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ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

AGENCY
SECTION ONE. NATURE AND OBJECT OF AGENCY
1|Rallos v. Felix Go Chan & Sons Realty Corp.| G.R. No. L24332........ 3
2 | Bordador v. Luz | G.R. No.
130148.................................................................. 3
3 | Orient Air Services v. Court of Appeals | G.R. No.
76931 .......................... 5
4 | Eurotech Industrial Technologies, Inc. v. Cuizon | G.R. No.
167552........ 5
6 | Domingo v. Domingo | G.R. No. L30573..................................................... 6
7| Manotok Bros, Inc. vs. CA | GR No.
94753........................................... 7
8 | Inland Realty vs. CA | GR
76969............................. 8
9 | Tan vs. Gullas | G.R. No.
143978............................. 9
9 | Medrano vs. CA | GR No.
150678........................... 10
11 | Litonjua vs. Eternit Corp. | GR No.
144805............................................ 11

2.4 | Dominion Insurance Corporation vs. CA | G. R. No.


129919.......... 14
2.5 | Veloso vs. CA | G.R. No. 102737................................. 15
2.6 | Pineda vs. CA | GR. No.
105562 .............................................. 17
2.7 | Home Insurance Co. vs. USL | GR L25593............................................. 18
2.8 | Estate of Liano Olaguer vs. Ongjoco | GR No.
173312.................... 19
2.9 |Bautista vs. Spouses Jalandoni | GR No.
171464................................20
2.10 | Gutierrez Hermanos vs. Orense | GR No. L9188....................... 21
2.11 | Cosmic Lumber vs. CA | GR No.
114311.................................. 23
2.12 | Pahud vs. CA | GR No.
160346.................................................. 25
2.13 | Yoshizaki vs. Joy Training Center of Aurora, Inc. | G.R.
No. 174978.....27
2.14 | City-Lite Realty Corp. vs. CA | GR No.
138639.................................30

SECTION TWO. FORMS AND KINDS OF AGENCY

SECTION THREE. POWERS AND OBLIGATIONS OF


THE AGENT.

2.1 | Rallos vs. Yangco | GR No. 6906......................................


11
2.2 | Litonjua vs. Fernandez | GR No. 148116............... 12
2.3 | Aggabao vs. Parulan, Jr. | G.R. No. 165803......................
13

3.1 | BA Finance vs. CA | GR No. 82040.....................31


3.2 | British Airways vs. CA | GR No. 121824..............33
3.3| Cervantes vs. CA | GR No. 125138.................................34
3.4| Borja, Sr. vs. Sulyap, Inc. | GR No.
150718............................................34

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS


3.5 | Gozun vs. Mercado | GR No.
167812........................................36
3.6 | Sazon vs. Vasquez-Menancio | GR No.
192085.........................................37
3.7 | Hernandez vs. Hernandez | GR
158576.................................................37
3.8| Escueta vs. Lim | GR No.
137162.........................................................37
3.9 | Serona vs. CA | GR No.
130423..................................................................37
3.10 | Municipal Council of Iloilo vs. Evangelista | GR No. L32977.................40
3.11 | Chemphil Export vs. CA | GR Nos. 11243839...................................40
3.12 | Uy vs. CA | GR No.
120465.........................................................41
3.13 | Angeles vs. PNR | GR No.
150128..............................................41
3.14 | NAPOCOR vs. NAMERCO | GR No. L-33819 and L22897.................41

3.15 | DBP vs. CA | GR No. L109937......................................................42


3.16 | Eugenio vs. CA | GR No.
103737....................................................43
3.17 | Toyota Shaw vs. CA | L116650.............................................................44
3.18 | Bacaltos Coal Mines vs. CA | GR No.
114091....................................45
3.19 | Yu Eng Cho vs. PANAM | G.R. No.
123560.............................46
3.20 | Manila Memorial Park Cemetery, Inc. vs. Linsangan |
GR No. 151319...46
3.21 | Green Valley vs. IAC | GR No. L49395......................................46
SECTION FOUR. OBLIGATIONS OF THE PRINCIPAL
4.1 | Bucton vs. Rural Bank of El Salvador, Inc. | GR No.
179625............53
4.2 | Panlilio vs. Citibank | GR No.
156335...........................................40
4.7 | Hahn vs. CA | GR No. 113074........................................ 45
4.8. Albaladejo y Cia vs. PRC | GR L-20726................................. 46
4.9 | De Castro vs. CA | GR No. 115838....................................... 47

4.3| Cuison vs. CA | GR No. 88539 ...................... 40


.4.4 | Pleasantville Development vs. CA | GR No.
79688.......................... 41
4.5 | Filipinas Life Assurance Co. vs. Pedroso | GR No.
159489............. 42
4.6 | Manila Remnant Co., Inc. vs. CA | GR No.
82978............................. 43

SECTION FIVE. EXTINGUISHMENT OF AGENCY


5.1 | Garcia vs. De Manzano | GR L-13414................................... 48
5.2 | CMS Logging vs. CA | GR No. 41420............................. 49
5.3. Dy Buncio & Co. vs. Ong Guan Ca | GR No
40681........................ 49
5.4 | Republic vs. Evangelista | GR No. 156015.................................
50

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS


5.5 | Sevilla vs. CA | G.R. Nos. 41182-83....................................... 50
5.6 | Valenzuela vs. CA | GR No. 83122................................... 51
5.7. National Sugar Trading vs. PNB | GR No.
151218........................ 52
5.8. Ching vs. Bantolo | GR No. 177086................................ 53
5.9 | Coleongco vs. Claparols | L-18616.............................................
54
5.10| Lustan vs. CA | GR No. 111924........................................... 55
5.11| Perez vs. PNB | GR No. 21813............................................. 56
5.12| Terrado vs. CA | GR No. 58794........................................... 57

SECTION ONE

1. RAMON RALLOS, Administrator of the Estate of


CONCEPCION RALLOS, vs. FELIX GO CHAN &

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

SONS REALTY CORPORATION and COURT OF


APPEALS, G.R. No. L-24332 January 31, 1978,
FACTS:
Concepcion and Gerundia Rallos were sisters and
registered co-owners of a parcel of land known as Lot
No. 5983 of the Cadastral Survey of Cebu covered by
Transfer Certificate of Title No. 11116 of the Registry of
Cebu.They executed a special power of attorney in favor
of their brother, Simeon Rallos, authorizing him to sell such
land for and in their behalf.
After Concepcion died, Simeon Rallos sold the
undivided shares of his sisters Concepcion and Gerundia to
Felix Go Chan & Sons Realty Corporation for the sum of P10,
686.90. New TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate
Estate of Concepcion filed acomplaint praying (1) that the
sale of the undivided share of the deceased Concepcion
Rallos in lot 5983 be unenforceable, and said share be
reconveyed to herestate; (2) that the Certificate of 'title
issued in the name of Felix Go Chan & SonsRealty
Corporation be cancelled and another title be issued in the
names of thecorporation and the "Intestate estate
of Concepcion Rallos" in equal undivided and(3) that plaintif
be indemnified by way of attorney's fees and payment of
costs of suit.
CFI ruled that theSale of land was null and void insofar
as the one-half pro-indiviso share of Concepcion Rallos
CA:CFI
Decision
reversed,
upheld
the
sale
of Concepcions share.
MR:denied

ISSUE: Whether or not the sale fell within the exception


to the general rule that death extinguishes the
authority of the agent?
RULING: Yes, the sale is void!
The court held that no one may contract in the name of
another without being authorized by the latter, or unless he
has by law a right to represent him (ARTICLE 1317 of the
Civil Code) Simons authority as agent was extinguished
upon Concolacions death.
The sale did not fall under the exceptions to the
general rule that death ipso jure extinguishes the authority of the
agent! Article 1913 inapplicable since SPA in favor of Simon Rallos
was not coupled with interest and ARTICLE 1931 inapplicable
because Rallos knew of principal Concepcions death! For ARTICLE
1931 to apply, both requirements must be present laws on agency,
the terms of which are clear and unmistakable leaving no room for an
interpretation contrary to its tenor, should apply, the law
provides that death of the principal ipso jure extinguishes the
authority of the agent to sell rendering the sale to a third
person in good faith unenforceable unless at the agent had
no knowledge of the principals death at that time /exception
under ARTICLE 1931.
Sale was null and void.
2. JOSE
BORDADOR
and
LYDIA
BORDADOR,
vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and
NARCISO DEGANOS, G.R. No. 130148. December
15, 1997

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

FACTS:
Petitioners were engaged in the business of purchase
and sale of jewelry and respondent Brigida Luz, also known
as Aida Luz, was their regular customer.
On several occasions, respondent Deganos, brother of
Luz, received several pieces of gold and jewelry from
petitioners amounting to P382, 816. These items and their
prices were indicated in seventeen receipts covering the
same. 11 of the receipts stated that they were received for a
certain Aquino, a niece of Deganos, and the remaining 6
receipts indicated that they were received for Luz.
Deganos was supposed to sell the items at a profit and
thereafter remit the proceeds and return the unsold items to
Bordador. Deganos remitted only the sum of P53, 207. He
neither paid the balance of the sales proceeds, nor did he
return any unsold item to petitioners.
The total of his unpaid account to Bordador, including
interest, reached the sum of P725, 463.98. Petitioners
eventually filed a complaint in the barangay court against
Deganos to recover said amount.
In the barangay proceedings, Luz, who was not
impleaded in the cases, appeared as a witness for Deganos
and ultimately, she and her husband, together with Deganos
signed a compromise agreement with petitioners.
In that compromise agreement, Deganos obligated
himself to pay petitioners, on installment basis , the balance
of his account plus interest thereon. However, he failed to
comply with his aforestated undertakings.

