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Case Digests in Civil Law Review 2

TABLE OF CONTENTS

JAIME D. ANG V. COURT OF APPEALS AND BRUNO SOLEDAD ................. 5
NUTRIMIX FEEDS CORPORATION V. COURT OF APPEALS AND
SPOUSES EFREN AND MAURA EVANGELISTA ............................................... 7

PARTNERSHIP, AGENCY & TRUST ......................................9
PASCUAL V. COMMISSIONER ON INTERNAL REVENUE AND COURT OF
TAX APPEALS ............................................................................................................. 9
ESTANISLAO, JR., V. COURT OF APPEALS ..................................................... 11
DAN FUE LEUNG V. INTERMEDIATE APPELLATE COURT AND LEUNG
YIU ............................................................................................................................... 12
HEIRS OF TAN ENG KEE V. CA AND BENGUET LUMBER COMPANY ..... 14
SARDANE VS. COURT OF APPEALS .................................................................. 15
SANTOS VS. SPOUSES ARSENIO AND NIEVES REYES ................................ 15
TOCAO VS. COURT OF APPEALS........................................................................ 16
TORRES V. COURT OF APPEALS........................................................................ 17
LIM TONG LIM V PHILIPPINE FISHING GEAR INDUSTRIES, INC .......... 18
EVANGELISTA & CO. V ESTRELLA ABAD SANTOS ...................................... 20
MOBIL OIL PHILIPPINES, INC., V. COURT OF FIRST INSTANCE OF
RIZAL, BRANCH VI, GEMINIANO F. YABUT AND AGUEDA ENRIQUEZ
YABUT ........................................................................................................................ 22

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Case Digests in Civil Law Review 2

SY JUCO V. CASTRO ............................................................................................... 23
ROJAS V. MAGLANA .................................................................................................. 25
YU VS NLRC ................................................................................................................ 26
ORTEGA VS COURT OF APPEALS ...................................................................... 28
PIONEER INSURANCE VS COURT OF APPEALS ........................................... 29
CARMEN LIWANAG VS. THE HON. COURT OF APPEALS AND THE
PEOPLE OF THE PHILIPPINES .......................................................................... 30
CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. RAMNANI AND
MOTI G. RAMNANI VS. COURT OF APPEALS, SPOUSES ISHWAR
JETHMAL RAMNANI, SONYA JETHMAL RAMNANI AND OVERSEAS
HOLDING CO., LTD., ............................................................................................... 31
SUNGA-CHAN V. CHUA .......................................................................................... 32
EMNACE V. COURT OF APPEALS....................................................................... 33
GENEVIEVE LIM V. FLORENCIO SABAN ......................................................... 34
MANILA MEMORIAL PARK INC. V LINSANGAN ............................................ 36
VICTORIAS MILLING CO., INC., PETITIONER, VS. COURT OF APPEALS
AND CONSOLIDATED SUGAR CORPORATION, RESPONDENTS. ............. 37
ROSA LIM, PETITIONER VS. COURT OF APPEALS AND PEOPLE OF THE
PHILIPPINES, RESPONDENTS. .......................................................................... 38
DOMINION INSURANCE CORPORATION VS. COURT OF APPEALS ........ 39
CONDE VS. COURT OF APPEALS ....................................................................... 41
UNILAND RESOURCES VS. DBP ......................................................................... 42
MANILA REMNANT CO. VS. CA ........................................................................... 43

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Case Digests in Civil Law Review 2

NAPOCOR V. NATIONAL MERCHANDISING CORPORATION .................... 45
SCHMID & OBERLY VS. RJL MARTINEZ FISHING CORPORATION ........ 46
BICOL SAVINGS AND LOAN ASSOCIATION VS. COURT OF APPEALS.... 47
CMS LOGGING INCORPORATED VS. COURT OF APPEALS ....................... 48
PROFESSIONAL SERVICES, INC. VS. NATIVIDAD AND ENRIQUE AGANA
...................................................................................................................................... 49
CARLOS SANCHEZ VS. MEDICARD PHILIPPINES, INC., ............................ 50
THE PHILIPPINE BANK OF COMMERCE VS. JOSE M. ARUEGO .............. 51
SIREDY ENTERPRISES, INC. VS.HON. COURT OF APPEALS AND
CONRADO DE GUZMAN......................................................................................... 52
SUMAOANG V. JUDGE RTC BR. XXXI, GUIMBA, NUEVA ECIJA AND ATTY.
PASCUA ...................................................................................................................... 54
O’LACO V. CO CHO CHIT ....................................................................................... 55
HUANG VS. COURT OF APPEALS ....................................................................... 56
THOMSON VS. COURT OF APPEALS ................................................................. 57
JOSUE ARLEGUI VS. HON. COURT OF APPEALS AND SPOUSES GIL AND
BEATRIZ GENGUYON ............................................................................................ 58
RUPERTO L. VILORIA, PETITIONER, VS. COURT OF APPEALS, LIDA C.
AQUINO ...................................................................................................................... 60
SECUYA V. VDA DE SELMA .................................................................................. 61
HEIRS OF SALVADOR HERMOSILLA VS. SPOUSES REMOQUILLO ........ 62
ELENA J. TOMAS ET AL VS COURT OF APPEALS ......................................... 64

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Case Digests in Civil Law Review 2

FILIPINAS PORT SERVICES, INC., REPRESENTED BY ELIODORO C.
CRUZ AND MINDANAO TERMINAL AND BROKERAGE SERVICES, INC. VS
VICTORIANO S. GO ET AL. ................................................................................... 65
VDA. DE CABRERA VS. COURT OF APPEALS ................................................. 66
SPOUSES RICARDO PASCUAL VS. COURT OF APPEALS ........................... 69

CREDIT TRANSACTIONS ...................................................72
ACME SHOE, RUBBER & PLASTIC CORPORATION VS. COURT OF
APPEALS.................................................................................................................... 72
NAVOA VS. COURT OF APPEALS........................................................................ 74
REPUBLIC V. PHILIPPINE NATIONAL BANK, THE FIRST NATIONAL
CITY BANK OF NEW YORK, ET AL. .................................................................... 76
PEOPLE V. VENANCIO CONCEPCION .............................................................. 77
BONNEVIE V. CA ..................................................................................................... 79
FRANCISCO HERRERA VS. PETROPHIL CORPORATION .......................... 82
SAURA IMPORT AND EXPORT CO VS.DEVELOPMENT BANK OF THE
PHILIPPINES ........................................................................................................... 83
CENTRAL BANK V. COURT OF APPEALS ........................................................ 83
REPUBLIC V. JOSE V. BAGTAS. ET. AL. ........................................................... 85
MINA, ET AL. V. RUPERTA PASCUAL, ET AL. ................................................. 86
CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, VS.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN
VALDEZ ...................................................................................................................... 88
MARGARITA QUINTOS AND ANGEL A. ANSALDO VS. BECK ..................... 89

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Case Digests in Civil Law Review 2

CEBU INTERNATIONAL FINANCE CORP. V. COURT OF APPEALS ......... 90
MAMBULAO LUMBER COMPANY. V. PHILIPPINE NATIONAL BANK ..... 91
LIAM LAW VS. OLYMPIC SAWMILL CO. ET. AL. ............................................. 93
SPOUSES FLORANTE ET. AL. VS. PILAR DEVELOPMENT CORPORATION
...................................................................................................................................... 94
SEVERINO TOLENTINO AND POTENCIANA MANIO VS. BENITO
GONZALEZ SY CHIAM ............................................................................................ 95
THE COSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK) VS.
THE COURT OF APPEALS, CONTINENTAL CEMENT CORPORATION,
GREGORY T. LIM AND SPOUSE .......................................................................... 97
COLINARES V. COURT OF APPEALS ................................................................ 99
REPUBLIC OF THE PHILIPPINES V. GRIJALDO ......................................... 100

JAIME D. ANG V. COURT OF APPEALS AND BRUNO SOLEDAD
G.R. No. 177874; September 29, 2008
FACTS:
Respondent Soledad sold his car to petitioner Ang by Deed of Absolute Sale dated July 28,
1992. Ang later offered the car he bought from Soldedad, for sale which was eventually sold
to Paul Bugash. However, the vehicle was seized by virtue of a writ of replevin on account of
the alleged failure of Ronaldo Panes, the owner of the vehicle prior to Soledad, to pay the
mortgage debt constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance but Soledad refused to reimburse
the said amount, despite repeated demands. Ang filed on July 15, 1996 with the MTCC a
complaint which was however dismissed on the ground of prescription since more than 6
months elapsed from the delivery of the subject vehicle to the plaintiff buyer to the filing of
this action, pursuant to Article 1571.
Ang appealed to the RTC which affirmed the dismissal of the complaint but required
defendant to reimburse the amount plaintiff paid BA Finance Corporation. Soledad’s Motion
for Reconsideration was denied hence, he elevated the case to the Court of Appeals and
accordingly reversed the RTC decision and denied the petition.

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Case Digests in Civil Law Review 2
Hence, the present recourse – petition for review on certiorari, Ang maintaining that his
cause of action had not yet prescribed when he filed the complaint and he should not be
blamed for paying the mortgage debt.
ISSUE:
1. Whether or not the defendant Soledad in executing the Deed of Absolute Sale
declaring that, “I hereby covenant my absolute ownership to (sic) the above-described
property and the same is free from all liens and encumbrances… xxx “ ,made an
EXPRESS warranty, the prescriptive period for which is that specified in the contract,
and in the absence of such period, the general rule on rescission of contract, which is
four years; or an IMPLIED warranty which prescribes six months from the date of
delivery of the thing sold.
2. Whether or not petitioner Ang is entitled to damages for warranty against eviction by
virtue of the writ of replevin issued on account of the alleged failure of Ronaldo Panes,
the owner of the vehicle prior to Soledad, to pay the mortgage debt constituted on the
subject vehicle and pursuant to the declaration of defendant Soledad in the Absolute
Sale that, “I will defend the same from all claims or any claim whatsoever; will save
the vendee from any suit by the government of the Republic of the Philippines.”
HELD:
In declaring that he owned and had clean title to the vehicle at the time the Deed of
Absolute Sale was forged, Soledad gave an implied warranty of title. In pledging that he "will
defend the same from all claims or any claim whatsoever [and] will save the vendee from any
suit by the government of the Republic of the Philippines," Soledad gave a warranty against
eviction.
A warranty is a statement or representation made by the seller of goods,
contemporaneously and as part of the contract of sale, having reference to the character,
quality or title of the goods, and by which he promises or undertakes to insure that certain
facts are or shall be as he then represents them.
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines
express warranty as any affirmation of fact or any promise by the seller relating to the thing
is an express warranty if the natural tendency of such affirmation or promise is to induce the
buyer to purchase the same, and if the buyer purchases the thing relying thereon.
On the other hand, an implied warranty is that which the law derives by application
or inference from the nature of the transaction or the relative situation or circumstances of
the parties, irrespective of any intention of the seller to create it. Among the implied warranty
provisions of the Civil Code are: as to the seller’s title (Art. 1548), against hidden defects and
encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction
(Art. 1548).
Since what Soledad, as seller, gave was an implied warranty, the prescriptive period
to file a breach thereof is six months after the delivery of the vehicle, following Art. 1571.
Ang’s action therefore has already prescribed.
On the merits of his complaint for damages, Ang cannot recover damages for breach
of warranty against eviction due to the absence of the following essential requisites for such
breach, vìz:

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they failed to issue checks despite the deliveries of animal feeds which were appropriately covered by sales invoices. there is no judgment which deprived Ang of the vehicle. In some instances. The respondents also lodged a complaint for damages against the petitioner for the untimely and unforeseen death of their animals supposedly effected by the adulterated animal feeds the petitioner sold to them. The petitioner made several demands for the respondents to settle their unpaid obligation. against the respondents for sum of money and damages with a prayer for issuance of writ of preliminary attachment. The trial court denied the same and the petitioner alleged that the death of the respondents’ animals was due to the widespread pestilence in their farm. (2) This eviction is by a final judgment.7 Case Digests in Civil Law Review 2 "A breach of this warranty requires the concurrence of the following circumstances: (1) The purchaser has been deprived of the whole or part of the thing sold. likewise. The petitioner. Consequently. They contended that inasmuch as the sudden and massive death of their animals was caused by the contaminated products of the petitioner. but the latter failed and refused to pay their remaining balance with the petitioner. Initially. maintained that it received information that the San Beda College of Law. Petitioner filed with RTC a complaint. and (4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. NUTRIMIX FEEDS CORPORATION V. No. In their answer with counterclaim. the nonpayment of their obligation was based on a just and legal ground. (3) The basis thereof is by virtue of a right prior to the sale made by the vendor. For another. Petitioner moved to dismiss the respondents’ complaint on the ground of litis pendentia. however. COURT OF APPEALS AND SPOUSES EFREN AND MAURA EVANGELISTA G. the respondents admitted their unpaid obligation but impugned their liability to the petitioner.R. the respondents were good paying customers. Mendiola. 152219. Manila . 2004 FACTS: Respondent spouses herein started to directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation. For one. there was no suit for eviction in which Soledad as seller was impleaded as co-defendant at the instance of the vendee. October 25. the respondents incurred an aggregate unsettled account with the petitioner.

the defect existed when the product left the hands of the petitioner. the feeds could have already been contaminated by outside factors and subjected to many conditions unquestionably beyond the control of the petitioner. The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the New Civil Code of the Philippines. In a span of three months. Mendiola. there is an implied warranty that it is reasonably fit and suitable to be used for the purpose which both parties contemplated. and finally. the second is that the injury occurred because the product was defective or unreasonably unsafe. Under the law. theorized that it was the respondents who mixed poison to its feeds to make it appear that the feeds were contaminated. To be able to prove liability on the basis of breach of implied warranty. moreover. must be important (renders thing UNFIT or considerably decreases FITNESS). (d) the defect. Manila . the requisites to recover on account of hidden defects are as follows: (a) the defect must be hidden. (c) the defect must ordinarily have been excluded from the contract. A hidden defect is one which is unknown or could not have been known to the vendee. to the time the animals died and the animal feeds were examined? RULING: A difference of approximately three months enfeebles the respondents’ theory that the petitioner is guilty of breach of warranty by virtue of hidden defects.8 Case Digests in Civil Law Review 2 respondents were in an unstable financial condition and even sold their animals to settle their obligations from other enraged and insistent creditors. (b) the defect must exist at the time the sale was made. (e) the action must be instituted within the statute of limitations. ISSUE: Is the petitioner corporation guilty of breach of warranty due to hidden defects despite a finding that there was a difference of approximately three months from delivery of the animal feeds. A manufacturer or seller of a product cannot be held liable for any damage allegedly caused by the product in the San Beda College of Law. In the sale of animal feeds. to respondent spouses. three things must be established by the respondents. The first is that they sustained injury because of the product. It.

allegedly containing rat poison. or when the product left the seller’s or manufacturer’s control. It bears stressing. on July 26. rudimentary that common law places upon the buyer of the product the burden of proving that the seller of the product breached its warranty. AGENCY & TRUST PASCUAL V. The respondents’ case of breach of implied warranty was fundamentally based upon the circumstantial evidence that the chickens and hogs sickened. and were not the ones that were ostensibly poisoned. there was evidence tending to show that the respondents combined different kinds of animal feeds and that the mixture was given to the animals. For these reasons. The nature of the animal feeds makes it necessarily difficult for the respondents to prove that the defect was existing when the product left the premises of the petitioner.9 Case Digests in Civil Law Review 2 absence of any proof that the product in question was defective. too. No. but it is astonishing that the respondents had the animal feeds examined only on October 20. There was even no attempt to have the dead fowls examined. that the chickens brought for laboratory tests were healthy animals. or barely three months after their broilers and hogs had died. Manila . the expert testimonies lack probative weight. PARTNERSHIP. Neither was there any analysis of the stomach of the dead chickens to determine whether the petitioner’s feeds really caused their sudden death. 78133. Likewise. The defect must be present upon the delivery or manufacture of the product. COMMISSIONER ON INTERNAL REVENUE AND COURT OF TAX APPEALS G. but this was not enough to raise a reasonable supposition that the unwholesome feeds were the proximate cause of the death with that degree of certainty and probability required. 1993. It is. and died after eating Nutrimix feeds. October 18.R. In essence. 1988 FACTS: San Beda College of Law. Tracing the defect to the petitioner requires some evidence that there was no tampering with. we hold that the respondents failed to prove that the petitioner is guilty of breach of warranty due to hidden defects. A review of the facts of the case would reveal that the petitioner delivered the animal feeds. or when the product was sold to the purchaser. stunted. likewise. Mere sickness and death of the chickens is not satisfactory evidence in itself to establish a prima facie case of breach of warranty. 1993. Mendiola. or the product must have reached the user or consumer without substantial change in the condition it was sold. The bevy of expert evidence adduced by the respondents is too shaky and utterly insufficient to prove that the Nutrimix feeds caused the death of their animals. or changing of the animal feeds.

etc. among others. Petitioners filed a petition for review with the CTA. They had the real properties rented or leased to various tenants for several years and they gained net profits from the rental income. and together with their personal funds they used the same for buying several properties. The transactions in the present case were isolated. in the present case. From their realized net profit from both sales.10 Case Digests in Civil Law Review 2 Petitioners bought 2 parcels of land on June 2. Acting BIR Commissioners Plana. formed an unregistered partnership HELD: The CIR and the CTA based their decision in the Evangelista case where the petitioners therein borrowed a sum of money from their father. (b) generally participating in both profits and losses. issue receipts. Thus. property or industry to a common fund. rent. But it affirmed the the decision of the CIR. collect. The character of habituality peculiar to business transactions for the purpose of gain was not present.Respondent Commissioner informed the petitioners that in the 1968 and 1970. Mendiola. 101. there was no evidence that petitioners entered into an agreement to contribute money. and that they intended to divide the profits among themselves.70 as alleged deficiency corporate income taxs for the years 1968 and 1970. from them. Hence the petitioners were required to pay the deficiency income tax assessed.m from the tax liability of the unregistered partnership. The first 2 parcels of land were then sold in 1968. Respondent commissioner just assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co-owners thereof. ISSUE: Whether or not petitioners who are co-owners of the parcels of land they sold. Petitioners protested the said assessment in a letter of June 26. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present. 1966. 1979 asserting that they had availed of tax amnesties way back in 1974. It was mentioned that the unregistered partnership was subject to corporate income tax and that the availment of tax amnesty did not relieve the. They appointed their brother to manage their properties with full power to lease. as San Beda College of Law. In Evangelista case. the Collector of Internal Revenue demanded the payment of income tax on a corporation. and the 3 parcels of land were sold in 1970. 1965 and another 3 parcels of land on May 28. However. the petitioner as co-owners in the real estate transactions formed an unregistered partnership or joint venture taxable as a corporation under Section 20(b) and Sec 24 of the NIRC. In 1979. In order to constitute a partnership inter sese there must be: (a) An intent to form the same. Hence this case. there was a series of transactions where petitioners purchased 24 lots showing that the purpose was not limited to the conservation or preservation of the common fund or even the properties acquired by them. they incurred a capital gains tax which they paid in 1973 and 1974 by availing of the tax amnesties granted in the said years. (c) and such a community of interest. sent a letter to the petitioners stating that they were assessed and required to pay an amount of P107. Manila .

In the present case.R. Under the circumstances. There is no adequate basis to support the proposition that they thereby formed an unregistered partnership.00 to be taken from the advance rentals due to them from SHELL for the occupancy of the said lots owned in common by them. manage the business. Quezon City which were then being leased to the Shell Company of the Philippines Limited (SHELL). they cannot be considered to have formed an unregistered partnership which is thereby liable for corporate income tax.” Petitioner contends that because of the said stipulation cancelling and superseding that previous Joint Affidavit. as the respondent commissioner proposes.000. A joint affidavit was executed by them on April 11.000. 1966. JR.owners and paid their capital gains taxes on their net profits and availed of the tax amnesty thereby. They shared in the gross profits as co. Herring) It is evident that an isolated transaction whereby two or more persons contribute funds to buy certain real estate for profit in the absence of other circumstances showing a contrary intention cannot be considered a partnership. the existence of a juridical personality different from the individual partners. there is clear evidence of co-ownership between the petitioners. V. April 27. whatever partnership agreement there was in said previous agreement had thereby been abrogated. Manila . and the freedom of each party to transfer or assign the whole property. 1988 FACTS: Petitioner and private respondents are brothers and sisters who are co-owners of certain lots at the corner of Annapolis and Aurora Blvd. No. (Municipal Paving Co. and dispose of the whole property. ISSUE: Whether or not a partnership exists between members of the same family arising from their joint ownership of certain properties? San Beda College of Law.11 Case Digests in Civil Law Review 2 far as third persons are concerned as enables each party to make contract. There must be a clear intent to form a partnership. vs. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make them partners. ESTANISLAO. They agreed to open and operate a gas station thereat to be known as Estanislao Shell Service Station with an initial investment of P 15..00 advance rental shall be deposited with SHELL to cover advances of fuel to petitioner as dealer with a proviso that said agreement "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners. The parties entered into an Additional Cash Pledge Agreement with SHELL wherein it was reiterated that the P 15. The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a joint or common right or interest in the property. COURT OF APPEALS G. Mendiola. L-49982. The petitione was allowed to operate and manage the gasoline service station of the family..

70926. Mendiola. Angeles. The sole dealership by the petitioner and the issuance of all government permits and licenses in the name of petitioner was in compliance with the afore-stated policy of SHELL and the understanding of the parties of having only one dealer of the SHELL products. This is attested by the testimonies of private respondent Remedies Estanislao and Atty.000. It provided therein that "This agreement.00 which private respondents agree to be a cash deposit of petitioner in favor of SHELL to increase his credit limit as dealer. is not correct. There is a mere duplication of reference to the P 15. Manila . There is no doubt that the parties hereto formed a partnership when they bound themselves to contribute money to a common fund with the intention of dividing the profits among themselves. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done. Respondent Remedios assisted in the running of the business. his sister. Petitioner gave a written authority to private respondent Remedies Estanislao. Petitioner submitted to private respondents periodic accounting of the business.R.12 Case Digests in Civil Law Review 2 Whether or not the proviso "cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the co-owners” dissolved the existing partnership between the parties? HELD: There is evidently an existing partnership between the parties herein but the contention of the petitioner that the proviso in the subsequent document abrogates the existing partnership agreement between him and the private respondents. 1966 while the latter agreement also refers to advance rentals of the same amount starting May 24.000. In the subsequent document entitled "Additional Cash Pledge Agreement.000. to examine and audit the books of their "common business'. San Beda College of Law. DAN FUE LEUNG V. 1966." the private respondents and petitioner assigned to SHELL the monthly rentals due them commencing the 24th of May 1966 until such time that the monthly rentals accumulated equal P 15.00 hence the need to provide in the subsequent document that it "cancels and supersedes" the previous one. No. cancels and supersedes the Joint Affidavit dated 11 April 1966 executed by the COOWNERS. therefore. Other evidence in the record shows that there was in fact such partnership agreement between the parties. 1989 What is the prescriptive period within which a partner may demand an accounting? DOCTRINE: The right to demand an accounting exists as long as the partnership exists. January 31.00 advance rentals starting May 25." This cancelling provision was necessary for the Joint Affidavit speaks of P 15. INTERMEDIATE APPELLATE COURT AND LEUNG YIU G.

Respondent adduced evidence that about the time Sun Wah Panciteria started to become operational. San Beda College of Law.13 Case Digests in Civil Law Review 2 FACTS: Respondent Leung Yiu filed a complaint to recover the sum equivalent to 22% of the annual profits derived from the operation of Sun Wah Panciteria from petitioner Dan Fue Leung. 1807. and 1809 show that the right to demand an accounting exists as long as the partnership exists. The petitioner's argument is based on Article 1144 in relation to Article 1155 of the Civil Code.00 from the profits of the operation of the restaurant for the year 1974. 1978 or after the lapse of 22 years. The petitioner denied the existence of partnership and maintained that Sun Wah Panciteria was a sole proprietorship. 1955 and the complaint was filed only on July 13. a restaurant. When the IAC ruled that the records sufficiently established that there was a partnership. petitioner raised the issue of prescription.000. It would be incorrect to state that if a partner does not assert his rights anytime within ten years from the start of operations. a deferment of sharing in the profits is perfectly plausible. 9 months and 12 days. private respondent received from petitioner the amount of P12. From October 1. was actually a partnership and that he was one of the partners having contributed P4.00 to its initial establishment. 1955 to July 13. 1978. If excellent relations exist among the partners at the start of business and all the partners are more interested in seeing the firm grow rather than get immediate returns. Regarding the prescriptive period within which the private respondent may demand an accounting.000. He argued that IAC gravely erred in not resolving the issue of prescription in his favor. such rights are irretrievably lost. he gave P4. Although registered as a single proprietorship in the name of petitioner Dan Fue Leung. Articles 1806. Mendiola. Prescription begins to run only upon the dissolution of the partnership when the final accounting is done. Manila . The alleged receipt is dated October 1. In effect the private respondent was asking for an accounting of his interests in the partnership. no written demands were ever made by private respondent. The private respondent's cause of action is premised upon the failure of the petitioner to give him the agreed profits in the operation of Sun Wah Panciteria. The private respondent is a partner of the petitioner in Sun Wah Panciteria. A partner shares not only in profits but also in the losses of the firm.000. ISSUE: Whether respondent’s right to demand an accounting has prescribed? HELD: No. respondent claimed that Sun Wah Panciteria. Furthermore.00 as his contribution to the partnership evidenced by a receipt wherein the petitioner acknowledged his acceptance.

