EFECTO DE RASCADO

(Note: Q – Ma‘am‘s question, A – student‘s answer, C – Ma‘am‘s comment)

Q: As a review of Article 1811, can you state the nature of a partner‘s right in a specific partnership property?

A: Under Article 1811, a partner‘s right over the specific property of the partnership cannot be assigned. Second, he or she has equal access to the possession of the specific properties, however as discussed in the previous discussion, they do not really act as co-owners but they have equal right to possession for the specific properties. Next, the right of a partner over the specific property of the partnership cannot be attached in any action against a partner in a partnership.

Q: Only attachment?

A: Attachment and execution ma‘am. And then it is not subject to legal support under Article 233.

Q: Why is the right is not assignable?

A: The right is not assignable ma‘am because according to the discussion in the book, in a specific property it is impossible to

determine the particular interest of a partner over that specific property. However in the succeeding articles, it can be gleaned that if ever the partner has a debt or an obligation with a third person, he can put it as a security the interest but not the specific property.

C: So take note, under Article 1811, the right given to any partner is only the right to equal possession of property. Each partner is said to be possessed with a joint interest in the whole interest of the partnership property but does not own individually any particular article or any separate part or aliquot part thereof. So when we say right to equal protection, what does this right to equal possession include? Right to equal possession includes the use and control of the said property including the power of sale and dispossession such as applying partnership property to partnership debts even without the consent of other partners. When you say again right to equal possession of the property, it must be possession, right to possess or use the said specific property only for partnership purposes.

Equal possession for partnership purposes. That is the general rule. So if a partner possesses that specific partnership property for partnership purposes, it can be done even without the consent of the other partners because the said right to possess is embodied under Article 1811.

Q: Example, if that right of equal possession is not for partnership purposes, is that allowed?

C: As a general rule, that is not allowed unless the other partners consent.

Q: What are the limitations to this right of equal possession?

C: First limitation, it extends only to partnership purposes. Thus a partner has no right to possess if it is for any other purpose without the consent of his other partners.

Q: If that partner possess without the consent of other partners, what is his liability?

C: He is accountable for the value of such use as well as for any profits that he may have derived therefrom.

Q: If the said partner converts partnership money to his own use, what is his liability?

A: Ma‘am, I think he should be liable for that amount including any criminal liability that he may be charged like for example estafa ma‘am.

C: He shall be liable for estafa. Second, civilly liable for the amount he converted including interest and damages from the time of such conversion. Okay, criminal and civil liability. Another principle under Article 1811 is that a partner‘s interest in specific partnership property, it is taken out of reach of his individual creditors. That‘s why it cannot be subject to any attachment or execution because of this principle. Again, under Article 1811, the general premise is that a partner has no personal property in any specific partnership property and he has no right to possess or use it except for partnership purposes only.

Q: Can a partner‘s interest in the partnership be assigned?

A: With respect to the interest in specific property ma‘am, then it is assignable. However with respect to the partner‘s interest in the whole partnership, then it is assignable.

Q: Is that subject to attachment or execution (partner‘s interest in the partnership)?

A: No ma‘am. It depends on who is the creditor ma‘am. If the creditor is that of the partnership, then the interest of the partners may be garnished, attached or executed. However the personal creditors of the partners, then it is not can be executed or garnished.

Q: So your stand is dependekung personally liable sya to the said creditor or the said creditor is the creditor of the partnership? Isn‘t it that under Article 1812, a partner‘s interest in the partnership is a share of a profit and a surplus which means that the said interest is the partner‘s own property?

A: Yes ma‘am, that‘s what I‘m saying ma‘am.

Q: So if that‘s his own property, is it not subject to attachment, garnishment or execution?

A: However ma‘am the personal creditor of a partner may avail of a charging order wherein the creditor may file before the competent court to satisfy his unsatisfied claim against the partner. Because the partner is entitled to income or profit in every year, then that income which will accrue will satisfy. So my answer is yes, a partner‘s interest may be subject to the execution on the charging order.

Q: Okay, nagskipka. When you say charging order, how can you avail of that charging order? In fact sabimo that is issued by the court. So how can you avail of that remedy? What is your procedure if you want to avail of that remedy?

A: Receivership ma‘am.

C: Receivership?! Nagskipkakasi.Sige, wag nalangyan.

Q: When can a partner determine his share in the partnership profits?

A: With respect to profits ma‘am, he may determine his interest depending on how they will make an account in their income statement ma‘am.

Q: When can a partner determine his share in a partnership profits? How do you define profits?

A: Profits is the net amount of revenue over expenses.

C: So when can you determine profits?

A: A partner can determine it annually, semiannually or even quarterly because the partnership will file an Income Tax Return in the BIR.

Q: So you are an accountant? So what happened in the case of De Lua v. Castillo?

