COURSE SYLLABUS IN PARTNERSHIP, AGENCY AND TRUST LAWS PAMANTASAN NG LUNGSOD NG MAYNILA COLLEGE OF LAW ATTY. RICHARD S. CLARIN 1* Semester, School Year 2015-2016 OBJECTIVE At the end of the course, the student is expected to: ‘A. Know the Civil Code provisions on partnership, agency and trust and the jurisprudence interpreting these laws. Enhance his/her communication skills in reciting cases and answering questions during class sessions and examinations. Develop a methodical mind that knows how to filter the essential facts and identify the relevant issue and ruling. Develop an analytical mind through evaluation and comparison of the evolving, and at times differing, doctrines. Acquaint him/her to (a) useful concepts in the actual practice of law, and (b) concepts that frequently come out in the Bar examinations. moos SCOPE ‘The course shall cover the following laws: Law on Partnership - Articles 1767 up to 1867 of the Civil Code Law on Agency - Articles 1868 up to 1932 of the Civil Code Law on Trust — Articles 1440 up to 1457 of the Givil Code Relevant case-laws and opinions gom>Outline in Partnership, Agency and Trust Laws OUTLINE IN PARTNERSHIP LAW [Civil Code, Book IV, Title IX} | HISTORICAL CONSIDERATIONS A. The Evolution of Partnership B. Sources of Philippine Partnership Law Il, NATURE AND ATTRIBUTES A. Concept - 1767 B. Partnership as a Contractual Relation 1. Essential Elements -1767 a Necessity of Contract - 1318 Parties - who may Become a partner ~ 1927, 1782, 739 Consent or Intention to Become Partner ~ 1769 (1), 1804 Lawful Subject Matter and Cause - 1347, 1348, 1770 i Effect of illegality - 1409 Contribution to Common Fund -1767 Purpose: Business/Profession -1767 & Community of interest — 1767, 1770, 1769(3),(4) i Co-ownership of Capital or Property ii. Joint Management and Control i Co-ownership of Profits and Participation in Profits and Losses 2. Principles governing Partnership . Contractual in nature ~ 1767, 1784 Separate Juridical Personality - 1768, 46, 51, 175 Delectus Personae - 1804, 1813 * Ortega v. Court of Appeals, G.R. No. 109248, July 3, 1995 d, Mutual Agency ~ 1803, 1818-1822 e. Unlimited Liability - 1816, 1817, 1824, 1826, 1827, 1839(4], [7]) 3. Distinguished from Other combinations and relations a. Joint Venture © Aurbach v. Sanitary Wares, 180 SCRA 130 (1989) * Heirs of Tan Eng Kee v. Court of Appeals, G.R. No. 126881, October 3, 2000 b. Agency c. Employment + Ruga vs. NLRC, G.R. 72654-81, January 22,1990 © Mendiola v. CA, G.R. No. 159333. July 31, 2006 Co-ownership Corporation £. Lease - Yulo vs. Yang Chiao Seng, G.R. L-12541, August 28, 1959 Ill. CLASSES OF PARTNERSHIPS AND PARTNERS A. Kind of PartnershipOutline In Partnership, Agency and Trust Laws 1. As to Object a. Universal - 1776-1782, 1847(2” par) i. Of present property il, Of profits b. Particular -1783 2. As to nature of activity - 1767 a. Commercial b. Non-Commercial 3. As to liability of partners a. General or Ordinary — 1816, 1822-1824 b. Limited - 1843 4, As to duration a. With a fixed term - 1785 b. Fora particular undertaking cc. Atwill - 1785 5. Aso legality of existence a, De jure - 1772(2™ par), 1773 b. De