HELD: There was no partnership. Petitioners filed an amended complaint impleading private respondent BENGUET LUMBER COMPANY. October 3. Each has the right to demand an accounting as long as the partnership exists. that despite the forty years the partnership was allegedly in existence. liquidation and winding up of the alleged partnership formed after World War II between Tan Eng Kee and Tan Eng Lay. Mendiola.” But in San Beda College of Law.” The incorporation was purportedly a ruse to deprive Tan Eng Kee and his heirs of their rightful participation in the profits of the business. No. the deferment. entered into a partnership engaged in the business of selling lumber and hardware and construction supplies. The amended complaint principally alleged that after the second World War. The essence of a partnership is that the partners share in the profits and losses. ISSUE: Whether there was a partnership in a situation where an alleged partner have never requested for accounting nor distribution for himself of profits from the enterprise.R. However. Petitioners prayed for accounting of the partnership assets. 2000 Is the lack of a demand for periodic accounting during the lifetime of an alleged partner evidence that there was no partnership? DOCTRINE: The essence of a partnership is that the partners share in the profits and losses. FACTS: Following the death of Tan Eng Kee petitioners as heirs filed suit against the decedent’s brother TAN ENG LA. They named their enterprise “Benguet Lumber” which they jointly managed until Tan Eng Kee’s death. if not unnatural. Tan Eng Kee never asked for an accounting. if any. Manila . …It is indeed odd. a deferment of sharing in the profits is perfectly plausible. a deferment of sharing in the profits is perfectly plausible. Each has the right to demand an accounting as long as the partnership exists. The complaint. had gone on too long to be plausible.” But in the situation in the case at bar. was for accounting. We have allowed a scenario wherein “[i]f excellent relations exist among the partners at the start of the business and all the partners are more interested in seeing the firm grow rather than get immediate returns. We have allowed a scenario wherein “[i]f excellent relations exist among the partners at the start of the business and all the partners are more interested in seeing the firm grow rather than get immediate returns. 126881. they claimed that in 1981. and the dissolution. pooling their resources and industry together. CA AND BENGUET LUMBER COMPANY G. A demand for periodic accounting is evidence of a partnership. winding up and liquidation thereof. Tan Eng Lay and his children caused the conversion of the partnership “Benguet Lumber” into a corporation called “Benguet Lumber Company. Tan Eng Kee and Tan Eng Lay.14 Case Digests in Civil Law Review 2 HEIRS OF TAN ENG KEE V. and the equal division of the net assets of Benguet Lumber. A person is presumed to take ordinary care of his concerns.

herein Sardane had no voice in the management of the affairs of the business. Furthermore. October 25. No. 135813. A person is presumed to take ordinary care of his concerns. ISSUE: Whether a partnership exist between Private Respondent Acojedo. SPOUSES ARSENIO AND NIEVES REYES G. Tan Eng Kee appeared never to have made any such demand for accounting from his brother. Sarcado naturally has some degree of control over the operations and maintenance thereof. L-47045 November 22. no such inference shall be drawn if such profits were received in payment as wages of an employee. SARDANE VS.25 based on promissory notes executed by the herein petitioner Nobio Sardane in his favor. No.15 Case Digests in Civil Law Review 2 the situation in the case at bar.217. Article 1769(4) of the Civil Code is explicit that while the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. During his lifetime. The fact that he had received 50% of the net profits does not conclusively establish that he was a partner of the private respondent herein. In this case. Sardane contended that a partnership existed between him and Acojedo making the promissory notes merely receipts for the contributions to said partnership. In his oral testimony. Tang Eng Lay. SANTOS VS. the deferment.R. Manila . 2001 FACTS: San Beda College of Law.R. 1988 FACTS: Private Respondent Acojedo brought an action in the City Court of Dipolog for collection of a sum of P5. COURT OF APPEALS G. who received shares on the enterprise profits as salary and Petitioner Sardane. if any. Mendiola. RULING: None. A demand for periodic accounting is evidence of a partnership. as manager of the business of Acojedo. had gone on too long to be plausible.

This stipulation clearly proved the establishment of a partnership. two or more persons bind themselves to contribute money. No. Belo introduced Anay to petitioner Marjorie Tocao. COURT OF APPEALS G. ISSUE: Whether or not a partnership exist between Santos and Spouses Reyes.16 Case Digests in Civil Law Review 2 Petitioner Fernando Santos and Respondent Nieves Reyes were introduced to each other by one Meliton Zabat regarding a lending business venture proposed by Nieves. Mendiola. TOCAO VS. with petitioner getting the lion's share. Belo volunteered to finance the joint venture and assigned Anay the job of marketing the product. RULING: Yes. a manufacturer of kitchen wares in the US.Santos would also receive 70% of the profits while Nieves and Zabat would earn 15% each. It was verbally agreed that Santos act as financier while Nieves and Zabat would take charge of solicitation of members and collection of loan payments. was entitled to P1. represented by Gragera. Belo was the capitalist. By the contract of partnership.31 commission per thousand paid daily to Santos. (2) overriding commission of six percent (6%) San Beda College of Law. who conveyed her desire to enter into a joint venture with her for the importation and local distribution of kitchenwares. The parties agreed further that Anay would be entitled to: (1) ten percent (10%) of the annual net profits of the business. Tocao was made President and General Manager. Santos filed a complaint for recovery of sum of money and damages against respondents Reyes allegedly in their capacities as employees with having misappropriated funds intended for Gragera In their answer. Zabat was thereby expelled from the partnership. and Anay as the Head of the Marketing Department and later the VicePresident for Sales. Petitioner and Gragera.1The "Articles of Agreement" stipulated that the signatories shall share the profits of the business in a 70-15-15 manner. considering her experience and relationship with West Bend Company. Santos and Nieves later discovered that their partner Zabat engaged in the same lending business in competition with their partnership. as representative of Monte Maria Development Corporation subsequently executed an agreement providing funds for Monte Maria's members. with the intention of dividing the profits among themselves. October 4. 2000 FACTS: Nenita Anay met petitioner William Belo through her former employer in Bangkok. Under the agreement. Manila . Monte Maria.R. 127405. In the said joint venture. respondents Reyes asserted that they were partners and not mere employees of Santos. property or industry to a common fund.

The following day. Anay was in fact an industrial partner and not that of a mere employee of Tocao and Belo.17 Case Digests in Civil Law Review 2 of the overall weekly production. a sole proprietorship registered in Marjorie Tocao’s name. TORRES V. It was through her reputation with the West Bend Company that the partnership was able to open the business of distributorship of that company’s cookware products. Marjorie Tocao and Belo asserted that the “alleged agreement” with Anay that was “neither reduced in writing. Both the RTC and the CA ruled in favor of Anay. They operated under the name of Geminesse Enterprise. hence.” They alleged that Anay merely acted as marketing demonstrator of Geminesse Enterprise for an agreed remuneration. she received a note that Tocao had barred her from holding office in both their Makati and Cubao offices. it was through the same efforts that the business was propelled to financial success. Anay attempted to contact Belo demanding for her overriding commission for the period of January 8. No. (3) thirty percent (30%) of the sales she would make. She admitted. 1987. Anay then filed a complaint for sum of money with damages against Tocao and Belo before the RTC of Makati. under the law. Mendiola. RULING: Yes. denied having entered into an oral partnership agreement with Anay. 1988 and the audit of the company to determine her share in the net profits. ISSUE: Whether or not Anay was a partner of Tocao and Belo and not a mere employee. this petition. 134559. On October 9. December 09. Anay learned that Tocao signed a letter addressed to their Cubao sales office that she was no longer the Vice-President of Geminesse Enterprise. and (4) two percent (2%) for her demonstration services. Petitioners admit that Anay had the expertise to engage in the business of distributorship of cookware. Tocao. Manila . she was the industrial or managing partner. She was then entitled to 37% commission for her personal sales as indicated in a memo signed by Belo which will last till December 21. 1987. but her letters were left unanswered by the same. Pursuant to the San Beda College of Law. Private respondent contributed such expertise to the partnership and hence. that Anay was granted commissions due to her expertise in the cookware business. however. on the other hand. In their answer.R. Anay later undertook the task of saving their business accounts due to unsatisfactory sales records.” was “either unenforceable or void or inexistent. 1999 FACTS: Petitioners and respondent entered into a joint venture agreement for the development of a parcel land located at Lapu-Lapu City island of Mactan into a subdivision. 1988 to February 5. Belo denied contributing capital to the business or receiving a share in the profits because he merely served as a guarantor of Tocao. nor ratified. COURT OF APPEALS G.

Its first stipulation states that petitioners did not actually receive payment for the parcel of land sold to respondent. In this case.18 Case Digests in Civil Law Review 2 contract. "the land was in effect given to the partnership as [petitioner's] participation therein. and according to the joint agreement. the Court held that a reading of the terms of the Joint Venture Agreement indubitably showed the existence of a partnership pursuant to Article 1767 of the Civil Code." LIM TONG LIM V PHILIPPINE FISHING GEAR INDUSTRIES. . they must bear the loss suffered by the partnership in the same proportion as their share in the profits stipulated in the contract. . who however was not a signatory to the agreement. can take different forms. should the venture come into fruition. They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim. Because of this. Consideration. Manila . and the land was subsequently foreclosed by the bank." Antonio Chua and Peter Yao entered into a Contract with Philippine Fishing Gear Industries. who then had it registered in his name. petitioner filed the instant petition contending that the Court of Appeals erred in concluding that the transaction between the petitioners and respondent was that of a joint venture/partnership. petitioners executed a deed of sale covering the said parcel of land in favor of the respondent. No. RULING: Yes. Inc.045) and floats (P68. which was later dismissed by the trial court. ISSUE: Whether a joint venture existed between the petitioner and respondent. more properly denominated as cause. November 3. the project did not push through. but in the expectation of profits from the subdivision project. such as the prestation or promise of a thing or service by another. There was therefore a consideration for the sale. On appeal. the cause of the contract of sale consisted not in the stated peso value of the land. they [would] get sixty percent of the net profits.R. the [petitioners] acting in the expectation that.000. However. The Joint Venture Agreement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Thus. petitioners filed a civil case before the Regional Trial Court of Cebu City. respondent mortgaged the property in the bank. Aggrieved by the decision.00 was to be used for the development of the subdivision. Thereafter. . As explained by the trial court. (respondent) for the purchase of fishing nets (P532. The appellate court held that the petitioner and respondent had formed a partnership for the development of the subdivision. 1999 FACTS: On behalf of "Ocean Quest Fishing Corporation. for which the land was intended to be used. 136448. Mendiola. the money obtained amounting to P40. San Beda College of Law. INC G.000). the Court of Appeals affirmed the decision of the trial court.

(b) reformation of contracts. Yao and Lim had decided to engage in a fishing business. to finance the venture. (d) injunction. brother of Petitioner Lim Tong Lim. private respondents filed a collection suit against Chua. the ultimate undertaking of the defendants was to divide the profits among themselves which is what a partnership essentially is. Lim. and (e) damages. but reaped benefits from that contract. RULING: Yes. Lim appealed to the CA which affirmed RTC’s decision. were jointly liable to pay respondent. that is for commercial fishing. while Chua was already Yao's partner. fell under the term "common fund" under Article 1767. and (9)That the case was amicably settled through a Compromise Agreement executed between the parties-litigants the terms of which are already enumerated above. with a prayer for a writ of preliminary attachment. The trial court ruled that the respondent was entitled to the Writ of Attachment and that Chua. According to the CA. Mendiola. as general partners. That the parties agreed that any loss or profit from the sale and San Beda College of Law. it is clear that Chua. and Yao verbally agreed to acquire two fishing boats (3) That they borrowed P3. The contribution to such fund need not be cash or fixed assets. a civil case was filed by Chua and Yao against Lim for (a) declaration of nullity of commercial documents. the evidence establishes that all the defendants including herein appellant Lim Tong Lim undertook a partnership for a specific undertaking. (2) That after convening for a few times. which they started by buying boats financed by a loan secured from Jesus Lim. hence. ISSUE: Whether the petitioner is liable as a general partner in a contract entered into on behalf of an unincorporated association or ostensible corporation in which he did not take direct part of. The CA held that petitioner was a partner of Chua and Yao in a fishing business and may thus be held liable as such for the fishing nets and floats purchased by and for the use of the partnership. Responded alleges that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the SEC. Chua. and to divide equally among them the excess or loss. as general partners. it could be an intangible like credit or industry. From the factual findings of both lower courts. The liability for a contract entered into on behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted on its behalf. In their Compromise Agreement. Obviously. Yao and Lim. the purchase and the repair of which were financed with borrowed money.25 million from Jesus Lim. Yao and Petitioner Lim Tong Lim.19 Case Digests in Civil Law Review 2 The buyers. These boats. they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats. (c) declaration of ownership of fishing boats. Manila . however. failed to pay for the fishing nets and the floats. … (8)That subsequently. Below are some of the factual findings of the lower courts: (1)That Petitioner requested Yao who was engaged in commercial fishing to join him.

L-31684. it is true that petitioner did not directly act on behalf of the corporation. as industrial partner. the original capitalist partners. and byway of affirmative defense alleged that the amended Articles of Co-partnership did not express the true agreement of the parties. Chua and Yao decided to form a corporation. It is difficult to disagree with the RTC and the CA that Lim. this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. are held liable as general partners. EVANGELISTA & CO. had been paying dividends to the partners except to her. No. he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppels. and that notwithstanding her demands the defendants had refused and continued to refuse and let her examine the partnership books or to give her information regarding the partnership affairs to pay her any share in the dividends declared by the partnership. 1955. the Articles of Co-partnership was amended as to include herein respondent.20 Case Digests in Civil Law Review 2 operation of the boats would be divided equally among them also shows that they had indeed formed a partnership. On December 17. Navarro. with a contribution of P17. However. Jr. She therefore prayed that the defendants be ordered to render accounting to her of the partnership business and to pay her corresponding share in the partnership profits after such accounting. V ESTRELLA ABAD SANTOS G. plus attorney's fees and costs. knowing it to be without valid existence. The CFI of Manila rendered a decision declaring Estrella as an industrial partner. to pay Estrella San Beda College of Law. that she did not in fact contribute industry to the partnership. 1973 FACTS: On October 9.. having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship. which was that the plaintiff was not an industrial partner. Leonardo Atienza Abad Santos and Conchita P. June 28. Estrella Abad Santos. Manila . those acting on behalf of a corporation and those benefited by it. Clearly. 1954 a co-partnership was formed under the name of "Evangelista & Co.R. which was also made a party-defendant. Technically. Mendiola." and On June 7. denied likewise that the plaintiff ever demanded that she be allowed to examine the partnership books. The court ordered the capitalist partners to render accounting of the business. remaining in that capacity. 1963 herein respondent filed suit against the three other partners alleging that the partnership. with herein petitioners Domingo C.500 each. Although it was never legally formed for unknown reasons. under the law on estoppel. Evangelista. The defendants denied ever having declared dividends or distributed profits of the partnership.

'ART.21 Case Digests in Civil Law Review 2 her share in the profits and/or dividends and to pay for her legal costs. this appeal before the SC assigning the following error. That appellee has faithfully complied with her prestation with respect to appellants. Hence. and to insure faithful compliance by said partner with this prestation. 1899. (2) If the right exists under the terms of any agreement. unless the partnership expressly permits him to do so. which affirmed the decision of the CFI. Any partner shall have the right to a formal account as to partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners. who is a judge. even on the part of the appellee is engaged in any business antagonistic to that of appellant company. San Beda College of Law. In this connection the Court of Appeals erred: ISSUE: Whether the respondent. Mendiola. which right appellants take exception under their second assigned error. Manila .' It is not disputed that the provision against the industrial partner engaging in business for himself seeks to prevent any conflict of interest between the industrial partner and the partnership. The CA erred in the finding that the respondent is an industrial partner notwithstanding the admitted fact that since 1954 and until after promulgation of the decision of the appellate court the said respondent was one of the judges of the City Court of Manila. since being a Judge of one of the branches of the City Court of Manila can hardly be characterized as a business. Petitioners raised the issue that respondent cannot qualify as an industrial partner because she is one of the judges of the City Court of Manila. (3) As provided by article 1807. among others: I. RULING: Yes. however. 1789. 1789 of the Civil Code. with the right to demand for a formal accounting and to receive her share in the net profit that may result from such an accounting. and if he should do so. the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision. devoting all hert ime to the performance of the duties of her public office and that she could not lawfull y contribute her full time and industry which is the obligation of an industrial partner pursuant to Art. and despite its findings that respondent had been paid for services allegedly contributed by her to the partnership. An industrial partner cannot engage in business for himself. with a right to damages in either case. There is no pretense. Petitioners appealed before the CA. can be considered as an industrial partner hence having the right to be rendered an accounting and to see the books of accounts. this. Our said holding is based on the following article of the New Civil Code: 'ART. What has gone before persuades us to hold with the lower Court that appellee is an industrial partner of appellant company.

R. all of whom shall be general partners. that should a partner or partners desire to withdraw from the co-partnership and the remaining partners are not willing to acquire his San Beda College of Law. However. shall be members comprising this partnership. Manila . citizenship and residences set forth after their respective names.. Mr. could not bind the partnership in the Sales Agreement he signed with plaintiff. MOBIL OIL PHILIPPINES. Partners. In its petition to Modify Decsision and/or Reconsideration. that if the heir or heirs of the deceased partner or partners elect not to continue in the co-partnership. No. and in proportion to their respective capital contributions. And. the copartnership shall continue to exist amongst the surviving partners and the heir or heirs of the deceased partner or partners. 40457May 8. any of the herein partners should die. for collection of a sum of money arising from gasoline purchased on credit but not paid. V.private respondents allege that one Miguel Enriquez. ISSUE: Whether Miguel Enriquez can be considered as a general partner of La Mallorca and thus bind the partnership. petitioner filed a complaint 1 in the Court of First Instance of Rizal against the partnership La Mallorca and its general partners. COURT OF FIRST INSTANCE OF RIZAL. Article IV of the uncontested Articles of Co-Partnership of La Mallorca provides: "IV. INC. GEMINIANO F. –– The parties above-named. RULING: YES. 1992 FACTS: On November 8.22 Case Digests in Civil Law Review 2 (4) Whenever other circumstance render it just and reasonable. with their civil status. for damages and attorney's fees. not being a general partner. Provided. YABUT AND AGUEDA ENRIQUEZ YABUT G. BRANCH VI. the surviving partners shall have the right to acquire the interests of the deceased partner or partners at their book value based upon the last balance sheet of the co-partnership. Mendiola. Miguel Enriquez automatically became a general partner of the partnership La Mallorca being one of the heirs of the deceased partner Mariano Enriquez. If during the existence of this co-partnership. And that GeminianoYabut already wothdrew as a partner of of La Mallorca. Provided Further. 1972. which included private respondents. Mr. Enriquez is considered as a general partner.

The debt was incurred long before his withdrawal as partner and his resignation as President of La Mallorca on September 14. Syjuco only) the sum of P800. Respondent Geminiano Yabut could not just withdraw unilaterally from the partnership to avoid his liability as a general partner to third persons like the petitioner in the instant case. the aggregate of the loans stood at P2. but such retiring partner or partners shall only be entitled to his or their shares in the assets of the co-partnership according to the latest balance sheet which have been drawn prior to the date of his or their withdrawal. so that as of May 8. Manila . the widow Maria Moreno (now deceased) and of his brother Lorenzo. but in the name of a partnership of which they themselves were the only partners: "Heirs of Hugo Lim.000. borrowed from petitioner Santiago Syjuco.00. (hereinafter. 1989 FACTS: Back in November 1964. that the Lims failed to pay it despite demands therefor. Mendiola. 1968. 70403. does not convince Us. Eugenio Lim. the co-partnership shall continue amongst the remaining partners. the co-partnership shall not thereby be dissolved. Active participation in a partnership is not a condition precedent for membership in a partnership so as to be entitled to its profits nor be burdened with its liabilities. In such event. he having withdrawn as such. Mario and Paulino. not in their individual names. that Syjuco consequently caused extra-judicial proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of Manila. nor about the additional circumstance that as stipulated in the mortgage deed the obligation matured on November 8. SY JUCO V. and the security had been augmented by bringing into the mortgage other property. The loan was given on the security of a first mortgage on property registered in the names of said borrowers as owners in common under Transfer Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of Manila.00. Nila.460. and his sister.23 Case Digests in Civil Law Review 2 or their shares or interest in the co-partnership in accordance with the foregoing provisions. for and in his own behalf and as attorney-in-fact of his mother. There is no dispute about these facts. and that the latter scheduled the auction sale of the mortgaged property on December 27. Aramis. CASTRO GR No. 75416 and 75418 of the Manila Registry." As to respondent Geminiano Yabut's claim that he cannot be liable as a partner. Thereafter additional loans on the same security were obtained by the Lims from Syjuco.000. exclusive of interest. This is likewise true with regard to the alleged non-active participation of respondent Agueda Yabut in the partnership. 1972. To prevent the execution of the judgment against them. also registered as owned pro indiviso by the Lims under two titles: TCT Nos." The complaint advocated the theory that the mortgage San Beda College of Law. July 7. Inc. together with his other brothers. 1967. a complaint was presented. all hereinafter collectively called the Lims. 1967.

1959. equity will debar him from speaking when in conscience he ought to remain silent. as individuals. In other words. and the partnership itself. "Heirs of Hugo Lim". despite the concealment of the existence of the partnership. ISSUE: Whether the mortgage executed by the Lims be attributable to their partnership. without exception. ordinary experience and common sense to propose that a partnership. it will operate as an estoppel. It would violate all precepts of reason. This doctrine rests on the principle that if one maintains silence. the respondent partnership was inescapably chargeable with knowledge of the mortgage executed by all the partners thereof. The court held that the legal fiction of a separate juridical personality and existence will not shield it from the conclusion of having such knowledge which naturally and irresistibly flows from the undenied facts. so as to raise an equitable estoppel. since the former constituted the entire membership of the latter.24 Case Digests in Civil Law Review 2 which they. Equally or even more preclusive of the respondent partnership's claim to the mortgaged property is the last paragraph of Article 1819 of the Civil Code. on March 30. let alone a space of more than seventeen years. Manila . The mortgage executed by the Lims is attributable to their partnership. RULING: YES. hence. said mortgage was void because executed by them without authority from the partnership. in fact no longer belonged to them at that time. when in conscience he ought to speak. having been earlier deeded over by them to the partnership. its silence and failure to impugn said mortgage within a reasonable time. When the silence is of such a character and under such circumstances that it would become a fraud on the other party to permit the party who has kept silent to deny what his silence has induced the other to believe and act on. had individually constituted (and thereafter amended during the period from 1964 to 1967) over lands standing in their names in the Property Registry as owners pro indiviso. Mendiola. which contemplates a situation duplicating the circumstances that attended the execution of the mortgage in favor of Syjuco and therefore applies foursquare thereto. as commonly known to all the partners or of acts in which all of the latter. where such matters or acts affect property claimed as its own by said partnership. He who remains silent when he ought to speak cannot be heard to speak when he should be silent. more precisely. for all intents and purposes and San Beda College of Law. have taken part. therefore. If. brought into play the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly unauthorized. together with their mother. Inaction or silence may under some circumstances amount to a misrepresentation and concealment of the facts. "Where the title to real property is in the names of all the partners a conveyance executed by all the partners passes all their rights in such property" There is thus no reason to distinguish between the Lims.

Maglana then told Rojas that the latter share will just be 20% of the net profits. the conclusion is inevitable that Rojas and Maglana shall be guided in the liquidation of the partnership by the provisions of its duly registered Articles of Co-Partnership. No. MAGLANA GR. ISSUE: What is the nature of the partnership and legal relationship of Maglana and Rojas after Pahamatong retired from the second partnership? RULING: Under Article 1830. The term is 30 years. even if there is a specified term. declarations and omissions cannot be deemed to be simply the individual acts of said members. And in whatever way he may view the situation. it was actually represented in said actions by all the individual members thereof. He never told Maglana that he will not be able to comply with the promised contributions and he will not work as logging superintendent. one partner can cause its dissolution by expressly withdrawing even before the expiration of the period. It was a partnership with an indefinite term of existence. but in fact and in law. After 3 months. all profits and losses of the partnership shall be divided "share and share alike" between the partners. They shall share in all profits and loss equally. the dissolution. He even withdrew his equipment from the partnership and was transferred to CMS. With his withdrawal. After withdrawal of Pamahatong. ROJAS V. that is. Mendiola. He left and abandoned the partnership. Of course. hence. with or without justifiable cause.25 Case Digests in Civil Law Review 2 consistently with the Lims' own theory. Due to difficulties encountered they decided to avail of the sources of Pahamatong as industrial partners. Rojas took funds from the partnership more than his contribution. par. December 10. 2 of the Civil Code. 1990 FACTS: Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast Development Enterprises (EDE). Maglana notified Rojas that he dissolved the partnership. Rojas entered into a management contract with another logging enterprise. those members' acts. San Beda College of Law. They again executed their Articles of Co-Partnership under EDE. Maglana shall manage the business affairs while Rojas shall be the logging superintendant and shall manage the logging operation. After sometime Pamahatong sold his interest to Maglana and Rojas including equipment contributed. if the cause is not justified or no cause was given. Manila . the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm. and consequently. it was that partnership which was the real party in interest in all the actions. Thus. those of the partnership. the number of members is decreased. Maglana and Rojas continued the partnership. 30616.

The majority of the founding partners sold their interests in said partnership to Willy Co and Emmanuel Zapanta without Yu’s knowledge. No. Said new partnership continued operating under the same name and continued the business’s operations. whether petitioner Yu could nonetheless assert his rights under his employment contract as against the new partnership. The applicable law in this connection — of which the NLRC seemed quite unaware — is found in the Civil Code provisions relating to partnerships. 1828. it transferred its main office from Makati to Mandaluyong. all business transactions were carried out under the duly registered articles. RULING : we agree with the result reached by the NLRC. YU VS NLRC GR. 97212. that is. Mendiola. Said new partnership did not anymore availed of the services of Yu. a partnership engaged in marble quarrying and export business. Thus. However. Manila . which they unmistakably called “additional agreement. that the legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which had hired petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987.” Otherwise stated even during the existence of the second partnership.It was not the intention of the partners to dissolve the first partnership. June 30.26 Case Digests in Civil Law Review 2 But an accounting must first be made and which in fact was ordered by the trial court and accomplished by the commissioners appointed for the purpose. ISSUE: (1) Whether the partnership which had hired petitioner Yu as Assistant General Manager had been extinguished and replaced by a new partnerships composed of Willy Co and Emmanuel Zapanta. and (2) if indeed a new partnership had come into existence. upon the constitution of the second one. Article 1828 of the Civil Code provides as follows: Art. No rights and obligations accrued in the name of the second partnership except in favor of Pahamatong which was fully paid by the duly registered partnership. 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 San Beda College of Law. recovery of unpaid wages and damages. he filed a complaint for illegal dismissal. 1993 FACTS: Benjamin Yu used to be the Assistant General Manager of Jade Mountain.

coupled with the retirement or withdrawal of the partners who had originally owned such 82% interest. just about all of the partners had sold their partnership interests (amounting to 82% of the total partnership interest) to Mr. Article 1829 of the Civil Code states that: [o]n dissolution the partnership is not terminated. but continues until the winding up of partnership affairs is completed. no doubt. 1830. Mendiola. liquidating and distributing its net assets. Manila . The occurrence of events which precipitate the legal consequence of dissolution of a partnership do not. The record does not show what happened to the remaining 18% of the original partnership interest. San Beda College of Law. automatically result in the termination of the legal personality of the old partnership. It is not. xxx xxx xxx (b) by the express will of any partner. the legal personality of the expiring partnership persists for the limited purpose of winding up and closing of the affairs of the partnership. There were. was enough to constitute a new partnership. it is important to underscore the fact that the business of the old partnership was simply continued by the new partners.27 Case Digests in Civil Law Review 2 winding up of the business. without winding up the business affairs of the old partnership. In the ordinary course of events. paying off its debts. without the old partnership undergoing the procedures relating to dissolution and winding up of its business affairs. however. who must act in good faith. and continued using the old name of Jade Mountain Products Company Limited. by the express will of any partner at any time. Dissolution is caused: (1) without violation of the agreement between the partners. (Emphasis supplied) Article 1830 of the same Code must also be noted: Art. xxx xxx xxx (Emphasis supplied) In the case at bar. and then re-assembling the said assets or most of them and opening a new business enterprise. In the case at bar. where the circumstances do not permit a dissolution under any other provision of this article. In other words. necessary to inquire into such matters. The acquisition of 82% of the partnership interest by new partners. xxx xxx xxx (2) in contravention of the agreement between the partners. Willy Co and Emmanuel Zapanta. however. powerful tax considerations which underlay such an informal approach to business on the part of the retiring and the incoming partners. the new partnership simply took over the business enterprise owned by the preceeding partnership. when no definite term or particular undertaking is specified.