A: In this case ma‘am, partners are De Lua and Castillo. They formed a partnership. Thereafter they agreed that a certain fishpond which will eventually be granted to one of the partners and they will divide it equally. Eventually, the fishpond was granted. Then now they decided to divide it. The question here is whether or not the fishpond is within the terms of the specific property that can be possessed by each of the partners, thus they can divide it. Well according to the Supreme Court, the interest or specific property in the partnership specifically 1811 only refers to tangible assets and by tangible means cars, personal properties, etc. However the fishpond forms part of the public domain which does not fall under tangible. In fact it is an intangible asset because it is a right or a privilege granted by the State. So it is not a tangible property, hence not falling under Article 1811 of the Civil Code.

Q: So under Article 1811, when you say specific partnership property, it refers to what kind of property?

A: Only tangible property.

Q: When can a partner determine his share of profits?

A: Ma‘am, when there is already accounting of profits of the revenue minus expenses in order for the profit to be determined. Usually this happens when there is dissolution of the partnership and there has already a winding up.

Q: I‘m not familiar in accounting. When you say accounting, does that presuppose liquidation?

A: Yes ma‘am.

Q: Is dissolution, is that synonymous to dissolution.

A: No ma‘am. Profit is sales less revenue. And it may be determined annually ma‘am.

(Note: Accounting is the art of identifying, classifying, recording business transactions within a given period of time and

communicating it to the interested business users. In order to determine your share in the profit, accounting is necessary because in accounting you will know whether or not your company is operating at a profit or at a loss. Profit is simply revenue/sales less expenses.

Halimbawa, magbentakangisang candy.Binilimongtagpiso, binentamong tag dos, di may profit kanapiso (sale na dos less expense monapiso). That is simple accounting. However, in an actual business scenario, there are a lot of business transactions of your sale, expenses, etc. Aside from your capital in purchasing your products (if for example your partnership is engaged in buy and sell), you have other factors to consider such as your expenses to electricity, wages of your employees, etc. in order for you to determine the profit of your partnership. Now, as to question on when you say accounting, does that presuppose liquidation? My unsolicited opinion is no. Why? Aside from the requirement by the BIR, SEC and other authorities for you to submit you financial statements annually for tax purposes, etc. (before you can submit your financial statements, accounting is necessary because your financial statements reflect the profit that you have earned for a givenperiod , usually 1 year), the rendering of accounting would depend on the need of the interested user. Of course in a partnership, the interested users are primarily the partners themselves who are presumably the most interested persons to know the result of their business operation. Example, nagjoinkang partnership. After 3 months,

nafeelmonaparang may anomalyangginagawaang partner mo. So paramacheckmo, magdemandkangayonsakanya to render accounting. Tanunginmosya, ―pare, anongnagyarisa business natin? May kita pa batayo, parangnilulustaymonaangperanatin ah?‖

So in rendering accounting, he should show to you what happened to the partnership operations and the financial situation of your partnership at a given period of time. Saannapunta at anongnangyarisaperanyo. After nyamagrenderng accounting,

narealizemonawalanamanpalasyangginagawanganomalya, then di kanamagliliquidation. It does not necessarily mean that there is

already liquidation when you render accounting. Okay?! It would also be remembered in our previous lessons that when a partner engaged in a competing business against the business of our partnership without being authorized to do so, he is required to render accounting to other partners regarding the profit but he alone shall shoulder the losses if any. In that case, magdemandkasakanyato render accounting paramalaman kung may kinitasyadoonsa competing business niya. Kung meron, share kayo. Kung nalugisya, sakanyalangyon kaynganungnienter. Again, rendering of accounting does not presuppose liquidation and winding up. But of course, pag mag liquidation or winding up kayo, necessary namagrenderng accounting paramalamanmo kung magkanoang share

namakukuhamosa partnership.)

Q: In relation to Article 1812, is a partner‘s interest deemed to be a debt of the partnership?

A: No ma‘am. Since the partnership is not a debtor of the partners, the partners‘ interest are not debts of the partnership.

Q: Can you please tell me the facts of the case of Navarro vs. Hon. Despidido.

A: (I can‘t clearly hear it so please check nalang your digests ha regarding the facts of this case)

Q: So what property relations existed between Karen Go and her husband?

A: Conjugal partnership of gains ma‘am.

Q: So if the property relation between the parties is conjugal partnership of gains, is it governed by the rules of partnership?

A: Pursuant to Art 108 ma‘am, conjugal partnerships shall also to be governed by the rules of partnership, or the rules of a contract of partnerships in all that is not in conflict with what is also determined by the spouses in their marriage settlement. So a conjugal

partnership of gains itself ma‘am is also governed by Article 147 of the Civil Code ma‘am. This provision also states that it shall be governed by the rules of the contracts of partnership also and all that is not in contrary with what is expressly provided in the chapter or by the spouses in their marriage settlement. So being the co-owner of such properties ma‘am, Karen Go (the wife yata in this case) may separately bring an action for the property administration.

