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Article 1840. Creditors of The Old Partnership Are Still Creditors of The New Partnership When

The document discusses the liability of creditors from an old partnership to a new partnership or third party continuing the business under various circumstances: (1) Creditors of the old partnership remain creditors of the new partnership if a new partner is admitted, a partner retires and assigns rights to others, or a deceased partner's representative assigns rights to others, as long as the business continues without liquidating the partnership affairs. (2) The same applies if all but one partner retires and assigns rights to the remaining partner, or a deceased partner's representative assigns rights to the remaining partner, without liquidating the partnership affairs. (3) Creditors also remain if a partner retires, dies, the dissolved

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2K views

Article 1840. Creditors of The Old Partnership Are Still Creditors of The New Partnership When

The document discusses the liability of creditors from an old partnership to a new partnership or third party continuing the business under various circumstances: (1) Creditors of the old partnership remain creditors of the new partnership if a new partner is admitted, a partner retires and assigns rights to others, or a deceased partner's representative assigns rights to others, as long as the business continues without liquidating the partnership affairs. (2) The same applies if all but one partner retires and assigns rights to the remaining partner, or a deceased partner's representative assigns rights to the remaining partner, without liquidating the partnership affairs. (3) Creditors also remain if a partner retires, dies, the dissolved

Uploaded by

Jhean Nares
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Article 1840.

Creditors of the old partnership are still creditors of the new


partnership when:

(1) a. Any new partner is admitted into an existing partnership or


b. When any partner retires or assigns, or the representative of the deceased
partner assigns, his rights in partnership property to:
i. two or more of the partners or
ii. one or more of the partners and one or more third persons,

If the business is continued without liquidation of the partnership affairs.

(2) a. When all but one partner retire and assign, or


b. the representative of a deceased partner assigns,

their rights in partnership property to the remaining partner, without liquidation of


the partnership affairs.

(3) a. When any partner retires or


b. dies
c. and the business of the dissolved partnership is continued
d. with the consent of the retired partners or the representative of the deceased
partner,
e. but without any assignment of his right in partnership property.
Article 1840. Creditors of the old partnership are still creditors of the new
partnership when:

(4) a. When all the partners/ representatives


b. assign their rights in partnership property to:
i. one or more third persons

who promise to pay the debts and who continue the business of the dissolved
partnership.

(5) a. When any partner wrongfully causes a dissolution


b. and the remaining partners continue the business under Article 1837, par. 2, No.
2,
c. either alone or with others
d. without liquidation of the partnership affairs.

(6) a. When a partner is expelled and


b. the remaining partners continue the business
c. either alone or with others
d. without liquidation of the partnership affairs.
What is the liability of a third person, continuing the business of the dissolved
partnership, to the creditors of the dissolved partnership?

The liability of a third person to the creditors of the dissolved partnership shall be
satisfied out of the partnership property only, unless there is a stipulation to the
contrary.
Illustration:

Xisola, Yu, and Zest Partnership.

Xisola passed away but the remaining partners, Yu and Zest, continued the business
of the partnership. If Yu incurred debts, does the individual property of Xisola liable for
the debt incurred by Yu?

Answer:

No. The individual property by Xisola shall not be liable for the debt incurred by
Yu.

The use by the person or partnership continuing the business of the partnership
name, or the name of a deceased partner as part thereof, shall not of itself make the
individual property of the deceased partner liable for any debts contracted by such
person or partnership. (Article 1840, las par.)
Example:
Old Firm New Firm

Firm Zoom  Firm Schoology

Members:  Members: With C as a new member.


A&B A, B, & C

Question:

Is C liable for the debts of the old firm?


Example:
Old Firm New Firm

Firm Zoom  Firm Schoology

Members:  Members: With C as a new member.


A&B A, B, & C

Question:
Is C liable for the debts of the old firm?

Answer:
Yes. C is liable to the debts of the old firm.

Ratio:
Article 1826. A person admitted as a partner into an existing partnership is liable for all the
obligations of the partnership arising before his admission as though he had been a partner
when such obligations were incurred…, except that this liability shall be satisfied out of
partnership property, unless there is a stipulation to the contrary.
Question:

How about if the continuation of the dissolved partnership business is made


by another company/corporation? Is the company liable to partnership
creditors?
Answer:

Yes. The company is liable to partnership creditors.


The corporation is presumed to have assumed partnership debts and is prima
facie liable therefor.

Ratio:
Because the members of the dissolved partnership have taken on a corporate cloak, and the
corporation is a mere continuation of the partnership. [Laguna Transportation Co., Inc. v.
Social Security System, 107 Phil. 833; 1960]
Take Note:

 Article 1840 only happens if the partnership is dissolved without any winding
up or liquidation of the partnership and is continued by the partners.

 The creditors of the dissolved partnership shall be prioritized over the


separate creditors of the retiring or deceased partner or representative
thereof.

 A new partnership contract is formed if the dissolved partnership is


continued by the partner or the partnership.

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