#%e 0ha%% ae#t the %ia6i%it& $nde/ a/1#%e : o' an& 4e/0on )ho ae/ di00o%$1on /e4/e0ent0 hi50e%' o/ #on0ent0 to anothe/ /e4/e0en1ng hi5 a0 a 4a/tne/ in a 4a/tne/0hi4 engaged in #a//&ing on 6$0ine00. 9n; ⸀

⸀

ACCEPTANCE O! *ILL "
LIA*ILITY LI"IT ED *Y NOTICE O! DISSOLUTION %he liability of partnership property for partnership debts does not extend to debts contracted by one partner a
A/1#%e . Ae/ di00o%$1on, a 4a/tne/ #an 6ind the 4a/tne/0hi4, e8#e4t a0 4/o(ided in the thi/d 4a/ag/a4h o' thi0 a/1#%e *& an& a#t a44/o4/iate 'o/ )inding $4 4a/tne/0hi4 aai/0 o/ #o54%e1ng t/an0a#1on0 $n7ni0hed at di00o%$1on *& an& t/an0a#1on )hi#h )o$%d 6ind the 4a/tne/0hi4 i' di00o%$1on had not taMen 4%a#e, 4/o(ided the othe/ 4a/t&

&ersons dealing with a surviving partner with noce of the co= partnerGs death are bound to recogni+e the limitaon on his authority, and act at their peril when they give credit to the survivor in a new transacon.

to the t/an0a#1on > Had e8tended #/edit to the 4a/tne/0hi4 4/io/ to di00o%$1on and had no Mno)%edge o/ no1#e o' the di00o%$1on o/  Tho$gh he had n ot 0o e 8tended #/edit, ha d ne(e/the%e00 Mno)n o' the 4a/tne/0hi4 4/io/ to di00o%$1on, and, ha(ing no Mno)%edge o/ no1#e

the absence of anything to indicate its terminaon, presumed to connue to exist, the law, for the protecon of innocent third persons, imposes upon partners, when they dissolve the partnership relaon or when dissoluon is eCected by the rerement or withdrawal of one of the partners, the duty of giving noce of the dissoluon of the partnership.

NOTICE O! DISSOLUTION )ince a partnership once established is, in

%he members of a partnership a

in good faith connue to act in the belief that the rm is sll in existence.

A/1#%e :. The di00o%$1on o' the 4a/tne/0hi4 doe0 not o' it0e%' di0#ha/ge the e8i01ng %ia6i%it& o' an& 4a/tne/. A 4a/tne/ i0 di0#ha/ged '/o5 an& e8i01ng %ia6i%it& $4on di00o%$1on o' the 4a/tne/0hi4 6& an ag/ee5ent to that ee#t 6et)een hi50e%', the 4a/tne/0hi4 #/edito/ and the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00 and 0$#h ag/ee5ent 5a& 6e in'e//ed '/o5 the #o$/0e o' dea%ing 6et)een the #/edito/ ha(ing Mno)%edge o' the di00o%$1on and the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00. The indi(id$a% 4/o4e/t& o' a de#ea0ed 4a/tne/ 0ha%% 6e %ia6%e 'o/ a%% o6%iga1on0 o' the 4a/tne/0hi4 in#$//ed )hi%e he )a0 a 4a/tne/, 6$t 0$6?e#t to the 4/io/ 4a&5ent o' hi0 0e4a/ate de6t0. 9n; CONTINUATION O! LIA*ILITY 8issoluon of partnership does not discharge the exisng contractual liability of any partner without express or implied agreement between himself, the partnership creditor, and the partnership connuing the business or without novaon1 and in the absence of such factors, a rering partnerGs liability on contracts of the partnership made before dissoluo n, connues as that of a principal or as a co=principal debtor.

NOTE " partner who has withdrawn from the partnership is released from liability only when there has been li9uidaon and his withdrawal has been published.

A/1#%e 3. Un%e00 othe/)i0e ag/eed, the 4a/tne/0 )ho ha(e not )/ong'$%%& di00o%(ed the 4a/tne/0hi4 o/ the %ega% /e4/e0enta1(e o' the %a0t 0$/(i(ing 4a/tne/, not in0o%(ent, ha0 the /ight to )ind $4 the 4a/tne/0hi4 aai/0, 4/o(ided, ho)e(e/, that an& 4a/tne/, hi0 %ega% /e4/e0enta1(e o/ hi0 a00ignee, $4on #a$0e 0ho)n, 5a& o6tain )inding $4 6& the #o$/t. 9n; KINDS O! +INDING UP @UDICIAL $hen there is a court intervenon iniated by any partner, a l egal representave or assignee of a partner

E-TRAB@UDICIAL $hen the dissoluon is voluntary without any court intervenon (Pineda, 2006).

+HO CAN INITIATE +INDING UP

>   

%he partner who is expressly authori+ed by agreement to iniate the winding up If there is no such agreement, all the partners may instute the winding up %he legal representave of the last surviving partner who must not be insolvent "ssignee (Pineda, 2006).

PO+ERS OR PREROGATIES O! THE LU
7444 'e may engage the services of counsel for reasonable fees to prosecute or defend cases of the rm1 he may also incur obligaons for ligaon expenses (Pineda, 2006).

A/1#%e 2. +hen di00o%$1on i0 #a$0ed in an& )a&, e8#e4t in #ont/a(en1on o' the 4a/tne/0hi4 ag/ee5ent, ea#h 4a/tne/, a0 again0t hi0 #oB4a/tne/0 and a%% 4e/0on0 #%ai5ing th/o$gh the5 in /e04e#t o' thei/ inte/ e0t0 in the 4a/tne/0hi4, $n%e00 othe/)i0e ag/eed, 5a& ha(e the 4a/tne/0hi4 4/o4e/t& a44%ied to di0#ha/ge it0 %ia6i%i1e0, and the 0$/4%$0 a44%ied to 4a& in #a0h the net a5o$nt o)ing to the /e04e#1(e 4a/tne/0. *$t i' di00o%$1on i0 #a$0ed 6& e84$%0ion o' a 4a/tne/, 6ona 7de $nde/ the 4a/tne/0hi4 ag/ee5ent and i' the e84e%%e d 4a/tne/ i0 di0#ha/ged '/o5 a%% 4a/tne/0hi4 %ia6i%i1e0, eithe/ 6& 4a&5ent o/ ag/ee5ent $nde/ the 0e#ond 4a/ag/a4h o' a/1#%e :, he 0ha%% /e#ei(e in #a0h on%& the net a5o$nt d$e hi5 '/o5 the 4a/tne/0hi4. +hen di00o%$1on i0 #a$0ed in #ont/a(en1on o' the 4a/tne/0hi4 ag/ee5ent the /ight0 o' the 4a/tne/0 0ha%% 6e a0 'o%%o)0 > Ea#h 4a/tne/ )ho ha0 not #a$0ed di00o%$1on )/ong'$%%& 0ha%% ha(e >.> A%% the /ight0 04e#i7ed in the 7/0t 4a/ag/a4h o' thi0 a/1#%e, and >. The /ight, a0 again0t ea#h 4a/tn e/ )ho ha0 #a$0ed the di00o%$1on )/ong'$%%&, to da5age0 6/ea#h o' the ag/ee5ent.  The 4a/tne/0 )ho ha (e not #a$ 0ed the di00o%$1on )/ong'$%%&, i' the& a%% de0i/e to #on1n$e the 6$0ine00 in the 0a5e na5e eithe/ 6& the50e%(e0 o/ ?oint%& )ith othe/0, 5a& do 0o, d$/ing the ag/eed te/5 'o/ the 4a/tne/0hi4 and 'o/ that 4$/4o0e 5a& 4o00e00 the 4a/tne/0hi4 4/o4e/t&, 4/o(ided the& 0e#$/e the 4a&5ent 6& 6ond a44/o(ed 6& the #o$/t, o/ 4a& an& 4a/tne/ )ho ha0 #a$0ed the di00o%$1on )/ong'$%%&, the (a%$e o' hi0 inte/e0t in the 4a/tne/0hi4 at the di00o%$1on, %e00 an& da5age0 /e#o(e/a6%e $nde/ the 0e#ond 4a/ag/a4h, No.  96; o' thi0 a/1#%e, and in %iMe 5anne/ inde5ni'& hi5 again0t a%% 4/e0ent o/ '$t$/e 4a/tne/0hi4 %ia6i%i1e0.  A 4a/tne/ )ho ha0 #a$0ed the di00o%$1on )/ong'$%%& 0ha%% ha(e .> I' the 6$0ine00 i0 not #on1n$e d $nde/ the 4/o(i0ion0 o' the 0e#ond 4a/ag/a4h, No. , a%% the /ight0 o' a 4a/tne/ $nde/ the 7/0t 4a/ag/a4h, 0$6?e#t to %ia6i%it& 'o/ da5age0 in the 0e#ond 4a/ag/a4h, No.  96;, o' thi0 a/1#%e. . I' the 6$0ine00 i0 #on1n$ed $nde/ the 0e#ond 4a/ag/a4h, No. , o' thi0 a/1#%e, the /ight a0 again0t hi0 #oB4a/tne/0 and a%% #%ai5ing th/o$gh the5 in /e04e#t o' thei/ i nte/e0t0 in the 4a/tne/0hi4, to ha(e the (a%$e o' hi0 inte/e0t in the 4a/tne/0hi4, %e00 an& da5age #a$0ed to hi0 #oB4a/tne/0 6& the di00o%$1on, a0#e/tained and 4aid to hi5 in #a0h, o/ the 4a&5ent 0e#$/ed 6& a 6ond a44/o(ed 6& the #o$/t, and to 6e /e%ea0ed '/o5 a%% e8i01ng %ia6i%i1e0 o' the 4a/tne/0hi4 6$t inthe a0#e/taining the goodB)i%% (a%$e o' the 4a/tne/0 inte/e0t (a%$e o' the o' the 6$0ine00 0ha%% not 6e #on0ide/ed. 9n; DISCHARGE O! LIA*ILITIES Fenerally, partnership property must rst be applied to the payment of partnership debts, and the co= partners or their creditors are entled to only such property as remains a

3pon the dissoluon of a partnership by death of a partner, all members of the rm are entled to a division of the surplus of the assets over the amount necessary to discharge the liabilies of the partnership.

CAUSES O! DISSOLUTION UNDER THIS ARTICLE 8issoluon not in contravenon of partnership agreement 8issoluon in contravenon of partnership agreement (Pineda, 2006)

GOOD+ILL O! PARTNERSHIP %he guilty partner is not entled to a proporonate share of the value of the goodwill if the rm. %his is a penalty for his bad faith in wrongfull y dissolving the rm (Pineda, 2006).

A/1#%e . +he/e a 4a/tne/0hi4 #ont/a#t i0 /e0#inded on the g/o$nd o' the '/a$d o/ 5i0/e4/e0enta1on o' one o' the 4a/1e0 the/eto, the 4a/t& en1t%ed to /e0#ind i0, )itho$t 4/e?$di#e to an& othe/ /ight, en1t%ed > To a %ien on, o/ /ight o' /eten1on o', the 0$/4%$0 o' the 4a/tne/0hi4 4/o4e/t& ae/ 0a10'&ing the 4a/tne/0hi4 %ia6i%i1e0 to thi/d 4e/0on0 'o/ an& 0$5 o' 5one& 4aid 6& hi5 'o/ the 4$/#ha0e o' an inte/e0t in the 4a/tne/0hi4 and 'o/ an& #a4ita% o/ ad(an#e0 #ont/i6$ted 6& hi5  To 0tand, ae/ a%% %ia6i%i1e0 to thi/d 4e/0on0 ha(e 6een 0a107ed, in the 4%a#e o' the #/edito/0 o' the 4a/tne/0hi4 'o/ an& 4a&5ent0 5ade 6& hi5 in /e04e#t o' the 4a/tne/0hi4 %ia6i%i1e0 and  To 6e inde5ni7ed 6& the 4e/0on g$i%t& o' the '/a$d o/ 5aMing the /e4/e0enta1on again0t a%% de6t0 and %ia6i%i1e0 o' the 4a/tne/0hi4. 9n; RESCISSION DUE !RAAUD

0

:ight to be indemnied by the supposed partner guilty of the fraud or misrepresentaon against all debts and liabilies of the partnership (Pineda, 2006).

A/1#%e F. In 0e%ing a##o$nt0 6et)een the 4a/tne/0 ae/ di00o%$1on, the 'o%%o)ing /$%e0 0ha%% 6e o60e/(ed, 0$6?e#t to an& ag/ee5ent to the #ont/a/& > The a00et0 o' the 4a/tne/0hi4 a/e > The 4 a/tne/0hi4 4/o 4e/t&,  The #o nt/i6$1on0 o' the 4a /tne/0 ne#e 00a/& 'o/ the 4a&5ent o' a%% the %ia6i%i1e0 04e#i7ed in No. .  The %ia6i%i1e0 o' the 4a/tne/0hi4 0ha%% /anM in o/de/ o' 4a&5ent, a0 'o%%o)0 > Tho0e o)ing to # /edito/0 othe/ t han 4a/tne/0,  Tho0e o)ing to 4a/tne/0 othe/ than 'o/ #a4ita% and 4/o7t0,  Tho0e o)ing to 4a/tne/0 in /e04e#t o' #a4ita%,  Tho0e o)ing to 4a/tne/0 in /e04e#t o' 4/o7t0.  The a00et0 0h a%% 6e a4 4%ied in th e o/de/ o' th ei/ de#%a/a1on in No.  o' thi0 a/1#%e to the 0a10'a#1on o' the %ia6i%i1e0.  The 4a/tne/0 0ha%% #ont/i6$te, a0 4/o(ided 6& a/1#%e 2F2, the a5o$nt ne#e00a/& to 0a10'& the %i a6i%i1e0.  An a00ignee 'o/ the 6ene7t o' #/edito/0 o/ an& 4e/0on a44ointed 6& the #o$/t 0ha%% ha(e the /ight to en'o/#e the #ont/i6$1on0 04e#i7ed in the 4/e#eding n$56e/.

$here one is induced to form a partnership by reason of fraud or misrepresentaon, the court, upon prompt applicaon of in#ured party a
NOTE )ince the ground indicated in the arcle to set aside the contract of partnership is fraud or misrepresentaon, the appropriate technical word for the seRng aside of the contract should be annulledJ and not rescindedJ (Pineda, 2006). %he decei t must be material and mere exaggeraons as to the prospects of an enterprise or the value of the property which he has put into the rm as capital is not a ground for dissoluon. $hen fraud is established, court will compel the repayment of whatever sums may have been improperly obtained.

RIGHTS O! PARTIES ENTITLED TO ANNUL 0

:ight of lie n on the su rplus of the pa rtnership property a
!

:ight to subrogate partnership creditors a
: An& 4a/tne/ o/ hi0 %e ga% /e4/e0enta1(e 0ha%% ha(e the /ight to en'o/#e the #ont/i6$1on0 04e#i7ed in No. , to the e8tent o' the a5o$nt )hi#h he ha0 4aid in e8#e00 o' hi0 0ha/e o' the %ia6i%it&. 3 The indi(id$a% 4/o4e/t& o' a de#ea0ed 4a/tne/ 0ha%% 6e %ia6%e 'o/ the #ont/i6$1on0 04e#i7ed in No. . 2 +hen 4a/tne/0hi4 4/o4e/t& and the indi(id$a% 4/o4e/1e0 o' the 4a/tne/0 a/e in 4o00e00ion o' a #o$/t 'o/ di0t/i6$1on, 4a/tne/0hi4 #/edito/0 0ha%% ha(e 4/io/it& on 4a/tne/0hi4 4/o4e/t& and 0e4a/ate #/edito/0 on indi(id$a% 4/o4e/t&, 0a(ing the /ight0 o' %ien o/ 0e#$/ed #/edito/0.  +he/e a 4a/tne/ ha0 6e#o5e in0o%(ent o/ hi0 e0 tate i0 in0o%(ent, the #%ai50 again0t hi0 0e4a/ate 4/o4e/t& 0ha%% /anM in the 'o%%o)ing o/de/ Tho0ee o) o)ing ing tto o 4a/ 0e4a/ ate0hi4 #/ed ito/ito/ 0 0 > Tho0 tne/ #/ed  Tho0e o)ing to 4a/tne/0 6& )a& o' #ont/i6$1on. 9n; LI

assets. %he reason is that the creditors of the partnership must be paid rst as they en#oy priority of payment (Pineda, 2006).

CONERSION O! ASSETS INTO CASH GR "
-PN0 25 2? 27

$here there are no debts and division in ind may be fairly and e9uitably made1 If sale of assets would be pre#udicial to an innocent partner who has not consented to the sale1 and $here dissoluon of the pa rtnership is ha d on suit of a partner upon violaon of a partnership agreement, and a #udicial sale of the assets would amount to conscaon.

AGREE"ENT AS TO DISTRI*UTION O! ASSETS -o=partners may agree in what proporon assets of the partnership may be divided between them upon dissoluon. $here there is no fraud, an agreement of dissoluon and se(lement will not be set aside merely because one partner has made an improvident agreement and se(lement is on the basis diCerent from that provided by the arcles. &artnerGs share cannot be returned without rst dissolving and li9uidang the partnership, for the return is dependent on the discharge of the creditors whose claims en#oy preference over those of the partners. It is self=evident that all partners of the partnership are interested in its assets and business, and are entled to be heard in the ma(er of the rmGs li9uidaon and the distribuon of its property.

PRE!ERENCES O! PAY"ENT 23 24 25 26

%hose owing the creditors other than partners %hose owing to partners other than capital and prots %hose owing to partners in respect of capital %hose owing to partners in respect of prots (Pineda, 2006)

RULE IN CASE O! INSOLENCY O! A PARTNER OR THAT O! HIS ESTATE IN CASE O! HIS DEATH rder 23 24 25

)eparate creditors &artnership creditors &artners who gave contribuons (Pineda, 2006)

4a/tne/0, o/ to one o/ 5o/e o' the 4a/tne/0 and one o/ 5o/e thi/d 4e/0on0, i' the 6$0ine00 i0 #on1n$ed )itho$t %i$ida1on o' the 4a/tne/0hi4 aai/0  +hen a%% 6$t one 4a/tne/ /e1 /e and a00i gn 9o/ the /e4/e0enta1(e o' a de#ea0ed 4a/tne/ a00ign0; thei/ /ight0 in 4a/tne/0hi4 4/o4e/t& to the /e5aining 4a/tne/, )ho #on1n$e0 the 6$0ine00 )itho$t %i$ida1on o' 4a/tne/0hi4 aai/0, eithe/ a%one o/ )ith othe/0  +hen an& 4a/tne/ /e 1/e0 o/ die0 and the 6$0ine 00 o' the di00o%(ed 4a/tne/0hi4 i0 #on1n$ed a0 0et 'o/th in No0.  and  o' thi0 a/1#%e, )ith the #on0ent o' the /e1/ed 4a/tne/0 o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/, 6$t )itho$t an& a00ign5ent o' hi0 /ight in 4a/tne/0hi4 4/o4e/t& : +hen a%% the 4a/tne/ 0 o/ thei/ /e4 /e0enta1(e0 a00ig n thei/ /ight0 in 4a/tne/0hi4 4/o4e/t& to one o/ 5o/e thi/d 4e/0on0 )ho 4/o5i0e to 4a& the de6t0 and )ho #on1n$e the 6$0ine00 o' the di00o%(ed 4a/tne/0hi4 3 +hen an& 4a/tne/ )/ong'$%%& #a$0e0 a di00o%$1on and the /e5aining 4a/tne/0 #on1n$e the 6$0ine00 $nde/ the 4/o(i0ion0 o' a/1#%e 2, 0e#ond 4a/ag/a4h, No. , eithe/ a%one o/ )ith othe/0, and )itho $t %i$ida1on o' the 4a/tne/0hi4 aai/0 2 +hen a 4a/tne/ i0 e84e%%ed and the /e5aining 4a/tne/0 #on1n$e the 6$0ine00 eithe/ a%one o/ )ith othe/0 )itho$t %i$ida1on o' the 4a/tne/0hi4 aai/0. The %ia6i%it& o' a thi/d 4e/0on 6e#o5ing a 4a/tne/ in the 4a/tne/0hi4 #on1n$ing the 6$0ine00, $nde/ thi0 a/1#%e, to the #/edito/0 o' the di00o%(ed 4a/tne/0hi4 0ha%% 6e 0a107ed o$t o' the 4a/tne/0hi4 4/o4e/t & on%&, $n%e00 the/e i0 a 014$%a1on to the #ont/a/&. +hen the 6$0ine00 o' a 4a/tne/0hi4 ae/ di00o%$1on i0 #on1n$ed $nde/ an& #ondi1on0 0et 'o/th in thi0 a/1#%e the #/edito/0 o' the di00o%(ed 4a/tne/0hi4, a0 again0t the 0e4a/ate #/edito/0 o' the /e1/ing o/ de#ea0ed 4a/tne/ o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/, ha(e a 4/io/ /ight to an& #%ai5 o' the /e1/ed 4a/tne/ o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/ again0 t the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00, on a##o$nt o' the /e1/ed o/ de#ea0ed 4a/tne/0 inte/e0t in the di00o%(ed 4a/tne/ 0hi4 o/ on a##o$nt o' an& #on0ide/a1on 4/o5i0ed 'o/ 0$#h inte/e0t o/ 'o/ hi0 /ight in 4a/tne/0hi4 4/o4e/t&. Nothing in thi0 a/1#%e 0ha%% 6e he%d to 5odi'& an& /ight o' #/edito/0 to 0et a0ide an& a00ign5ent on the g/o$nd o' '/a$d. The $0e 6& the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00 o' the 4a/tne/0hi4 na5e, o/ the na5e o' a de#ea0ed 4a/tne/ a0 4a/t the/eo', 0ha%% not o' it0e%' 5aMe the indi(id$a% 4/o4e/t& o' the de#ea0ed 4a/tne/ %ia6%e 'o/ an& de6t0 #ont/a#ted 6& 0$#h 4e/0on o/ 4a/tne/0hi4. 9n; SCOPE %he arc le deals with the right of -:s when a new part ner is

A/1#%e > . In the 'o%%o)ing #a0e0 #/edito/0 o' the di00o%(e d 4a/tne/0hi4 a/e a%0o #/edito/0 o' the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00

admi(ed or a partner reres, is expelled or dies and the business is connued without li9uidaon of all debts of the partnership dissolved by the change in personnel.

 +hen an& ne) 4a/tn e/ i0 ad5ied into an e8i 01ng 4a/tne/0hi4, o/ )hen an& 4a/tne/ /e1/e0 and a00ign0 9o/ the /e4/e0enta1(e o' the de#ea0ed 4a/tne/ a00ign0; hi0 /ight0 in 4a/tne/0hi4 4/o4e/t& to t)o o/ 5o/e o' the

%his does not alter the rule that any change in membership dissolves a partnership and creates a new partnership1 neither does it alter the rule that on any change of personnel, the prop erty of the dissolved partnership becomes the property of the partnership


connuing the business. 'ence, -:s of the dissolved partnership become -:s of the new partnership.

"pplying the general law on prescripon of acons, the period of prescripon is !0 years if the contract of partnership is in wring1 and if not, it is O years from dissoluon (Pineda, 2006).

SI- SITUATIONS +HERE THERE IS DISSOLUTION *Y REASON O! CHANGE IN "E"*ERSHIP CAUSED *Y ANY O! THE !! 7!2 7!5 7!? 7!7 7!O

"dmission of a new partner :erement of a partner "ssignment of rights in partnership property 8eath of a partner ;xpulsion

A/1#%e . +hen an& 4a/tne/ /e1/e0 o/ die0, and the 6$0ine00 i0 #on1n$ed $nde/ an& o' the #ondi1on0 0et 'o/th in the 4/e#eding a/1#%e, o/ in a/1#%e 2, 0e#ond 4a/ag/a4h, No. , )itho$t an& 0e%e5ent o' a##o$nt0 a0 6et)een hi5 o/ hi0 e0ta te and the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00, $n%e00 othe/)i0e ag/eed, he o/ hi0 %ega% /e4/e0enta1(e a0 again0t 0$#h 4e/0on o/ 4a/tne/0hi4 5a& ha(e the (a%$ e o' hi0 inte /e0t at the date o' di00o%$1on a0#e/tained, and 0ha%% /e#ei(e a0 an o/dina/& #/edito/ an a5o$nt e$a% to the (a%$e o' hi0 inte/e0t in the di00o%(ed 4a/tne/0hi4 )ith inte/e0t, o/, at hi0 o41on o/ at the o41on o' hi0 %ega% /e4/e0enta1(e, in %ie$ o' inte/e0t, the 4/o7t0 a/i6$ta6%e to the $0e o' hi0 /ight in the 4/o4e/t& o' the di00o%(ed 4a/tne/0hi4 4/o(ided that the #/edito/0 o' the di00o%(ed 4a/tne/0hi4 a0 again0t the 0e4a/a te #/edito/0, o/ the /e4/e0 enta1(e o' the /e1/ed o/ de#ea0ed 4a/tne/, 0ha%% ha(e 4/io/it& on an& #%ai5 a/i0ing $nde/ thi0 a/1#%e, a0 4/o(ided a/1#%e >, thi/d 4a/ag/a4h. 9n; AGREE"ENTS AS TO LI
GR $hen a partner reres from the rm, he is entled to payment of what may be due him a
A/1#%e . The /ight to an a##o$nt o' hi0 inte/e0t 0ha%% a##/$e to an& 4a/tne/, o/ hi0 %ega% /e4/e0enta1(e a0 again0t the )inding $4 4a/tne/0 o/ the 0$/(i(ing 4a/tne/0 o/ the 4e/0on o/ 4a/tne/0hi4 #on1n$ing the 6$0ine00, the date o' an& ag/ee5ent to the at #ont/a/&. 9n;o' di00o%$1on, in the a60en#e PRESCRIPTION O! ACTION &rescripon begins to run only upon dissoluon of the partnership when the nal accounng is done.

CHAPTER  Li5ited Pa/tne/0hi4 9n; A/1#%e . A %i5ited 4a/tne/0hi4 i0 one 'o/5ed 6& t)o o/ 5o/e 4e/0on0 $nde/ the 4/o(i0ion0 o' the 'o%%o)ing a/1#%e, ha(ing a0 5e56e/0 one o/ 5o/e gene/a% 4a/tne/0 and one o/ 5o/e %i5ited 4a/tne/0. The %i5ited 4a/tne/0 a0 0$#h 0ha%% not 6e 6o$nd 6& the o6%iga1on0 o' the 4a/tne/0hi4. LI"ITED PARTNERSHIP NATURE O! LIA*ILITY It is one in which the liability of the members is limited /but not all. )uch is formed under laws permiRng an individual to contribute to a specied sum to the capital of a rm and then liming his liability for losses to that amount on the pares complying with certain established re9uirements. %heir liability is limited to a xed amount, that is, to the amount they have contributed or invested in the partnership (Pineda, 2006).

SUCCESSION TO GENERAL PARTNER Mere acceptance of the inheritance does not mae the heir of a general partner a general partner himself. ut by authori+ing the widow of a managing partner to manage partnership property which is a limited partner could not be authori+ed to do, the other general partner recogni+ed her as a general partner, and is now in estoppel to deny her posion as a general partner with authority to administer and alienate partnership property.

CALLING A PARTNERSHIP AS LI"ITED DOES NOT NECESSARILY "AKE IT ONE %he legal intenon deducible from the acts of the pares controls in determining the existence of a partnership (Pineda, 2006).

CHARACTERISTICS O! LI"ITED PARTNERSHIP %here must be compliance with the statutory re9uirement of form under "rt. !4?? which is mandatory &artnership business is under the control of one or more of general partners who are personally liable to partnership creditors ne or more limited partner s contribute to the partnership capital who share in the prots but do not tae part in the management of the business %he limited partnerDs are not personally liable for the partnership obligaons beyond the amount of their contribuons or investments %he partn ership debts or obligaons are paid out of the partnership assets and the separate properes of the general partners %he limited partners may get bac their capital contribuon prescribed by law (Pineda, 2006).

ADANTAGES O! A LI"ITED PARTNERSHIP


n the part of the general partners %hey can secure capital from others for purposes of their business while retaining the control and supervision of the partnership business. n the part of limited partner %he limited partner shares on the prots without ris of personal liability (Pineda, 2006)

PURPOSE O! STATUTE AUTHORI[ING LI"ITED PARTNERSHIP %o encourage those having capital to become partners with those having sills, by liming the liability of the former to the incidental amount actually contributed by them (Pineda, 2006).

!i%e 'o/ /e#o/d the #e/17#ate in the OJ#e o' the Se#$/i1e0 and E8#hange Co55i00ion. A %i5ited 4a/tne/0hi4 i0 'o/5ed i' the/e ha0 6een 0$60tan1a% #o54%ian#e in good 'aith )ith the 'o/egoing /e$i/e5ent0. CO"PLIANCE +ITH LA+ " partnership transacng business is prima facie a general partnership and those who see to avail themselves of the protecon of laws permiRng the creaon of a limited partnership must show due compliance with such laws.

A/1#%e  . T)o o/ 5o/e 4e/0on0 de0i/ing to 'o/5 a %i5ited 4a/tne/0hi4 0ha%% Sign and 0)ea/ to a #e/17#ate, )hi#h 0ha%% 0tate \ > The na5e o' the 4a/tne/0hi4, adding the/eto the )o/d ]Li5ited]  The #ha/a#te/ o' th e 6$0ine00  The %o#a1on o' the 4/in#i4a% 4%a#e o' 6$0ine00  The na5 e and 4% a#e o' /e0 iden#e o' ea #h 5e56e/, gene/a% and %i5ited 4a/tne/0 6eing /e04e#1(e%& de0ignated  The te/5 'o/ )hi#h the 4a/tne/0hi4 i0 to e8i0t 9 ' ; The a5o$nt o' #a0h and a de0#/i41on o' and the ag/eed (a%$e o' the othe/ 4/o4e/t& #ont/i6$ted 6& ea#h %i5ited 4a/tne/ : The addi 1ona% #ont/i6$1on0, i' an& , to 6e 5ade 6& ea#h %i5ited 4a/tne/ and the 15e0 at )hi#h o/ e(ent0 on the ha44ening o' )hi#h the& 0ha%% 6e 5ade 3 The 15e, i' ag/eed $4on, )hen the #ont/i6$1on o' ea#h %i5ited 4a/tne/ i0 to 6e /et$/ned 2 The 0ha/e o' the 4/o7t0 o/ the othe/ #o54en0a1on 6& )a& o' in#o5e )hi#h ea#h %i5ited 4a/tne/ 0ha%% /e#ei(e 6& /ea0on o' hi0 #ont/i6$1on 9 ?; The /ight, i' gi(en, o' a %i5ited 4a/tne/ to 0$601t$te an a00ignee a0 #ont/i6$to/ in hi0 4%a#e, and the te/50 and #ondi1on0 o' the 0$601t$1on  The /ight, i' gi(en, o' the 4a/tne/0 to ad5it addi1ona% %i5ited 4a/tne/0 F The /ig ht, i' gi(en, o' on e o/ 5o/ e o' the %i5ited 4a/tne/0 to 4/io/it& o(e/ othe/ %i5ited 4a/tne/0, a0 to #ont/i6$1on0 o/ a0 to #o54en0a1on 6& )a& o' in#o5e, and the nat$/e o' 0$#h 4/io/it& > The /ight, i' gi(en, o' the /e 5aining gene/a% 4a/tne/ o/ 4a/tne/0 to #on1n$e the 6$0ine00 on the death, /e1/e5ent, #i(i% inte/di#1on, in0anit& o/ in0o%(en#& o' a gene/a% 4a/tne/ and  The /ig ht, i' gi(en, o' a %i5ited 4a/t ne/ to de5and and /e#ei(e 4/o4e/t& othe/ than #a0h in /et$/n 'o/ hi0 #ont/i6$1on.

'ence, to obtainre9uirements the privilege of limited liability, one must conform to the statutory regulang the formaon of limited partnership. " limited partnership that has not complied with the law is not considered as a limited partnership but a general partnership in which all the members are liable.

RE
NOTE )trict compliance is not re9uired. Mere substanal compliance in good faith will suce (Pineda, 2006).

DE!ECTIE CERTI!ICATE If the cercate of formaon of a limited partnership is defecve and shows on its face that the statutory re9uirements have not been complied with, a court can of its moon hold that a limited partnership has not been formed.

-PN If a(aching -:s recogni+e and deal with a rm as a limited partnership, they will be estopped from insisng that there is no such partnership or that the terms of the partnership were not suciently stated in the noce of its formaon.

A/1#%e :. The #ont/i6$1on0 o' a %i5ited 4a/tne/ 5a& 6e #a0h o/ 4/o4e/t&, 6$t not 0e/(i#e0. NOTE If he contributes services, he shall be considered an industrial and general partner. " limited partner who contributes services will tae acve part in the management of the partnership. %his means he will be exercising some controlling power in the business which is not supposed to be exercised by a limited partner (Pineda, 2006).

A/1#%e 3. The 0$/na5e o' a %i5ited 4a/tne/ 0ha%% not a44ea/ in the 4a/tne/0hi4 na5e $n%e00 It i0 a%0o the 0$/na5e o' a gene/a% 4a/tne/, o/ P/io/ to the 15e )hen the %i5ited 4a/tne/ 6e#a5e 0$#h, the 6$0ine00 ha0 6een #a//ied on $nde/ a na5e in )hi#h hi0 0$/na5e a44ea/ed. A %i5ited 4a/tne/ )ho0e 0$/na5e a44ea/0 in a 4a/tne/0hi4 na5e #ont/a/& to the 4/o(i0ion0 o' the 7/0t 4a/ag/ a4h i0 %ia6%e a0 a gene/a% 4a/tne/ to 4a/tne/0hi4 #/edito/0 )ho e8tend #/edit to the


4a/tne/0hi4 )itho$t a#t$a% Mno)%edge that he i0 not a gene/a% 4a/tne/. SURNA"E O! LI"ITED PARTNER &artnerships are re9uired to have a rm name. In a limited partnership, the surname of a limited partner shall not appea r in the partn ership name because he is exempted from general liability. 'is liability is limited, that is why, he is referred to as a limited partner. therwise, he becomes a general partner (Pineda, 2006).

A/1#%e 2. I' the #e/17#ate #ontain0 a 'a%0e 0tate5ent, one )ho 0$e/0 %o00 6& /e%ian#e on 0$#h 0tate5ent 5a& ho%d %ia6%e an& 4a/t& to the #e/17#ate )ho Mne) the 0tate5ent to 6e 'a%0e At the 15e he 0igned the #e/17#ate, o/ S$60e$ent%&, 6$t )ithin a 0$J#ient 15e 6e'o/e the 0tate5ent )a0 /e%ied $4on to ena6%e hi5 to #an#e% o/ a5end the #e/17#ate, o/ to 7%e a 4e11on 'o/ it0 #an#e%%a1on o/ a5end5ent a0 4/o(ided in a/1#%e 3:.

in0o%(en#& o' a gene/a% 4a/tne/, $n%e00 the /ight 0o to do i0 gi(en in the #e/17#ate. A/1#%e :. A %i5ited 4a/tne/ 0ha%% ha(e the 0a5e /ight0 a0 a gene/a% 4a/tne/ to Ha(e the 4a/tne/0hi4 6ooM0 Me4t at the 4/in#i4a% 4%a#e o' 6$0ine00 o' the 4a/tne/0hi4, and at a /ea0ona6%e ho$/ to in04e#t and #o4& an& o' the5 Ha(e on de5and t/$e and '$%% in'o/5a1on o' a%% thing0 ae#1ng the 4a/tne/0hi4, and a 'o/5a% a##o$nt o' 4a/tne/0hi4 aai/0 )hene(e/ #i/#$50tan#e0 /ende/ it ?$0t and /ea0ona6%e and Ha(e di00o%$1on and )inding $4 6& de#/ee o' #o$/t. A %i5ited 4a/tne/ 0ha%% ha(e the /ight to /e#ei(e a 0ha/e o' the 4/o7t0 o/ othe/ #o54en0a1on 6& )a& o' in#o5e, and to the /et$/n o' hi0 #ont/i6$1on a0 4/o(ided in a/1#%e0 :3 and :2. PO+ER TO CONTRACT

RE
A/1#%e . A %i5ited 4a/tne/ 0ha%% not 6e#o5e %ia6%e a0 a gene/a% 4a/tne/ $n%e00, in addi1on to the e8e/#i0e o' hi0 /ight0 and 4o)e/0 a0 a %i5ited 4a/tne/, he taMe0 4a/t in the #ont/o% o' the 6$0ine00. GR " limited partner is not liable as a general partner

" limited partner has no power to bind the partnership by a contract.

