TRUSTS
 Essence of trust = fiduciary relationship or enforcement
CHAPTER 1
INTRODUCTION
TRUSTS
 TRUST = a right, enforceable based on equity, to the
beneficial enjoyment of property, the legal title to which
is vested to another
Tolentino- the legal relationship between one person
having an equitable ownership in property and another
person owning legal title to such property
> the equitable ownership of the former = entitling him
to the performance of certain duties +
> exercise certain powers by the latter
 Express or implied
o Express – intention of the trustor or the
parties
o Implied – created by operation of law
ROOTED ON AMERICAN LAW ON TRUSTS
 1442: Principles of general law of trust > insofar not in
conflict with CIVIL CODE + CODE OF COMMERCE + ROC
+ SPL = are hereby adopted
EXPRESS TRUST
 CONSENSUALITY, MUTUALITY and RELATIVITY
 Equity also
EQUITY = ESSENCE OF IMPLIED TRUST
 1445: no trust shall fail because the trustee appointed
declines> unless contrary appears
 NO TRUST = WON Express or Implied > when it violates
law , morals or public policy
NATURE OF TRUST
 Technical sense: right, enforceable based on equity, to
the beneficial enjoyment of property, the legal title to
which is vested to another
 Also: indicates Duties, relations, and responsibilities >
not strictly technical trust
 Trustor – one who establishes the trust
 Trustee - one in whom confidence is reposed as regards
the property
 Beneficiary – one for whose benefit the trust has been
created
o Cestui que trust
INTENTION OF THE TRUSTOR = MORE ESSENTIAL
CONSIDERATION
 In private trust = beneficiary may not be named or even
in esse
 In charitable trust > for noble cause
SHOULD NOT VIOLATE THE LAW, MORAL, PUBLIC POLICY
NATURE OF TRUST
1. Do not Create a Separate Judicial Entities
2. Divorces Naked Title from the Rest of Trustor
Estate
3. Anchored on Splitting the Naked Title and
Beneficial Title
DO NOT CREATE A SEPARATE JUDICIAL ENTITY
 DBP v. COA = SC> no separate legal entity for the FUND
DIVORCES NAKED TITLE
 Principal and income of the fund> separate and distinct
from the funds of the bank > DBP as Trustor
SPLITTING NAKED AND BENEFICIAL TITLE
of equity is built on property relations
 NO Real Trusts = only meeting of the minds
o UNLESS THE TITLE IS TRANSFERRED TO
TRUSTEE
o 3 different ways to transfer
1. Only Naked Title given = registered
as naked/legal title holder
2. Full Title registered in his name +
Clear agreement: holding for the
benefit of another person =
EXPRESS TRUST, at best
RESULTING TRUST, at least
3. Constructive Trust = full title
acquired by law or equity> obligation
to convey it to another person who
has better claim
KINDS OF TRUSTS
 Express o implied
EXPRESS
 Created by the intention of the trustor or the parties
IMPLIED
 Comes into being by operation to law
 TWO TYPES OF IMPLIED TRUST (jurisprudence)
o Resulting Trust
o Constructive Trusts
DIFFERENCE IN ESSENCE
 Express > based on autonomy or “freedom to contract
doctrine”
 Implied > those, without being expressed, are deducible
from the nature of the transaction = as a matter of
intent
o Superinduced on the transaction as matters of
equity > independently of the particular
intention of the parties
SUSCEPTIBILITY TO PRESCRIPTION OR LACHES
 Express> not susceptible to prescription or laches
o His possession is not adverse
o There is an implied acceptance> he holds the
trust property for the beneficiary
 Implied> possible to be extinguished by prescription or
laches
o No implied acceptance of trust obligation>
ORAL EVIDENCE TO PROVE TRUST
 Express Trust on IMMOVABLE> cannot be enforced
by oral evidence = must be supported by written
instrument
 Implied Trust> may always be enforced by oral
evidence
o Not within the operative coverage of SOF
COMMON DENOMINATOR
 They are LEGAL RELATIONSHIPS built upon property
rights