Q: So as a review of your Family Code, what comprises the conjugal partnership of gains?

A: (From the Family Code)

Art. 106. Under the regime of conjugal partnership of gains, the husband and wife place in a common fund the proceeds, products, fruits and income from their separate properties and those acquired by either or both spouses through their efforts or by chance, and, upon dissolution of the marriage or of the partnership, the net gains or benefits obtained by either or both spouses shall be divided equally between them, unless otherwise agreed in the marriage settlements.

Q: Can you please state the effect of assignment by a partner of his whole interest in the partnership.

A: Basically a partner‘s right in specific partnership property is actually not assignable. But he may assign his interest in the partnership to one of his co-partners or to a third person irrespective of the consent of the other partners in the absence of agreement to the contrary.

Q: So if that said partner assigns his whole interest in the partnership, will that assignment divest him of his status as a partner in the partnership?

A: No ma‘am as long as there is no agreement to the contrary.

Q: So what are the rights granted to the said assignee?

A: The rights granted to the said assignee are to receive the profits and to avail himself of the usual remedies provided by law in case there is fraud and also to receive assignor‘s interest in case there is dissolution and to require an account of the partnership affairs

Q: You said that the assignee can availof the usual remedies provided by law in the event of fraud. What are these remedies?

A: Remedies such as to bring an action against a partner, example in case of fraud an action for a charging order.

Q: What are the rights withheld from an assignee?

A: The rights withheld from an assignee are: He is withheld to interfere with the management, to require any information or account of the partnership and he is also withheld from inspecting the books ma‘am.

Q: Why are these rights withheld from an assignee?

A: In my own understanding, these rights should be for the partners themselves. The rights assigned to him is limited by law as these rights are reserved for the partners.

Q: Why are these rights withheld from an assignee?

A: Because the mere assignment of a partner‘s right does not divest him of his being a partner. Even if he assigned his rights to other persons, he remains to be a partner of the partnership.

C: Okay. For the simple reason that the assignees does not become a partner of the partnership. Please read Art 1813.

A: ART. 1813. A conveyance by a partner of his whole interest in the partnership does not of itself dissolvethe partnership, or, against the other partners in theabsence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.

In case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners.

Q: Can you state the facts in the case of Rialubid vs. Jaso?

A: (Please refer to your case digests)

Q: What action was filed in court?

A: Action for specific performance, accounting, termination of the Joint Venture (JV), inventory of assets and properties, dissolution of the JV, appointment of receiver and damages ma‘am.

Q: So what is the ruling of the Supreme Court (SC)?

A: The SC ruled ma‘am, it upheld the validity of the said assignment. As to the contention that Jaso does not have a standing for such action, the SC held that the JV is likened to a particular partnership or one which has for its object determinate things, their use or

fruits is for an undertaking or for the exercise of a profession or a vocation. Therefore the rule is settled that JV are governed by the law on partnership which are in turn based on mutual agency or delectus personae. Article 1813 is applicable in this case.

Busorg July5 part2 Started at 39:00

What is a charging order? It is given by the court when a separate creditor of a partner in a partnership wants to collect money debts or anything from a partner. The book does not say how it can be availed of, but you have to file first an action for collection of sum of money before the court can adjudge that this partner has a debt, the separate creditor can now get a charging order such that a separate creditor can now get the interest of that partner in the partnership.

You mean to say, you have to file a separate civil case against that partner and then when a favorable judgment will be rendered in favor of the creditor, this creditor can now apply for this charging order. Can you please read Article 1814.

ART. 1814. Without prejudice to the preferred rights of partnership creditors under Article 1827, on due application to a competent court by any judgment creditor of a partner, the court which entered the judgment, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; and may then or later appoint a receiver of his share of the profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts and inquiries which the debtor partner might have made, or which circumstances of the case may require.

The interest charged may be redeemed at any time before foreclosure, or in case of a sale being directed by the court, may be purchased without thereby causing a dissolution:

1. With separate property, by any one or more of the partners; or

2. With partnership property, by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold.

Nothing in this Title shall be held to deprive a partner of his right, if any, under the exemption laws, as regards his interest in the partnership.

Take note ha, the court which entered the judgment or any other court. So based on 1814, the said judgment creditor can avail of this remedy when there is already a final judgment. There is an entry of judgment ha. Or any other court, bakit any other court pa, pwede?

If the partnership itself has other creditors and this separate creditor, his rights to the interest of the debtor partner is subsidiary only so that in case that that partnership has its own creditors, the residue of what will remain to that debtor-partner, what the separate

If the partnership itself has other creditors and this separate creditor, his rights to the interest of the debtor partner is subsidiary only so that in case that that partnership has its own creditors, the residue of what will remain to that debtor-partner, what the separate