A/1#%e :. +itho$t 4/e?$di#e to the 4/o(i0ion0 o' a/1#%e , a 4e/0on )ho ha0 #ont/i6$ted to the #a4ita% o' a 6$0ine00 #ond$#ted 6& a 4e/0on o/ 4a/tne/ 0hi4 e//one o$0%& 6e%ie( ing that he ha0 6e#o5e a %i5ited 4a/tne/ in a %i5ited 4a/tne/0hi4, i0 not, 6& /ea0on o' hi0 e8e/#i0e o' the /ight0 o' a %i5ited 4a/tne/, a gene/a% 4a/tne/ )ith the 4e/0on o/ in the 4a/tne/0hi4 #a//&ing on the 6$0ine00, o/ 6o$nd 6& the o6%iga1on0 o' 0$#h 4e/0on o/ 4a/tne/0hi4, 4/o(ided that on a0#e/taining the 5i0taMe he 4/o54t%& /eno$n#e0 hi0 inte/e0t in the 4/o7t0 o' the 6$0ine00, o/ othe/ #o54en0a1on 6& )a& o' in#o5e.

-PN If he taes part in the control of the business which contemplates acve parcipaon in the business of the partnership, he becomes liable as a general partner (Pineda, 2006).

A/1#%e F. Ae/ the 'o/5a1on o' a %ied 4a/tne/0hi4, addi1ona% %i5ited 4a/tne/0 5a& 6e ad5ied $4on 7%ing an a5end5ent to the o/igina% #e/17#ate in a##o/dan#e )ith the /e$i/e5ent0 o' a/1#%e 3:. A/1#%e :>. A gene/a% 4a/tne/ 0ha%% ha(e a%% the /ight0 and 4o)e/0 and 6e 0$6?e#t to a%% the /e0t/i#1on0 and %ia6i%i1e0 o' a 4a/tne/ in a 4a/tne/0hi4 )itho$t %i5ited 4a/tne/0. Ho)e(e/, )itho$t the )/ien #on0ent o/ /a17#a1on o' the 04e#i7# a#t 6& a%% the %i5ited 4a/tne/0, a gene/a% 4a/tne/ o/ a%% o' the gene/a% 4a/tne/0 ha(e no a$tho/it& to Do an& a#t in #ont/a(en1on o' the #e/17#ate Do an& a#t )hi#h )o$%d 5aMe it i54o00i6%e to #a//& on the o/dina/& 6$0ine00 o' the 4a/tne/0hi4 Con'e00 a ?$dg5ent again0t the 4a/tne/0hi4 Po00e00 4a/tne/ 0hi4 4/o4e/t&, o/ a00ign thei/ /ight0 in 04e#i7# 4a/tne/0hi4 4/o4e/t&, 'o/ othe/ than a 4a/tne/0hi4 4$/4o0e Ad5it a 4e/0on a0 a gene/a% 4a/tne/ Ad5it a 4e/0on a0 a %i5ited 4a/tne/, $n%e00 the /ight 0o to do i0 gi(en in the #e/17#ate Con1n$e the 6$0ine00 )ith 4a/tne/0hi4 4/o4e/t& on the death, /e1/e5ent, in0anit&, #i(i% inte/di#1on o/

NOTE " person advancing money to a limited partner and who deny that they are partners are within the protecon of the provision. It covers all cases wher e one has contributed to the capit al of a business conducted by the partnership or person erroneously believing that he is a limited partner. :elate to !4?4 which seems to be the only B&* to the right of a partner to tae advantage of the provisions of the arcle.

A/1#%e :. A 4e/0on 5a& 6e a gene/a% 4a/tne/ and a %i5ited 4a/tne/ in the 0a5e 4a/tne/0hi4 at the 0a5e 15e, 4/o(ided that thi0 'a#t 0ha%% 6e 0tated in the #e/17#ate 4/o(ided 'o/ in a/1#%e . A 4e/0on )ho i0 a gene/a%, and a%0o at the 0a5e 15e a %i5ited 4a/tne/, 0ha%% ha(e a%% the /ight0 and 4o)e/0 and 6e 0$6?e#t to a%% the /e0t/i#1on0 o' a gene/a% 4a/tne/ e8#e4t that, in /e04e#t to hi0 #ont/i6$1on, he 0ha%% ha(e the /ight0 again0t the othe/ 5e56e/0 )hi#h he )o$%d ha(e had i' he )e/e not a%0o a gene/a% 4a/tne/. NOTE " person may be both a general partner and a limited partner in the same partnership at the same me sub#ect to the condion that this fact be stated in the cercate provided for in "rt. !4?? (Pineda, 2006).

Right o' 0$#h 4e/0on )uch person shall have all the rights and powers and be sub#ect to all restricons of a general partner. %hus, he is liable with his private property to the creditors of the


partnership. "s regards his contribuon, he shall have the rights as a limited partner as against the other members. If he was ordered to rd

pay 5 persons, he would be entled to recover what he has paid1 further, he shall have priority over general partners in the return of their respecve contribuons (Pineda, 2006).

A/1#%e :. A %i5ited 4a/tne/ a%0o 5a& %oan 5one& to and t/an0a#t othe/ 6$0ine00 )ith the 4a/tne/0hi4, and, $n%e00 he i0 a%0o a gene/a% 4a/tne/, /e#ei(e on a##o$nt o' /e0$%1ng #%ai50 again0t the 4a/tne/0hi4, )ith gene/a% #/edito/0, a 4/o /ata 0ha/e o' the a00et0. No %i5ited 4a/tne/ 0ha%% in /e04e#t to an& 0$#h #%ai5 Re#ei(e o/ ho%d a0 #o%%ate/a% 0e#$/it& an& 4a/tne/0hi4 4/o4e/t&, o/ Re#ei(e '/o5 a gene/a% 4a/tne/ o/ the 4a/tne/0hi4 an& 4a&5ent, #on(e&an#e, o/ /e%ea0e '/o5 %ia6i%it& i' at the 15e the a00et0 o' the 4a/tne/0hi4 a/e not 0$J#ient to di0#ha/ge 4a/tne/0hi4 %ia6i%i1e0 to 4e/0on0 not #%ai5ing a0 gene/a% o/ % i5ited 4a/tne/0. The /e#ei(ing o' #o%%ate/a% 0e#$/it&, o/ 4a&5ent, #on(e&an#e, o/ /e%ea0e in (io%a1on o' the 'o/egoing 4/o(i0ion0 i0 a '/a$d on the #/edito/0 o' the 4a/tne/0hi4. NOTE %he relaonship between a limited partner and the partnership is not based on trust and condence. " limited partner is not prohibited from engaging in business for himself is not prohibited from engaging in business for himself even if such business will complete with the one being conducted by the partnership (Pineda, 2006).

SHARING PRO RATA +ITH GENERAL CREDITORS GR " limited partner is entled to a pro rata share of the partnership assets together with the creditors of the partnership

-PN 3nless he is also a general partner TRANSACTIONS PROHI*ITED O! LI"ITED PARTNERS 9P/e0$541on o' !/a$d; :eceiving or holding as collateral security any partnership property :eceiving any payment, conveyance, or release from liability if it will pre#udice the right of third persons (Pineda, 2006)

A/1#%e ::. +he/e the/e a/e 0e(e/a% %i5ited 4a/tne/0 the 5e56e/0 5a& ag/ee that one o/ 5o/e o' the %i5ited 4a/tne/0 0ha%% ha(e a 4/io/it& o(e/ othe/ %i5ited 4a/tne/0 a0 to the /et$/n o' thei/ #ont/i6$1on0, a0 to thei/ #o54en0a1on 6& )a& o' in#o5e, o/ a0 to an& othe/ 5ae/. I' 0$#h an ag/ee5ent i0 5ade it 0ha%% 6e 0tated in the #e/17#ate, and in the a60en#e o' 0$#h a 0tate5ent a%% the %i5ited 4a/tne/0 0ha%% 0tand $4on e$a% 'oo1ng.

ther ma(ers where some benet is granted (Pineda, 2006)

A/1#%e :3. A %i5ited 4a/tne/ 5a& /e#ei(e '/o5 the 4a/tne/0hi4 the 0ha/e o' the 4/o7t0 o/ the #o54en0a1on 6& )a& o' in#o5e 014$%ated 'o/ in the #e/17#ate 4/o(ided, that ae/ 0$#h 4a&5ent i0 5ade, )hethe/ '/o5 4/o4e/t& o' the 4a/tne/0hi4 o/ that o' a gene/a% 4a/tne/, the 4a/tne/0hi4 a00et0 a/e in e8#e00 o' a%% %ia6i%i1e0 o' the 4a/tne/0hi4 e8#e4t %ia6i%i1e0 to %i5ited 4a/tne/0 on a##o$nt o' thei/ #ont/i6$1on0 and to gene/a% 4a/tne/0. A/1#%e :2. A %i5ited 4a/tne/ 0ha%% not /e#ei(e '/o5 a gene/a% 4a/tne/ o/ o$t o' 4a/tne/0hi4 4/o4e/t& an& 4a/t o' hi0 #ont/i6$1on0 $n1% A%% %ia6i%4a/tne/0 i1e0 o' and the to4a/ tne/0hi4 , e8#e4on t %ia 6i%i1e0 o'to gene/a% %i5ited 4a/tne/0 a##o$nt thei/ #ont/i 6$1on0, ha(e 6een 4aid o/ the/e /e5ain0 4/o4e/t& o' the 4a/tne/0hi4 0$J#ient to 4a& the5 The #on0ent o' a%% 5e56e/0 i0 had, $n%e00 the /et$/n o' the #ont/i6$1on 5a& 6e /igh^$%%& de5anded $nde/ the 4/o(i0ion0 o' the 0e#ond 4a/ag/a4h and The #e/17#ate i0 #an#e%%ed o/ 0o a5ended a0 to 0et 'o/th the )ithd/a)a% o/ /ed$#1on. S$6?e#t to the 4/o(i0ion0 o' the 7/0t 4a/ag/a4h, a %i5ited 4a/tne/ 5a& /igh^$%%& de5and the /et$/n o' hi0 #ont/i6$1on > On the di00o%$1on o' a 4a/tne/0hi4 o/  +hen the date 04e#i7ed in the #e/17#ate 'o/ it0 /et$/n ha0 a//i(ed, o/  Ae/ he ha 0 0i8 5 onth0 no1# e in )/i 1ng to a%% othe/ 5e56e/0, i' no 15e i0 04e#i7ed in the #e/17#ate, eithe/ 'o/ the /et$/n o' the #ont/i6$1on o/ 'o/ the di00o%$1on o' the 4a/tne/0hi4. In the a60en#e o' an& 0tate5ent in the #e/17#ate to the #ont/a/& o/ the #on0ent o' a%% 5e56e/0, a %i5ited 4a/tne/, i//e04e#1(e o' the nat$/e o' hi0 #ont /i6$1on, ha0 on%& the /ight to de5and and /e#ei(e #a0h in /et$/n 'o/ hi0 #ont/i6$1on. A %i5ited 4a/tne/ 5a& ha(e the 4a/tne/0hi4 di00o%(ed and it0 aai/0 )o$nd $4 )hen He /igh^$%%& 6$t $n0$##e00'$%%& de5and0 the /et$/n o' hi0 #ont/i6$1on, o/ The othe/ %ia6i%i1e0 o' the 4a/tne/0hi4 ha(e not 6een 4aid, o/ the 4a/tne/0hi4 4/o4e/t& i0 in0$J#ient 'o/ thei/ 4a&5ent a0 /e$i/ed 6& the 7/0t 4a/ag/a4h, No. , and the %i5ited 4a/tne/ )o$%d othe/)i0e 6e en1t%ed to the /et$/n o' hi0 #ont/i6$1on. LIA*ILITY A!TER +ITHDRA+AL

NOTE %he arcle applies only when there are several limited

If the assets are not sucient to pay debts, the limited partner is liable for all sums withdrawn by him, but insuciency of assets must

partners. It nds no applicability if there is only one.

be alleged in an acon against him.

SCOPE O! PRE!ERENCES

%he obligaon of a limited partner who has withdrawn from the partnership to -:s of the rm in which he was a partner can be discharged by nothing less than payment, notwithstanding that at the me of his withdrawal the assets le< with the general partners were insucient to discharge the outstanding liabilies.

%he return of contribuons -ompensaon by way of income


@iability is limited to the capital contribuon as long as it is le< at the ris of the business. $hen withdrawn, the interest presumably earned must be included as part of the sum available to -:s.

TI"E +HEN RETURN O! CONTRI*UTION "AY *E DE"ANDED n the dissoluon of the limited partnership n the arrival of the date specied in the cercate n the lapse of O months from noce in wring to all other members if no me is specied for the date of the return or dissoluon (Pineda, 2006).

$hen there is failure to comply with the re9uisites for the formaon of limited partnership (Pineda, 2006)

RESPONSI*ILITIES O! A LI"ITED PARTNER 8iCerence between his actual contribuon and that stated in the cercate as having been made 3npaid contribuons which he agreed to mae at specied future me and on the condions stated in the cercate (Pineda, 2006)

NOTE %he liabilies of a limited partner may be waived by the

GR :eturn of the contribuon should be in cash

partnership if all the members of the partnership give their consent. If one disagrees, no waiver can be eCected (Pineda, 2006).

-PN 'e may receive his contribuon in another form, if there is a

A/1#%e :F. A %i5ited 4a/tne/0 i nte/e0t i0 a00igna6%e.

statement to that eCect in the cercate, or even if none, if all the partners give their consent (Pineda, 2006).

A/1#%e :. A %i5ited 4a/tne/ i0 % ia6%e to the 4a/tne/0hi4

A 0$601t$ted %i5ited 4a/tne/ i0 a 4e/0on ad5ied to a%% the /ight0 o' a %i5ited 4a/tne/ )ho ha0 died o/ ha0 a00igned hi0 inte/e0t in a 4a/tne/0hi4.

!o/ the die/en#e 6et)een hi0 #ont/i6$1on a0 a#t$a%%& 5ade and that 0tated in the #e/17#ate a0 ha(ing 6een 5ade, and !o/ an& $n4aid #ont/i6$1on )hi#h he ag/eed in the #e/17#ate to 5aMe in the '$t$/e at the 15e and on the #ondi1on0 0tated in the #e/17#ate.

An a00ignee, )ho doe0 not 6e#o5e a 0$601t$ted %i5ited 4a/tne/, ha0 no /ight to /e$i/e an& in'o/5a1on o/ a##o$nt o' the 4a/tne/0hi4 t/an0a#1on0 o/ to in04e#t the 4a/tne/0hi4 6ooM0 he i0 on%& en1t%ed to /e#ei(e the 0ha/e o' the 4/o7t0 o/ othe/ #o54en0a1on 6& )a& o' in#o5e, o/ the /et$/n o' hi0 #ont/i6$1on, to )hi#h hi0 a00igno/ )o$%d othe/)i0e 6e en1t%ed.

A %i5ited 4a/tne/ ho%d0 a0 t/$0tee 'o/ the 4a/tne/0hi4

An a00ignee 0ha%% ha(e the /ight to 6e#o5e a 0$601t$ted %i5ited 4a/tne/ i' a%% the 5e56e/0 #on0ent the/eto o/ i' the a00igno/, 6eing the/e$nto e54o)e/ed 6& the #e/17#ate, gi(e0 the a00ignee that /ight.

S4e#i7# 4/o4e/t& 0tated in the #e/17#at e a0 #ont/i6$ted 6& hi5, 6$t )hi#h )a0 not #ont/i6$ted o/ )hi#h ha0 6een )/ong'$%%& /et$/ned, and "one& o/ othe/ 4/o4e/t& )/ong'$%%& 4aid o/ #on(e&ed to hi5 on a##o$nt o' hi0 #ont/i6$1on. The %ia6i%i1e0 o' a %i5ited 4a/tne/ a0 0et 'o/th in thi0 a/1#%e #an 6e )ai(ed o/ #o54/o5i0ed on%& 6& the #on0ent o' a%% 5e56e/0 6$t a )ai(e/ o/ #o54/o5i0e 0ha%% not ae#t the /igh t o' a #/edito/ o' a 4a/tne/0hi4 )ho e8tended #/edit o/ )ho0e #%ai5 a/o0e ae/ the 7%ing and 6e'o/e a #an#e%%a1on o/ a5end5ent o' the #e/17#ate, to en'o/#e 0$#h %ia6i%i1e0. +hen a #ont/i6$to/ ha0 /igh^$%%& /e#ei(ed the /et$/n in )ho%e o/ in 4a/t o' the #a4ita% o' hi0 #ont/i6$1on, he i0 ne(e/the%e00 %ia6%e to the 4a/tne/0hi4 'o/ an& 0$5, not in e8#e00 o' 0$#h /et$/n )ith inte/e0t, ne#e00a/& to di0#ha/ge it0 %ia6i%i1e0 to a%% #/edito/0 )ho e8tended #/edit o/ )ho0e #%ai50 a/o0e 6e'o/e 0$#h /et$/n. E-CEPTIONS TO THE GENERAL RULE ON THE NONBLIA*ILITY $hen he contributes services instead of only money or property $hen his surname appears in the rm name $hen there is a false statement in the cercate or arcles of partnership which he nows and failed to correct on me $hen he parcipates and taes part in the control of the business of the rm $hen he commits fraud on the creditors of the partnership under "rt. !47?

An a00ignee 6e#o5e 0 a 0$601t$ted %i5ited 4a/tne/ )hen the #e/17#ate i0 a44/o4/iate%& a5ended in a##o/dan#e )ith a/1#%e 3:. The 0$601t$ted %i5ited 4a/tne/ ha0 a%% the /ight0 and 4o)e/0, and i0 0$6?e#t to a%% the /e0t/i#1on0 and %ia6i%i1e0 o' hi0 a00igno/, e8#e4t tho0e %ia6i%i1e0 o' )hi#h he )a0 igno/ant at the 15e he 6e#a5e a %i5ited 4a/tne/ and )hi#h #o$%d not 6e a0#e/tained '/o5 the #e/17#ate. The 0$601t$1on o' the a00ignee a0 a %i5ited 4a/tne/ doe0 not /e%ea0e the a00igno/ '/o5 %ia6i%it& to the 4a/tne/0hi4 $nde/ a/1#%e0 2 and :. SU*STITUTED LI"ITED PARTNER" person admi(ed to all the rights of a limited partner who has died or has assigned his interest in a partnership (Pineda, 2006)

NOTE @imited partnerGs interest in the partnership is assignable. n the other hand, a general partner cannot assign his interest in the partnership as to mae the assignee a new partner without the consent of the other partnerDs (Pineda, 2006).

+hen 5a& an a00ignee 6e#o5e a 0$601t$ted 4a/tne/=

0

If all the members of the partnership consent thereto1 or


$hen the assignor who is empowered in the "rcles of &artnership gives the assignee the right to become a substuted limited partner. Eet, it is sll re9uired that the cercate or arcles of partnership be properly amended in accordance with "rt. !4O7. "
Right0 o' 0$601t$ted %i5ited 4a/tne/ %o ac9uire any informaon or account of the partnership transacons1 and %o inspect the partnership boos (Pineda, 2006).

business is conducted by the remaining general partners under a right stated in the cercate or even if not so stated, when all the members have given their consent to the conn uaon of the business (Pineda, 2006). In any event, the cercate must be amended to reNect the connuaon of the business by the remaining general partner s (Pineda, 2006).

A/1#%e 3. On the death o' a %i5ited 4a/tne/ hi0 e8e#$to/ o/ ad5ini0t/ato/ 0ha%% ha(e a%% the /ight0 o' a %i5ited 4a/tne/ 'o/ the 4$/4o0e o' 0eWng hi0 e0tate, and 0$#h 4o)e/ a0 the de#ea0ed had to #on01t$te hi0 a00ignee a 0$601t$ted %i5ited 4a/tne/. The e0tate o' a de#ea0ed %i5ited 4a/tne/ 0ha%% 6e %ia6%e 'o/ a%% hi0 %ia6i%i1e0 a0 a %i5ited 4a/tne/.

Lia6i%it& o' the 0$601t$ted %i5ited 4a/tne/ %he arcle applies if one who died is a limited partner. 'e shall be sub#ect to all restricons and liabilies of the assigning limited partner (Pineda, 2006).

Right0 o' e8e#$to/ o/ ad5ini0t/ato/ o' the e0tate o' the de#ea0ed %i5ited 4a/tne/

-PN %hose liabilies he was ignorant at the me he became a limited partner and could not be ascertained in the cercate or th arcles of partnership /"rt. !47K, O par. (Pineda, 2006). %he fact that the assignee has become a substuted limited partner does not relive the limited partner of all liabilies to the partnership vis=S=vis a person who relied on a false statement in the cercate of partnership. *either is the assignor relieved of his responsibility under "rt. !474 which states that the liabilies of a limited partner specially to all -:s who extended credit to the partnership or whose claims arose before the return of his capital (Pineda, 2006).

Stat$0 and /ight0 o' an a00ignee )ho did not 6e#o5e a 0$601t$ted %i5ited 4a/tne/ 'e shall remain a mere assignee. %hus, he cannot re9u ire, as a ma(er of right, informaon or account of the partnership transacons or aCairs, neither can he inspect the partnership boos. 'e has the right to receive the share of the prots or other compensaon by way of income or the return of his contribuon to which his assignor would otherwise be entled (Pineda, 2006).

A/1#%e 3>. The /e1/e5ent, death, in0o%(en#&, in0anit& o/ #i(i% inte/di#1on o' a gene/a% 4a/tne/ di00o%(e0 the 4a/tne/0hi4, $n%e00 the 6$0ine00 i0 #on1n$ed 6& the /e5aining gene/a% 4a/tne/0 Unde/ a /ight 0o to do 0tated in the #e/17#ate, o/ +ith the #on0ent o' a%% 5e56e/0.

'e shall ac9uire all the rights of a limited partner for the purpose of se(ling the estate (Pineda, 2006).

Lia6i%it& o' the e0tate o' de#ea0ed %i5ited 4a/tne/ It shall be liable for all his obligaons or liabilies to the partnership as a limited partner (Pineda, 2006).

A/1#%e 3. On d$e a44%i#a1on to a #o$/t o' #o54etent ?$/i0di#1on 6& an& #/edito/ o' a %i5ited 4a/tne/, the #o$/t 5a& #ha/ge the inte/e0t o' the inde6ted %i5ited 4a/tne/ )ith 4a&5ent o' the $n0a 107ed a5o$nt o' 0$#h #%ai5, and 5a& a44oint a /e#ei(e/, and 5aMe a%% othe/ o/de/0, di/e#1on0 and in$i/ie0 )hi#h the #i/#$50tan#e0 o' the #a0e 5a& /e$i/e. The inte/e0t 5a& 6e /edee5ed )ith the 0e4a/ate 4/o4e/t& o' an& gene/a% 4a/tne/, 6$t 5a& not 6e /edee5ed )ith 4a/tne/0hi4 4/o4e/t&. The /e5edie0 #on'e//ed 6& the 7/0t 4a/ag/a4h 0ha%% not 6e dee5ed e8#%$0i(e o' othe/0 )hi#h 5a& e8i0t. Nothing in thi0 Cha4te/ 0ha%% 6e he%d to de4/i(e a %i5ited 4a/tne/ o' hi0 0tat$to/& e8e541on. %he partnerGs interest in the partnership consists of his share in the prots and surplus.

Right0 o' CR0 o' %i5ited 4a/tne/0 to #ha/ge the inte/e0t o' the inde6ted %i5ited 4a/tne/

%his arcle applies to the rerement, death, insolvency, insanity or civil interdicon of a general partner. %he limited partners hip is

%he -: may le a peon to charge the interest of the la(er in the partnership with the payment of the unsased amount of the -:s claim. %his is a sort of a foreclosure of the interest of the indebted

dissolved by the rerement, death, insolvency , insanity or civil interdicon of a general partner.

limited partner for the sasfacon of the creditorGs claim (Pineda, 2006).

ut if the partner involved is a limited partner, the presence of any of the said circumstances will not dissolve the partnership.

Rede541on o' #ha/ged inte/e0t

-PN %he limit ed partnership is not dissolved even if a general partner is involved in any of the above 7 circumstances provided the

%he charged interest may be redeemed with the separate property of any general partner. It may not however be redeemed by any one or more partners using partnership property, unless it is with the


consent of all partners whose interests are not charged (Pineda, 2006).

%hose to general partners other than for capital and prots1

-harging of interest is not an exclusive remedy.

%hose to general partners in respect to prots1

A/1#%e 3. In 0e%ing a##o$nt0 ae/ di00o%$1on the %ia6i%i1e0 o' the 4a/tne/0hi4 0ha%% 6e en1t%ed to 4a&5ent in the 'o%%o)ing o/de/

%hose to general partners in respect to capital.

Tho0e to #/edito/0, in the o/de/ o' 4/io/it& a0 4/o(ided 6& %a), e8#e4t tho0e to %i5ited 4a/tne/0 on a##o$nt o' thei/ #ont/i6$1on0, and to gene/a% 4a/tne/0 Tho0e to %i5ited 4a/tne/0 in /e04e#t to thei/ 0ha/e o' the 4/o7t0 and othe/ #o54en0a1on 6& )a& o' in#o5e on thei/ #ont/i6$1on0 Tho0e to %i5ited 4a/tne/0 in /e04e#t to the #a4ita% o' thei/ #ont/i6$1on0 Tho0e to gene/a% 4a/tne/0 othe/ than 'o/ #a4ita% and 4/o7t0 Tho0e to gene/a% 4a/tne/0 in /e04e#t to 4/o7t0 Tho0e to gene/a% 4a/tne/0 in /e04e#t to #a4ita%. S$6?e#t to an& 0tate5ent in the #e/17#ate o/ to 0$60e$ent ag/ee5ent, %i5ited 4a/tne/0 0ha/e in the 4a/tne/0hi4 a00et0 in /e04e#t to thei/ #%ai50 'o/ #a4ita%, and in /e04e#t to thei/ #%ai50 'o/ 4/o7t0 o/ 'o/ #o54en0a1on 6& )a& o' in#o5e on thei/ #ont/i6$1on /e04e#1(e%&, in 4/o4o/1on to the /e04e#1(e a5o$nt0 o' 0$#h #%ai50.

It is notable that limited partners are given priority over general partners.

+inding $4 o' the %i5ited 4a/tne/0hi4 aai/0 It is the general and not the limited partners who have the duty and power to wind=up the partnershipGs aCairs.

P/o4o/1onate 0ha/ing 6& %i5ited 4a/tne/0 If there is no agreement in the cercate, the limited partners shall share in the partnership assets and pro ts in proporon to the respecve amounts of their claims.

P/io/it& o' #%ai50 a5ong the %i5ited 4a/tne/0 %he members of limited partners may include in the partnership arcles an agreement for priority of distribuon on the winding up of partnership aCairs. )uch agreement becomes controlling as between the partners themselves. In the absence of such an agreement, all limited partners shall stand on e9ual foong.

%he arcle applies to li9uidaon of a limited partnership. %he arcl e applies only a
Se%ing o' a##o$nt0%ia6i%i1e0 ae/ di00o%$1on o' a %i5ited 4a/tne/0hi4 %hose to creditors, in the order of priority as provided by law, except those to limited partners on account of their contribuons, and to general partners1 %he pernent laws on concurrence and preference of credit shall be applicable. %hose to limited partners in respect to their share of the prots and other compensaon by way of income on their contribuons1 %hose to limited partners in respect to the capital of their contribuons1

-reditors are given priority of payment over both limited and general partners in case of insolvency of the partnership (Pineda, 2006).

A/1#%e 3. The #e/17#ate 0ha%% 6e #an#e%%ed )hen the 4a/tne/0hi4 i0 di00o%(ed o/ a%% %i 5ited 4a/tne/0 #ea0e to 6e 0$#h. A #e/17#ate 0ha%% 6e a5ended )hen The/e i0 a #hange in the na5e o' the 4a/tne/0hi4 o/ in the a5o$nt o/ #ha/a#te/ o' the #ont/i6$1on o' an& %i5ited 4a/tne/ A 4e/0on i0 0$601t$ted a0 a % i5ited 4a/tne/ An addi1ona% %i5ited 4a/tne/ i0 ad5ied A 4e/0on i0 ad5ied a0 a gene/a% 4a/tne/ A gene/a% 4a/tne/ /e1/e0, die0, 6e#o5e0 in0o%(e nt o/ in0ane, o/ i0 0enten#ed to #i(i% inte/di#1on and the 6$0ine00 i0 #on1n$ed $nde/ a/1#%e 3> The/e i0 a #hange in the #ha/a#te/ o' the 6$0ine00 o' the 4a/tne/0hi4 The/e i0 a 'a%0e o/ e//oneo$0 0tate5ent in the #e/17#ate The/e i0 a #hange in the 15e a0 0tated in the #e/17#ate 'o/ the di00o%$1on o' the 4a/tne/0hi4 o/ 'o/ the /et$/n o' a #ont/i6$1on A 15e i0 78ed 'o/ the di00o%$1on o' the 4a/tne/0hi4, o/ the /et$/n o' a #ont/i6$1on, no 15e ha(ing 6een 04e#i7ed in the #e/17#ate, o/ The 5e56 e/0 de0i/e to 5aMe a #hange in an& othe/ 0tate5ent in the #e/17#ate in o/de/ that it 0ha%% a##$/ate%& /e4/e0ent the ag/ee5ent a5ong the5.


E!!ECT O! !AILURE TO A"END

Ae/ the #e/17#ate i0 d$%& a5ended in a##o/dan#e )ith thi0 a/1#%e, the a5ended #e/17ed 0ha%% the/eae/ 6e 'o/ a%% 4$/4o0e0 the #e/17#ate 4/o(ided 'o/ in thi0 Cha4te/.

>ailure to amend the cercate under this arcle and business is connued a
Can#e%%a1on o' Ce/17#ate o/ A/1#%e0 o' Pa/tne/0hi4 < +hen 0ha%% the #e/17#ate 6e #an#e%%ed= A $hen the partnership is dissolved1 and $hen all limited partners cease to be such. %here can be no limited partnership if there is no limited partner (Pineda, 2006).

RE
A5end5ent o' #e/17#ate o' a/1#%e0 o' 4a/tne/0hi4 %he cercate or arcles will not be cancelled but shall only be amended in case any of the !0 changes and circ umstances has transpired or is present. %he purpose of the cancellaon or amendment is to put on in9uiry all persons who may deal with the partners or with the partnership itself about the status of the partnership so they cannot claim later that they were misled.

A/1#%e 3:. The )/i1ng to a5end a #e/17#ate 0ha%% Con'o/5 to the /e$i/e5ent0 o' a/1#%e  a0 'a/ a0 ne#e00a/& to 0et 'o/th #%ea/%& the #hange in the #e/17#ate )hi#h it i0 de0i/ed to 5aMe and *e 0igned and 0)o/n to 6& a%% 5e56e/0, and an a5end5ent 0$601t$1ng a %i5ited 4a/tne/ o/ adding a %i5ited o/ gene/a% 4a/tne/ 0ha%% 6e 0igned a%0o 6& the 5e56e/ to 6e 0$601t$ted o/ added, and )hen a %i5ited 4a/tne/ i0 to 6e 0$601t$ted, the a5end5ent 0ha%% a%0o 6e he 0igned 6& the a00igning %i5ited 4a/tne/.

RE
%he instrument of cancellaon must be signed by all the members

!

%he instrument of cancellaon must be recorded with the );-. If the cancellaon is by order of the court, a cercaon of the nal order of the court must be led with the );- (Pineda, 2006).

+hen i0 a #e/17#ate dee5ed a5ended o/ #an#e%%ed= It is deemed amended or cancelled by the ling of the amended cercate or the instrument of cancellaon with the );- (Pineda, 2006).

A/1#%e 33. A #ont/i6$to/, $n%e00 he i0 a gene/a% 4a/tne/, i0 not a 4/o4e/ 4a/t& to 4/o#eeding0 6& o/ again0t a 4a/tne/0hi4, e8#e4t )he/e the o6?e#t i0 to en'o/#e a %i5ited 4a/tne/0 /ight again0t o/ %ia6i%it& to the 4a/tne/0hi4. LI"ITED PARTNER IS A "ERE CONTRI*UTOR %he arcle referred to

The )/i1ng to #an#e% a #e/17#ate 0ha%% 6e 0igned 6& a%% 5e56e/0. A 4e/0on de0i/ing the #an#e%%a1on o/ a5end5ent o' a #e/17#ate, i' an& 4e/0on de0ignated in the 7/0t and 0e#ond 4a/ag/a4h0 a0 a 4e/0on )ho 5$0t e8e#$te the )/i1ng /e'$0e0 to do 0o, 5a& 4e11on the #o$/t to o/de/ a #an#e%%a1on o/ a5end5ent the/eo'.

the limited as a mere contributor to stress the point that as a general rule, he cannot be a proper party in a case for or against the partnership. %he reason for this is that a limited partner is not a principal party in the partnership transacons. 'is liability is not to the creditors of the partnership but to the partnership itself (Pineda, 2006).

< +hen #an a %i5ited 4a/tne/ 6e a 4/o4e/ 4a/t& in a 0$it a0 0$#h=

I' the #o$/t 7nd0 that the 4e11one/ ha0 a /ight to ha(e the )/i1ng e8e#$ted 6& a 4e/0on )ho /e'$0e0 to do 0o, it 0ha%% o/de/ the OJ#e o' the Se#$/i1e0 and E8#hange Co55i00ion )he/e the #e/17#ate i0 /e#o/ded, to /e#o/d the #an#e%%a1on o/ a5end5ent o' the #e/17#ate and )hen the #e/17#ate i0 to 6e a5ended, the #o$/t 0ha%% a%0o #a$0e to 6e 7%ed 'o/ /e#o/d in 0aid oJ#e a #e/17ed #o4& o' it0 de#/ee 0eWng 'o/th the a5end5ent.

If the ob#ect of the acon is to enforce his individual rights against the partnership as authori+ed in "rt. !47!. 'e can be a defendant in an acon led against him by the partnership to enforce his liability to the la(er (Pineda, 2006).

A #e/17#ate i0 a5ended o/ #an#e%%ed )hen the/e i0 7%ed 'o/ /e#o/d in the OJ#e o' the Se#$/i1e0 and E8#hange Co55i00ion, )he/e the #e/17#ate i0 /e#o/ded

, 4/o(ided the #e/17#ate 0et0 'o/th

A )/i1ng in a##o/dan#e )ith the 4/o(i0ion0 o' the 7/0t o/ 0e#ond 4a/ag/a4h, o/ A #e/17ed #o4& o' the o/de/ o' the #o$/t in a##o/dan#e )ith the 4/o(i0ion0 o' the 'o$/th 4a/ag/a4h

A/1#%e 32. A %i5ited 4a/tne/0hi4 'o/5ed $nde/ the %a) 4/io/ to the ee#1(it& o' thi0 Code, 5a& 6e#o5e a %i5ited 4a/tne/0hi4 $nde/ thi0 Cha4te / 6& #o54%&in g )ith the 4/o(i0ion0 o' a/1#%e

The a5o$nt o' the o/igina% #ont/i6$1on o' ea#h %i5ited 4a/tne/, and the 15e )hen the #ont/i6$1on )a0 5ade and That the 4/o4e/t& o' the 4a/tne/0hi4 e8#eed0 the a5o$nt 0$J#ient to di0#ha/ge it0 %ia6i%i1e0 to 4e/0on0


not #%ai5ing a0 gene/a% o/ % i5ited 4a/tne/0 6& an a5o$nt g/eate/ than the 0$5 o' the #ont/i6$1on0 o' it0 %i5ited 4a/tne/0. A %i5ited 4a/tne/0hi4 'o/5ed $nde/ the %a) 4/io/ to the ee#1(it& o' thi0 Code, $n1% o/ $n%e00 it 6e#o5e0 a %i5ited 4a/tne/0hi4 $nde/ thi0 Cha4te/, 0ha%% #on1n$e to 6e go(e/ned 6& the 4/o(i0ion0 o' the o%d %a).

RE!ERENCES 8; @;*, ';-%: )., he 1a on ales, genc, and Creditransacons, :ex oostore, Inc., 2007 &I*;8", ;:*;)% @., Partnership, genc and r'sts, -entral oo &ublishing, -o., Inc., 200O

%@;*%I*, ":%3: M., Co##entaries and 'rispr'dence on the Ciil Code o the Philippines , Aol. A., -entral oo &ublishing, -o., Inc. !KK!


Tit%e -. B AGENCY CHAPTER  NATURE, !OR" AND KINDS O! AGENCY

< +hat i0 the 4$/4o0e o' agen#&= It is to extend the personality of the principal.

+ho a/e the 4a/1e0 to the #ont/a#t= A/t. 3. *& the #ont/a#t o' agen#& a 4e/0on 6ind0 hi50e%' to /ende/ 0o5e 0e/(i#e o/ to do 0o5ething in /e4/e0enta1on o/ on 6eha%' o' anothe/, )ith the #on0ent o/ a$tho/it& o' the %ae/. 92>Fa;

0

< +hat i0 a #ont/a#t o' agen#&= ! It is a relaonship which implies a power in an agent to contract with a third person on behalf of a principal.

P/in#i4a%Tone whom the agent represents and from whom he derives his authority1 he is the person represented1 and AgentTone who acts for and represents another1 he is the person acng in a representave capacity.

CAPACITY O! THE PARTIES It is this power to aCect the principalGs contractual relaons with third persons that diCerenates the agent from the ;;, the servant, and the independent contractor.

+hat a/e the #ha/a#te/i01#0 o' a #ont/a#t o' agen#&= %he contract of agency is a 0 !

Con0en0$a% contract1 P/in#i4a% because it can stand by itself without the need of

2

another contract1 No5inate because it has its own name1

5

?