Petitioners instituted a complaint for recovery of sum of


money and damages, with an application for preliminary
attachment against Deganos and Luz.
Deganos and Luz was also charged with estafa
During the trial of the civil cae, petitioners claimed that
Deganos acted as agent of Luz when received the subject
items of jewelry, and because he failed to pay for the same,
Luz, as principal, and her spouse are solidarily liable with
him
Trial court ruled that only Deganos was liable to
Bordador for the amount and damages claimed. It held that
while Luz did have transactions with petitioners in the past,
the items involved were already paid for and all that Luz
owed Bordador was the sum or P21, 483 representing
interest on the principal account which she had previously
paid for.
CA afirmed RTCs decision
ISSUE: Whether or not Luz are liable to petitioners for
the latters claim for money and damages?
RULING: No
Evidence does not support the theory of Bordador that
Deganos was an agent of Luz and that the latter should
consequently be held solidarily liable with Deganos in his
obligation to petitioners.

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS


The basis for agency is representation. Here, there is
no showing that Luz consented to the acts of Deganos or
authorized him to act on her behalf, much less with respect
to the particular transactions involved.
It was grossly and inexcusably negligent of petitioner
to entrust to Deganos, not once or twice but on at least six
occasions as evidenced by 6 receipts, several pieces of
jewelry of substantial value without requiring a written
authorization from his alleged principal.
A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.
Records show that neither an express nor an implied
agency was proven to have existed between Deganos and
Luz. Evidently, Bordador who were negligent in their
transactions with Deganos cannot seek relief from the efects
of their negligence by conjuring a supposed agency relation
between the two respondents where no evidence supports
such claim.
The trial court also found that it was petitioner Lydia
Bordador who indicated in the receipts that the items were
received by Deganos for Evelyn Aquino and Brigida D.
Luz. [7]Said court was persuaded that Brigida D. Luz was
behind Deganos, but because there was no memorandum to
this efect, the agreement between the parties was
unenforceable under the Statute of Frauds. Absent the
required memorandum or any written document connecting
the respondent Luz spouses with the subject receipts, or
authorizing Deganos to act on their behalf, the alleged
agreement between petitioners and Brigida D. Luz was
unenforceable.

3. ORIENT
AIR
SERVICES
&
HOTEL
REPRESENTATIVES, vs.
COURT OF APPEALS and AMERICAN AIR-LINES
INCORPORATED, G.R. No. 76933, May 29, 1991
FACTS:
American Air, an air carrier ofering passenger and air
cargo transportation, entered into a General Sales Agency
Agreement with Orient Air, authorizing the latter to act as its
exclusive general sales agent for the sale of air passenger
transportation.
Orient air failed to remit the net proceeds of sales for
several months prompting American Air to undertake the
collection of the proceeds of tickets sold originally by
Orient Air and terminating their agreement. American air
instituted suit against Orient Air for the settlement of past
outstanding funds in possession of the latter. Orient Air
contended that because of the unpaid overriding
commissions it retained the sales proceeds before remitting
the balance to American Air. American Air contended that
the sale must be made by Orient Air and the sale must be
done with the use of American Air's ticket stocks in order for
it to be entitled to the overriding commission.
On the other hand, Orient Air contends that the
contractual stipulation of a 3% overriding commission covers
the total revenue of American Air and not merely that derived
from ticketed sales undertaken by Orient Air because it was
an exclusive General Sales Agent. CA held that Orient Air is
entitled to commissions and ordered American Airto reinstate
Orient Air as its General Sales Agent

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

ISSUE: 1. Whether
to commissions.

or

not

Orient Air

2. Whether CA is correct
reinstatement of Orient Air as an agent.

is
in

entitled
ordering

RULING:
1. Yes. Orient Air was entitled to an overriding
commission based on total flown revenue. American Air's
perception that Orient Air was remiss or in default of its
obligations under the Agreement was, in fact, a situation
where the latter acted in accordance with the Agreement
that of retaining from the sales proceeds its accrued
commissions before remitting the balance to American Air.
Since the latter was still obligated to Orient Air by way of
such commissions. Orient Air was clearly justified in
retaining and refusing to remit the sums claimed by
American Air. The latter's termination of the Agreement was,
therefore, without cause and basis, for which it should be
held liable to Orient Air.
2. No. CA in efect compels American Air to extend its
personality to Orient Air. Such would be violative of the
principles and essence of agency, defined by law as a
contract whereby "a person binds himself to render some
service or to do something in representation or on behalf
of another, WITH THE CONSENTOR AUTHORITY OF
THE LATTER. In an agent-principal relationship, the
personality of the principal is extended through the facility of
the agent. In so doing, the agent, by legal fiction, becomes
the principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be efected

with the consent of the principal, which must not, in any way,
be compelled by law or by any court.
4. EUROTECH INDUSTRIAL TECHNOLOGIES, INC.,
- versus EDWIN CUIZON and ERWIN CUIZON,
G.R. No. 167552 April 23, 2007
FACTS:
From January to April 1995, petitioner sold to Impact
Systems various products allegedly amounting to P91, 338.00
pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at P250, 000.00
with respondents making a down payment of P50, 000.00.
When the sludge pump arrived from the United Kingdom,
petitioner refused to deliver the same to respondents without
their having fully settled their indebtedness to petitioner.
Thus, on 28 June 1995, respondent Edwin and Alberto de
Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner. Impact
systems are owed by Erwin Cuizon.
Despite the existence of the Deed of Assignment,
respondents proceeded to collect from Toledo Power
Company the amount of P365, 135.29. Alarmed by this
development, petitioner made several demands upon
respondents to pay their obligations. As a result, respondents
were able to make partial payments to petitioner. On 7
October 1996, petitioner's counsel sent respondents a final
demand letter wherein it was stated that as of 11 June 1996,
respondents' total obligations stood at P295, 000.00
excluding interests and attorney's fees.
Because of
respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages,

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS


with application for preliminary attachment against herein
respondents
By way of special and afirmative defenses, respondent
EDWIN alleged that he is not a real party in interest in this
case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction
with petitioner and the latter was very much aware of this
fact.
ISSUE: Whether or not the act of Edwin Cuizon as sales
manager in signing the Deed of Assignment binds his
principal Impact Systems?
RULING: Yes, the act of Edwin in signing the Deed of
Assignment binds Impact Systems
The Supreme Court held that in a contract of agency, a
person binds himself to render some service or to do
something in representation or on behalf of another with the
latter's consent. Its purpose is to extend the personality of
the principal or the party for whom another acts and from
whom he or she derives the authority to act. It is said that
the basis of agency is representation, that is, the agent acts
for and on behalf of the principal on matters within the scope
of his authority and said acts have the same legal efect as if
they were personally executed by the principal.
In this case at hand, the parties do not dispute the
existence of the agency relationship between respondents
ERWIN as principal and EDWIN as agent.Respondent Edwin
Cuizon acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed
of Assignment, it follows that he is not a real party in interest

who should be impleaded in this case. A real party in interest


is one who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit. In
this respect, we sustain his exclusion as a defendant in the
suit before the court a quo.
5. VICENTE M. DOMINGO, represented by his heirs,
ANTONINA RAYMUNDO VDA. DE DOMINGO,
RICARDO,
CESAR,
AMELIA,
VICENTE
JR.,
SALVADOR, IRENE and JOSELITO, all surnamed
DOMINGO, petitioners-appellants, vs.GREGORIO
M. DOMINGO, respondent-appellee, TEOFILO P.
PURISIMA, intervenor-respondent. G.R. No. L30573 October 29, 1971
FACTS:
On June 2, 1956, Vicente M. Domingo granted Gregorio
Domingo, a real estate broker, the exclusive agency to sell his
lot No. 883 of Piedad Estate with an area of about 88,477
square meters at the rate of P2.00 per square meter (or for
P176,954.00) with a commission of 5% on the total price, if
the property is sold by Vicente or by anyone else during the
30-day duration of the agency or if the property is sold by
Vicente within three months from the termination of the
agency to a purchaser to whom it was submitted by Gregorio
during the continuance of the agency with notice to Vicente.
The said agency contract was in triplicate, one copy was
given to Vicente, while the original and another copy were
retained
by
Gregorio.
On June 3, 1956, Gregorio authorized the intervenor
Teofilo P. Purisima to look for a buyer, promising him one-half

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS


of the 5% commission.Thereafter, Teofilo Purisima introduced
Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written ofer which was
very much lower than the price of P2.00 per square meter.
Vicente directed Gregorio to tell Oscar de Leon to raise his
ofer. After several conferences between Gregorio and Oscar
de Leon, the latter raised his ofer to P109, 000.00 on June 20
and
Vicente
agreed.
Upon demand of Vicente, Oscar de Leon issued to him
a check in the amount of P1, 000.00 as earnest money, after
which Vicente advanced to Gregorio the sum of P300.00.
Oscar de Leon confirmed his former ofer to pay for the
property at P1.20 per square meter in another letter.
Subsequently, Vicente asked for an additional amount of P1,
000.00 as earnest money, which Oscar de Leon promised to
deliver
to
him.
Pursuant to his promise to Gregorio, Oscar gave him as
a gift or propina the sum of 1,000.00 for succeeding in
persuading Vicente to sell his lot at P1.20 per square meter
or a total in round figure of P109, 000.00. This gift of P1,
000.00 was not disclosed by Gregorio to Vicente. Neither did
Oscar pay Vicente the additional amount of P1, 000.00 by
way
of
earnest
money.
When the deed of sale was not executed on August 1,
1956 as stipulated nor on August 16, 1956 as extended by
Vicente, Oscar told Gregorio that he did not receive his
money from his brother in the United States, for which
reason he was giving up the negotiation including the
amount of P 1,000 given as earnest money to Vicente and the

1,000

given

to

Gregorio

as

propina

or

gift.