 No Express or Implied Trust, unless some property
is involved
 2. BENEFICIARY
CHAPTER 2 3. RES
EXPRESS TRUSTS 4. CONTROL
DEFINITION AND NATURE
 1440: Trustor, Trustee, Beneficiary EXPRESS TRUST ESTABLISH CONTRACTUAL RELATIOSHIPS
 1441: Express or Implied > express = by intention of BUILT AROUND PROPERTY RELATION
trustor or the parties  With respect to property, not one involving merely
TRUSTOR, TRUSTEE, BENEFICIARY personal duties
 Trustor = grantor, settlor, founder  There must be PRESENT and COMPLETE
 Trustee = to whom confidence is reposed as regards to DISPOSITION of the TRUST PROPERTY,
the property or corpus notwithstanding that enjoyment in the beneficiary
o Res = trust property will take place in the future
 Beneficiary = cestui que trust
EXPRESS TRUST NOMINATE AND PRINCIPAL
 1440: legal relayionship
 Trust = fideicomiso; Trustee= fiduciario; Beneficiary = UNILATERAL AND GARTUITOUS
cestui que trustant
ESSENTAIL CHARACTERISTICS OF EXPRESS TRUST PREPARATORY CONTRACT
1. RELATIONSHIP
2. FIDUCIARY CHARACTER FIDUCIARY DUTIES ON THE TRUSTES
3. WITH RESPECT TO PROPERTY
4. EXISTENCE OF EQUITABLE DUTIES IMPOSED UPON ACQUISITIVE PRESCRIPTION ON CORPUS = UNAVAILING TO
THE HOLDER OF TITLE THE TRUSTEE
5. RESULT OF MANIFESTATION OF INTETION TO
CREATE RELATIOSHIP RULES OF ENFORCEABILITY OF EXPRESS TRUST
 Pertains to express and resulting trust  1443: no express trust on immovable or any interest >
o Not constructive trusts = because technically may be proved by parol evidence
the Trustee owes no fiduciary duty to  1444: no particular words required> sufficient that
beneficiary > it arises by operation of law; not trust is clearly intended
from the manifestation of intention to create  CONSENSUAL V. REAL
the relationship o Real = needs delivery
EXPRESS TRUST > ESSENTIALLY CONTRACTUAL IN CHARACTER  PROPRIETARY RELATIOSHIP
 1444: No particular words are required = sufficient o Needs possession
that a trust is clearly intended o Not merely acceptance of duties and
 1445: no trust shall fail because the trustee responsibilities of a trustee
declines, unless the contrary appear o Designated Trustee = may formally accept
 1446: ACCEPTANCE BY THE BENEFICIARY IS those duties and responsibilities laid out in a
NECESSARY Deed of Trust
> if trust has no onerous condition upon beneficiary =  Needs TRANSFER
acceptance is presumed, if there is no proof to contrary  WITHOUT NAKED TITLE OF THE
o Wrong impression: no need for consent of CORPUS being transferred= there is
trustee = not necessarily a contractual no moral or legal basis upon which
relationship his fiduciary obligation can arise
 TRUST IS REAL AND PREPARATORY  1445: no trust shall fail… = CAN ONLY MEAN TWO
CONTRACT > correct THINGS
TESTAMENTARY TRUST 1. No contractual Relationship has been
 Constituted in a will> law on Succession established YET
TRUST AS DONATION o could not fail = final establishment of trustee
 Solemn contract> Law on Donation mat be effected by another person who
STIPUATION POUR ATRUI accepts the trust > to whom naked title of
 Beneficiary is other than the trustor corpus may be instituted
2. Naked/Legal title has been effected by the
ESSENTIAL CHARACTERISTIC OF EXPRESS TRUST trustor in the name of the trustee , before the
1. Nominate And Principal trustee has expressly accepted the designation
2. Unilateral And Primarily Onerous As To Trustee o His refusal = not “fail” > because it is still
3. Primarily Gratuitous possible to transfer the naked title to another
4. Real person who accepts
5. Preparatory And Primarily As To Beneficiary  IDEAL FORM = Written Deed of Trust
6. Fiduciary o whereby naked title is conveyed to the
specified trustee under clear terms and
ESSENTIAL ELEMENTS condition
1. TRUSTEE  BUT, being EXPRESS> can also be by ORAL, DEEDS
  Execution of a Deed of Trust as PUBLIC DOCUMENT = in
effect > CONTRUCTIVE DELIVERY of the Trust Property EXPRESS TRUST DISTINGUISHED FROM SIMILAR
