C. Property Rights Of A Partner 5u3s1r

C. PROPERTY RIGHTS OF A PARTNER

b.

1. To possess specific partnership property and to participate in management (Art. 1810, 1811)

c.

Article 1810. The property rights of a partner are:

d.

(1) His rights in specific partnership property; (2) His interest in the partnership; and (3) His right to participate in the management

INCIDENTS OF CO-OWNERSHIP 1. Equal rights to Possess Article 1811. A partner is co-owner with his partners of specific partnership property. The incidents of this co-ownership are such that: (1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners;  

A partner has an equal right with his partners to possess partnership property for partnership purposes Includes use and control even without the consent of the other partners. This includes sale and disposition (e.g. applying partnership property to partnership debts)

Limitations: (1) Not Exclusive – One partner is not entitled to the exclusive possession or control of the firm assets; the excluded partner or partners may ask for a formal from the excluding partner and/or to petition for a decree of dissolution (2) For partnership purposes only – partner has no right to possess property for any other purpose without the consent of his partners. If he does, he is able for the value of such and the profits he may have derived therefrom. (3) Subject to agreement and provisions of Code  By agreement, exclusive possession and control of partnership property may be vested in one partner  By express provision of the Code: a. None of the partners may, without the consent of the others, make any important alteration in the

immovable property of the partnership even if such alteration may be useful to the partnership The partner who has been appointed manager in the article s of partnership may execute all acts of istration despite opposition of his partners, unless he should act in bad faith If any of the partners should oppose the acts of the other partners, the decision of the majority shall prevail, or in case of a tie, the decision of those owning the controlling interests Certain acts enumerated in Art. 1818 (e.g. assignment of partnership property in trust, disposal of the good-will of the business, etc.) must be authorized by all the partners.

2. Nonassignability Article 1811. A partner is co-owner with his partners of specific partnership property. The incidents of this co-ownership are such that: (2) A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property;  

A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property This rule obtains even if the assignment is made after dissolution of the partnership but before its termination by the completion of the winding up of its business.

Effect of separate assignment  Any separate assignment of such right, or any attempt at such assignment is null and void except when real property is involved and the provisions of Art. 1819 of the Code relative to the interest of an innocent purchaser apply  But such assignment, may in a proper case be regarded and held as a valid assignment of his interest in the partnership Reasons for nonassignability 1. Partnership is a voluntary relation and the other partners cannot have a new partner thrust upon them without their consent. Assignee would pro tanto become a partner since he would have the right to possess the property for partnership purposes irrespective of the desires of the other partners. 2. Impossibility to measure or value a partner’s beneficial interest in a particular partnership asset Prohibition is limited to: 1. Assignment by one partner to a third party or stranger unless it is ed in by all the other partners, or

2.

Assignment to a partner not executed by all the other partners

Prohibition does not apply to: 1. Assignment by a partner to his sole remaining partner 2. Assignment to two or more remaining partners, with the consent of all Reasons for inapplicability of prohibition on above two: 1. No outsider could interfere with the conduct, possession or management of the partnership or partnership property 2. No new partner is itted to the partnership 3. No other partner or no partnership creditor is deprived of his right to have the partnership assets applied to the payment of partnership debts 4. No other partner nor partnership creditor are prejudiced and neither are subordinated to the claims of creditors of individual partners 3. Not subject to Attachment or Execution Article 1811. A partner is co-owner with his partners of specific partnership property. The incidents of this co-ownership are such that: (3) A partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws; 

A partner’s right in specific partnership property is not subject to attachment, except on a claim against the partnership.

Rationale  Logical consequence of the prohibition against separate assignment by a partner of his right in such property. Remedy of partner’s separate creditors  Although a partner’s separate creditors are prevented from reaching the specific property of the partnership or his rights therein, they may proceed against the partner’s interest in the partnership in accordance by obtaining from the court a charging order or lien, have the court appoint a receiver and order, where necessary, the sale of the debtor partner’s interest in the partnership. 4. Not subject to Article 1811. A partner is co-owner with his partners of specific partnership property. The incidents of this co-ownership are such that:

(4) A partner's right in specific partnership property is not subject to legal under article 291. 