Uni%ate/a% if it is gratuitous because it creates obligaons for only one of the paresTthe agent1 or 6i%ate/a% if it is for compensaon because it gives rise to reciprocal rights and obligaons1 and P/e4a/ato/& because it is entered into as a means to an endTcreaon for other contracts.

"ny person who is capacitated to act in his own right may be a principal. In case of an agent, since he assumes no personal liability, he does not have to possess full capacity to act insofar as third persons are concerned. ut persons who are absolutely incapacitated, such as insane persons cannot be agents. Insofar as his obligaons to his principal are concerned, agent must be competent to bind himself.

+hat a/e the a#t0 that 5a& 6e de%egated to agent0=

G.R $hat a man may do in person, he may do thru another. -PN

+hat a/e the e00en1a% e%e5ent0 o' agen#&= 0

0 ! 2 5

%here is consent, express or implied, of the pares to establish the relaonship1 %he ob#ect is the execuon of a #uridical act in relaon to third persons1 %he agent acts as representave and not for himself1 and %he agent acts within the scope of his authority.

;.g. right to vote, maing of a will, statements which are re9uired to be made under oath should be made personally. !

NATURE, *ASIS AND PURPOSE O! AGENCY "gency is both a contract and a representaon.

&ersonal actsTif personal performance is re9uired by law or public policy or the agreement of the pares, the doing of the act by a person on behalf of another does not constute performance by the la(er.

-riminal acts or act s not al lowed by law Tan a(empt to delegate to another authority to do an act which, if done by the principal would be illegal, is void.

"s a #ont/a#t, the following re9uisites must concur

0 ! 2

-onsent of the contracng pares1 b#ect which is the sub#ect ma(er of the contract1 and -ause which is established.

;.g. aliens cannot purchase land through a >ilipino agent.

+hat a/e the di01n#1on0 6et)een agen#& and %oan #ont/a#t0=

"s a representave relaonTthe agent renders some service or does something in representaon or on behalf of another. :epresentaon constutes the basis of agency.

%he acts of the agent on behalf of the principal within the scope of his authority produce the same legal eCect as if they were personally done by the principal. %he relaon of an agent to his principal is 7d$#ia/&in character since it is based on trust and condence.

AGENCY

"n agent is given funds by principal to advance the la(erGs usiness

LOAN

arrower is given money for purposes of his own and he must generally return it whether or not his own business is successful1

< +hat i0 the die/en#e 6et)een agen#& and %ea0e o' 0e/(i#e=


+hat i0 the die/en#e 6et)een agen#& and nego1o/$5 ge01o= A AGENCY %he agent executes a #uridical act on behalf of another asis is representaon "gent exercises discreonary powers

LEASE O! SERICE @essor of services performs a material act for the benet of another. asis is service, it is employment1 %he servant ordinarily performs onlyministerialfuncons

TOLENTINO

%he legal possibility of an agency without representaon may be inferred from the provisions of "rcle !445, parcularly the last paragraph

A/t. . I' an agent a#t0 in hi0 o)n na5e, the 4/in#i4a% ha0 no /ight o' a#1on again0t the 4e/0on0 )ith )ho5 the agent ha0 #ont/a#ted neithe/ ha(e 0$#h 4e/0on0 again0t the 4/in#i4a%. In 0$#h #a0e the agent i0 the one di/e#t%& 6o$nd in 'a(o/ o' the 4e/0on )ith )ho5 he ha0 #ont/a#ted, a0 i' the t/an0a#1on )e/e hi0 o)n, e8#e4t )hen the #ont/a#t in(o%(e0 thing0 6e%onging to the 4/in#i4a%. The 4/o(i0ion0 o' thi0 a/1#%e 0ha%% 6e $nde/0tood to 6e )itho$t 4/e?$di#e to the a#1on0 6et)een the 4/in#i4a% and agent. 922; %he existence of an agency is perfectly consistent with the circumstances that the agent acts exclusively in his own name. %he true essence of the disn con in such case, between lease of services and agency, lies in that the agent enters or is designed to enter into #uridical relaons, with or without representaon of the principal.

+hat i0 the die/en#e 6et)een agen#& and inde4endent #ont/a#t= A

AGENCY

NEGOTIORIU"GESTIO

In both cases, there is representaon :epresentaon is expressly It is only without the authority conferred1 oftheownerofthebusinessbut is without his nowledge1 "gent acts according to the Festor acts according to the express will of the principal1 presumed will of the owner by exercising all the diligence of a good father of a family. "contract "9uasi=contract Implied agency is founded on the lac of contradicon or opposion which constutes the simultaneous agreement on the part of the presumed principal to the execuon of the contract

%here is no simultaneous consent, either express or implied, but con or presumpon of consent because of the benets received.

+hat i0 the die/en#e 6et)een agen#& and 6/oMe/age=

AGENCY

*ROKERAGE

" commission agent is engaged in the purchase or sale for another of personal property which, for this purpose is placed in his possession and at his disposal.

'as no relaon with the thing he buys o r sel ls1 mer ely an intermediary between the purchaser and the vendor.

'e maintains a relaon not only

'is only oce is to bring together the pares to the transacon.

with his principal and the purchaser or vendor, but also with the property which is the sub#ect ma(er of the transacon.

NO AGENCY IN I"PERSONATION AGENCY

INDEPENDENTCONTRACT

"gent is sub#ect to the control and direcon of the principal whom he represents.

$here one part undertaes to accomplish a certain result according to his own methods and without being sub#ect to other partyGs control except as to the result of the worTthe contract is one for a piece of wor.

%here is no agency in

impersonaon. ll'straon$ %hus, if Huan pretends to be &edro, and enters into a

contract with Hose, who thins he is contracng actually with &edro, there is no agency. %he element of representaon is absent. n the part of Hose, there is no nowledge that the contract is on behalf of a person other than the one before him or with whom he is negoang. "nd on the part of Huan, he is not acng in anotherGs name, but under another name. %his is HuanGs own contract, binding upon him, unless it is annulled on the ground of error or fraud on the part of Hose.

+hat i0 the die/en#e 6et)een agen#& and 4a/tne/0hi4=

ACTS SUSCEPTI*LE O! AGENCY GR "gency is admissible in all contracts or acts

AGENCY "gent acts only for his principal

PARTNERSHIP &artner acts not only for his co= partners and the partnership but also as principal of himself.

-PN0 ;ntering into a marriage contract Maing of wills and testaments %he presence of the accused during trial of a criminal case


s to e"tent o %'siness coered$

NOTE %he spous es, as between themselves, can enter into a contract of agency.

Gene/a%=one which comprises all the business of the principal1

CREATION O! AGENCY%he tesmony of the person who dra
S4e#ia%=one which comprises one or more specic transacons.

or contract that his purpo se was to establish an agency does not determine its nature1 the pares did not perform the contract in accordance with its terms and condions with its terms and a contract must be considered, not as the pares spulated, but as they performed it. %he mere use of the term agencyJ in one clause cannot dominate the whole contract.

s to a'thorit conerred$

Co$#hed in gene/a% te/50 =one which is created in general

CAPACITY O! PARTIES oth pares must have capacity to give

terms and is deemed to comprise only acts of administraon1 Co$#hed in 04e#i7# te/50=one authori+ing only the performance of a specic act or acts.

consent. If any special capaci ty is re9uired for the act entrusted to the agent, it is the principal and not the agent who must have special capacity in addion to the general capacity to contract.

s to its nat're and eects$

Rao$ It is the principal who will receive the benets and incur the obligaons or losses arising therefrom.

CAPACITY O! AGENT *o parcular capacity is re9uired for the agent, so long as he has sucient intelligence and freedom of will. ut with respect to his obligaons and responsibilies towards the principal, the agent must have the capacity to bind himself.

NOTE "n incapacitated agent can set up his incapacity against his principal, and such agent would be liable to the principal only in cases of illicit acts and un#ust enrichment. %he law does not sancon such fraudulent acts.

RELATION O! PRINCIPAL AND AGENT %he relaons of an agent to

0

O0ten0i6%e o/ /e4/e0enta1(e= one where the agent acts in the name and representaon of the principal1

!

Si54%e o/ #o55i00ion= one where the agent acts for the account of the principal but in his own name.

+hat i0 the /e$i/ed 'o/5 o' agen#&= %here are no formal re9uirements governing the appointment of an agent. It may be oral or wri(en. It may even be implied from the circumstances.

A/t. 2>. A##e4tan#e 6& the agent 5a& a%0o 6e e84/e00, o/ i54%ied '/o5 hi0 a#t0 )hi#h #a//& o$t the agen#&, o/ '/o5 hi0 0i%en#e o/ ina#1on a##o/ding to the #i/#$50tan#e0. 9n;

his principal are duciary and in regard to the property forming the sub#ect ma(er of an agency, he is stopped from ac9uiring or asserng tle adverse to that of the principal.

< +hat i0 the /e$i/ed 'o/5 o' a##e4tan#e 6& agent=

A/t. 3F. Agen#& 5a& 6e e84/e00, o/ i54%ied '/o5 the a#t0 o' the 4/in#i4a%, '/o5 hi0 0i%en #e o/ %a#M o' a#1on, o/ hi0 'ai%$ /e to /e4$diate the agen#&, Mno)ing that anothe/ 4e/0on i0 a#1ng on hi0 6eha%' )itho$t a$tho/it&.

express or implied.

Agen#& 5a& 6e o/a%, $n%e00 the %a) /e$ i/e0 a 04e#i7# 'o/5. 92>a; +hat a/e the Mind0 o' agen#&=

"s a contract, there must be consent by both pares. It can be

A/t. 2. *et)een 4e/0on0 )ho a/e 4/e0ent, the a##e4tan#e o'the agen#& 5a& a%0o 6e i54%ied i' the 4/in#i4a% de%i(e/0 hi0 4o)e/ o' ao/ne& to the agen t and the %ae/ /e#ei(e0 it )itho$t an& o6?e#1on. 9n; PRESU"PTION %his arcle presumes the acceptance of the agency1 but such presu mpon is only pri#a acie, and may be defeated by proof to the contrary.

NOTE "s regards implied acceptance by agent, the law disnguishes 0

s to the #anner o its creaon$

between cases $here persons are present1 and $here persons are absent.

E84/e00=the agent has been actually authori+ed by the principal either orally or in wring1

I54%ied= implied from the acts of the principal, from his silence or lac of acon or his failure to repudiate the agency, nowing that another person is acng on his behal f without authority. s to its character$

G/at$ito$0B one where the agent receives no compensaon for

"n agency is impliedly accepted if the agent receives a power of a(orney from the principal himself personally without any ob#econ, both being present.

+hat i0 a power of aorney = It is a wri(en authori+aon to an agent to perform specied acts in behalf of his principal which acts, when performed, shall have binding eCect on the principal.

his services1 or

Co54en0ated o/ one/o$0Bone where the agent receives compensaon for his services.

A/t. 2. *et)een 4e/0on0 )ho a/e a60ent, the a##e4tan#e o' the agen#& #annot 6e i54%ied '/o5 the 0i%en#e o' the agent, e8#e4t


+hen the 4/in#i4a% t/an05it0 hi0 4o)e/ o' ao/ne& to the agent, )ho /e#ei(e0 it )itho$t an& o6?e#1on +hen the 4/in#i4a% ent/$0t0 to hi5 6& %ee/ o/ te%eg/a5 a 4o)e/ o' ao/ne& )ith /e04e#t to the 6$0ine00 in )hi#h he i0 ha6it$a%%& engaged a0 an agent, and he did not /e4%& to the %ee/ o/ te%eg/a5. 9n;

If by public adversement, the agent as such with regard to any person.

< +hat i0 the 5anne/ o' /e(o#a1on o' agen#&= " &ower f "(orney /&" must be revoed in the same manner in which it was given.

NOTE In the cases contemplated by this arcle, the acceptance of

NOTE If the agency has been entrusted for the purpose of

the agency is not compulsory1 but the agent wants to refuse it, he must act immediately, so that his silence may not be interpreted as an acceptance, and so he may not incur responsibilies.

contracng with specied persons, its revocaon shall not pre#udice the la(er if they were not given noce thereof.

If both the & and the " are absent, acceptance by the agent is not implied from his silence or inacon. Eet, in 2 cases under "rt. !462, agency is implied.

A/t. 2. +hen a 0a%e o' a 4ie#e o' %and o/ an& inte/e0t the/ein i0 th/o$gh an agent, the a$tho/it& o' the %ae/ 0ha%% 6e in )/i1ng othe/)i0e, the 0a%e 0ha%% 6e (oid. 9n; NOTE )ale for a piece of land or any interest thereon lie usufruct,

< +hen i0 the/e an i54%ied a##e4tan#e= If the agent writes a le(er acnowledging receipt of power of a(orney but oCers no ob#econ to the creaon of the agency.

mortgage, etc. through an agent is void unless the authority of the agent is in wring. %his arcle speas only of an agency for sale of a piece of land or any interest therein.

NOTE 'is failure to give reply however does not mean that the agency has been accepted unless the power of a(orney is with respect to the business on which he is habitually engaged as an agent or the acceptance could be inferred from his acts which carry out the agency as when he begins to act under the authority conferred upon him. In !462, the principal transmits the power of a(orney to the agent while in !46! he personally delivers the power of a(orney to the agent.

RECEIPT +ITHOUT O*@ECTION 3nder the rst paragraph, the mere fact that the agent does not answer refusing the agency, cannot be interpreted as an acceptance. %he retenon of the power of a(orney is not a clear proof of acceptance in this case as when it is delivered personally1 the failure to answer may be merely due to negligence on the part of the agent, or to his desire to deliberate on whether to accept or not. 3nder the second paragraph, the acceptance is implied from the ail're to repl to the le(er or telegram1 therefore, in cases falling outside of par.2. more than mere failure to reply is re9uired. %he court should consider all the special circums tances of each case to determine whether there has been an acceptance or not.

A/t. 2. I' a 4e/0on 04e#ia%%& in'o/50 anothe/ o/ 0tate0 6& 4$6%i# ad(e/10e5ent that he ha0 gi(en a 4o)e/ o' ao/ne& to a thi/d 4e/0on, the %ae/ the/e6& 6e#o5e0 a d$%& a$tho/ized agent, in the 'o/5e/ #a0e )ith /e04e#t to the 4e/0on )ho /e#ei(ed the 04e#ia% in'o/5a1on, and in the %ae/ #a0e )ith /ega/d to an& 4e/0on. The 4o)e/ 0ha%% #on1n$e to 6e in '$%% 'o/#e $n1% the no1#e i0 /e0#inded in the 0a5e 5anne/ in )hi#h it )a0 gi(en. 9n; +hat a/e the )a&0 o' gi(ing no1#e o' agen#&=

ll'straon$ $here the owner of certain parcels of land le< them in the care of his sister as his agent, and later, while absent, wrote to her to sell one parcel of land which she did, it has been held that the la(er containing the authority to sell was sucient.

A/t. 2:. Agen#& i0 4/e0$5ed to 6e 'o/ a #o54en0a1on, $n%e00 the/e i0 4/oo' to the #ont/a/&. 9n; NOTE %he principal must pay the agent the compensaon agreed upon, or the reasonable value of the agentGs services if no compensaon was specied. %his presupposes however that the agent has complied with his obligaon as such to the principal. ut a broer, not having 9uite succeeded in bringing the minds of the buyer and seller to an agreement in regard to the terms of the sale, is not entled to the commission, nor if his exclusive authority to such has expired. %o be entled to commission, it is not sucient for him to nd a buyer but to nd one who will actu ally buy the property on the terms and condions imposed by the owner.

E!!ICIENTBANDBPROCURING CLAUSE %hat special condion in a contract entling the broer to the spulated commission when the property is sold within a certain period following the expiraon of the agency agreement to a purchase procured by the broer during the life of such agency, does not #usfy a departure from the rule that the broer must be the ecient agent or procuring cause of the sale. %he ecient=and=procuring clause is synonymous with the /ead&B )i%%ingBandBa6%e /$%e, and these words provide oC the test in determining whether the agent was the procuring cause of the sale.

A/t. 23. An agen#& i0 eithe/ gene/a% o/ 04e#ia%. The 'o/5e/ #o54/i0e0 a%% the 6$0ine00 o' the 4/in#i4a%. The %ae/, one o/ 5o/e 04e#i7# t/an0a#1on0. 92;

If by special informaon, the person appointed as agent is considered such with respect to the person to whom it was given1

+hat a/e the #%a00i7#a1on0 o' agent0=


Uni(e/0a% agent or one authori+ed to do all acts that the principal may personally do, which he can lawfully delega te to another the power of doing1 " gene/a% agent or one authori+ed to transact alld the business of the principal, or all business of a parcular ind or in a parcular place, or in other words to do all acts, connected with a parcular trade, business, or employment1 " 04e#ia% o/ 4a/1#$%a/ agent or one authori+ed to act with one or more specic transacons or to act upon a parcular occasion.

A/t. 22. An agen#& #o$#hed in gene/a% te/50 #o54/i0e0 on%& a#t0 o' ad5ini0t/a1on, e(en i' the 4/in#i4a% 0ho$%d 0tate that he )ithho%d0 no 4o)e/ o/ that the agent 5a& e8e#$te 0$#h a#t0 a0 he 5a& #on0ide/ a44/o4/iate, o/ e(en tho$gh the agen#& 0ho$%d a$tho/ize a gene/a% and $n%i5ited 5anage5ent. 9n;

To 5aMe gi0, e8#e4t #$0to5a/& one0 'o/ #ha/it& o/ tho0e 5ade to e54%o&ee0 in the 6$0ine00 5anaged 6& the agent To %oan o/ 6o//o) 5one&, $n%e00 the %ae/ a#t 6e $/gent and indi04en0a6%e 'o/ the 4/e0e/(a1on o' the thing0 )hi#h a/e $nde/ ad5ini0t/a1on To %ea0e an& /ea% 4/o4e/t& to anothe/ 4e/0on 'o/ 5o/e than one &ea/ To 6ind the 4/in#i4a% to /ende/ 0o5e 0e/(i#e )itho$t #o54en0a1on To 6ind the 4/in#i4a% in a #ont/a#t o' 4a/tne/0hi4 To o6%igate the 4/in#i4a% a0 a g$a/anto/ o/ 0$/et&

< +hat i0 an agen#& #o$#hed in gene/a% te/50=

To #/eate o/ #on(e& /ea% /ight0 o(e/ i55o(a6%e 4/o4e/t&

It includes only acts of administraon and an express power is necessary to perform any act of strict ownership even if the principal states

To a##e4t o/ /e4$diate an inhe/itan#e

0 ! 2

%hat he withholds no power1 %hat the agent may execute such acts as he may consider appropriate1 or %hat he authori+es a general or unlimited management.

< +hat i0 the 5eaning o' a#t0 o' ad5ini0t/a1on= %hose which do not imply the authority to alienate for the exercise of which an express power is necessary. 3nless the contrary appears, the authority of the agent is presumed to include all the necessary and usual means to carry out the agency into eCect. !"a#ples$

%he right to commence suits to collect debts owing to the principal %o appoint servants or employees of a rm

A/t. 2. S4e#ia% 4o)e/0 o' ao/ne& a/e ne#e00a/& in the'o%%o)ing #a0e0

To /a1'& o/ /e#ognize o6%iga1on0 #ont/a#ted 6e'o/e the agen#& An& othe/ a#t o' 0t/i#t do5inion. 9n; SPECIAL PO+ERS %he power of a(orney, as re9uired by this arcle, should expressly menon the act for which it is drawn. ut such special power can be included in a general power of a(orney, either by giving autho rity for all acts of a parcular chara cter or by specifying therein the act or transacon for which a special power is needed. ll'straon$ $hen in a general power of a(orney the agen t is authori+ed to sell the principalGs immovable property, such agent is empowered to sell any real property of the principal, without the necessity of a special power to sell for every specic property.

Unde/ )hat #i/#$50tan#e0 i0 a 04e#ia% 4o)e/ o' ao/ne& ne#e00a/&= %he following are general acts of strict dominion or ownership and thus a special power of a(orney is necessary for their execuon through an agent.

>

To 5aMe 4a&5ent

To 5aMe 0$#h 4a&5ent0 a0 a/e not $0$a%%& #on0ide/ed a0 a#t0 o' ad5ini0t/a1on To ee#t no(a1on0 )hi#h 4$t an end to o6%iga1on0 a%/ead& in e8i0ten#e at the 15e the agen#& )a0 #on01t$ted

< +hat i0 4a&5ent=

To #o54/o5i0e, to 0$65it $e01on0 to a/6it/a1on, to /eno$n#e the /ight to a44ea% '/o5 a ?$dg5ent, to )ai(e o6?e#1on0 to the (en$e o' an a#1on o/ to a6andon a 4/e0#/i41on a%/ead& a#$i/ed

"n act of ownership because it involves conveyance of ownership of money or property. ut if payment is made in the ordinary course of management it is considered as mere act of administraon.

To )ai(e an& o6%iga1on g/at$ito$0%& To ente/ into an& #ont/a#t 6& )hi#h the o)ne/0hi4 o' an i55o(a6%e i0 t/an05ied o/ a#$i/ed eithe/ g/at$ito$0%& o/ 'o/ a (a%$a6%e #on0ide/a1on

It is the delivery of money or the performance in any other manner of an obligaon.

. To ee#t no(a1on < +hat i0 no(a1on= It is the exncon of an obligaon through the creaon of new one which substutes it by changing the ob#ect or principal


condions thereof, substung a debtor, or subrogang another in the right of the creditor.

>

To #o54/o5i0e

+hat i0 a #o54/o5i0e= It is a contract whereby pares, by maing reciprocal concessions, avoid a ligaon or put an end to one already commenced.

< +hat i0 a/6it/a1on= It is where the pares submit their controversies to one or more arbitrators for decision. It is an act of ownership since they involve the possibility of disposing of the thing or right sub#ect of the comp romise or arbitraon. %he same applies with respect to the authority of the agent to waive 0 ! 2

%he right to appeal from a #udgment1 b#econs to the venue of an acon1 &rescripon already ac9uired.



To )ai(e an o6 %iga1on g/at$ito$0%&`#ondona1on o/ /e5i00ion



To #on(e& o/ a#$i/e i55o(a6%e



To 5aMe gi0

>. To 6ind the 4/in#i4a% in a #ont/a#t o' 4a/tne/0hi4 " contract of partnership creates an obligaon and the fulllment of which re9uires an act of strict ownership.

>

To o6%igate the 4 /in#i4a% a0 g $a/anto/ o/ 0$/et&

+hat i0 a #ont/a#t o' g$a/ant&= It is one where the guarantor binds himself to fulll the obligaon of the principal debtor in case the la(er should fail to do so. If the person binds himself solidarily, he is a surety and the contract is called 0$/et&0hi4.

" contract of guaranty is unenforceable unless it is made in wring.

To #/eate o/ #on(e& /ea% /ight0 o(e/ i55o(a6%e 4/o4e/t& 6e%onging to hi0 4/in#i4a% )itho$t 04e#ia% 4o)e/ To a##e4t o/ /e4$diate an inhe/itan#e To /a1'& o6%iga1on0 #ont/a#ted 6e'o/e the agen#& NOTE "gent cannot eCect novaon of obligaons exisng at the me of constuon of the agency unless he be especially authori+ed to do so. )imilarly, he cannot rafy or recogni+e obligaons contracted before the agency without special power from the principal.

An& othe/ a#t o' 0t/i#t do5inion NOTE

+hat a/e gi0 o/ dona1on=

)ale or purchase of personal property1

It is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another who accepts it.

" power of a(orney is valid although no notary public intervened in its execuon.

NOTE ut the maing of customary gi
A/t. 2F. A 04e#ia% 4o)e/ to 0e%% e8#%$de0 the 4o)e/ to 5o/tgage and a 04e#ia% 4o)e/ to 5o/tgage doe0 not in#%$de the 4o)e/ to 0e%%. 9n;

to employees in the business managed by the agent are considered as acts of administraon.

>

To %oan o/ 6o//o) 5one&

In loan of money, the barrower is bound to pay the creditor an e9ual amount of the same ind and 9uality. %he agent is empowered to barrow money.

PO+ER TO SELL " power to sell must be understood as for cash, and not on credit, unless the la(er is expressly authori+ed. If the sale is for cash the agent is also considered authori+ed to receive the price.

*o. 6 refers to money and not to other fungible things.

>

To %ea0e /ea%t& 'o/ 5o/e than  &ea/

In case of lease, the lessor gives to the lessee the en#oyment or use of a thing for a price certain, and for a period which may be denite or indenite. "n unrecorded lease of real estate is not binding upon third persons. "n agreement for the leasing of real property for a longer period than ! year is unenforceable unless made in wring.

To 6ind the 4/in#i4a% to /ende/ 0e/(i#e g/at$ito$0%&

y the nature of things, an agent cannot sell in a foreign country without maing some ind of a contract, and if he had power to sell, it would carry with it the authority to mae and enter into the usual and customary contract for its sale.

PO+ER TO RAISE "ONEY If the power is to raise a sum of money for which purpose the agent is authori+ed to sell a parcular real property, or to avail himsel f of any other means, the agent is considered asthe employed toto mortgage thisthe case the real ob#ect of agency is raise the the sumproperty. of money,Inand sale is merely one of the means indicated for a(aining that ob#ect. ut a special power to mortgage real estate does not include the power to contract loans for the principal.

NOTE %he agent cannot sell or mortgage the property belonging to the principal without special power1


In the absence of special authority, the sale of mortgage will be unenforceable against the principal as the agent acted beyond his powers.

to escape liability to the principal if the la(er demands that the cash price paid by him.

< Di01ng$i0h 6et)een 4o)e/ and a$tho/it&.

A/t. > . A 04e#ia% 4o)e/ to #o54/o5i0e doe0 not a$tho/ize 0$65i00ion to a/6it/a1on. 92a;

&ower is considered as the source or cause and the la(er is the eCect.

$hile the principal may have condence in the agentGs #udgment, the arbitrator may not possess the trust of the principal.

NOTE "n agent with authority to do act has also the power to bind

A/t. . The agent 5$0t a#t )ithin the 0#o4e o' hi0 a$tho/it&. He 5a& do 0$#h a#t0 a0 5a& 6e #ond$#i(e to the a##o54%i0h5ent o' the 4$/4o0e o' the agen#&. 92a;

)o far as third persons are concerned, no disncon exists. "n act within the power of the agent is deemed within the scope of his authority even if the agent has in fact exceeded the limits of his authority.

the principal but the power may exist without authority.

LI"ITATION ON AUTHORITY%he powers and dues of an agent are conned and limited to those which are specied and dened in his power of a(orney, which limitaon is a noce to, and is binding upon, the person dealing with such agent.

+hat a/e the die/ent Mind0 o' a$tho/it&=

E!!ECT

O! UNAUTHORI[ED ACTS $here an agent or representave, in entering into a contract on behalf of his principal, exceeds his authority, the contract is not an absolute nullity, but only (oida6%e at the instance of the party who has been improperly misrepresented.

0 !

reasonably necessar y to accomplish the purpose of the agency1 2

$hen the agent exceeds the scope of his autho rity, only the principal is pre#udiced and the la(er is the only one who can impugn the formerGs act. %he agent becomes personally liable for the damages.

5 ?

A$tho/it& 6& ne#e00it& =when it is demanded by virtue of the existence of an emergency.

NOTE ut where the powers of a(orney are forged by an agent,

and eCect, and the registraon of the mortgages executed thereunder were liewise null and void and could not in any way pre#udice the rights of the registered owners of the property in 9ueson.

A44a/ent o/ o0ten0i6%e=conferred by conduct or silence. stensible auth ority is another name for a$tho/it& 6& e0to44e%1 Gene/a%= refers to all the business of the principal1 S4e#ia%= when it is limited only to one or more specic transacons1

7 purporng to have been executed by the owners of certain registered lands, and mortgages were made by such agent by virtue thereof, it was held that such powers of a(orney were without force

E84/e00=when it is conferred by words1 I54%ied=when it is incidental to the transacon or

+hat a/e the /e$i0ite0 in o/de/ that the 4/in#i4a% 5a& 6e 6o$nd to thi/d 4e/0on0 6& the a#t o' the agent= A 0 !

%he agent must act within the scope of his authority1 and %he agent must act on b ehalf of the principal.

A/t. . The %i5it0 o' the agent0 a$tho/it& 0ha%% not 6e #on0ide/ed e8#eeded 0ho$%d it ha(e 6een 4e/'o/5ed in a 5anne/ 5o/e ad(antageo$0 to the 4/in#i4a% than that 04e#i7ed 6& hi5. 92:;

+hat i' the agent a#t0 )itho$t the a$tho/it& o/ in e8#e00 o/ 6e&ond the 0#o4e o' a$tho/it&=

< +hat i0 an a$tho/it& o' an agent=

)uch act shall be unenforceable, unless it is raed, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoed by the other contracng party.

It is the power of the agent to aCect the legal rela ons of the principal by acts done in accordance with the principalGs manifestaon of consent to him.

NOTE ut the agent is not deemed to have exceeded the limits of

NOTE %he condion of the agency can be improved but not made worse. %he agent, therefore, is not deemed to have exceeded his authority when he acts in a manner more advantageous to the principal that that specied by the la(er, because it is assumed that if the principal were the one acng, he would have also followed the more advantageous course.

his autho rity should he perform the agenc y in a manner more advantageous to the principal than that indicated by him. 'e is authori+ed to do such acts as may be conducive to the accomplishment of the purpose of the agency.

+hen i0 the 4/in#i4a% 6o$nd 6& the a#t0 o' the agent 6e&ond hi0 4o)e/0= A

%his arcle refers to an advantage which can be obtained without modifying the condions, the form, or the ob#ect of the agency. %hus, if an agent is empowered to sell for cash, and he sells on credit at a higher price, he cannot allege the advantage of the higher price

G.R %he principal is not bound by the acts of an agent beyond his limited powers.

-PN


$here the principalGs acts have contributed to deceive third persons in good faith1

'ence, the principal does not have the right of acon against the third person nor the third person against him.

$here the limitaons upon the power created by him could not have been nown by third persons1

< +hat i0 the e8#e41on to 0$#h /$%e=

$here the principal has placed in the hands of the agent instruments signed by him in blan1 $here the principal has raed the acts of the agent.

It is when the contract involves things belonging to the principal. In such case, the contract is considered as entered into between the principal and the third person.

A/t. . I' an agent a#t0 in hi0 o)n na5e, the 4/in#i4a% ha0 no /ight o' a#1on again0t the 4e/0on0 )ith )ho5 the agen t ha0 #ont/a#ted neithe/ ha(e 0$#h 4e/0on0 again0t the 4/in#i4a%. In 0$#h #a0e the agent i0 the one di/e#t%& 6o$nd in 'a(o/ o' the 4e/0on )ith )ho5 he ha0 #ont/a#ted, a0 i' the t/an0a#1on )e/e hi0 o)n, e8#e4t )hen the #ont/a#t in(o%(e0 thing0 6e%onging to the 4/in#i4a%. The 4/o(i0ion0 o' thi0 a/1#%e 0ha%% 6e $nde/0tood to 6e )itho$t 4/e?$di#e to the a#1on0 6et)een the 4/in#i4a% and agent. 922; SCOPE O! THIS ARTICL E %he rule contained is applicable only to cases where it is material to the third person to now with whom he is contracng. ut there are cases where it is immaterial to the third person to now with whom he contracts. %hus, when a person contracts with the driver of an ordinary vehicle for hire, he does not trouble himself to nd out who owns the vehicle.

PERSONAL LIA*ILITY O! AGENT $hen the agent transacts business in his own, it shall not be necessary for him to state the name of his principal, and shall be directly liable, as if the business were for his own account, to the persons with whom the transacts the same, said persons not having any right of acon against the principal nor the la(er against them.

+hat a/e the die/ent Mind0 o' 4/in#i4a%=

0

8isclosed prin cipal= wh ere the oth er par ty the reto has noce that the agent is acng for a principal and of the principalGs identy1

!

&arally dis closed pri ncipal=if th e other part y has no ce that the agent is or may be acng for a principal but has no noce of the principalGs identy1 3ndisclosed principal=if the other party has no noce that the agent is acng for a principal.

2

To )hat #i/#$50tan#e0 i0 A/t.  a44%i#a6%e=

0 !

$here the agent being authori+ed to act on behalf of the principal1 'e acts instead in his own name

NOTE In such case, the agent is the one directly liable to the person with whom he had contracted as if the transacon were his own. "ccordingly, there is no representaon of the principal when the agent acts in his own name.

@UDG"ENT AGAINST AGENT" #udgment, for or against an agent, in no way binds the real party in interest. "m acon is brought for a praccal purpose, to obtain actual and posive relief. If the party sues upon is not the proper party, any decision that may be rendered against him would be fule, for it cannot be enforced or executed.

CHAPTER  O*LIGATIONS O! THE AGENT A/t. . The agent i0 6o$nd 6& hi0 a##e4tan#e to #a//& o$t the agen#&, and i0 %ia6%e 'o/ the da5age0 )hi#h, th/o$gh hi0 nonB 4e/'o/5an#e, the 4/in#i4a% 5a& 0$e/. He 5$0t a%0o 7ni0h the 6$0ine00 a%/ead& 6eg$n on the death o' the 4/in#i4a%, 0ho$%d de%a& entai% an& dange/. 92; +hat a/e the 04e#i7# o6%iga1on0 o' the agent=

%o carry out the agency in accordance with its terms1 %o answer for the damages which through his nonperformance the principal may suCer1 %o nish the business already begun on the death of the principal, should delay detail any danger1 %o observe the diligence of a good father of a family in the custody and preservaon of the goods forwarded him by the owner in case he declines n agency, unl an agency is appointed1 %o advance the necessary funds should there be a spulaon to that eCect1 %o act in accordance with the instrucons of the principal1 *ot to carry out the agency if its execuon would manifestly result in loss or danger to the principal1 %o answer for damages should he prefer in case of conNict, his own interests to those of the principal. *ot to loan to himself without the consent of the principal when he has been authori+ed to lend at interest1 %o render an account of his tran sacons and to deliver to the principal whatever he may have received by virtue of the agency1 %o disnguish goods by countermars and designate the merchandise respecvely belonging to each principal1 %o be responsible in certain cases for the acts of the substute1 %o pay interest on funds he has applied to his own use1 %o inform the principal, where an authori+ed sale of credit has been made, of such sale1 %o bear the ris of collecon, should he receive also on a sale, a guarantee commission1 %o indemnify the principal for damages for his failure to collect the credits of his principal at the me that they become due1


!6. %o answer for his fraud or negligence.

NOTE " person is free to refuse to be an agent but once he accepts the agency, he is bound to carry it out in accordance with its terms in good faith. 3pon his failure to do so, he is liable for the damage which the principal may suCer. 'aving accepted the agency, when he was free to refuse it, the agent betrays the condence reposed on him if he does not fulll the mandate.

O6%iga1on to 7ni0h 6$0ine00 $4on 4/in#i4a%0 death NOTE "lthough the death of the principal exnguishes the agency, the agent has an obligaon to conclude the business already begun on the death of the principal. ut the duty exists only should delay entail any danger.

A/t. :. In #a0e a 4e/0on de#%ine0 an agen#&, he i0 6o$nd to o60e/(e the di%igen#e o' a good 'athe/ o' a 'a5i%& in the #$0tod& and 4/e0e/(a1on o' the good0 'o/)a/ded to hi5 6& the o)ne/ $n1% the %ae/ 0ho$%d a44oint an agent o/ taMe #ha/ge o' the good0. 9n;

NOTE &ersons dealing with the agent do so at their own ris and are duty bound to invesgate his authority because if the fact is done outside the scope of his authority the principal is not bound. Eet, they need not verify or invesg ate the instrucons of the principal since they concern only the & and the ". It is the responsibility of the agent to obey the reasonable and lawful instrucons given to him by his principal. If the agent exceeds, violates or fails to act upon such instrucons, he will be liable to the principal for any loss or damage resulng therefrom.

< +hat i0 the /$%e )he/e the/e a/e no 04e#i7# in0t/$#1on0= In the absence of the specic instrucons of the &, the " shall do all that a good father of a family would do as re9uired by the nature of the business.

A/t. . An agent 0ha%% not #a//& o$t an agen#& i' it0 e8e#$1on )o$%d 5ani'e0t%& /e0$%t in %o00 o/ da5age to the 4/in#i4a%. 9n; RESULT IN LOSS In order that this arcle may apply, the possible loss

NOTE %his rule is based on e9uity. In such case, the owner must act as soon as praccable either y appoinng an agent1 and y taing charge of the goods.

A/t.  3. Sho$%d the/e 6e a 014$%a1on that the agent 0ha%% ad(an#e the ne#e00a/& '$nd0, he 0ha%% 6e 6o$nd to do 0o e8#e4t )hen the 4/in#i4a% i0 in0o%(ent. 9n; G.R %he principal must advance to the agent, should the la(er

or damage must not be a ma(er of appreciaon1 it is necessary that to anyone the transacon is undoubtedly pre#udicial.

NOTE %he agent is not bound in all cases to carry out the agency as when its execuon would manifestly result in the loss or damage to the principal. "ccordingly, the duty of the agent is to render service for the benet of the & and not to act to his detriment.