 BEST FORM OF EXPRESS TRUST > IMMOVABLES; LAND ARRANGEMENTS
OR INTEREST= WHEN TRUSTEE IS EXPRESSLY 1. Splitting of Full Dominion into Naked/Legal Title and
REGISTERED AS “NAKED TITLE OWNER” Beneficial/Equitable title
Trust
EXPRESS TRUST MUST NEVERTHELESS BE CLEARLY SHOWN TO Usufruct U> enjoys the Trustee> naked
HAVE BEEN INTENDED property and holder +
 Intended: shown by > clear, satisfactory, and fruits actively
Convincing evidence - not the naked manages and
owner administers the
o Cannot rest on vague, uncertain evidence; or
trust proeprty
on loose, equivocal, or indefinite declaration
U> obliged to
 Even without using words “trust” or “trustee” preserve the Beneficiery>
form and passive
ESSENCE OF RELATIONSHIP BETWEEN TRUSTOR AND TRUSTEE substance + receiver of
PRIOR TO THE CONVEYANCE OF RES take care of it fruits and
 A private deed of trust = would not give rise to a true with the benefits
trust relationship , until the property, constituted as diligence of a
corpus, is ACTUALLY CONVEYED TO THE TRUST good father
RELATIONSHIP Lease Lessee > Beneficiary>
o With the deed = constituting as constructive narrow full beneficial
delivery enjoyment of ownership over
possession and trust property
What is the status of a private Deed of Trust. Duly executed by
use
the trustor and trustee and accepted in the same instrument
-for limited Trustee >
by the beneficiary, before the title to the designated property period manage and
is actually placed un the name of the trustee administer
 BEFORE DELIVERY = no valid contract of trust
o DO UT FACIA Benefit>
 Trustor contractually bound himself Benefit> permanent
to deliver and transfer title over the temporary
trust property to the trustee; and period
 Trustee has bound himself to accept Sale Buyer> takes Trustee> only
delivery and to manage the fill ownership takes naked
properties to be delivered for the title
interest of the beneficiary
For its own end Preparatory
o Binding Obligation = trustor to delivery
Act
EXPRESS TRUST OVER IMMOVABLES MUST BE IN WRITING
2. On Being Bound to Fiduciary Duties and
 Clear Indication of 1443: must be in writing
Obligations
 CLV: 1443= lame provision
Agency Trust
1. Not in writing= express trust over immovable not Duty of NO duty of Obedience >trustee
void, but mere UNENFORCEABLE Obedience transacts business in his own
> merely for purposes of proof, not for the validity behalf as a trustee and legal title
of the trust agreement holder, not in the name of the
2. As a Real Contract> requires delivery beneficiary
> under current legislations = no title to registered
land may be registered with the register of deed in - trustee> has the legal title
the name of the trustee, unless the deed s are in Diligence Diligence
public instrument Loyalty Though bound by duty of loyalty >
3. PH Jurisprudence: when not in writing> it can still he must act for the best interest of
be proven by clear and convincing parol evidence the beneficiary
a. Under 1457: an implied trust may be
BUT HE IS NOT BOUND BY THE
proved by oral evidence> Resulting trust
INSTRUCTION OF THE
BENEFICIARY
LEGAL SIGNIFICANCE OF 1443
Though both a fiduciary in nature
 Provision to apply to an “agreement to create an Revocable at Not revocable at will
express trust over an immovable or any interest therein will = based Unless shown > unfit; breach of
 ORAL AGREEMENR> between the trustor and the primarily on obligation
trustee to constitute a trust over an immovable which is the willingness
not followed-up with an actual conveyance of the of the principal
covered property = NOT ENFORCEABLE BY PAROL to be
EVIDENCE represented by
another person
KINDS OF EXPRESS TRUST
1. Contractual Trusts
2. Inter Vivos Trusts = DONATION
3. Testamentary Trusts = WILL
4. Charitable Trust = Eleemosynary
5. Publicly- regulated Trust