Jesus Bito and Mariano Lozada as senior partners and Gregorio Ortega. paying off its debts. are liable for the debts of the preceding partnership. Reconsideration was sought by the parties and Atty. Not only the retiring partners but also the new partnership itself which continued the business of the old. liquidating and distributing its net assets. MIZA and LOZADA. Respondent SEC denied the Reconsideration.The legal effect of the changes in the membership of the partnership was the dissolution of the old partnership which had hired Yu in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel Zapanta in 1987. one. without winding up the business affairs of the old partnership. are liable for the debts of the preceding partnership. the hearing officer rendered decision ruling that the withdrawal of Atty Misa did not dissolve the law partnership. Misa. the parties filed their separate appeals. the Law Firm could be dissolved by any partner at any time regardless of good faith or bad faith. asked for an appointment of receivership. dissolved. Atty. et al. not only the retiring partners (Rhodora Bendal. Such firm was duly registered in the Mercantile Registry since 1937 and again registered with the Securities and Exchange Commission on 1948. and then re-assembling the said assets or most of them and opening a new business enterprise. one. 109248. Joaquin Miza withdraw from the firm and reasons out that the Partnership already ceased to be mutually satisfactory because of the working conditions of the employees including the Assistant Attorneys. Mendiola. ORTEGA VS COURT OF APPEALS GR. The new partnership simply took over the business enterprise owned by the preceeding partnership. dissolved. Meanwhile. Afterwards.28 Case Digests in Civil Law Review 2 What is important for present purposes is that. On appeal. July 3. and continued using the old name of Jade Mountain Products Company Limited. under the above described situation. Manila . The Commission ruled that. since no partner can be forced to continue partnership against his will. Tomas Del Castillo and Benjamin Bacorro as Junior Partners.) but also the new partnership itself which continued the business of the old. being a partnership at will. The said law is composed of Joaquin Miza. On 1989. 1995 FACTS: The Respondent was a Senior Partner of BITO. No. In addition. He filed to the SEC a petition for dissolution and liquidation of the Partnership. The record shows that there were several subsequent amendments to the articles of partnership since the firm name was changed six (6) times from 1958 to 1977. the SEC en banc reversed the decision of the Hearing Officer and held the withdrawal had dissolved the Partnership. San Beda College of Law.

Mendiola. PIONEER INSURANCE VS COURT OF APPEALS GR. Pioneer Insurance and Surety Corporation executed its surety bond in favor of JDA on behalf of its principal Lim Border Machinery and Heacy Equipment Co. Manila . The CA decision affirmed in toto the SEC division and denied the appointment of receivership. such partner who wishes to dissolve the partnership must act in good faith. San Beda College of Law. and Constancio Maglana contributed funds based on the misrepresentation of Lim that they will form a new corporation to expand his business. 1989 FACTS: Jacob S. Atty Bito and Atty Lozada both died. Attendance of bad faith may hinder dissolution and render damage to the said partner. No. one signed by Maglana and the other jointly signed by Lim for SAL Bormaheco and the Cervanteses the indemnity agreement stipulated that the indemnitors principally agree and bind themselves jointly and severally to indemnify and hold and save Pioneer from and against any/all damages. RULING: 1) A Partnership which does not fix its term is a Partnership at will. July 28. and 2) Did the withdrawal of Atty. However. Japan Domestic Airlines (JDA) and Lim entered into a sales contract. Lim is the owner-operator of Southern Airlines (SAL). in turn. Meanwhile. ISSUES: 1) Is the Partnership a Partnership at will. Misa dissolve the Partnership regardless of good and bad faith. a single proprietorship company. the said partnership is a partnership at will as the partnership agreements states that: “the partnership shall continue as long as there is mutually satisfactory and upon death or legal incapacity of the parties. The right to choose with whom a person wishes to associate himself is the very foundation and essence of a Partnership. Of whatever kind and nature may incur in consequence of having become surety. etc. Its continued existence is.29 Case Digests in Civil Law Review 2 During the pendency of the case. dependent on the mutual resolve of the Partners’s capability and the absence of causes of dissolution of the partnership at will. Accordingly. Francisco and Modesto Cervantes. 84197. They executed two separate indemnity agreements in favor of Pioneer.” 2) The birth of a Partnership at will is predicated on the mutual desire and consent of the partners. Among others. losses. An unjustified dissolution by the Partner can subject him to damages. Inc. mutual agency arises and the doctrine of delectus personae allows them to have the power to dissolve the partnership.

Manila . At first. when their purpose is that no partnership shall exist and it should be implied only when necessary to do justice between the parties. An attorney in fact is not real party in interest. However.650. ISSUE: 1. THE HON. CARMEN LIWANAG VS. Rosales gave several cash advances to Liwanag and Tabligan amounting to P633. otherwise the money would be returned to Rosales. 2. Pioneer paid for him and filed a petition for the foreclosure of chattel mortgage as security Maglana. Liwanag visits Rosales every now and then to update her of the business. Consequently. NO. Convinced of the feasibility of the venture. thus. Under their agreement. it is well-settled that an action brought by the attorney in fact in his own name instead of that of the principal will not prosper.00. for ordinary persons cannot be made to assume the relation of partners as between themselves. 1997 FACTS: Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went to the house of complainant Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes. so as to be liable as such in an action for settlement of the alleged partnership and contribution. Does Pioneer Insurance have a cause of action against respondent? 2. one who takes no part except to subscribe for stock in a proposed corporation which is never legally formed does not become a partner with other subscribers who engage in business under the name of the pretended corporation. Rosales would give the money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents. Bormaheco and the Cervantes’s filled cross-claims against Lim alleging that they were not privies to the contract signed by Lim and for recovery of the sum of money they advanced to Lim for the purchases of the aircraft. with a corresponding 40% commission to her if the goods are sold. Upon default on the payments. San Beda College of Law. No. Mendiola. The decision was rendered holding Lim liable to pay. that there is no law permitting an action to be brought by an attorney in fact. 114398 October 24.30 Case Digests in Civil Law Review 2 Lim executed in favor of pioneer deed of chattel mortgage as security. Does failure to incorporate automatically result in de facto partnership? RULING: 1. Pioneer has no right institute and maintain in its own name an action for the benefit of the reinsurers. Rosales readily agreed. and this is so even where the name of the principal is disclosed in the complaint.R. COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES G. Partnership inter se does not necessarily exist.

Ishwar sought to recover all of his properties. Ltd and erected a building using the money sent by Ishwar. Thus. Rosales filed an estafa case against Liwanag. The language of the receipt could not be any clearer. we have ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it. he appointed Choithram as his attorney-in-fact in order to manage their properties in the Philippines. 1991 FACTS: Choithram and Ishwar are brothers. Liwanag argues that their business is a partnership agreement. Mendiola. RAMNANI VS.R. G. for the purchase of cigarettes. outraged. It indicates that the money delivered to Liwanag was for a specific purpose. No. COURT OF APPEALS.00 due to the efforts of Choithram. that is. CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. Choithram bought 2 parcels of land from Ortigas & Co. The latter. upon full payment of the land. the title was named in favor of Nirmla. Thus. Since Ishwar is residing in New York. Liwanag was nowhere to be found. and in the event the cigarettes cannot be sold. even assuming that a contract of partnership was indeed entered into by and between the parties. assigned his power of attorney to his daughter in law Nirmla Ramnani without informing Ortigas. LTD. Ishwar revoked his general power of attorney to Choithram. the money must be returned to Rosales.000. SONYA JETHMAL RAMNANI AND OVERSEAS HOLDING CO. 85494 May 7. Later on. the failure to return the money gives rise only to a civil liability. Thus.304.. SPOUSES ISHWAR JETHMAL RAMNANI. ISSUE: Whether or not a partnership exists RULING: No.31 Case Digests in Civil Law Review 2 after a few updates... Manila . The properties are now valued at no less than P22. ISSUE: Whether or not he can recover all his properties San Beda College of Law. such partner is guilty of estafa. RAMNANI AND MOTI G.

SHELLITE GAS APPLIANCE CENTER. the other contributed his industry and talent. blood is thicker than water. have committed acts which demonstrate their bad faith and scheme to defraud spouses Ishwar and Sonya of their rightful share in the properties in litigation. One furnished the capital.00 to the partnership. 23. Rule 130. After all. to prove the alleged partnership three (3) years after Jacinto’s death. 143340. should not have been admitted to prove certain claims against a deceased person (Jacinto). Upon Jacinto’s death in the later part of 1989. assisted by Josephine Sy. August 15. To support the argument. We have a situation where two brothers engaged in a business venture. No. Manila . et al. Josephine. San Beda College of Law.32 Case Digests in Civil Law Review 2 RULING: NO. Both would stand to gain.000. Lamberto filed a complaint against Lilibeth with the RTC. In the absence of any written document to show such partnership between Lamberto and Jacinto. Lilibeth thus implores this Court to rule that the testimonies of Lamberto and his alter ego. No one would end up the loser. he verbally entered into a partnership with Jacinto in the distribution of Shellane LPG. Lamberto and Jacinto allegedly agreed to register the business name of their partnership. For business convenience. Both Lamberto and Jacinto contributed P100. Lilibeth argues that these courts were proscribed from hearing the testimonies of Lamberto and his witness. Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. the capitalist partner in the joint venture. sister-in-law of Lamberto. CHUA GR. his daughter. Mendiola. she failed to comply. Lilibeth invokes the “DEAD MAN’S STATUTE OR SURVIVORSHIP RULE” under Sec. SUNGA-CHAN V. RTC decided in favor of Lamberto. On June 22m 1992. Perhaps this Solomonic solution may pave the way towards their reconciliation. Josephine. 2001 FACTS: Lamberto Chua alleged that in 1977.. Nevertheless. under the peculiar circumstances of this case and despite the fact that Choithram. with the intention that the profits would be equally divided between them. the Court cannot ignore the fact that Choithram must have been motivated by a strong conviction that as the industrial partner in the acquisition of said assets he has as much claim to said properties as Ishwar. The partnership allegedly had Jacinto as manager. Lilibeth took over the operations of Shellite without Lamberto’s consent. Despite Lamberto’s repeated demands for accounting. under the name of Jacinto as a sole proprietorship. Lilibeth questions the correctness of the finding that a partnership existed between Lamberto and Jacinto.

Jacinto Divinagracia and Vicente Tabanao formed a partnership engaged in the fishing industry. Moreover. Josephine. Josephine is merely a witness of Lamberto. Lilibeth filed a compulsory counterclaim against Lamberto in their answer before the RTC. Based not only on the testimonial evidence. In 1986. Jacinto decided to leave the partnership hence they agreed to dissolve the partnership. insanity. EMNACE V. the surviving party is not entitled to the undue advantage of giving his own contradicted and unexplained account of the transaction.00. At that time. No. but the documentary evidence as well. Lilibeth’s insistence that Josephine is the alter ego of Lamberto does not make her an assignor because of the term “assignor” of a party means “assignor of a cause of action which has arisen. November 23. may testify to occurrences before the death of the deceased to defeat the counterclaim. The “Dead Man’s Statute” provides that if one party to the alleged transaction is precluded from testifying by death. RULING: No. Lamberto offered the testimony of Josephine to establish the existence of the partnership between Lamberto and Jacinto.33 Case Digests in Civil Law Review 2 ISSUE: Whether or not the “DEAD MAN’S STATUTE” applies to this case so as to render inadmissible Lamberto’s testimony and that if his witness. 2001 FACTS: Emilio Emnace. Manila . The testimony of Josephine is not covered by the “Dead Man’s Statute” for the simple reason that she is not “a party or assignor of a party to a case or persons in whose behalf a case is prosecuted”. Lamberto is not disqualified from testifying as to matters of fact occurring before the death of the deceased. Lilibeth herself effectively removed this case from the ambit of the “Dead Man’s Statute”.000. and with the filing of their counterclaim. Lilibeth’s reliance alone on the “Dead Man’s Statue” to defeat Lamberto’s claim cannot prevail over the factual findings that a partnership was established between Lamberto and Jacinto. COURT OF APPEALS GR. albeit an informal one. Mendiola. Plainly then. Well entrenched is the rule that when it is the executor or administrator or representatives of the estate that sets up the counterclaim. and not the assignor of a right assigned before any cause of action has arisen”. they considered the evidence for Lamberto as sufficient to prove the formation of a partnership.000. 126334. said action not having been bought against but by the estate or representatives of the deceased. or other mental disabilities. San Beda College of Law. the partnership has an estimated asset amounting to P30. Lamberto. latter being the plaintiff. as defendant in the counterclaim.

ISSUE: Whether Emnace contention that the heirs of his late partner Tabanao has already prescribed is correct. When a final accounting is made. since Emnace has failed or refused to render an accounting of the partnership’s business and assets. although dissolved. Hence. Ybañez authorized Saban to look for a buyer of the lot for P200. 2004 FACTS: Eduardo Ybañez. The partnership. RULING: No.34 Case Digests in Civil Law Review 2 However. that the heirs are barred by prescription hence they can no longer demand an accounting. entered into an Agreement and Authority to Negotiate and Sell with Florencio Saban.000. among others. at which time it completes the winding up of its affairs. The three final stages of partnership are: a) dissolution. Mendiola. Emnace reneged on his promise to turn over Tabanao’s share which is 1/3 of the P30M. No. and that is precisely what the heirs are seeking in their action before the trial court. In the case at bar. the saidaction is not barred by prescription.R.000-square meter lot in Cebu City. Emnace argued. any of the partners (or legal representative – in this case the heirs of Tabanao) may demand an accounting of the partnership’s business. until the death of Vicente Tabanao in 1994. 163720 December 16. owner of a 1. Through Saban’s efforts. it has never begun. Prescription of the said right starts to run only upon the dissolution of the partnership when the final accounting is done. Under the Agency Agreement. Manila . For as long as the partnership exists. transfer of title and other expenses incident to the sale. they can no longer inquire. it is only then that prescription begins to run. So beyond 1990. The heirs of Tabanao then sued Emnace. that said right has expired in 1990 or 4 years after.00 and to mark up the selling price to include the amounts needed for payment of taxes. Prescription has not run in this case. continues to exist and its legal personality is retained. and c) termination. In this case. b) winding up. Emnace and his partners dissolved their partnership but such did not perfect the dissolution because no accounting took place. He contends that the partnership was dissolved in 1986 and that was the time when Tabanao’s (and his heirs’) right to inquire into the business affairs accrued. Ybañez and his wife were able to sell the lot to Genevieve Lim and the spouses Benjamin and Lourdes Lim. including the partitioning and distribution of the net partnership assets to the partners. Emnace never rendered an accounting either to Vicente or his heirs. no final accounting has been made. FLORENCIO SABAN G. GENEVIEVE LIM V. as well as Saban’s commission for the sale. The price of the lot as indicated in the Deed of San Beda College of Law.

ISSUES: (1) WON Saban is entitled to receive his commission from the sale. the agent’s interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation.00. inclusive of taxes and other incidental expenses of the sale.00 for payment of taxes due on the transaction as well as P50. Saban received checks in payment of his commission but all of them were dishonored upon presentment. he filed a complaint for collection of sum of money and damages against Ybañez and Lim. an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent. since an agent’s interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship. San Beda College of Law. When an agent’s interest is confined to earning his agreed compensation.000.00 from his asking price of P200.000.000. Saban had already performed his obligation as Ybañez’s agent when. Saban may claim such excess from Ybañez’s estate.000. Furthermore. (2) if in the affirmative. since Ybañez received a total of P230.00.00.The agency was not revoked since Ybañez requested that Lim make stop payment orders for the checks payable to Saban only after the consummation of the sale. in view of the trial court’s dismissal of Saban’s complaint as against Ybañez.257. Mendiola.000. To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency with Ybañez which expressly states that Saban would be entitled to any excess in the purchase price after deducting the P200. Lim remitted to Saban the amounts of P113.00 due to Ybañez and the transfer taxes and other incidental expenses of the sale. if that remedy is still available. with Saban’s express consent. due to the latter’s demise when the case was still pending. through his (Saban’s) efforts. In an agency coupled with an interest.000. Thus.00 as broker’s commission. or for the interest of the principal and of third persons. After the sale. or an excess of P30.000. It is just and proper for Lim to pay Saban the balance of P200.00 from Lim.00.000. Saban alleged that Ybañez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the actual selling price of the lot from Ybañez and because he was not a licensed real estate broker. The vendees agreed to purchase the lot at the price of P600. the agency is not one coupled with an interest. Manila . 1927) (2) Yes. and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. At that time. Saban’s agency was not one coupled with an interest. (See Art. Ybañez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.35 Case Digests in Civil Law Review 2 Absolute Sale is P200. WON it is Lim who is liable to pay Saban his sales commission RULING (1) Yes.

Atty. Linsangan completed. Moreover. V LINSANGAN GR. Linsangan that he would only pay the agreed P95. 000 but Florencia assured Atty. Florencia informed Linsangan that their contract was cancelled and offered a different lot. Mendiola. Atty. 000. Linsangan acceded that he has read and understood all the stipulations therein. The payment was made in installments for two years which Atty. Atty.000. Linsangan refused the offer and filed a suit for breach of contract against MMPI and Florencia. Atty. Linsangan agreed and payed an initial P35. Florencia advised Atty. RULING: NO.36 Case Digests in Civil Law Review 2 MANILA MEMORIAL PARK INC. November 22. In the new contract. 151319. MMPI avers that Florencia acted beyond the scope of her authority as MMPI’s agent since the latter did not allow her to renegotiate existing contracts but only to sell new contracts. ISSUE: Whether or not MMPI is liable for the acts of Florencia. after two years. (MMPI) to sell burial lots to those interested in purchasing. Herein respondent Atty. No. Linsangan was approached by Florencia with an offer to sell to the former a lot that she alleges to have already been previously sold but the owner thereof has cancelled and thus. Lnsangan on the other hand argues that MMPI should be liable for the acts of its agents. however. Atty. Linsangan shall only continue the payment thereof amounting to P95. 000. Linsangan that there were changes in the contract and that she needed him to sign a new contract stipulating the total price of P132. Atty. Thereafter. 2004 FACTS: Florencia Baluyot is authorized by the Manila Memorial Park Inc. Linsangan’s signature over San Beda College of Law. Manila . Linsangan failed to ascertain the authority given to Florencia especially that their agreement on the second contract had a different stipulation than what he and Florencia agreed upon. The SC ruled that Florencia acted outside the scope of her authority as agent of MMPI and Atty.

Manila . G. 2000 FACTS: St. Petitioner also noted that CSC had represented itself to be STM's agent as it had withdrawn the 2. RESPONDENTS. Among these was SLDR No.000 bags. CSC thus inquired when it would be allowed to withdraw the remaining 23. Since STM had already drawn in full all the sugar corresponding to the amount of its cleared checks. it could no longer authorize further delivery of sugar to CSC. The transaction it covered was a "direct sale. petitioner refused to allow further withdrawals of sugar.000 bags had been released. PETITIONER. However. As a result. after 2. VICTORIAS MILLING CO. petitioner said that it could notallow any further withdrawals of sugar because STM had already withdrawn all the sugar covered by the cleared checks.000 bags of sugar. No. Mendiola. the SC ruled that the principal cannot be held liable for actions of agents outside the scope of their authority when such acts are ratified by the principal himself. 117356. which gave rise to the instant case. CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by the SLDR. STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co. San Beda College of Law. The Trial Court rendered its judgment favoring the private respondent CSC. Inc. Petitioner also contended that it had no privity of contract with CSC. In its reply. INC. they did not ratify Florencia’s acts. CSC filed a complaint for specific performance. Petitioner's primary defense a quo was that it was an unpaid seller for the 23. June 19.. In the course of their dealings. Furthermore. 1214M covers 25. As such. On the part of MMPI. That same day. VS.000 bags "for and in behalf" of STM.. petitioner issued several Shipping List/Delivery Receipts to STM as proof of purchases.000 bags. SLDR No.37 Case Digests in Civil Law Review 2 the new contract signifies his agreement thereto and serves as a form of ratification for the acts of Florencia which were outside the authority given her.R. 1214M.." Thereafter. nor did they know of such actions. The appellate court affirmed said decision but modified the costs against petitioner. COURT OF APPEALS AND CONSOLIDATED SUGAR CORPORATION. the SLDRs prescribed delivery of the sugar to the party specified therein and did not authorize the transfer of said party's rights and interests. 1214M.

In fact. one person . It is clear from Article 1868 that the basis of agency is representation. RESPONDENTS. Mendiola. The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale. 102784 April 7. The real agreement between her and the private respondent was a sale on credit with Mrs. 1214M as an assignee. As a result. and not an agency. Hence. 1214M had been "sold and endorsed" to it. one 3. 1987. That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No. 1997 FACTS: On October 8. she was a prospective buyer of the pieces of jewelry.38 Case Digests in Civil Law Review 2 ISSUE: Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence.35 carat diamond ring worth P169K and one bracelet worth P170K. On December 15. No. She told Mrs. That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. no error was committed by the respondent appellate court when it held that CSC was not STM's agent and could independently sue petitioner. Rosa Lim who had come from Cebu received from private respondent Victoria Suarez the following two pieces of jewelry. wrote a demand letter to petitioner asking for the return of said ring or the proceeds of the sale thereof. ROSA LIM.the principal. private complainant. what is decisive is the intention of the parties. but failed to return the diamond ring or to turn over the proceeds thereof if sold.the agent . Lim returned the bracelet to Suarez. One factor which most clearly distinguishes agency from other legal concepts is control. Manila . The agreement was reflected in a receipt. COURT OF APPEALS AND PEOPLE OF THE PHILIPPINES. She cannot be liable for estafa since she never received the jewelries in trust or on commission basis from Vicky Suarez. on this score. RULING: No. PETITIONER VS. Ultimately. estopped to sue upon SLDR No. Lim contended that she was not an agent of Suarez. Suarez as the owner-seller and San Beda College of Law.agrees to act under the control or direction of another . to be sold on commission basis. Suarez that she would consider buying the pieces of jewelry for her own use and that she would inform the private complainant of such decision before she goes back to Cebu. G. 1987. aside from making verbal demands.R.

February 6.39 Case Digests in Civil Law Review 2 petitioner as the buyer. Guevarra sought to recover thereunder the sum of P156. provided all the essential requisites for their validity are present. This does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. The Court of Appeals affirmed trial court’s decision San Beda College of Law. ISSUE: Whether or not the real transaction between Lim and Suarez was that of sale or that of contract of agency to sell? RULING: It is a contract of agency. There are some provisions of the law which require certain formalities for particular contracts. Guevarra instituted a civil action for sum of money against Dominion Insurance Corporation. Manila . Contracts shall be obligatory in whatever form they may have been entered into. The trial court favored Guerra ordering the corporation to pay sum abovementioned. The receipt contains the following provisions: XXX I received from Vicky Suarez the following jewelries XXX XXX if I could not sell.473.90 which he claimed to have advanced in his capacity as manager of the corporation to satisfy certain claims filed by corporation’s clients. hence it is valid and enforceable in whatever form it may be entered into. if I would be able to sell. Mendiola. DOMINION INSURANCE CORPORATION VS. It is required for the validity of the contract. I shall return all the jewelry within the period mentioned above. to make the contract effective as against third parties and. 2002 FACTS: Rodolfo S. A contract of agency to sell on commission basis does not belong to any of these three categories. I shall immediately deliver and account the whole proceeds of sale thereof to the owner of the jewelries at his/her residence XXX. Rosa Lim’s signature indeed appears on the upper portion of the receipt immediately below the description of the items taken. 129919. for the purpose of proving the existence of the contract. as indicated by the bet that petitioner did not sign on the blank space provided for the signature of the person receiving the jewelry but at the upper portion thereof immediately below the description of the items taken. COURT OF APPEALS GR NO.

The act of making payment in the case at hand was not considered as an act of administration. second paragraph. and in the absence of such intent. Civil Code. The basis for agency is representation. his right to recover may still be justified under the general law on obligations and contracts. Article 1236. A perusal of the Special Power of Attorney would show that petitioner and respondent Guevarra intended to enter into a principal-agent relationship. but. respondent Guevarra’s authority to settle claims is embodied in the Memorandum of Management Agreement which enumerates the scope of respondent Guevarra’s duties and responsibilities as agency manager for San Fernando. However. Pampanga. which states that: “The principal is not liable for the expenses incurred by the agent in the following cases: “(1) If the agent acted in contravention of the principal’s instructions. the expenses that respondent Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from petitioner Dominion. On the part of the principal. unless the latter should wish to avail himself of the benefits derived from the contract. with the consent or authority of the latter.40 Case Digests in Civil Law Review 2 ISSUE: 1. special power of attorney is required. However. there is generally no agency. The agency comprises all the business of the principal. Manila . the contents reveal that what was constituted was actually a general agency. a person binds himself to render some service or to do something in representation or on behalf of another. it is limited only to acts of administration. there must be an intention to accept the appointment and act on it. Having deviated from the instructions of the principal. provides: San Beda College of Law. Despite the word “special” in the title of the document. couched in general terms. By the contract of agency. Did respondent Guevarra acted within his authority as agent for petitioner? 2. Respondent is entitles to reimbursement. A general power permits the agent to do all acts for which the law does not require a special power. and on the part of the agent. Mendiola. which states that the payment shall come from respondent Guevarra’s revolving fund or collection. Is Respondent entitled to reimbursement of amounts he paid out of his personal money in settling the claims of several insured? RULING: 1. there must be an actual intention to appoint or an intention naturally inferrable from his words or actions. 2. “xxx xxx xxx” However. Yes. Civil Code. respondent Guevarra’s authority is further limited by the written standard authority to pay. This conclusion is in accord with Article 1918. Under the first paragraph of Article 1878 of the Civil Code. while the law on agency prohibits respondent Guevarra from obtaining reimbursement.

a parcel of agricultural land located in Leyte. signed a document stating that he received the consideration for the repurchase of the lot. Petitioner maintains that because Pio Altera was very ill at the time. Pio Altera. was a signatory to the deed. sold with right of repurchase.11 representing the total amount advanced by the latter in the payment of the claims of petitioner’s clients. Petitioner further states that she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose. Petitioner then filed a case for queting of title. However. stating that petitioner had failed to validly exercise her right of repurchase in view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera. Thus. as heirs of Santiago Conde. respondent Guevarra may demand for reimbursement from his principal. The Court of Appeals affirmed the decision. petitioner’s liability as insurer arose. to the extent that the obligation of the petitioner has been extinguished. This obligation was extinguished when respondent Guevarra paid the claims and obtained Release of Claim Loss and Subrogation Receipts from the insured who were paid.. Pio Altera nor Casimira Pasagui. Neither of the vendees-a-retro. when the risk insured against occurred. L-40242. DECEMBER 15 1982 FACTS: Petitioner Dominga Conde and others. The "Pacto de Retro Sale" further provided: . Mendiola. The Court ordered payment to Respondent amounting only to P112. private respondent Paciente Cordero. ISSUE: San Beda College of Law. To rule otherwise would result in unjust enrichment of petitioner. CONDE VS. Manila . On 28 November 1945. a new agreement shall be made between the parties and in no case title and ownership shall be vested in the hand of the party of the SECOND PART (the Alteras). Paciente Cordero executed the deed of resale for and on behalf of his father-in-law. the vendee-a-retro. (4) if at the end of 10 years the said land is not repurchased.00. son-in-law of the Alteras.” In this case. On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. COURT OF APPEALS GR NO.. and that there is nothing in said document to show that Cordero was specifically authorized to act for and on behalf of the vendee a retro. except that if he paid without the knowledge or against the will of the debtor.41 Case Digests in Civil Law Review 2 “Whoever pays for another may demand from the debtor what he has paid. within ten (10) years from said date. but the trial court decided against her. Conde (no relation to petitioner). to the Alteras for P165.672. he can recover only insofar as the payment has been beneficial to the debtor.

or their failure to repudiate the agency. Considering that the bid was higher than that of Counsel. Counsel Realty Corporation (Counsel). The lots were primarily mortgaged by Marinduque to Caltex. UNILAND RESOURCES VS. neither did the Alteras repudiate the deed that their son-in-law had signed. Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was executed. the bidding guidelines made by DBP provided among others that any bid to purchase either of the two (2) lots would be considered only should there be two bids or a bid for the two items which. when she instituted this action. Paciente Cordero. Manila . there was an implied agency. ATP offered for sale its right of redemption. The other lot was sold by DBP to BPI as trustee for the Perpetual Care Fund of the Manila Memorial Park. DBP paid 5% broker’s fee to DBP Management San Beda College of Law. When the bidding was held. If. Since Caltex required that both lots be redeemed. another affiliate of Glaxo. such was approved by DBP.42 Case Digests in Civil Law Review 2 Whether there is an implied agency due to the failure of respondent Altera to repudiate the Memorandum of Repurchase made by his son-in-law. Philippines. will fully cover the sale of the two lots. 95709. as alleged. was the only bidder and only offered to bid on the warehousing lot. RULING: Yes. DBP G. DBP redeemed the lots as physical assets by retrieving its account from ATP. who is a client of petitioner. when combined. Mendiola. was the bidder and offered only to bid on the warehousing lot. Although neither of the vendees-a-retro signed the "Memorandum of Repurchase". When Marinduque defaulted in paying its obligations with Caltex. On the day of the bidding. making the mortgage in favor of DBP a second mortgage. an implied agency must be held to have been created from their silence or lack of action. Such account was later transferred to Assets Privatization Trust (ATP). In order to recover the investment on the Marinduque account. if the vendors a retro failed to exercise their right of redemption after ten years. the Alteras must be deemed to have incurred in laches. or for 24 years. and there was no formal authorization from the vendees for Paciente Cordero to act for and on their behalf. This was rejected by DBP. Thus. petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from his illness. only Charges Realty Corporation. No new agreement was entered into by the parties as stipulated in the deed of pacto de retro. to 1969. they have done nothing to clear their title of the encumbrance therein regarding petitioner's right to repurchase. 16 AUGUST 1991 FACTS: Marinduque Mining Corporation (Marinduque) obtained a loan from DBP and mortgaged certain real properties situated in Makati as security.R. the latter foreclosed the subject lots. No. A new set of bidding guidelines was made by DBP. an affiliate of Glaxo Philippines.