facto - 1825 * Pioneer Insurance vs. CA, G.R. 84197, July 28,1989 6. As to representation to others a. Ordinary or real 'b. Ostensible or by estoppel - 1825 B. Kinds of Partners 1. Asto liability a. General - 1843, 1816 b. Limited - 1843 2. As to contribution a. Capitalist - 1767 b. Industrial - 1789, 1767 3. As to the degree their connection with the partnership is known or made known a. Ostensible — b. Nominal ~ 1825 c. Dormant, silent or secret - 1834 (2™ par) 4, As to the time they joined the partnership a. Original or charter b. Incoming ~ 1826, 1840 (2” par.) 5. As to their special duties a. Managing - 1800 b. Liquidating or winding - 1886Outline in Partnership, Agency and Trust Laws 4 6. Asto their status after dissolution a. Retiring - 1840, 1841 b. Continuing c. Surviving 7. Partner by estoppel - 1825 C. Weaknesses of a Partnership — 1819, 1828, 1830(1)(b), 1830(1)(d), 1830(4), 1830(5)(6)(7), 1831 /. CREATION AND DURATION ‘A. How Constituted; Formalities 1. General Rule - 1771 2. When Capital At Least P3,000.00 - 1772 3. When Immovables or Real Rights Contributed - 1771, 1773 + Litonjua, Jr. vs. Litonjua, Sr, et al., G.R. Nos. 166299-300, December 13, 2005 + Torres v. Court of Appeals, G.R. No. 134559, December 9, 1999 B. Duration 4. Commencement - 1784 2. Term - 1785 V. OBLIGATIONS OF PARTNERS TO ONE ANOTHER A. Promised Contribution — 1786 (1" par) 1. Money - 1788 2. Property - 1787, 1786 in rel. to 1547, 1795 3. Industry - 1789, 1767 4. Amount of Contribution Due from Each Partner - 1790 B. Contribution of Additional Capital - 1791 ©. Fiduciary Duty 1. Nature + Liwanag vs. CA, G.R. 114398, October 24, 1997 2. Duration * Hanlon vs. Haussermann, G.R. 14617, February 18, 1920 + Pang Lim vs. Lo Seng, 42 Phil 282 (1921) * Catalan vs. Gatchalian, G.R. L-11648, April 22, 1959 3. Aspects a. Secret Benefit or Profits from Transactions Connected with Partnership Affairs -1807, 1831, 1794 b. Engaging in Competitive Business i Capitalist Partner - 1808 ii, Industrial Partner - 1789 ©. Collected share in Firm Credit - 1793 4. Collections from Common Debtor of Firm and Managing Partner - 1792Outline in Partnership, Agency and Trust Laws 5 D. Participation in Losses ~ 1797-1799 VI. PROPERTY RIGHTS OF A PARTNER — 1810, 1805, 1806, 1809(1), 1796 A. Co-ownership ~ 1811 B. Incidents of Co-ownership 1. Equal rights to Possess ~ 1811(1), 1809 (1), 1831, 1807, 1788(2” par.) 2. Non-assignability - 1811(2), 1840(1)(2) 3. Not Subject to Attachment or Execution ~ 1811 (3), 1814 4, Not Subject to support - 1811(4) C. Interest in Partnership 1. What it consists of - 1812 2. Nature and Characteristics; Differentiated from Right in Specific Property - 1813, 1814 (last par.) . Assignment - 1813 Charging Order - 1814, 1827, 1839, 1830 (1)(c) pe D. Participation in Management 1. General Rule - equal right in management and conduct of the partnership business 2. When Agreement Exists - 1800, 1802 3. When No Agreement Made as to manner of management - 1803, 1818, 1801 E. Access to Partnership Books F. Right to True and Full Information - 1806 G. Right to Formal Account - 1809 H. Reimbursement of Advances and Indemnification for Risks - 1796 VI. RELATIONS AND DEALINGS WITH THIRD PERSONS A. Firm Name - 1815, 1816 B. Partners as Agents ~ 1. Basis 2. Contractual Obligations a. Acts within Apparent Authority - 1818 (1% par.), 1819 * Goquiolay vs. Sycip, G.R. L-11840, July 26, 1960 b. Acts not within Apparent Authority — 1818 (2 par), 1811(1) c. Acts Requiring Unanimous Consent 1818(3* par.), 1878 d. Known Restrictions on Authority - 1818 (last par.) Liability for Wrongful Acts or Omissions ~ 1822, 1823(1), 1823(2) a. Tortious Acts b. Criminal Acts ‘Admissions or Representations - 1820 Notice or Knowledge - 1821 e osOutine In Partnership, Agency and Trust Laws 6. Partnership liability by Estoppel - 1769(1), 1825, 1815 (2 par.) C. Individual Liability of Partners for Partnership Acts 1. AllPartners a. For Contracts - 1816, 1817, 1797 * Island Sales vs. United Pioneers Gen. Const., G.R. L-22493 July 31, 1975 ‘+ Mobil Oil Philiopines vs. CFI of Rizal, G.R. 40457, May 8, 1992 b. For Torts and Delicts - 1824 2. Partner by Estoppel - 1925 (1,2) 3. Incoming Partner - 1826, D. Suit by or against the Partnership - 46 Vill DISSOLUTION, WINDING UP AND TERMINATION A. Concepts and Definitions — 1828, 1829, 1840(1) * Idos vs. CA, G.R. 110782, September 25, 1988 B. Causes of Dissolution - 1880 1. Types a. Voluntary i Extrajudicial - 1830 (1) Without violation of Agreement - 1785 - In Contravention of Agreement - 1830(2), 1837(2” par.), 1836, 1838 + Bearneza vs. Dequilla, G.R. 17024, March 24, 1922 + Roxas vs. Maglana, G.R. 30616, December 10, 1990 * Ortega vs. CA, G.R. 109248, July 3, 1995 * Primelink Properties vs. Lazatin-Magat, et al., G.R. 167379, June 27, 2006 b. Judicial i. Who may apply ~ 1831(1* & 2" pars.), 1813, 1814 ii, Grounds - 1831 ii, On Application of Assignee or Purchaser of Partner's Interest - 1813, 1831 (2 par.), c. By Operation of Law 1830 (3-7) C. Effect of Dissolution - 1821, 1892-1835, 1934, 1816, 1824 + Fue Leung vs IAC, G.R. 70926, January 31, 1989 C. Rights of Partners and Liabilities of Dissolved Partnership - 1836-1838, 1840, 1841 + Yuvs. NLAC, G.R. 97212, June 30, 1993 D. Application of Assets to Liabilities - 1839 1. In General 2. Partnership Assets and Order of Their Application 3. Order of Priority of Liabilties 4, Contributions of PartnersOutline In Partnership, Agency and Trust Laws 5. Priority Between Partnership Creditors and Separate Creditors - 1827 1X, LIMITED PARTNERSHIP ‘A. Origin and Development B. Concept and Rationale - 1843 C. Formation - 1844 1. Statutory Requirements 2. Effect of Failure to Fulfill Requirements 3. Effect of False Statement in Certificate — 1847 D. Rights, Powers, Restrictions and Liabilities of Partners - 1850 1, General Partner or Partners a. Rights, Powers and Restrictions b. Liabilities c. Effect of Retirement, Death, etc. - 1860 2. Limited Partner a. Rights - 1843, 1846, 1847, 1848, 1851, 1853- 1859, b. Liabilities - 1858, 1854, 1862 Limited Partner who is also a General Partner ~ 1853 (1* & 2° pars.) Person erroneously believing himself a Limited Partner - 1852 Additional Limited Partners gae E. Amendment or Cancellation of Cer to — 1864, 1844, 1865 F. Dissolution and Winding up — 1860, 