CAPACITIES, RIGHTS, DUTIES, AND OBLIAGTIONS OF THE

APRTIES OF THE EXPRESS TRUST
Trustor = creator
Must have Legal
Trustor
Capacity to Convey
trust Property
Party Primarily
bound
Must have Legal
Capacity to Accept
the Trust
When trustee
Declines
Contractually Stated
Duties and Obligations
of the Trustee
Common Law Duties
Prohibited from
Donating the Trust
Property
Trustee cannot use
Trustee
Funds of the Trust to
Acquire Property for
Himself
Obligation of Trustee D & O under ROC
Proper Proceedings for
Sale or Encumbrance
Trustee does not
assume generally
personal liability on the
trust
Trustee is not entitled
to compensation for
Management
Removal or resignation
of Trustee
Passive recipient of
benefits from the
Beneficiary trust
Need have legal
capacity

EXTINGUISHMENT OF EXPRESS TRUST

 By reason determined in the trust agreement
 Those provided by law
1. Destruction of the Corpus
- destroyed or no longer serves its purpose
2. Revocation of the Trustor
- gen rule: trustor cannot revoke, unless expressly
provided
3. Achievement of the Objective/ Happening of an
Event> Provided for in the Instrument
4. Death or Legal Incapacity of the Trustee
5. Confusion/ Merger> Legal and Beneficial title in
Same person
6. Breach of Trust
 IMPLIED TRUST
NATURE AND TYPES OF IMPLIED TRUST
 1441: Trust either EXPRESS or IMPLIED; Express =
intention; Implied = by operation of law
 1442: principles of general law of trusts are adopted >
insofar as not in conflict with CC, Code of Commerce and
ROC and Special Laws
 NOT ONLY IN THE LIST GIVEN BY CC
TWO TYPES OF IMPLIED TRUSTS
1. Resulting Trusts – deductible from the nature of the
transaction as matter of intent
 The court supplies the nomenclature; who are
the parties
 Law presumes intent
2. Constructive Trusts – coming into being by operation of
law; Property is ACUIRED THROUGH MISTAKE or
FRAUD
 No presumption of intent
 Law protects from fraud or mistake
DUTIES AND RESPONSIBILITIES OF PARTIES: RESULTING V.
CONSTRUCTIVE
1. Resulting: Duty of Loyalty and Diligence
Constructive: only to surrender the property to the beneficiary
IMPLIED TRUST V. EXPRESS TRUST
RESULTING TRUST
 Burden of Proof
o Beneficiary need only to prove facts that
would cover the transaction + legal
presumption hat there exists a resulting trust
would arise from the very nature of the
transaction
o Trustee = to show that there was no such trust
relationship intended
 Blurring distinction between Express and resulting
trust
 Rules of Prescriptibility of resulting trust= same with
express trust
o Imprescriptible > as long as the trustee has not
repudiate
CONSTRUCTIVE TRUST
 Imposed by law> there is neither a promise nor
fiduciary relation + so-called trustee does not
recognize any trust and has no intent to hold the
property for the beneficiary
 Prescription
o Applies only when the trustee assert right
adverse to that of the beneficiary> such as
asserting ownership
 VS RESULTING TRUST
o C/T draw its essence from the need to impose
an obligation on a person who takes title to a
property to achieve justice or equity on behalf
of another person who would be adversely
affected by the fact that the title remains with
another person
o R/T draw its essence from the perceived
intention of the parties as taken from the
transaction
 C/T similar to the Purpose to Quasi-Contracts of
Solution Indebiti
o More on procedural difference
IMPLIED TRUST PARTICULARLY CONSTITUTED BY LAW
 1447: enumeration of implied trusts does not exclude
other established by general law of trust> but the
limitation in 1442 shall be applicable
 1448- 1455 = resulting trust
 1456 = constructive trust
RESULTING TRUST
1448 1. Purchase of Property Where Title is Placed in One
Person, But the Price Paid by Another Person
BUT IF TRUSTEE > CHILD = presumed GIFT
PURCHASE MONEY RESULTING TRUST
1449 6. DONATION of a property to a Donee who shall
have no Beneficial Title
1450 2. Purchase of Property where the Title is place in
the Name of Person Who Loaned the Purchase
Price
1451 7. Land Passes By SUCCESSION but Heir Places
Title into a Trustee
1452 4. When Two or More Persons Purchase Property
JOINTLY > But place Title to ONE of them
1453 5. Property Conveyed to a Person Merely as Holder
thereof
1454 3, Where Absolute Conveyance of Property Effected
as a Means to Secure Performance of Obligation
1555 8. TRUST FUND used to Purchase Property with is
Registered in Trustee’s Name
CONSTRUCTIVE TRUST
1456 Property is ACUIRED THROUGH MISTAKE or FRAUD:
constructive trust
1. Purchase of Property Where Title is Placed in One Person,
But the Price Paid by Another Person
 PURCHASE MONEY RESULTING TRUST
 Basis
o Implied intention> Trustor-beneficiary and
the acceptance of the obligation by the trustee
who is fully aware > that the property
registered under his name for which he never
paid the price
 Emphasized: Difference of Express trust
o Formal constitution: The naked title s placed
in the trustee and the beneficial title pertains
to beneficiary
 TITLE PLACED in the NAME OF A CHILD
o Presumed as a gift
o “child” = minor
 o It cannot be normally expected that a child