RULING: 1. Hence. execute contracts to sell to lot buyers and issue official receipts. Petitioner claimed the same broker’s fee for acting as a middleman between Charges Realty Corporation and DBP. No. 2. Mendiola. hence. However. MANILA REMNANT CO. the consummation of the sale and the authorization from the principal are necessary. No necessary step is needed by DBP to prevent petitioner. existed between DBP and petitioner. However. On 3 March 1970. or his failure to repudiate the agency knowing that another person is acting on his behalf without authority. 22 NOVEMBER 1990 FACTS: Petitioner is the owner of parcels of land located in Quezon City which constitute a subdivision known as Capital Homes Subdivision I and II. his silence or lack of action. it is a well settled principle that no one may contract in the name of other without the latter’s consent. a broker may still claim for commission despite the absence of authorization. Manila . CA G. 2. the decision was reversed. Whether or not a broker can claim for commission despite the absence of authority form the seller for the former to be a middleman. Whether or not there was an implied agency between DBP and petitioner. Hence. ISSUE: 1. wherein the latter will develop the subdivision with authority to manage sales thereof. Valencia executed two (2) contracts to sell covering Lots 1 and 2 San Beda College of Law. it is evident that only accredited brokers may be agents of DBP in its transactions and such fact was clear and understood by petitioner. In the present case.U. on appeal. The Bidding Committee rejected the said claim which prompted petitioner to file an action before the court.U. he should be awarded his commission. At the same time.R.43 Case Digests in Civil Law Review 2 Corporation as broker for the sale. for equity considerations. Petitioner now contends that there was an implied agency. it is only fair and just to give petitioner his commission. no agency. The trial court ruled in favor of petitioner. whether express or implied. As a general rule. petitioner thru A. considering that DBP gained profit by petitioner’s act of introducing to the bidding process Charges Realty Corporation. Valencia & Co. Article 1869 of the Civil Code provides that an agency may be implied from the acts of the principal. 82978. Artemio Valencia was the President then of both companies. Petitioner entered into a written agreement with A. a broker can claim for commission if the sale was consummated. VS. No. In the present case. Inc.

ISSUE: Whether or not petitioner’s liability together with A. the Ventanillas went to Remnant to pay the outstanding balance.” This is intended to protect the rights of innocent persons for in this situation. Believing that they have remitted almost P 36. Considering such circumstance.U. Receipts were issued in favor of Crisostomo instead of the Ventanillas. Valencia. petitioner’s liability is solidary based on the principle of estoppel.U. holding that petitioner is solidarily liable with A. Article 1911 of the Civil Code provides that “even when the agent has exceeded his authority. Valencia and Carlos Crisostomo should be solidary even if it did not consent on the conduct of Artemio Velencia. Valencia from collecting the monthly dues and ordered the complete list of lot buyers. Petitioner filed before the trial court an action to terminate the agency agreement between petitioner and A. Hence. This was affirmed by the Court of Appeals. After 10 days from the signing of the contract. Moreover. it is well taken that Artemio Valencia was the President of both Manila Remnant and A. the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers. little did the Ventanillas know that Valencia sold the subject lots without consideration to Carlos Crisostomo. They were surprised to discover that their names were not on the list. Unfortunately.44 Case Digests in Civil Law Review 2 of Block 17 in favor of Oscar Ventanilla and Carmen Gloria Diaz where the latter paid the agreed down payment even before the formal contract was signed. Petitioner refused to accept the offer since it has no personality to do so. Ventanillas were not on the list. RULING: Yes. petitioner is precluded for questioning his liability due to its negligence. the court ordered the cancellation of all contracts to sell executed by A. San Beda College of Law.U Valencia to the Ventanillas. Valencia.U. Valencia was terminated as President of both companies due to discrepancies and irregularities on the sale of the subdivision lots. it will be impossible for petitioner not to have known the conduct nor consented to the acts of Valencia. the agent and the principal are considered as joint tort feasors making their liability joint and solidary. Manila . The Ventanillas then filed an action against petitioner before the trial court which ruled in favor of the Ventanillas. It prohibited A. The court ordered that the monthly amortizations be deposited before the court. The fictitious Crisostomo contracts were transmitted to petitioner and the contract of Ventanillas were kept in his files. Mendiola.U. by principle of estoppel. In the present case. Valencia. The amount paid by Ventanillas was also deposited in Valencia’s account. Valencia even ordered that the monthly payments made by Ventanillas be remitted by petitioner to Crisostomo’s account.U. Eventually.000 for the subject lots.

R. and the principal does not ratify the contract. Namerco. the Court of First Instance rendered judgment ordering defendants-appellants to pay solidarity to the NPC reduced liquidated damages with interest. ISSUE: Whether NaMerCo exceeded their authority by failing to disclose the instruction of its principal. in a cabled instruction. Thereafter.45 Case Digests in Civil Law Review 2 NAPOCOR V. In entering into the contract. The New York supplier was not able to deliver the sulfur due to its inability to secure shipping space. the rule is complemented by article 1898 of the Civil Code which provides that "if the agent contracts in the name of the principal. executed a contract of sale of sulfur with a stipulation for liquidated damages in case of breach. did not disclose to NPC that Namerco's principal. and demanded payment of liquidated damages from both Namerco and the surety. For that reason and because Namerco exceeded the limits of its authority. Consequently. Namerco never disclosed to the Napocor the cabled or written instructions of its principal. 1982 FACTS: Plaintiff-appellant National Power Corporation (NPC) and defendant. NATIONAL MERCHANDISING CORPORATION G. Defendant-appellant Domestic Insurance Company executed a performance bond in favor of NPC to guarantee the seller's obligation.appellant National Merchandising Corporation (NAMERCO). RULING: Yes. It is being enforced against the agent because article 1897 implies that the agent who acts in excess of his authority is personally liable to the party with whom he contracted. the Philippine representative of New York-based International Commodities Corporation. Namerco agreed that non-availability of a steamer was not a justification for non-payment of liquidated damages. After trial. it virtually acted in its own name San Beda College of Law. Manila . and contrary to its principal's instruction. The Supreme Court held that before the contract of sale was signed Namerco was already aware that its principal was having difficulties in booking shipping space. L-33819 and L-33897. the Government Corporate Counsel rescinded the contract of sale due to the supplier's non-performance of its obligations. Nos. exceeding the scope of his authority. Moreover. stated that the sale was subject to availability of a steamer. it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal". NPC sued for recovery of the stipulated liquidated damages. Mendiola. however. NaMerCo exceeded their authority. October 23.

negotiating contracts relative to property with the custody of which he has no concern. Through an irrevocable line of credit. Manila . (1) buyer. Schmid and Oberly sells electrical generators with the brand of “Nagata”. Nagata shipped to the Schmid the generators and RJL paid the amount of the purchase price. Asmere indentor. As to the second sale. October 18. A broker is generally defined as one who is engaged. is not enforceable against its principal. RJL MARTINEZ FISHING CORPORATION G. asking for rescission of the contract and that Schmid be ordered to accept the generators and be ordered to pay back the purchase money as well as be liable for damages. Schmid replaced the 3 generators subject of the first sale with generators of a different brand. the negotiator between other parties. Schmid not having personally assumed any such warranty. Later. 3were returned. Ltd. (First sale = 3 generators. RJL informed the Schmid that it shall return the 12 generators. Schmid advertised the 12 Nagata generators for sale and RJL purchased 12 brand new generators. SCHMID & OBERLY VS. bound by the contract of sale which. of Japan was Schmid’s supplier. it needed electrical generators for the operation of its business. never acting in his own name but in the name of those who employed him. 1988 FACTS: RJL Martinez Fishing Corporation is engaged in deep-sea fishing. it avers that is not liable for the seller’s implied warranty against hidden defects. Second sale = 12 generators). 2) Whether or not Schmid may still be liable for warranty if he is merely an indentor. and (3) supplier who is usually a non-resident manufacturer residing in the country where the goods are to be bought. for others. Mendiola.R. There are 3 parties to an indent transaction. the exporter and RJL Martinez. ISSUE: 1) Whether or not the second transaction between the parties was a sale or an indent transaction.. No.46 Case Digests in Civil Law Review 2 and not as agent and it is. 3 were shipped to Japan and the remaining 9 were not replaced. the importer. RULING: 1) The SC held it to be an indent transaction. the generators were found to be factory defective. Nagata Co. In the course of its business. Schmid opposes such liability averring that it was merely the indentor in the sale between Nagata Co. therefore. on a commission. RJL sued the defendant on the warranty. 75198. a Japanese product. An indentor is a middlemen in the same class as commercial brokers and commission merchants. The chief feature of a commercial broker San Beda College of Law. (2) indentor. he is strictly a middle man and for some purpose the agent of both parties. however. D.

Even as SCHMID was merely an indentor. Yes. The lower court dismissed the case. ISSUE: Whether or not the extrajudicial foreclosure sale of the property was valid. Jose filed for annulment of the foreclosure sale. RJL MARTINEZ admitted that the generators were purchased “through indent order. He executed a Special Power of Attorney in favor of Jose de Jesus.000 from Bicol Savings. Juan de Jesus died and the loan obligation was not paid. by procuring an order from RJL and forwarding the same to Nagata for which the company received a commission from Nagata. he may expressly obligate himself to undertake the obligations of his principal. Thereafter. Bicol Savings extrajudicially foreclosed the mortgaged property. Hence. COURT OF APPEALS GR 85302. his son. Hence. wherein the latter could negotiate and mortgage the former’s property in any bank preferably in the Bicol Savings and Loan Association. and that the latter company itself invoiced the sale and shipped the generators directly to the former. 2. they are merely intermediaries or middle-men. the CA reversed RTC’s decision. As a result. By virtue of such document. As such agent. BICOL SAVINGS AND LOAN ASSOCIATION VS. Mendiola. there was nothing to prevent it from voluntarily warranting that twelve (12)generators subject of the second transaction are free from any hidden defects. he executed a deed of mortgage wherein it was stipulated that upon the mortgagor’s failure or refusal to pay the obligation. As stated above. To secure payment. The bank won as the highest bidder during the auction sale. for the generators. and act in a certain sense as the agent of both parties to the transaction. Jose was able to obtain P20. if indeed it had so bound itself. the mortgageemay immediately foreclose the property. Manila . The only participation of Schmid was to act as an intermediary or middleman between Nagata and RJL. Jose and the other heirs failed to redeem the property.” The evidence also show that RJL MARTINEZ paid directly NAGATA CO. San Beda College of Law. an indentor is to some extent an agent of both the vendor and the vendee. Bicol Savings sold the property to another person. On appeal. SCHMID may be held answerable for some other contractual obligation.47 Case Digests in Civil Law Review 2 and a commercial merchant is that in effecting a sale. by indent order and three(3) by direct purchase. this appeal. In other words. they tried to negotiate with Bicol Savings but the parties did not come up to an agreement. therefore.” RJL admitted in its demand letter previously sent to SCHMID that 12 of 15 generators “were purchased through your company. 1989 FACTS: Juan de Jesus was the owner of a parcel of land in Naga City. March 31.

representative or liaison officer for selling their company’s logs and earned a commission of $1/1. CMS LOGGING INCORPORATED VS. July 10. for a period of five (5) years. Mendiola. ISSUE: Whether or not DRACOR is entitled to a commission for the sales made by CMS directly to Japanese firms. 1992 FACTS: CMS (a forest concessionaire engaged in the logging business) and DRACOR (engaged in the business of exporting and selling logs and lumber) entered into a contract of agency whereby the former appointed the latter as its exclusive export and sales agent for all logs that the former may produce. Since the contract of agency had been revoked by the time these sales were effected. What it proscribes is a voluntary and independent contract of sale and not an auction sale resulting from extrajudicial foreclosure caused by the default of the mortgagor. Six months before the expiration of the agreement. In this case. COURT OF APPEALS GR L-41420. Dominguez discovered while on a trip to Japan that DRACOR had used Shinko Trading Corp. as agent. CMS’ president Atty. The right of the bank to foreclose is independent of the mortgage contract as it is recognized by the Rules of Court. San Beda College of Law. By virtue of this agreement. The power to foreclose is not an ordinary agency but is primarily conferred upon the mortgagee for its protection. Art 1879 of the CC which states that special power to sell excludes the power to mortgage and vice versa is inapplicable in the case. CMS contended that since DRACOR had been paid the 5% commission under the agreement. CMS was able to sell 77M board feet of logs in Japan. dealing directly with third persons. such that it was able to get $77k from the arrangement. Manila . Sison and its general manager and legal counsel Atty. the DRACOR is no longer entitled to claim or retain commission in relation to these transactions. Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the agent. it is no longer entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving double compensation for the services it rendered. CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the logs. RULING: No. there was an implied revocation when CMS sold its logs directly to Japanese firms.000 board feet.48 Case Digests in Civil Law Review 2 RULING: Yes. DRACOR is not entitled to its commission to the subsequent sales.

(PSI). VS. Apparent authority. prompting Natividad to seek treatment at the Polymedic General Hospital. Juan Fuentes to perform hysterectomy on her. but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists. They alleged that the latter are liable for negligence for leaving two pieces of gauze inside Natividad’s body and malpractice for concealing their acts of negligence. Thus. Ampil proceeded to her house where he managed to extract by hand a piece of gauze and then he assured her that the pains would soon vanish. or what is sometimes referred to as the “holding out” theory. the attending nurses entered these remarks: “sponge count lacking 2” “announced to surgeon searched (sic) done but to no avail continue for closure. Ampil. However. Ampil out as its agent and is thus liable for the latter’s negligence? HELD: The court held in the positive. or doctrine of ostensible agency or agency by estoppel. Upon being informed about it. Mendiola. Manila .” Dr. necessitating the removal of certain portions of it.” A couple of days after the surgery. Dr. Enrique Agana. It imposes liability. INC. another foreign object was found in her vagina -. NATIVIDAD AND ENRIQUE AGANA G. Natividad complained of excruciating pain in her anal region. not as the result of the reality of a contractual relationship. While confined there. 126297. She consulted both Dr. after some time her daughter found a piece of gauze protruding from her vagina. Dr. Ampil. However. 2007 FACTS: Natividad Agana was diagnosed by Dr. He found that the malignancy in her sigmoid area had spread on her left ovary. Dr. to permit Dr. has its origin from the law of agency. No.a foul-smelling gauze which badly infected her vaginal vault. Natividad and her husband filed with the RTC a complaint for damages against the Professional Services. 127590. owner of the Medical City Hospital. 126467. Miguel Ampil to be suffering from “cancer of the sigmoid. The liability of PSI is also anchored upon the agency principle of apparent authority or agency by estoppel which have gained acceptance in the determination of a hospital’s liability for negligent acts of health professionals. Fuentes. performed an anterior resection surgery on Natividad. January 31. assisted by the medical staff of the Medical City Hospital. the operation appeared to be flawed. and Dr.R. But the pains intensified. Ampil and Dr. In the corresponding Record of Operation. Fuentes about it but was only told that the pain was the natural consequence of the surgery. Inc. ISSUE: Did PSI hold Dr. Ampil obtained the consent of Natividad’s husband. The concept is essentially one of estoppel and has been explained in this manner: San Beda College of Law.49 Case Digests in Civil Law Review 2 PROFESSIONAL SERVICES.

G. The question in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence. CARLOS SANCHEZ VS. Medicard and Unilab executed a Health Care Program Contract for which petitioner was paid a commission. Ampil and Dr. 2005 FACTS: Respondent Medicard appointed petitioner Sanchez as its special corporate agent. Again. or which he holds the agent out to the public as possessing. Ampil for damages.50 Case Digests in Civil Law Review 2 “The principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume. Fuentes. through petitioner’s initiative. or servants. Unilab negotiated with Medicard. including those of Dr. Unilab confirmed its decision not to renew the health program contract with Medicard. from his silence or lack of action. conversant with business usages and the nature of the particular business.” Our jurisdiction recognizes the concept of an agency by implication or estoppel.” prompting Medicard to request petitioner to reduce his commission. agents. through its accredited physicians. In order not to prejudice its personnel by the termination of their health insurance. PSI is now estopped from passing all the blame to the physicians whose names it proudly paraded in the public directory leading the public to believe that it vouched for their skill and competence. Fuentes and publicly advertising their qualifications. In this case. through petitioner. Thus. By accrediting Dr. PSI publicly displays in the lobby of the Medical City Hospital the names and specializations of the physicians associated or accredited by it. 141525. Medicard proposed to Unilab. an increase of the premium for the next year. knowing that another person is acting on his behalf without authority. offers quality health care services. Mendiola. Ampil and Dr. Article 1869 of the Civil Code reads: ART. Natividad being one of them. PSI is solidarily liable with Dr.” Through petitioner’s efforts. but the latter refused.. Subsequently.R. September 2. As expected. is justified in presuming that such agent has authority to perform the particular act in question. or implied from the acts of the principal. No. Unilab rejected the proposal “for the reason that it was too high. Prior to the expiration of the renewed contract. or his failure to repudiate the agency. Agency may be express. authorized to perform medical or surgical services for its patients. the hospital created the impression that they were its agents. 1869. Manila . to discuss ways in order to continue the insurance coverage of San Beda College of Law. Medicard gave him a commission based on the “cash brought in. the contract between Medicard and Unilab was renewed for another year and petitioner was again given his commission. MEDICARD PHILIPPINES. INC. Indeed. As such agent. these patients. PSI’s act is tantamount to holding out to the public that Medical City Hospital. accepted the services on the reasonable belief that such were being rendered by the hospital or its employees.

ISSUE: Is petitioner entitled to a commission on the new scheme agreed upon between Medicard and Unilab. Unilab negotiated with Medicard. L-25836-37 January 31. The agency is revoked if the principal directly manages the business entrusted to the agent. THE PHILIPPINE BANK OF COMMERCE VS. 1981 FACTS: San Beda College of Law. RULING No. Manila . thus revoking its agency contract with petitioner. The proximate. Nos. In order not to prejudice its personnel. through petitioner. Since petitioner refused to reduce his commission. Such revocation is authorized by Article 1924 of the Civil Code which provides: “Art. an agent receives his commission only upon the successful conclusion of a sale. close. where said agent. dealing directly with third persons. proposed an increase in premium. JOSE M. Mendiola. to entitle him to a commission. Thus.R. took diligent steps to bring back together the parties. he is not entitled to a commission. In other words. he was not the agent or the “procuring cause” of the third Health Care Program Contract between Medicard and Unilab. and causal connection between the agent’s efforts and the principal’s sale of his property cannot be ignored. which simply means that the measures employed by him and the efforts he exerted must result in a sale. 1924. ARUEGO G. notwithstanding the expiration of his authority. petitioner filed a complaint for sum of money against Medicard. his principal. he must be the procuring cause of the sale.51 Case Digests in Civil Law Review 2 those personnel. it follows that where his efforts are unsuccessful. such that a sale was finalized and consummated between them. Petitioner demanded from Medicard of his commission plus damages. this Court held that for the purpose of equity. In Prats vs.” Moreover. It is dictum that in order for an agent to be entitled to a commission. but Unilab rejected this proposal. Unilab and Medicard came to an agreement regarding a new scheme for which petitioner did not receive any commission. an agent who is not the efficient procuring cause is nonetheless entitled to his commission. or there was no effort on his part. Court of Appeals. nonetheless. Obviously. but the latter refused to heed his demand. which resulted in a new contract. petitioner did not render services to Medicard. It may be recalled that before the expiration of the renewed contract. Medicard. Conversely. Medicard directly negotiated with Unilab.

For failure to disclose his principal. Aruego a civil case for the recovery of a sum representing the cost of the printing of "World Current Events. does not exempt him from personal liability. ISSUE: Whether plaintiff acted as an agent of Phil. but the mere addition of words describing him as an agent or as filing a representative character. He merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO. (hereafter San Beda College of Law. September 17.HON." An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation Company. he is not liable on the instrument if he was duly authorized. Inc. To facilitate the payment of the printing the defendant obtained a credit accommodation from the plaintiff.R. Education Foundation when he signed the drafts and thus absolved of liability for the same. RULING: Section 20 of the Negotiable Instruments Law provides that "Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity. that his liability is only secondary." the printer. without disclosing his principal. and that he believed that he was signing only as an accommodation party. The defendant filed his answer to the complaint interposing the following defenses: That he signed the document upon which the plaintiff sues as an agent of Philippine Education Foundation where he is President. Thus. said draft being sent later to the defendant for acceptance. 129039. VS. collected the cost of printing by drawing a draft against the plaintiff." a periodical published by the defendant. INC. the plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the sale of said publication to answer for the payment of all obligations arising from the draft. Encal Press and Photo Engraving. for every printing of the "World Current Events. Mendiola. Aruego is personally liable for the drafts he accepted.52 Case Digests in Civil Law Review 2 The Philippine Bank of Commerce instituted against Jose M. SIREDY ENTERPRISES. Manila . As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving. 2002 FACTS: Private respondent Conrado De Guzman is an architect-contractor doing business under the name and style of Jigscon Construction. COURT OF APPEALS AND CONRADO DE GUZMAN G. Herein petitioner Siredy Enterprises. No.

assuming arguendo that Siredy was bound by the acts of Santos. Yanga. It was upon the authority of this document that De Guzman transacted business with Santos that resulted in the construction contract denominated as the Deed of Agreement. duly approved by the Securities and Exchange Commission. Mendiola. De Guzman constructed 26 residential units at Ysmael Village. Santos was a duly constituted agent of Siredy. among other things. he instituted the action for specific performance against Siredy. his act is the act of the principal if done within the scope of the authority. De Guzman tried but failed to collect the unpaid account from petitioner. Siredy can be held liable for the amount sought to be collected by private respondent De Guzman.” On its face. Manila . coupled with the Letter of Authority. However. San Beda College of Law. RULING: By the relationship of agency. the Letter of Authority executed by Yanga clearly and unequivocally constituted Santos “to do and execute”. and Second. “He who acts through another acts himself. ISSUE: Whether or not Hermogenes B. Aside from the Letter of Authority. Santos entered into a Deed of Agreement with De Guzman to build housing units in Ysmael Village.[24] Such Articles. shows that Siredy may also undertake to erect buildings and houses on the lots and sell.” Private respondent was referred to as “contractor” while petitioner Siredy was cited as “principal”. Yanga executed an undated Letter of Authority authorizing one Hermogenes Santos to negotiate and enter into contract to build Housing Units in Ysmael Village. Thirteen (13) of these were fully paid but the other 13 remained unpaid. is sufficient to have given De Guzman reason to believe that Santos was duly authorized to represent Siredy for the purpose stated in the Deed of Agreement. one party called the principal authorizes another called the agent to act for and in his behalf in transactions with third persons. The deed expressly stated that Santos was “representing Siredy Enterprises. petitioner denies any liability by stating that the nature of Siredy’s business did not involve the construction of housing units since it was merely engaged in the selling of empty lots. Inc. the act of negotiating and entering into “contract or contracts to build Housing Units on our subdivision lots in Ysmael Village. Siredy’s Articles of Incorporation. The authority of the agent to act emanates from the powers granted to him by his principal. or otherwise dispose of said properties to interested buyers. Yanga. The president of Siredy is Ismael E. whether or not under the terms of the Deed of Agreement. Nothing could be more express than the written stipulations contained therein.53 Case Digests in Civil Law Review 2 Siredy) is the owner and developer of Ysmael Village. with authority to enter into contracts for the construction of residential units in Ysmael Village and thus the capacity to bind Siredy to the Deed of Agreement. lease. and Santos who all denied liability. Thus.

they are not required to go beyond the terms of the written power of attorney.R. The trial court stated in its judgment that Atty. 1881) and said acts have the same legal effect as if they were personally done by the principal. the agent acts for and in behalf of the principal on matters within the scope of his authority (Art. Pascua to protect their interest over the homestead acquired by their predecessor. The Bureau of Lands and the lower court decided in their favor. XXXI. By this legal fiction of representation.[26] Moreover. A writ of execution was issued and the Sheriff then levied upon and sold at public auction the entire lot of 21. Pascua as the San Beda College of Law.000. Jorge A. The decision was affirmed by the appellate courts and became final and executory.00. SUMAOANG V. On the other hand. What De Guzman only saw was the written Letter of Authority where Santos appears to be duly authorized. JUDGE RTC BR. Mendiola. Pascua was entitled only to "the equivalent of one-half of the property — in its peso valuation" and ordered petitioner and his brothers to pay attorney's fees in the amount of P110. The basis of agency is representation. 78173 October 26. The scope of the agent’s authority is what appears in the written terms of the power of attorney. promising the latter a contingent fee of "not less than one-half (1/2)" of the entire homestead. PASCUA G. Third persons cannot be adversely affected by an understanding between the principal and his agent as to the limits of the latter’s authority. Hence. if recovered. and the authority conferred upon the latter includes the power to enter into a construction contract to build houses such as the Deed of Agreement between Santos and De Guzman’s Jigscon Construction. the inescapable conclusion is that Siredy is bound by the contract through the representation of its agent Santos. NUEVA ECIJA AND ATTY. 1992 FACTS: Petitioner and his brothers engaged the services of private respondent Atty. In the same way. Pascua filed a complaint for collection of attorney's fees against his former clients. While third persons are bound to inquire into the extent or scope of the agent’s authority. that is. GUIMBA. Atty. No.54 Case Digests in Civil Law Review 2 We find that a valid agency was created between Siredy and Santos. the latter is still bound to pay De Guzman. even if arguendo Santos’ mandate was only to sell subdivision lots as Siredy asserts. the actual or legal absence of the principal is converted into his legal or juridical presence. De Guzman is considered a third party to the agency agreement who had no knowledge of the specific instructions or agreements between Siredy and its agent.3445 hectares here involved to Atty. third persons need not concern themselves with instructions given by the principal to his agent outside of the written power of attorney. ordering the cancellation of the homestead patent issued in favor of the Domingos and ordered the reversion of the land to the State subject to the rights of petitioner and his brothers. Manila .

