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Property rights of a partner

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Property rights of a partner

  2. 2. ARTICLE 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
  3. 3. Extent of property rights of a partner 1. PRINCIPAL RIGHTS- The property rights of a partner enumerated under the law are as follows: (1) His rights in specific partnership property; (Art. 1811) (2) His interest in the partnership; (Art. 1812) and (3) His right to participate in the management (Art. 1803)
  4. 4. 2. RELATED RIGHTS- A partner has other rights which are related to principal rights, namely: a. the right to reimbursement for amounts advanced to the partnership and to indemification for risks in consequence of management. b. the right of access and inspection of partnership. c. the right to true and full information of all things affecting the partnership. d. the right to a formal account of partnership affairs under certain circumstances e. the right to have the partnership dissolved also under certain conditions.
  5. 5. PARTNERSHIP PROPERTY and PARTNERSHIP CAPITAL DISTINCTIONS: 1. Changes in value – Partnership property is variVARIABLE. Its value may vary from day to day with changes in the market value of the partnership assets, while partnership capital is CONSTANT. 2. Assets included - Partnership property includes all the property subsequently acquired on account of the partnership or with the partnership funds.
  6. 6. OWNERSHIP OF CERTAIN PROPERTY 1. Property used by the partnership- A partner may contribute to the partnership only the use or enjoyment of property reserving the ownership thereof; or he may allow the partnership to use his separate property without having it become part of the partnership property. 2. Property acquired by a partner with partnership funds- Unless a contrary intention appears, property acquired by a partner in his own name with the partnership funds is presumed to be partnership property.
  7. 7. 3. Property carried in partnership books as partnership asset- This fact create a very strong inference that is partnership property. The inference is stronger if the record scary as a partnership liability an unpaid balance on the property. 4. Other factors tending to indicate property ownership- The fact that the income generated by the property is received by the partnership or the taxes thereon are paid by the partnership is evidence that the partnership is the owner. But the sole fact that the partnership funds were later used to repair or maintain property purchased with funds of an individual partner is not sufficient as basis to show that the property now belongs to the partnership.
  8. 8. 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;
  9. 9. (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; (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; (4) A partner's right in specific partnership property is not subject to legal support under article 291.
  10. 10. 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 account 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 accountable for the value of such and the profits he may have derived therefrom.
  11. 11. (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
  12. 12. b. The partner who has been appointed manager in the article s of partnership may execute all acts of administration despite opposition of his partners, unless he should act in bad faith c. 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 d. 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.
  13. 13. Nature of partner's right in specific partner property 1. Equal right of possession of the property for partnership purposes. 2. Assignment of rights to the property 3. Attachment or execution 4. Legal support 5. Partner’s interest is not a debt due from partnership.
  14. 14. ARTICLE 1812 A partner's interest in the partnership is his share of the profits and surplus.
  15. 15. Nature of partners interest in the partnership 1. Share of the profits and surplus The partners interest in the partnership consists of his proportionate share in the profits during the life of the partnership as a going concern and you share in the surplus after its dissolution. This interest is assignable by the partner in the absence of any agreement to the contrary, being personal property:
  16. 16. a. Profit means the excess of returns over expenditure in a transaction or series of transactions; or the net income of the partnership or given period of time. b. Surplus refers to the assets of the partnership after partnership debts and liabilities are paid and settled and the rights of the partners among themselves are adjusted.
  17. 17. 2. Extent of the partners interest Nothing is to be considered as the share of a partner but his proportion of the residue or balance after an account has been taken of the debts and credits, including the amount paid by the several partners and liquidating firm debts or in making advances to the partnership, and until that occurs, it is impossible to determine the extent of his interest. This interest in the surplus alone is available for the satisfaction of the separate debts of the partners.
  18. 18. 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 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.
  19. 19. 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.
  20. 20. Effect of assignment of partner's whole interest in partnership 1. Rights with held from assignee - However such aAssignment does not grant the assigned me the right: a. to interfere in the management b. To require any information or account; or c. To inspect any of the partnership books.
  21. 21. 2. Status and rights of assignor and partnership unaffected - The legal effect of such conveyance is the same as that of a partner associating another in his name or interest. Partnership is a relation in which delectus personae or mutual agency is an important element. No one can become a partner without the consent of the other partners. The assignment does not divest the assignor of his status and rights as a partner nor operate as a dissolution of the partnership
  22. 22. 3. To receive the assignor’s interest in case of the solution and 4. To require an account of partnership affairs but only in the case the partnership is dissolved and such account shall cover the period from the date only of the last account agreed to buy all the partners.
  23. 23. Dissolution of the partnership 1. Dissolution not intended - The mere assignment of a partner's interest does not dissolve the partnership. Many partnership agreements are made merely as a security for loans, the assigning partner never intending to destroy the partnership relation.
  24. 24. 2. Dissolution intended - A partner's conveyance of his interest in the partnership operates as a dissolution of the partnership only when it is clear that the parties contemplated and intended the entire withdrawal from the partnership of such partner in the termination of the partnership as between the partners.
  25. 25. 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, accounts and inquiries which the debtor partner might have made, or which the circumstances of the case may require.
  26. 26. 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.
  27. 27. 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.
  28. 28. Remedies of separate judgment creditor of a partner Application for a charge in order after securing judgment on this credit. A separate creditor of a partner cannot attach or levy upon specific partnership property for the satisfaction of his credit.
  29. 29. You can however secure a judgment on his credit and then apply to the court for a charging order subjecting the interest of a debtor-partner in the partnership with the payment of the unsatisfied amount of such judgment with interest thereon
  30. 30. 2. Preferred rights of partnership creditors- The above remedies given the partner's creditor are without prejudice to the preferred rights of a partnership creditors under article 1827. It means that the claims of partnership creditors must be satisfied first before the separate creditors of the partners can be paid out of the interest charged.
  31. 31. 3. Availability of other remedies - In providing for the charger order above described, article 1814 seems to have made this an exclusive remedy so that a writ of execution will not be proper. The court may resort to other courses of action provided in article 1814 if the judgment debt remains unsatisfied notwithstanding the issuance of the charging order.
  32. 32. Redemption or purchase of interest charged 1. Redemptioner- The interest of the debtor-partner so charged may be redeemed with the separate property of anyone or more of the partners, are with partnership property but with the consent of all the partners whose interests are not so charged or sold.
  33. 33. 2. Redemption price In an ordinary sale the price of the thing sold theoretically represents its market or actual value. This is not true in a foreclosure sale where mere inadequacy of the price obtained at the sheriff's sale is not material because the mortgagor is given the right to redeem. By the same token valley of the partners interest in the partnership has no bearing on the redemption price which is likely to be lower since it will be dependent on the amount of the unsatisfied judgment debt.
  34. 34. 3. Right of redeeming non-debtor-partner For this reason the redeeming non-debtor-partner, it is believed, does not acquire absolute ownership over the debtor-partner's interest but hold it in trust for him consistent with the principles of fiduciary relationship.
  35. 35. Right of partner on the exemption laws Under article 1811 a partner cannot claim any right under the homestead loss or exemption lost one specific partnership property is a task for partnership debt. With respect, however, the partner's interest in the partnership as distinguished from his interest in specific partnership property, the partner may avail himself of the exemption laws after partnership debts have been paid. A partner's interest or share in a partnership is really his property.