would administer property for the benefit of
the parents
 EXCEPTION: no implied resulting trust under 1448
1. Trustee Minor Child that a parent stands in
loco parentis
2. Actual Contrary Intention is proved
3. Where the Purchase is made in violation of an
existing statute and in evasion of its express
provision> since no trust can result in favor of
a party who is guilt of fraud
 WHEN CHILD PROVIDES for the PURCHASE PRICE
o Considered as LOAN = no transfer of any
interest to the child
o Extended as a Loan = not a Trust
2, Purchase of Property where the Title is place in the Name of
Person Who Loaned the Purchase Price
 Situation
o Where a person, using his own funds > buys a
property on behalf of another > who is in the
meantime may not have the funds to purchase
it = the tile to the property is being place in the
name of the trustee > the person who pays,
until he is reimbursed by the beneficiary
 Akin to EQUITABLE MORTGAGE ARRANGEMENT
o Equitable Mortgage = as one which although
lacking in some formality> nevertheless
reveals the intention of the parties to chare the
real property as security for a debt and
contains nothing impossible or contrary to law
 Constructed> between PURPORTED
SELLER and BUYER in a contract of
sale with a right of repurchase >
where the purpose of sale is to
secure a principal obligation , usually
a loan between them
o HOWERVER IN 1450
 Not a typical equitable mortgage
 Sale of a third party of his
property to a purported buyer
who takes tilte to secure his loan
made to the beneficiary who is a
stranger to the contract
3. , Where Absolute Conveyance of Property Effected as a
Means to Secure Performance of Obligation
 1454: = really constitutes an equitable mortgage
 Better to transfer the Right to redeem to be part of Art.
1605
4. When Two or More Persons Purchase Property JOINTLY >
But place Title to ONE of them
 Insofar as the proportionate share of the first co-owner
is concerned
 WONDER WHY IT IS IMPLIED > despite having “agree”
and “ by common consent”
o Reason why it is not express: because Full
title, not just naked title, is placed in the
name of the trustee
5. Property Conveyed to a Person Merely as Holder thereof
 it may be considered as an express trust: BUT THE
DIFFRENCE > THE PERSON SOUGHT TO BE BENEFITED
BY THE GRANTOR HAS NOTYET GIVEN FORMAL
ACCEPTANCE TO THE BENEFIT
 1453 implies
o Person conveying the property did not
expressly state that he was establishing the
trust
6. DONATION of a property to a Donee who shall have no
Beneficial Title
 Analogous to FIDEICOMMISSARY > Art. 863: where
the testator designates a person as an heir charging him
to deliver to another person the whole or part of the
inheritance
7. Land Passes By SUCCESSION but Heir Places Title into a
Trustee
 Limited to LAND
1. The principal of implied trust it embodies is most
appropriate to registered land> where the title is
issued in the name of the trustee
RULES ON PRESCRIPTION
RULES OF PRESCRIPTION FOR EXPRESS TRUSTS
 General Rule: Express trusts not susceptible to
Acquisitive Prescription
o Exception: trustee who is in Adverse
Possession may claim title by prescription
o Requisites:
1. Trustee performed unequivocal acts of
repudiation> amounting to an ouster of
beneficiary
2. Positive acts of repudiation > made
known to the beneficiary
3. Clear and Convincing Evidence
 Successor-in-Interest of the Trustee> cannot relat of the
Torrens Title issue under the name of the Trustee
RULES OF PRESCRIPTION FOR IMPLIED TRUST
 MINOR =
o Defense of prescription or laches by the
trustee cannot be accepted when the
beneficiary is a minor
 Since the latter was not in the
position to defend himself
 STILL ACKNOWLEDGES
o Prescription cannot arise in favor of a trustee
who still acknowledges the rights of the
beneficiary
 UNDER THE NEW CIVIL CODE
o 2 stream of decision
 Upholding the Doctrine of
Imprescriptibility; and
 Acknowledging the clear
repudiation of the trust
 Action for Reconveyance based upon a Constructive
or Implied Trust> may be barred by the statute of
limitation
o 10 years prescriptive period for all types of
implied trusts
  PERIOD
o Constructive Trust = cause of action must be
deemed to have accrued only upon the
discovery of such bad faith or mistake
 SUMMARY OF RULES (Ramos v. Ramos)
1. Rule of Imprescriptibility = may possibly apply
as long as the trustee has not repudiate the
trust
2. Rule of Imprescriptibility does not apply in
Constructive Trust
3. Prescription may supervene in an implied
trust
4. Implied trust may be barred by laches
 WHEN DOES THE PERIOD BEGIN
o The beneficiary’s cause of action for
reconveyance arises not when the trust is
constituted but when the trustee repudiates
the trust
 Majority of Court Decision:
registration of title = reckoning time
 But there are decisions >
discovery of fraud =
reckoning time
 WHEN BENEFICIARY IS IN POSSESSION OF THE
PROPERTY = PRESCRIPTIVE PERIOD WILL NOT BE
APPLICABLE
 WHEN CIRCUMSTANCES DIS NOT GRANT
BENEFICIARY SUFFICIENT TIME TO DISCOVER THE
FRAUD
o Hid from other heir (Adille v. CA)
 Court: the period starts only from the
knowledge of the other heir