The Court said in Licudan v. Pascua a one-half (1/2) portion of the property involved as stipulated in the contingent fee contract. 58010 March 31. . Pascua obviously knew that he was entitled to ask only for one-half (1/2) of the land and he took advantage of the Judge's mistake in order to acquire the entire lot. CO CHO CHIT G. unilaterally and officiously converted the form or medium into a peso amount representing. ISSUE: Whether or not the said award of attorney fees was unconscionable. instead of simply awarding Atty. The respondent Judge. Mendiola. the notice of levy and auction sale and the certificate of sale issued in favor of Atty. Pascua. CA. 1993 FACTS: The Philippine Sugar Estate Development Company. the value of that one-half (1/2) portion. By doing so. . There should never be an instance where a lawyer gets as attorney's fees the entire property involved in the litigation. sold a parcel of land in Oroquieta with the Deed of Absolute Sale naming Emilia O'Laco as vendee and a TCT was issued in her name. under the circumstances of this case.. must be regarded as holding the title of the property acquired by him at public sale under an implied trust set forth in Article 1456 and based on the principles of the general law of trusts in favor of petitioner and his brothers.R. Pascua had been retained. The same property was sold by petitioner to the Roman Catholic Archbishop of Manila for P230. Pascua was unconscionable. The Court holds that respondent Atty.00 as partial payment of the judgment obligation. Atty.00.000. not because the original agreement between the parties was itself unreasonable and unconscionable but rather as a result of the subsequent dispositions of the trial court. the amount and character of his attorney's fees became unreasonable and unconscionable and constituted unjust enrichment at the expense of his clients. Pascua on the contention that the award of P110. Petitioner asked for the nullification of the decision as well as the writ of execution. Pascua to acquire the entire parcel of land which had been the subject matter of the litigation and for the recovery of which.00 as attorney's fees of Atty. This must be so even though the operative mistake was a mistake of respondent trial judge. Manila .55 Case Digests in Civil Law Review 2 sole and the highest bidder. Atty. “.000. for and in consideration of P110. No. Pascua received from petitioner and his brothers became unreasonable and unconscionable in character. The respondent-spouses sued San Beda College of Law. RULING: The Court considers that the fees which Atty. Ltd. O’LACO V.000. Said judgment allowed Atty. It is unconscionable for the victor in litigation to lose everything he won to the fees of his own lawyer. in the mind of the Judge. to the extent of one-half (1/2) of that property. with assumption of the real estate mortgage.

1994 San Beda College of Law. COURT OF APPEALS G. No. HUANG VS. "There is an implied trust when property is sold. the prescriptive period commences to run from the time respondent acquired knowledge of the sale. They arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in equity to hold his legal title for the benefit of another. Until the sale of the Oroquieta property to the Roman Catholic Archbishop of Manila. however. RULING: The Court holds that a resulting trust was indeed intended by the parties under Art. CA. Petitioner also failed to convince the court that she was financially capable of purchasing the Oroquieta property. (c) the evidence thereon is clear and convincing. it is converted into a constructive trust and is subject to prescription. while the latter is the beneficiary . The action has not yet prescribed since the complaint for breach of trust was filed by respondent-spouses two (2) months after acquiring knowledge of the sale. the rule of imprescriptibility may apply for as long as the trustee has not repudiated the trust in case of resulting trusts. 2) Whether prescription has set in. in Tale v. and. In the instant case. Mendiola. 1448 of the New Civil Code which states. September 3. and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property. . ISSUE 1) Whether a resulting trust was intended by the parties in the acquisition of the property. Petitioner assured the respondent that the transfer of the property to them would be arranged after the former’s wedding.R. petitioner actually recognized the trust. The Court. Once the resulting trust is repudiated. which is a disavowal of the resulting trust." Resulting trusts are based on the equitable doctrine that valuable consideration and not legal title determines the equitable title or interest and are presumed always to have been contemplated by the parties. . the respondent spouses have been in continued possession of the documents of ownership since the time of sale in 1943 which strongly suggests that O'Laco merely held the Oroquieta property in trust for them. (b) such positive acts of repudiation have been made known to the cestui qui trust. A resulting trust is repudiated if the following requisites concur: (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust. In the instant case. While prescription may supervene in constructive trusts. 108525.56 Case Digests in Civil Law Review 2 petitioner-spouses for the recovery of the purchase price of the land asserting that they were the real vendees of the Oroquieta property. categorically ruled that an action for reconveyance based on an implied or constructive trust must perforce prescribe in ten (10) years. Manila . The former is the trustee.

October 28. The decision of the trial court as sustained by the Court of Appeals is affirmed. the lessees prohibited the use of the swimming pool by the respondents. and the Huangs began challenging the respondents‘ ownership of the property. No. Respondents actually financed the construction of thehouse. Respondents constructed a house on Lot 21 while petitioners were allowed by respondents to build a house on Lot 20. Makati but was allowed to buy only one lot per policy of the subdivision owner. Respondents also boughtLot 20 but the deed of sale was in thename of petitioner Ricardo Huang and registered in his name. Private respondents bought Lot 21 and registered it in their name. 116631. Thus. Petitioners were also allowed to mortgage theLot 20 to the SSS to secure a loan. petition is denied. Article 1448 of theNew Civil Code provides that there is an implied trust when property is sold and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest for the property. ISSUE: Whether or not petitioners can claim ownership of the property registered in their name but for which was paid by the respondents.respondents filed a complaint before the trial court for the nullification of the deed of sale to the petitioners and the quieting of title of Lot 20. and the fence surrounding the properties on the understanding that the petitioners would merely hold title in trust for the respondents‘ beneficial interest. Mendiola. Respondent Sandoval provided the money for the purchase of Lot 20but the corresponding deed of sale and transfer certificate of title were placed in the name of petitioner Huang. But later.R. COURT OF APPEALS G.the swimming pool.Petitioner Huangs leased the property to Deltron Corporation for its official quarters without the permission of the respondents. Thus. petitioner was only a trustee of the property in question for the benefit of the respondent who is the real owner. A resulting trust arises because of the presumption the he who pays for a thing intends a beneficial therein for himself. The trial court found that the respondents were the real owners of the Lot20 and therefore ordered the petitioners to vacate the property and to remit to the respondents the rentals earned from Lot 20.Through this transaction. RULING: No. THOMSON VS. with costs against petitioners.Given these provisions of law. Manila . Hence.petitioner cannot claim ownership of the property even when it was registered in his name. The Court of Appeals affirmed the lower court‘s decision.57 Case Digests in Civil Law Review 2 FACTS: Private respondents Dolores and Aniceto Sandoval wanted to buy two lots in Dasmarinas Village. a resulting trust was created. the instant recourse. 1998 FACTS: San Beda College of Law. Therefore. Petitioner became the trustee of Lot 20 and its improvements for the benefit of respondent as owner.

that is. However.58 Case Digests in Civil Law Review 2 Petitioner Marsh Thomson was an officer of the respondent American Chamber of Commerce (AmCham) for over ten years. 126437 March 6. When petitioner’s contract of employment was up for renewal. Manila . that he shall accept it if he shall be allowed to retain the shares after reimbursing AmCham the purchase price. AmChain. the latter’s proprietary share in the Manila Polo Club (MPC) was listed in Thomson’s name and paid for by AmCham through his retiring superior’s intercession. to enjoy the facilities and privileges of such membership. Such arrangement reflects a trust relationship governed by the law and equity. Pending the negotiation. It was rejected. The Court of Appeals reversed the decision. AmCham executed a Release and Quitclaim of its claims against Thomsoin. Mendiola. When AmChain paid the purchase price for the share but Thomson was given legal title thereto. asked the former to stay on for another six (6) months. The respondent’s purpose in acquiring the share was to provide additional incentive to its chosen executive. When his superior retired. 2002 San Beda College of Law. he notified his employer of his unwillingness to continue his services. On the other hand. The petitioner made a counter-proposal. The trial court awarded the share to Thomson on the ground that the Articles of incorporation of Manila Polo Club prohibits artificial persons to be club members. The company demanded the return of the MPC shares and the transfer of said shares to the nominee of AMCHAM but Thomson claims ownership of the MPG shares. AmChain asserts beneficial ownership whereby petitioner only holds the share in its name but the beneficial title belongs to private respondent. ISSUE: Whether or not petitioner has the obligation to transfer the MPG shares to the nominee of AMCHAM. HON. RULING: Petitioner is obligated to transfer the MPG shares to the nominee of AmCham as he is merely holding the shares in trust. No. asserting that he merely incurred a debt to respondent when the latter advanced the funds for the purchase of the share. however. JOSUE ARLEGUI VS. it was agreed that Thomson shall execute a document recognizing AmCham’s beneficial ownership over the shares.R. COURT OF APPEALS AND SPOUSES GIL AND BEATRIZ GENGUYON G. Although the share was placed in the name of the petitioner. As an officer of AMCHAM. The quitclaim did not mention the MPC shares. a resulting trust is presumed as a matter of law. Thomson paid the corresponding transfer fee but AmCham subsequently reimbursed the amount. He failed to do so despite the many demands from AmCham management. his title is limited to usufruct. petitioner occupied a fiduciary position in the business of AmCham.

particularly Mateo Tan Lu and Josue Arlegui. is utterly disabled from acquiring for his own benefit the property committed to his custody. The absence of fraud or mistake on the part of the petitioner does not prevent the court from ruling that an implied or constructive trust was created nonetheless. by making it impossible to profit by yielding to temptation. The election of the two officers was done prior to the sale of the subject property to them. trustee. damages have accrued upon spouses Genguyons for which they must be indemnified. In the meantime. The Genguyons continued to occupy the subject premises and paid the rentals therefor. Spouses Genguyon alleged that they are entitled to claim the right of first refusal and further alleged that Mateo Tan Lu and Josue Arlegui breached the trust reposed on them as officers of. Mendiola. Barretto Enterprises for the purchase of their respective apartment units. Among those elected were Josue Arlegui as vice-president and Mateo Tan Lu as auditor of the association. the tenants formed the Barretto Apartment Tenants Association. and negotiators for. apprehensive that they were about to be ejected from their respective units. Manila . or any other person occupying fiduciary relations respecting property of persons.The trial court ruled against plaintiffs. agent. Sometime thereafter. a fiduciary relationship and Mateo Tan Lu and Josue Arlegui committed a breach of trust when they purchased the apartment unit leased by the Genguyons.Mateo Tan Lu and petitioner Josue Arlegui breached the trust reposed San Beda College of Law.59 Case Digests in Civil Law Review 2 FACTS: A residential apartment unit which was formerly owned by Serafia Real Estate. Mateo Tan Lu sold the subject property to Josue Arlegui. Barretto Enterprises. There is no doubt that because of Tan Lu and Arlegui's violation of the trust and confidence reposed in them as officers and negotiators in behalf of the tenantsmembers of the Association.B. The respondents Genguyons then filed an action for annulment of sale. ISSUE: Whether or not constructive trusts may arise out of abuse of confidence. They elected officers from among themselves to represent them in the negotiations with A. the Genguyon Spouses and other tenants were informed that Serafia and its assets had been assigned and transferred to A. No fraud in fact need be shown . Tolentino opined: "a receiver. the tenants formed such organization. In a similar vein.B. If a person obtains legal title to property by fraud and concealment. The subject property was later on sold to Mateo Tan Lu. Incorporated was leased to the spouses Gil and Beatriz Genguyon. redemption and damages against the Barrettos. Courts of equity will impress upon the title a so called constructive trust in favor of the defrauded party. specific performance. the tenants' association..The rule stands on the moral obligation to refrain from placing one's self in positions which ordinarily excite conflicts between self interest and integrity. attorney. Mateo Tan Lu and Josue Arlegui before the RTC of Mandaluyong City. in order to satisfy the demands of justice? RULING: Constructive trusts do not only arise out of fraud or duress. in order to satisfy the demands of justice. but also by abuse of confidence. The Court of Appeals set aside the RTC decision and ruled that there existed between the Genguyons and the officers of the tenants' association. It seeks to remove the temptation that might arise out of such a relation to serve one's self interest at the expense of one's integrity and duty to another.

COURT OF APPEALS. private respondents asserted that Rosaida executed a deed of revocation of the sale. or from 1965 up to the filing of the case in 1991. ploy to appropriate the apartment unit that they knew fully well the Genguyons had every intention to buy from A. PETITIONER. No. VS. The Court of Appeals affirmed the decision of the trial court. Barretto Enterprises violated the trust and confidence so willingly and without reservation reposed on them. were co-owners in equal shares and pro-indiviso with petitioner of a commercial lot and an orchard. After Nicolasa and Rosaida died. the Genguyons have no right of first refusal to speak of. who was in possession of the properties. Petitioner now impugns the decision of the Court of Appeals as and contends that the appellate court committed serious errors when it affirmed the findings of the lower court that the 1965 deed of sale of the commercial lot was an express trust and not a true conveyance of real property and that prescription did not run against private respondents. private respondents asserted that Nicolasa and Rosaida exercised acts of administration and dominion over the property and collected rentals from the buildings standing thereon for 25 years or until they died.B. publicly and continuously owned and possessed the properties for a period of more than 25 years. and negotiators for. against their co-heir. to partition the same among them. Their successful. albeit clandestine. The trial court ruled that the deed of sale of the commercial lot was an express trust and not a true conveyance of real property and petitioner became a trustee to an express trust which incapacitated him from acquiring for his own benefit the property committed to his custody although titled in his name. Petitioner contends that prescription has already run against co-owners Nicolasa and Rosaida Viloria. Manila . La Union. AQUINO G. Private respondents maintained that the transfer of title of the commercial lot in the name of petitioner was only for loan and that petitioner assured Nicolasa and Rosaida that they would remain as co-owners and the Deed of Sale returned to them. during their lifetime. the tenants' association by acquiring for themselves the subject property without informing the respondent spouses of the progress of the negotiations. Mateo Tan Lu and the petitioner did not act with the candor and honesty expected of them.The Supreme Court ruled that as lessees of the residential apartment unit.R. herein petitioner. 119974 June 30. As regards the orchard. VILORIA. Mendiola. but he refused claiming that during their lifetime Nicolasa and Rosaida sold and conveyed to him by virtue of a Deed of Sale all their shares over the properties in question. As proof of this arrangement. They alleged that Nicolasa and Rosaida. RUPERTO L. San Beda College of Law. 1999 FACTS: The heirs of Rosaida and Nicolasa Viloria filed an action for partition with the Regional Trial Court of Balaoan. LIDA C.60 Case Digests in Civil Law Review 2 on them as officers of. since Ruperto Viloria openly. or of their desire to purchase the said property. with good and just title. private respondents demanded from petitioner.

SECUYA V. Article 1390 of the New Civil Code has no bearing in the instant case. Ramos inherited all of the latter's property. After Secuya bought the land. Such sale was confirmed by Ramon Sabellona. A certain Edilberto Superales married Secuya's neice. Moreover. Secuya died. Moreover. VDA DE SELMA G. Petitioner cannot rely on the registration of the land subject of the 1965 sale and the corresponding issuance of a certificate of title in his name as vesting ownership on him because the trial court found the deed of sale to be in fact an express trust. Dalmacio Secuya bought the land from Pacencia by means of a private document which was lost. Pacencia took possession of the parted 1/3 portion. an action to compel the trustee to convey property registered in his name for the benefit of the cestui que trust does not prescribe unless the trustee repudiates the trust.61 Case Digests in Civil Law Review 2 ISSUE: When does the prescriptive period for an action of reconveyance of real property based on implied or constructive trust commence? RULING: Prescriptive period for an action of reconveyance of real property based on implied or constructive trust which is counted from the date of registration of property applies when the plaintiff is not in possession of the contested property. Superales was able to build a house on the land and continuously lived there. Hence. It has been held that a trustee who obtains a Torrens title over property held in trust by him for another cannot repudiate the trust by relying on the registration. a separate declaration of nullity is no longer necessary since the trial court already assumed jurisdiction over the validity of the 1965 deed of sale in determining whether co-ownership in fact existed and whether partition was proper. Mendiola.R. With The latter's tolerance. Manila . Eventually. At no time did Ruperto openly repudiate the claims of his co-owners but continued to assure them of their rights regarding the property. prescriptive period did not commence to run against private respondents. the only heir of Pacienca. Subsequently. Nicolasa and Rosaida were in possession of the land and were exercising acts of ownership and administration over the property consistent with their responsibility as co-owners. 2000 FACTS: Maxima Caballero owned a land. It is therefore the nature of the contract that is in issue and not the character of the consent given. The parties in the instant case freely gave their consent to the 1965 deed of sale but intended it to be merely a trust agreement and not a relinquishment of rights. Being San Beda College of Law. 136021 February 22. No. The provision alludes to contracts which could be voided by reason of absence or infirmity of consent and not to simulated contracts. She partitioned the said land and executed a deed selling 1/3 of the land to Pacencia Sabellona. Pursuant to Pacencia's will. he took possession of the such and cultivated it.

RULING: Yes. and The Deed of Confirmation of Sale executed by Ramon Sabellona. No. Since this is a trust agreement. In 1962. but allege that the contract had been lost. and was therefore exercised by the heirs of Caballeros. Mendiola. 167320 January 30. but not to 3rd parties. and that it was only a private document.R. RTC-Cebu decided in favor of Selma. a certain Selma bought a portion of Lot 5679. 2007 FACTS: The subject property is a 65 sq. Secuyas contest that there was a sale. CA affirmed. Apolinario Hermosilla (Apolinario) was occupying a lot in such homesite until his death in 1964. Manila .62 Case Digests in Civil Law Review 2 single. Re: Partition Upon closer look. when they sold the land to a 3rd party buyer (Selma). SC says that although there is no form required for a sale to be valid. The land was a portion of Lot 5679 and is included within the boundary of what Selma acquired. HEIRS OF SALVADOR HERMOSILLA VS. a sale such as this (one pertaining to land) must be registered in the Registry of Property. Trust is the right to the beneficial enjoyment of property. it can be repudiated. There is strength in his title. the SC says this Agreement is not one of partition. Since this is an action for quieting of title. while the legal title to land is vested in another. The Secuyas contest their claim on the basis of 2 documents: the Agreement of Partition executed by Maxima Caballero and Paciencia Sabellona. Caballero merely entrusted the portion specified to Sabellona. lot located in the San Pedro Tunasan Homesite.m. The land subject of this controversy forms part of Lot 19. This is one in the nature of a trust agreement. then the sale is valid as to only the contracting parties. and the parties in the contract are not co-owners. Jaime Remoquillo. it must first be established if the Secuyas have the requisite title that would enable them to avail of the remedy of quieting of title. Selma is now asserting ownership over the land on the strength of his title. Regarding the sale. The Land Tenure Administration later found that Lot 19 is San Beda College of Law. Lot 12 and Lot 19. If it was not. This Homesite was acquired by the Republic of the Philippines in 1931. because there was no property to partition. his brothers and sisters took physical possession of the land. with the same area. He caused the subdivision of the lots into two. SPOUSES REMOQUILLO G. ISSUE: Whether or not the land belongs to Selma. Apolinario made a deed of assignment transferring possession of Lot 19 in favor of his grandson. like Selma in this case. Then. This right to repudiation does not expire. It therefore does not constitute a title.

this petition. Mendiola. petitioners have no personality to impute fraud or misrepresentation against the State or violation of the law. Fraud is never presumed. or in some manner injure him must be specifically alleged and proved by the petitioners by clear and convincing evidence. reckoned from the date of the issuance of the certificate of title. Apolinario conveyed Lot 12 to his son Salvador. The petitioners filed for the annulment of the title on the ground of fraud because by the virtue of the agreement. it having been filed to enforce an alleged implied trust after Jaime refused to segregate title over Lot 19. hence. The prescriptive period for the reconveyance of fraudulently registered real property is 10 years . ISSUE: (1)Whether or not the property was acquired by the spouses Remoquillo through fraud which by force of law. In 1986. it is the State which should file the suit to recover the property through the Office of the Solicitor General. The trial court held that the petitioners were co-owners of the subject property and allowed for the action for specific performance. On that same year. Since there was no actual need to reconvey the property as petitioners remained in possession thereof. In 1972. Intentional acts to deceive and deprive another of his right. which the LTA granted in 1971.m. the CA held that the action had prescribed. it having been filed in 1992. Hence. Petitioners failed to discharge this burden. It is undisputed that petitioners’ houses occupy the questioned property and that respondents have not been in possession thereof. if the plaintiff is not in possession . the petitioners must prove by clear and convincing evidence not only his title to the property but also the fact of fraud. Jaime and Salvador made a agreement whereby Jaime transferred ownership of the 65 sq. being its occupant filed an application in 1963. for which he and his wife were issued a title. The title originated from a grant by the government. Also.m. Jaime. petitioners seek the reconveyance of the property based on implied trust. no right was transferred to Jaime. From the allegations of the Complaint. He filed for an application to purchase the said lot. From the body of the complaint. San Beda College of Law. At all events. the 65 sq. (2)NO. in Lot 19 in favor of Salvador. its cancellation is a matter between the grantor and the grantee. rendering the agreement void because at the time of its execution (1972). however. the NHA (then LTA) awarded Lot 19 to Jaime. who was awarded the lot in 1986 and no right was transferred by Salvador to the petitioners. The property was previously a public land. this type of action denotes imprescriptibility. the lot was still owned by the Republic of the Philippines. considered them trustees of an implied trusts (2)Whether or not the prescriptive period to recover the property obtained by fraud is applicable in the case at bar RULING: (1)NO. the action took the nature of a suit for quieting of title. more than four years from the issuance of the title to the spouses Remoquillo.One who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. Hence. for an action for reconveyance based on fraud to prosper. but imprescriptible if he is in possession of the property. If the title was in fact fraudulently obtained. The CA reversed the trial court’s decision. in Lot 19 were already conveyed to Salvador. Manila .63 Case Digests in Civil Law Review 2 still available for qualified applicants.

Article 1456 of the Civil Code provides that: “If a property is acquired through mistake or fraud. in 1978. respondents discovered that defendant-petitioners together with their deceased brother. Mendiola. The prevailing rule in this jurisdiction does not bar a land owner whose property was wrongfully or erroneously San Beda College of Law. The original deed executed on September 5.64 Case Digests in Civil Law Review 2 ELENA J. thus an action for reconveyance was instituted. is. 1961 covered 57 square meters but the second deed executed on February 5. 1990 FACTS: Respondents are the vendees of a parcel of land measuring 105 square meters covered by Tax Declaration No. In the year 1978. Respondents claimed to be in possession since 1963 of said parcel of land. Manila . No. 2826 of the Meycauayan Cadastre. TOMAS ET AL VS COURT OF APPEALS G. Prescription will not lie in favor of the petitioners who are not even in possession of the disputed land. and obtained Original Certificate of Title No. 06337 of the Registry of Deeds of Bulacan. RULING: No. ISSUE: Whether or not prescription will lie in favour of the petitioners who are not even in possession of the disputed land. 79328. the person obtaining it. including a 3-door apartment in 1963. 2626. one year from the time respondents discovered that petitioners together with their deceased brother applied for the registration of a parcel of land known as Lot No. and “either by mistake or by design” included therein a portion of the land belonging to respondents consisting of 65 square meters adjacent to the parcel owned by petitioners on the Northern part thereof. where they constructed valuable improvements. 1963 covered 105 square meters instead of 57 square meters (may sukat na Isang Daan at Limang (105) metrong parisukat humigit kumulang sa halip na Limampu’t Pitong (57) metrong parisukat kasunduan ng Bilihang Tuluyan. May 21. they are considered as trustees of an implied trust for the benefit of the respondents from whom the property came. applied for the registration of a parcel of land known as Lot No. by force of law considered a trustee of an implied trust for the benefit of the person from whom the property comes. 1979. It is well-settled that an action for reconveyance based on an implied trust or constructive trust prescribes in ten years from the issuance of torrens title over the property which must be brought within ten years from the time of accrual of the cause of action Respondent’s action for reconveyance was filed on January 2.R. Undoubtedly. Lazaro Tomas. they obtained the property by mistake or fraud so that by operation of law. Petitioners refused to reconvey the said land to respondents. 2502 in the names of certain Cirila Mistica and her children. which included the said 65 square meters of land.” In the present case.

No. for alleged acts of mismanagement detrimental to the interest of the corporation and its shareholders at large. purportedly in representation of Filport and its stockholders. Manila . FILIPINAS PORT SERVICES. 1992. while admittedly stockholders of Filport. among which is herein co-petitioner Mindanao Terminal and Brokerage Services. 3. Cruz requested the board to take necessary action/actions to recover from those elected to the aforementioned positions the salaries they have received. 2007 FACTS: The case is an intra-corporate dispute involving Filport. Vice-President. G. INC. CRUZ AND MINDANAO TERMINAL AND BROKERAGE SERVICES. re-creation of the positions of Assistant Vice-Presidents for Corporate Planning. wrote a letter to the corporation’s Board of Directors questioning the board’s creation of the various positions with a monthly remuneration of P13.. the sums of money variedly representing the damages incurred as a result of the creation of the offices/positions complained of and the aggregate amount of the questioned increased salaries. petitioner Eliodoro C. as represented by Cruz and Minterbro.00 for each member per meeting.65 Case Digests in Civil Law Review 2 registered under the Torrens System from bringing an action after one year from issuance of the decree. namely: 1. is not provided for in the by-laws of the corporation and whose function merely duplicates those of the President and General Manager. creation of an executive committee in 1991 composed of seven members of the board with compensation of P500. Filport’s president from 1968 until he lost his bid for reelection as Filport’s president during the general stockholders’ meeting in 1991. Cruz. INC. Mendiola.050. GO ET AL. ISSUE: San Beda College of Law. increase in the emoluments of the Chairman. an office which. Respondents asserted that (1) the petition is not duly verified by petitioner Filport which is the real party-in-interest. a domestic corporation engaged in stevedoring services.R. to Cruz. Treasurer and Assistant General Manager which increases are greatly disproportionate to the volume and character of the work of the directors holding said positions. 2. and (3) the petition does not show that the stockholders bringing the suit are joined as nominal parties. (Minterbro). Cruz. 1993. March 16. (2) Filport. VS VICTORIANO S. Finance and Administration. and 4.00 each. failed to exhaust remedies for redress within the corporation before bringing the suit. jointly and severally. Inc. Respondents averred that Cruz and his copetitioner Minterbro. and the election thereto of board members. On September 4. filed with the SEC a petition which he describes as a derivative suit against the herein respondents who were then the incumbent members of Filport’s Board of Directors. On June 14. for the reconveyance of the property in question. REPRESENTED BY ELIODORO C. 161886. Operations. creation of the additional positions of Special Assistants to the President and the Board Chairman. have no authority nor standing to bring the so-called “derivative suit” for and in behalf of the corporation. Cruz prayed that the respondent members of the board of directors be made to pay Filport.