When Oscar did not see him after several weeks,


Gregorio sensed something fishy. So, he went to Vicente and
read a portion to the efect that Vicente was still committed
to pay him 5% commission. Vicente grabbed the original of
the
document
and
tore
it
to
pieces.
From his meeting with Vicente, Gregorio proceeded to
the ofice of the Register of Deeds of Quezon City, where he
discovered a deed of sale executed on September 17, 1956 by
Amparo
Diaz.
Upon thus learning that Vicente sold his property to the
same buyer, Oscar de Leon and his wife, he demanded in
writing payment of his commission on the sale price of P109,
000.00.Vicente stated that Gregorio is not entitled to the 5%
commission because he sold the property not to Gregorio's
buyer, Oscar de Leon, but to another buyer, Amparo Diaz,
wife
of
Oscar
de
Leon
ISSUE: Whether Gregorio was entitled to receive the
5%
commission?
RULING: No, Gregorio is not entitled to receive the 5%
commission.
The Supreme Court held that the law imposes upon the
agent the absolute obligation to make a full disclosure or
complete account to his principal of all his transactions and
other material facts relevant to the agency, so much so that
the law as amended does not countenance any stipulation
exempting the agent from such an obligation and considers

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

10

such

an

exemption

as

void.

Hence, by taking such profit or bonus or gift or propina


from the vendee, the agent thereby assumes a position
wholly inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as his
Commission is concerned, as if no agency had existed. The
fact that the principal may have been benefited by the
valuable services of the said agent does not exculpate the
agent who has only himself to blame for such a result by
reason of his treachery or perfidy.
6. Manotok Bros., Inc. vs CA | GR no. 94753 (221
SCRA 224) | 7 April 1993
FACTS:
Manotok Brothers, Inc. is the owner of a certain parcel
of land and building. The land was leased by the City of
Manila and used by the Claro M. Recto High School, at M.F.
Jhocson Street, Sampaloc Manila. They authorized a certain
Salvador Salumbiga to negotiate with the City of Manila the
sale of the aforementioned property in the amount of
P425,000.00. In the same writing, Manotok agreed to pay
Salumbiga a five percent (5%) commission in the event the
sale is finally consummated and paid. The Municipal Board of
the City of Manila eventually passed Ordinance No. 6603,
appropriating the sum of P410,816.00 for the purchase of the
property which private respondent was authorized to sell.
Notwithstanding the realization of the sale, Salumbiga never
received any commission, which should have amounted to
P20,554.50. This was due to the refusal of petitioner to pay

private respondent said amount as the former does not


recognize the latter's role as agent in the transaction.
Issue: Whether or not Salvador Salumbiga was entitled
to the 5% agents commission?
Holding and Ratio Decidendi
The Court ruled that when there is a close, proximate
and causal connection between the agent's eforts and labor
and the principal's sale of his property, the agent is entitled
to a commission. They agreed with the respondent Court that
the City of Manila ultimately became the purchaser of
petitioner's property mainly through the eforts of private
respondent. Without discounting the fact that when
Municipal Ordinance No. 6603 was signed by the City Mayor
on May 17, 1968, private respondent's authority had already
expired, it is to be noted that the ordinance was approved on
April 26, 1968 when private respondent's authorization was
still in force. Moreover, the approval by the City Mayor came
only three days after the expiration of private respondent's
authority. It is also worth emphasizing that from the records,
the only party given a written authority by petitioner to
negotiate the sale from July 5, 1966 to May 14, 1968 was
private respondent.
7. Inland realty vs. CA | GR No. 76969 273 SCRA 70 |
9 June 1997
FACTS:
Inland realty Invetsment Services, Inc. is a corporation
engaged in the real estate business and brokages. Gregotio

11

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

Araneta Inc., through its Assistant Manger Armando Eduque,


granted Inland Realty the Authority to sell on a first comoe
first served basis the holdings of Gregorio Araneta, Inc.
After receiving a proposal letter from the Inalnd Realty,
Stanford Microsystem, Inc. a Prospective buyer, counterproposed to nuy the shares. The authority to sell given to
Inland Realty by Gregorio Araneta Inc. was extended for
three times. On july 8, 1977, Inland Realty finally sold the
shares of stock in Architects Building Inc. to Stanford
Microsystems, Inc. for 13.5M. thereafter, Inland Realty sent a
demand letter to Gregorio Araneta, Inc., for the Payment of
their 5% Brokers Commission which was declined by
Gregorio Araneta Inc., claiming that that after their authority
to sell expired 30 days where the petitioners were no
longerprivy to the consummation of the sale.
Inland Realty filed as case in RTC for the collection of its
broker commission from Gregorio Araneta Inc. however, the
RTC dismissed the case. CA also dismissed the petition since
the inland realtys contract of agency and autjprity to sell
already expired.
Issue: Whether or not the Inland realty was entiled to
the brokers commission upon the expiration of the
contract of agency and authority to sell?
Holding and ratio Decidendi
Inland Realty was not entitled to the Brokers
Commission since the petitioner was not eficient in
procuring cause in bringing about the sale on July, 7, 1977.
Inland Realty had nothing to show that they performed
substantial acts that led to the consummation of the sale to
Stanford of Araneta, Incs shares in Architects. Inland Realty

failed in selling said shares under the terms and agreements


set out by Araneta, Inc.
The Court of Appeals cannot be faulted for emphasizing
the lapse of more than one (1) year and five (5) months
between the expiration of petitioners' authority to sell and
the consummation of the sale to Stanford, to be a significant
index of petitioners' non-participation in the really critical
events leading to the consummation of said sale, i.e., the
negotiations to convince Stanford to sell at Araneta, Inc.'s
asking price, the finalization of the terms and conditions of
the sale, the drafting of the deed of sale, the processing of
pertinent documents, and the delivery of the shares of stock
to Stanford.
8. Tan vs Gullas GR no. 143978 33 SCRA 334 |
December 3 2002 | Justice Ynares-Santiago
FACTS:
Spouses Eduardo and Norma Gullas, were the
registered owners of a parcel of land in the Municipality of
Minglanilla, Province of Cebu. On June 29, 1992, they
executed a special power of attorney authorizing Manuel B.
Tan, a licensed real estate broker, and his associates Gregg
M. Tecson and Alexander Saldaa, to negotiate for the sale of
the land at Five Hundred Fifty Pesos (P550.00) per square
meter, at a commission of 3% of the gross price. The power of
attorney was non-exclusive and efective for one month from
June 29, 1992.
Tan accompanied Sisters Michaela Kim and Azucena
Gaviola, representing the Sisters of Mary, to see Eduardo

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Gullas in his ofice at the University of Visayas. The Sisters,


who had already seen and inspected the land, found the same
suitable for their purpose and expressed their desire to buy
it.[8] However, they requested that the selling price be
reduced to Five Hundred Thirty Pesos (P530.00) per square
meter instead of Five Hundred Fifty Pesos (P550.00) per
square meter. Private respondent Eduardo Gullas referred
the prospective buyers to his wife.
It was the first time that the buyers came to know that
private respondent Eduardo Gullas was the owner of the
property. The land was subsequently bought by the sisters.
However, the Gullas refused to pay Tan their commission.
This was on the ground that they were not the eficient
procuring cause in bringing about the consummation of the
sale because another broker, Roberto Pacana, introduced the
property to the Sisters of Mary ahead of the petitioners.
Private respondents maintained that when petitioners
introduced the buyers to private respondent Eduardo Gullas,
the former were already decided in buying the property
through Pacana, who had been paid his commission. Private
respondent Eduardo Gullas admitted that petitioners were in
his ofice on July 3, 1992, but only to ask for the
reimbursement of their cellular phone expenses.
Issue: Whether or not the petitioner was entitled to
their commission?
Holding and Ration Decidendi
There was no dispute as to the role that petitioners
played in the transaction. At the very least, petitioners set
the sale in motion. They were not able to participate in its

consummation only because they were prevented from doing


so by the acts of the private respondents.
The Supreme Court ruled that an agent receives a
commission upon the successful conclusion of a sale. On the
other hand, a broker earns his pay merely by bringing the
buyer and the seller together, even if no sale is eventually
made. Clearly, therefore, petitioners, as brokers, should be
entitled to the commission whether or not the sale of the
property subject matter of the contract was concluded
through their eforts.
9. Medrano vs. CA | GR No. 150678 452 SCRA 77 | 18
February 2005
FACTS:
Bienvenido R. Medrano was the Vice-Chairman of Ibaan
Rural Bank, a bank owned by the Medrano family. In 1986,
Mr. Medrano asked Mrs. Estela Flor, a cousin-in-law, to look
for a buyer of a foreclosed asset of the bank, a 17-hectare
mango plantation priced at P2,200,000.00, located in Ibaan,
Batangas.
Mr. Dominador Lee, a businessman from Makati City,
was a client of respondent Mrs. Pacita G. Borbon, a licensed
real estate broker. The two met through a previous
transaction where Lee responded to an ad in a newspaper
put up by Borbon for an 8-hectare property in Lubo,
Batangas, planted with atistrees. Lee expressed that he
preferred a land with mango trees instead. Borbon promised
to get back to him as soon as she would be able to find a
property according to his specifications.

