ESTRADA, ROCHELLE ANN V. 1. What is a CORPORATION?

 A CORPORATION is an artificial being entity created by operation of law having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. 2. What are the distinction between partnership and corporation? PARTNERSHIP CORPORATION Creation  Mere agreement  Operations of law Juridical Personality  Separate Juridical  Separate Juridical Personality Personality Purpose  Realization of Profits  Depends on the Articles Dissolution  Anytime by the will of any  Consent of the State or all of the partners Duration/Time of  No limitation  Max. of 50 years Existence Disposal/Transfer of  A partner may not dispose  Stockholders may freely interest his interest unless agreed upon by do so all partners Power to act with 3rd  Mutual agency  Board of Directors persons/Management Effect of  Partner can sue a partner  Suit against the Director Mismanagement who mismanages of trustee who mismanages shall be brought in the name of the corporation Death  Dissolves automatically  Does not affect existence No. of Incorporators  At least 2  At least 5 Commencement of JP  From the perfection of  Issuance of Certificate of Contract of Partnership Incorporation by the SEC Firm name  Has to put Ltd. On its  Any name not identical to name any registered firms Governing Law  Civil Code  Corporation Code

3. What are the advantages and Disadvantages of a Corporation? Advantages Strong Juridical Personality Centralized Management Limited Liability to Investors Free Transferability of Units of Investment Advantages over Unregistered Associations Attract Creditors Owner and Employee Disadvantages Complicated and Costly Formation and Maintenance Lack of Personal Element & Abuse of Corp. Powers Limited Liability Hits Innocent Victims Double Taxation

4. Distinguish a Partnership from co-ownership. Partnership Mere agreement/meeting of the minds Separate Juridical Personality Realization of Profits Co-Ownership Created by law, can exist even without a contract No SJP Common enjoyment of a thing or right; division of profits is not necessary Max of 10 years May freely do so Co-owner cannot bind the coownership Does not necessarily dissolve Share in the profits derived incident to the joint ownership No fiduciary relationship Action for non-performance of a contract No intent to form a partnership

Creation Juridical Personality Purpose

Duration Disposal of Interest Power to Act with 3rd persons Effect of Death Intent to Derive Profits Existence of Fiduciary Relationship Remedy for Dispute

No limit Cannot dispose without unanimous consent Mutual agency Dissolution Profits must be derived from the operations of the business Well-defined fiduciary relationship Dispute may give rise to action for dissolution, termination and accounting Unmistakable intent to form one

Intent

5. May a corporation enter into a contract of Partnership?  NO. A corporation cannot ordinarily enter into a contract of partnership because the identity of the corporation is lost or merged with that of another and the direction of its affairs is placed in the hands than those provided by law of its creation. A corporation can only act through its duly authorized agents and is not bound by the act of anybody else. Tuason v. Bolanos  RULING: Although a corporation has no power to enter into a partnership, it may nevertheless enter into a joint venture when such nature of the venture is in line with the business authorized by its charter. Being a particular undertaking, the BOI can exercise their business judgement and can properly evaluate all the consequences and liabilities to which the corporation may be held liable for. A partnership may expose the corporation to any and various risks and liabilities which cannot be anticipated and evaluated by the board.

6. Does a defective incorporation result into a partnership?  NO. (1) Both are contractual relationships created by co-venturers who consent to come together under such relationship. If they had intended to create an association in the form of

