Article 1827. The creditors of the partnership shall be preferred to those of each partner as regards the partnership property. Without prejudice to this right, the private creditors of each partner may ask the attachment and public sale of the share of the latter in the partnership assets. The rule is based upon the theory that the partnership treated as a legal entity distinct and separate from the members composing It should apply Its property to the payment of Its debts in preference to the claim of any partner or his creditors CHAPTER 3 Dissolution and Winding up Article 1828.
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The dissolution of a partnership Is the change In the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. Dissolution, winding up, and termination defined. Dissolution is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying of the business. It is that point in time when the partners cease to carry on the business together.
Winding up is the process of settling the business or partnership affairs after dissolution Termination is that point hen all the partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. Article 1829. On dissolution the partnership Is not terminated, but continues until the welding up of partnership affairs Is completed. Dissolution refers to the change In relationship and not the actual cessation of the business. Article 1830.
Dissolution is caused: (1) Without violation of the agreement between the partners: (a) By the termination of the definite term or particular undertaking specified in the agreement; (b) By the express will of any partner, who must act in good faith, when no definite term or particular is specified; (c) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking; (d) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners; (2) In contravention of the agreement between the partners, where the circumstances do not permit a ratter at any time; (3) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership; (4) When a specific thing which a partner had promised to contribute to the partnership, perishes before the delivery; in any case by the loss of the thing, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use or enjoyment of the same; but the partnership shall not be dissolved by the loss of the thing when it occurs after the partnership has acquired he ownership thereof; (5) By the death of any partner; (6) By the insolvency of any partner or of the partnership; (7) By the civil interdiction of any partner; (8) By decree of court under the following article. (AAA and AAA) Loss of specific thing (No. 4) 1.
Loss before delivery – if the specific thing to be contributed by a partner is lost before delivery, the partnership is dissolved because there is no contribution inasmuch as the thing to be contributed cannot be substituted with another. There is, here, a failure of a partner to fulfill his part of the obligation. 2. Loss after delivery – if the loss occurred after the delivery of the thing promised, then the partnership is not dissolved, but it assumes the loss of the thing having acquired ownership thereof. 3. Loss where only use or enjoyment contributed – if only the use or enjoyment of the thing is contributed the partner having reserved the ownership thereof, the loss of the same before or after delivery, dissolves the partnership. Article 1831.
On application by or for a partner the court shall decree a dissolution whenever: (1) A partner has been declared insane in any Judicial proceeding or is hon. to be of unsound mind; (2) A partner becomes in any other way incapable of performing his part of the partnership contract; (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; (5) The business of the partnership can only be carried on at a loss; (6) Other circumstances ender a dissolution equitable. On the application of the purchaser of a partner’s interest under article 1813 or 1814: (1) After the termination of the specified term or particular undertaking; (2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued. (n) Article 1832.
Except so far as may be necessary to wind up partnership affairs or to complete transactions begun but not then finished, dissolution terminates all authority of any partner to act for the partnership: (1) With respect to the partners, a) When the dissolution is not by the act, insolvency or death of a partner; or (b) When the dissolution is by such act, insolvency or death of a partner, in cases where article 1833 so requires; (2) With respect to persons not partners, as declared in article 1834. The event of dissolution, therefore terminates the actual authority of the partners to undertake new business for the partnership. A. In so far as the partners themselves are concerned the authority of any partners to bind the by the act of, insolvency or death of a partner. B. With respect to third persons, the readership is generally bound by the new contract although the authority of the acting partner as it affects his co-partners is already deemed terminated. In such case however the innocent partners can always recover from the acting partner. Article 1833.
Where the dissolution is caused by the act, death or insolvency of a partner, each partner is liable to his co-partners for his share of any liability created by any partner acting for the partnership as if the partnership had not been dissolved unless: (1) The dissolution being by act of any partner, the partner acting or the partnership had knowledge of the dissolution; or (2) The dissolution being by the death or insolvency of a partner, the partner acting for the partnership had knowledge or notice of the death or insolvency. The above article speaks of dissolution caused by the act, insolvency, or death of a partner The authority of a partner as it affects his co-partners (not third persons ) is not deemed terminated except in two instances, namely; 1. The cause of dissolution is the act of the partner and the acting partner had knowledge of such dissolution 2.
The cause of the solution is the death or insolvency of a partner and the acting partner had knowledge or notice of the death or insolvency. When a partner has knowledge or notice of a fact 1. A person has knowledge of a fact within the meaning of this act not only when he has actual knowledge thereof but also when he has knowledge of such other facts in the circumstances show bad faith 2. A person has notice of a fact within the meaning of this act when the person who claims the benefit of the notice: a. States the fact to such person, or b. Delivers through mail or by other means of communication, a written statement of act to such person or to a proper person at his place of business or residence. Article 1834.
After dissolution, a partner can bind the partnership, except as provided in the third paragraph of this article: (1) By any act appropriate for winding up partnership affairs or completing transactions unfinished at dissolution; (2) By any transaction which would bind the partnership if dissolution had not taken place, provided the other party to the transaction: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of the dissolution; or b) Though he had not so extended credit, had nevertheless known of the partnership prior to dissolution, and, having no knowledge or notice of dissolution, the fact of dissolution had not been advertised in a newspaper of general circulation in the place (or in each place if more than one) at which the partnership business was regularly carried on. The liability off partner under the first paragraph, No. 2, shall be satisfied out of partnership assets alone when such partner had been prior to dissolution: (1) Unknown as a partner to the person with whom the contract is made; ND (2) So far unknown and inactive in partnership affairs that the business reputation of the partnership could not be said to have been in any degree due to his connection with it.
The partnership is in no case bound by any act of a partner after dissolution: (1) Where the partnership is dissolved because it is unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs; or (2) Where the partner has become insolvent; or (3) Where the partner has no authority extended credit to the partnership prior to dissolution and had no knowledge or twice of his want of authority; or (b) Had not extended credit to the partnership prior to dissolution, and, having no knowledge or notice of his want of authority, the fact of his want of authority has not been advertised in the manner provided for advertising the fact of dissolution in the first paragraph, No. 2 (b). Nothing in this article shall affect the liability under article 1825 of any person who after dissolution represents himself or consents to another representing him as a partner in a partnership engaged in carrying on business. Article 1835. The dissolution of the partnership does not of itself discharge the existing liability of any partner.
A partner is discharged from any existing liability upon dissolution of the partnership by an agreement to that effect between himself, the partnership creditor and the person or partnership continuing the business; and such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business. The individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner, but subject to the ROR payment of his separate debts. The dissolution off partnership does not itself discharge the existing, liability of a partner. The liability of estate of a deceased partner – the individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner. Note that the individual creditors of the deceased partner are to be preferred over the partnership creditor. Article 1836.
Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal representative of the last surviving partner, not insolvent, has the right to wind up the partnership affairs, provided, however, that any partner, his legal representative or his assignee, upon cause shown, may obtain winding up by the court. Manner of winding up 1 . Judicially – under the control and direction of the court. 2. Extrajudicial – by the partners themselves without intervention of court. Persons authorized to wind up 1 . The partners designated by agreement 2. In absence of such agreement, all the partners who have not wrongfully dissolved the partnership 3. The legal representative of the last surviving partner Article 1837.