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Borbon relayed to her business associates and friends


that she had a ready buyer for a mango orchard. Flor then
advised her that her cousin-in-law owned a mango plantation
which was up for sale. She told Flor to confer with Medrano
and to give them a written authority to negotiate the sale of
the property.
Upon being informed by Flor that Medrano was selling
his mango orchard, Borbon lost no time in informing Lee that
they had found a property according to his specifications. An
ocular inspection of the property together with Lee was
immediately planned; unfortunately, it never pushed through
for reasons beyond the respondents control. Since Lee was in
a hurry to see the property, he asked the respondents the
exact address and the directions on how to reach Ibaan,
Batangas. The respondents thereupon instructed him to look
for Teresa Ganzon, an oficer of the Ibaan Rural Bank and the
person to talk to regarding the property. While the letterauthority issued in favor of the respondents was nonexclusive, no evidence was adduced to show that there were
other persons, aside from the respondents, who informed Lee
about the property for sale. Ganzon testified that no
advertisement was made announcing the sale of the lot, nor
did she give any authority to other brokers/agents to sell the
subject property.
However, despite of the respondents participation in
finding a buyer for the petitioners property, the petitioners
refuse to pay them commission, asserting that they are not
the eficient procuring cause of the sale. It was alleged that
they since they did not participate in the negotiation of the
sale, they were thus not entitled to their commission.

Issue:Whether or not the brokers are entitled to


commission for the sale of the subject property?
Holding and ratio Decidendi
The brokers were entitled to the commission. The
Supreme Court that the aggrieved brokers were the
procuring causes in the transaction although they did not
participate in the negotiation of the sale. Armed with an
authority to procure a purchaser and with a license to act as
broker, we see no reason why the respondents cannot
recover compensation for their eforts when, in fact, they are
the procuring cause of the sale.
Procuring cause is meant to be the proximate cause.
The term procuring cause, in describing a brokers activity,
refers to a cause originatinga series of events which, without
break in their continuity, result in accomplishment of prime
objective of the employment of the broker producing a
purchaser ready, willing and able to buy real estate on the
owners terms.
A broker will be regarded as the procuring cause of a
sale, so as to be entitled to commission, if his eforts are the
foundation on which the negotiations resulting in a sale are
begun. The broker must be the eficient agent or the
procuring cause of the sale. The means employed by him and
his eforts must result in the sale. He must find the
purchaser, and the sale must proceed from his eforts acting
as broker. Indeed, the evidence on record shows that the
respondents were instrumental in the sale of the property to
Lee. Without their intervention, no sale could have been

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14

consummated. They were the ones who set the sale of the
subject land in motion.

10.
Litonjua vs Etermit Corp. | GR No. 144805
452 SCRA 77 | 18 February 2005
FACTS:
The Eternit Corporation (EC) manufactures roofing
materials and pipe products. Ninety (90%) percent of the
shares of stocks of EC were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation registered under the laws
of Belgium. Glanville was the General Manager and President
of EC, while Delsauxwas the Regional Director for Asia of
ESAC. In 1986, because of the political situation in the
Philippines the management of ESAC wanted to stop its
operations and to dispose the land in Mandaluyong City. They
engaged the services of realtor/broker Lauro G. Marquez.
Marquez thereafter ofered the land to Eduardo B. Litonjua,
Jr.
for
P27,000,000.00.
Litonjua
counter
ofered
P20,000,000.00 cash. Marquez apprisedGlanville & Delsaux
of the ofer. Delsaux sent a telex stating that, based on the
"Belgian/Swiss
decision,"
the
final
ofer
was
"US$1,000,000.00 andP2,500,000.00. The Litonjua brothers
deposited US$1,000,000.00 with the Security Bank & Trust
Company, and drafted an Escrow Agreement to expeditethe
sale.Meanwhile, with the assumption of Corazon C. Aquino as
President, the politicalsituation improved. Marquez received
a letter from Delsaux that the ESAC Regional Ofice decided
not to proceed with the sale. When informed of this, the

Litonjuas, filed a complaint for specific performance and


payment for damages on account of the aborted sale. Both
the trial court and appellate court rendered judgment in
favor of defendants and dismissed the complaint. The lower
court declared that since the authority of the agents/realtors
was not in writing, the sale is void and not merely
unenforceable.
Issue: Whether or not the written authority from the
Eternit was necessary before the sale can be perfected?
Holding and Ration Decidendi
It appears that Marquez acted not only as real estate
broker for the petitioners but also as their agent. As gleaned
from the letter of Marquez to Glanville, on February 26,
1987, he confirmed, for and in behalf of the petitioners, that
the latter had accepted such ofer to sell the land and the
improvements thereon.
The Supreme Court agrees with the ruling of the
appellate court that Marquez had no authority to bind
respondent EC to sell the subject properties. A real estate
broker is one who negotiates the sale of real properties. His
business, generally speaking, is only to find a purchaser who
is willing to buy the land upon terms fixed by the owner. He
has no authority to bind the principal by signing a contract of
sale. Indeed, an authority to find a purchaser of real property
does not include an authority to sell.
SECTION TWO

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15

11.
Rallos vs Yangco G.R. No. 6906 (20 Phil
269) September 27, 1911 Justice Moreland
FACTS:
Defendant Yangco sent a letter to Plaintif Rallos on
November 27, 1907 ofering a consignment agreement. In
such letter, Yangco made known that he conferred upon
Florentino Collantes a public power of attorney notarized by
Mr.Perfecto Salas Rodriguez dated November 16, 1907 to
perform in his name and on his behalf all acts necessary for
carrying out his plans.
Accepting this invitation, the plaintifs proceeded to do
a considerable business with the defendant through the said
Collantes, as his factor, sending to him as agent for the
defendant a good deal of produce to be sold on commission.
Later, and in the month of February, 1909, the plaintifs sent
to the said Collantes, as agent for the defendant, 218 bundles
of tobacco in the leaf to be sold on commission, as had been
other produce previously. The said Collantes received said
tobacco and sold it for the sum of P1,744. The charges for
such sale were P206.96. leaving in the hands of said
Collantes the sum of P1,537.08 belonging to the plaintifs.
This sum was apparently, converted to his own use by said
agent.
It appears, however, that prior to the sending of said
tobacco the defendant had severed his relations with
Collantes and that the latter was no longer acting as his
factor. This fact was not known to the plaintifs and it is
conceded in the case that no notice of any kind was given by
the defendant to the plaintifs of the termination of the
relations between the defendant and his agent. The

defendant refused to pay the said sum upon demand of the


plaintifs, placing such refusal upon the ground that at the
time the said tobacco was received and sold by Collantes he
was acting personally and not as agent of the defendant. This
action was brought to recover said sum.
ISSUE: Whether or not Yangco is liable to Rallos for
having failed to notify that Collantes was no longer in
his employ?

RULING:
Yes, Yangco is liable. Having advertised the fact that
Collantes was his agent and having given them a special
invitation to deal with such agent, it was the duty of the
defendant on the termination of the relationship of principal
and agent to give due and timely notice thereof to the
plaintifs. Failing to do so, he is responsible to them for
whatever goods may have been in good faith and without
negligence sent to the agent without knowledge, actual or
constructive, of the termination of such relationship.