In the instant case. (2) he sought without success to have its board of directors remedy what he perceived as wrong when he wrote a letter requesting the board to do the necessary action in his complaint. 108547. In the end. 2. The requisites before a derivative suit can be filed by a stockholder are present in this case.R. having inherited the same from their late father. Thus. a parcel of unregistered land which was owned in common by Daniel. the reliefs prayed were asked to be made in favor of Filport. the party bringing suit should be a shareholder as of the time of the act or transaction complained of. or when a demand upon them to file the necessary action would be futile because they are the ones to be sued. to wit: 1. he has tried to exhaust intra-corporate remedies. DE CABRERA VS. where a corporation is an injured party. its power to sue is lodged with its board of directors or trustees. the corporation is the real party-in-interest while the suing stockholder. In 1957. the action is principally for damages resulting from alleged mismanagement of the affairs of Filport by its directors/officers. Manila . Albertana and Felicidad Teokemian. petitioner Cruz (1) is a stockholder of Filport. In such actions. In the prayer portion of petitioners’ petition before the SEC. No. since the ones to be sued are the directors/officers of the corporation itself. the injury complained of primarily pertains to the corporation so that the suit for relief should be by the corporation. in behalf of the corporation. RULING: Yes. may validly institute a “derivative suit” to vindicate the alleged corporate injury. has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea. But an individual stockholder may be permitted to institute a derivative suit in behalf of the corporation in order to protect or vindicate corporate rights whenever the officials of the corporation refuse to sue. it is Filport. February 3. Domingo Teokemian. Indisputably.66 Case Digests in Civil Law Review 2 Whether or not petitioner Cruz can validly institute a derivative suit in representation and in behalf of Filport and its stockholders. it being alleged that the acts of mismanagement are detrimental to the interests of Filport. Under the Corporation Code. and not against Cruz or Minterbro. i. the number of his shares not being material. in which case Cruz is only a nominal party while Filport is the real party-in-interest. San Beda College of Law. 1997 FACTS: In 1950. or because they hold control of the corporation. or being caused to the corporation and not to the particular stockholder bringing the suit. in particular. is only a nominal party. the wrongdoing or harm having been. was sold to Andres Orais wherein Felicidad was not able to sign in the Deed of Sale. a stockholder. COURT OF APPEALS G. and (3) the alleged wrong was in truth a wrong against the stockholders of the corporation generally. VDA. the cause of action actually devolves on the corporation. However. not Cruz which directly stands to benefit from the suit. Mendiola.. like petitioner Cruz.e. and 3.

Court of Appeals) The principle of indefeasibility of title is unavailing where there was fraud that attended the issuance of the free patents and titles. In 1972. as erroneously submitted by the plaintiffs. on one hand and Andres Orais on the other. daughter of the vendee issued Free Patent and Original Certificate of Title over the said property. that the right of the defendants for reconveyance of the subject property arising from an implied trust under Article 1456 of the Civil Code is material to the instant case. Court of Appeals) Be that as it may. as this was not among those ceded in the Deed of Sale between Daniel/Albertana Teokemian and Andres Orais. and were issued in a calculated move to deprive Felicidad Teokemian of her dominical rights over the property reserved to her by descent. ruling that the latter can no longer recover the portion of land occupied by the former due to laches. such remedy has not yet lapsed. to say the least.67 Case Digests in Civil Law Review 2 Virgilia Orais. considering that the Deed of Sale executed by Daniel and Albertana Teokemian. As can be discerned from the established facts. and. On April 27. Mendiola. did not cover the latter’s share. the latter held that portion as a trustee of an implied trust for the benefit of Felicidad. the Certificates of Title of the vendees Orais are. the lower court rendered judgment in favor of defendants against the plaintiff. it must be observed that the Certificate of Title of the plaintiff. In the case of Heirs of Jose Olviga vs. 1989. ISSUE: Whether or not the action of the plaintiffs is barred by laches. which was derived from Free Patent No. leaves much to be desired in propriety. RULING: At the outset. is thus. a bar to the plaintiff’s action. Court of San Beda College of Law. The Court of Appeals reversed such findings upon appeal on the justification that the defendant’s action for reconveyance based on an implied trust had already been barred by prescription and that the action of the plaintiffs is not barred by laches because what was sold to the Cabreras was a definite portion of the community property. Virgilia Orais filed a civil case for quieting of title against Felicidad Teokemian and Felicidad Cabrera. the one-third share of Felicidad Teokemian in her possession was sold to espouses Elanoand Felicidad Cabrera who immediately took possession of it. (Meneses vs. It must be remembered that registration does not vest title. therefore. The defense of indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. In 1988. it is merely evidence of such title over a particular property. V-79089. and therefore. did not bear the signature of Felicidad Teokemian. 1456 of the Civil Code. issued in the name of Virgilia Orais. pursuant to Art. (Anonuevo vs. irregular. It was the respondent appellate court which observed that “the registration of the plaintiff’s title over the subject property was fraudulent insofar as it involved the one-third interest of Felicidad Teokemian who did not sign the Deed of Sale in favor of plaintiff’s predecessor-in-interest and. Manila . Plaintiff could not have registered the part reserved to Felicidad Teokemian.

warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. we observed that an action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years.68 Case Digests in Civil Law Review 2 Appeals. and thereafter. the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property. to do that which by exercising due diligence could or should have been done earlier. and its use as defense in the present suit. despite the sale of the two-third portion thereof to the plaintiff in 1950. before the period of prescription may start. which right can be claimed only by one who is in possession. De Cabrera and her late husband have been actively in possession of the same. since if a person claiming to be the owner thereof is in actual possession of the property. the reason for the rule being. the action for reconveyance (quieting of title) of the plaintiff was instituted only in 1988. The defense of laches is an equitable one and does not concern itself with the character of the defendant’s title. Laches is not concerned merely with lapse of time. it is negligence or omission to assert a right within a reasonable time. it must be shown that (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust. but only with whether or not by reason of plaintiff’s long inaction or inexcusable neglect. In the case at bar. defendant Felicidad vda. were in actual possession of the property since it was left to Felicidad Teokemian by her father in 1941. the Cabreras. Mendiola. have not displayed any unequivocal act of repudiation. and constructing an irrigation system thereon. This must surely constitute such tardiness on the part of the plaintiff constituting the basis for laches. does not prescribe. has been lost by prescription. but this rule applies only when the plaintiff or the person enforcing the trust is not in possession of the property. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right. because to allow him to do so would be inequitable and unjust to defendant. the right to seek reconveyance. as the defendant is in the instant case. which in effect seeks to quiet title to the property. On the other hand. for an unreasonable and unexplained length of time. likewise. and the latter’s procurement of a Certificate of Title over the subject property in 1957. which could be considered as an assertion of adverse interest from the defendants. that is. In the meantime. Thus. Manila . Until the institution of the present action in 1988. which possession had not been interrupted. thirty years from the time the plaintiff’s husband was able to acquire Certificate of Title covering the properties inherited by the Teokemians. San Beda College of Law. and apparently including that portion belonging to Felicidad Teokemian. tilling it. (c) the evidence thereon is clear and positive. laches deals with the effect of unreasonable delay. the defendant Felicidad Teokemian. Laches has been defined as the failure or neglect. he should be barred from asserting his claim at all. and. which satisfies the abovequoted requisites. unlike prescription. While the latter deals with the fact of delay. (b) such positive acts of repudiation have been made known to the cestui que trust. it cannot be argued that the right of reconveyance on the part of the defendants. As it is. that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title. plaintiffs.

and. and even substitute another person in its enjoyment. is untenable. In other words. 14 Phil 528 [1909]).69 Case Digests in Civil Law Review 2 This Court emphasized in Mejia de Lucas vs. the sale will affect only his own share but not those of the other co-owners who did not consent to the sale (Punzalan vs. This is because under the aforementioned codal provision. the latter had allowed Felicidad Teokemian to occupy that one-third portion allotted to her. with respect to the co-owners. shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. and even he may therefore alienate.R. COURT OF APPEALS [G. for a period too long to be ignored--the possessor is in a better condition or right. Boon Liat. 2003] FACTS: San Beda College of Law. where the transferees of an undivided portion of the land allowed a co-owner of the property to occupy a definite portion thereof and has not disturbed the same. “As early as 1923. 115925. void. therefore. No. where a court finds that the position of the parties has to change. Gampona. Manila . Bautista. 44 Phil 320 [1923]). the sale or other dispostion affects only his undivided share and the transferee gets only what would correspond to his grantor in the partition of the things owned in common (Ramirez vs. xxx For Article 494 of the Civil Code explicitly declares: ‘No prescription shall lie in favor of a co-owner or co-heir so long as he expressly or impliedly recognizes the co-ownership. that equitable relief cannot be afforded without doing injustice.[19] the reason upon which the rule is based is not alone the lapse of time during which the neglect to enforce the right has existed. The argument that laches does not apply because what was sold to the Cabreras was a definite portion of the community property. Mendiola. assign or mortgage it. it will not exert its equitable powers in order to save one from the consequences of his own neglect. or that the intervening rights of third persons may be destroyed or seriously impaired. August 15. it is an enshrined rule that even a registered owner of property may be barred from recovering possession of property by virtue of laches. SPOUSES RICARDO PASCUAL VS. this Court has ruled that even if a co-owner sells the whole property as his. except when personal rights are involved. In our jurisdiction. There has. But the effect of the alienation or the mortgage. Under Article 493 of the Civil Code: “Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto.” Undisputed is the fact that since the sale of the two-third portion of the subject property to the plaintiff. been a partial partition. therefore. but the changes of condition which may have arisen during the period in which there has been neglect.

” REMEDIOS claimed that she is the owner of Lot Nos.70 Case Digests in Civil Law Review 2 Petitioner Consolacion Sioson (“CONSOLACION”) and respondent Remedios S. REMEDIOS seeks the removal of this excess area from TCT No. On 26 September 1956. REMEDIOS does not assail the KASULATAN as a voidable contract. the four-year prescriptive period under Article 1391 begins to run from the time of discovery of the mistake. for “Annulment or Cancellation of Transfer Certificate [of Title] and Damages. undue influence or fraud. However. 4207 issued by the Register of Deeds of Rizal.347 square meters and was covered by Original Certificate of Title No. The action is already barred by prescription. were co-owners of a parcel of land in Tanza. notarized by Notary Public. Branch 165. Metro Manila. 2-A and 2-E because CATALINA devised these lots to her in CATALINA’s last will and testament.335 meters is not part of the sale under the KASULATAN. 2-A and 2-E. CANUTO. of the late Canuto Sioson (“CANUTO”). The four-year prescriptive period relied upon by the trial court applies only if the fraud does not give rise to an implied trust. intimidation. and the action is to annul a voidable contract under Article 1391 of the Civil Code. The KASULATAN. (232252) 1321 that was issued to CONSOLACION. She later declared the land for taxation purposes and paid the corresponding real estate taxes On 4 February 1988. The property. Manila .250. CANUTO and 11 other individuals. EugenioGino (“REMEDIOS”) are the niece and granddaughter. CONSOLACION immediately took possession of Lot Nos. Consequently. REMEDIOS admits the validity of the sale of 1.”[14] REMEDIOS’ action is based on an implied trust under Article 1456 since she claims that the inclusion of the additional 1. Mendiola. and VICTORIANO each owned an aliquot 10/70 share or 1.335 square meters of land under the KASULATAN. In the present case. REMEDIOS does not seek to annul the KASULATAN. known as Lot 2 of Plan Psu 13245. and REMEDIOS should have filed the action within four years from the registration of CONSOLACION’s title on 28 October 1968 and not some 19 years later on 4 February 1988. respectively. violence. Petitioners sought to dismiss the complaint on the ground of prescription. REMEDIOS filed a complaint against CONSOLACION and her spouse Ricardo Pascual in the Regional Trial Court of Malabon. Under the KASULATAN. CANUTO sold his 10/70 share in Lot 2 in favor of CONSOLACION for P2. In fact. (232252) 1321 was without San Beda College of Law. had an area of 9. Navotas. REMEDIOS alleges that the excess area of 1.335 square meters in TCT No. ISSUE: Whether or not the action is barred by prescription? RULING: Yes. In such a case. including his sister Catalina Sioson (“CATALINA”) and his brother Victoriano Sioson (“VICTORIANO”).00. REMEDIOS’ action is for “Annulment or Cancellation of Transfer Certificate [of Title] and Damages. Petitioners claimed that the basis of the action is fraud. CATALINA.335 square meters of Lot 2. CANUTO and CONSOLACION executed a Kasulatan ng Bilihang Tuluyan[4] (“KASULATAN”).

2-A and 2-E on 28 October 1968. Unquestionably. Clearly. REMEDIOS asserts that CONSOLACION acquired the additional 1. Mendiola. giving rise to an implied trust under Article 1456 of the Civil Code. which repudiation takes place when the adverse party registers the land. REMEDIOS filed the complaint late thus warranting its dismissal.335 square meters through mistake or fraud and thus CONSOLACION should be considered a trustee of an implied trust for the benefit of the rightful owner of the property. We went further by specifying the reference point of the ten-year prescriptive period as the date of the registration of the deed or the issuance of the title.[19] we have consistently held that an action for reconveyance based on an implied trust prescribes in ten years.[18] — Following Caro. Manila . REMEDIOS filed her complaint on 4 February 1988 or more than 19 years after CONSOLACION registered her title over Lot Nos. As the Court recently declared in Spouses Alfredo v.71 Case Digests in Civil Law Review 2 basis. In effect. It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake. Spouses Borras.[16] This ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust. the applicable prescriptive period is ten years under Article 1144 and not four years under Articles 1389 and 1391. San Beda College of Law. is ten years pursuant to Article 1144.

Mendiola.. letters of credit. Due to financial constraints. the court San Beda College of Law. A provision in the chattel mortgage agreement was to this effect — (c) If the MORTGAGOR. in 1981.000. RUBBER & PLASTIC CORPORATION VS.00 each.000. the president and general manager of co-petitioner "Acme Shoe. during or after the constitution of this mortgage.00 was paid by petitioner corporation." executed on 27 June 1978. This mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature. then this mortgage shall be null and void.000. with damages and a prayer for a writ of preliminary injunction. 103576. Ultimately.000. with the Sheriff of Caloocan City. as an extension thereof.00). acceptances and bills of exchange. or as a new loan.00) covered by four promissory notes for P250. . whether such obligations have been contracted before. prompting petitioner corporation to forthwith file an action for injunction. C-12081). this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. the bank yet again extended to petitioner corporation a loan of one million pesos (P1.000.R. for and in behalf of the company.700. No. . COURT OF APPEALS G. Subsequently. 1996 FACTS Petitioner Chua Pac. a chattel mortgage in favor of private respondent Producers Bank of the Philippines.000. August 22. In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note. Manila . etc. herein before cited.00. The mortgage stood by way of security for petitioner's corporate loan of three million pesos (P3.000. Rubber & Plastic Corporation. On 10 and 11 January 1984. it obtained from respondent bank additional financial accommodations totalling P2.000.72 Case Digests in Civil Law Review 2 CREDIT TRANSACTIONS ACME SHOE. releases of import shipments on Trust Receipts. Respondent bank thereupon applied for an extra judicial foreclosure of the chattel mortgage. In due time. before the Regional Trial Court of Caloocan City (Civil Case No. or is given any other kind of accommodations such as overdrafts. the loan was not settled at maturity. the loan of P3. These borrowings were on due date also fully paid. . executors or administrators shall well and truly perform the full obligation or obligations above-stated according to the terms thereof. his heirs.

73 Case Digests in Civil Law Review 2 dismissed the complaint and ordered the foreclosure of the chattel mortgage. (the) mortgage is made for the purpose of securing the obligation specified in the conditions thereof. does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law. It held petitioner corporation bound by the stipulations. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon. as hereinbefore so intimated. can only cover obligations existing at the time the mortgage is constituted. or antichresis may exceptionally secure afterincurred obligations so long as these future debts are accurately described. While a pledge. By virtue of Section 3 of the Chattel Mortgage Law. the fact. that the statute has provided that the parties to the contract must execute an oath that — . Petitioner corporation appealed to the Court of Appeals which. however. however. of course. under Section 5 thereof. . of the chattel mortgage. however. must comply substantially with the form prescribed by the Chattel Mortgage Law itself. not an obligation that is yet merely contemplated. The motion for reconsideration was denied on 24 January 1992. the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed. Mendiola.000. One of the requisites. is an affidavit of good faith." the decision of the court a quo. and that the same is a just and valid obligation. real estate mortgage. A chattel mortgage.000. Manila . the security itself. aforequoted. makes it obvious that the debt referred to in the law is a current. on 14 August 1991. Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but. "in all respects.00 loan which petitioner corporation later fully paid. a chattel mortgage. the only obligation specified in the chattel mortgage contract was the P3. . and one not entered into for the purpose of fraud. the payment of the obligation automatically rendered the chattel mortgage void or terminated. and for no other purpose. San Beda College of Law. ISSUE Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its coverage to obligations yet to be contracted or incurred? RULING: NO. In the chattel mortgage here involved. While it is not doubted that if such an affidavit is not appended to the agreement. affirmed. the chattel mortgage would still be valid between the parties (not against third persons acting in good faith).

FACTS On 17 December 1977 private respondents filed with the Regional Trial Court of Manila an action against petitioners for collection of various sums of money based on loans obtained by the latter. and. Whether or not the private respondents. Mendiola. The other causes of action should be tried on the merits subject to the defenses the defendants may allege in their answer.000. (c) an act or omission on the part of the defendant constituting a violation of the plaintiff's right or breach of the obligation of the defendant to the plaintiff. San Beda College of Law.R. consideration of other facts being proscribed and any attempt to prove extraneous circumstances not being allowed.00 and issued as security therefor a check for the same amount dated 15 August 1977 with the condition that if the ring was not returned within fifteen (15) days the ring would be considered sold. Lack of cause of action must appear on the face of the complaint and its existence may be determined only by the allegations of the complaint. 2. A cause of action is the fact or combination of facts which affords a party a right to judicial interference in his behalf." ISSUE 1. RULING: YES. In their first cause of action private respondents Eduardo and Teresita Domdoma alleged that petitioner Olivia Navoa obtained from the latter a ring valued at P15. COURT OF APPEALS G. upon filing of an answer subject to the provisions of Articles 1182 and 1197 of the Civil Code for the first cause of action. Manila . it is the act or omission of defendant resulting in the violation of someone's right. Whether petitioners committed an act or omission constituting a violation of the right of private respondents. The requisites for a cause of action are: (a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created. (b) an obligation on the part of the defendant to respect and not to violate such right. it is the reason why the litigation has come about. have causes of action for collection of various sums of money based on loans obtained by the petitioners. no. Briefly stated. 1995. December 29. On 27 March 1978 private respondents appealed to the Court of Appeals which on 11 December 1980 modified the order of dismissal "by returning the records of this case for trial on the merits. L-59255. After private respondents submitted their opposition to the motion to dismiss on 9 January 1978 the trial court dismissed the case. Teresita Domdoma and Eduardo Domdoma.74 Case Digests in Civil Law Review 2 NAVOA VS. Olivia and Ernesto Navoa. A motion to reconsider the dismissal was denied. only the statements in the complaint may properly be considered. In determining the existence of a cause of action. On 3 January 1978 petitioners filed a motion to dismiss the complaint on the ground that the complaint stated no cause of action and that plaintiffs had no capacity to sue.

the corresponding duty of petitioners to pay private respondents is undisputed.00 plus interest from 15 August 1977 until fully paid. out of which the person to be made secure can be compensated for loss. San Beda College of Law. or other device is used to have property held. From these facts the ring was considered sold to petitioner Olivia Navoa 15 days from 15 August 1977 and despite the sale the latter failed to pay the price therefor even as the former was given ample time to pay the agreed amount covered by a check. Culled from the above. YES. As a consequence. Security is something to answer for as a promissory note. Manila . From the allegations in the complaint there is no other fair inference than that the loans were payable one month after they were contracted and the checks issued by petitioners were drawn to answer for their debts to private respondents. as when a mortgage. pledge. It may be personal. private respondents filed the action with the trial court precisely to compel petitioners to pay their due and demandable obligations. Private respondent Teresita Domdoma sought to collect the amount of P15. charge. The continuing refusal of petitioners to heed the demand of private respondents stated in their complaint unmistakably shows the existence of a cause of action on the part of the latter against the former. Moreover. That when these checks were deposited on their due dates they were all dishonored by the bank. private respondent Teresita Domdoma asked to deposit the check but petitioner Olivia Navoa requested the former not to deposit it in the meantime. In this regard. respondent Teresita Domdoma's right under the agreement with petitioner Olivia Navoa was violated by the latter. Petitioners failed to make good the checks on their due dates for the payment of their obligations. All the loans granted to petitioners are secured by corresponding checks dated a month after each loan was obtained. private respondents prayed that petitioners be ordered to pay the amounts of the loans granted to them plus one percent interest monthly from the dates the checks were dishonored until fully paid. Clearly. that when Teresita Domdoma deposited the check after holding it for sometime the same was dishonored for lack of funds. That is why a secured creditor is one who holds a security from his debtor for payment of a debt. Mendiola. 1169 of the Civil Code is explicit — those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. 2. In the second to the sixth causes of action it was alleged that private respondents granted loans to petitioners in different amounts on different dates. the right of private respondents to recover the amounts loaned to petitioners is clear. Hence. or a property security. Art. after the lapse of the period. lien. All these loans were secured by separate checks intended for each amount of loan obtained and dated one month after the contracts of loan were executed.000. as when an individual becomes a surety or a guarantor.75 Case Digests in Civil Law Review 2 and. the term security is defined as a means of ensuring the enforcement of an obligation or of protecting some interest in property.

Hence. Manila . properly speaking. PHILIPPINE NATIONAL BANK. it is prayed that said credits and deposits be escheated to the Republic of the Philippines by ordering defendant banks to deposit them to its credit with the Treasurer of the Philippines. while it admits that various savings deposits. it is not credit nor deposit.589. 3936. pre-war inactive accounts. are not credits or deposits within the contemplation of Act No. L-16106 December 30. Mendiola. Wherefore.76 Case Digests in Civil Law Review 2 REPUBLIC V. 2031) does not operate as an assignment of funds in the hands of the drawee who is not liable on the instrument until he accepts it. To begin with. G. and accepted in advance by the act of issuance. and has the same San Beda College of Law. among them the First National City Bank of New York. In other words. 3936 against several banks. for it has been held that the latter is a primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. are subject to escheat however. Verily. 1961 FACTS: The Republic of the Philippines filed before the Court of First Instance of Manila a complaint for escheat of certain unclaimed bank deposits balances under the provisions of Act No. appellee bank never became a debtor of the payee concerned and as such the aforesaid drafts cannot be considered as credits subject to escheat within the meaning of the law.89 which. A cashier's check. which remained dormant for 10 years or more. we may say that a demand draft is a bill of exchange payable on demand. it prayed that said items be not included in the claim of plaintiff. On the other hand. a bill of exchange within the meaning of our Negotiable Instruments Law (Act No. THE FIRST NATIONAL CITY BANK OF NEW YORK. NOTE: But a demand draft is very different from a cashier's or manager's cheek. It is alleged that pursuant to Section 2 of said Act defendant banks forwarded to the Treasurer of the Philippines a statement under oath of their respective managing officials of all the credits and deposits held by them in favor of persons known to be dead or who have not made further deposits or withdrawals during the period of 10 years or more.000. No. it has inadvertently included in said report certain items amounting to P18. contrary to appellant's pretense. DEMAND DRAFT – YES. ET AL. Since it is admitted that the demand drafts herein involved have not been presented either for acceptance or for payment. being merely a bill of exchange drawn by a bank on itself. In its answer the First National City Bank of New York claims that.R. is not subject to countermand by the payee after indorsement. totaling more than P100. and sundry accounts contained in its report submitted to the Treasurer of the Philippines pursuant to Act No. 3936. in order that a drawee may be liable on the draft and then become obligated to the payee it is necessary that he first accepts the same. the inevitable consequence is that the appellee bank never had any chance of accepting or rejecting them.00. ISSUE: Whether demand drafts and telegraphic transfer payments do not come within the meaning of the term "credits" or "deposits" employed in the law as ruled by the lower court? RULING: 1.

"Puno y Concepcion. was granted the firm of "Puno y Concepcion. was charged in the Court of First Instance of Cagayan with a violation of section 35 of Act No. grant loans to any of the members of the board of directors of the bank nor to agents of the branch banks. 368). Now." was a co-partnership capitalized by several persons. Manila . In the particular cases under consideration it appears in the books of the defendant bank that the amounts represented by the telegraphic payment orders appear in the names of the respective payees. if the payees decide to have their money remain for sometime in the defendant bank. . Section 35 of Act No. 1918. 1919." in the amount of P300. Venancio Concepcion. 1922 FACTS: By telegrams and a letter of confirmation to the manager of the Aparri branch of the Philippine National Bank. en C. en C. Mendiola.77 Case Digests in Civil Law Review 2 legal effects as a certificate deposit or a certified check. can the latter maintain that the ownership of said telegraphic payment orders is now with the drawer bank? The latter was already paid the value of the telegraphic payment orders otherwise it would not have transmitted the same to the defendant bank. it is absurd to say that the drawer banks are still the owners of said telegraphic payment orders. Filamor. L-19190 November 29." PEOPLE V. reads as follows: "The National Bank shall not. though insofar as the remitting bank is concerned the contract is executory until the credit is established. there could be no question that this bank would have to pay them.S.000. 1919. S. It is said that as the transaction is for the establishment of a telegraphic or cable transfer the agreement to remit creates a contractual obligation that has been termed a purchase and sale transaction (9 C. S. 2747. Pursuant to this authorization.. effective on February 20.000." ISSUE: San Beda College of Law. between April 10. No. as President of the Philippine National Bank and as member of the board of directors of this bank. were taken up and paid by July 17. it is within the meaning of the terms “credit” or “deposit”. one of whom is the wife of Venancio Concepcion. On the facts recounted. the question is. authorized an extension of credit in favor of "Puno y Concepcion. it is within the meaning of the terms “credit” or “deposit” 2.J. The notes. en C. The purchaser of a telegraphic transfer upon making payment completes the transaction insofar as he is concerned. and May 7. 1919.R. We agree with the following comment the Solicitor General: "This is so because the drawer bank was already paid the value of the telegraphic transfer payment order. . directly or indirectly. President of the Philippine National Bank. Hence. TELEGRAPHIC TRANSFER PAYMENT – NO. S. Judge of First Instance. If the latter choose to demand payment of their telegraphic transfers at the time the same were received by the defendant bank. Hence. VENANCIO CONCEPCION G. credit aggregating P300. 2747. Venancio Concepcion. He was found guilty by the Honorable Enrique V." the only security required consisting of six demand notes. together with the interest.