1857(1" & 2” pars.), 1855Outine in Partnership, Agency and Trust Laws 8 onmmoom> OUTLINE IN AGENCY LAW [Civil Code, Book IV, Title X] I NATURE, FORM AND KINDS OF AGENCY Nature - 1868 Kinds - 1869, 1876 Acceptance - 1870 - 1873 Form - 1874 & 1878 Consideration - 1875 Scope - 1881, 1877, 1879, 1880, 1882, 1883 Cases: 1. Characteristics * Ralls vs. Felix Go Chan & Sons Realty Corp., G.R. L-24332, January 31, 1978, 2. Modes of formation * Macke vs. Camps, G.R. L-2962, February 27, 1907; © Dela Pena vs. Hidalgo, G.R. 5486, August 17, 1910; * Gutierrez Hermanos vs. Orense, G.R. 9188, December 4, 1914. 3. Effects * Thomas vs. Pineda, G.R. L-2411, June 28, 1951 4, Presumption of compensation + Ayllon vs. Roman Catholic Archbishop of Manila, G.R. 13868, August 27, 1919; ‘+ Infante vs. Cunanan, et al., G.R. L-5180, August 31, 1953; © Prats vs. CA, G.R. L-39822, January 31, 1978; + Uniland Resources vs. DBP, G.R. 95909, August 16, 1991 5. Entitlement of agent to commission after expiration of his authority + Sanchez vs. Medicard Philiopines, et al, G.R. No. 141525, September 2, 2005. 6. Distinguished from other contracts and relations '* Gonzalo Puyat & Sons, Inc. vs. Arco Amusement Co., G.R. 47538, June 20, 1941; + Shell'vs. Fireman’s Insurance, et al., G.R. L-8169, January 23, 1957; * San Diego vs. Nombre, et al, G.R. L-19265, May 29, 1964; ‘+ Neilson & Co., Inc. vs. Lepanto, G.R. L- 21601, December 28, 1968;Outline in Partnership, Agency and Trust Laws © Sevilla vs. CA, et al, G.R. L-41182-3, April 15, 1988. 7. Construction Lian vs. Puno, et al., G.R. 9608, August 7, 1915; Philippine American Life Insurance Co. vs. Ansaldo, G.R. 76452, July 26, 1994, I. OBLIGATIONS OF THE AGENT A. Principal obligations of the agent - 1884, 1887 & 1891 B. To carry out the agency in accordance with the instructions of the principal 1. Authority to advance funds - 1886 Authority to borrow money - 1890 Authority to appoint substitute - 1892 Conflict of interests - 1889 Liability for use of principal's funds - 1896 Liability for fraud and negligence - 1909 Responsibility of two or more agents - 1894-1895 NOaeeon C. Liability of agent to third persons ‘Agent acting as such - 1897 2, Agent exceeds the scope of his authority - 1898-1899 3. Where agent's authority not known to third person - 1900-1902 D. Commission agent - 1903-1906, 1908-1909 1. Del credere agent - 1907 E Cases Carry out the agency * Barton vs. Leyte Asphalt, G.R. 21237, March 22, 1924; * International Films vs. Lyric Film, G.R. 42465, November 19, 1936; + Switzerland General Insurance vs. Ramirez, G.R. L-48264, February 21, 1980; * Samar Mining vs. Nordeutscher Lloyd, G.R. L-28673, October 23, 1984. * Bravo-Guerrero, et al. vs. Bravo, et al., G.R. No. 152658, July 29, 2005. 2. Liability for damages + Macias vs. Warner Barnes, G.R. 16492, March 9, 1922;Outline In Partnership, Agency and Trust Laws 10 Severino vs. Severino, G.R. 18058, January 16, 1923; Philippine Sugar Estates vs. Poizat, G.R. 23352, December 31, 1925; Philippine National Bank vs. Manila Surety, G.R. L-20567, July 30, 1965; Green Valley Poultry vs. IAC, G.R. L-49395, December 26, 1984; * Bordador vs. Luz, G.R. 130148, December 15, 1997. 