3SECTION 2 Propery Rights of a Partner

8/16/2019 3SECTION 2 Propery Rights of a Partner

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SECTION 2. - PROPERTYRIGHTS OF A PARTNER


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Art. 1810. The property rights of a partner are:(1) His rights in specific partnership property;

(2) His interest in the partnership; and (3) His right to participate in the

management.


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Right to true and full information of all thingsaffecting the partnership (Art. 1806)

Right to a formal account of partnershipaffairs under certain circumstances (Art.1809)

Right to have the partnership dissolved alsounder certain circumstances (Art. 1830-1831


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Related rights

Right to reimbursement for amountsadvanced to the partnership and toindemnification for risks in consequence ofmanagement (Art. 1796)

Right to access and inspection of partnershipbooks (Art. 1805)


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Ownership of certain property

Key: depends on intention of the parties –

controlling factor: No express agreement that property used by a

partnership constitutes partnership propertydoes not make it partnership property. Depends

on intention of the parties (shown by expressagreements or acts of particular conduct)

A partner may contribute the use or enjoyment

of property to the partnership while retainingownership of property

A partner may hold title to partnership propertywithout it actually belonging to him


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General rule:

Property acquired with partnership funds ispartnership property

Exception: Unless there is a contraryintention

Property acquired after dissolution but before

winding up is separate property; BUT hewould be liable to the partnership ifpartnership funds are used.


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Art. 1811. A partner is co-owner with hispartners of specific partnership property.

The incidents of this co-ownership are suchthat:

(1) A partner, subject to the provisions of thisTitle and to any agreement between the

partners, has an equal right with his partnersto possess specific partnership property forpartnership purposes; but he has no right topossess such property for any other purposewithout the consent of his partners;

(2) A partner's right in specific partnershipproperty is not assignable except inconnection with the assignment of rights of all

the partners in the same property;


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(3) A partner's right in specific partnershipproperty is not subject to attachment orexecution, except on a claim against the

partnership. When partnership property isattached for a partnership debt the partners,or any of them, or the representatives of adeceased partner, cannot claim any right

under the homestead or exemption laws; (4) A partner's right in specific partnership

property is not subject to legal support underArticle 291. (n)


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Contemplates tangible property (cars, truck, land) butnot intangible things (rights to the land of public

domain)

A partner is a co-owner with his partners but the rulesof co-ownership do not necessarily apply

1. equal right of possession – partners have equal rightto possess specific partnership property for partnershippurposes

a. if used NOT for personal profit or benefit, he mustaccount to the others for the profits derived therefrom

b. if partner wrongfully excluded from possession –right to formal account and even apply for judicial

decree of dissolution


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c. on the death of a partner, his right in specificpartnership property vests in the surviving partners,not the legal representative of the deceased partner.Executor of deceased partner CANNOT insist onparticipating in the winding up process

d. by agreement, right to possess specificpartnership property may be surrendered. If no

agreement, equal dominion over partnershipproperty

e. a partnership possession of partnership propertyis equal to possession of all partners. Therefore, it

cannot acquired by adverse possession. Unless hemakes an adverse claim of title under suchcircumstances as will charge his co- partner withnotice of the adverse claim.


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2. right not assignable – a partner cannotseparately assign his rights to specific property

but all of them can assign their rights in thesame property

a. not assignable because cannot determinethe extent of beneficial interest in the propertyuntil after liquidation

b. partner cannot dispose or mortgage

without consent or approval of the otherpartners even if he contributed property


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c. consent of all the partners, either express or

implied, is the source and limit of a partner’s

right to deal with partnership property for any

but a partnership purpose

d. not assignable so that it prevents interference

by outsiders in partnership affairs. Protects rightof other partners and partnership creditors

e. assignment of specific partnership property is

void but assignment of partnership interest is

valid. A retiring partner may assign his rights inpartnership property to the partner or partners

continuing the business (Art. 1840)


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3. right limited to share of what remains afterpartnership debts have been paid

a. the whole partnership property belongs to the

partnership as a juridical person (Art. 1768) and apartner has no interest in it but his share of whatremains after all partnership debts are paid (Art.1812)

b. specific partnership property is not subject toattachment, execution, garnishment or injunctionwithout the consent of all partners EXCEPT if it is aclaim against the partnership itself

c. right of the partners to specific partnershipproperty is not subject to legal support becauseproperty belongs to the partnership and not to thepartners. Partnership interest may be subject to

legal support


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Art. 1812. A partner's interest in thepartnership is his share of the profits andsurplus. (n)


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The partner’s interest in the partnershipconsists of his share in the undistributed profits

during the life of the partnership as an ongoingconcern and his share in the undistributedsurplus after its dissolution