A/t. F. The agent 0ha%% 6e %ia6%e 'o/ da5age0 i', the/e 6eing a #oni#t 6et)een hi0 inte/e0t0 and tho0e o' the 4/in#i4a%, he 0ho$%d 4/e'e/ hi0 o)n. 9n;

re9uest, the sums necessary for the execuon of the agency.

NOTE "gency is duciary in characterTagent is re9uired to observe NOTE Eet, they may spulate that the agent shall advance the necessary funds. In such case, the agent is bound to furnish such funds except when the principal is insolvent.

utmost good faith and loyalty towards his principal. %he rule applies whether the agency is onerous or gratuitous.

< +hat i0 the 6a0i0 'o/ 0$#h /$%e= A/t. 2. In the e8e#$1on o' the agen#&, the agent 0ha%% a#t in a##o/dan#e )ith the in0t/$#1on0 o' the 4/in#i4a%. In de'a$%t the/eo', he 0ha%% do a%% that a good 'athe/ o' a 'a5i%& )o$%d do, a0 /e$i/ed 6& the nat$/e o' the 6$0ine00. 92F; < Di01ng$i0h 6et)een a$tho/it& and in0t/$#1on0.

%he reason for prohibing the agent from engaging in self=dealing is to shut the door against temptaon on his part and to ensure that he places the rights and welfare of his princ ipal above his own in performing his agency.

A$tho/it& is the extent of the limitaon of the agentGs power to represent the principal. In0t/$#1on0 are direcons which the

A/t. F>. I' the agent ha0 6een e54o)e/ed to 6o//o) 5one&, he 5a& hi50e%' 6e the %ende/ at the #$//ent /ate o' inte/e0t. I' he ha0 6een a$tho/ized to %end 5one& at inte/e0t, he #annot 6o//o) it )itho$t the #on0ent o' the 4/in#i4a%. 9n;

principal may give the agent to follow in the discharge of his dues as such agent.

NOTE %he agent cannot, without a special power of a(orney, loan or borrow money.

INTERPRATIONS O! INSTRUCTIONS Instrucons of the principal must be interpreted in accordance with his presumed will and

In the second sentence of the arcle, the " cannot barrow without

usages of trade.

the consent of the & because the agent may prove to be bad debtor. %here is a possible conNict of interest. %he transacon may thus be pre#udicial to the &.

E!!ECT O! INSTRUCTIONS %he instrucons of the principal to the agent form part of the agency1 they constute the means or the orders carrying out the power granted1 hence, to depart from them is to exceed the authority conferred on the agent.

A/t. F . E(e/& agent i0 6o$nd to /ende/ an a##o$nt o' hi0 t/an0a#1on0 and to de%i(e/ to the 4/in#i4a% )hate(e/ he 5a& ha(e /e#ei(ed 6& (i/t$e o' the agen#&, e(en tho$gh it 5a& not 6e o)ing to the 4/in#i4a%.


E(e/& 014$%a1on e8e5 41ng the agent '/o5 the o6%iga1on to /ende/ an a##o$nt 0ha%% 6e (oid. 92>a; NOTE It is the duty of the " to account for and deliver to the & all the money and property which may have come into his hands by virtue of or as a result of the agency.

< +hat i0 a 0$6agent= 'e is a person to whom the agen t delegates as his agen t, the performance of an act for the principal which the agent has been empowered to perform through his representave.

NOTE 3nless prohibited, the agent may appoint a subagent or It is immaterial whether such money or property is the result of the performance or violaon of the "Gs duty since " cannot be permi(ed to derive advantage from his own neglect or violaon of duty.

substute. %he right of acon against the substute is an excepon to the general rule that contracts are binding only between the contracng pares, assigns, and heirs.

SCOPE %his arcle, however, does not apply to over=payment by

+hat a/e the die/ent ee#t0 o' 0$601t$1on=

mistae. If a debtor, by mistae, pays to the agent more than what is owing to the principal, such agent may eep the excess, because he is the one against who an acon may be brought by the payor to recover the excess amount paid.

0

If th e substute is ap pointed by th e agent against the express prohibion of the &, the agent exceeds the limits of his authority. In such case, the acts of the substute shall be void.

!

If th e substuon is auth ori+ed, the sub stuon ha s the eCect of releasing the agent from his responsibility unless the person appointed is notoriously incompetent or insolvent.

2

If the su bstuon is not au thori+ed but no t pro hibitedT the law recogni+es the validity of the substuon if the same is benecial to the &. If the substuon has occasioned damage to the &, the " shall be primarily responsible for the acts of the substute as he himself executed them. %he & has also a right of acon against the substute.

DO"INGO (. DO"INGO  SCRA  "n agent who taes a secret prot in the nature of a bonus, gratuity or personal benet from the vendee without revealing the same to his principal is guilty of a breach of his loyalty to the la(er and forfeits his right to collect the commission that may be due him, even if the principal does not suCer any in#ury by reason of such breach.

O*LIGATION TO ACCOUNT SCOPE %he duty of the agent to account to his principal for all money and property which may have come into his hands during and by virtue of the agency embraces not only such money and property as may be received directly from the principal, but also that which comes into the agentGs hands as the result of his agency.

A/t. F. The /e04on0i6i%it& o' t)o o/ 5o/e agent0, e(en tho$gh the& ha(e 6een a44ointed 0i5$%taneo$0%&, i0 not 0o%ida/&, i' 0o%ida/it& ha0 not 6een e84/e00%& 014$%ated. 92;

TRANS"ISSI*ILITY %he obligaon or the agent to render an account

@OINT AGENCY

is transmissible to his heirs. %he right of a principal to an accounng is also transmissible to his heirs.

A/t. F. The agent 5a& a44oint a 0$601t$te i' the 4/in#i4a% ha0 not 4/ohi6ited hi5 '/o5 doing 0o 6$t he 0ha%% 6e /e04on0i6%e 'o/ the a#t0 o' the 0$601t$te +hen he )a0 not gi(en the 4o)e/ to a44oint one +hen he )a0 gi(en 0$#h 4o)e/, 6$t )itho$t de0igna1ng the 4e/0on, and the 4e/0on a44ointed )a0 noto/io$0%& in#o54etent o/ in0o%(ent. A%% a#t0 o' the 0$601t$te a44ointed again0t the 4/ohi6i1on o' the 4/in#i4a% 0ha%% 6e (oid. 92; USE O! E"PLOYEES %he use of employees by the agent is diCerent form a substuon. %he agent can mae use of his employees in carrying out the agency, unless this is expressly prohibited by the principal, or excluded by the nature and purpose of the agency. %he agent, however, shall always be l iable to the principal for the fault or negligence of such employees.

A/t. F. In the #a0e0 5en1oned in No0.  and  o' the 4/e#eding a/1#%e, the 4/in#i4a% 5a& '$/the/5o/e 6/ing an a#1on again0t the 0$601t$te )ith /e04e #t to the o6%iga1on0 )hi#h the %ae/ ha0 #ont/a#ted $nde/ the 0$601t$1on. 92a;

%his arcle has reference to the rela on of the agent s to the principal1 each agent is responsible for his own acts to the principal. It does not regulate #oint agency in relaon to third persons with whom the agents may contract. 3nder #oint agency, several agents are appointed to act collecvely. %he declaraon of one of them to a third person in relaon to the agency does not become eCecve unl the others mae the same declaraon to the same person or rafy the declaraon already made by the rst agent. In other words, whether they act together or separately, they are considered as a single unit1 all must act towards the same end to bind the principal. ut the nowledge of a fact by one of them is considered as nowledge of all.

LIA*ILITY IS PERSONAL If the agen ts are char ged with a #oint undertaing, so that one cannot act without the others, and the agency is not performed due to the omission of the agent, then he alone bears the enre responsibility for the in#ury caused. ut if each one can act separately, then he is liable only for his own omission or fault.


A/t. F:. I' 0o%ida/it& ha0 6een ag/eed $4on, ea#h o' the agent0 i0 /e04on0i6%e 'o/ the nonB'$%7%%5ent o' agen#&, and 'o/ the 'a$%t o/ neg%igen#e o' hi0 'e%%o)0 agent0, e8#e4t in the %ae/ #a0e )hen the 'e%%o) agent0 a#ted 6e&ond the 0#o4e o' thei/ a$tho/it&. 9n;

A/t. F3. The agent o)e0 inte/e0t on the 0$50 he ha0 a44%ied to hi0 o)n $0e '/o5 the da& on )hi#h he did 0o, and on tho0e )hi#h he 01%% o)e0 ae/ the e81ng$i0h5ent o' the agen#&. 92a; NOTE %he present arcle contemplates 2 disnct cases

G.R %he presumpon is that an obligaon is #oint. -PN If solidarity has been agreed upon, each of the agents becomes solidarily liable

)ums belonging to the & which the " applied to his own use1 and )ums which the agent sll owes the & a
>or the non=fulllment of the agency1 >or the fault or negligence of his fellow agents provided the la(er acted within the scope of their authority.

%he agent who converted to his personal use the funds of the & is liable for interest as compensaon or indemnity from the day on which he did so.

SOLIDARY AGENCY < I0 it ne#e00a/& that de5and 6e 5ade 6& the P= %he arcle governs solidarity in the relaon of the agents to the principal and not in relaon to third persons.

< +hat i0 0o%ida/& agen#&=

It is clear that if by provision of law the agent is bound to deliver to the & whatever he may have recei ved by virtue of the agenc y demand is no longer necessary.

It is one in which there being several agents for the same purpose, each one acts independently of the other s, and can bind the principal without the intervenon of the others.

A/t. F2. The agent )ho a#t0 a0 0$#h i0 not 4e/0ona%%& %ia6%e to the 4a/t& )ith )ho5 he #ont/a#t0, $n%e00 he e84/e00%& 6ind0 hi50e%' o/ e8#eed0 the %i5it0 o' hi0 a$tho/it& )itho$t gi(ing 0$#h 4a/t& 0$J#ient no1#e o' hi0 4o)e/0. 92:;

$hen a person appoints 2 agents independently, the consent of one will not be re9uired to validate the acts of the other, unless that appears posively to have been the principalGs intenon.

NOTE %he agent is precluded from doing any posive act that could

%his governs a #oint agency where the agency act collecvely as a unit in relaon to third persons but where it is spulated that they shall be solidarily liable to the principal.

"n agent who acts as such within the scope of his authority represents the & so that his contract is really the principalGs. %he " is not personally liable to the party whom he contracts.

oth "rcle !4K? and this arcle apply to a #oint or collecve agency but are limited to the liability of the agents to the principal. %he relaons of agents to third persons are governed by other principles.

In case the " acts in excess of his authority, the & is not bound unless he raes the act.

ACTS *EYOND PO+ERS

prevent performance on the part of his principal.

$hen the " expressly binds himself, he thereby obligates himself personally and by his own act.

"n act of one agent beyon d the scop e of the agency does not concern the other agents1 they have no power to prevent it and they should be held liable for it.

If he exceeds in his authority, the agent becomes personally liable because by his wrong or omission he deprives the third person with whom he contracts of any remedy against the &.

Eet, the mere fact that one agent oversteps the limits of his authority does not exempt the others from discharging the agency, nor does it deprive the principal of the guaranty arising from the spulated solidarity.

ut if the " gave sucient noce of his power to third persons dealing with him and such person nevertheless contract with him, neither the & nor the " are bound.

ll'straons$

%wo agents are authori+ed solidarily to sell a parcel of land *o. ! at &!0,000.00. ne of the agents sells parcel land *o. 2 instead. %he other agent cannot be held liable for this act. ut if parcel land *o. ! has been sold for &O,000 instead of &!0,000 this irregular performance of the agency maes both agents solidary liable to the principal for damages. %he agents empowered to sell an immovable are authori+ed to receive only part of the price. ne agent collects the enre price. %he other agents are not liable to the principal for the excess collected, because as to that excess the act is beyond the scope of the agency.

A/t. F . I' the agent #ont/a#t0 in the na5e o' the 4/in#i4a%, e8#eeding the 0#o4e o' hi0 a$tho/it&, and the 4/in#i4a% doe0 not /a1'& the #ont/a#t, it 0ha%% 6e (oid i' the 4a/t& )ith )ho5 the agent #ont/a#ted i0 a)a/e o' the %i5it0 o' the 4o)e/0 g/anted 6& the 4/in#i4a%. In thi0 #a0e, ho)e(e/, the agent i0 %ia6%e i' he $nde/tooM to 0e#$/e the 4/in#i4a%0 /a17#a1on. 9n; NOTE %he agent is precluded from doing any posive act that could prevent performance on the part of his princi pal. %he eCec t of representaon is to bind the & as though he personally entered into the contract. If the agent acts in excess of his authority, the " is the one personally liable unless there is subse9uent racaon by the &. Eet, the " will not be liable if he gave noce of his powers to the person with whom he has contracted nor in case such person is aware of the limits of the powers granted by the &.


E-CESS O! AUTHORITY %he liability of an agent who has exceeded the scope of his authority, if the principal does not rafy his act, depends upon whether or not the third person nows the limits of the agentGs power. If he nows such limits, he is to blame and he is not entled to recover damages from the agent, unless the la(er undertoo to secure the principalGs racaon. ut if the third person is unaware of the limits of the authority conferred, he has been deceived, and the agent is liable for damages to him. %his is implied under "rt. !4K6.

RATI!ICATION %he acts of an agent beyond the scope of his authority does not bind the principal, unless, he raes them ;xpressly Impliedly nly the princi pal can raf y1 the agent cannot rafy his own unauthori+ed acts. "nd the principal must have nowledge of the acts he is to rafy.

NOTE If the principal receives the benets from the unauthori+ed acts of the agent, it is evident that he tacitly raes them.

A/t. FF. I' a d$%& a$tho/ized agent a#t0 in a##o/dan#e )ith the o/de/0 o' the 4/in#i4a%, the %ae/ #annot 0et $4 the igno/an#e o' the agent a0 to #i/#$50tan#e0 )he/eo' he hi50e%' )a0, o/ o$ght to ha(e 6een, a)a/e. 9n; < +hat i0 the ee#t o' the igno/an#e o' the agent= If the & appoints an " who is ignorant, the fault is his alone and he must suCer the conse9uences of his acts.

A/t. F>>. So 'a/ a0 thi/d 4e/0on0 a/e #on#e/ned, an a#t i0 dee5ed to ha(e 6een 4e/'o/5ed )ithin the 0#o4e o' the agent0 a$tho/it&, i' 0$#h a#t i0 )ithin the te/50 o' the 4o)e/ o' ao/ne&, a0 )/ien, e(en i' the agent ha0 in 'a#t e8#eeded the %i5it0 o' hi0 a$tho/it& a##o/ding to an $nde/0tanding 6et)een the 4/in#i4a% and the agent. 9n; < +hat i0 the ee#t o' an $n)/ien a$tho/it&= ;very person dealing with the " is under obligaon, to mae an in9uiry not only as to the existence of the agency but also as to the nature and extent of authority of the agent.

< +hat i' the a$tho/it& i0 )/ien= If the authority is in wring, the third party is not re9uired to in9uire further than the terms of the wri(en power of a(orney. "n act of the " within the terms of the &" within the scope of the agentGs authority although the agent has in fact exceeded the limits of his actual authority.

A/t. F>. A thi/d 4e/0on #annot 0et $4 the 'a#t that the agent ha0 e8#eeded hi0 4o)e/0, i' the 4/in#i4a% ha0 /a17ed, o/ ha0 0igni7ed hi0 )i%%ingne00 to /a1'& the agent0 a#t0. 9n;

A/t. F>. A thi/d 4e/0on )ith )ho5 the agent )i0he0 to #ont/a#t on 6eha%' o' the 4/in#i4a% 5a& /e$i/e the 4/e0enta1on o' the 4o)e/ o' ao/ne&, o/ the in0t/$#1on0 a0 /ega/d0 the agen#&. P/i(ate o/ 0e#/et o/de/0 and in0t/$#1on0 o' the 4/in#i4a% do not 4/e?$di#e thi/d 4e/0on0 )ho ha(e /e%ied $4on the 4o)e/ o' ao/ne& o/ in0t/$#1on0 0ho)n the5. 9n; NOTE Ignorance of the agentGs authority is not an excuse. It is the duty of the third person to re9uire the " to produce his &" to ascertain the scope of his authority.

< I0 the thi/d 4e/0on 6o$nd 6& the P0 4/i(ate in0t/$#1on0= %he third perso n is chargeable with nowledge of the terms of the &" as wri(en and the instrucons disclosed to him. Eet he is not bound by the secret orders and instrucons of the &.

A/t. F>. The #o55i00ion agent 0ha%% 6e /e04on0i6%e 'o/ the good0 /e#ei(ed 6& hi5 in the te/50 and #ondi1on0 and a0 de0#/i6ed in the #on0ign5ent, $n%e00 $4on /e#ei(ing the5 he 0ho$%d 5aMe a )/ien 0tate5ent o' the da5age and dete/io/a1on 0$e/ed 6& the 0a5e. 9n; < +ho i0 a 'a#to/ o/ #o55i00ion agent= 'e is one whos e business is to recei ve and sell the good s for commission and who is entrusted by the & with the possession of the goods to be sold.

< +hat i0 the %ia6i%it& o' 0$#h agent a0 to the good0 /e#ei(ed= 'e will be responsible for any damage or deterioraon suCered by the same. %o avoid liability, such agent should mae a wri(en statement of the damage or deterioraon if the goods received by him do not agree with the descripon in the consignment.

A/t. F>. The #o55i00ion agent )ho hand%e0 good0 o' the 0a5e Mind and 5a/M, )hi#h 6e%ong to die/ent o)ne/0, 0ha%% di01ng$i0h the5 6& #o$nte/5a/M0, and de0ignate the 5e/#handi0e /e04e#1(e%& 6e%onging to ea#h 4/in#i4a%. 9n; A/t. F>:. The #o55i00ion agent #annot, )itho$t the e84/e00 o/ i54%ied #on0ent o' the 4/in#i4a%, 0e%% on #/edit. Sho$%d he do 0o, the 4/in#i4a% 5a& de5and '/o5 hi5 4a&5ent in #a0h, 6$t the #o55i00ion agent 0ha%% 6e en1t%ed to an& inte/e0t o/ 6ene7t, )hi#h 5a& /e0$%t '/o5 0$#h 0a%e. 9n; NOTE " commission agent can sell on credit only with the express or implied consent of the &. therwise, the & has 2 alternave remedies 'e may re9uire payment in cash and any interest or benet from the sale shall belong to the " since the & cannot be allowed to enrich himself at the "Gs expense1 or :afy the sale on credit in which case it will have all the riss and advantages to him.

NOTE %he third person cannot set up the fact that the " exceeded his authority to disarm his contract not only a
A/t. F>3 . Sho$%d the #o55i0 0ion agent, )ith a$tho/it& o' the 4/in#i4a%, 0e%% on #/edit, he 0ha%% 0o in'o/5 the 4/in#i4a%, )ith a 0tate5ent o' the na5e0 o' the 6$&e/0. Sho$%d he 'ai% to do 0o, the 0a%e 0ha%% 6e dee5ed to ha(e 6een 5ade 'o/ #a0h in0o'a/ a0 the 4/in#i4a% i0 #on#e/ned. 9n;


%o reimburse the " for all the advances made by him provided the " is free from fault1

A/t. F> 2. Sho$%d the #o55 i00ion agent /e#ei(e on a 0a%e, in addi1on to the o/dina/& #o55i00ion, anothe/ #a%%ed a g$a/antee #o55i00ion, he 0ha%% 6ea/ the /i0M o' #o%%e#1on and 0ha%% 4a& the 4/in#i4a% the 4/o#eed0 o' the 0a%e on the 0a5e te/50 ag/eed $4on )ith the 4$/#ha0e/. 9n;

%o indemnify the " for all the damages which the execuon of the agency may have caused the la(er without fault or negligence on his part1 %o pay the agent the compensaon agreed upon or otherwise, the reasonable value of the agentGs services.

< +hat i0 a g$a/antee #o55i00ion= NOTE :epresentaon is the essence of agency. It is not enough that It is one where in consideraon of an increased commission the factor or commission agent guarantees to the & the payment of debts arising through his agency.

the " should act within the scope of his authority, the " must also act in a representave capacity.

LIA*ILITY !OR AGENT S ILLICIT ACTS $hen the agent is in the A/t. F> . The #o55i00ion agent )ho doe0 not #o%%e#t the #/edit0 o' hi0 4/in#i4a% at the 15e )hen the& 6e#o5e d$e and de5anda6%e 0ha%% 6e %ia6%e 'o/ da5age0, $n%e00 he 4/o(e0 that he e8e/#i0ed d$e di%igen#e 'o/ that 4$/4o0e. 9n;

performance of an obligaon of the principal, the fault of the agent is a(ributable to the principal1 this is c'lpa contract'al. %he rule is the same even if the illicit of the agent amounts to a crime.

GR ut if the fault or crime commi(ed by the agent is not in the NOTE %he agent who has made an authori+ed sale on credit must collect the credits due the & at the me they become due and demandable. therwise, he shall be liable for damages unless he can show that the credit should not be collected notwithstanding the exercise of due diligence on his part.

performance of an obligaon of the principal, the la(er generally is not bound by the illicit act of the agent, even if it is done in connecon with his funcons.

-PN0

A/t. F>F. The agent i0 /e04on0i6%e not on%& 'o/ '/a$d, 6$t a%0o 'o/ neg%igen#e, )hi#h 0ha%% 6e ?$dged )ith 5o/e o/ %e00 /igo/ 6& the #o$/t0, a##o/ding to )hethe/ the agen#& )a0 o/ )a0 not 'o/ a #o54en0a1on. 923;

$hen the delict or 9uasi=delict was commi(ed by the agent because of defecve instrucons from the principal, or due to the lac of necessary vigilance or supervision on his part, the principal is liable because of his own negligence $hen the agent secures a contract through fraud, or maes a fraudulent alienaon, or executes a simulated contract, all of these acts are imputable to the principal as if done by him, because the illicit act is inseparable from the transacon executed for him

*REACH O! TRUST %he agent may not, without the permission of the princi pal, directly or indirectly buy for himself what he has commissioned to sell, or sell what he has been commissioned to buy. %his prohibion ceases upon the terminaon of the agency.

$hen the crime consists in the performance of an act which is within the powers of the agent, but becomes criminal only because of the manner in which the agent has performed it, then principal is liable to third persons who act in good faith.

NOTE %he " is responsible to the & not only for fraud commi(ed by him but also for negligence. It is held that the failure of a subagent with whom lm has been le< for safeeeping to insure against loss by re does not constute negligence or fraud on its part when it has received no instrucon to that eCect from its principal.

A/t. F. E(en )hen the agent ha0 e8#eeded hi0 a$tho/it&, the 4/in#i4a% i0 0o%ida/i%& %ia6%e )ith the agent i' the 'o/5e/ a%%o)ed the %ae/ to a#t a0 tho$gh he had '$%% 4o)e/0. 9n; *ASIS O! LIA*ILITY %he basis is the failure to adopt the necessary

CHAPTER  O*LIGATIONS O! THE PRINCIPAL

measures to prevent third persons from being deceived by the apparent authority of the agent. %he liability extends only to third persons who have lawfully supposed the existence of the authority.

A/t. F>. The 4/in#i4a% 5$0t #o54%& )ith a%% the o6%iga1on0 )hi#h the agent 5a& ha(e #ont/a#ted )ithin the 0#o4e o' hi0 a$tho/it&.

< +hat i0 e0to44e%=

A0 'o/ an& o6%iga1on )he/ein the agent ha0 e8#eeded hi0 4o)e/, the 4/in#i4a% i0 not 6o$nd e8#e4t )hen he /a17e0 it e84/e00%& o/ ta#it%&. 922;

It is a bar which prec ludes a person from denying or asserng anything contrary to that which has been established as the truth by his own deed or representaon.

+hat a/e the 04e#i7# o6%iga1on0 o' the P=

Di01ng$i0h 6et)een a44a/ent a$tho/it& and a$tho/it& 6& e0to44e%= A

0

!

%o comply with all th e obl igaons which th e agent may have contracted within the scope of his authority and in the name of the &1 %o advance to the ", should the la(er so re9uest, the sums necessary for the execuon of the agency1

A 44 a / e nt a $ t ho/ it &

A44a/ent a$tho/it& i0 that

A $ t h o/ it & 6& e 0t o4 4e % "uthority by estoppel arises in those cases where the & by his


)hi#h

tho$gh not a#t$a%%& the 4/in#i4a% Mno)ing%& 4e/5it0 the agent to e8e/#i0e o/ ho%d0 o$t a0 4o00e00ing. g/anted,

culpable negligence permits his agent to exercise powers not granted to him, even though the & may have no noce or nowledge of the conduct of the ".

Di01ng$i0h 6et)een i54%ied agen#& and agen#& 6& e0to44e%=

In such case however, the agent is not entled to the excess in case the things are sold to sasfy his claim and the proceeds thereof are more than the amount due.

A/t. F:. I' t)o o/ 5o/e 4e/0on0 ha(e a44ointed an agent 'o/ a #o55on t/an0a#1on o/ $nde/taMing, the& 0ha%% 6e 0o%ida/i%& %ia6%e to the agent 'o/ a%% the #on0e$en#e0 o' the agen#&. 92; +hat a/e the  /e$i0ite0 'o/ the a44%i#a1on o' the a6o(e a/1#%e= A

I"PLIEDAGENCY The/e i0 an a#t$a% agen#& The 4/in#i4a% a%one i0 %ia6%e

AGENCY*YESTOPPEL %he authority of the agent is not real but only apparent If the estoppel is caused by the &, he is liable to any third person who relied on the misrepresentaon1 if the estoppels is caused by the agent, then only the agent is liable.

A/t. F . The 4/in#i4a% 5$0t ad(an#e to the agent, 0ho$%d the %ae/ 0o /e$e0t, the 0$50 ne#e00a /& 'o/ the e8e#$1on o' the agen#&. Sho$%d the agent ha(e ad(an#ed the5, the 4/in#i4a% 5$0t /ei56$/0e hi5 the/e'o/, e(en i' the 6$0ine00 o/ $nde/taMing )a0 not 0$##e00'$%, 4/o(ided the agent i0 '/ee '/o5 a%% 'a$%t. The /ei56$/0e5ent 0ha%% in#%$de inte/e0t on the 0$50 ad(an#ed, '/o5 the da& on )hi#h the ad(an#e )a0 5ade. 92; %he &execuon must advance toagency. the " upon his re9uest the sums necessary for the of the If the & fails to do so, the " will not be liable for the damage which the & may suCer.

A/t. F. The 4/in#i4a% 5$0t a%0o inde5ni'& the agent 'o/ a%% the da5age0 )hi#h the e8e#$1on o' the agen#& 5a& ha(e #a$0ed the %ae/, )itho$t 'a$%t o/ neg%igen#e on hi0 4a/t. 92F; %he liability of the & for damages is limited only to that which the execuon of the agency has caused the agent.

PRO!ESSIONAL SERICES %he principal must reimburse the agent for amounts the la(er may have paid as reasonable compensa on for professional services rendered by third persons in the execuon of the agency.

A/t. F. The agent 5a& /etain in 4%edge the thing0 )hi#h a/e the o6?e#t o' the agen#& $n1% the 4/in#i4a% ee#t0 the /ei56$/0e5ent and 4a&0 the inde5nit& 0et 'o/th in the t)o 4/e#eding a/1#%e0. 92>; < I0 the A a$tho/ized to /etain the o6?e#t o' the agen#& in 4%edge= If the & fails to reimburse or indemnify the ", the " has the right to retain in pledge the things which are the ob#ect of the agency. %his is a pledge created by operaon of law.

%here are 2 or more principals1 %he & have all concurred in the appointment of the same agent1 and %he agent appointed for a common transacon or undertaing.

SOLIDARITY O! PRINCIPALS %he arcle applies even when the appointments were made by the principals in separate acts, provided that they are for the same transacon. %he solidarity arises from the common interest of the principals and not from the act of constung the agency. y virtue of this solidarity, the agent can recover from any principal the whole compensaon and indemnity owing to him by others. ut the pares may agree to negate such solidarity. %he solidarity does not disappear by the mere paron aCected by the principals a
A/t. F3. +hen t)o 4e/0on0 #ont/a#t )ith /ega/d to the 0a5e thing, one o' the5 )ith the agent and the othe/ )ith the 4/in#i4a%, and the t)o #ont/a#t0 a/e in#o54a16%e )ith ea#h othe/, that o' 4/io/ date 0ha%% 6e 4/e'e//ed, )itho$t 4/e?$di#e to the 4/o(i0ion0 o' A/1#%e :. 9n; A/t. :. I' the 0a5e thing 0ho$%d ha(e 6een 0o%d to die/ent (endee0, the o)ne/0hi4 0ha%% 6e t/an0'e//ed to the 4e/0on )ho 5a& ha(e 7/0t taMen 4o00e00ion the/eo' in good 'aith, i' it 0ho$%d 6e 5o(a6%e 4/o4e/t&. Sho$%d it 6e i55o(a6%e 4/o4e/t&, the o)ne/0hi4 0ha%% 6e%ong to the 4e/0on a#$i/ing it )ho in good 'aith 7/0t /e#o/ded it in the Regi0t/& o' P/o4e/t&. Sho$%d the/e 6e no in0#/i41on, the o)ne/0hi4 0ha%% 4e/tain to the 4e/0on )ho in good 'aith )a0 7/0t in the 4o00e00ion and, in the a60en#e the/eo', to the 4e/0on )ho 4/e0ent0 the o%de0t 1t%e, 4/o(ided the/e i0 good 'aith. 92;


A/t. F2. In the #a0e /e'e//ed to in the 4/e#eding a/1#%e, i' the agent ha0 a#ted in good 'aith, the 4/in #i4a% 0ha%% 6e %ia6%e in da5age0 to the thi/d 4e/0on )ho0e #ont/a#t 5$0t 6e /e?e#ted. I' the agent a#ted in 6ad 'aith, he a%one 0ha%% 6e /e04on0i6%e. 9n; A/t. F. The 4/in#i4a% i0 not %ia6%e 'o/ the e84en0e0 in#$//ed 6& the agent in the 'o%%o)ing #a0e0 I' the agent a#ted in #ont/a(en1on o' the 4/in#i4a%0 in0t/$#1on0, $n%e00 the %ae/ 0ho$%d )i0h to a(ai% hi50e%' o' the 6ene7t0 de/i(ed '/o5 the #ont/a#t

< A/e the 5ode0 5en1oned e8#%$0i(e= *o, agency may also be exnguished by the modes of exnguishment of obligaons when applicable lime loss of the thing and novaon. ther causes include chang e in law aCecng the sub#ect ma(er or transacon involved lie if it maes illegal the re9uired act1 or change in the condions not ancipated by the pares lie the outbrea of war, prevenng or maing impossible the accomplishment of the purpose of the agency.

Death o' 4/in#i4a%

+hen the e84en0e0 )e/e d$e to the 'a$%t o' the agent +hen the agent in#$//ed the5 )ith Mno)%edge that an $n'a(o/a6%e /e0$%t )o$%d en0$e, i' the 4/in#i4a% )a0 not a)a/e the/eo' +hen it )a0 014$%ated that the e84en0e0 )o$%d 6e 6o/ne 6& the agent, o/ that the %ae/ )o$%d 6e a%%o)ed on%& a #e/tain 0$5. 9n;

"gency is terminated by the death of the princ ipal, even if the agency is for a denite period, and the period has not yet expired. %he authori+aon by a principal to another to furnish necessaries to the formerGs grandson could not be made to extend a
-PN0 0

CHAPTER  "ODES O! E-TINGUISH"ENT O! AGENCY

A/t. F>. The agen#& 0ha%% /e5ain in '$%% 'o/#e and ee#t e(en ae/ the death o' the 4/in#i4a%, i' it ha0 6een #on01t$ted in the #o55on inte/e0t o' the %ae/ and o' the agent, o/ in the inte/e0t o' a thi/d 4e/0on )ho ha0 a##e4ted the 014$%a1on in hi0 'a(o/. 9n;

A/t. FF. Agen#& i0 e81ng$i0hed >     :

*& it0 /e(o#a1on *& the )ithd/a)a% o' the agent *& the death, #i(i% in te/di#1on, in 0anit& o / in0 o%(en#& o' the 4/in#i4a% o/ o' the agent *& the di00o%$1on o' the 7/5 o/ #o/4o/a1on )hi#h ent/$0ted o/ a##e4ted the agen#& *& the a##o54%i0h5ent o' th e o6?e#t o/ 4$/4o0e o' th e agen#& *& the e84i/a1on o' the 4 e/iod 'o/ )hi#h the agen#& )a0 #on01t$ted. 92a;

"rcle !K501 and

!

"rcle !K5!

A/t. F. An&thing doneo'6&the the4/in#i4a% agent, )itho$t Mno)%edge o' the death o/ o' an& othe/ #a$0e )hi#h e81ng$i0he0 the agen#&, i0 (a%id and 0ha%% 6e '$%%& ee#1(e )ith /e04e#t to thi/d 4e/0on0 )ho 5a& ha(e #ont/a#ted )ith hi5 in good 'aith. 92;

+hat a/e the die/ent 5ode0 o' e81ng$i0hing an agen#&= A y agreement1 y the subse9uent acts of the pares which may be either

A/t. F>. The 4/in#i4a% 5a& /e(oMe the agen#& at )i%%, and #o54e% the agent to /et$/n the do#$5ent e(iden#ing the agen#&. S$#h /e(o#a1on 5a& 6e e84/e00 o/ i54%ied. 92a; :evocaon=when the agency is terminated by the principal1 :enunciaon= when the same is done by the agent.

y the act of both pares or by mutual consent1 or y the unilateral act of one of them. 5. y operaon of law. "gency re9uires the existence and capacity of both the & and the ".

-ondence is the cardinal basis of the relaon, it stands to reason that it should cease when such condence disappears.

$hile the & may have the absolute power to revoe the " at anyme, he must respond to damages in those cases wherein not having the right to do so, he should discharge the agent.

< +hat a/e the Mind0 o' /e(o#a1on=

%he death, civil interdicon, insanity, or insolvency of either party terminates the agency.

It may be express or implied as when the & appoints a new agent for

< +hat i0 #i(i% inte/di#1on=

the same business and transacon or when the & manages the business entrusted to the agent.

It is a form of dis9ualicaon which deprives the oCender during the period of his sent ence of the right to manage his property and dispose of such property by any act or any conveyance inter vivos.

If the authority of the agent is in wring, the & can compel the " to return the same so as to prevent the " from maing use of the


power and thus avoid liability to third persons who may subse9uently deal with the " on the faith of the instrument.

PO+ER TO REOKE *ASIS It is the will of the person represented that may put an end to the representaon. therwise, the representaon would be converted into a true alienaon of the personality, either in perpetuity or for a denite period. %his is an B&* to the general rules of contract. %he agent has no power to oppose such terminaon even if there was a denite period xed for the agency. %he rule applies whether the agency is gratuitous or remuneratory.

INDE"NITY TO AGENT

SCOPE O! THE ART ICLE It is the duty of the principal on the terminaon of the agency to give due and mely noce thereof to third persons to whom he has given special invitaon to deal with his agent and failure to do so renders him liable to them for whatever may have been in good faith and without negligence sent to the agent without nowledge, actual or construcve, of the terminaon of the agency. %he arcle also applies to cases where the authority of the agent has been communicated to parcular persons, even if they were not rd indicated at the me the agency was created. If 5 persons have nowledge of the revocaon, this is e9uivalent to nocaon.

A/t. F . I' the agent had gene/a% 4o)e/0, /e(o# a1on o' the agen#& doe0 not 4/e?$di#e thi/d 4e/0on0 )ho a#ted in good 'aith and )itho$t Mno)%edge o' the /e(o#a1on. No1#e o' the /e(o#a1on in a ne)04a4e/ o' gene/a% #i/#$%a1on i0 a 0$J#ient )a/ning to thi/d 4e/0on0. 9n;

GR %he principal is not liable for damages for having made use of his power to revoe the agency.

NOTE &ublicaon constutes noce to third persons and this is true whether or not they have read the newspaper concerned.

-PN If the revocaon was made in such a manner as to constute an abuse of right, the agent can recover damages from the principal. %he principal cannot revoe the agency in > and as a means to avoid paying compensaon to the agent.

3nder !K2!, the noce must be personal1 under !K22, it may be personal.

APPLICATION O! THE ARTICLE S14$%a1on on i//e(o#a6i%it& &ares may validly spulate that the agency shall be irrevocable for a certain period. %here is no reason why it cannot become irrevocable by agreement so long as the agreement is according to the agency and not contrary to morals. %he agreement may tae 2 forms " renunciaon of a right to revoe, in which case, the principal cannot revoe the agency1 or " mere obligaon of the principal not to revoe, in which case the agency may be revoed but the principal becomes liable for breach of contract. ;ven an irrevocable power however, does not prevent the principal from execung the delegated act himself.

AGENCY IS NOT E-CLUSIE "n agency conferred to carry out certain transacon is not exclusive1 it does not prevent the principal from concluding the transacon himself or naming other persons with the same authority. agent cannot prevent third persons from exercising their right to deal directly with the principal, even when the agenc y is granted as exclusive because the principal cannot renounce future acts.