12.
Litonjua vs Fernandez G.R. No. 148116
(427 SCRA 478) April 14, 2004 Justice Callejo
Sr.,

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FACTS:
Sometime in September 1995, Mrs. Lourdes Alimario
and Agapito Fisico who worked as brokers, ofered to sell to
the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua,
Jr., the parcels of land covered by TCT Nos. 36754 and
36766. The petitioners were shown a locator plan and copies
of the titles showing that the owners of the properties were
represented by Mary Mediatrix Fernandez and Gregorio T.
Eleosida, respectively. The brokers told the petitioners that
they were authorized by respondent Fernandez to ofer the
property for sale. The petitioners, thereafter, made two
ocular inspections of the property, in the course of which
they saw some people gathering coconuts.
In the afternoon of November 27, 1995, the petitioners
met with respondent Fernandez and the two brokers at the
petitioners ofice in Mandaluyong City. The petitioners and
respondent Fernandez agreed that the petitioners would buy
the property consisting of 36,742 square meters, for the
price of P150 per square meter, or the total sum of
P5,098,500. They also agreed that the owners would
shoulder the capital gains tax, transfer tax and the expenses
for the documentation of the sale. The petitioners and
respondent Fernandez also agreed to meet on December 8,
1995 to finalize the sale.
It was also agreed upon that on the said date,
respondent Fernandez would present a special power of
attorney executed by the owners of the property, authorizing
her to sell the property for and in their behalf, and to execute
a deed of absolute sale thereon. The petitioners would also

remit the purchase price to the owners, through respondent


Fernandez.
However, only Agapito Fisico attended the meeting. He
informed the petitioners that respondent Fernandez was
encountering some problems with the tenants and was trying
to work out a settlement with them. After a few weeks of
waiting, the petitioners wrote respondent Fernandez on
January 5, 1995, demanding that their transaction be
finalized by January 30, 1996. When the petitioners received
no response from respondent Fernandez, the petitioners sent
her another Letter dated February 1, 1996, asking that the
Deed of Absolute Sale covering the property be executed in
accordance with their verbal agreement dated November 27,
1995. The petitioners also demanded the turnover of the
subject properties to them within fifteen days from receipt of
the said letter otherwise, they would have no option but to
protect their interest through legal means.
Respondent Fernandez wrote the petitioners on
February 14, 1996, clarifying that their claims are not true.
On April 2, 1996, the petitioners filed the instant complaint
for specific performance with damages against respondent
Fernandez and the registered owners of the property.
The trial court rendered judgement in favor of
petitioners while the appellate court reversed the decision.
ISSUE: Whether or not the letter signed by Respondent
Fernandez is binding on the registered owners of the
subject properties?
RULING:

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No.The Letter relied upon by the petitioners was signed


by respondent Fernandez alone, without any authority from
the respondents-owners. There is no evidence on record that
the respondents-owners ratified all the actuations of
respondent Fernandez in connection with her dealings with
the petitioners. As such, said letter is not binding on the
respondents as owners of the subject properties.
Article 1878 of the New Civil Code provides that a
special power of attorney is necessary to enter into any
contract, by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable
consideration, or to create or convey real rights over
immovable property, or for any other act of strict dominion.
Any sale of real property by one purporting to be the agent of
the registered owner without any authority therefor in
writing from the said owner is null and void. The declarations
of the agent alone are generally insuficient to establish the
fact or extent of her authority.
In this case, the only evidence adduced by the
petitioners to prove that respondent Fernandez was
authorized by the respondents owners is the testimony of
petitioner Antonio Litonjua that respondent Fernandez
openly represented herself to be the representative of the
respondents owners, and that she promised to present to the
petitioners on December 8, 1996 a written authority to sell
the properties.

13.
Aggabao vs Parulan Jr.G.R. No. 165803
(629 SCRA 562) September 1, 2010 Justice
Bersamin
FACTS:
In January 1991, real estate broker Marta K. Atanacio
ofered the property to spouses Aggabao, who initially did not
show interest due to the rundown condition of the
improvements. But Atanacios persistence prevailed upon
them, so that on February 2, 1991, they and Atanacio met
with Ma. Elena at the site of the property.During their
meeting, Ma. Elena showed to them the owners original copy
of TCT No. 63376, a certified true copy of TCT No. 63377,
three tax declarations, and a copy of the special power of
attorney (SPA) dated January 7, 1991 executed by Dionisio,
authorizing Ma. Elena, to sell the property. Before the
meeting ended, they paid P20, 000.00 as earnest money, for
which Ma. Elena executed a handwritten Receipt of Earnest
Money, whereby the parties stipulated that: (a) they would
pay an additional payment of P130,000.00 on February
4,1991 (b) they would pay the balance of the bank loan of
the respondents amounting to P650,000.00 on or before
February 15, 1991 and (c) they would make the final
payment of P700,000.00 once Ma. Elena turned over the
property on March 31, 1991.
On March 18, 1991, the petitioners delivered the final
amount of P700,000.00 to Ma. Elena, who executed a deed of
absolute sale in their favor. However, Ma. Elena did not
turn over the owners duplicate copy of TCT No. 63376,
claiming that said copy was in the possession of a relative
who was then in Hongkong. She assured them that the

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owners duplicate copy of TCT No. 63376 would be turned


over after a week.
On March 19, 1991, TCT No. 63377 was cancelled and
a new one was issued in the name of the petitioners. Ma.
Elena did not turn over the duplicate owners copy of TCT
No. 63376 as promised. In due time, the petitioners learned
that the duplicate owners copy of TCT No. 63376 had been
all along in the custody of Atty. Jeremy Z. Parulan, who
appeared to hold an SPA executed by his brother Dionisio
authorizing him to sell both lots. At Atanacios instance, the
petitioners met on March 25, 1991 with Atty. Parulan at the
Manila Peninsula. For that meeting, they were accompanied
by one Atty. Olandesca. They recalled that Atty. Parulan
smugly demanded P800,000.00 in exchange for the duplicate
owners copy of TCT No. 63376, because Atty. Parulan
represented the current value of the property to be P1.5
million. As a counterofer, however, they tendered
P250,000.00, which Atty. Parulan declined, giving them only
until April 5, 1991 to decide.
Hearing nothing more from the petitioners, Atty.
Parulan decided to call them on April 5,
1991, but they informed him that they had already fully paid
to Ma. Elena.
Thus, on April 15, 1991, Dionisio, through Atty. Parulan,
commenced an action, praying for the declaration of the
nullity of the deed of absolute sale executed by Ma. Elena,
and the cancellation of the title issued to the petitioners by
virtue thereof.

The RTC ruled in favor of Plaintif Parulan and declared


the sale of both lots null and void, declaring that the SPA in
the hands of Elena was a forgery. The CA afirmed the
decision of the RTC.
ISSUE: Whether or not the sale of the conjugal party
executed without the consent of Dionisio valid on the
ground that his power of administration had been
delegated to his brother through an SPA?
RULING:
No, the sale is not valid. The petitioners failed to
substantiate their contention that Dionisio, while holding the
administration over the property, had delegated to his
brother, Atty. Parulan, the administration of the property,
considering that they did not present in court the SPA
granting to Atty. Parulan the authority for the administration.
Nonetheless, the Supreme court stress that the power
of administration does not include acts of disposition or
encumbrance, which are acts of strict ownership. As such, an
authority to dispose cannot proceed from an authority to
administer, and vice versa, for the two powers may only be
exercised by an agent by following the provisions on agency
of the Civil Code (from Article 1876 to Article 1878).
Specifically, the apparent authority of Atty. Parulan, being a
special agency, was limited to the sale of the property in
question, and did not include or extend to the power to
administer the property.

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19

14.
Dominion Insurance Corp. vs CAG.R. No.
129919 (376 SCRA 239) February 6, 2002
Justice Pardo
FACTS:
On January 25, 1991, plaintif Rodolfo S. Guevarra
instituted Civil Case No. 8855 for sum of money against
defendant Dominion Insurance Corporation. Plaintif sought
to recover thereunder the sum of P156, 473.90 which he
claimed to have advanced in his capacity as manager of
defendant to satisfy certain claims filed by defendants
clients. In its traverse, defendant denied any liability to
plaintif and asserted a counterclaim for P249, 672.53,
representing premiums that plaintif allegedly failed to remit.
The terms of the agreement read:
That
we,
FIRST
CONTINENTAL
ASSURANCE
COMPANY, INC., a
corporation duly organized and
existing under and by virtue of the laws ofthe Republic
of
the Philippines, xxx represented by the undersigned as
Regional
Manager, xxx do hereby appoint RSG
Guevarra Insurance
Services represented by
Mr.
Rodolfo Guevarra xxx to be our Agency Manager in San Fdo.,
for our
place and stead, to do and perform the following
acts and things:
1. To conduct, sign, manager (sic), carry on and
transact Bonding and Insurance business as usually pertain
to a Agency Ofice, or FIRE, MARINE,
MOTOR
CAR,
PERSONAL ACCIDENT, and BONDING with the right, upon

our

prior written consent, to appoint agents and


subagents.
2. To accept, underwrite and subscribed (sic) cover
notes or Policies of
Insurance and Bonds for and on our
behalf.
3. To demand, sue, for (sic) collect, deposit, enforce
payment, deliver and transfer for and receive and give
efectual receipts and discharge for all money to which the
FIRST CONTINENTAL ASSURANCE
COMPANY,
INC.,
may hereafter become due, owing payable or transferable
to said Corporation by reason of or in connection with the
abovementioned appointment.
4. To receive notices, summons, and legal processes for
and in behalf of the FIRST CONTINENTAL ASSURANCE
COMPANY, INC., in
connection with actions and all legal
proceedings against the said Corporation.
Respondent Guevarras authority to settle claims is
embodied
in
the
Memorandum
of
Management
Agreement[23] dated February 18, 1987 which enumerates
the scope of respondent Guevarras duties and responsibilities
as agency manager for San Fernando, Pampanga, as follows:
1. You are hereby given authority to settle and dispose of all
motor car claims in the amount of P5,000.00 with prior
approval of the Regional Ofice.2. Full authority is given you
on TPPI claims settlement.Respondent Guevarras authority
is further limited by the written standard authority to pay,
which states that the payment shall come from respondent
Guevarras revolving fund or collection.