YES. because (1) interest was not deducted from the face of the notes. A loan to a partnership of which the wife of a director of a bank is a member. a loan to partnership of which the wife of a director is a member. and to permit the loan P300. The "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise.000 to the co-partnership a "loan" within the meaning of section 35 of Act No. directly or indirectly. but was paid when the notes fell due. 3. live. 2747? RULING: 1. In this instance. S. A "loan" means the delivery by one party and the receipt by the other party of a given sum of money. it is shown that the husband is financially interested in the success or failure of his wife's business venture. YES. while in a loan. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit. But in its last analysis. express or implied.78 Case Digests in Civil Law Review 2 1. is an indirect loan to such director. In the interpretation and construction of statutes. The prohibition against indirect loans is a recognition of the familiar maxim that no man may serve two masters — that where personal interest clashes with fidelity to duty the latter almost always suffers. Was the granting of a credit of P300. and (2) they were single-name and not double-name paper. San Beda College of Law. interest is deducted in advance. Manila . That it was the intention of the Legislature to prohibit exactly such an occurrence is shown by the acknowledged fact that in this instance the defendant was tempted to mingle his personal and family affairs with his official duties." were not discount paper but were mere evidences of indebtedness." 2. Mendiola.000 to the co-partnership an "indirect loan" within the meaning of section 35 of Act No. upon an agreement. (2) a discount is always on double-name paper. a loan is generally on single-name paper. interest is taken at the expiration of a credit. Was the granting of a credit of P300.000 to a partnership of no established reputation and without asking for collateral security. to any of the members of the board of directors of the bank nor to agents of the branch banks? 2. If. therefore. the primary rule is to ascertain and give effect to the intention of the Legislature. with or without interest. out of an actual. transaction. these distinctions: (1) In a discount. Was the granting of a credit of P300. 2747 which prohibits the National Bank to grant loans. the purpose of the Legislature is plainly to erect a wall of safety against temptation for a director of the bank. however. with. en C. Discounts are favored by bankers because of their liquid nature.000 to the co-partnership a "loan" or a "discount"? 3. The conclusion is inevitable that the demand notes signed by the firm "Puno y Concepcion. as they do. growing. falls within the prohibition. to repay the sum loaned. to discount a paper is only a mode of loaning money.

Bonnevie had rested his case. which was affirmed by the appellate court. 3. 2. Likewise. Mendiola. it is clearly seen that the mortgage deed was executed for and on condition of the loan granted to the Lozano spouses. the herein contract of loan was perfected at the same time the contract of mortgage was executed. ISSUES: 1.R. Whether or not the extrajudicial sale was validly and legally effected.79 Case Digests in Civil Law Review 2 BONNEVIE V. 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution. RULING: 1. the property was foreclosed pursuant to Act No. From the recitals of the mortgage deed itself. but was remain unpaid. L-49101 October 24. Yes. No. 1983 FACTS: Petitioner Honesto Bonnevie filed a complaint seeking the annulment of the Deed of Mortgage executed in favor of the Philippine Bank of Commerce by the spouses Jose M. however. Whether or not the mortgage was validly executed. Lozano and Josefa P. Moreover. The fact that the latter did not collect from the respondent Bank the consideration of the mortgage on the date it was executed is immaterial. After petitioner Honesto V. The defendant has not given its written consent to the sale of the mortgaged property to Bonnevie and the assumption by the latter of the loan secured thereby as the law on contracts requires defendant's consent before Jose Lozano can be released from his bilateral agreement with the former and before Honesto Bonnavie be substituted for Jose Lozano and Alfonso Lim. petitioner Raoul SV Bonnevie filed a motion for intervention as Honesto executed a Deed of Assignment covering the rights and interests of Honesto over the subject property in favor of Raoul SV Bonnevie. The promissory note executed on December 12. 3135 as amended. It finally alleged that respondent Bank should have accepted petitioner's offer to redeem the property under the principle of equity said justice. without. Respondent bank in its answer raised that that it was with consideration because the execution and registration of the securing mortgage. The trial court dismissed the complaint. San Beda College of Law. Hence. complying with the condition imposed for a valid foreclosure. A contract of loan being a consensual contract. Likewise it raised that defendant was informed of the alleged sale only after the foreclosure. Lozano as well as the extrajudicial foreclosure made. Whether or not the petitioners had the right to redeem the property. Manila . that demand letters and notice of foreclosure were sent to Jose Lozano at his address. It alleged that the Deed of Mortgage lacks consideration and the mortgage was executed by one who was not the owner of the mortgaged property. CA G. this petition for review. the signing and delivery of the promissory note and the disbursement of the proceeds of the loan were mere implementation of the basic consensual contract of loan.

Secondly. 32 SCRA 48). It was not bound to go behind the same to look for flaws in the mortgagor's title. such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city In the case at bar. Coupled with the fact that the sale/assignment was not registered so that the title remained in the name of the Lozano spouses. therefore. petitioner Honesto Bonnevie was not entitled to any notice because as of May 14. Act No. the notice of sale was published in the Luzon Courier on June 30. he had transferred and assigned all his rights and interests over the property in favor of intervenor Raoul Bonnevie and respondent Bank not likewise informed of the same. Dinglasan. can validly claim that it was not aware of the same and hence. Petitioners were thus placed on constructive notice. The requirement on notice is that: Section 3. insofar as respondent Bank was concerned. Finally. 1968. the Lozano spouses could rightfully and validly mortgage the property. disposition of. 495. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated. Manila . mortgage and encumbrance of the mortgaged properties. Petitioners admit that they did not secure the consent of respondent Bank to the sale with assumption of mortgage. Respondent Bank had every right to rely on the certificate of title. Mendiola. Most importantly. estopped from impugning its validity whether on the original loan or renewals thereof. without the written consent of the mortgagee. petitioners failed to consider the provision 2 of the contract of mortgage which prohibits the sale. as well as the additional proviso that if in spite of said stipulation. and if such property is worth more than four hundred pesos. These provisions are expressly made part and parcel of the Deed of Sale with Assumption of Mortgage. July 7 and July 14. (Roxas vs. Mallorca vs. 2. Mortgage follows the property whoever the possessor may be and subjects the fulfillment of the obligation for whose security it was constituted. the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. As regards the claim that the period of publication of the notice of auction sale was not in accordance with law. the vendee shall assume the mortgage in the terms and conditions under which it is constituted. it can also be said that petitioners voluntarily assumed the mortgage when they entered into the Deed of Sale with Assumption of Mortgage. 1968 satisfies the San Beda College of Law. 28 SCRA 430. cited by petitioners is inapplicable because said case involved a judicial foreclosure and the sale to the vendee of the mortgaged property was duly registered making the mortgaged privy to the sale. the Court of Appeals ruled that the publication of notice on June 30. 1968 and notices of the sale were posted for not less than twenty days in at least three (3) public places in the Municipality where the property is located.80 Case Digests in Civil Law Review 2 Moreover. 92 Phil. Raoul Bonnevie is not entitled to notice. De Ocampo. respondent Bank not being a party to the Deed of Sale with Assumption of Mortgage. namely: once a week for at least three consecutive weeks. 3135 does not require personal notice on the mortgagor. Dionisio. For the same reason. They are. the mortgaged property is sold. July 7 and July 14. As to the lack of notice of the foreclosure sale on petitioners. The case of Santiago vs. it may not be obliged to notify petitioners. Yes.

Banta vs. To be a newspaper of general circulation. copies of said notice were also posted in the place where the property was located. obtain the Release of the Mortgage after full payment of the obligation and to take San Beda College of Law. This constitutes prima facie evidence of compliance with the requisite publication. their rights were never recorded and hence. et al. 3135 notwithstanding the fact that June 30 to July 14 is only 14 days. namely: the Municipal Building of San Juan. executed by the Publisher. 67). Rizal. as the case may be. respondent Bank is charged with the obligation to recognize the right of redemption only of the Lozano spouses. Granting that the petitioners had the right to redeem. 107 SCRA 126). that it has a bona fide subscription list of paying subscribers. 1968. the records show that copies of said notice were posted in three conspicuous places in the municipality of Pasig. Whether or not the notice of auction sale was posted for the period required by law is a question of fact. that it is published at regular intervals. the Pasig Municipal Market and Pasig Municipal Hall. 18 SCRA 491). petitioners failed to exercise said right within the period granted by law. Manila . July 7 and July 14. vs." (Basa vs. the petitioners had acquired a right to redeem the property. No. But even granting that as purchaser or assignee of the property.. Mercado. In the same manner. to receive acknowledgment of payments. Pacheco. does not mean that notice should be published for three full weeks. Mendiola. In fact. The affidavit of publication. 74 Phil. Rizal namely: the Hall of Justice. the Municipal Market and on Benitez Street. 3. Act No. A single act of posting (which may even extend beyond the period required by law) satisfies the requirement of law. The testimony of three witnesses that they do read the Luzon Weekly Courier is no proof that said newspaper is not a newspaper of general circulation in the province of Rizal." Such phrase. head of the legal department of respondent bank as to the posting made is not a sufficient countervailing evidence to prove that there was no compliance with the posting requirement in the absence of proof or even of allegation that the notices were removed before the expiration of the twenty. Nevertheless.day period. 61 Phil. No consent having been secured from respondent Bank to the sale with assumption of mortgage by petitioners. CA. 61 Phil. 3135 merely requires that such notice shall be published once a week for at least three consecutive weeks. The burden of proving that the posting requirement was not complied with is now shifted to the one who alleges non-compliance. (Reyes. We agree. It can no longer be entertained by this Court. stares that it is "a newspaper of general circulation in . 632). GSIS. et al. and that the Notice of Sheriff's sale was published in said paper on June 30... it is enough that "it is published for the dissemination of local news and general information. the latter were not validly substituted as debtors. Rizal. The statement of Atty. as interpreted by this Court in Basa vs. Mercado. Santiago Pastor.81 Case Digests in Civil Law Review 2 publication requirement under Act No. 632. the letter of Jose Lozano to respondent Bank advising the latter that Honesto Bonnevie was authorized to make payments for the amount secured by the mortgage on the subject property. The newspaper need not have the largest circulation so long as it is of general circulation. business/advertising manager of the Luzon Weekly Courier. The argument that the publication of the notice in the "Luzon Weekly Courier" was not in accordance with law as said newspaper is not of general circulation must likewise be disregarded. Sadang vs.

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Case Digests in Civil Law Review 2
delivery of the title of said property, does not show that the petitioner is the new owner of the
property nor request that all correspondence and notice should be sent to him, it shows that
it was merely authorized to do acts mentioned therein.

FRANCISCO HERRERA VS. PETROPHIL CORPORATION
G.R. No. L-48349

December 29, 1986

ISSUE:
Whether or not under a lease contract, the interest collected out of the rentals paid by the
defendant for the first eight years, which amounted to Php98,828.03 out of the total sum of
Php180,288.47, was excessive and violative of the Usury Law.

HELD:
No. The contract between the parties is one of lease and not of a loan. The provision
for the payment of rentals in advance cannot be construed as a repayment of a loan because
there was no grant or forbearance of money as to constitute indebtedness on the part of the
lessor. On the contrary, the defendant-appellee was discharging its obligation in advance by
paying the eight years rentals, and it was for this advance payment that it was getting a
rebate or discount.
There is no usury in this case because no money was given by the defendant-appellee
to the plaintiff-appellant, nor did it allow him to use its money already in his possession.
There was neither a loan nor forbearance but a mere discount which was allowed to be
deducted from the total payments because they were being made in advance for eight years.
The discount was in effect a reduction of the rentals which the lessor had the right to
determine, and any reduction thereof, by any amount, would not contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the former does
not have to be repaid. The loan or forbearance is subject to repayment and is therefore
governed by the laws on usury.
To constitute usury, "there must be loan or forbearance; the loan must be of money or
something circulating as money; it must be repayable absolutely and in all events; and
something must be exacted for the use of the money in excess of and in addition to interest
allowed by law."

San Beda College of Law, Mendiola, Manila

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Case Digests in Civil Law Review 2

SAURA IMPORT AND EXPORT CO VS.DEVELOPMENT BANK OF THE
PHILIPPINES
G.R. No. L-24968 April 27, 1972
ISSUE:
Saura applied for a loan with DBP (formerly RFC) amounting to P500,000 which was
approved by DBP with some conditions. The Loan agreement was secured by a mortgage over
the properties of Saura. DBP failed to release the full amount of loan which caused damage
to Saura. Was there a perfected contract of loan to entitle Saura to claim damages?
HELD:
The court held that there was a perfected contract. Under Article 1954 of the Civil code:
ART. 1954. An accepted promise to deliver something, by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple loan itself
shall not be perferted until the delivery of the object of the contract.
There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a
loan of P500,000.00 was approved by resolution of the defendant, and the corresponding
mortgage was executed and registered. But this fact alone falls short of resolving the basic
claim that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled
to recover damages.

CENTRAL BANK V. COURT OF APPEALS
G.R. No. L-45710, October 3, 1985
FACTS:
Island Savings Bank approved a loan application for P80,000.00 in favor of Sulpicio M.
Tolentino, who, as a security for the loan, executed a real estate mortgage over his 100hectare land located in Cubo, Las Nieves, Agusan which mortgage was annotated on its title.
Later, P17,000.00 partial release of the P80,000.00 loan was made by the Bank, thus Sulpicio
M. Tolentino and his wife Edita Tolentino signed a promissory note for P17,000.00 at 12%
annual interest, payable within 3 years from the date of execution of the contract at semiannual installments of P3,459. The Bank, thru its vice-president and treasurer, promised
repeatedly the release of the P63,000.00 balance.

Later, the Monetary Board of the Central Bank, after finding Island Savings Bank was
suffering liquidity problems, issued Resolution No. 1049, which prohibited the bank from
making new loans and investments. About 3 years after, the Monetary Board, after finding

San Beda College of Law, Mendiola, Manila

84

Case Digests in Civil Law Review 2
that Island Savings Bank failed to put up the required capital to restore its solvency, issued
Resolution No. 967 which prohibited Island Savings Bank from doing business in the
Philippines and instructed the Acting Superintendent of Banks to take charge of the assets
of Island Savings Bank.
In view of the non-payment of the P17,000 covered by the promissory note, Island Savings
Bank filed an application for the extra-judicial foreclosure of the real estate mortgage
covering the 100-hectare land of Sulpicio M. Tolentino; and the sheriff scheduled the auction
for. Before the sale, Tolentino filed a petition for injunction, specific performance or rescission
and damages with preliminary injunction, alleging that since Island Savings Bank failed to
deliver the P63,000.00 balance of the P80,000.00 loan, he is entitled to specific performance
by ordering Island Savings Bank to deliver the P63,000.00 with interest of 12% per annum
from April 28, 1965, and if said balance cannot be delivered, to rescind the real estate
mortgage, which the court granted. An answer in intervention of Central bank and by the
Acting Superintendent of Banks, praying for the dismissal of the petition of Tolentino and
the setting aside of the restraining order was later on admitted by the court. After trial on
the merits, the trial court rendered its decision finding unmeritorious the petition of
Tolentino, ordering him to pay Island Savings Bank the amount of PI 7 000.00 plus legal
interest and legal charges due thereon, and lifting the restraining order so that the sheriff
may proceed with the foreclosure. On appeal by Tolentino, CA modified the CFI's decision by
affirming the dismissal of Tolentino's petition for specific performance, but it ruled that
Island Savings Bank can neither foreclose the real estate mortgage nor collect the P17,000.00
loan.
ISSUE:
Whether or not the bank can foreclose the real estate mortgage or collect the P17,000 loan.
RULING:
No. The consideration of the accessory contract of real estate mortgage is the same as that of
the principal contract (Banco de Oro vs. Bayuga, 93 SCRA 443 [1979]). For the debtor, the
consideration of his obligation to pay is the existence of a debt. Thus, in the accessory contract
of real estate mortgage, the consideration of the debtor in furnishing the mortgage is the
existence of a valid, voidable, or unenforceable debt (Art. 2086, in relation to Art, 2052, of the
Civil Code).
The fact that when Tolentino executed his real estate mortgage, no consideration was then
in existence, as there was no debt yet because Island Savings Bank had not made any release
on the loan, does not make the real estate mortgage void for lack of consideration. It is not
necessary that any consideration should pass at the time of the execution of the contract of
real mortgage (Bonnevie vs. C.A., 125 SCRA 122 [1983]). lt may either be a prior or
subsequent matter. But when the consideration is subsequent to the mortgage, the mortgage
can take effect only when the debt secured by it is created as a binding contract to pay (Parks
vs, Sherman, Vol. 176 N.W. p. 583, cited in the 8th ed., Jones on Mortgage, Vol. 2, pp. 5-6).
And, when there is partial failure of consideration, the mortgage becomes unenforceable to
the extent of such failure (Dow. et al. vs. Poore, Vol. 172 N.E. p. 82, cited in Vol. 59, 1974 ed.
CJS, p. 138). Where the indebtedness actually owing to the holder of the mortgage is less
than the sum named in the mortgage, the mortgage cannot be enforced for more than the

San Beda College of Law, Mendiola, Manila

P63. Neither can the creditor's heir who have received his share of the debt return the pledge or cancel the mortgage.00 balance of the P80.75% of P80. ET. the rule of indivisibility of a mortgage cannot apply. the appointed administrator contended that one of the bulls was accidentally killed during a raid by the Huk.00 debt. That such death was San Beda College of Law. BAGTAS. Therefore. A writ of execution was issued ordering him to return the three bulls. Since Island Savings Bank failed to furnish the P63.00. P. 88. vs. The rule of indivisibility of the mortgage as outlined by Article 2089 above-quoted presupposes several heirs of the debtor or creditor which does not obtain in this case. Jose Bagtas wrote to the Director of Animal Industry that he would pay the value of the three bulls. 1962 FACTS: Jose Bagtas borrowed from the Republic three bulls from 8 May 1948 to 7 May 1949 for breeding purposes subject to a government charge of breeding fee of 10% of the book value of the bulls.00 is 78. F(2d) p. 21.00 loan.000. G. the borrower asked for a renewal for another period of one year.25 hectares subsists as a security for the P17.R. Vol. The mortgage covering the remainder of 21. Manila . to the prejudice of other heirs who have not been paid. Wiltsie on Mortgage.. the debtor's heirs who has paid a part of the debt can not ask for the proportionate extinguishment of the pledge or mortgage as long as the debt is not completely satisfied. 180).85 Case Digests in Civil Law Review 2 actual sum due (Metropolitan Life Ins. The rule of indivisibility of a real estate mortgage provided for by Article 2089 of the Civil Code is inapplicable to the facts of this case.75 hectares. his widow. October 25.000. REPUBLIC V. hence the real estate mortgage covering 100 hectares is unenforceable to the extent of 78. However. 1.00 debt. L-17474. Article 2089 provides: A pledge or mortgage is indivisible even though the debt may be divided among the successors in interest of the debtor or creditor.000. Co. Hence. Upon the expiration on 7 May 1949 of the contract. Jose Bagtas failed to pay the book value of the three bulls or to return them. Mendiola. AL. No.000.000. the real estate mortgage of Tolentino became unenforceable to such extent. Peterson. Vol. the Secretary of Agriculture and Natural Resources approved a renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and requested the return of the other two.25 hectares is more than sufficient to secure a P17.000. JOSE V. cited in 5th ed. 19. Upon his death.

together with its lot. Andres Fontanilla. RULING: YES. she should be relieved from the duty of returning the bull or paying its value. The warehouse. . The original period of the loan was from 8 May 1948 to 7 May 1949. because article 1942 of the Civil Code provides that a bailee in a contract of commodatum — . which they claimed was their exclusive property. Mendiola. unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event. October 14. No. V. Ruperta Pascual. petitioned the Court of First Instance of Ilocos Norte for authorization to sell "the six-sevenths of the one-half of the warehouse. If the breeding fee be considered a compensation. Ilocos Norte.R. Francisco Fontanilla. ET AL. embracing 14 meters of its frontage by 11 meters of its depth. Andres Fontanilla. Francisco’s brother. The loan of one bull was renewed for another period of one year to end on 8 May 1950. erected a warehouse on a part of the said lot. 1913 FACTS: Francisco Fontanilla owns a lot located in Laoag. the former owner of the lot. also having died. ISSUE: Whether or not the contract was a commodatum. even if it should be through a fortuitous event: (2) If he keeps it longer than the period stipulated . the former owner of the warehouse.86 Case Digests in Civil Law Review 2 due to a force majeure and thus. Manila . of 14 by 11 meters. because she had continued possession of the bull after the expiry of the contract. it was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability. is liable for loss of the things. being dead. And even if the contract be commodatum. Moreover. (3) If the thing loaned has been delivered with appraisal of its value. as the guardian of her minor children. MINA. . then the contract would be a lease of the bull. A contract of commodatum is essentially gratuitous. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith. still the appellant is liable. was represented by herein plaintiffs. . But the appellant kept and used the bull until November 1953 when during a Huk raid it was killed by stray bullets. RUPERTA PASCUAL. G. ET AL. . L-8321. together with the lot on which it San Beda College of Law." The plaintiffs opposed the petition of Ruperta Pascual for the reason that the latter had included therein the lot occupied by the warehouse. was represented by Ruperta Pascual and her children.

the other defendant in this case. The sale of a thing effected by one who is not its owner is null and void. whatsoever be the manner in which the sale was effected. The effect of the sale being a transfer of the ownership of the thing. ISSUE: Whether or not the sale is null and void. and the plaintiffs the ownership. these former and the defendants agree that there existed. Manila . with no finding concerning the decree of the lower court that ordered the sale. That the herein plaintiffs excepted to the judgment and appealed therefrom to the Supreme Court which found for them by holding that they are the owners of the lot in question. San Beda College of Law. The sale of it by them is necessarily null and void. notwithstanding the finding made by the Supreme Court that the plaintiffs were the owners. was sold to Cu Joco. RULING: YES. On cannot convey to another what he has never had himself. Mendiola. whether judicially or extrajudicially.87 Case Digests in Civil Law Review 2 stands. and they themselves only the use. it is evident that he who has only the mere use of the thing cannot transfer its ownership. the meaning of that clause is that. The plaintiff appealed to the Supreme Court for the determination of the ownership of the property. The Court interpreted the following agreement entered into by plaintiffs and defendants: 9. although there existed and still exists a commodatum by virtue of which the guardianship (meaning the defendants) had and has the use. The defendants never were the owners of the lot sold. What is essentially pertinent to the case is the fact that the defendant agree that the plaintiffs have the ownership. While plaintiffs were found to be the owners of the lot. Nothing could be more inexact. He who has only the use of a thing cannot validly sell the thing itself. and still exists. also. a commodatum. The Supreme Court ruled in the plaintiff’s favor. of the said lot. of the property. The nullity of the sale of the lot is in all respects quite evident. the Court recognized the existence of a commodatum under which the defendants held the lot. Possibly. Plaintiffs commenced an action for the purpose of having the sale of the said lot declared null and void and of no force and effect.

A possessor may lose his possession: (1) By the abandonment of the thing. Article 555 of the Civil Code provides as follows: Art. In the decision of the appellate court in CA-G. 1977. No. as amended. subject to the provisions of Article 537. No. ISSUE: Who is entitled to the land? RULING: The trial court and the appellate court have no lawful basis in ordering petitioner to return and surrender possession of said lots to private respondents. 555.R. 38830-R. That is now res judicata. they also asked that said two lots be registered in their names. HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ G. On August 12. Mendiola. it appears that the petitioner was in possession of the said property as borrower in commodatum from private respondents since 1906 but in 1951. VS. Manila . In separate motions for reconsideration filed by private respondents Heirs of Octaviano and Heirs of Juan Valdez relating to the same decision. therefore. (4) By the possession of another. Effectively. 1990 FACTS: The case originated from a land registration case where petitioner and private respondents were asking for confirmation of their alleged imperfect titles to the lots in question under Section 49 (b) of the Public Land Act. petitioner had been in adverse possession of the same for at least 11 years. the Court of Appeals denied both motions. in the said decision the appellate court ruled that neither the petitioner nor the private respondents are entitled to the confirmation of imperfect title over said two lots. Said property being a public land. 80294 March 23. (2) By an assignment made to another either by onerous or gratuitous title.R. its disposition is subject to the provision of the Public Land Act. if the new possession has lasted longer than one San Beda College of Law. The appellate court found that the petitioner was not entitled to confirmation of its imperfect title to Lots 2 and 3. When it filed its application for registration of the said property in 1962. COURT OF APPEALS.88 Case Digests in Civil Law Review 2 CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE. (3) By the destruction or total loss of the thing or because it goes out of commerce. petitioner repudiated the trust when it declared the property for tax purposes under its name.

No. But the real right of possession is not lost till after the lapse of ten years. No. Thereafter. finds that the trial court and the Court of Appeals erred in declaring the private respondents to be entitled to the possession thereof. RULING: The contract entered into between the parties is one of commadatum. Whether or not plaintiff is bound to bear the deposit fees thereof. before vacating the house. ISSUES: 1. L-46240. the former gratuitously granted to the latter the use of the furniture. upon the novation of the contract of lease between the plaintiff and the defendant. particularly paragraph 4 thereof. MARGARITA QUINTOS AND ANGEL A. the action for recovery of possession of said property filed by private respondents against petitioner must fail. reserving for herself San Beda College of Law.89 Case Digests in Civil Law Review 2 year. On January 14. The plaintiff sold the property to Maria Lopez and Rosario Lopez and on September 14. The plaintiff refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. the plaintiff required the defendant to return all the furniture transferred to him for them in the house where they were found on several instances. H. these three notified the defendant of the conveyance. Manila . Thus. subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. and whether she is entitled to the costs of litigation. the defendant deposited with the Sheriff all the furniture belonging to the plaintiff and they are now on deposit in the warehouse in the custody of the said sheriff. therefore. Whether or not the defendant complied with his obligation to return the furniture upon the plaintiff's demand. Much less can they pretend to be owners thereof. (460a) (Emphasis supplied.R. 1939 FACTS: The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. BECK G.) From the foregoing provision of the law. On November 15. 1175. giving him sixty days to vacate the premises. it is clear that the real right of possession of private respondents over the property was lost or no longer exists after the lapse of 10 years that petitioner had been in adverse possession thereof. Said lots are part of the public domain. ANSALDO VS. because under it the plaintiff gratuitously granted the use of the furniture to the defendant. 2. 1936. 1936. Mendiola. November 3. del Pilar street. The Court.

Despite repeated demands. private respondent was not paid the amount embodied in the check. 1991 in the amount of P516. it is just and equitable that he pay the legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed. The costs in both instances should be borne by the defendant because the plaintiff is the prevailing party (Sec. 12 october 1999 FACTS: Cebu International Finance Corporation (CIFC). On April 25. In these circumstances.94 in favor of the private respondent as proceeds of his matured investment plus interest.5%) percent for thirty-two (32) days. a quasi-banking institution. 487 of the Code of Civil Procedure). The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand. and without any reason he refused to return and deliver all the furniture upon the plaintiff's demand. This covered private respondent's placement plus interest at twenty and a half (20. 123031. means that he should return all of them to the plaintiff at the latter's residence or house. Respondent. Petitioner issued a promissory note to mature on May 27. However. San Beda College of Law. upon the latter's demand. invested with CIFC. 1991. V. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff. thus.238. private respondent. The defendant was the one who breached the contract of commodatum. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff. the check was dishonored by BPI and took custody of the same pending an investigation for counterfeit checks issued against CIFC’s checking account. the Court could not legally compel her to bear the expenses occasioned by the deposit of the furniture at the defendant's behest. because the defendant wanted to retain the three gas heaters and the four electric lamps.67. The lower court ruled in favor of respondent which was affirmed by the CA. as bailee.390. was not entitled to place the furniture on deposit. 1991. retaining for his benefit the three gas heaters and the four eletric lamps. Petitioner contends that it must not be held liable anymore for it was discharged from paying the obligation when BPI credited it against its checking account. CIFC also filed a complaint against BPI for the recovery of the money credited against its checking account from the counterfeit checks which included the amount owed to respondent.90 Case Digests in Civil Law Review 2 the ownership thereof. P500.R. filed a civil action for collection of sum of money. by this contract the defendant bound himself to return the furniture to the plaintiff. CIFC issued a BPI Check for P514. CEBU INTERNATIONAL FINANCE CORP. upon the latter’s demand.000. is engaged in money market operations. No. The latter. Manila .00 in cash. On May 27. Vicente Alegre. nor was the plaintiff under a duty to accept the offer to return the furniture. COURT OF APPEALS G. Mendiola.