3. Rendition of accounts + United States vs. Kiene, G.R. 3188, March 12, 1907; * United States vs. Igpuara, G.R. 7593, March 27, 1913; ‘+ Domingo vs. Domingo, G.R. L-30573, October 29, 1971 IIL- OBLIGATIONS OF THE PRINCIPAL ‘A. To comply with obligations contracted by the agent - 1910 (a) Estoppel on the part of principal - 1911 () Agent's compensation B. To make advances to the agent upon the latter's request - 1912, 1* par, C. To reimburse the agent's advances - Art, 1912, 2” par. (a) Agent's lien - 1914 (b) Instances when principal not liable for agent's expenses - 1918 To indemnify the agent for damages caused to the latter - 1913 Solidary principals - 1915 Rules in case principal and agent separately contract with 2 persons - 1916-1917 9 ™mo . Cases: + Agustinos Recoletos vs. Lichauico, G.R. 10934, February 26, 1916; + Lim Chai Seng vs. Trinidad, G.R. 16671, March 30, 1921 IV, MODES OF EXTINGUISHMENT OF AGENCY E- Expiration of period - 1919 D- Death, etc. - 1919, 1930-1932 W- Withdrawal of agent - 1919, 1928-1929 A - Accomplishment of object or purpose - 1919 R- Revocation - 1919, 1920-1927 D- Dissolution of firm - 1919 onrmoog> + Dela Pena vs. Hidalgo, G.R. 6486, August 17, 1910;Outline in Partnership, Agency and Trust Laws uw + Valera vs. Velasco, G.R. 28050, March 13, 1928; = Coleongco vs. Claparols, G.R. L-18616, March 31, 1964; © Diolosa vs. CA, G.R. L-36585, July 16, 1984; ‘+ Siasat vs. IAC, G.R. L-67889, October 10, 1985; * CMS Logging vs. CA, G.R. 41420, July 10, 1992; * Inland Realty vs. CA, G.R. 76969, June 9, 1997. * Republic vs. Evangelista, G.R. No. 156015, August 11, 2005Outline in Partnership, Ageney and Trust Laws 12 QUTLINE IN TRUST LAW’ [Civil Code, Book IV, Title V] A. Definition - 1440 1. Trustor 2. Trustee 3. Beneficiary Essential elements ©. Compare to - 1. Bailment (see De Leon, p. 659) 2. Donation (see De Leon, p. 659) D. Express trusts - 1441 1. Living trusts or inter vivos trusts Testamentary trusts Charitable trusts Spendthrift trusts Totten trusts 2 geen E. Implied trusts - These come into being by operation of law. 1. Constructive trusts - 1450, 1454, 1455, and 1456 2. Resulting trusts - 1448, 1449, 1451, 1452, and 1453 Trustee powers and duties G. Trust termination H. Cases © Sps. Gomez, et al. vs. Duyan, et al, G.R. No. 144148, March 18, 2005; * Aznar Brothers Realty Company vs. Aying, G.R. No. 144773, May 16, 2005; ‘+ Vda. de Rigonan, et al. vs. Derecho, et al, G.R. No. 159571, July 15, 2005; '* Spouses Bejoc vs. Prima Calderon Cabreros, et al,, G.R. No. 145849, July 22, 2005; * Spouses Oco vs. Limbaring, G.R. No. 161298, January 31, 2006; + Comilang vs. Burcena, et al, G.R. No. 146853, February 13, 2006; Estate of Edward Miller Grimm vs. Estate of Charles Parsons, et al., G.R. No. 159810, October 9, 2006. |. Additional source: Wills, Trusts, and Estates by Jesse Dukeminier and Stanley M. Johanson, Little, 4” ed., Brown and Company, 1990 ~ End - [Except as otherwise india the discussion inthis outline has ben sourced (with some sight etrial changes) from West’ ‘Business Law, 7 e, 198, West Educational Publishing, pp. 957-960, 962. llrightsreserved