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ISSUE:Whether or not respondent Guevarra acted


within his authority as agent for petitioner in
accordance with the Special Power of Attorney?
RULING:
No. A perusal of the Special Power of Attorney would
show that petitioner (represented by third-party defendant
Austria) and respondent Guevarra intended to enter into a
principal-agent relationship. Despite the word special in the
title of the document, the contents reveal that what was
constituted was actually a general agency
The agency comprises all the business of the principal,
but, couched in general terms, it is limited only to acts of
administration. A general power permits the agent to do all
acts for which the law does not require a special power. Thus,
the acts enumerated in or similar to those enumerated in the
Special Power of Attorney do not require a special power of
attorney.
The payment of claims is not an act of administration.
The settlement of claims is not included among the acts
enumerated in the Special Power of Attorney, neither is it of a
character similar to the acts enumerated therein. A special
power of attorney is required before respondent Guevarra
could settle the insurance claims of the insured.
Respondent Guevarra was authorized to pay the claim
of the insured, but the payment shall come from the
revolving fund or collection in his possession. Having
deviated from the instructions of the principal, the expenses
that respondent Guevarra incurred in the settlement of the

claims of the insured may not be reimbursed from petitioner


Dominion.
15.
Veloso vs CA G.R. No. 102737 (260 SCRA
593) August 21, 1996 Justice Torres Jr.
FACTS:
Petitioner Francisco Veloso was the owner of a parcel
of land situated in the district of Tondo, Manila, with an area
of one hundred seventy seven (177) square meters and
covered by Transfer Certificate of Title No. 49138 issued by
the Registry of Deeds of Manila. The title was registered in
the name of Francisco A. Veloso, single, on October 4, 1957.
The said title was subsequently canceled and a new one,
Transfer Certificate of Title No. 180685, was issued in the
name of Aglaloma B. Escario, married to Gregorio L. Escario,
on May 24, 1988.
On August 24, 1988, petitioner Veloso filed an action
for annulment of documents, reconveyance of property with
damages and preliminary injunction and/or restraining order.
The complaint, docketed as Civil Case No. 8845926, was
raffled to the Regional Trial Court, Branch 45, Manila.
Petitioner alleged therein that he was the absolute owner of
the subject property and he never authorized anybody, not
even his wife, to sell it. He alleged that he was in possession
of the title but when his wife, Irma, left for abroad, he found
out that his copy was missing. He then verified with the
Registry of Deeds of Manila and there he discovered that his
title was already canceled in favor of defendant Aglaloma
Escario. The transfer of property was supported by a General

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Power of Attorney dated November 29, 1985 and Deed of


Absolute Sale, dated November 2, 1987, executed by Irma
Veloso, wife of the petitioner and appearing as his
attorneyinfact, and defendant Aglaloma Escario.
Petitioner Veloso, however, denied having executed the
power of attorney and alleged that his signature was
falsified. He also denied having seen or even known
Rosemarie Reyes and Imelda Santos, the supposed witnesses
in the execution of the power of attorney. He vehemently
denied having met or transacted with the defendant. Thus, he
contended that the sale of the property, and the subsequent
transfer thereof, were null and void. Petitioner Veloso,
therefore, prayed that a temporary restraining order be
issued to prevent the transfer of the subject property that
the General Power of Attorney, the Deed of Absolute Sale and
the Transfer Certificate of Title No. 180685 be annulled and
the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that
she was a buyer in good faith and denied any knowledge of
the alleged irregularity. She allegedly relied on the general
power of attorney of Irma Veloso which was suficient in form
and substance and was duly notarized. She contended that
plaintif (herein petitioner), had no cause of action against
her. In seeking for the declaration of nullity of the
documents, the real party in interest was Irma Veloso, the
wife of the plaintif. She should have been impleaded in the
case. In fact, Plaintifs cause of action should have been
against his wife, Irma.
ISSUE: Whether or not the general power of attorney is
valid and regular on its face?

RULING:
Yes. An examination of the records showed that the
assailed power of attorney was valid and regular on its face.
It was notarized and as such, it carries the evidentiary weight
conferred upon it with respect to its due execution. While it
is true that it was denominated as a general power of
attorney, a perusal thereof revealed that it stated an
authority to sell.
Thus, there was no need to execute a separate and
special power of attorney since the general power of attorney
had expressly authorized the agent or attorney in fact the
power to sell the subject property. The special power of
attorney can be included in the general power when it is
specified therein the act or transaction for which the special
power is required.
Whether the instrument be denominated as general
power of attorney or special power of attorney, what matters
is the extent of the power or powers contemplated upon the
agent or attorney in fact. If the power is couched in general
terms, then such power cannot go beyond acts of
administration. However, where the power to sell is specific,
it not being merely implied, much less couched in general
terms, there can not be any doubt that the attorney in fact
may execute a valid sale. An instrument may be captioned as
special power of attorney but if the powers granted are
couched in general terms without mentioning any specific
power to sell or mortgage or to do other specific acts of strict
dominion, then in that case only acts of administration may
be deemed conferred.

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22

16.
Pineda vs CA G.R. No. 105562 (226 SCRA
754) September 27, 1993 Justice Davide Jr.
FACTS:
On 23 September 1983, Prime Marine Services, Inc., a
crewing/manning outfit, procured Group PoIicy No. G004694
from respondent-appellant Insular Life Assurance Co., Ltd. to
provide life insurance coverage to its sea-based employees
enrolled under the plan. On 17 February 1986, during the
efectivity of the policy, six covered employees of the PMSI
perished at sea when their vessel, M/V Nemos, a Greek cargo
vessel, sunk somewhere in El Jadida, Morocco. They were
survived by complainants-appellees, the beneficiaries under
the policy.
Following the tragic demise of their loved ones,
complainants-appellees sought to claim death benefits due
them and, for this purpose, they approached the President
and General Manager ofPMSI, Capt. Roberto Nuval. Capt.
Nuval evinced willingness to assist complainants-appellees to
recover Overseas Workers Welfare Administration (OWWA)
benefits from the POEA and to work for the increase of their
PANDIMAN and other benefits arising from the deaths of
their husbands/sons. They were thus made to execute, with
the exception of the spouses Alarcon, special powers of
attorney authorizing Capt. Nuval to, among others, "follow
up, ask, demand, collect and receive" for their benefit
indemnities of sums of money due them relative to the
sinking of M/V Nemos. By virtue of these written powers of
attorney, complainants-appellees were able to receive their
respective death benefits. Unknown to them, however, the

PMSI, in its capacity as employer and policyholder of the life


insurance of its deceased workers, filed with respondentappellant formal claims for and in behalf of the beneficiaries,
through its President, Capt. Nuval. Among the documents
submitted by the latter for the processing of the claims were
five special powers of attorney executed by complainantsappellees.
On the basis of these and other documents duly
submitted, respondent-appellant drew against its account
with the Bank of the Philippine Islands on 27 May 1986 six
(6) checks, four for P200,00.00 each, one for P50,000.00 and
another for P40,00.00, payable to the order of complainantsappellees. These checks were released to the treasurer of
PMSI upon instructions of Capt. Nuval over the phone to Mr.
Mariano Urbano, Assistant Department Manager for Group
Administration Department of respondent-appellant. Capt.
Nuval, upon receipt of these checks from the treasurer, who
happened to be his son-in-law, endorsed and deposited them
in his account with the Commercial Bank of Manila, now
Boston Bank.
On 3 July 1989, after complainants-appellees learned
that they were entitled, as beneficiaries, to life insurance
benefits under a group policy with respondent-appellant, they
sought to recover these benefits from Insular Life but the
latter denied their claim on the ground that the liability to
complainants-appellees was already extinguished upon
delivery to and receipt by PMSI of the six (6) checks issued in
their names.
ISSUE: Whether or not the power of attorney relied
upon by Insular Life sufficient to convey absolute

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authority to Capt. Nuval to collect the insurance


proceeds?
RULING:
No. The special powers of attorney "do not contain in
unequivocal and clear terms authority to Capt. Nuval to
obtain, receive, receipt from respondent company insurance
proceeds arising from the death of the seaman-insured. On
the contrary, the said powers of attorney are couched in
terms which could easily arouse suspicion of an ordinary
man."
There is nothing in the law which mandates a specific
or special power of attorney to be executed to collect
insurance proceeds. Such authority is not included in the
enumeration of Art. 1878 of the New Civil Code. Neither does
the Supreme Court perceive collection of insurance claims as
an act of strict dominion as to require a special power of
attorney.
The person dealing with an agent must also act with
ordinary prudence and reasonable diligence. Obviously, if he
knows or has good reason to believe that the agent is
exceeding his authority, he cannot claim protection. So if the
suggestions of probable limitations be of such a clear and
reasonable quality, or if the character assumed by the agent
is of such a suspicious or unreasonable nature, or if the
authority which he seeks to exercise is of such an unusual or
improbable character, as would sufice to put an ordinarily
prudent man upon his guard, the party dealing with him may
not shut his eyes to the real state of the case, but should

either refuse to deal with the agent at all, or should ascertain


from the principal the true condition of afairs.
17.
DOMINION INSURANCE CORPORATION VS.
CA G. R. NO. 129919, FEBRUARY 6, 2002
FACTS:
On January 25, 1991, plaintif Rodolfo S. Guevarra
instituted Civil Case No. 8855 for sum of money against
defendant Dominion Insurance Corporation. Plaintif sought
to recover thereunder the sum of P156,473.90 which he
claimed to have advanced in his capacity as manager of
defendant to satisfy certain claims filed by defendants
clients.
The Special Power of Attorney executed between the
petitioner, represented by third-party defendant Austria, and
respondent Gueverra intended to enter into a principal-agent
relationship.
The terms of the agreement read that the First Continental
Assurance Company, Inc appointed RSG Guevarra Insurance
Services represented by Mr. RodolfoGuevarra xxx to be our
Agency Manager in San Fdo., for our place and stead, to do
and perform the following acts and things:
to conduct, sign, manager (sic), carry on and transact
bonding and insurance business as usually pertain to a
agency office, or fire, marine, motor car, personal accident,
and bonding with the right, upon our prior written consent,
to appoint agents and sub-agents.