corporation, a partnership cannot be created in its stead since such is not within their intent and therefore, does not constitute a part of their consent to the contractual relationship. (2) It does not follow that in the absence of one the parties would have gone along with the latter because parties may have chosen corporation due to its advantages compared to that of the partnership. (3) Parties do not necessarily come together (delectus personae; personal selection).  Exp: HOWEVER, if parties act and pretend to be a corporation, when in fact none exist, the law would impute to them a juridical personality to validate the contract under the corporation by ESTOPPEL DOCTRINE. It would treat the partners as general partners since it expressly makes them as general partners.  PIONEER INSURANCE V. CA (1) Parties who had intended to participate or actually participated in the business affairs of the proposed corporation would be considered as partners under a de facto partnership, and would be liable as such in an action for settlement of partnership obligations. (2) Parties who took no part except to subscribe to shares of stock in the intended corporation, do not become partners with other subscribers who engaged in business under the name of the pretended corporation, and are not liable for action for settlement of the alleged partnership contribution. 7. May a Corporation enter into a Joint Venture?  YES. It is just an organization formed for some temporary purpose.  JOINT VENTURE is an association of persons or companies jointly undertaking some commercial enterprise; generally all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith and duty, which may be altered by agreement to share both in the profits and losses. The acts of working together in a joint project. Aurbach v. Sanitary Wares  Some features of a joint venture agreement, carried out in the form of a corporation, are that a minority group is given a specified number of seats in the board of directors, i.e. three directors in a board of nine directors; the minority group is entitled to designate a member of the executive committee and his vote is required for certain transactions; the quorum is required for the amendment of the articles and by-laws is more than the number specified in the law. 8. What are the distinction between joint account/joint venture and partnership? Partnership Duration generally relates to a continuing business of various transactions of a certain kind Permanent There must be a firm name under which the partnership Joint Account Limited to the period in which the goods are sold or the project is carried on or a single transaction. Temporary, although it may continue for a number of years A firm name is not necessary , participating persons can

Transactions entered into

Nature Firm Name and Liabilities

shall operate.

Corporations as partner

Cannot enter into such by reason of public policy; otherwise people other than its officers may be able to bind it Acquires legal personality

Legal Personality

transact business under their own name and can be individually liable therefore. Can enter into with another through a contract of agreement if the nature of the venture is in line with the business of the corporation No legal personality

_____________________________________________________________________________________ 1. Historical Background and Sources of Law on Partnership Notion of Partnership is of ANCIENT ORIGINS partnership as a business device was popular among the ancients (Babylonians from the time of Hammurabi, Babylonian Jews as early as the 4th century and Romans from the time they laid the foundation of their monumental legal system) and had an important role in their social and economic life that they included provisions pertaining thereto in their laws. It was also a device popular in the medieval times among merchant princes in the Italian cities. It also thrived in the 13th century England regulated by guilds merchant. As early as 2300 BC, Hammurabi, provided for the regulation of the relation called partnership in his compilation of system of laws. Commercial partnerships were generally for single transactions Jewish Law, partnership as a business organization was concerned with the holding of title of land by two or more persons. Civil and Common Law Bases English commercial courts which was eventually integrated by CJ Lord Mansfield into the common law system and it was not until the latter years of the 18th century that the law on partnership as we know today came into form and substance. United States, In 1914, the Uniform Partnerships Act was endorsed by the National Conference of Commissioners on Uniform State Laws greatly similar to the English Partnership Act of 1890. modern partnership law may be a combination of principles and concepts from Roman Law, Law on Merchant and Equity, and Common Law Courts. 2. DISTINGUISH BETWEEEN CIVIL AND COMMERCIAL PARTNERSHIPS  Industrial partnership may have the characteristics of commercial or civil partnership.  Commercial partnership essence; undertaken by merchants (those having a legal capacity to engage in commerce, and habitually devote themselves thereto) and possessed the characteristics of habitualness or pursued as a going concern governed by the Code of Commerce.