A/t. F. I' the agen#& ha0 6een ent/$0ted 'o/ the 4$/4o0e o' #ont/a#1ng )ith 04e#i7ed 4e/0on0, it0 /e(o#a1on 0ha%% not 4/e?$di#e the %ae/ i' the& )e/e not gi(en no1#e the/eo'. 92; "ccordingly, since the third persons have been made to believe that the " is authori+ed to deal with them, they have a right to presume that the representaon connues in the absence of nocaon by the &.

%he arcle refers to agency in which the person with whom the agent is to contract, is not specied.G

A/t. F. The a44oint5ent o' a ne) agent 'o/ the 0a5e 6$0ine00 o/ t/an0a#1on /e(oMe0 the 4/e(io$0 agen#& '/o5 the da& on )hi#h no1#e the/eo' )a0 gi(en to the 'o/5e/ agent, )itho$t 4/e?$di#e to the 4/o(i0ion0 o' the t)o 4/e#eding a/1#%e0. 92:a; NOTE :evocaon does not become eCecve as between the & and the " unl it is in same way communicated to the la(er1

:ights of third persons who acted in good faith and without nowledge of the revocaon will not be pre#udiced thereby.

INCO"PATI*ILITY O! PO+ERS " new agency revoes an exisng one only when 2 are incompable with each other or when the principal maes nown to the rst agent that his powers have ceased by the appointment of the new agent. $here there is no incompability, the new agency may only mean a division of the agency and the 2 agencies can co=exist. 'ence, an agent may be appointed to buy lands in certain locality without specicaon of the parcular properes, his powers being limited to the amount stated in his powers. If a second agent is appointed to buy lands in same locality, this is not necessarily incompable with the rst agency, which is not thereby revoed.

NOTICE TO THE !IRST AGENT %he grant of a new power of a(orney to the new agent must be made nown to the rst agent in order to revoe the power granted to the la(er. therwise, it must be considered that the rst agent acted under a valid power of a(orney which had not been legally revoed.


E-CLUSIE AGENCY In cases where the agency is for compensaon, and the compensaon depends upon the success of the transacon entrusted to the agent, it is usual to spulate that the agency shall be exclusive. %hus, the principal is deprived of the right to appoint a new agent for the same transacon whether #ointly with the exclusive agent or by way of revocaon of his powers. %his spulaon is valid provided that it is limited to the transacon or with respect to me1 otherwise, it will be contrary to the revocability of the agency.

A/t. F. The agen#& i0 /e(oMed i' the 4/in#i4a% di/e#t%& 5anage0 the 6$0ine00 ent/$0ted to the agent, dea%ing di/e#t%& )ith thi/d 4e/0on0. 9n; NOTE 8irect management of the business by the & himself1 If the purpose is to avoid payment of his agentGs commission, the implied revocaon is deemed made in bad faith, and cannot be sanconed without the commission which is due to the ".

DIRECT INTERENTION *Y PRINCIPAL %he direct intervenon by the principal will revoe the agency only when such intervenon is incompable with the agency. "ccording to )ec. %olenno, the rule under "rgenne -ode applies to our #urisdicon even when there is incompability the agency sll subsists if the principal expressly manifests that he has no intenon of revoing the agency. %he express intenon must prevail over that which is merely presumed by law.

$hen the agency is created for the mutual interest of both the & and the ".

Agen#& #o$4%ed )ith inte/e0t NOTE "n agency coupled with interest cannot be terminated by the sole will of the & although it is so revocable a
CONDITION IN *ILATERAL CONTRACT E8a54%e "yel buys a piece of land from ebeng, with part of the price on credit, but spulang that he appoints ebeng as agent, to collect a certain amoun t from -H and to apply the same to the unpaid price. In this case, " cannot revoe the agency of .

"EANS O! !UL!ILL"ENT If, in a contract of loan with a mortgage or pledg e, the -: is appointed as an agent to sell the property given as security or to collect the fruits therefrom, the agency is irrevocable.

OTHER CASES O! IRREOCA*ILITY $hen there is an express spulaon to that eCect1 and $hen the agency is for the benet of the agent.

A/t. F:. +hen t)o o/ 5o/e 4/in#i4a%0 ha(e g/anted a 4o)e/ o' ao/ne& 'o/ a #o55on t/an0a#1on, an& one o' the5 5a& /e(oMe the 0a5e )itho$t the #on0ent o' the othe/0. 9n;

S14$%a1on o' i//e(o#a6i%it&

A/t. F3. A gene/a% 4o)e/ o' ao/ne& i0 /e(oMed 6& a 04e#ia% one g/anted to anothe/ agent, a0 /ega/d0 the 04e#ia% 5ae/ in(o%(ed in the %ae/. 9n;

Irrevocable agency is not perpetual. It must be limited to a parcular transacon or to a determinate period because public order is against indenite or irrevocable obligaons.

NOTE " specic power naturally prevails over the general power. SU*SE
A/t. F2. An agen#& #annot 6e /e(oMed i' a 6i%ate/a% #ont/a#t de4end0 $4on it, o/ i' it i0 the 5ean0 o' '$%7%%ing an o6%iga1on a%/ead& #ont/ a#ted, o/ i' a 4a/tne/ i0 a44ointed 5anage/ o' a 4a/tne/0hi4 in the #ont/a#t o' 4a/tne/0hi4 and hi0 /e5o(a% '/o5 the 5anage5ent i0 $n?$017a6%e. 9n; G.R %he & may revoe an agency at will. -PN $hen the agency is created not only for the interest of the & but also for the interest of third person1

E!!ECT O! IRREOCA*LE AGENCY Irrevocability of agency does not merely insure an indemnity to the agent or third persons pre#udiced by the revocaon1 except when otherwise spulated, it extends the agency even against the will of the principal in the sense that the acts of the agent will bind the principal notwithstanding the unmely revocaon.

A/t. F. The agent 5a& )ithd/a) '/o5 the agen#& 6& gi(ing d$e no1#e to the 4/in#i4a%. I' the %ae/ 0ho$%d 0$e/ an& da5age 6& /ea0on o' the )ithd/a)a%, the agent 5$0t inde5ni'& hi5 the/e'o/, $n%e00 the agent 0ho$%d 6a0e hi0 )ithd/a)a% $4on the i54o00i6i%it& o' #on1n$ing the 4e/'o/5an#e o' the agen#& )itho$t g/a(e det/i5ent to hi50e%'. 923a; NOTE %he " may withdraw from the agency at any me. %his is based on constuonal prohibion against involuntary servitude. If the same is )itho$t ?$0t #a$0e=the " has the duty to give noce to the & and if the withdrawal is without #ust cause, to indemnify the & should the la(er suCer damage by reason of such withdrawal.


If the same is )ith ?$0t #a$0e = as whe n it is based on the impossibility of connuing with the agency without grave detriment to himself, or is due to a fortuitous event, the " cannot be held liable.

NOTE &resupposes that the " acted without nowledge of the death of the principal or any other cause which exnguishes the agency. %he law re9uires good faith not only as to third persons but also the agent.

+HAT CONSTITUTE +ITHDRA+AL GOOD !AITH O! A THIRD PERSON $hen an agent informs his principal that for reasons of health he is about to depart from the place where he is exercising his agency, abandons his property, turns it over to third party, renders his accounts, and ass his principal to execute a power of a(orney to third party, it is shown that he renounced his agency but must turn over any balance of money to the principal.

>iling of complaint by anresulng agent against principal for of a balance in his favor from his a li9uidaon of the the collecon agency accounts between them, and his rendering of a nal account of his operaons are e9uivalent to an express renunciaon of the agency and terminate the #uridical relaon between them.

+AIER O! RIGHT TO +ITHDRA+ "gent may renounce his right to withdraw from the agency but even in such case, the rela onship may be terminated in case of an impossibility of connuing the agency without serious in#ury to himself.

rd

%his arcle extends to 5 persons contracng in F> with the agent, even if the agent has nowledge of the cause of revocaon. $here the revocaon of power is unnown to a third person, there being a basis for condence previously created by the &rincipal and on which the third person can rely, it is proper to impute the ris to the principal. F> of a third person is sucient basis in itself for his protecon.

DEATH O! PRINCIPAL @aw does not impose a duty on the heirs of the principal to nofy the agent of the death of the principal1 but if the agent dies, his heirs must nofy the principal thereof.

A/t. F . I' the agent die0, hi0 hei/0 5$0t no1'& the 4/in#i4a% the/eo', and in the 5ean15e ado4t 0$#h 5ea0$/e0 a0 the #i/#$50tan#e0 5a& de5and in the inte/e0t o' the %ae/. 92F; +HEN NOTICE IS I"POSSI*LE

A/t. FF. The agent, e(en i' he 0ho$%d )ithd/a) '/o5 the agen#& 'o/ a (a%id /ea0on, 5$0t #on1n$e to a#t $n1% the 4/in#i4a% ha0 had /ea0ona6%e o44o/t$nit& to taMe the ne#e00a/& 0te40 to 5eet the 0it$a1on. 922a; A/t. F>. The agen#& 0ha%% /e5ain in '$%% 'o/#e and ee#t e(en ae/ the death o' the 4/in#i4a%, i' it ha0 6een #on01t$ted in the #o55on inte/e0t o' the %ae/ and o' the agent, o/ in the inte/e0t o' a thi/d 4e/0on )ho ha0 a##e4ted the 014$%a1on in hi0 'a(o/. 9n;

$hen the heirs of the agent cannot give noce re9uired by the arcle because the whereabouts of the principal is unnown, they should consign the things ob#ect of the agency to the court. %he law imposes upon the heirs of the deceased " not only the obligaon to nofy the & to enable the la(er reasonable opportunity to tae such steps as may be necessary to meet the situaon but also to adopt such measures as the circumstance may demand for the interest of the &.

G.R "gency is terminated by the death of the &. RE!ERENCES

-PN If the agency has been constuted in the common interest of the & and the ". If it has been constuted in the interest of third persons.

CO""ON INTEREST %his is illustrated by a case where a 8: has authori+ed his -: to sell certain properes of the 8: upon non=payment of the debt. %he power of sale given in a mortgage has been held to be a power coupled with interest which survives the death of the grantor.

*ENE!IT O! THIRD PERSON %his is illustrated by a case where a 8: in selling his land, authori+es the buyer to deliver part of the purchase price to his -:.

A/t. F . An&thing done 6& the agent, )itho$t Mno)%edge o' the death o' the 4/in#i4a% o/ o' an& othe/ #a$0e )hi#h e81ng$i0he0 the agen#&, i0 (a%id and 0ha%% 6e '$%%& ee#1(e )ith /e04e#t to thi/d 4e/0on0 )ho 5a& ha(e #ont/a#ted )ith hi5 in good 'aith. 92;

&I*;8", ;:*;)% @., Partnership, genc and r'sts, -entral oo &ublishing, -o., Inc., 200O %@;*%I*, ":%3: M., Co##entaries and 'rispr'dence on the Ciil Code o the Philippines , Aol. A., -entral oo &ublishing, -o., Inc.

!KK!


TITLE B TRUSTS

TRUST (. STIPULATION POUR AUTRUI

CHAPTER  Gene/a% P/o(i0ion0 A/1#%e >. A 4e/0on )ho e0ta6%i0he0 a t/$0t i0 #a%%ed the t/$0to/ one in )ho5 #on7den#e i0 /e4o0ed a0 /ega/d0 4/o4e/t& 'o/ the 6ene7t o' anothe/ 4e/0on i0 Mno)n a0 the t/$0tee and the 4e/0on 'o/ )ho0e 6ene7t the t/$0t ha0 6een #/eated i0 /e'e//ed to a0 the 6ene7#ia/&. CONCEPT O! TRUST 9!IDEICO""ISSO; It is a duciary relaonship created by agreement or by law where the trustor of the property has the e9uitable tle while the legal tle is vested in another /trustee. %he trustee holds the property for the benet of another /beneciary who could be the trustor himself or a third person.

TRUST It can arise either by virtue of a contract or b y a legal provision

It can arise only by virtue of a contract and never by o peraon of law As to object %he ob#ect of a trust is always a %he ob#ect of a spulaon pour specic property, whether real autrui could either be a sp ecic or personal, including an property or other things undivided interest therein as in co=ownership or choses in acon As to form It is either express or implied. It It is always express and must be rd connues to exist unless accepted by the 5 person repudiated beforethegrantspulatedinhis favor is mutually revoed by the pares (Pineda, 2006)

%rust is a duciary relaonship involving a property whereby the duciary holds it for the benet of another (Pineda, 2006).

TRUST (. TRUST RECEIPT

TRUST, de7nedIn its technical sense, a trust is dened as the right, enforceable solely in e9uity, to be the benecial en#oyment of property, the legal tle to which is vested in another, but the word trustJ is fre9uently employed to indicate dues, relaons, and responsibilies which are not strictly technical trusts (Pineda, 2006). It is a legal relaonship between one person having an e9uitable ownership in property and another person owning the legal tle to suhc property, the e9uitable ownership of the former, entling him to the performance of certain dues and the exercise of certain powers by the la(er (Pineda, 2006).

STIPULATIONPOURAUTRUI As to srcin

TRUST

TRUSTRECEIPT

%he right to th e benecial en#oyment of a property but the lehal tle to which is vested in another. It is a legal relaonship which is duciary in nature whereby a person called tr'stee is holding the propeprty for the benet of another called the %enefciar

It involves a security transacon intended to aid in nancing importers and retail dealers who do not have sucient funds or resources to nance the importaon or purchase of merchandise, and who may not be able to a9cuire credit except through uli+aon, as collateral, of the merchandise imported or

CHARACTERISTICS O! TRUST It is a relaonship It us a relaonship of duciary character It is a relaonship with respect to property, not one involving merely personal dues It involves the existence of e9uitable dues inposed upon the holder of the tle to the property to deal with it for the benet of another It arises as a result of manifestaon of intenon to create the relaonship (Pineda, 2006)

PARTIES IN A TRUST r'stor who establishes the trust r'stee /duciary, the one in whom the condence is reposed as regards the property for the benet of another person 7enefciar /cestui 9ue trust is the person for whose benet the trust has been created (Pineda, 2006)

NOTE %he cestui 9ue trust need not be named at the me the trust

is created. It is enough that the cestui 9ue trust is suciently certain or idenable (Pineda, 2006).

purchased (Pineda, 2006)

A/1#%e . T/$0t0 a/e eithe/ e84/e00 o/ i54%ied. E84/e00 t/$0t0 a/e #/eated 6& the inten1on o' the t/$0to/ o/ o' the 4a/1e0. I54%ied t/$0t0 #o5e into 6eing 6& o4e/a1on o' %a). KINDS O! TRUST AS TO "ANNER O! CREATION E-PRESSTRUST

I"PLIEDTRUST

As to &reaon ne created by the express ne which is not created agreement of the pares, or by expressly by the pares or by the intenon of the trustor the trustor, but by operaon of law, there being a law creang it As to manner of creaon -reated by the direct and the It is merely deducible from the posive acts of the pares, by nature of the transacon some wring, deed or by words, either expressly or inpliedly, evincing an intenon to create a

trust

As to proof needed when immo'able or i nterest therein is in'ol'ed

Imprescripble

&rescribesa

possession of the trustee is not adverse

KINDS O! I"PLIED TRUSTS RESULTINGTRUST

CONSTRUCTIETRUST

If there is no substute, and the trustor did not provide that the trust will be rendered ineCecve in case of the death, resignaon, removal or refusal of the designated trustee to assume the respobsibility, the court will appoint a new trustee (Pineda, 2006).

PRE!ERENCE IN THE DESIGNATION O! TRUSTEE *Y THE COURT

" resulng trust is a species of " cons trucve tru st is one implied trust that is presumed created not by an y word or always to have been phrase, either expressly or contemplated by the pares, the impliedly, evincing a direct intenon as to which can be intenon to create a trust, but found in the nature of their one which arises in order to transacon although not sasfy the demands of #usce. It expressed in a d eed o r does not come about by

etween the mother and the uncle, the former is preferred to the trustee of the proceeds of the insurance policy in the absence of any showing that the former is incompetent (Pineda, 2006).

instrument ofis based conveyance. " the agreement intenon resulng trust on the main by or operaon ofbut law,in e9uitable doctrine that it is the construed against one who, by more valuable consideraon fraud, duress or abuse of than the legal tle that condence, obtains or holds the the e9uitable legal right to property which he determines interest in property. ought not, in e9uity and good conscience, to hold (Pineda, 2006).

NO ACCEPTANCE, NO TRUST CREATED It is essenal that the

A/1#%e . The 4/in#i4%e0 o' the gene/a% %a) o' t/$0t0, in0o'a/ a0 the& a/e not in #oni#t )ith thi0 Code, the Code o' Co55e/#e, the R$%e0 o' Co$/t and 04e#ia% %a)0 a/e he/e6& ado4ted.

CHAPTER  E84/e00 T/$0t0 A/1#%e . No e84/e00 t/$0t0 #on#e/ning an i55o(a6%e o/ an& inte/e0t the/ein 5a& 6e 4/o(ed 6& 4a/o% e(iden#e. E-PRESS TRUST ;xpress trusts are those which are created by the direct and posive acts of the pares, by some wring or deed, or will, or by words evincing an intenon to create a trust.

PROO! NECESSARY TO ESTA*LISH AN E-PRESS TRUST +HEN PROPERTY IS I""OA*LE AND "OA*LE %here must be a statement or menon of a wri(en instrument to evidence the trust. *o express trust over a realty can be proved by parol evidence (Pineda, 2006).

A/1#%e . No 4a/1#$%a/ )o/d0 a/e /e$i/ed 'o/ the #/ea1on o' an e84/e00 t/$0t, it 6eing 0$J#ient that a t/$0t i0 #%ea/%& intended. CREATION O! AN E-PRESS TRUST $hat is important is that there must be a clear intent to establish it. %here must direct and posive acts of the pares, by some wring or deed, or will, or by words evincing an intenon to create a trust (Pineda, 2006).

A/1#%e  No t/$0t 0ha% % 'ai%the 6e#a$0 e the t/$0tea44ea/ e a44oininte d de#%ine0 the:.de0igna1on, $n%e00 #ont/a/& 0ho$%d the in0t/$5ent #on01t$1ng the t/$0t. NOTE If the designated trustee, upon whom condence is reposed, has declined the appointment as such, the designated substute= trustee, if there is any, and who accepts the appointment will tae over.

A/1#%e 3. A##e4tan#e 6& the 6ene7#ia/& i0 ne#e00a/&. Ne(e/the%e00, i' the t/$0t i54o0e0 no one/o$0 #ondi1on $4on the 6ene7#ia/&, hi0 a##e4tan#e 0ha%% 6e 4/e0$5ed, i' the/e i0 no 4/oo' to the #ont/a/&.

beneciary accepts the trust. 'owever, the acceptance in trust does not have follow the stringent re9uisites of acceptance of a donaon Tas this is not so provided. ;ven if the real property is involved, the acceptance need not be in a public instrument (Pineda, 2006).

-PN %here is a presumpon of acceptance if the trust is purely gratuitous, that is, it imposes no condion whatsoever upon the beneciary.

E-TINGUISH"ENT O! AN E-PRESS TRUST "ccomplishment of the aims of the trust ;xpiraon of the agreed term Mutual agreement of all the pares 'appening of the resolutory condion if one had been imposed %otal loss of the ob#ect of trust "nnulment or rescissiion of the trust 8ecision of the court declaring it as terminated Merger of the rights of the trustor and the trustee, as when the trustor waived his benecia rights in favor of the trustee, or vice=versa &rescripon which arises when there is an express repudiaon of the trust, and connuous possession which is public, adverse and peaceful in the concept of an owner for the re9uired period

AC
-PN &rovided the C. re9uisites are present !. %he trustee has performed une9uivocal acts if repudiaon amounng to an ouster of the cestui 9ue trust 2. )uch posive acts of repudiaon have been made nown to the

I"PLIED TRUST )ame rule when it comes to the operaon of prescripon as a mode of ac9uision


ceatui 9ue trust %he evidence thereon is clear and conclusive

*ASIS O! I"PLIED TRUST It is based on e9uity. It applies to cases where in#usce would result if the legal tle of the trustees will prevail over the e9uitable right of the beneciary (Pineda, 2006).

%he adverse possessio n of the trustee together with other elements of prescripon, must be at least !0 years in the concept of an owner. It begins to run from

KINDS O! I"PLIED TRUSTS RESULTING TRUSTS

the me the beneciary, or trustor gained nowledge of the repudiaon by the trustee (Pineda, 2006).

ACTS +HICH +ERE HELD INSU!!ICIENT TO CONSTITUTE REPUDIATION " mere silent possession without acts amounng to ouster Mere reciept of rents and prots by the trustee and the building 8eclaraon of the property in the trusteeGs name for taxaon purposes does not constute acts of repudiaon

PRESCRIPTION O! ACTION !OR RECOERY O! PROPERTY HELD IN TRUST E-PRESSTRUST GR "n acon to recover

I"PLIEDTRUST a. Re0$%1ng t/$0t

property held in trust does not GR %he acon does not prescribe. 'owever, if there is repudiaon and no acon had prescribe been led within !0 years from the ne the beneciary had -PN %here is repudiaon been inforned of the repudiaon, the acon for 6. Con0t/$#1(e t/$0t recovery will prescribe It prescribes if no acon is led within !0 years from the registraon of the property in the name of the trustee.

CONSTRUCTIE TRUSTS

:esulng trusts are based on the -onstrucve trusts are created e9uitable doctrine that valuable by the construcon of e9uity in consideraon and not legal tle order to sasfy the demands of determines the e9uitable tle or #usce and prevent un#ust interest and are presumed enrichment. %hey arise contrary always to have been to intenon against one who, by contemplated by the pares. fraud, duress or abuse of %hey arise from the nature or condence, obtains or holds the circumstances of the legal right to property which he consideraon involved in a ought not, in e9uity and good transacon whereby one person conscience, to hold. thereby becomes invested with legal tle but is obliged in e9uity to hold his legal tle for the benet of another.

< "a& an i54%ied t/$0t 6e #on(e/ted into an e84/e00 t/$0t= Ees, if the implied trustee recogni+es the right of the owner over the property (Pineda, 2006).

PROO! RE
NOTE %he enumerated causes of implied trusts are not excluisve (Pineda, 2006).

NOTE %he !0 year prescripve period applies only when the cestui 9ue trust is not in possesion of the property. therwise, there is no prescripon (Pineda, 2006).

CHAPTER  I54%ied T/$0t0 A/1#%e 2. The en$5e/a1on o' the 'o%%o)ing #a0e0 o' i54%ied t/$0t doe0 not e8#%$de othe/0 e0ta6%i0hed 6& the gene/a% %a) o' t/$0t, 6$t the %i5ita1on %aid do)n in a/1#%e  0ha%% 6e a44%i#a6%e. I"PLIED TRUST Implied trusts are those which, without being expressed, are deducible from the nature of the transacon as ma(ers of intent or, independently, of the parcular intenon of the pares, as being superinduced on the transacon by operaon of law basically by reason of e9uity (Pineda, 2006).

A/1#%e . The/e i0 an i54%ied t/$0t )hen 4/o4e/t& i0 0o%d, and the %ega% e0tate i0 g/anted to one 4a/t& 6$t the 4/i#e i0 4aid 6& anothe/ 'o/ the 4$/4o0e o' ha(ing the 6ene7#ia% inte/e0t o' the 4/o4e/t&. The 'o/5 e/ i0 the t/$0 tee, )hi%e the %ae / i0 the 6ene7#ia/&. Ho)e(e/, i' the 4e/0on to )ho5 the 1t%e i0 #on(e&ed i0 a #hi%d, %egi15ate o/ i%%egi15ate, o' the one 4a&ing the 4/i#e o' the 0a%e, no t/$0t i0 i54%ied 6& %a), it 6eing di04$ta6%& 4/e0$5ed that the/e i0 a gi in 'a(o/ o' the #hi%d. CASE +HERE PURCHASER PAID !OR THE PRICE *UT THE LEGAL TITLE OR ESTATE IS GRANTED TO ANOTHER %he "rcle refers to an implied resulng trust as there is a clear intent to create a trust but short of the ordinary instrument to reNect it. %here is a principle recogni+ed in law that a person who pays for something generally does so for his own ineterest and benet (Pineda, 2006).

-PN If the person who receives the legal tle is a legimate or illegimate child of the one paying the price , there is no trust implied by law. instead, there is a presumpon that there is gi<


given in favor of the child. %he reason is that the donaon is void for being an indirect donaon (Pineda, 2006).

that such posive acts or repudiaon have been made nown to the cestui 9ue trust or other co=owners and

NOTE ;ven if there is already a legal presumpon that there is a gi<

that the evidence thereon must be clear and convincing (Pineda, 2006)

granted to the child, there is sll a need to follow the formalies of a donaon re9uired by law (Pineda, 2006).

-PN0 A/1#%e . The/e i0 an i54%ied t/$0t )hen 4/o4e/t& i0 0o%d, and the %ega% e0tate i0 g/anted to one 4a/t& 6$t the 4/i#e i0 4aid 6& anothe/ 'o/ the 4$/4o0e o' ha(ing the 6ene7#ia% inte/e 0t o' the 4/o4e/ t&. The 'o/5e / i0 the t/$0tee, )hi%e the %ae/ i0 the 6ene7#ia/&. Ho)e(e/, i' the 4e/0on to )ho5 the 1t%e i0 #on(e&ed i0 a #hi%d, %egi15ate o/ i%%egi15ate, o' the one 4a&ing the 4/i#e o' the 0a%e, no t/$0t i0 i54%ied 6& %a), it 6eing di04$ta6%& 4/e0$5ed that the/e i0 a gi in 'a(o/ o' the #hi%d. $here the actual contrary intenon is proved (Pineda, 2006).

PURCHASE "ONEY RESULTING TRUST %he trust created under the st

! sentence of "rt. !??4 i s referred to as a purchase money resulng trust.

A/1#%e :>. I' the 4/i#e o' a 0a%e o' 4/o4e/t& i0 %oaned o/ 4aid 6& one 4e/0on 'o/ the 6ene7t o' anothe/ and the #on(e&an#e i0 5ade to the %ende/ o/ 4a&o/ to 0e#$/e the 4a&5ent o' the de6t, a t/$0t a/i0e0 6& o4e/a1on o' %a) in 'a(o/ o' the 4e/0on to )ho5 the 5one& i0 %oaned o/ 'o/ )ho5 it0 i0 4aid. The %ae/ 5a& /edee5 the 4/o4e/t& and #o54e% a #on(e&an#e the/eo' to hi5. A/1#%e :. +hen %and 4a00e0 6& 0$##e00ion to an& 4e/0on and he #a$0e0 the %ega% 1t%e to 6e 4$t in the na5e o' anothe/, a t/$0t i0 e0ta6%i0hed 6& i54%i#a1on o' %a) 'o/ the 6ene7t o' the t/$e o)ne/. NOTE %he arcle provides for a resulng trust there being a clear intenon to establish a trust. %he law refers to inherited land. %here is no good reason why the princ iple cannot apply to personal properes (Pineda, 2006).

A/1#%e :. I' t)o o/ 5o/e 4e/0on0 ag/ee to 4$/#ha0e 4/o4e/t& and 6& #o55on #on0ent the %ega% 1t%e i0 taMen in the na5e o' one o' the5 'o/ the 6ene7t o' a%%, a t/$0t i0 #/eated 6& 'o/#e o' %a) in 'a(o/ o' the othe/0 in 4/o4o/1on to the inte/e0t o' ea#h.

Re8'isites$

NOTE " resulng trust arises in the instant situaon because of the "n actual payment of money, property or services or an e9uivalent, consulng valuable consideraon )uch consideraon must be furnished by the alleged beneciary of a resulng trust (Pineda, 2006).

NOTE *o implied trust is created when purchase is made in violaon of law (Pineda, 2006).

A/1#%e F. The/e i0 a%0o an i54%ied t/$0t )hen a dona1on i0 5ade to a 4e/0on 6$t it a44ea/0 that a%tho$gh the %ega% e0tate i0 t/an05ied to the donee, he ne(e/the%e00 i0 eithe/ to ha(e no 6ene7#ia% inte/e0t o/ on%& a 4a/t the/eo'. COBO+NERSHIP IS A !OR" O! A TRUST" co=ownership is a form of a trust, with each owner being a trustee for each other and possession of a co=owner shall not be regarded as adverse to other co=owners but in fact is benecial to them. Mere actual possession by one will not give rise to the inference that the possession was adverse because a co=owner is, a
intenon to create one. %he purchasers are co=owners of the property. In the absence of any specic agreement to the contrary, their shares are presumed e9ual (Pineda, 2006).

A/1#%e :. +hen 4/o4e/t& i0 #on(e&ed to a 4e/0on in /e%ian#e $4on hi0 de#%a/ed inten1on to ho%d it 'o/, o/ t/an0'e/ it to anothe/ o/ the g/anto/, the/e i0 an i54%ied t/$0t in 'a(o/ o' the 4e/0on )ho0e 6ene7t i0 #onte54%ated. NOTE In this situaon, an implied resulng trust is created because of the declar ed intenon of the grantee or to another person (Pineda, 2006).

A/1#%e :. I' an a60o%$te #on(e&an#e o' 4/o4e/t& i0 5ade in o/de/ to 0e#$/e the 4e/'o/5an#e o' an o6%iga1on o' the g/anto/ to)a/d the g/antee, a t/$0t 6& (i/t$e o' %a) i0 e0ta6%i0hed. I' the '$%7%%5ent o' the o6%iga1on i0 oe/ed 6& the g/anto/ )hen it 6e#o5e0 d$e, he 5a& de5and the /e#on(e&an#e o' the 4/o4e/t& to hi5. NOTE "n implied resulng trust is created in this situaon. %here is

NOTE " mere silent possession by a co=owner, his receipt of rents, fruits or prots from the property, the erecon of buildings and fences and the planng of trees thereon and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and conv incing evidence that he exercised acts of possession which une9uivocably constuted an ouster or deprivaon of the rights of the other co=owners. %he elements in order that a co=ownerGs possession may be deemed adverse to the cestui 9ue trust or the co=owner are that he has performed une9uivocal acts of repudiaon amounng to ouster cestui 9ue trust or other co=owners

a clear intenon to create a trust, although, it was not reNected in the deed of conveyance. %his is lie a sale with the right to repurchase, except that the right is not stated in the document. %he seller is the beneicary and the buyer, the trustee. $hen the seller oCers to pay his obligaon when due, the buyer must reconvey the property (Pineda, 2006).

A/1#%e ::. +hen an& t/$0tee, g$a/dian o/ othe/ 4e/0on ho%ding a 7d$#ia/& /e%a1on0hi4 $0e0 t/$0t '$nd0 'o/ the 4$/#ha0e o' 4/o4e/t& and #a$0e0 the #on(e&an#e to 6e 5ade to hi5 o/ to a thi/d 4e/0on, a t/$0t i0 e0ta6%i0hed 6& o4e/a1on o' %a) in 'a(o/ o' the 4e/0on to )ho5 the '$nd0 6e%ong. CASE +HERE !IDUCIARY USED TRUST !UNDS IN PURCHASING PROPERTY IN HIS NA"E"n impled construcve trust is created in


this situtaon to prevent un#ust enrichment on the part of the duciary (Pineda, 2006).

PERSONS COERED *Y THE ARTICLE trustee guardian agent partner condenal employee persons holding a duciary posion (Pineda, 2006) aonale behind the arcle*%o prevent the duciart from temptaon of puRng his own self=interest above that of his principal whom he is supposed to protect. >urther, the law is intended to eep and encourage the duciary to remain honest, and loyal to his principal (Pineda, 2006).

A/1#%e :3. I' 4/o4e/t& i0 a#$i/ed th/o$gh 5i0taMe o/ '/a$d, the 4e/0on o6taining it i0, 6& 'o/#e o' %a), #on0ide/ed a t/$0tee o' an i54%ied t/$0t 'o/ the 6ene7t o' the 4e/0on '/o5 )ho5 the 4/o4e/t& #o5e0. NOTE %his trust is created to prevent un#ust enrichment on the part of the ac9uirer to the pre#udice of the true owner. %he mistae must be commi(ed by a third person. If made by a party, there is no trust (Pineda, 2006).

NOTE %here can be an implied trust in the absence of mistae or fraud (Pineda, 2006). %he arcle does not cover case of violaon of a condion in donaon (Pineda, 2006).

A/1#%e :2. An i54%ied t/$0t 5a& 6e 4/o(ed 6& o/a% e(iden#e. NOTE "s a rule, the burden of proving the existence of a trust is on the party asserng its existence, and such proof must be clear and sasfactorily show the existence of the trust and its elements. $hile implied trusts may be proved by oral evidence, the evidence must be trustworthy and received by the courts with extreme cauon, and should not be made to rest on loose, e9uivocal or indenite declaraons. %rustworthy evidence is re9uired because oral evidence can easily be fabricated.

RE!ERENCES &I*;8", ;:*;)% @., Partnership, genc and r'sts, -entral oo &ublishing, -o., Inc., 200O %@;*%I*, ":%3: M., Co##entaries and 'rispr'dence on the Ciil Code o the Philippines , Aol. A., -entral oo &ublishing, -o., Inc.

!KK!


TITLE III LEASE

DEPOSIT

LEASE If the price is to be paid whether or not the ob#ects are actually ept in the premises or safe, there is a lease because deposit is a real contract which is perfetced only by delivery of the ob#ect. $hen the owner of the place or safe ha no obligaon to tae care of the things ept therein, the contract is liewise lease. 'ence, the locing up of an

CHAPTER  Gene/a% P/o(i0ion0 ARTICLE 3. The #ont/a#t o' %ea0e 5a& 6e o' thing0, o/ o' )o/M and 0e/(i#e. 9:; Di01ng$i0h 6et)een 0a%e and %ea0e.

PURCHASEANDSALE

LEASE

%here is transmission of ownershio of the thing sold

automobile garage,amount upon paymnet of ina a xed daily, without special spulaons, or the use of a safety deposit box in a ban, has been held to be a lease.

nly the use or en#oyment of of the thing is transferred and only for a determinate period

%ransmission is permanent unless sub#ect to a resolutory condion

< Di01ng$i0h %ea0e '/o5 0i54%e %oan. In case of doubt, the intenon of the pares should be the guide in determining the contract entered into.

RENT

-ontracts in the form of leases either with opons to the buyer to purchase for a small consideraon at the end of the term, provided the so=called rent has been duly paid, or with spulaon that if the rent throughout the term is paid, tle shall thereupon vest upon the lessee, are lessees in name only. %he rents must be regarded as paymnet of the price in instllments since the due payment of the agrred amount results in the transfer if lte to the lessee.

%he owner of the property does not lo se i ts o wnership. ' e simply loses his control oveer the property rented during the period of the contract. %he relaonship between the pares is that of landlord and tenant.

Di01ng$i0hed %ea0e '/o5 $0$'/$#t.

ARTICLE 3. In the %ea0e o' thing0, one o' the 4a/1e0 6ind0

USU!RUCT "lways areal right %o con stute a usu fruct, one must be the owner of th e thing wner allows the usufructuary to use and en#oy the property Includes all possible uses and manner o f en #oyment of t he property May be for an indenite peruod ofme

LEASE " real right by excepon wnership is not re9uired in order to give an ob#ect in l ease @essor places and maintains the lessee in the paymnet of the thing May be limited to parcular uses by the contract

hi50e%' to gi(eand to 'o/ anothe/ the )hi#h en?o&5ent o/ de7nite $0e o' a o/ thing 'o/ a 4/i#e #e/tain, a 4e/iod 5a& 6e inde7nite. Ho)e(e/, no %ea0e 'o/ 5o/e than ninet&Bnine &ea/0 0ha%% 6e (a%id. 9:a; LEASE O! THINGS %he sub#ect ma(er of lease must be within the commerce of men. therwise, it is void.

NOTE %he lease of a building includes the lease of the lot.

0 ! 2 5

LEASE

-onsist in the cession of the use of the thing to another ;ssenallygratuitous onerous

Di01ng$i0h %ea0e '/o5 de4o0it.

%he relaon between the pares is th at of th e obl igor an d obligee.

+hat a/e the 04e#ia% #ha/a#te/i01#0 o' a %ea0e o' thing0= Must be for a determionte period1 otherwise, the court must x seuch period in an acon brought for such purpose.

Di01ng$i0h %ea0e '/o5 #o55odat$5.

CO""ODATU"

SI"PLLEOAAN %he thing loaned becomes the property of the obligor.

?

Its essenal purpose is to transmit the use or en#oymnet of a thing1 It is consensual1 It is onerous1 Its price is xed in relaon to the period of use or en#oymnent1 and It is temporary.

E-TENT O! EN@OY"ENT It is noy indispensable that the use or en#oyment granted to the lessee be total or exclusive1 within the freedom of contract authori+ed by law, the pares may establish the terms they deemed


convenient, sub#ecng the manner of use or en#oyment to limitaons and condions.