Based on the basic policy of the law to keep intact partnership property for creditors and for partnership purposes

PARTICIPATION IN MANAGEMENT

General Rule: All partners have equal rights in the management and conduct of partnership business.  Whatever any one of them may do alone shall bind the partnership  Limitations o Power only embraces acts of istration and acts for apparently carrying on, in the usual way, the partnership business o Power does not cover acts of disposition nor acts not apparently for carrying on the partnership business in the usual way nor power to modify articles of partnership o Decision of the majority, or in case of tie, that of the owners of the controlling interest prevail should any partner oppose an act o No important alteration in any immovable property may be made without the consent of the other partners even if useful. But partner concerned may seek intervention of the court if the other partners’ refusal to give their consent is manifestly prejudicial to the interest of the partnership. Consent may also be presumed if they didn’t oppose alteration despite knowledge. Exception: Partners agree that management be vested in one or more of the partners Extent of Authority A managing partner may execute all acts of istration. Powers are not specified May exercise all acts that may be necessary to attain the object of the partnership Powers are specified Must act within the scope of his authority; should not act in bad faith Sole manager May exercise all acts even against the opposition of his partners, unless he does so in bad faith Solidary Management (multiple May execute all acts of managers with no specification of istration, but if any of them respective duties nor necessity of opposes, the majority’s decision consent of all to act) shall prevail t Management (multiple Concurrence of all shall be managers with stipulation that necessary for the validity of the they cannot act without the acts.

consent of others)

agreed to by all the partners.

Absence or disability of any one of them cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership. (Note: this restriction is addressed to partner acting in the transaction not the third person who is under no obligation to ascertain whether partner obtained consent of copartners) (Note: restriction applies only to execution of formal written contracts and not routine matters) Revocation of authority  Power of managing partner is irrevocable without just or lawful cause  The Code does not specify what would be considered as just or lawful cause. However, it has been opined, that all grounds for the revocation of agency may be considered as such.  If power was granted by articles of partnership - revocation needs vote of the partners representing controlling interest  If power was granted by subsequent agreement - may be revoked at any time

2. To share in the profits and surplus and to convey partnership interest (Art. 1812, 1813) Article 1812. A partner's interest in the partnership is his share of the profits and surplus.

Article 1813. A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or istration of the partnership business or affairs, or to require any information or 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 asg 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 from the date only of the last

INTEREST IN PARTNERSHIP Partner’s interest in the partnership – his share of the profits and surplus PROFIT SURPLUS Gain realized from the business or Excess of assets over liabilities investment over and above expenditures or the excess of the value of returns over the value of advances May be determined and distributed Usually determined and distributed from time to time before the only after dissolution, winding up dissolution of the partnership and and liquidation winding up and liquidation of its affairs Nature of a partner’s interest in the partnership: BEFORE DISSOLUTION UPON DISSOLUTION Interest is in the partnership as a Interest is in the property remaining business or a going concern. after all the debts and liabilities to outside creditors have been satisfied. INTEREST IN PARTNERSHIP Personal property (intangible in nature) and present interest Assignable irrespective of the consent of the other partners May be reached by the partners’ separate creditors by means of a charging order and other remedies specified in Art. 1814 Partner can, with respect to it, claim rights under the exemption laws

RIGHT IN SPECIFIC PROPERTY Nonassignable Not subject to attachment or execution When partnership property is attached for a partnership debt the partners cannot claim any right under the homestead or exemption laws;

ASSIGNMENT OF INTEREST

General Rule: A partner may assign his interest in the partnership to his copartners or any of them, or to a third person. Exception: Partners may agree that one of them cannot sell or assign his interest without the consent of the others, or agree to prohibit assignment altogether. Rights of assignee

 

 

The transfer by a partner of his partnership interest to a third person does not make the assignee of such interest a partner in the firm. He may not interfere in the management or istration of the partnership business or affairs, or to require any information or of partnership transactions, or to inspect partnership books. It merely entitles him to receive the profits to which his assignor would otherwise be entitled. To become a partner, (1) the assignee must have such intention and that (2) nonasg partners agree to his ing them in business

Rights of assignor  An assignment of partnership interest does not necessarily divest the asg partner of his status as partner. It all depends on the of the assignment and the intent of the parties  But if assignor does not lose his rights, he also is not relieved of his obligations. Note: Assignment is not of itself a cause of dissolution (look at nature of the assignment and intent or agreement of the parties)

CHARGING ORDER Article 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, s and inquiries which the debtor partner might have made, or which the 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) (2)

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



This article was taken from the U.S. Uniform Partnership Act which was patterned after the English Partnership Act of 1890.