The private respondent accepted the CHECK. In the case of Philippine Airlines. which is the legal tender or. A "money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. vs. is not legal tender. In a money market transaction. l-22973. petitioner is still liable. To secure the payment of the loan. the same was dishonored by non-acceptance. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art.R. “ In the case at bar. Under these circumstances. situated in the poblacion of Jose Panganiban (formerly Mambulao). Mere delivery of checks does not discharge the obligation under a judgment.) MAMBULAO LUMBER COMPANY. the holder has an immediate right of recourse against the drawer. this Court held: Since a negotiable instrument is only a substitute for money and not money. machinery." These facts were testified to by BPI's manager. and after the notice of dishonor. logging and transportation equipments as collaterals. Mendiola. 1991.000 with the Naga Branch of defendant PNB and the former offered real estate. A check. Court of Appeals. No. by itself. the obligation to pay a sum certain in money may be paid in money. the investor is a lender who loans his money to a borrower through a middleman or dealer. however. and therefore cannot constitute valid tender of payment. when he presented it to RCBC for encashment. 3. 1249. PHILIPPINE NATIONAL BANK G. was approved for a loan of P100. The application. the money market transaction between the petitioner and the private respondent is in the nature of a loan. In a loan transaction. province of Camarines Norte as well as San Beda College of Law.000 only. 1956 the plaintiff applied for an industrial loan of P155. and consequently could immediately file an action for the recovery of the value of the check.91 Case Digests in Civil Law Review 2 ISSUE: Whether or not petitioner is still liable for the amount owed to herein respondent. Inc. 13 January 1968 FACTS: On May 5. as early as June 17. A check is not a legal tender. RULING: Yes. the plaintiff mortgaged to defendant PNB a parcel of land. with BPI's annotation: "Check (is) subject of an investigation. by the use of a check. V. par. Yet. together with the buildings and improvements existing thereon. instead of requiring payment in money. and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. the delivery of such an instrument does not. Manila . whether a manager's check or ordinary check. Civil Code. operate as payment (citation omitted).

provided that the owner thereof consents thereto. The outstanding obligation of the petitioner amounted to 57. While the law grants power and authority to the mortgagee to sell the mortgaged property at a public place in the municipality where the mortgagor resides or where the property is situated.86 pesos which it failed to despite repeated demands. we still find the subsequent sale of herein appellant's chattels illegal and objectionable on other grounds. this time of the chattels owned by petitioner. herein appellee bank insisted that the proceeds of the sale of appellant's real property was deficient to liquidate the latter's total indebtedness. to answer for the 10% attorney’s fees and expenses of the sale. RULING: No. any way. then. An auction of the parcel of land was conducted in Camarines Norte and PNB was the highest bidder in the amount of 56. So. They may validly be waived. and in accordance with such belief. as in this case. however. Their right arising thereunder. From the. the law clearly contemplated benefits not only to the mortgagor but to the mortgagee as well. 495. despite fulfillment of the obligation. rolling unit and other fixed assets of the plaintiff. is the residence of the mortgagor. the parties agreed to have the sale of the mortgaged chattels in the City of Manila. it is NOT VALID. ISSUE: Whether or not the second auction sale of the chattels was valid. illegal and void.59 pesos. this Court has held that the sale of a mortgaged chattel may be made in a place other than that where it is found. 908 pesos. are personal to them. however. Mendiola.92 Case Digests in Civil Law Review 2 various sawmill equipment. Thereafter. at the option of the mortgagee. Petitioner now contends that the auction sale of the chattels was not anymore necessary and that the sale should have been conducted in Manila and not in Camarines Norte in accordance with their agreement. or that there is an agreement to this effect between the mortgagor and the mortgagee. all situated in its compound in the aforementioned municipality. Respondent found out that petitioner had already stopped its operations. it is clear that there was no further necessity to foreclose the mortgage of herein appellant's chattels. Be that as it may. sent a letter to the Sheriff of Camarines Norte to take possession of the chattels and sell them at a public auction. But we take into consideration the fact that the PNB must have been led to believe that the stipulated 10% of the unpaid loan for attorney's fees in the real estate mortgage was legally maintainable. they do not affect either public policy or the rights of third persons. it cannot be rightly said that mortgagee still retained the power and authority to select from among the places provided for in the law and the place designated in their agreement over the objection of the mortgagor. respondent proceeded with another public auction. we may declare the sale of appellant's chattels on the said date. Respondent. when herein mortgagor and mortgagee agreed in the mortgage contract that in cases of both judicial and extra-judicial foreclosure San Beda College of Law. But when. However. petitioner remitted the amount of 738. which. In providing that the mortgaged chattel may be sold at the place of residence of the mortgagor or the place where it is situated. Manila . and on this ground alone.

AL. 1960. 1984 FACTS: It appears that on or about September 7. without interest. legal interest.L-30771. where it is the defendant. 1960. as amended.00 as follows: “That the sum of SIX THOUSAND PESOS (P6. LIAM LAW VS. not the plaintiff.000. Mendiola. the defendant shall be deemed to have admitted the usury. 1960. RULING: Section 9 of the Usury Law (Act 2655) envisages a complaint filed against an entity which has committed usury. 1960. OLYMPIC SAWMILL CO. if the entity sued shall not file its answer under oath denying the allegation of usury. Payment of the P10.4 The Rules of Court in regards to allegations of usury. May 28. No. usury has been legally nonexistent. for the recovery of the usurious interest paid.” ISSUE: Whether the additional P6. should be considered repealed with retroactive effect. to defendant partnership and defendant Elino Lee Chi. as the managing partner.000. plaintiff loaned P10. Manila .00.00). On March 17. Interest can now be charged as lender and borrower may agree upon.000. they waived their corresponding rights under the law. San Beda College of Law. who is alleging usury. as in the present.93 Case Digests in Civil Law Review 2 under Act 1508. Philippine currency shall form part of the principal obligation to answer for attorney’s fees. with the debtors asking for an extension of three months. The correlative obligation arising from that agreement has the force of law between them and should be complied with in good faith. The loan became ultimately due on January 31. the corresponding complaint for foreclosure or the petition for sale should be filed with the courts or the Sheriff of Manila. but was not paid on that date. procedural in nature. and other cost incident thereto to be paid unto the creditor and his successors in interest upon the termination of this agreement. For sometime now. ET.000. the parties executed another loan document.000. or up to April 30. The provision does not apply to a case. but the obligation was increased by P6.00 constituted usurious interest. 1957. In that case.00 was extended to April 30. as the case may be.

regardless San Beda College of Law. 712 reiterating the effective interest rate of 21% on said loan transactions. No. To partially finance the purchase. 705 which fixed the effective rate of interest on loan transactions with maturities of more than 730 days to twenty-one per cent (21%) per annum for both secured and unsecured loans. 1979.43 at the increased interest rate of twenty-one per cent (21%) per annum with no provision for service charge but with penalty charge of 1 1/2% for late payments. goods or credits.3 Late payments were to be charged a penalty of one and one-half per cent (1 1/2%) of the amount due.28 On January 28. Payment was to be made for a period of 196 months or 16. Metro Manila. the interest of 12% was the maximum rate fixed by the Usury Law for loans secured by a mortgage upon registered real estate. petitioners authorized Apex to “increase the rate of interest and/or service charges– without notice to them in the event that a law. in monthly installments of P1.378. 1978 obligating themselves.180. Petitioner spouses also authorized Apex to “increase/decrease the rate of interest and/or service charges– on the note in the event any law or Central Bank regulation shall be passed increasing or decreasing the same. ISSUE: Whether the terms of the second promissory note increasing the interest rate to 21% and the escalation clauses authorizing Apex to increase interest rates pursuant to any law or Central Bank regulation are null and void in the absence of a de-escalation clause in the same note. series of 1982. jointly and severally. VS. AL. Payment of the promissory note was secured by a second mortgage on the house and lot purchased by petitioners. petitioner spouses again failed to pay the installments.R. they executed another promissory note in favor of Apex. This Circular declared that the rate of interest on any loan or forbearance of any money. The Monetary Board issued Circular No.33 years in monthly installments of P2.94 Case Digests in Civil Law Review 2 SPOUSES FLORANTE ET.00 with interest rate of 12% and service charge of 3%– for a period of 240 months. RULING: At the time the parties executed the first promissory note in 1978. to pay the “principal sum of P100. 1983. from date. Presidential Decree or any Central Bank regulation should be enacted increasing the lawful rate of interest and service charges on the loan. the Monetary Board of the Central Bank of the Philippines27 issued Circular No. 905.29 On January 1. Apex assigned the second promissory note to respondent Pilar Development Corporation without notice to petitioners. In November 1983. took effect. 1999. Petitioner spouses failed to pay several installments. Mendiola. This note was in the amount of P142. On December 1. CB Circular No.576. Las Piñas. In the same promissory note. They executed a promissory note on December 22. inclusive of principal and interest. 1980.83.326. On September 20. they obtained from the Apex Mortgage & Loan Corporation (Apex) a loan in the amount of P100.00. Manila . 135046. or twenty years.180.68. PILAR DEVELOPMENT CORPORATION G.* FACTS: In 1978. 1984. 1982. On June 6. petitioner spouses Florante and Laarni Bautista purchased a house and lot in Pilar Village. August 17.

Thus. two (2) years.500 upon the condition that the plaintiffs execute and deliver to him a pacto de retro of said property. San Beda College of Law.. “shall not be subject to any ceiling prescribed under or pursuant to the Usury Law. Manila . These Circulars fixed the effective interest rate for secured loan transactions with maturities of more than 730 days. regardless of maturity.500 upon condition that the plaintiffs execute and deliver to him a pacto de retro of said property. is a mortgage.. as amended. and the plaintiffs have shown no circumstance whatever which would justify the Court in construing said contract to be a mere "loan" with guaranty. i. 905 removed the ceiling on interest rates for secured and unsecured loans.31 When the second promissory note was executed on September 20. There is no pretension on the part of the appellant that said contract. 1927 FACTS: The appellants purchased from the Luzon Rice Mills. Inc. BENITO GONZALEZ SY CHIAM G. Circular No. at 21% per annum. a piece or parcel of land with the for the price of P25. 705 and 712 were already in effect. 528.R. The terms of the contract quoted by the plaintiffs to the defendant was a "sale" with pacto de retro.95 Case Digests in Civil Law Review 2 of maturity and whether secured or unsecured. promising to pay therefor in three installments. The two installments were paid as agreed. In the present case the plaintiffs allege in their complaint that the contract in question is a pacto de retro. SEVERINO TOLENTINO AND POTENCIANA MANIO VS.000. With regard to the last installment of P15.e. No. ISSUE: Whether the transaction between the parties is a pacto de retro sale or a loan secured the mortgage as when respondent Chiam agreed to loan the plaintiffs the sum of P17. No. After some negotiations the defendants agreed to loan the plaintiffs the sum of P17. they realized that they would be unable to pay the balance due so they began to make an effort to borrow money with which to pay the balance of their indebtedness. An application was made to the defendant Chiam.–30 In short. They admit they sold the property in question with the right to repurchase it. The interest rate of 21% provided in the second promissory note was therefore authorized under these Circulars. 1982. Central Bank Circulars Nos.000. 26085 August 12. The intention to sell with the right to repurchase cannot be more clearly expressed. standing alone. Mendiola. They admit that they signed it. the appellants were able to pay the balance and the vendor of said property had issued to them transfer certificate of title to said property. HELD: An examination of said contract of sale shows clearly that it is a pacto de retro and not a mortgage.

In a contract of "rent" the thing still remains the property of the lessor. received by the owner of the soil from the occupant thereof. goods or chattels. provisions. etc. It is defined as the return or compensation for the possession of some corporeal inheritance. It will be noted from a reading of said sale of pacto de retro. During the period of redemption the relation which existed between the vendor and the vendee was that of landlord and tenant. He simply loses control of the same in a limited way during the period of the contract of "rent" or lease. Manila . A "loan" signifies the giving of a sum of money. a phrase. It differs materially from a contract of "rent. entered into a contract with the purchaser by virtue of which she became the "tenant" of the purchaser." In a contract of "rent" the owner of the property does not lose his ownership. and is a profit issuing out of lands or tenements. Mendiola. chattels or credits. it has done so. or the sum of P375 per month. cease to be the property of the former owner and becomes the absolute property of the obligor. It is that." in general parlance. "Rent" may be defined as the compensation either in money. To "loan. In a contract of "rent" the relation between the contractors is that of landlord and tenant. but never the same thing loaned. The collection of a rate of interest higher than that allowed by law is condemned by the Philippine Legislature. The appellant contends that the rental price paid during the period of the existence of the right to repurchase." is very different contract from that of "rent". He simply loses his control over the property rented during the period of the contract. There is not a word. or to deliver for temporary use on condition that an equivalent in kind shall be returned with a compensation for its use. It never means the return of the same thing. The central idea of said statute is to prohibit a rate of interest on "loans. That relation can only be terminated by a repurchase of the property by the vendor in accordance with the terms of the said contract. is to deliver to another for temporary use. goods or credits to another. which justifies this court in holding that the said contract of pacto de retro is a mortgage and not a sale with the right to repurchase. In every case in which this court has construed a contract to be a mortgage or a loan instead of a sale with pacto de retro. chattels. unless the terms of the document and the surrounding circumstances require it. as used in the statute. The contract was not a loan. based upon the value of the property. that the vendor. but not a promise to return the same thing. has a technical meaning.96 Case Digests in Civil Law Review 2 We are not unmindful of the fact that sales with pacto de retro are not favored and that the court will not construe an instrument to one of sale with pacto de retro. which is San Beda College of Law. recognizing the absolute sale of the property. It means the return of an equivalent only. During the period of redemption the purchaser was the absolute owner of the property and the vendor was a tenant of the purchaser. It will be noted that the Legislature imposes a penalty upon a "loan" or forbearance of any money. with the stringent and onerous effect which follows. The contract was one of rent. In a contract of "loan" of money. in return for their use. goods. In a contract of "loan" the thing loaned becomes the property of the obligor. with a promise to repay. or labor. either because the terms of such contract were incompatible or inconsistent with the theory that said contract was one of purchase and sale. the relation between the parties is that of obligor and obligee. a sentence or a paragraph in the entire record." however." A contract of "loan. the moment the contract is executed. goods. on condition that the thing or its equivalent be returned. The word "loan. At all events. the money. amounted to usury. chattels or credits.

1982. with respondent Lim as signatory.520. based upon a thousand different conditions and may or may not have any direct reference to the value of the property rented. A contract of "rent" is a contract by which one of the parties delivers to the other some nonconsumable thing. In relation to the same transaction. which in the slightest way indicates that the parties to the contract in question did not intend to sell the property in question absolutely. To hold that "usury" can be based upon the comparative actual rental value and the actual value of the property. We cannot bring ourselves to believe that the Legislature contemplated any such disturbance in the equilibrium of the business of the country." under the civil law. the courts have no right to make contracts for parties. simply with the right to repurchase. whereas a contract of "loan". signifies the delivery of money or other consumable things upon condition of returning an equivalent amount of the same kind or quantity.97 Case Digests in Civil Law Review 2 to paid for the use of land. goods or credits is easily ascertained while the amount of rent to be paid for the use and occupation of the property may depend upon a thousand different conditions. whether in money. People who make their own beds must lie thereon.93 was executed by respondent Corporation." In the case of a contract of "rent. THE COSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK) VS. Lim obtained from petitioner Consolidated Bank and Trust Corporation Letter of Credit No. 2001 FACTS: On July 13. a sentence or paragraph. GREGORY T. in which cases it is called merely a "loan. in order that the latter may use it during a certain period and return it to the former. labor or other thing agreed upon. LIM AND SPOUSE G. 114286 April 19.150.068. CONTINENTAL CEMENT CORPORATION. They made their own contract in the present case. it is called a "commodatum.001. which was delivered directly to Continental Cement Corporation in its Bulacan plant. It will thus be seen that the rent to be paid for the use and occupation of property is not necessarily fixed upon the value of the property. Such was used used to purchase around five hundred thousand liters of bunker fuel oil from Petrophil Corporation. a phrase. Claiming that respondents failed to turn over the goods covered by the trust receipt or the proceeds thereof. In answer to the complaint. THE COURT OF APPEALS. and would create a very great disturbance in every business or rural community." The value of money. The amount of rent is fixed. a trust receipt for the amount of P 1. petitioner filed a complaint for sum of money with application for preliminary attachment3 before the Regional Trial Court of Manila. yet nevertheless. as that word is used in the statute. There is not a word. respondents and Gregory T. No. As obnoxious as contracts of pacto de retro are.R. Mendiola. is to subject every landlord to an annoyance not contemplated by the law. DOM-23277 in the amount of P 1. Manila . respondents averred that the transaction between them was a simple loan and San Beda College of Law.00.

respondent Corporation was required to sign the trust receipt simply to facilitate collection by petitioner of the loan it had extended to the former. the transaction in question was a simple loan and not a trust receipt agreement. which acquired the bunker fuel oil for re-sale. Gregory Lim. or on September 2. Furthermore. Further. On the other hand. and that the amount claimed by petitioner did not take into account payments already made by them. Manila . the delivery to respondent Corporation of the goods subject of the trust receipt occurred long before the trust receipt itself was executed. then. it needed the oil for its own operations. Evidently. it is apparent that there was really no trust receipt transaction that took place. The practice of banks of making borrowers sign trust receipts to facilitate collection of loans and place them under the threats of criminal prosecution should they be unable to pay it may be unjust and inequitable if not reprehensible. and is prone to misinterpretation. through its President. Mendiola. HELD: The transaction was a loan transaction. 1982 and was completed by July 19. respondent Corporation is not an importer. 1982. The fact that ownership of the oil belonged to respondent Corporation. Prior to the date of execution of the trust receipt. delivery of the bunker fuel oil to respondent Corporation's Bulacan plant commenced on July 7. This situation is inconsistent with what normally obtains in a pure trust receipt transaction. The resort to this scheme leaves poor and hapless borrowers at the mercy of banks. San Beda College of Law. More importantly. wherein the goods belong in ownership to the bank and are only released to the importer in trust after the loan is granted. but directly to respondent Corporation to which the oil was directly delivered long before the trust receipt was executed. at no time did title over the oil pass to petitioner. was acknowledged by petitioner's own account officer. Inasmuch as the debtor received the goods subject of the trust receipt before the trust receipt itself was entered into. ISSUE: Whether or not the transaction involved was a loan transaction or a trust receipt transaction when the trust receipt was entered into after the debtor received the goods subject of the trust receipt. the subject trust receipt was only executed nearly two months after full delivery of the oil was made to respondent Corporation. 1982. 1982. More specifically. In the case at bar. Such agreements are contracts of adhesion which borrowers have no option but to sign lest their loan be disapproved. By all indications. the oil was used up by respondent Corporation in its normal operations by August.98 Case Digests in Civil Law Review 2 not a trust receipt transaction. as had happened in this case. ownership over the goods was already transferred to the debtor.

On 14 January 1983. No. documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods. and 20 April 1981. documents or instruments themselves if they are unsold or not otherwise disposed of.83 in the Carmelite Monastery Project and requested for a grace period of until 15 June 1980 to settle the account. No.000 per month . 2000 FACTS: Melvin Colinares and Lordino Veloso (hereafter Petitioners) were contracted for a consideration of P40.000 on or before 3 December 1980. Colinares proposed that the terms of payment of the loan be modified P2. Veloso confessed that they lost P19. the spouses defaulted.R. and another person referred to as the entrustee. whereby the entruster who owns or holds absolute title or security interest over certain specified goods.389. PBC wrote to Petitioners demanding that the amount be paid within seven days from notice. ISSUE What is the transaction covered under the Trust Receipts Law? RULING: Section 4. Instead of complying with PBC’s demand.80 to cover the full invoice value of the goods. 115. San Beda College of Law. PBC approved the letter of credit for P22. P. the Trust Receipts Law. and thereafter P500 on 11 February 1981.720 from Petitioners’ marginal deposit as partial payment of the loan. and P1. Cagayan de Oro City.D. Mendiola. Manila . releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt” wherein the entrustee binds himself to hold the designated goods. Colinares applied for a commercial letter of credit with the Philippine Banking Corporation. petitioner Veloso insisted that the transaction was a “clean loan” as per verbal guarantee of Cayo Garcia Tuiza. in accordance with the terms and conditions specified in the trust receipt. PBC’s former manager. Petitioners paid P1. 16 March 1981. only learning of the trust receipt implication much later. Petitioners signed a proforma trust receipt as security. defines a trust receipt transaction as any transaction by and between a person referred to as the entruster. PBC continued to demand payment of the balance. No.000 by the Carmelite Sisters of Cagayan de Oro City to renovate the latter’s convent at Camaman-an.99 Case Digests in Civil Law Review 2 COLINARES V.195. Concurrently with the separate demand for attorney’s fees by PBC’s legal counsel. COURT OF APPEALS G. Pending approval of the proposal. 115 (Trust Receipts Law) in relation to Article 315 of the Revised Penal Code. He and petitioner Colinares signed the documents without reading the fine print.D. Cagayan de Oro City branch (hereafter PBC) in favor of CM Builders Centre. PBC debited P6. documents or instruments. 90828September 5. Petitioners were charged with the violation of P. After the initial payment.000 to PBC on 4 December 1980. During trial.

but because the loans were due one year after they were incurred.97 with interest at the rate of 6% per annum. and under the authority provided for in the Trading with the Enemy Act.00. No. GRIJALDO G.281. The second is covered by the provision which refers to merchandise received under the obligation to “return” it (devolvera) to the owner. it takes full title to the goods at the very beginning and continues to hold that title as his indispensable security until the goods are sold and the vendee is called upon to pay for them. on June 3. P200.R. The ownership of the merchandise continues to be vested in the person who had advanced payment until he has been paid in full. To secure that the bank shall be paid. in the total sum of P1. P600. Ltd. These loans are evidenced by five promissory notes executed by the appellant in favor of the Bank of Taiwan.00. L-20240. covered by the trust receipt to the entruster or to return said goods if they were not disposed of in accordance with the terms of the trust receipt shall be punishable as estafa under Article 315 (1) of the Revised Penal Code. Negros Occidental. P22. Trust receipt transactions are intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise. trust receipts partake of the nature of a conditional sale where the importer becomes absolute owner of the imported merchandise as soon as he has paid its price. were vested in the Government of the United States. 1494 known as Hacienda Campugas in Hinigiran. Lot No. 1943. Failure of the entrustee to turn over the proceeds of the sale of the goods. 1943. as follows: On June 1. all notes without due dates. Ltd.11.. compounded quarterly. of the merchandise imported or purchased REPUBLIC OF THE PHILIPPINES V. December 31. 1943. To secure the payment of the loans the appellant executed a chattel mortgage on the standing crops on his land. hence. in Bacolod City. Pursuant to the Philippine San Beda College of Law. 1946. without need of proving intent to defraud. as collateral. as amended.00. Mendiola. This situation belies what normally obtains in a pure trust receipt transaction where goods are owned by the bank and only released to the importer in trust subsequent to the grant of the loan. In a certain manner. 1965 FACTS: In the year 1943 appellant Jose Grijaldo obtained five loans from the branch office of the Bank of Taiwan. on June 18. the importer has never owned the goods and is not able to deliver possession. on August 13. and who may not be able to acquire credit except through utilization. The first is covered by the provision which refers to money received under the obligation involving the duty to deliver it (entregarla) to the owner of the merchandise sold. Ltd. or if the merchandise has already been sold. Manila . dated January 21. the proceeds of the sale should be turned over to him by the importer or by his representative or successor in interest. 1943. the assets in the Philippines of the Bank of Taiwan.86.The bank acquires a “security interest” in the goods as holder of a security title for the advances it had made to the entrustee. 1943. P-4. By virtue of Vesting Order No.P300. on August 9.100 Case Digests in Civil Law Review 2 There are two possible situations in a trust receipt transaction. P159.

required Manuel Lagtapon. The appellee appealed to the Court of First Instance of Negros Occidental and on March 26. Republic of the Philippines. money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid. 1954. dismissed the case on the ground that the action had prescribed. his obligation was to pay a generic thing — the amount of money representing the total sum of the five loans. Aguilar. During the pendency of this appeal the appellant Jose Grijaldo died. in support of his contention that the appellee has no cause of action. made a written extrajudicial demand upon the appellant for the payment of the account in question. The record shows that the appellant had actually received the written demand for payment. On January 17. in a resolution of May 13. Rather.377. 1959.23 as of December 31. but he failed to pay. one of the parties delivers to another . Jacinto Lagtapon. 1950. was a series of five contracts of simple loan of sums of money. these assets. Ruben Lagtapon and Anita L. Manila . The Justice of the Peace Of Hinigaran. 1954 the appellee.. do not support the claim of appellant. ISSUE: Is an obligation to pay the loan extinguished by the loss or destruction of the object of the chattel mortgage securing it? RULING: The appellant likewise maintains. The appellant appealed directly to this Court. Mendiola. with interest. represented by the Chairman of the Board of Liquidators.101 Case Digests in Civil Law Review 2 Property Act of 1946 of the United States. The terms of the promissory notes and the chattel mortgage that the appellant executed in favor of the Bank of Taiwan. Civil Code) The obligation of the appellant under the five promissory notes evidencing the loans in questions is to pay the value thereof. to collect from the appellant the unpaid account in question. Ltd. were subsequently transferred to the Republic of the Philippines by the Government of the United States under Transfer Agreement dated July 20. that San Beda College of Law. who are the legal heirs of Jose Grijaldo to appear and be substituted as appellants. This argument is untenable. dated November 24." (Article 1933. 1961 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran.. 1963. Upon motion by the Solicitor General this Court. 8 and 477 and other pertinent laws. Ltd. These assets were among the properties that were placed under the administration of the Board of Liquidators created under Executive Order No. 1962 the court a quo rendered a decision ordering the appellant to pay the appellee the sum of P2. that because the loans were secured by a chattel mortgage on the standing crops on a land owned by him and these crops were lost or destroyed through enemy action his obligation to pay the loans was thereby extinguished. including the loans in question. the crops to be harvested from his land. On September 29. 372. The transaction between the appellant and the Bank of Taiwan. Negros Occidental. after hearing. The obligation of the appellant under the five promissory notes was not to deliver a determinate thing namely. or the value of the crops that would be harvested from his land. "By a contract of (simple) loan. plus interest at the rate of 6% per annum compounded quarterly from the date of the filing of the complaint until full payment was made. and in accordance with Republic Acts Nos.

because the account could still be paid from other sources aside from the mortgaged crops. a generic thing. Mendiola. and the loss of the crops did not extinguish his obligation to pay.102 Case Digests in Civil Law Review 2 is. Manila . San Beda College of Law. the loss or destruction of anything of the same kind does not extinguish the obligation. Article 1263 of the Civil Code provides: In an obligation to deliver a generic thing. to deliver a sum of money — a clear case of an obligation to deliver. The chattel mortgage on the crops growing on appellant's land simply stood as a security for the fulfillment of appellant's obligation covered by the five promissory notes.