!OR" O! RENT 3nlie in sale where it is re9uired that the price must be in money or its e9uivalent, the price in lease may be in money or in fruits or in some other useful things. It may even be in some other prestaon. $hen it consists in fruits or products, it may be a determinate or xed 9uanty or an ali9uot part or percentage of the produce of the tenement. It may be variable at diCerent periods within the duraon of the lease.

" lease of things during the lifeme of one of the pares is considered valid. $hen the lease is for such me as the lessor or lessee may please, it is considered as one for lofe, ending upon the death of the party who could have terminated the contract.

*EYOND FF YEARS ur -ode, allow s leases of property for more than KK years. "ccording to )en. %olenno, a lease made for more than KK years shall be considered as terminated a
LEASE O! "OA*LES $hen thefrom price ofcontract a certain fruits obtaining theconsists thing, the is topercentage be regardedofasthe a tenan#& #ont/a#t which is generally regarded as an important variaon of the contract of lease. ut under our law, land tenancy on shares is regarded more as a partnership than as a lease contract.

A5o$nt o' /ent %he price of lease must be serious or substanal. It should not be so insignicant as to indicate an intenon of liberality on the part of the owner1 otherwise, the contract would not be a lease but a commodatum. %he price must be determined by the pares or at least suscepble fo determinaon under the contract. If the pares are not able to x the price, the contract is absolutely AI8.

INCREASES O! RENT $here there is no statute xing a ceiling on rentals, the landowner has a right to demand an increase thereof upon the expiraon of the contract.

+hat a/e the 'a#to/0 in dete/5ining /ea0ona6%ene00 o' /enta% in#/ea0e0 o' 6$i%ding0= A @ocaon of the apartment incluing the neighborhood1 %he area per Noor or storey1 *umber of rooms, bedrooms, itchen, closet, facilites provided therefor1 8escripon of the buildig, its type and construcon as well as the age of the building.

PERIOD O! LEASE %he law excludes perpetual lease. %here must always be a period which may be denite or indenite.

-ode maes no special provisions for the lease of movables. In the absence of special law, the provisions of the *-- are applicable to leases of personal property.

ARTICLE 3. In the %ea0e o' )o/M o/ 0e/(i#e, one o' the 4a/1e0 6ind0 hi50e%' to e8e#$te a 4ie#e o' )o/M o/ to /ende/ to the othe/ 0o5e 0e/(i#e 'o/ a 4/i#e #e/tain, 6$t the /e%a1on o' 4/in#i4a% and agent doe0 not e8i0t 6et)een the5. 9:a; CONTRACT !OR +ORK y such contract, one of the pares binds himself to produce a result of wor or labor and the other party to pay a remuneraon. %he contract of surgeon to mae an operaon, that of an arst to give a concert and that of a contractor to construct a building are contracts for wor.

LEASE O! SERICES y such contract, one of the pares binds himself to render some service that is his own acvity or labor and the other party binds himself to pay some remuneraon. %he party obligated to render service does not lease his person or his power or energy for wor but a free acvity within the limits set forth by by the contract and by good faith.

Di01ng$i0h 6et)een %ea0e and #ont/a#t o' )o/M.

LEASE O! SERICE 9LOCATIO OPERARU";

LEASE O! +ORK 9LOCATIO OPERIS;

%he ob#ect of the contract is the serivce itslef and not the result whoch itproduces e.g contract of carpenter

%he result is the ob#ect to be delivered without considering the labor that produces it. e.g contract of architect to build a house for another

;ven if the result intended is not a(ained, without fault on the part of the pares, th e remuneraon is du e fo r the services remdered. %he direct ob#ect of the contract is the lessorGs labor1 the acts in which such labor consists,

%he ris is upon the promissor so that if the result promised is not accomplished he is not entled to demand the compensaon

$hen the period is indenite, and the thing leased is a rural land, arcle !O42 shall apply. If it is a rural land, arcle !O46 governs. therwise, these 2 arcles should be applied by analogy. In principle, if the thing is fruit=producing, arcle !O42 should govern and if it is not fruit=producing, arcle !O46 should be applied.

%he lessorGs labor although an important factor is not the direct ob#ect of the contract of the


performed for the benet of the contract not is im mediately taen lessee are into taen into consideraon1 consideraon immediately %he ob#ect which the pares consider is not the labor but its result, the complete and nsihed wor @aw does not spea of riss for %he price is sp ulated tai ng the wormen never assumes into consideraon not the labor them1 wormen is paid for the but the mished wor1 the price labor he performs, whatwever is not payable unl the wor is the result of the wor assignes completed and accepted, amd to him, and even should it be the same cammot lawfully be destroyed by accident demanded if the wor is destroyed before it is nished and accepted.

PRO!ESSIONALS

CHAPTER  Lea0e o' R$/a% and U/6an Land0 SECTION  Gene/a% P/o(i0ion0 < Di01ng$i0h 6et)een /$/a% and $/6an tene5ent0. If the principal purpose is for habitaon, it is urban, even if it has gardens or orchards1 and if the princ ipal purpose is the direc t exploitaon of the soil, it is rural even if ut has some structures thereon.

A/1#%eand 33. Thea/e 4e/0on0 di0$a%i7ed to 6$& /e'e//ed to ino'a/1#%e0 F> F, a%0o di0$a%i7ed 6e#o5e %e00ee0 the thing0 5en1oned the/ein. 9n; CAPACITY O! !OREINERS

NOTE %hese are leases of services.

%his may consist of money or some other thing or of xed sum or certain percentage of the product of the wor.

*otwithstanding the contuonal prohibion on foreigners to ac9uire lands in the &hilippines, they can lease real or immovable property in the &hilippines because "rt. !?K! refers only to those persons who, by special relaons they have with the property should not be allowed to purchase.

"lthough no xed amount may have been determiend as the consideraon for the contract of hiring, the contract is nevertheless valid if the amiunt of the implied compensarion can be determined by custom or fre9uent use in the place where the services were rendered.

A/1#%e 32. I' a %ea0e i0 to 6e /e#o/ded in the Regi0t/& o' P/o4e/t&, the 'o%%o)ing 4e/0on0 #annot #on01t$te the 0a5e )itho$t 4/o4e/ a$tho/it& the h$06and )ith /e04e#t to the )i'e0 4a/a4he/na% /ea% e0tate, the 'athe/ o/ g$a/dian a0 to the 4/o4e/t& o' the 5ino/ o/ )a/d, and the 5anage/ )itho$t 04e#ia% 4o)e/. 9:a;

CO"PENSATION

'ence, where there has been xed for the services rendered by a physician to a sic person the la(er is obliged to pay to the former a reasonable and e9uitable compensaon, the amount of which shall be xed by the courts according to the uses and customs of the place and the evidence in the case, with or without the tesmony of experts.

ARTICLE 3:. Con0$5a6%e good0 #annot 6e the 0$6?e#t 5ae/ o'a #ont/a#t o' %ea0e, e8#e4t )hen the& a/e 5e/e%& to 6e e8hi6ited o/ )hen the& a/e a##e00o/& to an ind$0t/ia% e0ta6%i0h5ent. 9::a; LEASE O! CONSU""A*LE GOODS GR -onsumable goods cannot be the sub#ect ma(er of a contract of lease.

-PN0 @ease of consumable property, not for the purpose of consuming it but for purposes of display or adversing such as wine to be placed in a showcase of a store but not to be drun. %his is nown as ad po#pa# et ostentaone#. @ease of consumables which constute accessories in the lease of an industrial establishment such as the coal in a factory.

E!!ECT O! +ANT O! SPECIAL PO+ER 3nder the *--, the husband with respect to the property of his wife, the father and guardian with respect to the property of the child or minor, and an administrator with respect to property under his administraon, cannot lease without special power, if the lease is to be recorded in the :egistry of &roperty. 'ence, a lease executed by said persons is valid, if the lease is not to be recorded in the registry even withiut special power. ut if the lease of real property is to be for a period or more than ! year, par. 4 of "rt. !464 of the new -ode re9uires a special power of a(orney, irrespecve of whether the lease will be recorded or not. It is submi(ed that this re9uirem ent applies to the persons menoned in this arcle.

"ANAGER UNDER THE NE+ CODE

"pplies to a #udicial administrator, an administrator of a deceasedGs property, as well as one of con#ugal property. It also applies to apply to the administrator or manager of property owned in common and to an administrator of patrimonial or private property of the )tate.

A/1#%e 3. E(e/& %ea0e o' /ea% e0tate 5a& 6e /e#o/ded in the Regi0t/& o' P/o4e/t&. Un%e00 a %ea0e i0 /e#o/ded, it 0ha%% not 6e 6inding $4on thi/d 4e/0on0. 9:Fa; LEASE IS A PERSONAL RIGHT @ease is a personal right although its inscripon in the :egistry of &roperty gives it a certain eCect against rd 5 person1 but this does not modif y the natu re of the #uridical relaon because the lease right has a life of its own independent of the regis traon. %he righ ts of the lesse e are not alter ed by its rd registraon1 they are merely guaranteed as against 5 persons.


GR $rit of possession is issuable in foreclosure of mortgage, despite possessesion of a lessee of the premises and the lease has not yet terminated. ;xcepons are where the lease had been registered or prior nowledge of the mortgagee of the existence and duraon of the lease.

GR %he power to sublease -PN $here there is an express prohibion NOTE %he prohibion, to be express, must be stated or declared

E!!ECT O! ACTUAL NOTICE$here the lesseGs contract of lease with the former owner was not recorded on the tle, said contract cannot bind the purchaser. ut where a purchaser of land at the me of the purchase has full nowledge of the fact that the land has been leased to a third person and is informed of the terms of such lease, he is bound to respect said lease, although it is not entered upon the cercate of tle.

posively, in clear and direct language. It cannot be le< to inferences or implicaon. %he term of the sublease, however, cannot exceed that of the lease, and so the sublease terminates upon the terminaon of the lease.

RE"EDY $hen the lesse e subleases the property inspite of a prohibion to do so, he violates the contract, and the lessor can as for rescission and damages, or damages only, unnder "rt. !O7K.

DELIERY O! TITLE %he landowner may be compelled by the court to deliver the cercate of tle to the lessee so that the lease can be recorded therein.

A/1#%e 3F. The %e00ee #annot a00ign the %ea0e )itho$t the #on0ent o' the %e00o/, $n%e00 the/e i0 a 014$%a1on to the #ont/a/&. 9n; ASSIGN"ENT O! LEASE %he assignment of the lease by the lessee would involve the transfer, not only of rights but also of obligaons1 hence, the consent of the lessor is necessary. It constutes novaon by a substuon of the person of one of the pares. %he assignee becomes the lessee of the property by assignment, entled to all the rights of a lessee, and said rights are enforceable only against the owners of the property leased, and not against the assignors of the lease.

TRANS!ER O! RIGHTS " mere transfer of rights of the lessee, and not of the contract itself, would not re9uire the lessorGs consent, unless there is an express spulaon to the contrary.

ASSIGN"ENT O! THE LEASE (. SU*LEASE ASSIGN"ENTO!THELEASE

SU*LEASE

" transfer of a third person of Merely another contract of the rights and obl igaons arising lease, where the src inal lease from the lease contract becomes in turn a lessor In fact, a sale of the lesseeGs ;ven when the lessor consents rights, and when the lessor gives to the suble ase, the srcin al his consent to it, the original lease contract subsists and is lessee i s re leased f rom h is binding on the lessee. obligaons under the contract %he personality of the original %here is a #uxtaposion of 2 lessee disappears and there only leases which are 2 disnct remains the #uridical relaon #uridical relaons a lthough between th e lessor a nd the related to each other assignee, who becomes the new lessee %here is a su ccession of )ublessee does not have any parcular tle to one contract direct acon against the lessor lease

onthecontractwiththelessee, or vice=versa

A/1#%e 3:>. +hen in the #ont/a#t o' %ea0e o' thing0 the/e i0 no e84/e00 4/ohi6i1on, the %e00ee 5a& 0$6%et the thing %ea0ed, in )ho%e o/ in 4a/t, )itho$t 4/e?$di#e to hi0 /e04on0i6i%it& 'o/ the 4e/'o/5an#e o' the #ont/a#t to)a/d the %e00o/. 9::>;

+HEN DOES IOLATION TAKE PLACE*ot upon the execuon of the contract of sublease but when the lessee places the thing at the disposal of the sublessee. %he lessee cannot #usfy the breach of contract by proof that the sublease is solvent and of good standing.

A/1#%e 3: . +itho$t 4/e?$di#e to hi0 o6%iga1on to)a/d the 0$6%e00o/, the 0$6%e00ee i0 6o$nd to the %e00o/ 'o/ a%% a#t0 )hi#h /e'e/ to the $0e and 4/e0e/(a1on o' the thing %ea0ed in the 5anne/ 014$%ated 6et)een the %e00o/ and the %e00ee. 9::; LIA*ILITY O! LESSOR TO SU*LEASE %he lessor is liable to the lessee for such damages as may be caused to the la(er by reason of breach of the cont ract by the lessor, but is not dire ctly liabl e to the sublessee, whose damages are included in whatvever damages the lessee may recover from the lessor, said lease, as sublessor, being the one directly liable to the sublessee.

A/1#%e 3:. The 0$6%e00ee i0 0$60idia/i%& %ia6%e to the %e00o/ 'o/ an& /ent d$e '/o5 the %e00ee. Ho)e(e/, the 0$6%e00ee 0ha%% not 6e /e04on0i6%e 6e&ond the a5o$nt o' /ent d$e '/o5 hi5, in a##o/dan#e )ith the te/50 o' the 0$6%ea0e, at the 15e o' the e8t/aB ?$di#ia% de5and 6& the %e00o/. Pa&5ent0 o' /ent in ad(an#e 6& the 0$6%e00ee 0ha%% 6e dee5ed not to ha(e 6een 5ade, 0o 'a/ a0 the %e00o/0 #%ai5 i0 #on#e/ned, $n%e00 0aid 4a&5ent0 )e/e ee#ted in (i/t$e o' the #$0to5 o' the 4%a#e. 9::a; O+NERS DE"AND ON SU*LESSEE TO PAYIt does not exempt the la(er from his obligaon to pay the sublessor /lessee the rents which he failed to pay the sublessor. %his arcle does not annul the contractual relaon betwee n the lessee and sublessee, but simply helps the owner of the property to collect the rentals of the same.

RATIO !OR 

ND

PAR. It is a precauon to avoid collusion between

the lessee and the sublessee, because with a supposed payment of rents in advance by the sublessee and the insolvency of the lessee, the lessorGs rights would be pre#udiced.

TER"INATION O! SU*LEASE 3nder "rt. !O0O of the said -ode, when the lease ceases , the sublease is also terminated, but when the exnguishment of the


lease is due to non=payment of rents by the lessee, the sublease may maintain the contract by complying with what is incumbent upon the lessee. 3nder "rt. !O06, the terminaon of the lease by confu sion or merger in the rights of lessor and lesee, does not terminate the sublease, because the sublease is an independent contract and not merely an accessory to the srcinal lease.

E@ECT"ENT O! LESSEE" #udgment of evicon against a lessee aCets his sublessees, even if the la(er are not sued in the e#ectment case. %he subessees can only assert such right of possession as could have been granted them by their sublessors, their right of possession depending enrely upon that of the la(er.

A/1#%e 3:. The 4/o(i0ion0 go(e/ning )a//ant&, #ontained in the Tit%e on Sa%e0, 0ha%% 6e a44%i#a6%e to the #ont/a#t o' %ea0e. In the #a0e0 )he/e the /et$/n o' the 4/i#e i0 /e$i/ed, /ed$#1on 0ha%% 6e 5ade in 4/o4o/1on to the 15e d$/ing )hi#h the %e00ee en?o&ed the thing. 9::;

DUTY TO "AKE REPAIRS )ince the lessor is bound to deliver and eep the thing suitable for the use intended, he must remedy all defects which impede or impair such use, whether such defects existed before the delivery or came into existence later. :epairs does not include reconstrucon.

+AIER %he lessee may, expressly or tacitly waive the right to repairs to eep the thing suita ble for the use intended, or to parcular inds of repairs, in which case, the lessor is relieved of his duty to mae such repairs. " spiulaon that the thing shall be delivered to and returned by the lessee in the condion in which it is at the me, is a tacit waiver of repairs.

LIA*ILITY If the lessor, upon formal nocaon by the lessee to mae the necessary repairs undertoo and completed the repairs, the lessee has no right to cancel the lease contract for its unexpired term, in the absence of any provision in the contract to the contrary. It is only when the owner fails to perform his duty a
+ARRANTY O! LESSOR %he warranes implied in contracts of purchase and sale are also implied in contracts of lease. 3nder "rts. !7O! and !7OO, the lessor is liable for the warranty of the thing leased against any hidden defects it may have, even when unnown to said lessor, but this liability for warranty of the thing leased does not amount to an obligaon to indemnify the tenant for damages, which is only to be allowed when there is proof that the lessor acted with fraud amd in bad faith by concealing the defect in the thing leased and in not revealinhg it to the l essee.

SECTION  Right0 and O6%iga1on0 o' the Le00o/ and the Le00ee A/1#%e 3:. The %e00o/ i0 o6%iged To de%i(e/ the thing )hi#h i0 the o6?e#t o' the #ont/a#t in 0$#h a #ondi1on a0 to /ende/ it 7t 'o/ the $0e intended To 5aMe on the 0a5e d$/ing the %ea0e a%% the ne#e00a/& /e4ai/0 in o/de/ to Mee4 it 0$ita6%e 'o/ the $0e to )hi#h it ha0 6een de(oted, $n%e00 the/e i0 a 014$%a1on to the #ont/a/& To 5aintain the %e00ee in the 4ea#e'$% and ade$ate en?o&5ent o' the %ea0e 'o/ the en1/e d$/a1on o' the #ont/a#t. 9::a; DELIERY O! PROPERTY$hen a lessee rents a building which turns out, however, to be occupied by another person, and the former cannot obtain possession, his /lesseeGs cause of acon is against the lessor for breach of contract in that the la(er violated the obligaon of delivering to him the peaceful possession of the leased premises.

PEACE!UL, ADE
A/1#%e 3::. I' the thing %ea0ed i0 tota%%& de0t/o&ed 6& a 'o/t$ito$0 e(ent, the %ea0e i0 e81ng$i0hed. I' the de0t/$#1on i0 4a/1a%, the %e00ee 5a& #hoo0e 6et)een a 4/o4o/1ona% /ed$#1on o' the /ent and a /e0#i00ion o' the %ea0e. 9n; SCOPE O! THIS ARTI CLE %his arcle refers to destrucon, total or paral, and to the deterioraons or damages, which must be repaired by the lessor under "rt. !O7?, par. /2. In case of destrucon, therefore, "rt. !O7? is not applicable, the present arcle governs, and under it the lessee is not entled to as that the thing lost be reconstructed totally or parally by the lessor. %his is the rule even when the thing is insured and the lessor has recovered on the policy.

NOTE %he total destrucon of a building, a room of which is leased by a lessee, terminates the la(erGs lease.

PARTIAL DESTRUCTION CONDITION !OR USED INTENDED %he thing need not be in a condion that will sas
%he lessee may choose between proporonal reducon of rents and rescission of the lease. %he elecon is given by law to the lessee, not to the lessor. nce the choice of the lessee has been accepted by the lessor, however, the former cannot change it, because it becomes binding on both. If the reducion of rent is chosen, the reducon retroacts to the moment of paral destrucon.


It is submi(ed that rescission will be allowed by the court only whe the destrucon is substanal1 but if it is insignifant, only a proporonal reducon of rent will be decreed.

A/1#%e 3:3. The %e00o/ o' a 6$0ine00 o/ ind$0t/ia% e0ta6%i0h5ent 5a& #on1n$e engaging in the 0a5e 6$0ine00 o/ ind$0t/& to )hi#h the %e00ee de(ote0 the thing %ea0ed, $n%e00 the/e i0 a 014$%a1on to the #ont/a/&. 9n;

ILLICIT USE O! THE THING %he use of the thing for an illicit purpose invalidates the contract. If such use was spulated, no acon can be maintained to enforce the contract, which shall be absolutely void. If it was spulated, but the lessee later devotes the thing to such illicit use, such as when he uses it for gambling or prostuon, the lessor may demand the terminaon of the contract.

USE IN!ERRED !RO" THE NATURE O! THINGS $hen a thing by its NOTE $hen the lessor leases a part of a building for commercial purposes, he may use the other parts, or lease them to others, for the same purposes, unless there is a spulaon to the contrary. %he lessor warrants only the peaceful and ade9uate en#oyment of the lease1 he does not warrant the successful results of the business of the lessee in the premises.

A/1#%e 3:2. The %e00ee i0 o6%iged To 4a& the 4/i#e o' the %ea0e a##o/ding to the te/50 014$%ated To $0e the thing %ea0ed a0 a di%igent 'athe/ o' a 'a5i%&, de(o1ng it to the $0e 014$%ated and in the a60en#e o' 014$%a1on, to that )hi#h 5a& 6e in'e//ed '/o5 the nat$/e o' the thing %ea0ed, a##o/ding to the #$0to5 o' the 4%a#e

nature is susecpble of various uses, the lessee may use it for any of the purposes for which it may be suitable. %he lessee need not to limit himself to the use to which the thing was devoted at the me of the lease.

NOTE $hen the lease is for a commercial establishment dedicated to a parcular business, such as a baery or a grocery, the lessee cannot change the pupose of such establishment.

A/1#%e 3:. The %e00ee 5a& 0$04end the 4a&5ent o' the /ent in #a0e the %e00o/ 'ai%0 to 5aMe the ne#e00a/& /e4ai/0 o/ to 5aintain the %e00ee in 4ea#e'$% and ade$ate en?o&5ent o' the 4/o4e/t& %ea0ed. 9n; NOTE " tenant is released from the obligaon to pay rents from the me he is unlawfully dispossessed.

To 4a& e84en0e0 'o/ the deed o' %ea0e. 9:::; !ORCE "A@EURE If force ma#eure or fortuitous event deprives the PAY"ENT O! RENT %he obligaon imposed upon the lessee to pay rent in the manner agreed upon arises only where the contract has been actually carried into eCect by the delivery of the things leased to the lessee for the purposes spulated in the contract. $here the lessor has refused to accept the rent being paid by the lessee, the la(er should mae a monthly tender of payment and noce of consignaon for the monthly rentals.

+HO !I-ES THE RENT nly the owner has the right to x the rent. %he court cannot determine the rent and compel the lessor or owner to conform thereto and allow the lessee to occupy the premises on the basis of the rent xed by it. If the lessee disagrees with the rent xed by the lesso r, his duty is to vaca te the prem ises1 he has absolutely no right to have the cour t x the rent and connue occupyingh the premises pending #udicial determinaon of said rents.

lessee of the use or en#oyment of the property, the situaon would be similar to total or paral destrucon of the property, governed by "rt. !O77. %he lessee may as for the rescission of the contract, or the suspe nsion of the paym ent of rents during the perio d of interrupon.

A/1#%e 3:F. I' the %e00o/ o/ the %e00ee 0ho$%d not #o54%& )ith the o6%iga1on0 0et 'o/th in a/1#%e0 3: and 3:2, the agg/ie(ed 4a/t& 5a& a0M 'o/ the /e0#i00ion o' the #ont/a#t and inde5ni7#a1on 'o/ da5age0, o/ on%& the %ae/, a%%o)ing the #ont/a#t to /e5ain in 'o/#e. 9::3; ALRTERNATIE RE"EDIES 3pon failure of the lessee to pay the spulated rent at the me agreed upon, the lessor may elect between the remedies of &erformance :esoluon of the lease contract

NOTE In either case, the lessee is entled to such damages as are INCREASE AND DECREASE O! RENTS %he owner of leased property ha no absolute right to increase the rents. $here the ground relied upon for the increase of rent is the increase in assessment of the property, the rent will be increased in the proporon of the increase in assessment.

NOTE " devaluaon or depreciaon of the currency #uses increase in rentals.

!AILURE TO PAY INTEREST %he ten ant who fails to pay the rent , in the absence of some agreement to the contrary, will entle the lessor to evict the tenant and recover the unpaid rent1 and in addion to the rent due, the tenant is liable for the accrued legal interest thereon at the rate of O per cent per annum.

appropriate to the parcular remedy chosen, but may not, upon resoluon of the contract, recover damages that are appropriate only where performance is demanded. $here both pares defaulted in the performance of their corresponding dues, but it could not be determined with deniteness who of them commi(ed the rst infracon of the terms of the contract, the pares are in pari delicto and the contract is deemed exngu ished, with the pares suCering their respecv e losses.

RESCISSION O! CONTRACT $here the lessee, in possession of land, fails to pay on me the prooper rents, the lessor has a right to rescind the contract, recover the unpaid rents and e#ect the tenant from the land.


CHANGES IN !OR" AND SU*STANCE%he lessee of a building under " lessor may see rescission of lease contract and e#ectment of lessee simultaneously in a single acon for illegal detainer. $here rescission is the acon taen, the rule is that both demands to pay rent and to vacate are necessary to mae a lessee a deforciant in order that an e#ectment suit may be led. &ayment of the arrearages in rental a
a long term lease has the right to mae such changes as the business established therein re9uires, provided thaty neither the value nor the solidity of the building is impaired.

NOTE :escission will not be permi(ed for a slight or casual breach

A/1#%e 33. I' d$/ing the %ea0e it 0ho$%d 6e#o5e ne#e00a/& to 5aMe 0o5e $/gent /e4ai/0 $4on the thing %ea0ed, )hi#h #annot 6e de'e//ed $n1% the te/5ina1on o' the %ea0e, the %e00ee i0 o6%iged to to%e/ate the )o/M, a%tho$gh it 5a& 6e (e/& anno&ing to hi5, and a%tho$gh d$/ing the 0a5e, he 5a& 6e de4/i(ed o' a 4a/t o' the 4/e5i0e0.

of the contract, but only for such breaches as are so substanal and fundamental as to defeat the ob#ect of the pares in maing the agreement. *either can rescission be availed of by the wrongdoer, because the same is a remedy granted only to the in#ured party.

I' the /e4ai/0 %a0t 5o/e than 'o/t& da&0 the /ent 0ha%% 6e /ed$#ed in 4/o4o/1on to the 15e B in#%$ding the 7/0t 'o/t& da&0 B and the 4a/t o' the 4/o4e/t& o' )hi#h the %e00ee ha0 6een de4/i(ed.

NECESSITY O! @UDICIAL ACTION " contract of lease is a bilateral one and should its resoluon be sought it cannot be decided by one party alone. " #udicial acon is necessary.

+hen the )o/M i0 o' 0$#h a nat$/e that the 4o/1on )hi#h the %e00ee and hi0 'a5i%& need 'o/ thei/ d)e%%ing 6e#o5e0 $ninha6ita6%e, he 5a& /e0#ind the #ont/a#t i' the 5ain 4$/4o0e o' the %ea0e i0 to 4/o(ide a d)e%%ing 4%a#e 'o/ the %e00ee. 9::a;

ARTICLE F and ARTICLE 3:F CO"PARED URGENT REPAIRS ARTICLEF

ARTICLE3:F

-ourts have the discreon to *o such discreon is granted to refuse the resoluon or the courts rescission of contracts in their #udgment the circumstances of the case warrant the xing of a term within which the obligor may fulll or perform his overdue obligaon

" lessor cannot do anything which may disturb the lessee in the en#oyment of the thing leased. ut he cannot be obliged to leave the thing to perish for lac of repairs during the term of the lease. )o when urgent repairs are re9uired, the lesssee will have to bear the inconvenience they may cause. %he lessor has the burden of proving the urgency of the repair1 if they are not really urgent, he will be liable for damages suCered by the lessor.

NOTE Modicaons or improvements which the lessor may want to RECOERY O! DA"AGES "n acon which has for its ob#ect the recovery of damages is 9uite diCerent from an acon for e#ectment, which has for its purpose the recovery of the possession of the leased property. " breach of rental contract entles the other party to demand imdemnity for damages. ut an acon for damages against an occupant of buildings, who unlawfully detains the same, will not lie in favor of a lessee of said buildings who has never entered into possession under his lease, because there is no privity between the pares.

EN!ORCE"ENT O! LEASE $here the lessor resumes possessi on of his leased propert y for its protecon a
A/1#%e 33>. I' a d)e%%ing 4%a#e o/ an& othe/ 6$i%ding intended 'o/ h$5an ha6ita1on i0 in 0$#h a #ondi1on that it0 $0e 6/ing0 i55inent and 0e/io$0 dange/ to %i'e o/ hea%th, the %e00ee 5a& te/5inate the %ea0e at on#e 6& no1'&ing the %e00o/, e(en i' at the 15e the #ont/a#t )a0 4e/'e#ted the 'o/5e/ Mne) o' the dange/o$0 #ondi1on o/ )ai(ed the /ight to /e0#ind the %ea0e on a##o$nt o' thi0 #ondi1on. 9n; A/1#%e 33. The %e00o/ #annot a%te/ the 'o/5 o' the thing %ea0ed in 0$#h a )a& a0 to i54ai/ the $0e to )hi#h the thing i0 de(oted $nde/ the te/50 o' the % ea0e. 9::2a;

mae on the thing prior to the expiraon of the lease, so as to insure another lease, cannot be considered as urgent repairs.

RE"EDIES O! LESSEE If the repairs last more than ?0 days, the lesse e can as for a proporonate reducon of rents. If the poron used by the lessee becomes uninhabitable, even for a short me, he can as for rescission of the contract1 but he cannot as for the reducon of rents in this case if the repairs do not last more than ?0 days. If the repars do not last for more than ?0 days, and they do not mae the poron used by the lessee as adwelling uninhabitable, he has no right at all to rescission, reducon of rents, or damages.

A/1#%e 33. The %e00ee i0 o6%iged to 6/ing to the Mno)%edge o' the 4/o4/ieto/, )ithin the 0ho/te0t 4o00i6%e 15e, e(e/& $0$/4a1on o/ $nto)a/d a#t )hi#h an& thi/d 4e/0on 5a& ha(e #o55ied o/ 5a& 6e o4en%& 4/e4a/ing to #a//& o$t $4on the thing %ea0ed. He i0 a%0o o6%iged to ad(i0e the o)ne/, )ith the 0a5e $/gen#&, o' the need o' a%% /e4ai/0 in#%$ded in No.  o' a/1#%e 3:. In 6oth #a0e0 the %e00ee 0ha%% 6e %ia6%e 'o/ the da5age0 )hi#h, th/o$gh hi0 neg%igen#e, 5a& 6e 0$e/ed 6& the 4/o4/ieto/. I' the %e00o/ 'ai%0 to 5aMe $/gent /e4ai/0, the %e00ee, in o/de/ to a(oid an i55inent dange/, 5a& o/de/ the /e4ai/0 at the %e00o/0 #o0t. 9::Fa;


USURPATION OR UNTO+ARD ACT PURPOSE O! NOTICE %he purpose of re9uiring the lessee to bring to the nowledge of the owner of the property leased every usurpaon and untoward act which any third person may have commi(ed or may be openly preparing to carry out upon the thing leased, is to enable the owner to maintain his civil possession, by suit if necessary.

Di0t$/6an#e in !a#t (0. Di0t$/6an#e in La) DISTUR*ANCE IN !ACT %aes place when the en#oyment of the lease is physically reduced or impeded, the intruder not claiming any right to the thing or to itsen#oyment.

RIGHT O! O+NERBLESSOR 3pon ouster of the tenant the owner

DISTUR*ANCE IN LA+ %aes place when by #urdicial or extra=#udicial acts of third person 9uesons the right of the lessee to en#oy the property or the lease, and claims it for himself by virtue of a right pertaining to him. %he lessor is liable to the lessee for the dist urbance in the la(erGs possession

may commence summary proceedings to recover possession. "nd summary possessory acon will lie against him who disturbs another in his possession whether acng in his own behalf or under direcon of another.

%he lessor is not liable to the lessee, who has a direct acon against theintruder

%he owner is entled to defend his property from any aggression in order to prevent serious in#ury to his interests, which would happen if this was le< to the tenant who has no interests and has no real right in the property leased.

A/1#%e 33:. The %e00ee 0ha%% /et$/n the thing %ea0ed, $4on the te/5ina1on o' the %ea0e, a0 he /e#ei(ed it, 0a(e )hat ha0 6een %o0t o/ i54ai/ed 6& the %a40e o' 15e, o/ 6& o/dina/& )ea/ and tea/, o/ '/o5 an ine(ita6%e #a$0e. 9:3a;

NOTICE O! NEED O! REPAIRS "s during the peiod of the lease, the

NOTE "t the expiraon of the lease, the lessee is obliged to vacate

lessee maintains a relaon more direct and proximate to the thing leased, he has the obligaon to nofy the lessor of the necessity of maing the repairs for he cannot allege that he does not now them. It is not the duty of the lessor to constantly inspect the premises to see if there are repairs to be made. %he lessee, however, is not entled to reimbursement for the costs of repairs and improvements undertaen by him on the leased premises without the lessorGs nowledge and consent, which was re9uired in their lease contract, which also spulated that, even when the lessor had previously comsented thereto, they shall be for the sole account of the tenant.

O+NER !AILS TO "AKE REPAIRS %he remedy of tenants where lessor refuses to mae an urgent repair of the leased premises is not to suspend rental payments but to mae the urgent repair themselves and charge the costs thereof to lessor.

A/1#%e 33. The %e00o/ i0 not o6%iged to an0)e/ 'o/ a 5e/e a#t o' t/e04a00 )hi#h a thi/d 4e/0on 5a& #a$0e on the $0e o' the thing %ea0ed 6$t the %e00ee 0ha%% ha(e a di/e#t a#1on again0t the int/$de/. The/e i0 a 5e/e a#t o' t/e04a00 )hen the thi/d 4e/0on #%ai50 no /ight )hate(e/. 9:3>a; TRESASS IN !ACT If the act of trespass is not accompanied or preceded by anything which reveals a really #uridic intenon on the part of the trespasser, in such wise that the lessee can only disnguish the material fact, stripped of all legal form or reason, the trespass is in fact only (de #ero hecho) . %he less or is not liab le for trespass of this ind, although he is liable for trespass es in law (de derecho), pursuant to par. 5 of "rt. !O7?. %respass in fact aCects only the use of the property leased, and therefore, it is incumbent upon the lessee to repel it.

and return the premises leasedTthe whole of the thing sub#ect of thr lease and not only a part thereofTto the lessor, the owner of the land has the right to cause the building erected on his estate to be taen down without incurring any obligaon to return the estate in the same condion in which he received it, unless an agreement was executed prior to the construcon of the building.

NOTE %he expenses incurred by the lessee in placing the thing at the disposal of the lessor, cannot be charged against the lessor, because it is his obligaon to return the sub#ect ma(er of the lease.

HO+ RETURN "ADE %his arcle does not, and no other legal provision does, specify the manner in which the possession of leased property should be returned. y its very nature, the relin9uishment of possession need no be accomplished by physical delivery or any other prescribed form. In order to return the thing leased to the lessor, however, it is not enough that the lessee vacates it. It is necessary that he place the thing at the disposal of the lessor, so that the la(er can receive it without any obstacle. 'e must return the eys and leave no sub= lessees or other persons in the property1 otherwise, he shall connue to be liable for the payment of rents.

E!!ECT O! LESSORS LENIENCY %he owner may allow a defaulng tenant to remain in the rented property onee month, one year or even more, and that consent, no ma(er how long it may last, maes the tenantGs possession lawful.

A/1#%e 33 3. In the a60en#e o' a 0tate5ent #on#e/ning the #ondi1on o' the thing at the 15e the %ea0e )a0 #on01t$ted, the %a) 4/e0$5e0 that the %e00ee /e#ei(ed it in good #ondi1on, $n%e00 the/e i0 4/oo' to the #ont/a/&. 9:3; PRESU"PTION In the absence of proof that when the lesse es accepted the building leased, the same was uninhabited and inade9uate for the use for which it was leased, the legal presumpon that the lessee received the thing leased in good condion applies.

A/1#%e 332. The %e00ee i0 /e04on0i6%e 'o/ the dete/io/a1on o/ %o00 o' the thing %ea0ed, $n%e00 he 4/o(e0 that it tooM 4%a#e )itho$t hi0


'a$%t. Thi0 6$/den o' 4/oo' on the %e00ee doe0 not a44%& )hen the de0t/$#1on i0 d$e to ea/th$aMe, ood, 0to/5 o/ othe/ nat$/a% #a%a5it&. 9:3a;

-onnued possession of the premises by the lessee a
DESTRUCTION O! PROPERTY$hen leased property is destroyed by

TER"INATION O! THE LEASE

re, there arises a presumpon against the lessee, which maes him responsible to the owner for the resulng damages, in the absence of proof that the loss happened without the l esseeGs fault.

NOTE 3nder the contractual spulaon whereby the lessee undertaes to mae the necessary repairs on the building leased, failure by the lessee to mae the repairs which causes the destrucon of the building renders him liable to the lessor.