Profit – excess of returns over expenditure in atransaction of series of transactions or the netincome of the partnership over a given period

Surplus – assets of the partnership after debts

and liabilities are paid and the rights of thepartnership are adjusted. Excess assets overliabilities


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Extent of partner’s interest is the proportionresidue or balance after an account has been

taken of debts and credits, including theamount paid by the several partners inliquidating firm debts or in making advancesto the partnership. Until that occurs, it is

impossible to determine the extent of apartner’s interest

A partner is not a creditor of the partnershipfor the amount of his share. The interest of a

partner is not subject to attachment orexecution on a judgment recovered againstthe individual partner


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Art. 1813. A conveyance by a partner of his wholeinterest in the partnership does not of itself

dissolve the partnership, or, as against the otherpartners in the absence of agreement, entitle theassignee, during the continuance of thepartnership, to interfere in the management oradministration of the partnership business or

affairs, or to require any information or account ofpartnership transactions, or to inspect thepartnership books; but it merely entitles theassignee to receive in accordance with his contract

the profits to which the assigning partner wouldotherwise be entitled. However, in case of fraud inthe management of the partnership, the assigneemay avail himself of the usual remedies.


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In case of a dissolution of the partnership,the assignee is entitled to receive hisassignor's interest and may require anaccount from the date only of the lastaccount agreed to by all the partners. (n)


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A partner’s right in specific partnership property is

not assignable (Art. 1811[2]), but he may assign his

interest in the partnership (Art. 1812) to any of his

co-partners or to a third person irrespective of theconsent of the other partners, in the absence of

agreement to the contrary

Partner may convey his whole interest in the

partnership without causing dissolution. However,

his assignment does not grant assignee right to:

1. to interfere with the management

2. to require any information or account

3. to inspect any of the partnership books


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Partnership is a relation in which delectuspersonae is an important element. No onemay be introduced into the firm as a partnerwithout the unanimous consent of the otherpartners


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Remedy of the other partners if:

1. dissolution of the partnership is NOTintended

o partnership may continue. Assigning partnerstill has to participate in his partnership duties.Dissolution may occur if assigning partnerneglects his partnership duties

2. dissolution of the partnership is intended

o operates as a dissolution of the partnershiponly when it is clear that the parties

contemplated and intended the entirewithdrawal from the partnership of suchpartners and the termination of the partnershipas between the parties


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The rights of the transferee or assignee are asfollows:

1. to receive in accordance with his contract theprofits accruing to the assigning partner

2. to avail himself of the usual remediesprovided by law in the event of fraud in the

management 3. to receive the assignor’s interest in case of

dissolution

4. to require an account of partnership affairs,

but only in case the partnership is dissolved, andsuch account shall cover the period from thedate only of the last account agreed to by all thepartners


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Art. 1814. Without prejudice to the preferredrights of partnership creditors under Article

1827, on due application to a competent courtby any judgment creditor of a partner, thecourt which entered the judgment, or anyother court, may charge the interest of thedebtor partner with payment of the

unsatisfied amount of such judgment debtwith interest thereon; and may then or laterappoint a receiver of his share of the profits,and of any other money due or to fall due tohim in respect of the partnership, and make allother orders, directions, accounts and inquirieswhich the debtor partner might have made, orwhich the circumstances of the case mayrequire.


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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 ormore of the partners with the consent of all

the partners whose interests are not so

charged or sold.


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Nothing in this Title shall be held to deprivea partner of his right, if any, under theexemption laws, as regards his interest inthe partnership. (n)


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a separate creditor of a partner cannot attach or levyupon partnership property for the satisfaction of hiscredit (Art. 1811[3]) because partnership assets are

reserved for partnership creditors (Art. 1827).

However, he can secure a judgment on his credit andthen apply to the proper court for a “ChargingOrder” subjecting the interest of the debtor partner

in the partnership (Art. 1812) with the payment ofthe unsatisfied amount of such judgment withinterest thereon with the least interference with thepartnership business and the rights of otherpartners.

Through the “Charging Order”, any amount orportion which would be paid to the debtor partnershould instead be given to the judgment creditor


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Interest of the debtor partner may be redeemed orpurchased with the separate property of any one ormore of the partners, or with the partnershipproperty but with the consent of all the partnerswhose interests are not so charged or sold

Redemption price should be equal to the actual ormarket value.

Value of partner’s interest has no bearing on theredemption price which would likely be lower since itwill be dependent on the amount of the partnershipdebts

If another partner redeems the partner’s interest, hedoes not acquire absolute ownership but holds it intrust for the debtor-partner due to the fiduciaryrelationship


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3SECTION 2 Propery Rights of a Partner

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