Both the partnership and the separate partners may be joined in one action; private property of each partner may only be taken after all the common partnership properties had been exhausted More solemn affair; failure to register the articles in mercantile registry will not result to a juridical or any personality distinct from the personality of the individuals

Distinctions: Commercial Registration was essential to be existent and to the acquisition of juridical personalities Civil Mere meeting of the minds (perfection of contract of partnership) brings the separate juridical personality Commercial partners were solidarily liable for Civil partners were primarily but only jointly liable partnership debts although in a subsidiary manner; for partnership debts thus, there is the benefit of excussion Subject to provisions of Code of Commerce Subject to provisions of the Old Civil Code

Prautch v. Hernandez  Commercial partnership had for its object the pursuit of industry or commerce; to be treated like a merchant; under the Code of Commerce; has to comply with the registration requirements for existence.  Distinction is the object to which the partnership id devoted  Civil partnership may be organized in any form (organization, control, continuance, liabilities, dissolution and juristic personalities of assoc.) Dietrich v. Freedman  Civil Partnership partnership existed even when there is no formal partnership agreement entered into and registered; obligations are pro-rata.

3. TRI-LEVEL EXISTENCE OF THE PARTNERSHIP a. Contractual Relationship between and among the parties b. Means of medium of doing Business, through the structure of Separate Juridical Personality, or as the basis of creating multi-leveled contractual relations among various parties c. Business Enterprise, or a business venture, or a going concern

4. Attributes of the Partnership  Informal/Consensual/Weak Juridical Personality

Exceptions y Having three thousand capital or more, in money or property shall appear in public instrument, which must be recorded in the SEC (failure does not affect the liability of the partnership and its members to third persons) Immovable property is contributed plus inventory, signed by parties and attached to public instrument, otherwise, partnership is void. Limited partnership, describing limited partners in particular provisions in the articles of partnership formally registered in the SEC.

y y

Grounds of Dissolution y y y y y y y Express will of any partner Express will of all Expulsion of one Event which makes partnership business unlawful Loss of the thing before delivery promised by a partner as a contribution Death, insolvency, civil interdiction of any Court decree, insane or incapacitated, guilty of act prejudicial to the partnership business or in breach of agreement, business can only be carried at a loss

 Mutual Agency No authority to: y Assign the partnership property in trust of creditors or on the assignee s promise to pay the debts of the partnership y Dispose the goodwill of the business y Any act that would make it impossible to carry the ordinary business of the partnership y Confess a judgment y Enter into a compromise concerning partnership claim or liability y Submit partnership claim or liability to arbitration y Renounce a claim of the partnership

 Delectus Personae y Principle of relativity y Privity of contracts  Parties are burdened with Unlimited Liability 5. REQUISITES OF PARTNERSHIP a. Intention to create partnership

b. Common Fund obtained from contributions c. Joint interest in dividing the profits (and losses) - Valid Contract - Legal Capacity of Contracting Parties - Contribution of Money, Property or industry - Legality of Object - Purpose to Obtain Profits 6. What are the Characteristics of Partnership? a. Consensual b. Nominate special name or designation in the law c. Bilateral rights and obligations are always reciprocal d. Onerous each party aspires to procure for himself a benefit thru the giving of something e. Commutative undertaking of one is equivalent to the others f. Principal can stand on its own g. Preparatory entered into as a means to an end, i.e. to engage in business or specific venture for the realization oof profits with the view of dividing the same among them h. Fiduciary based on trust and confidence 7. FORMALITIES OF CONTRACT OF PARTNERSHIP General rule: No FORM regardless of value of contribution Exp: 1. Real rights and immovable properties are contributed requires inventory and public instrument (to show how much is due from each to complete his share in the common fund and how much is due to each in liquidation) 2. 3 thousand or more as capital, either in money or property 3. Agreement covered by Statute of Frauds (terms not to be performed for within a year)requires note, memoranda, writing 4. Can be implied from conduct

8. RULES ON PARTNERSHIP NAME 9. Effects of Unlawful Partnership     VOID AB INITIO. (Judicial decree is not necessary) PARTNERSHIP NEVER EXISTED IN THE EYES OF THE LAW. PROFITS SHALL BE CONFISCATED IN FAVOR OF GOVT. INSTRUMENTS, TOOLS, PROCEEDS OF THE CRIME SHALL ALSO BE FORFEITED BY THE GOVT