A/1#%e 33. The %e00ee i0 %ia6%e 'o/ an& dete/io/a1on #a$0ed 6& 5e56e/0 o' hi0 ho$0eho%d and 6& g$e0t0 and (i0ito/0. 9:3a; *ASIS O! LIA*ILITY %he liability of the lessee for the acts of 5

%he lease may terminate y the expiraon of the period y the total loss of the thing y the resoluon of the right of the lessor, such as when the lessor is a usufructuary and the usufruct is terminated y the will of the purchaser or transferee of the thing y rescission due to non=performance of the obligaon of one of the pares

NOTE "n agreement of the pares that either of them may rd

persons is based on the contract itself, under which the lessee has assumed the custody of the thing of which the lessor has been dispossessed. %here is no need of proving that he was negligent in selecng and supervising his household helpers, visitors and guests. 'e is liable from the mere fact of having allowed them into the immovable leased.

A/1#%e 33F. I' the %ea0e )a0 5ade 'o/ a dete/5inate 15e, it #ea0e0 $4on the da& 78ed, )itho$t the need o' a de5and. 9:3:; LEASE !OR DE!INITE PERIOD

terminate tge lease on a 50=dat noce is valid. $hen the agreement between the lessor and the lessee is that the lease is only temporary may be terminated when the former needs it for his business or when his children need the same, the lease is terminated when the condion happens and the lessee is noed accordingly.

A/1#%e 32>. I' at the end o' the #ont /a#t the %e00 ee 0ho$%d #on1n$e en?o&ing the thing %ea0ed 'o/ 7een da&0 )ith the a#$ie0#en#e o' the %e00o/, and $n%e00 a no1#e to the #ont/a/& 6& eithe/ 4a/t& ha0 4/e(io$0%& 6een gi(en, it i0 $nde/0tood that the/e i0 an i54%ied ne) %ea0e, not 'o/ the 4e/iod o' the o/igina% #ont/a#t, 6$t 'o/ the 15e e0ta6%i0hed in a/1#%e0 3 and 32. The othe/ te/50 o' the o/igina% #ont/a#t 0ha%% 6e /e(i(ed. 9:33a;

$here the lease is for a denite period, the tenancy expires with the term and no noce to 9uite is necessary. 3pon the expiraon of the term, the tenant thenceforth becomes a deforciant withholding the property unlawfully.

NOTE %he !7=day clause of this arcle is not applicable to successive

NOTE %he court is completely devoid of authority to extend the

payable.

renewals under "rt. !O46. %hus, the lease of a dwelling house at a monthly renta terminable upon 50 daysG wri(en noce terminates at the expiraon of thirty days from receipt of such noce, whether or not such terminaon coincides, with a day on which rent is

lease a
TACIT RENE+AL INCREASE O! RENT "t the end of the period of the lease, the landlord has the right to increase the rent, and the tenant has the opon to pay the new rent or to vacate the premises in order to avoid paying the higher rent. If he agrees to pay the new rent, he cannot be e#ected unl he defaults in said obligaon.

E-TENSION $hen a contract contains a provision that the term of the lease may be extended for a further similar period, the extension is to be understood as having been promised to the lessee, and the la(er, without need of further consent of the lessor, /unless he breas the terms of the contract, can connue the lease and occupy the premises on noce to the lessor. " spulaon that the lease is extendible for O years agreed upon by both paresJ gives to the lessee the right to tae addional period or to 9uit upon the expiraon of the term. In construing provisions of this character the tenant is favored, in case of uncertainty in the term of the lease, and not the landlord. )pulaoons for the extension of the period of lease at the exclusive opon of the lessee, are valid. " covenant to renew a lease which maes no provision as to the terms of the renewal or extension implies an extension or renewal upon the same terms as provided in the srcinal lease contract.

DURATION $hen the tenant, with the ac9uiesence of the landlord, holds over a
NOTE Implied new lease revives only those terms of the srcinal contract germane to the lesseGs right of en#oyment of possession of leased premises. )pecial agreements foreign to right of occupancy are excluded.

A/1#%e 32. I' the %e00ee #on1n$e0 en?o&ing the thing ae/ the e84i/a1on o' the #ont/a#t, o(e/ the %e00o/0 o6?e#1on, the 'o/5e/ 0ha%% 6e 0$6?e#t to the /e04on0i6i%i1e0 o' a 4o00e00o/ in 6ad 'aith. 9n; A/1#%e 32. In #a0e o' an i54%ied ne) %ea0e, the o6%i ga1on0 #ont/a#ted 6& a thi/d 4e/0on 'o/ the 0e#$/it& o' the 4/in#i4a% #ont/a#t 0ha%% #ea0e )ith /e04e#t to the ne) %ea0e. 9:32; A/1#%e 32. The %e00o/ 5a& ?$di#ia%%& e?e#t the %e00ee 'o/ an& o' the 'o%%o)ing #a$0e0


+hen the 4e/iod ag/eed $4on, o/ that )hi#h i0 78ed 'o/ the d$/a1on o' %ea0e0 $nde/ a/1#%e0 3 and 32, ha0 e84i/ed La#M o' 4a&5ent o' the 4/i#e 014$%ated io%a1on o' an& o' the #ondi1on0 ag/eed $4on in the #ont/a#t +hen the %e00ee de(ote0 the thing %ea0ed to an& $0e o/ 0e/(i#e not 014$%ated )hi#h #a$0e0 the dete/io/a1on the/eo' o/ i' he doe0 not o60e/(e the /e$i/e5ent in No.  o' a/1#%e 3:2, a0 /ega/d0 the $0e the/eo'. The e?e#t5e nt o' tenant0 o' ag/i#$%t$/a% %and0 i0 go(e/ned 6& 04e#ia% %a)0. 9:3Fa; TER"INATION O! PERIOD 3pon the terminaon of the period of lease, the lessor is entled to recover possession and dispose of the leased property to another lessee.

INCREASE O! RENT $here a
REASONA*LENESS O! RENT It was held that the determinaon of what is to be paid for leasing municipal property lies within the power and discreon of the city or municipal board, and unless the ordinance passed by the board on the ma(er is ultra vires or clearly unreasonable, courts should not interfere with it.

acon, upon failure of the lessee to comply with the terms and condions of the contract, is valid and binding.

A/1#%e 32. In e?e#t5e nt #a0e0 )he/e an a44ea% i0 taMen the /e5ed& g/anted in a/1#%e :F, 0e#ond 4a/ag/a4h, 0ha%% a%0o a44%&, i' the highe/ #o$/t i0 0a107ed that the %e00ee0 a44ea% i0 '/i(o%o$0 o/ di%ato/&, o/ that the %e00o/0 a44ea% i0 4/i5a 'a#ie 5e/ito/io$0. The 4e/iod o' ten da&0 /e'e//ed to in 0aid a/1#%e 0ha%% 6e #o$nted '/o5 the 15e the a44ea% i0 4e/'e#ted. 9n; SCOPE O! THE ARTICLE %he present arcle applies not only to the lease of lands, but also to the buildings standing thereon, on the principle that the accessory follows the principal. &rior physical possession by the plainC of the property in ligaon in an unlawful detainer case is not indispensable for the issuance of the writ of preliminary mandatory in#unconn where said plainC is the vendee of the property. >or the purpose of this arcle, it is enough that the plainC is the owner of the land and the defendant is in temporary occupancy thereof whether under a lease contract, or on mere tolerance or under a temporary permit. %his arcle is applicable where a
HIGHER COURTB %he issuance of the writ of preliminary mandatpry in#uncon as authori+ed by the present arcle, in an e#ectment case, is expressly vested in the appellate court, because the law employs the phrase higher courtJ and it is the higher court with must sasCy itself that the appeal is either frivolous or dilatory, in the case of the lessee, or prima facie meritorious, in the case of the lessor.

PERIOD O! O DAYS %he period of !0 days within which to le a peon for a writ of preliminary mandatory in#uncon should be counted from the date when the peoning party is noed of the perfecon of the appeal.

NONBPAY"ENT O! RENT Mere failure to pay rents, or a breach of contract to pay rents, does not render the possession of the lessee per se unlawful. It is not the failure of the lessee to pay rents as agreed upon in a contract, but the failure of the lessee to pay rents aailure or refusal of the lessor to receive the rent is not a valid defense in e#ectment cases1 in such instances the debtor=lessee must consign the amount due from him.

IOLATION O! CONTRACT%he landlord has the right to terminate a contract of lease under "rt. !O65 of the *-- par. 5 which provides that the lessor may #udicially e#ect the lessee for violaiton of any of the condions agreed upon in the contract. %he lesso rsare not in law re9 uired to bring rst an acon for rescission, but could as the court to do so and simultaneously see the e#ec on of the lessee in a single acon for illegal detainer. 8enite or indenite, the lessor has the right to terminate the contract of lease upon violaon of its terms and condions.

A/1#%e 32:. E8#e4t in #a0e0 0tated in a/1#%e 32, the %e00ee 0ha%% ha(e a /ight to 5aMe $0e o' the 4e/iod0 e0ta6%i0hed in a/1#%e0 3 and 32. 9:2>; A/1#%e 323. The 4$/#ha0e/ o' a 4ie#e o' %and )hi#h i0 $nde/ a %ea0e that i0 not /e#o/ded in the Regi0t/& o' P/o4e/t& 5a& te/5inate the %ea0e, 0a(e )hen the/e i0 a 014$%a1on to the #ont/a/& in the #ont/a#t o' 0a%e, o/ )hen the 4$/#ha0e/ Mno)0 o' the e8i0ten#e o' the %ea0e. I' the 6$&e/ 5aMe0 $0e o' thi0 /ight, the %e00ee 5a& de5and that he 6e a%%o)ed to gathe/ the '/$it0 o' the ha/(e0t )hi#h #o//e04ond0 to the #$//ent ag/i#$%t$/a% &ea/ and that the (endo/ inde5ni'& hi5 'o/ da5age0 0$e/ed. I' the 0a%e i0 7#11o$0, 'o/ the 4$/4o0e o' e81ng$i0hing the %ea0e, the 0$44o0ed (endee #annot 5aMe $0e o' the /ight g/anted in the 7/0t 4a/ag/a4h o' thi0 a/1#%e. The 0a%e i0 4/e0$5ed to 6e 7#11o$0 i' at the 15e the 0$44o0ed (endee de5and0 the te/5ina1on o' the %ea0e, the 0a%e i0 not /e#o/ded in the Regi0t/& o' P/o4e/t&. 9:2a; SCOPE O! THIS ART ICLE "lthough this arcle maes express

E-TRA@UDICIAL RE"EDY " spulaon in a lease contract authori+ing the lessor to tae possession of the leased premises, without resorng to #udicial

reference only to sales, its intent and reason #usfy its applicaon to any other form of alienaon.


SALE O! LEASED PROPERTY RIGHT O! ENDEE " contract of lease of real property exeucted by the vendor, unless recorderd, ceases to have eCect when the property is sold, in the absence of contrary agreement. %he purchaser of said property is not bound by an unrecorded lease thereof which is not menoned in the deed of conveyance. %he new owner may terminate both the lease and any subleases made by the lessee.

the lessee, reserving to the lessee only the right to gather the fruits of the crop corresponding to the current agricultural year. %he lessee, however, may recover his damages from the vendor, his lessor. %he righ t granted to a lessee to gather the fruit s of the crop corresponding to the current agricultuaral year, does not extend to the gathering of shers which re9uire 2 years before they are of any commercial value.

NOTE %he act of the new owner of giving noce of an increase of rent, when the srcinal period has expired, constutes a noce of terminaon of the srcinal lease. 3pon purchase of the leased property, the lessee must pay to the new owner, and if a
APPLICATION O! THIS ARTICLE %he provisions of the present arcle apply only to the leases for a xed term, and not to those from month to month. $here the lease is on month to month basis, and the purchaser sees to recover from the lease the property which said lessee has leased from the vendor, the purchaserGs right is not based onn the present arcle, but on his right as the owner or vendee to recover possession from a tenant holding=over a
A/1#%e 322. The 4$/#ha0e/ in a 0a%e )ith the /ight o' /ede541on #annot 5aMe $0e o' the 4o)e/ to e?e#t the %e00ee $n1% the end o' the 4e/iod 'o/ the /ede541on. 9:2; %he provision of this of arcle is not SC OPE ANto D aLI" ITAwhere TION the applicable case vendor, on disposing real property under the right of repurchase, connues nevertheless in possession thereof by virtue of a special agreement, not as owner, but as tenant of the purchaser by the payment of rent. %he limitaon contained in said arcle refers to the tenant or lessee who has contracted with the vendor and who has had no relaon whatever with the purchaser under an agreement of redempon1 such tenant is a third person with respect to said vendor and purchaser, because, if the vendor should by redempon recover property, the lessee would again be entled to the en#oyment of the lease1 wheref ore, the limitaon of the puchaserGs right is proper and #ust.

+HEN AAILED O! *o special period for its exercise. It may be asserted at any me before the acon prescribes. ut when a new relaon is created between the vendee and the lesee, thus, excluding that which existed between the vendor and the lessee,the vendee cannot avail himself of the right granted by this arcle.

ENODR AS LESSEE ut where the vendor remains in possession as a tenant, and he fails to pay the agreed rent, he may be evicted by the vendee even before the period of redempon has expired. "
E!!ECT O! ACTUAL NOTICE " purchaser of land who has full nowledge of the fact that the land has been leased to a third person and is inf ormef of the terms of such lease at the me of the purchase, is bound to respect said lease, allthough it is not tendered upon the cercate of tle. %he lease in eCect become part of the contract of sale. ut where land registered in the name of the landlord is sub#ect to an exisng lease not recorded on the tle, and the terms of the lease are not nown to a person dealing subse9uently with the property, but who was informed that the lease was to terminate at a certain me, it was held that the la(erGs nowledge that a lessee was in possession of the land was not sucient to charge him with noce of the duraon of the lease, which was longer than the period made nown to him, for he had a right to rely on the cercate of tle and was not bound to mae further in9uiries.

PURCHASER IN !ORECLOSURE $hen an immovable is mortgaged,

A/1#%e 32. I' the %e00ee 5aMe0, in good 'aith, $0e'$% i54/o(e5ent0 )hi#h a/e 0$ita6%e to the $0e 'o/ )hi#h the %ea0e i0 intended, )itho$t a%te/ing the 'o/5 o/ 0$60tan#e o' the 4/o4e/t& %ea0ed, the %e00o/ $4on the te/5ina1on o' the %ea0e 0ha%% 4a& the %e00ee oneBha%' o' the (a%$e o' the i54/o(e5ent0 at that 15e. Sho$%d the %e00o/ /e'$0e to /ei56$/0e 0aid a5o$nt, the %e00ee 5a& /e5o(e the i54/o(e5ent0, e(en tho$gh the 4/in#i4a% thing 5a& 0$e/ da5age the/e6&. He 0ha%% not, ho)e(e/, #a$0e an& 5o/e i54ai/5ent $4on the 4/o4e/t& %ea0ed than i0 ne#e00a/&. +ith /ega/d to o/na5enta% e84en0e0, the %e00ee 0ha%% not 6e en1t%ed to an& /ei56$/0e5ent, 6$t he 5a& /e5o(e the o/na5enta% o6?e#t0, 4/o(ided no da5age i0 #a$0ed to the 4/in#i4a% thing, and the %e00o/ doe0 not #hoo0e to /etain the5 6& 4a&ing thei/ (a%$e at the 15e the %ea0e i0 e81ng$i0hed. 9n;

the puchaser thereof in foreclosure proceedings is not bound to respect a lease which was recorded subse9uent to y#e registraon of the mortgage.

A/1#%e 32F. I' nothing ha0 6een 014$%ated #on#e/ning the 4%a#e and the 15e 'o/ the 4a&5ent o' the %ea0e, the 4/o(i0ion0 o/ a/1#%e : 0ha%% 6e o60e/(ed a0 /ega/d0 the 4%a#e and )ith /e04e #t to the 15e, the #$0to5 o' the 4%a#e 0ha%% 6e 'o%%o)ed. 9:2;

RARTI!ICATION %he terminaon of the exisng lease is oponal to

PLACE O! PAY"ENT O! RENT %he rent should be paid in the place

the vendee1 if he does not mae use of his right, the lease connues in force. %he vendee may be barred from terminang the lease when he expressly accepts or raes it, or when he tacitly renounces his right to terminate it by the collec on of rents under the lease contract or by other similar acts.

designated in the obligaon. In the absence of an agreement between the pares as to the place of the payment, the rent is payable at the domicile of the lessees. "nd where the failure of the lessee to pay rent is a(ributable to the lessorGs omission or neglect to collect at his domicile, the same cannot be a ground for their e#ectment.

RIGHT O! THE LESSEE TO GATHER !RUITS RECOER DA"AGES%he law grants the purchaser of a leased estate the right to terminate


SECTION  S4e#ia% P/o(i0ion0 'o/ Lea0e0 o' R$/a% Land0 A/1#%e 3>. The %e00ee 0ha%% ha(e no /ight to a /ed$#1on o' the /ent on a##o$nt o' the 0te/i%it& o' the %and %ea0ed, o/ 6& /ea0on o' the %o00 o' '/$it0 d$e to o/dina/& 'o/t$ito$0 e(ent0 6$t he 0ha%% ha(e 0$#h /ight in #a0e o' the %o00 o' 5o/e than oneBha%' o' the '/$it0 th/o$gh e8t/ao/dina/& and $n'o/e0een 'o/t$ito$0 e(ent0, 0a(e a%)a&0 )hen the/e i0 a 04e#i7# 014$%a1on to the #ont/a/&. E8t/ao/dina/& 'o/t$ito$0 e(ent0 a/e $nde/0tood to 6e 7/e, )a/, 4e01%en#e, $n$0$a% ood, %o#$0t0, ea/th$aMe, o/ othe/0 )hi#h a/e $n#o55on, and )hi#h the #ont/a #1ng 4a/1e0 #o$%d not ha(e /ea0ona6%& 'o/e0een. 9:2:;

A/1#%e 3. The o$tgoing %e00ee 0ha%% a%%o) the in#o5ing %e00ee o/ the %e00o/ the $0e o' the 4/e5i0e0 and othe/ 5ean0 ne#e00a/& 'o/ the 4/e4a/ato/& %a6o/ 'o/ the 'o%%o)ing &ea/ and, /e#i4/o#a%%&, the in#o5ing %e00ee o/ the %e00o/ i0 $nde/ o6%iga1on to 4e/5it the o$tgoing %e00ee to do )hate(e/ 5a& 6e ne#e00a/& 'o/ the gathe/ing o/ ha/(e01ng and $1%iza1on o' the '/$it0, a%% in a##o/dan#e )ith the #$0to5 o' the 4%a#e. 9:2a; O+NERSHIP O! !RUITS %his arcle does not determine the ownership of the fruits exisng on the tenement at the terminaon of the lease. It only re9uires the incoming lessee or lessor to permit the outgoing lessee to do whatever is necessary for the gathering or harvesng and en#oyment of the fruits in accordance with the customs of the place1 this refers to the fruits which under the other provisiobs pertain to the lessee.

RIGHT TO REDUCTION Re$i0ite0 %he land leased must be of rural character More than U of the fruits must have been lost %he loss must have occurred through extraordinary and unforseen fortuitous event1 and %here must be no spulaon against the applicaon of the arcle

!ORTUITOUS EENT 8epradaon of strangers is a fortuitous event which constutes a #uscaon for the reducon of rental due from the lessee. %he violence of robbers though not independent of human will1 and war, although dependent upon the will of the combatants1 is caso fortuito. )o is the will of a third person who prevents performance of the obligaon.

A/1#%e 3. Land tenan#& on 0ha/e0 0ha%% 6e go(e/ned 6& 04e#ia% %a)0, the 014$%a1on0 o' the 4a/1e0, the 4/o(i0ion0 on 4a/tne/0hi4 and 6& the #$0to50 o' the 4%a#e. 9:2Fa; RE
AGRICULTURAL LANDBa shpond is also an agricultural land. $here the land is ocially classied and assessed as residenal, it cannot be considered agricultural. $here the land is within the poblacion, the presumpon is that is residenal.

NOTE %yphoons are not extra=ordinary fortuitous event events, under the present arcle, because in the &hilippines, it cannot be said that they are uncommin and not be reasonably foreseen by the contracng pares.

PERCENTAGE O! REDUCTION%he rent spulated should be reduced in the same raon that the actual receipts are to the normal income obtainable from the leased tenement.

-PN $here by the terms of the contract of lease, the rent is xed at an ali9uot part of the crops, the tenant cannot demand a reducon on account of loss of more than U of the crop by fortuitous events, and the failure to deliver the spulated proporon of the crop gathered entles the landlord to evict the tenant.

A/1#%e 3. Neithe/ doe0 the %e00ee ha(e an& /ight to a /ed$#1on o' the /ent i' the '/$it0 a/e %o0t ae/ the& ha(e 6een 0e4a/ated '/o5 thei/ 0ta%M, /oot o/ t/$nM. 9:23; A/1#%e 3. The %ea0e o' a 4ie#e o' /$/a% %and, )hen it0 d$/a1on ha0 not 6een 78ed, i0 $nde/0tood to ha(e 6een 'o/ a%% the 15e ne#e00a/& 'o/ the gathe/ing o' the '/$it0 )hi#h the )ho%e e0tate %ea0ed 5a& &ie%d in one &ea/, o/ )hi#h it 5a& &ie%d on#e, a%tho$gh t)o o/ 5o/e &ea/0 ha(e to e%a40e 'o/ the 4$/4o0e. 9:22a;

A/1#%e 3:. The tenant on 0ha/e0 #annot 6e e?e#ted e8#e4t in #a0e0 04e#i7ed 6& %a). 9n; SECTION  S4e#ia% P/o(i0ion0 'o/ the Lea0e o' U/6an Land0 A/1#%e 33. In de'a$%t o' a 04e#ia% 014$%a1on, the #$0to5 o' the 4%a#e 0ha%% 6e o60e/(ed )ith /ega/d to the Mind o' /e4ai/0 on $/6an 4/o4e/t& 'o/ )hi#h the %e00o/ 0ha%% 6e %ia6%e. In #a0e o' do$6t it i0 $nde/0tood that the /e4ai/0 a/e #ha/gea6%e again0t hi5. 9:>a; A/1#%e 32. I' the 4e/iod 'o/ the %ea0e ha0 not 6een 78ed, it i0 $nde/0tood to 6e '/o5 &ea/ to &ea/, i' the /ent ag/eed $4on i0 ann$a% '/o5 5onth to 5onth, i' it i0 5onth%& '/o5 )eeM to )eeM, i' the /ent i0 )eeM%& and '/o5 da& to da&, i' the /ent i0 to 6e 4aid dai%&. Ho)e(e/, e(en tho$gh a 5onth%& /ent i0 4aid, and no 4e/iod 'o/ the %ea0e ha0 6een 0et, the #o$/t0 5a& 78 a %onge/ te/5 'o/ the %ea0e ae/ the %e00ee ha0 o##$4ied the 4/e5i0e0 'o/ o(e/ one &ea/. I' the /ent i0 )eeM%&, the #o$/t0 5a& %iMe)i0e dete/5ine a %onge/ 4e/iod ae/ the %e00ee ha0 6een in 4o00e00ion 'o/ o(e/ 0i8 5onth0. In #a0e o' dai%& /ent, the #o$/t0 5a& a%0o 78 a %onge/ 4e/iod ae/ the %e00ee ha0 0ta&ed in the 4%a#e 'o/ o(e/ one 5onth. 9:a; APPLICATION %his arcle refers to a lesseeJ, i.e, one who has a

E!!ECT O! I"PROE"ENTS "ADE%he duraon of a lease depends upon the spulaon in the contract of rental and cannot be aCected by the more or less valuable improvements voluntarily made by the lessee upon the property.

contract of lease with the owner. It does not contemplate sublessees having no contractual relaons with such owner, much less a mere occupant.


" tenancy from day to day, month to month, or year to year under this arcle may arise in either of 2 ways If the pares say nothi ng in the cont ract of lease as to its duraon and mae no provision for its terminaon upon noce, the duraon is determined by the agreement as to the period at which the rent is payable. If the tenant is permi(ed to commence a new perio d, there is a tacit renewal of the lease for a lie term If at the expiraon of a lease for a denite period, the tenant is permi(ed to hold over for !7 days, i.e., if by the terms of the lease the period of its dura on was 7 years, for instance, and a monthly, 9uarterly, or yearly rental was reserved, and upon its expiraon the tenant, with the ac9uiescence of the landlord, holds over for !7 days, this does not bring abou t a tacit rene wal of the lease for another term of 7 years, but creat es a tenancy, from month to month, 9uarter to 9uarter, or from year to year, as the case may be, governed therea
DURATION O! LEASE $here the lease is for a denite period the tenancy expires with the term and no noce to 9uit is necessary. ut when there is no agreement as to the duraon of the lease and rent is paid monthly, it is understood that it shall terminate without necessity of special noce, upon the expiraon of the term, even if there has been no violaon of the contract, unless prior thereto, the extension of said term has been sought by appropriate acon, and #udgment, is eventually granted therein granng relief. " verbal contract of lease, however, without a denite period xed, wherein the lessees have agreed to pay monthly rentals, should be considered as one exis ng from month to month, and beingh renewed by tacit approval of the pares, unl the lessor signied his intenon to terminate the lease.

!I-ING LONGER PERIOD %he court may x a longer term for such the lease a
DURATION LE!T TO THE LESSEE %he present arcle xing the legal terms for leases in which no convenonal term is spulated, has no applicaon to a lease whose terminaon is expressly le< to the will of the lessee.

NOTE "rt. !!K6 is not applicable, however, where the duraon of the lease is le< to the will of the lessor, because in a l ease, the lessor is the creditor and the lessee the debtor. " spulaoon authori+ing the lessees to connue occupying the leased premises indenitely as long as they should faithfully fulll the obligaon with respect to the payment of rentals, has been held invalid, since that would have leave to the sole and exclusive will of one of the contracng pares, the validity and fulllment of the contract, within the meaning of "rt. !504.

A/1#%e 3. +hen the %e00o/ o' a ho$0e, o/ 4a/t the/eo', $0ed a0 a d)e%%ing 'o/ a 'a5i%&, o/ )hen the %e00o/ o' a 0to/e, o/ ind$0t/ia% e0ta6%i0h5ent, a%0o %ea0e0 the '$/nit$/e, the %ea0e o' the %ae/ 0ha%% 6e dee5ed to 6e 'o/ the d$/a1on o' the %ea0e o' the 4/e5i0e0. 9:;

RE!ERENCE %@;*%I*, ":%3: M., Co##entaries and 'rispr'dence on the Ciil Code o the Philippines , Aol. A., -entral oo &ublishing, -o., Inc. !KK!


TITLE  PRESCRIPTION CHAPTER  Gene/a% P/o(i0ion0 Prescripon is generally used with reference to ac9uision of a right by the lapse of me. n the other hand, the word limitaonJ as applied to acons under the common law, has reference to the me within which an acon must be brought a
 KINDS O! PRESCRIPTIONS %he ac9u ision of a right by the laps e of me, nown as ac8'isie prescripon or aderse possession and 's'capcion %he loss of a right of acon by the lapse of me nown as e"nce prescripon or li#itaon o acons .

A/1#%e >3. *& 4/e0#/i41on, one a#$i/e0 o)ne/0hi4 and othe/ /ea% /ight0 th/o$gh the %a40e o' 15e in the 5anne/ and $nde/ the #ondi1on0 %aid do)n 6& %a). In the 0a5e )a&, /ight0 and #ondi1on0 a/e %o0t 6& 4/e0#/i41on. 9F>a; *ASIS O! PRESCRIPTION

y abandonment, negligence or carelessness, owners provided with the most perfect tle may be deprived and dispossessed of their properes by usurpers who, by lapse of me specied by law, ac9uire the same by prescripon.

AC
E-TINCTIE PRESCRIPTION

"c9uisive prescripon is based on the asseron by a usurper of an adverse right for such a long me, uncontested by the true owner of th e right, as to gi ve the presumpon that the la(er has given up such right in favor of theformer.

ased on the p robability, born of experience, that the alleged right which accrued in the distant past never existed or has already been exnguished1 or if it exists, the inconvenience caused by the la pse of m e shouldbebornebytheparty negligent in the asseron of his right.

ased on negligence or presumed abandonment by the owner of a right, whether patrimonial or remedial

E!!ECT O! AC
RETROACTIITY O! PRESCRIPTION %he ac9uision of ownership or other real rights through the prescripon is retroacve1 once the period is completed, the new owner is considered as having ac9uired the thing or right from the moment the period began to run.

PRESCRIPTION AS A "ATTER O! DE!ENSE It must be explicitly relied upon in the pleadings. It cannot be availed of unless it is specially pleaded in the answer1 and it must be proved or established with the same degree of certainty as any essenal obligaon in the civil acon.

A/1#%e >2. Pe/0on0 )ho a/e #a4a6%e o' a#$i/ing 4/o4e/t& o/ /ight0 6& the othe/ %ega% 5ode0 5a& a#$i/e the 0a5e 6& 5ean0 o' 4/e0#/i41on. "ino/0 and othe/ in#a4a#itated 4e/0on0 5a& a#$i/e 4/o4e/t& o/ /ight0 6& 4/e0#/i41on, eithe/ 4e/0ona%%& o/ th/o$gh thei/ 4a/ent0, g$a/dian0 o/ %ega% /e4/e0enta1(e0. 9Fa; CAPACITY !OR PRESCRIPTION GR -apacity to ac9uire property or rights by other legal modes is re9uired for prescripon.

-PN Minors and other incapacitated persons may also, under certain circumstances, ac9uire by prescripon. >or them to ac9uire by prescripon, it is necessary that they must have discern#ent, because the inten t to appropriate the thing as oneGs own is an essenal element of the possession. $hen discernment is wanng, they can ac9uire by prescripon only throug their legal representaves. $hen the prescripon re9uires #ust tle, the capacity to prescribe will be the same capacity re9uired for the parcular tle in 9ueson.

A/1#%e >. P/e0#/i41on, 6oth a#$i0i1(e and e81n#1(e, /$n0 again0t "ino/0 and othe/ in#a4a#itated 4e/0on0 )ho ha(e 4a/ent0, g$a/dian0 o/ othe/ %ega% /e4/e0enta1(e0 A60entee0 )ho ha(e ad5ini0t/ato/0, eithe/ a44ointed 6& the5 6e'o/e thei/ di0a44ea/an#e, o/ a44ointed 6& the #o$/t0 Pe/0on0 %i(ing a6/oad, )ho ha(e 5anage/0 o/ ad5ini0t/ato/0 @$/idi#a% 4e/0on0, e8#e4t the State and it0 0$6di(i0ion0. Pe/0on0 )ho a/e di0$a%i7ed '/o5 ad5ini0te/ing thei/ 4/o4e/t& ha(e a /ight to #%ai5 da5age0 '/o5 thei/ %ega% /e4/e0enta1(e0 )ho0e neg%igen#e ha0 6een the #a$0e o' 4/e0#/i41on. 9Fa; A/1#%e >F. P/e0#/i41on doe0 not /$n 6et)een h$06and and )i'e, e(en tho$gh the/e 6e a 0e4a/a1on o' 4/o4e/t& ag/eed $4on in the 5a//iage 0e%e5ent0 o/ 6& ?$di#ia% de#/ee. Neithe/ doe0 4/e0#/ i41on /$n 6et)een 4a/ent0 and #hi%d/en, d$/ing the 5ino/it& o/ in0anit& o' the %ae/, and 6et)een g$a/dian and )a/d d$/ing the #on1n$an#e o' the g$a/dian0hi4. 9n; *ET+EEN HUS*AND AND +I!E %he law does not permit prescripon to run between the spouses during the marriage, because reasons of inNuence or aCecon may o

A/1#%e >. P/e0#/i41on, a#$i0i1(e and e81n#1(e, /$n0 in 'a(o/ o', o/ again0t a 5a//ied )o5an. 9n;

the State o/ an& o' it0 0$6di(i0ion0 not 4at/i5onia% in #ha/a#te/ 0ha%% not 6e the o6?e#t o' 4/e0#/i41on. 9F3a;

A/1#%e . P/e0#/i41on o6taine d 6& a #oB4/o4/ieto/ o/ a #oB o)ne/ 0ha%% 6ene7t the othe/0. 9F;

O*@ECT O! PRESCRIPTION 3nder "rt. 750, only things suscepble of

NEED !OR RATI!ICATION In the language used by the arcle, it seems racaon is not necessary. %his arcle will apply only when the prescripon has a relaon to the property owned in common. >or instance, if 5 persons own in common a parcel of land with an area of !00 hectares, and the co=owner who is managing the land occupies more than the area owned, then the exce ss may be ac9uired by prescripon for all, because there is no doubt that the asseron of ownership over such excess is but an extenon of the co=ownership ober !00 hectares really owned by the 5 co=owners. %he co=owner in adverse possession clearly possesses in representaon of the co=ownership. In order that he may ac9uire possession for the other co=owners, they must rafy his act, pursuant to "rt. 752. "nd because possession must be in the concept of an owner in order to ripen into ownership by prescripon, it seems #uridically incompable wthat co=owners who do not rafy and may not even now the possessory acts of another co=owner, should be considered also in possession in the concept of owner.

A/1#%e . Pe/0on0 )ith #a4a#it& to a%ienate 4/o4e/ t& 5a& /eno$n#e 4/e0#/i41on a%/ead& o6tained, 6$t not the /ight to 4/e0#/i6e in the '$t$/e.

being appropriated may be the ob#ect of possession. )ince possession is an essenal element of prescripon, it follows that things which are not suscepble of appropriaon cannot be ac9uired by prescripon. %hus, common things, property of public dominion, and the intransmissible rights, cannot be ac9uired by prescripon.

-PNS TO THE RULE

%he following cannot be ac9uired by

prescripon Movables possessed through a crime @ands registered under the %orrens )ystem

NOTE 3nder "rt. !!04, prescripon does not run against the )tate and its subdivisions. %here is inconsistency between "rt. !!04 and the present arcle, as to prescripon against the )tate and its subdivisions. $hile under the present arcle, patrimonial property may be the ob#ect of prescripon, under "rt. !!04, prescripon does not run against the )tate and its subdivisions /irrespecve of the ind of property. %he intent of the law is to exclude patrimonial patrimony from the operaon of ac9uisive prescripon, it is liewise clear that the congress intended that only property not patrimonial in characterJ should be free from prescripon. &atrimonial property can be ac9uired by prescripon against the )tate or any of its subdivisions.

P/e0#/i41on i0 dee5ed to ha(e 6een ta#it%& /eno$n#ed )hen the /en$n#ia1on /e0$%t0 '/o5 a#t0 )hi#h i54%& the a6andon5ent o' the /ight a#$i/ed. 9F:;

A/1#%e . C/edito/0 and a%% othe/ 4e/0on0 inte/e0ted in 5aMing the 4/e0#/i41on ee#1(e 5a& a(ai% the50e%(e0 the/eo' not)ith0tanding the e84/e00 o/ ta#it /en$n#ia1on 6& the de6to/ o/ 4/o4/ieto/. 9F2;

RENUNCIATION IS UNILATERAL:enunciaon of prescripon already

CREDITORS "AY PLEAD PRESCRIPTION " current creditor of a

ac9uired is a unilateral act, and does not re9uire the acceptance of the person to be beneted by it. *o formality is re9uired for it1 it may even be tacit.

corporaon may interpose the plea of prescripon to prevent the corporaon from payig prescribed debts ahead of the current creditor.

TACIT RENUNCIATION$here a party acnowledges the correctness

NOTE ut prescripon pleaded by one creditor does not inure to

of a debt and promises to pay it a
the benet of another creditor.

NOTE " simple acnowledgment, which contains no new and posive promise to pay the debt which has prescribed, such as a promise to pay only U, or even a part of payment, does not amount to a renunciaon of the prescripon.

RENUNCIATION OID " renunciaon of prescripon in advance is void. %hus, no renunciaon can be made, at the me of entering into contract, of the right of pleading a prescripon which may therea
RENUNCIATION *Y REPRESENTATIES nly persons with capacity to

alienate property can renounce prescripon already obtained. 'ence, an administrator or executor is without the power to renounce or waive prescripon a
A/1#%e . A%% thing0 )hi#h a/e )ithin the #o55e/#e o' 5en a/e 0$0#e416%e o' 4/e0#/i41on, $n%e00 othe/)i0e 4/o(ided. P/o4e/t& o'

A/1#%e :. The 4/o(i0ion0 o' the 4/e0ent Tit%e a/e $nde/0tood to 6e )itho$t 4/e?$di#e to )hat in thi0 Code o/ in 04e#ia% %a)0 i0 e0ta6%i0hed )ith /e04e#t to 04e#i7# #a0e0 o' 4/e0#/i41on. 9F; A/1#%e 3. P/e0#/i41on a%/ead& /$nning 6e'o/e the ee#1(it& o' thi0 Code 0ha%% 6e go(e/ned 6& %a)0 4/e(io$0%& in 'o/#e 6$t i' 0in#e the 15e thi0 Code tooM ee#t the en1/e 4e/iod he/ein /e$i/ed 'o/ 4/e0#/i41on 0ho$%d e%a40e, the 4/e0ent Code 0ha%% 6e a44%i#a6%e, e(en tho$gh 6& the 'o/5e/ %a)0 a %onge/ 4e/iod 5ight 6e /e$i/ed. 9FF;

CHAPTER  P/e0#/i41on o' O)ne/0hi4 and Othe/ Rea% Right0 A/1#%e 2. A#$i0i1(e 4/e0#/i41on o' do5inion and othe/ /ea% /ight0 5a& 6e o/dina/& o/ e8t/ao/dina/&.