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to accept, underwrite and subscribed (sic) cover notes or


policies of insurance and bonds for and on our behalf. to
demand, sue, for (sic) collect, deposit, enforce payment,
deliver and transfer for and receive and give effectual
receipts and discharge for all money to which the company
may hereafter become due, owing payable or transferable to
said corporation by reason of or in connection with the
above-mentioned appointment. to receive notices, summons,
and legal processes for and in behalf of the first continental
assurance company, inc., in connection with actions and all
legal proceedings against the said corporation.
The trial court rendered judgement in favor of Rodolfo
S. Guevarra.
The Court of Appeals promulgated a decision afirming
that of thetrial court.
ISSUE: Whether respondent Guevarra acted within his
authority as agent for petitioner?
RULING:
No. Even though the contact entered into by Guevarra
and Dominion was with the word special the contents of
the document was actually a general agency. A general power
permits the agent to do all acts for which the law does not
require a special power and the contents in the document did
not require a special power of attorney.
Art 1878 of the civil code provides instances when a
special power of attorney is required.: 1) To make such
payment as are not usually considered as acts of
administration. 2) Any other act of dominion.

The payment of claims is not an act of administration


which requires a special power of attorney before Guevarra
could settle the insurance claims of the insured.
Also Guevarra was instructed that the payment for the
insured must come from the revolving fund or collection in
his possession, Gueverra should not have paid the insured
through his own capacity.
Under 1918 of civil code an agent who acted in
contravention of the principals instruction the principal will
not be liable for the expenses incurred by the agent.
Although a Special Power of Attorney was issued by the
insurance company to its agency manager, it wordings show
that it sought only to establish an agency that comprises all
the business of the principal within the designated locality,
but couched in general terms, and consequently was limited
only to acts of administration.
A general power permits the agent to do all acts for
which the law does not require a special power. Thus, the
acts enumerated in or similar to those enumerated in the
Special Power of Attorney (i.e., really a general power of
attorney) did not require a special power of attorney, and
could only cover acts of administration.
In the case of the area manager of an insurance
company, it was held that the payment of claims is not an act
of administration, and that since the settlement of claims was
not included among the acts enumerated in the Special
Power of Attorney issued by the insurance company, nor is of
a character similar to the acts enumerated therein, then a

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

25

special power of attorney was required before such area


manager could settle the insurance claims of the insured.
Consequently, the amounts paid by the area manager to
settle such claims cannot be reimbursed from the principal
insurance company.

authority to compromise, assured the court that though he


had no written authority, he had such authority verbally given
by the plaintif. On the same day, the court dismissed the
case for failure of the plaintif to appear at the pre-trial
conference.

18.
HOME INSURANCE CO. VS. USL, GR L25593, 15 NOVEMBER 1967

ISSUE: Whether or not the lower court correctly


dismiss the case for failure of the plaintiff to appear at
the pre-trial conference who allegedly gave his attorney
a verbal authority to compromise?

FACTS:
Sometime in 1964, SS "Pioneer Moon" arrived in
Manila and discharged unto the custody of the Bureau of
Customs, as arrastre operator, two hundred (200) cartons of
carbonized adding machine rolls consigned to Burroughs,
Limited. When the cargo was delivered to the consignee,
however, several cartons were damaged.
The consignee claimed the P2,605.64 worth of damage
from the Bureau of Customs, the United Lines Company
owner of the vessel, and the Home Insurance Company which
had insured the cargo. The latter paid the claim and
demanded reimbursement from either arrastre operator or
the carrier.
When both rejected the claim, the Home Insurance Company
filed an action against the Republic of the Philippines, the
Bureau of Customs and the United States Lines, in the
alternative, for the recovery of P2,605.64, with interest plus
costs.
On the date set for pre-trial, only the counsel for the
plaintif appeared, who upon being asked for written

RULING:
YES. The lower court was correct in dismissing the
case. True, said counsel asserted that he had verbal authority
to compromise the case. The Rules, however, require, for
attorneys to compromise the litigation of their clients, a
special authority (Section 23, Rule 138, Rules of Court).
And while the same does not state that the special
authority be in writing, the court has every reason to expect,
that, if not in writing, the same be duly established by
evidence other than the self-serving assertion of counsel
himself that such authority was verbally given to him.
For, authority to compromise cannot lightly be
presumed. And if, with good reason, the judge is not satisfied
that said authority exists, as in this case, dismissal of the suit
for non-appearance of plaintif in pre-trial is sanctioned by
the Rules. The dismissal should therefore be sustained in
toto, with respect to all the defendants.

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26

19.
ESTATE OF LIANO OLAGUER VS. ONGJOCO,
GR NO. 173312
26 AUGUST 2008
FACTS:
The plaintifs Sor Mary Edith Olaguer, Aurora O. de
Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O.
Montayre are the legitimate children of the spouses Lino
Olaguer and defendant Olivia P. Olaguer. Lino Olaguer died
on October 3, 1957 so Special Proceedings No. 528 for
probate of will was filed in the then Court of First Instance of
Albay. Defendant Olivia P. Olaguer was appointed as
administrator pursuant to the will. Later, defendant Eduardo
Olaguer was appointed as coadministrator. On October 15,
1959 defendant Olivia P. Olaguer got married to defendant
Jose A. Olaguer before the then Justice of the Peace of Sto.
Domingo (Libog) Albay. On January 24, 1965 they were
married in church.
In the order of the probate court dated April 4, 1961,
some properties of the estate were authorized to be sold to
pay obligations of the estate.
Relying upon the order, but without prior notice or
permission from the Probate Court, defendants Olivia P.
Olaguer and Eduardo Olaguer on November 1, 1965 sold to
Estanislao Olaguer 10 parcels of land. The sale to was
approved by the Probate Court on November 12, 1965.
On July 7, 1966, defendant Olivia P. Olaguer executed a
Special Power of Attorney in favor of defendant Jose A.
Olaguer, authorizing the latter to "sell, mortgage, assign,
transfer, endorse and deliver" of 6 properties.

On the same date, Estanislao Olaguer executed a


Special Power of Attorney in favor of Jose A. Olaguer
authorizing the latter to "sell, mortgage, assign, transfer,
endorse and deliver" the 9 properties.
By virtue of this Special Power of Attorney, on March 1,
1967, Jose A. Olaguer as Attorney-in-Fact of Estanislao
Olaguer mortgaged Lots 7589, 7593 and 7396 to defendant
PNB as security for a loan of 10,000 Pesos. The mortgage
was foreclosed by the PNB on June 13, 1973 and the
properties mortgage were sold at public auction to PNB. On
December 10, 1990, the PNB transferred the properties to
the Republic of the Philippines pursuant to Exec. Order No.
407 dated June 14, 1990 for agrarian reform purposes.
On October 29, 1966, Estanislao Olaguer executed a
General Power of Attorney in favor of Jose A. Olaguer,
authorizing the latter to exercise general control and
supervision over all of his business and properties, and
among others, to sell or mortgage any of his properties.
On December 29, 1966, Estanislao Olaguer sold to Jose A.
Olaguer for 15,000 the 10 parcels of land he bought from
Olivia P. Olaguer and Eduardo Olaguer.
On March 16, 1968, Estanislao Olaguer sold to Jose A.
Olaguer for 1 Peso and other valuable consideration 2 parcels
of land which have a total area of 2.5 hectares.
On June 5, 1968, Estanislao Olaguer sold another 2 lots
to Jose A. Olaguer for 1 Peso and other valuable
consideration.
On May 13, 1971, Jose A. Olaguer in his capacity as Attorney
in-Fact of Estanislao Olaguer sold to his son Virgilio Olaguer
for 1 Peso and other valuable consideration.