LAND + WITHOUT REGISTRATION = 10 YEAR PERIOD DOES

NOT EVEN BEGIN TO RUN
 Important: registration = in order to determine the
running of prescriptive period

WHEN REGISTRATION COVERS A VOID TITLE

 “signature of some the forced heirs were forged”
 Court: implied trust doctrines apply only when the
tile of the purported trustee is valid
o The court refused to apply the doctrines
that an action for reconveyance prescribes
after 10 years, on the ground that o
constructive rust had arisen

RULES ON PRESCRIPTION ON RESULTING TRUSTS FOLLOW

THOSE OF EXPRESS TRUST
 RESULTING TRUSTS: prescription does not begin to
run until there is an express repudiation by the
trustee
o Unequivocal acts
o Made known to the Beneficiary
o Clear and Convincing Evidence
PARTNERSHIP
TRI-LEVEL EXISTENCE OF THE PARTNERSHIP
1. Contractual Relationship
2. Means/ medium to do Business, thru a Separate
Judicial Personality
3. Business Enterprise
*knowing the levels = important in determining the legal
significance of various provisions of CC in regulating
partnership
NOTED:
 Dissolution of a partnership as the change in the
relation of the partners caused by any partner ceasing
to be associated = different from the winding up of the
business
 Legal personality of an expiring partnership persists for
the limited purpose of winding up and closing
o When new partnership simply ook ove the
business enterprise + without winding up the
business affiars > paying off its debts,
liquidating and distributing its assets
o SUCCESSOR- LIABILITY RULE
 the creditors of the business have a
right to recover payment against the
transferee of the business enterprise
 UNLIMITED LIABILITY = PARTNERSHIP > personal
property may be made liable
o Except: limited partnership
CIVIL ACTION ARISING FROM PARTNERSHIP V. ESTAFA
 failure to deliver the profit = civil action
 failure to appropriate money for capital = estafa
TWO IMPORTANT ASPECTS OF PARTNERSHIP
1. REGISTRATION of the contract of partnership > legal
effect: BINDING THE PARTNERS, as to contractual
obligations , right and duties of the partners
2. UNDERLYING BUSINESS ENTERPRISE > durable aspect
of the partnership and has much legal influence on
determining the contractual intents of the partners
PARTNERSHIP IS PRIMARILY A CONTRACTUAL
RELATIONSHIP
1767: By the contract of PARTNERSHIP > TWO or MORE
PERSONS bind themselves to contribute money, property or
industry to a COMMON FUND, with the INTENTION > dividing
the profits among themselves
Two or more persons may also a Form of Partnership
for the EXERCISE OF PROFESSION.
1770: PARTNERSHIP must have a LAWFUL OBJECT or
PURPOSE + must be established for the COMMON BENEFIT or
INTEREST OF THE PARTIES
1771: PARTNERSHIP> may be CONSTITUTED IN ANY FORM
Except: where immovable property or real rights are
contributed = public instrument is necessary
1784: PARTNERSHIP BEGINS> moment the execution of the
contract,
Unless it is otherwise stipulated
LEVELS OF EXISTENCE
1. Contractual relationship
2. Means of Doing business
3. Underlying business enterprise
DOCTRINE OF CONSENSUALITY
 1771: P> may be constituted in any form
o Except: immovable property or real right is
contributed = public instrument is needed
 1770: principle: the provision of law are deemed
incorporated into every contract > “ a partnership must
have lawful object or purpose”
 MEETING OF THE MINDS = necessary > to constitute a
contract of partnership
PARTNERSHIP AS A MEANS OF DOING BUSINESS, THROUGH