O/dina/& a#$i0i1(e 4/e0#/i41on /e$i/e0 4o00e00ion o' thing0 in good 'aith and )ith ?$0t 1t%e 'o/ the 15e 78ed 6& %a). 9F>a;

former. In both cases, the possessor acts in recognion of the rights of the owner.

RE
NOTE >rom the moment the possessor disgards the owner and exercise rights in opposion to that of the la(er, the possession is converted into one in concept of owner and can be the basis of prescripon.

+HEN POSSESSION CONSIDERED PU*LIC &ublic means the acts of

RE
en#oyment are executed in such a manner as to be manifest or visible to all, especially to the person against whom the possessopm is being adversely asserted. It must be nown to the owner of the thing. If the possession is publicly nown, it is presumed that the owner nows it, unless there is clear proof to the contrary.

CONERSION O! POSSESSION PEACE!UL $hen it is ac9uired and maintained without violence, +hen the 4o00e00ion 6egin0 in good 'aith, 6$t %ate/ on i0 #on(e/ted into 6ad 'aith, ho) %ong 0ho$%d the 4/e0#/i41on 6e, o/dina/& o/ e8t/aBo/dina/&=

physical or moral. %he possession connues to be peaceful even if the possessor should use such force as is reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion of the property /"rt. ?2K.

%here are possible soluons

UNINTERRUPTED It is connuous when the possessor has never 0

! 2

%he supervening bad faith erases the former possession in good faith, and extra=ordinary prescripon will run from the date of possession in bad faith %he prescripon will be extraordinary but the period will be counted form the me the possession began %he prescripon will be extraordinary but the possession in good faith shall be computed in the proporon that the period of extraordinary prescripon bears to that of ordinary prescripon.

NOTE %he last soluon appears to be the most acceptable, because it reNects the diCerence betweenb the 2 inds of prescripon and gives the proper value to possession in good faith. %he rst is inadmissible because it places a possessor who began in goof faith in a worse posion than the one who began in bad faith %he second is liewise unacceptable because possession in good faith and possession in bad faith are given idencal eCects.

A/1#%e . Po00e00ion ha0 to 6e in the #on#e4t o' an o)ne/, 4$6%i#, 4ea#e'$% and $ninte//$4ted. 9F; A/1#%e F. A#t0 o' 4o00e00o/& #ha/a#te/ e8e#$ted in (i/t$e o' %i#en0e o/ 6& 5e/e to%e/an#e o' the o)ne/ 0ha%% not 6e a(ai%a6%e 'o/ the 4$/4o0e0 o' 4o00e00ion. 9F; CONCEPT O! O+NER

TOLERANCE (. LICENSE LICENSE

A/1#%e >. Po00e00ion i0 inte//$4ted 'o/ the 4$/4o0e0 o' 4/e0#/i41on, nat$/a%%& o/ #i(i%%&. 9F; E!!ECT O! INTERRUPTION $hen prescripon is uninterrupted, all the benets ac9uired so far from the possession cease1 when prescpon runs again, it will be enrely a new one. %his disnguishes interrupon from suspension of prescripon.

SUSPENSION O! PRESCRIPTION In suspension, the past period is included in the compu taon, being added to the period a
A/1#%e . Po00e00ion i0 nat$/a%%& inte//$4ted )hen th/o$gh an& #a$0e it 0ho$%d #ea0e 'o/ 5o/e than one &ea/. The o%d 4o00e00ion i0 not /e(i(ed i' a ne) 4o00e00ion 0ho$%d 6e e8e/#i0ed 6& the 0a5e ad(e/0e #%ai5ant. 9Fa; A/1#%e . I' the nat$/a% inte//$41on i0 'o/ on%& one &ea/ o/ %e00, the 15e e%a40ed 0ha%% 6e #o$nted in 'a(o/ o' the 4/e0#/i41on. 9n;

"cts of a possessory character which are merely tolerat ed by bthe possessor or which are due to his license, do not constute possession.

" posive act of the owner in favor of the holder of the thing

ceased to manifest with external acts his intenon to exercise a right over the thing, whcin presupposes that he has never in fact ceased to exercise the right. It need no be absolute but only in relaon to the nature of the right exercised. It is interrupted if there has been no act of deprivaon of en#oyment of the things by a third person or any other act which interrupts prescripon.

A/1#%e . Ci(i% inte//$41on i0 4/od$#ed 6& ?$di#ia% 0$55on0 to the 4o00e00o/. 9F:a; A/1#%e . @$di#ia% 0$55on0 0ha%% 6e dee5ed not to ha(e 6een i00$ed and 0ha%% not gi(e /i0e to inte//$41on

TOLERANCE %he passive ac9uiescense of the owner to acts being performed by another which appear to be contrary to the rights of the

I' it 0ho$%d 6e (oid 'o/ %a#M o' %ega% 0o%e5ni1e0 I' the 4%ain1 0ho$%d de0i0t '/o5 the #o54%aint o/ 0ho$%d a%%o) the 4/o#eeding0 to %a40e


9; I' the 4o00e00o/ 0ho$%d 6e a60o%(ed '/o5 the #o54%aint. In a%% the0e #a0e0, the 4e/iod o' the inte//$41on 0ha%% 6e #o$nted 'o/ the 4/e0#/i41on. 9F3a;

NOTE $hile the registered owner who executed the tle which is the basis for prescripon, is not considered a third person, he is however, regarded as a third person with respect to a tle executed by another who is not registered owner. $hen the tle of rst transferee of a real right over the things is considered as a third person if his lte is recorded.

La#$e0ta (. G$e//e/o %he general rule declared in "rcle !!2? of the -ivil -ode is to the eCect that a suit brought and abandoned or decided against the plainC, is considered as never having been commenced.

%he me for prescripon to the pre#udice of those who are not considered as third persons with recorded tles, shall be counted from the commencement of the possession under tle of ownership, although the tle by virtue of which it is held may not have been registered.

E!!ECT O! RECOERY O! POSSESSION 3nder "rcles !!2! and !!22, in case of natural prescripon, the old possession loses all its #uridical eCects, and even if the possession is reac9uired, the old possession cannot be tacled to the new possession for purposes of prescripon. ut in case of civil interrupon, if the possession is recovered, it can be connected to the me that has elapsed as if it were in fact connuous, the period of interrupon is to be counted for the prescripon.

REGISTERED LANDS "dverse possession may not be allowed to defeat the ownerGs right to possessopn of land registered under the %orrens system1 otherwise, loss of the land by prescripon would be indirectly approved, in violaon of )ec. ?O of the @and :egistraon "ct. *either can prescriprion be allowed against the registered ownerGs hereditary successors because the la(er merely step into the shoes of the decede nt and merely the con nuaon of the personality of their predecessor in interest.

NOTE @aches, not prescripon may be set up as to the registered %he use of the phrase period of interruponJ is misleading because there is really no interrupon, as shown by the opening paragraph. %he possession is deemed connuous.

A/1#%e :. An& e84/e00 o/ ta#it /e#ogni1on )hi#h the 4o00e00o/ 5a& 5aMe o' the o)ne/0 /ight a%0o inte//$4t0 4o00e00ion. 9F; RECOGNITION *Y THE POSSESSOR

In order to interrupt prescripon, the recognion of the ownerGs right mut be made by the possessor. %he declaraon of a third person that the property does not belong to the possessor, when such declaraon has not been authori+ed or raQied by the possessor, does not interrupt the

land.

A/1#%e 2. The good 'aith o' the 4o00 e00o/ #on0i0t0 in the /ea0ona6%e 6e%ie' that the 4e/0on '/o5 )ho5 he /e#ei(ed the thing )a0 the o)ne/ the/eo', and #o$%d t/an05it hi0 o)ne/0hi4. 9F:>a; A/1#%e . The #ondi1on0 o' good 'aith /e$i/ed 'o/ 4o00e00ion in a/1#%e0 :3, :2, :, and :F o' thi0 Code a/e %iMe)i0e ne#e00a/& 'o/ the dete/5ina1on o' good 'aith in the 4/e0#/i41on o' o)ne/0hi4 and othe/ /ea% /ight0. 9F:; POSSESSION IN GOOD !AITH

possession of prescripon.

A0 to %and0 /egi0te/ed $nde/ the Land Regi0t/a1on A#t, the 4/o(i0ion0 o' that 04e#ia% %a) 0ha%% go(e/n. 9FFa;

3nder the -ivil -ode, a prescripve tle to real state is not ac9uired by the mere possession thereof, under claim of onwership, for a period of !0 years, unless it was srcinally ac9uired with #ust tle and good faithJ. Food faith in this connecon, while it is always to be presumed in the absence of proof to the contrary, re9uires a well= founded belief that the person from whom tle was received was himself the owner of the land with the right to convey. "nd unless the contrary is shown, the possessor of the land must be presumed to be in good faith.

RECORDED TITLES O! THIRD PERSONS %he owner of the thing at

GOOD !AITH %he posse ssor muts believe that the tle for his

the beginning of the prescripve period is not considered as a third person within the meaning of this rule. ut those who ac9uire their right subse9uently, relying on the registraon of ownership in the :egistry, must be considered as third persons, and they cannot be pre#udiced by the period of possession prior to the date of their ac9uision.

ac9uision is sucient1 it is not enough that he nows of no defect in it. %his belief must be founded and there is sucient basis when he believes that the transferor was the owner of the thing anc could transmit the owneship thereof.

A/1#%e 3. Again0t a 1t%e /e#o/ded in the Regi0t/& o' P/o4e/t&, o/dina/& 4/e0#/i41on o' o)ne/0hi4 o/ /ea% /ight0 0ha%% not taMe 4%a#e to the 4/e?$di#e o' a thi/d 4e/0on, e8#e4t in (i/t$e o' anothe/ 1t%e a%0o /e#o/ded and the 15e 0ha%% 6egin to /$n '/o5 the /e#o/ding o' the %ae/.

%he third, persons, however, must comply with the C %hat the ac9uision is by onerous tle %hat the ac9uision is from one who, according to the :egistry, can transmit tle %hat the ac9uision is registered %hat such third person has no nowledge of the prescripon

%he good faith must exist, not only at the beginning of the possession, but throughout the entre period re9uired for prescripon. %he -ode re#etcs :oman @aw principle that supevening bad faith does not pre#udice the prescripon, and follows the contrary rule of the common law.

A/1#%e F. !o/ the 4$/4o0e0 o' 4/e0#/i41on, the/e i0 ?$0t 1t%e )hen the ad(e/0e #%ai5ant #a5e into 4o00e00ion o' the 4/o4e/t& th/o$gh one o' the 5ode0 /e#ognized 6& %a) 'o/ the a#$i0i1on o' o)ne/0hi4 o/ othe/ /ea% /ight0, 6$t the g/anto/ )a0 not the o)ne/ o/ #o$%d not t/an05it an& /ight. 9n;


REOCA*LE TITL EB ne in which the transferor has made a A/1#%e >. The 1t%e 'o/ 4/e0#/i41on 5$0t 6e t/$e and (a%id. 9F:; A/1#%e . !o/ the 4$/4o0e0 o' 4/e0#/i41on, ?$0t 1t%e 5$0t 6e 4/o(ed it i0 ne(e/ 4/e0$5ed. 9F:a;

reservaon by virtue of which the right of the posse ssor may disappear, cannot serve as a basis for a prescripon1 but once the reservaon becomes ineCecve, the period that has run can be counted for the prescripon. !"$ a sale witht the right to repurchase

TITLE !OR PRESCRIPTION >or purposes of prescripon, the tle of the possessor must be #ust, true, valid, and proved.

NOTE " voidable tle, so long as it has not been annulled, can be the basis of ordinary prescripon.

@UST TITLEB"n act which has for its purpose the transmission of ownership, and which would have actually transferred ownership if the grantor had been the owner. %his vice or defect is the one cured by prescripon. !"a#ples$ sale with delivery exchange donaon succession daon in payment

'owever, the C. do not constute tle lease of things loan deposit all contracts which do not transmit property rights paron compromise court decisions Rao$ "ll the abovemenoned are all declaratory of property rights but do not transmit them.

TRUE TITLEB %he tle for prescripon must be true. %o be true, the tle must exist actually, and not merely in the mind of the possessor. " legally non=existent tle is without value. %hus, a will cannot be a sucient tle if it has been revoed by an unnown subse9uent will which is later discovered. )o is a tle that is absolutely simulated. ut where there is only relave simulaon, the true tle hidden behind the cous one will suce. 'owev er, a simulated tle, which conceals a prohibited act, cannot be the basis for prescripon.

$hen the tle is sub#ect to a suspensive condion, the period of prescripon begins tot run from the fulllment of the condion1 if the condion is resolutory the period begins at once, without pre#udice to the eCect of the resoluon by the condion which may later happen.

TITLE "UST *E PROED %he re9uirement that #ust tle must be proved for purposes of prescripon, is an excepon to the general rule embodied in arcle 7?!, which presumes a #ust tle for every possessor in the concept of owner. %he excepon is based on the oCensive, and not merely defensive, character of prescripon, which re9uires greater guarantees.

A/1#%e . The o)ne/0hi4 o' 5o(a6%e0 4/e0#/i6e0 th/o$gh $ninte//$4ted 4o00e00ion 'o/ 'o$/ &ea/0 in good 'aith. The o)ne/0hi4 o' 4e/0ona% 4/o4e/t& a%0o 4/e0#/i6e0 th/o$gh $ninte//$4ted 4o00e00ion 'o/ eight &ea/0, )itho$t need o' an& othe/ #ondi1on. +ith /ega/d to the /ight o' the o)ne/ to /e#o(e/ 4e/0ona% 4/o4e/t& %o0t o/ o' )hi#h he ha0 6een i%%ega%%& de4/i(ed, a0 )e%% a0 )ith /e04e#t to 5o(a6%e0 a#$i/ed in a 4$6%i# 0a%e, 'ai/, o/ 5a/Met, o/ '/o5 a 5e/#hant0 0to/e the 4/o(i0ion0 o' a/1#%e0 ::F and :>: o' thi0 Code 0ha%% 6e o60e/(ed. 9F::a; A/1#%e . "o(a6%e0 4o00e00ed th/o$gh a #/i5e #an ne(e/ 6e a#$i/ed th/o$gh 4/e0#/i41on 6& the oende/. 9F:3a; A/1#%e . O)ne/0hi4 and othe/ /ea% /ight0 o(e/ i55o(a6%e 4/o4e/t& a/e a#$i/ed 6& o/dina/& 4/e0#/i41on th/o$gh 4o00e00ion o' ten &ea/0. 9F:2a;

!ALSE TITLEB ne whic h does not exis t but is believed by the possessor to exist, may or may not be sucient. %he false belief may be based on an error of fact or of law If the mistae of fact refers to an act of a third person, the tle is sucient for prescripon1 if it refers to an act of a third person, the tle is sucient for prescripon if it refers to an act of the possessor himself, it is not sucient if the error of law refers to the validity of the act, then the tle is not ade9uate if the mistae refers to a fact in the applicaon of a rule of law, there will be an ade9uate tle

NOTE If one buys from an insane party, believing that an insane person can validly alienate property, the tle is not sucient1 but if he did not now tha t the vend or was insane, then the tle is sucient.

A/1#%e :. In #a0e the ad(e/0e #%ai5ant 4o00e00e0 6& 5i0taMe an a/ea g/eate/, o/ %e00 than that e84/e00ed in hi0 1t%e, 4/e0#/i41on 0ha%% 6e 6a0ed on the 4o00e00ion. 9n; CONSTRUCTIE

POSSESSION %he possession upon which prescripon is based, is not limited to the area actually occupied, but covers the area over which the possession is asserted. %he doctrine of construcve possession applies when the possession is under tle calling for the whole. %he actual possession of part of the property is deemed to extend to the whole as shown by the limits or boundaries described in the tle. %he actual possession of a part of the property may be through a tenant. It does not apply, however, where the possession is without tle.

A/1#%e 3. Po00e00ion in )a/15e, )hen the #i(i% #o$/t0 a/e not o4en, 0ha%% not 6e #o$nted in 'a(o/ o' the ad(e/0e #%ai5ant. 9n;


A/1#%e 2. O)ne/0hi4 and othe/ /ea% /ight0 o(e/ i55o(a6%e0 a%0o 4/e0#/i6e th/o$gh $ninte//$4ted ad(e/0e 4o00e00ion the/eo' 'o/ thi/t& &ea/0, )itho$t need o' 1t%e o/ o' good 'aith. 9F:Fa; +HEN TTILE OID ;ven when tle of the possessor is void such as an oral donaon of real property, he may ac9uire ownership by prescripon under the provisions of this tle.

A/1#%e . In the #o54$ta1on o' 15e ne#e00a/& 'o/ 4/e0#/i41on the 'o%%o)ing /$%e0 0ha%% 6e o60e/(ed The 4/e0en t 4o00e00o/ 5a& #o54%ete the 4e/iod ne#e00a/& 'o/ 4/e0#/i41on 6& ta#Ming hi0 4o00e00ion to that o' hi0 g/anto/ o/ 4/ede#e00o/ in inte/e0t

Stat$te o' %i5ita1on0 %hese are acts liming the me withinwhich acons shall be brought. It does not confer any right of acon but are enacted to /estrict the period within which the right, otherwise unlimited, might be asserted. %hey are not ma(ers of substanve rights but are available only as defenses. %he purpose of the statute is to protect the diligent and vigilant not those who sleep on their rights. 'owever, the basic prinicple most genereally relied upon by the authoriRes is that statute of limitaons are statutes of repose, the ob#ect of which is to suppress fraudulent and stale claims from springin g up at great distances of me and surprising the pares or their representaves when all the proper vouchers and evidences are lost or the facts have become obscure from the lapse of me or the defecve memory or death or removal of witness.

It i0 4/e0$5ed that the 4/e0 ent 4o00e00o/ )ho )a0 a%0o the 4o00e00o/ at a 4/e(io$0 15e, ha0 #on1n$ed to 6e in 4o00e00ion d$/ing the inte/(ening 15e, $n%e00 the/e i0 4/oo' to the #ont/a/&

%he prescripon of acons in -- contemplates civil acons and not criminal acons.

The 7/0t da& 0ha%% 6e e8#%$ded and the %a0t da& in#%$ded. 9F3>a;

P/e0#/i41on and %a#he0

TACKING O! POSSESSION In order that there cab be a tacing of possession, the pres ent possessor must have obtained his possession from the previous possessor. %here must be privity between them. %acing is possible only when there is succession of rights between the predecessor and the successor. " mere usurper cannot invoe the possession of any previous possessor.

%he defense of laches applies independently of prescripon. It is diCerent from statute of limitaons.

P/e0#/i41on

La#he0

-oncerned with the fact of delay "ma(erofme

DI!!ERENT CHARACTER O! POSSESSION

-oncerned with the eCect of delay " 9uesron of ine9uity of permiRng a claim to be enforced, this ine9uity being founded on some change of condion of the property or the relaon of pares. *otstatutory "ppliestoe9uity *ot

$hen the predecessor is in good faith, and the successor is in bad faith, the la(er can assert only extra=ordinary prescripon. %he more reaosonable view in compung the period is that the taci ng of the posse ssion should be permi(ed in such case. %he period should be computed in the same manner as where the character of the possession of a person changes while the period is running1 that is, the period of possession in good faith should be computed in the proporon that the period of extra=ordinary prescripon bears that of ordinary prescripon.

)tatutory "ppliestolaw asedonxedme

If the possession of the predecessor was in bad faith and that of the successor is in good faith, the present possessor can claim under ordinar y prescripon, but in this case, the posession of the predecessor cannot be counted. %he period of bad faith possession cannot be availed of for ordinary prescripon. %he present possessor in good faith, however, should not be limited to ordinary prescripoon. %he period of possession of the predecessor, although in bad faith, may have been so long that it would be benecial

Ee#t o' %a40e o' 15e It has the eCect of exnguishing the acon.

CHAPTER  P/e0#/i41on o' A#1on0 &rescripon of acons or limitaon of acons refe r to the me within which an acon may be brought, or some act done, to preserve a right. It is a legal and not a natural cause of the exnguishnent of obligaons.

A/1#%e F. A#1on0 4/e0#/i6e 6& the 5e/e %a40e o' 15e 78ed 6& %a). 9F3; Lea4 &ea/ in 4e/iod >ebraury 24 and 2K should be counted as separate

days

not

as

one

day.

ut there is no exncve prescripon unless the period provided by law expires. Mere delay in the enforcement of a claim does not result in any reducon or loss of right, unless the full period re9uired by law for prescripon has expired.

P/e0#/i41on to 6e 4%eaed %he bar of statute of l imitaons cannot be asserted as a defense unless it is specically pleaded in the answer and proven with the same degree of certainty by which any essenal allegaon in the pleadings is established. )ince it is a defense which the 8: alone can plead, and the obligaon subsists unl he avails himself thereof, the courts of #usce cannot supply the defense if the 8: himse lf does not do so. It is thus error to permit pro of of prescripon if it has not been defensively pleaded and such proof is ob#ected to. %he right may be waived or renounced. It is deemed waived if not mely raised or pleaded before or during the hearing of the case. 'owerver, if it is apparent on the face of the complaint, it may be favorably considered even a

A/1#%e >. A#1on0 to /e#o(e/ 5o(a6%e0 0ha%% 4/e0#/i6e eight &ea/0 '/o5 the 15e the 4o00e00ion the/eo' i0 %o0t, $n%e00 the 4o00e00o/ ha0 a#$i/ed the o)ne/0hi4 6& 4/e0#/i41on 'o/ a %e00 4e/iod, a##o/ding to a/1#%e0 , and )itho$t 4/e?$di#e to the 4/o(i0ion0 o' a/1#%e0 ::F, :>:, and . 9F3a;

9; U4on a $a0iB#ont/a#t. 9n; A/1#%e 3. The 'o%%o)ing a#1on0 5$0t 6e in01t$ted )ithin 'o$/ &ea/0 U4on an in?$/& to the /ight0 o' the 4%ain1

A/1#%e . Rea% a#1on0 o(e/ i55o(a6%e0 4/e0#/i6e ae/ thi/t& &ea/0. Thi0 4/o(i0ion i0 )itho$t 4/e?$di#e to )hat i0 e0ta6%i0hed 'o/ the a#$i0i1on o' o)ne/0hi4 and othe/ /ea% /ight0 6& 4/e0#/i41on. 9F3;

U4on a $a0iBde%i#t

A/1#%e . A 5o/tgage a#1on 4/e0#/i6e0 ae/ ten &ea/0. 9F3a;

Ho)e(e/, )hen the a#1on a/i0e0 '/o5 o/ o$t o' an& a#t, a#1(it&, o/ #ond$#t o' an& 4$6%i# oJ#e/ in(o%(ing the e8e/#i0e o' 4o)e/0 o/ a$tho/it& a/i0ing '/o5 "a/1a% La) in#%$ding the a//e0t, deten1on ando/ t/ia% o' the 4%ain1, the 0a5e 5$0t 6e 6/o$ght )ithin one 9; &ea/. 9A0 a5ended 6& PD No. 2::, De#. , F>.;

Not i54/e0#/i416%e %he fact that a mortgage is registered does not

In?$/& to /ight0 %he !=year period xed by the rules of court within

mae the acon to foreclose it imprescripble.

which a peon for 8'o arranto should be led, counted from the date of ouster does not apply to a case where & is separated from his employment for un#usbale causes. )uch un#used separaon from employment is an in#ury to the rights of the & and the acon may be brought within ? years under this arcle.

Ee#t o' inte/e0t It is not possible to separate legally the interest or any part thereof from the principal itself1 hence, if the acon to recover the mortgage debt itslef has prescribed, the acon to recover the interest must also be prescribed.

A#1on on '/a$d It prescribes in ? years from discovery of the fraud. A/1#%e . The 'o%%o)ing /ight0, a5ong othe/0 04e#i7ed e%0e)he/e in thi0 Code, a/e not e81ng$i0hed 6& 4/e0#/i41on To de5and a /ight o' )a&, /eg$%ated in a/1#%e 3F To 6/ing an a#1on to a6ate a 4$6%i# o/ 4/i(ate n$i0an#e. 9n; Othe/ I54/e0#/i16%e a#1on0 "mong acons that have been held as imprescripble are "con by the government or government enty1 "con for mandamus1 "con to enforce an express trust, as long as the trustee does not repudiate the trust1 "con to 9uiet tle to property in oneGs possession1 "con or defense to declare a contract or #udgment void ab inio1 and "con of the registered owner to recover his land.

A/1#%e . The 'o%%o)ing a#1on0 5$0t 6e 6/o$ght )ithin ten &ea/0 '/o5 the 15e the /ight o' a#1on a##/$e0 U4on a )/ien #ont/a#t U4on an o6%iga1on #/eated 6& %a)

U4on a $a0iBde%i#t where real property which belongs in ownershio to 8 and over which he was amd has always been in possession but by mistae of the cadastral cler came to be tled in !K57 in the name of @, who had never claimed it and who new all along that he was not the owner there of but had only a paper tle thereto, never bothered to disturb 8Gs pssession save only in !K?4 when he sought to do so, thera
A/1#%e 2. The 'o%%o)ing a#1on0 5$0t 6e 7%ed )ithin one &ea/ !o/ 'o/#i6%e ent/& and detaine/ !o/ de'a5a1on. 9n; A/1#%e . The %i5ita1on0 o' a#1on 5en1oned in a/1#%e0 > to , and  to 2 a/e )itho$t 4/e?$di#e to tho0e 04e#i7ed in othe/ 4a/t0 o' thi0 Code, in the Code o' Co55e/#e, and in 04e#ia% %a)0. 9n;

U4on a ?$dg5ent. 9n;

A/1#%e F. A%% othe/ a#1on0 )ho0e 4e/iod0 a/e not 78ed in thi0 Code o/ in othe/ %a)0 5$0t 6e 6/o$ght )ithin 7(e &ea/0 '/o5 the 15e the /ight o' a#1on a##/$e0. 9n;

I54%ied t/$0t0 $hen property is registered in anotherGs name, an

Right to #o%%e#t ta8e0 @imitaons upon the right of the government

implied or construcve trust is created by law in favor of the true owner. %he acon for reconveyance of the tle to the righQul owner prescribes in !0 years from the issuance of the tle. ut if fraud has

to assess and collect taxes will not be presumed in the absence of clear legislaon to the contrary, and where the government has not by express statutory provision provided a limitaon upon its right to

been commi(ed, and this is the basis of acon, not implied trust, the acon will be barred a
assess unpaid taxes, such right is imprescripble.

A/1#%e :. The 'o%%o)ing a#1on0 5$0t 6e #o55en#ed )ithin 0i8 &ea/0

A/1#%e :>. The 15e 'o/ 4/e0#/i41on 'o/ a%% Mind0 o' a#1on0, )hen the/e i0 no 04e#ia% 4/o(i0ion )hi#h o/dain0 othe/)i0e, 0ha%% 6e #o$nted '/o5 the da& the& 5a& 6e 6/o$ght. 9F3F; /

9; U4on an o/a% #ont/a#t

Ti5e '/o5 )hi#h 4e/iod #o54$ted %he principal and most important point when we examine the character, condions and


conse9uences of prescripon of acons under -ode is the me from which we are to compute the period xed by law for the exnguishment of the abandoned right of acon. In cases where there is no special provision for such computaon, recourse must be had to the rule that the period must be counted from the day on which the corresponding acon could have been instuted. It is the legal possibilit y of bringing the acon which determines the starng point for the computaon. %he period should not be made to retroact to the date of execuon of the contract.

A##/$a% o' #a$0e o' a#1on It arises when that which should have been done is not done or that which should not have been done is done. .ssenal elements*

;xistence of a legal right in the &1 $ith a corresponding legal duty in the defendant1 " violaon or breach of that right or duty with conse9uenal in#ury of damage to the plainC, for which he may maintain an acon for appropriate relief. >rom that moment, the period of prescripon of acon accrues or begins to run.

P/e0#/i41(e 4e/iod0 $hen windows were opened in the building of a neighbor in violaon of law, the period of prescripon for the acon to close the same must be counted from the day they were opened. In an obligaon to pay upon receipt of an inheritance by the debtor, prescripon beins to run from the date of suhc receipt because when the obligaon is sub#ect to a suspensive condion, prescripon runs only from the happening of the condion. ut where the obligaon is without date of maturity, or a note is payable on demand, prescripon begins to run from the date of the note or obligao n and not from demand. %his last rule does not apply to liability for the unpaid balance of a subscripon to shares of a corporaon1 in this case, the liability of the subscriber does not arise unl call or demand for payment by the board of directors, and therefore, prescripon would run only from such demand. $hen a contract provides for the payment of money within a year, with the privilege of extension for another year at the opon of the creditor, a delay by the debtor, or the failure of the creditor to insist upon payment, does not import a tacit renewal, and prescripon will run from the end of the rst year. $hen an acon is based on fraud, deceit, the period of prescripon will begin to run on the date of the discovery of the fraud or deceit. In case of 9uasi=delict, the prescripve period starts from the day the 9uasi=delict occurred or was commi(ed.

$hen the acon is for paron, and reconveyance based on implied or construcve trusts, the me for prescripon begins to run from the date of issuance of the srcinal cercate of tle because the registraon of an instrument in the oce of the :egister of 8eeds constutes construcve noce to the whole world. %he period begins to run from the me a possessor was made aware of a claim adverse to his own. %he period of prescripon of the right of the nearest relave, as intestate heir to some properes, to 9ueson the validity of a purported will or donaon mors causa made by the decedent, does not commence to run unl a third person claims a right under such instrument where in the meanme the intestate heir has been in possession of the properes and there was no occasion to see #udicial annulment of the instrument. %he prescripve period within which to bring acon to set aside a simulated wri(en deed of pacto de retro sale starts only when the alleged vendees made nown their intenon by overt acts not to hide by the true agreement, and not from the date of execuon of the contract.

A/1#%e :. The 15e 'o/ the 4/e0#/i41on o' a#1on0 )hi#h ha(e 'o/ thei/ o6?e#t the en'o/#e5ent o' o6%iga1on0 to 4a& 4/in#i4a% )ith inte/e0t o/ ann$it& /$n0 '/o5 the %a0t 4a&5ent o' the ann$it& o/ o' the inte/e0t. 9F2>a; O*LIGATIONS +ITH INTEREST%he rule in this arcle that the period of prescripon in obligaons with interest runs only from the last payment of interest, is applicable only to cases where the principal debt is already due. $here there is a period for the principal obligaon which is not yet due, payment of interest at spulated intervals does not cause the running of interest at spulated intervals does not cause the running of the period of prescripon, which will commence only a
A/1#%e :. The 4e/iod 'o/ 4/e0#/i41on o' a#1on0 to de5and the '$%7%%5ent o' o6%iga1on de#%a/ed 6& a ?$dg5ent #o55en#e0 '/o5 the 15e the ?$dg5ent 6e#a5e 7na%. 9F2; +HEN @UDG"ENT *ECO"ES !INAL T/ia% #o$/t S$4/e5e Co$/t o/ Co$/t o' A44ea%0

3pon the expiraon of the period for appeal, therea
A/1#%e :. The 4e/iod 'o/ 4/e0#/i41on o' a#1on0 to de5and a##o$n1ng /$n0 '/o5 the da& the 4e/0on0 )ho 0ho$%d /ende/ the 0a5e #ea0e in thei/ '$n#1on0.


The 4e/iod 'o/ the a#1on a/i0ing '/o5 the /e0$%t o' the a##o$n1ng /$n0 '/o5 the date )hen 0aid /e0$%t )a0 /e#ognized 6& ag/ee5ent o' the inte/e0ted 4a/1e0. 9F2;

$hen prescripon is interrupted by a #udicial demand, the full period for the prescripon must be reconed from the cessaon of the interrupon.

NOTE "lthough an opon is started within the prescripve period, if ACTION TO CO"PEL ACCOUNTING %he period of prescrip on of an acon to compel an accounng by #oint account partner begins to run from the date of rerement of the members from whom accounng is demanded. It begins to run from the dissoluonof a partnership when the nal accounng is done.

CURRENT ACCOUNTS %here is a disncon as to the me when the period of prescripon begins to run in mutual current accounts and in simple current open accounts. In the former, the statute of limitaions begins to run on the date of the last item1 while in the la(er, the statute begins to run from the date of each parcular item.

the plainC desists in its prosecuon or #udgment is uncondionally stayed for one reas on or another, the runni ng of the perio d of limitaons is not suspended. %he pares are exactly in the same posion as if no acon had been commenced at all.

+RITTEN E-TRAB@UDICIAL DE"AND )ince exncve prescripon is based on presumed abandonment of a right, it is obvious that the running of the period shall be interrupted when a demand is made by the creditor upon the debtor before the lapse of the period xed by law. %he burden of proof to show such demand is upon the creditor. %he law re9uires that such demand be in wring, hence, a verbal deman d upon the debto r is not suci ent to interrupt or renew the prescripve period.

+RITTEN ACKNO+LEDG"ENT O! DE*T $hen there is a mutual, open, and curr ent account between 2 pares it is said that it implies that they have mutually consented that each item shall not constute an independent debt immediately, to be paid or enforced at once but that the items occuring from me to me, in favor of the respecve pares, shall operate as mutual set=oCs, and that the shi
In

exncve prescripon, the interrupon through acnowldgment of the creditorGs right can tae place only when such acnowledgment is in wring.

%here must always be a wring but the recognion of the debt may be either expressly stated therein or may be implied therefrom. %he law does not re9uire express acnowledgment. !"a#ples$

$hen an accounng has been made betweeb the pares in their current account dealings, the right of acon accrues, and the period of prescripon begins to run, on the date when the last balance was strucm and not when the business relaons terminated.

" promise to pay a debt can be considered in no other light but an acnowledgment of its existence, and interrupts prescripon

A/1#%e :. The 4e/iod d$/ing )hi#h the o6%igee )a0 4/e(ented 6& a 'o/t$ito$0 e(ent '/o5 en'o/#ing hi0 /ight i0 not /e#Moned again0t hi5. 9n;

%he lisng of a mortgage indebtedness by the debtor in his schedule of liabilies led in insolvency procee dings, is sucient acnowledgment of such indebtedness for the purpose of interrupng prescripon.

E!!ECT O! DESTRUCTION O! @UDICIAL RECORDS "ll terms or periods xed by law or regulaons shall cease to run from the date of destrucon of the records of the case, and shall only begin to run again onn the date when the pares or counsel shall have received noce to the eCect that the records have been constuted.

A/1#%e ::. The 4/e0#/i41on o' a#1on0 i0 inte//$4ted )hen the& a/e 7%ed 6e'o/e the #o$/t, )hen the/e i0 a )/ien e8t/a?$di#ia% de5and 6& the #/edito/0, and )hen the/e i0 an& )/ien a#Mno)%edg5ent o' the de6t 6& the de6to/. 9F2a;

!"a#ples o ins'9cient ac/noledg#ent$

Mere oCer to compromise a suit upon a supposed debt 8enial of the correctness of the account claiming that the same is exorbitant.

NOTE %he acnowledgment of the debt may be made by a legal representave. %hus, a guardian, executor, or administrator, may acnowledge a debt so as to interrupt prescripon.

Ee#t o' a#Mno)%edge5ent y acnowledging a debt, a 8: may !ILING O! ACTION IN COURT %he ling of an acon interrupts exncve prescripon as to the pares defendants therein. %he interrupon lasts during the pendency of the acon. %he prescripon period runs anew ailing a moon for reconsideraon connues the suspension of the running of the period of prescripon, which runs again a
renew the obligaon and interrupt the prescripon, so as to mae it run only from the date of the acnowledgement. %hus, where a decedent a(empted to mae a will, which was not valid because of its form, but which contained acnowledgment of a debt in favor of another, it was held that prescripon ran against the claim, not from the death of the decedent but from the date of the invalid will.

Ee#t o' 4a/t 4a&5ent It cannot interrupt the period of prescritpion. " paral payment before the period has elapsed is undoubtedly an implied acnowledgement of the debt. ur present re9uires that the acnowledgement, in order to interrupt prescripon, must be wri(en1 hence, the legal impossibility of


considering payment as an acnowledgement sucient to interrupt prescripon.

Othe/ #a$0e0 not inte//$41ng %he death of 8: does not interrupt the running of the statute of limitaons because the -: has at his disposal appropriate means for the prosecuon of an acon to enforce the collecon of his claim. %he transfer of the right to another person does not suspend the running of the period of prescritpion because once it begins to run, it never stops unl legally interrupted. %he instuon of criminal acon cannot have the eCect of interrupng the instuon of a civil acon based on a 9uasi=delict. "n order to stay execuon of a #udgment does not suspend the running of the prescripon against it. -onnement in #ail is not one of the grounds by which prescripon of an acon may be interrupted. %he exncon of the debt of one of various #oint 8:s does not necessarily aCect the debt of the others, and the acnowledgment of the debt by him will not stop the running of the statute of limitaons as to them.

RE!ERENCE %@;*%I*, ":%3: M., Co##entaries and 'rispr'dence on the Ciil Code o the Philippines , Aol. A., -entral oo &ublishing, -o., Inc. !KK!

Hizon Notes - Partnership, Lease and Prescription.doc

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