Remedies under the Article: The competent court, upon due application by a judgment creditor of a partner, is empowered to:

(1) Enter an order charging the interest of the debtor partner with payment of the unsatisfied amount of the judgment debt as well as the interest thereon (2) Appoint a receiver of the debtor partner’s share of the profits any other money due or to fall due to him in respect of the partnership (3) Make all other orders, directions, s, and inquiries which the debtor partner might have made, or which the circumstances of the case may require (4) Direct the sale of the interest charged The two basic remedies are: (1) employment of a charging order and, this proves inadequate, (2) the sale of the debtor’s interest in the partnership. The other remedies serve simply as aids to these two basic remedies.  Example: Charging order may be effected through a receiver (who receives the debtor-partner’s share in the profits) and the sale of the interest may again be done by the receiver Reach of Remedies  The above remedies can only reach the distributive share of the debtor partner, i.e. his share of such profits as may from time to time be distributed  These remedies cannot extend to the partnership assets  However, since any diminution of partnership assets automatically entails a diminution of the profits due to a partner, a judgment creditor may avail of every measure to prevent unauthorized or illegal dissipation or transfer of partnership assets (e.g. nullify mortgages, assignments)

Redemption or Purchase of Charged Interest  Partners may redeem or purchase the interest of a debtor partner which is charged with satisfaction of the judgment of his creditor  Redemption or purchase may be made with the separate property of one of the partners or with the partnership property (in the latter case, all partners must consent) Right to dissolve partnership  Redemption or purchase of the charged interest of a debtor partner does not dissolve the partnership  But the mere sufferance by a partner of a charging lien on his interest is a ground for the other partners to dissolve the partnership under Art. 1830(c) CC. REDEMPTION Made at any time before sale or before the expiration of a redemption period. Redemption made after sale is discretionary on the court Merely advanced moneys for the

PURCHASE Exercised when sale of the charged interest is directed by the court

Acquire the debtor partner’s interest

benefit of the debtor and holds the interest in trust for him

absolutely

3. To have access to partnership books

General Rule: No partner has a right to demand a formal ing except as a consequence of dissolution or unless he at the same time seeks dissolution of the partnership.  This is because he has equal access with his partners to the partnership books Exception: 4 circumstances in Art. 1809

Article 1805. The partnership books shall be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every partner shall at any reasonable hour have access to and may inspect and copy any of them.



“Reasonable hour” means any reasonable hour on business days throughout the year and not merely during some arbitrary period of a few days chosen by some or one of the partners.

4. To true and full information Article 1806. Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or of any partner under legal disability.

5. To a formal

6. To reimbursement of advancement and indemnification of risks Article 1796. The partnership shall be responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest, from the time the expense are made; it shall also answer to each partner for the obligations he may have contracted in good faith in the interest of the partnership business, and for risks in consequence of its management.

Partnership shall be responsible to every partner for: (1) Amounts he may have disbursed on behalf of the partnership and for the corresponding interest, from the time the expenses are made (2) Obligations he may have contracted in good faith in the interest of the partnership business (3) For risks in consequence of its management  

Article 1809. Any partner shall have the right to a formal as to partnership affairs:

 (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners; (2) If the right exists under the of any agreement; (3) As provided by article 1807; (4) Whenever other circumstances render it just and reasonable.

A partner has no obligation to loan or advance money to his firm. If he does, he becomes a creditor of his firm and is entitled to reimbursement for such loan or advance before there can be any distribution of profits. Any voluntary contribution of money or property for the use of the partnership beyond the amount required to be contributed by the partnership agreement is considered an advance or a loan.

Note: With respect to the above expenses, advances, risks and losses, a partner, although he acts as agent of the partnership and his co-partners, is not given the right of retention similar to that accorded to an ordinary agent under Art. 1914, CC. The law subordinates the interest of the individual partner to that of the entire firm.