THE PARTNERSHIP JURIDICAL PERSON
1768: SEPARATE AND DISTINCT JURIDICAL PERSONALITY
The partnership has a juridical personality separate and
distinct from that of each of the partners > even in case of failure
to comply with Art. 1772, par. 1
>1772: Every contract of partnership having a capital of three
thousand pesos or more, in money or property, shall appear in a
public instrument, which must be recorded in the Office of the
Securities and Exchange Commission.
44: JURIDICAL PERSON
(3) Corporation, PARTNERSHIPS and associations for pirvate
interest or purpose to which the law grants a JURIDICAL
PERSONALITY, SEPARATE AND DISTINCT. FROM THAT OF EACH
SHAREHOLDER, PARTNER, OR MEMBER
45: PARTENRSHIPS and association for private interest or
purpose are governed by the provisions of the code in
partnerships
46: JURIDICAL PERSON may:
ACQUIRE AND POSSESS property of all kinds +
INCUR obligations +
BRING civil/ criminal actions
In conformity with the laws and regulations of their
organizations
1774: IMMOVABLE PROPERTY OR INTERST THEREIN> may
be acquired in the partnership name. TITLE SO ACQUIRED >
may be conveyed only in the partnership name
LEGAL BASIS OF THE PARTNERSHIP JDURIDICAL PERSONALITY
 1768 > clear implication > constitution of partnership
immediately bring a constitution by law of a separate
juridical person
UNDERLYING BUSINESS ENDS OF THE APRTNERSHIP JURIDICAL
PEROSN
 Importance of Grant of Separate Juridical Personality =
to make the partnership medium an efficient means
by which several persons can collectively pursue
business
o 46: Partnership > may acquire property, incur
obligation, and bring civil/criminal actions
“PERSON” IN PARTNERSHIP
 Does not occupy the same level as the “person” of an
individual
 PERSON in PARTNERSHIP = a legislative grant by the
State or Created by law > as a means or medium by
 which individuals in society may achieve certain
business or commercial ends

SECRET ASSOCIATION
 1775> shall have no juridical personality and shall
be governed by the provisions of CO-OWNERSHIP
 They are not meant to undertake a business that is
supposed to deal with the public
o Since not intended to be a medium of being
business> no purpose of granting it a separate
juridical personality

DOCTRINE OF SEPARATE JURIDICAL PERSONALITTY OF

PARTNERSHIP
 Treat it as a class> as a legal or juridical entity and to
permit it to sue and be sued in the name of the
partnership
 COURT: death of either partner is not a ground for the
dismissal of a pending suit
 Insolvency of Partners > is NOT INSOLVENCY OF
PARTNERSHIP

DOCTRINE OF PEIRCING OF THE CORPORATE VEIL

 When acting partners may be held personally liable for
corporate debts > when shown: juridical personality
of the partnerships is but a means to evade the law
> then the court will pierce the veil of its separate
juridical personality to treat the partners as directly
liable or accountable for the consequence of the acts
done in partnership name
 Though limited application in Partnership = it may be
applied
 UNLIMITED LIABLITY of PARTNERS

ENTITLEMENT TO CONSTITUTIONAL RIGHTS AND

GUARANTEES
 PH Corporate Law = “person before the law” > entitled
to the Constitutional guarantee to:
o Due process and Equal Protection
o Rights against unreasonable searches and
seizure
*not right against self-incrimination
 Corporation organizing itself as a collective body waives
no constitutional immunities appropriate for such body

PARTNERSHIP AS A BUSINESS ENTERPRISE

 “A GOING CONCERN”