 CONTRIBUTIONS OF THE PARTNERS SHALL NOT BE CONFISCATED UNLESS THEY FALL UNDER the preceding effect 10. CLASSIFICATIONS OF PARTNERSHIP

11. WHO MAY BE PARTNERS? Gen. Rule Any person capacitated to contract EXPS: a. Spouses (giving donations or any advantage to each other) b. Person suffering from civil interdiction c. Persons who cannot give consent - Minors - Insane persons - Deaf-mutes who do not how to write 12. Different Kinds of Partners

UNIVERSAL PARTNERSHIP 13. What are the distinctions between Universal partnership of all present property and of all profits? UNIVERSAL PARTNERSHIP OF ALL PRESENT UNIVERSAL PARTNERSHIP OF ALL PROPERTY PROFITS Is that in which the partners contribute all the One which comprises all that the property which actually belongs to them to common partners may acquire by their industry funds, with the intention of dividing the profits or work during the existence of the among themselves, as well as the profits that they partnership and the usufruct of may acquire therewith; property that belongs to any movable and immovable property partner at the time of the constitution of partnership which each of the partners may possess at the time of the celebration of the becomes the common property of all plus profits contract What ALL properties belonging to the Only usufruct of the properties of the constitutes partner are contributed owned by all partners become common property common and the partnership property As to Aside from the contributed properties, All profits acquired by the industry of PROFITS as profits of said properties are the partners become common property COMMON PROPERTY (whether or not they were obtained COMMON through the usufruct contributed) PROPERTY XPN: Profits from other sources may become common if there is a stipulation to that effect

Properties subsequently acquired by inheritance, legacy or donation, cannot be included in the stipulation , only the FRUITS can be included 14. What is a particular partnership?  It is one which has for its object, determinate things, their use and fruits, or a specific undertaking or the exercise of a profession or a vocation.  Does not describe what is establish Particular SCOPE OF SUBJECT MATTER Object is vague and indefinite, Object limited, well-defined, confined to an contemplating a general business with some undertaking of a single, temporary, or ad hoc degree of continuity nature Ex. Acquisition of immovables for the purpose of reselling it at a profit or for the common enjoyment of its use and the benefits derived therefrom Those established for the purpose of carrying out a specific enterprise such as the construction if a building, those formed for the practice of profession pr vocation. Firm engaged in the importation, marketing, distribution and operation of automatic phonographs, radios, television sets and amusement machines, their parts and accessories Universal

15. What is a contract if sub-partnership?  Is one where every partner may associate another person with him in his share, but the associate shall not be admitted into the partnership without the consent of all the other partners, even if the partner having an associate should be the manager.  Privity of contract with one partner only  Partnership within a partnership  Partners inter se, no partnership liability and rights

16. When does a partner bind the partnership?  When he is expressly or impliedly authorized  When he acts in behalf and in the name of the partnership

Art. 1818. Every partner is an agent of the partnership for the purpose of it business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member BINDS the partnership, UNLESS the partners so acting has in fact NO AUTHORITY to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. AN ACT of a partner which is NOT APPARENTLY FOR THE CARRYING ON OF THE BUSINESS of the partnership in the usual way does not bind the partnership unless authorized by other partners. WHEN CAN PARTNERSHIP NOT INCUR LIABILITY?  The partners so acting has no authority  The third person knows that the acting partner has no authority A partner who acts without authority is personally liable. 17. What are the instances of partnership TORT? a. By any wrongful act or omission of any partner, acting in the ordinary course of business of the partnership or with authority of his co-partners, loss or injury is caused to any person, not being a partner in the partnership b. One partner, acting within the scope of his apparent authority, receives money or property from a third person, and misapplies it c. The partnership, in the course of its business, receives money or property, and it is misapplied by any partner while is in the custody of the partnership. Note: PARTNERS ARE SOLIDRILY LIABLE WITH THE PARNTERSHIP FOR ANY PENALTY OR DAMAGE ARISING FROM A PARTNERSHIP TORT.