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On July 15, 1974, Jose A. Olaguer sold to his son


Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for 1,000
Pesos.
On September 16, 1978 Virgilio Olaguer executed a General
Power of Attorney in favor of Jose A. Olaguer authorizing the
latter to exercise general control and supervision over all of
his business and properties and among others, to sell or
mortgage the same.
Olivia P. Olaguer and Eduardo Olaguer were removed
as administrators of the estate and on February 12, 1980,
plaintif Ma. Linda Olaguer Montayre was appointed
administrator by the Probate Court.
The decedent Lino Olaguer have had three marriages.
He was first married to Margarita Ofemaria who died April 6,
1925. His second wife was Gloria Buenaventura who died on
July 2, 1937. The third wife was the defendant Olivia P.
Olaguer.
Jose Olaguer acting upon the general power of attorney
sold 8 parcels of land to Emilio Ongjoco.
On 28 January 1980, the Estate of Lino Olaguer filed an
action for the Annulment of Sales of Real Property and/or
Cancellation of Titles in the then Court of First Instance of
Albay. The plaintifs therein alleged that the sales of the
following properties belonging to the Estate of Lino Olaguer
to Estanislao Olaguer were absolutely simulated or fictitious,
the plaintifs likewise prayed that the resulting Transfer
Certificates of Title issued to Jose Olaguer, Virgilio Olaguer,
Cipriano Duran and the PNB be annulled.

ISSUE: Whether General Power of Attorney was


sufficient to effect the sale of the subject properties?
RULING:
Yes, the general power of attorney was suficient The
Supreme Court held that while the law requires a special
power of attorney, the general power of attorney was
suficient in this case, as Jose A. Olaguer was expressly
empowered to sell any of Virgilio's properties; and to sign,
execute, acknowledge and deliver any agreement therefor.
As regards Lots Nos. 76D, 76E, 76F and 76G, Ongjoco
was able to present a general power of attorney that was
executed by Virgilio Olaguer. While the law requires a special
power of attorney, the general power of attorney was
suficient in this case, as Jose A. Olaguer was expressly
empowered to sell any of Virgilio'sproperties and to sign,
execute,
acknowledge
and
deliver
any
agreement
therefor.Even if a document is designated as a general power
of attorney, the requirement of a special power of attorney is
met if there is a clear mandate from the principal specifically
authorizing the performance of the act.
The special power of attorney can be included in the
general power when the act or transaction for which the
special power is required is specified therein.
On its face, the written power of attorney contained the
signature of Virgilio Olaguer and was duly notarized. As
such, the same is considered a public document and it has in
its favor the presumption of authenticity and due execution,

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

28

which can only be contradicted by clear and convincing


evidence.
According to the provisions of Article 1874of the Civil
Code on Agency, when the sale of a piece of land or any
interest therein is made through an agent, the authority of
the latter shall be in writing. Absent this requirement, the
sale shall be void. Also, under Article 1878,a special power of
attorney is necessary in order for an agent to enter into a
contract by which the ownership of an immovable property is
transmitted or acquired, either gratuitously or for a valuable
consideration.
20.
LITONJUA VS. FERNANDEZ, GR NO. 148116,
14 APRIL 2004
FACTS:
Sometime in September 1995, Mrs. Lourdes Alimario
and Agapito Fisico who worked as brokers, ofered to sell to
the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua,
Jr., the parcels of land covered by TCT Nos. 36754 and
36766. The petitioners were shown a locator plan and copies
of the titles showing that the owners of the properties were
represented by Mary Mediatrix Fernandez and Gregorio T.
Eleosida, respectively.
The brokers told the petitioners that they were
authorized by respondent Fernandez to ofer the property for
sale. The petitioners, thereafter, made two ocular inspections
of the property, in the course of which they saw some people
gathering coconuts.

In the afternoon of November 27, 1995, the petitioners


met with respondent Fernandez and the two brokers at the
petitioners ofice in Mandaluyong City.The petitioners and
respondent Fernandez agreed that the petitioners would buy
the property consisting of 36,742 square meters, for the
price of P150 per square meter, or the total sum of
P5,098,500. They also agreed that the owners would
shoulder the capital gains tax, transfer tax and the expenses
for the documentation of the sale. The petitioners and
respondent Fernandez also agreed to meet on December 8,
1995 to finalize the sale.
It was also agreed upon that on the said date,
respondent Fernandez would present a special power of
attorney executed by the owners of the property, authorizing
her to sell the property for and in their behalf, and to execute
a deed of absolute sale thereon. The petitioners would also
remit the purchase price to the owners, through respondent
Fernandez.
However, only Agapito Fisico attended the meeting. He
informed the petitioners that respondent Fernandez was
encountering some problems with the tenants and was trying
to work out a settlement with them. After a few weeks of
waiting, the petitioners wrote respondent Fernandez on
January 5, 1995, demanding that their transaction be
finalized by January 30, 1996.
ISSUE: Whether or not the letter signed by Fernandez
alone without any authority from the respondentsowners binding on the latter as owners of the subject
properties?
RULING:

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No. In this case, we agree with the findings of the


appellate court that there was no perfected contract of sale
between the respondents-owners, as sellers, and the
petitioners, as buyers. There is no documentary evidence on
record that the respondents-owners specifically authorized
respondent Fernandez to sell their properties to another,
including the petitioners.
Article 1878 of the New Civil Code provides that a
special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable
consideration or to create or convey real rights over
immovable property, or for any other act of strict dominion.
Any sale of real property by one purporting to be the agent of
the registered owner without any authority therefor in
writing from the said owner is null and void. The declarations
of the agent alone are generally insuficient to establish the
fact or extent of her authority.
In this case, the only evidence adduced by the
petitioners to prove that respondent Fernandez was
authorized by the respondents-owners is the testimony of
petitioner Antonio Litonjua that respondent Fernandez
openly represented herself to be the representative of the
respondents-owners, and that she promised to present to the
petitioners on December 8, 1996 a written authority to sell
the properties.
The settled rule is that persons dealing with an
assumed agent are bound at their peril, and if they would
hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in

case either is controverted, the burden of proof is upon them


to prove it. In this case, respondent Fernandez specifically
denied that she was authorized by the respondents-owners to
sell the properties, both in her answer to the complaint and
when she testified. The Letter dated January 16, 1996 relied
upon by the petitioners was signed by respondent Fernandez
alone, without any authority from the respondents-owners.
There is no evidence on record that the respondentsowners ratified all the actuations of respondent Fernandez in
connection with her dealings with the petitioners. As such,
said letter is not binding on the respondents as owners of the
subject properties.
21.
BAUTISTA VS. SPOUSES JALANDONI, GR
NO. 171464, 27 NOVEMBER 2013
FACTS:
In May 1997, the Spouses Jalandoni applied for a loan
with a commercial bank and, as a security thereof, they
ofered to constitute a real estate mortgage over the two lots
they were allegedly the absolute owners of.
After a routine credit investigation, it was discovered that
their titles over the two lots had been cancelled and new
TCTs were issued in the names of Spouses Baustista. Upon
further investigation, they found out that the bases for the
cancellation of their titles were two deeds of absolute sale,7
dated April 4, 1996 and May 4, 1996, purportedly executed
and signed by them in favor of Spouses Baustista.

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Spouses Bautista claimed that in March 1996, a certain


Teresita Nasino (Nasino) ofered to Eliseo Baustista (Eliseo)
two parcels of land located in Muntinlupa City; that the
parcels of land were sold at a bargain price because the
owners were in dire need of money; that upon their request,
Nasino showed them the photocopies of the titles covering
the subject lands; that Nasino told them that she would
negotiate with the Spouses Jalandoni, prepare the necessary
documents and cause the registration of the sale with the
Register of Deeds; and that since Nasino was a wife of a
friend, Spouses Baustista trusted her and gave her the
authority to negotiate with Spouses Jalandoni on their behalf.
On December 17, 2004, the RTC rendered judgment
declaring the sale of the subject lots void.
The RTC explained that Nasino had no authority to
negotiate for the Spouses Jalandoni, much less to receive the
consideration of the sale. Spouses Bautista were not innocent
purchasers in good faith and for value for their failure to
personally verify the original copies of the titles of the
subject properties and to ascertain the authority of Nasino
since they were not dealing with the registered owner.
The RTC, nonetheless, found MCC a mortgagee in good
faith and upheld the validity of the mortgage contract
between Spouses Bautista and MCC.
ISSUE: Whether or not Nasino has the authority to
negotiate for the Spouses Jalandoni in the contract of
sale made to Spouses Bautista?

RULING:
No. Article 1874 and Aritcle 1875 (5) explicitly require
a written authority when the sale of a piece of land is through
an agent, whether the sale is gratuitously or for a valuable
consideration.
Articles 1874 of the Civil Code provides: When a sale of a
piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale
shall be void.
Likewise, A1iicle 1878 paragraph 5 of the Civil Code
specifically mandates that the authority of the agent to sell a
real property must be conferred in writing, to wit:
Art. 1878. Special powers of attorney are necessary in the
following cases:
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or
for a valuable consideration;
Absent such authority in writing, the sale is null and
void.
In the case at bar, it is undisputed that the sale of the
subject lots to Spouses Bautista was void. Based on the
records, Nasino had no written authority from Spouses
Jalandoni to sell the subject lots. The testimony of Eliseo that
Nasino was empowered by a special power of attorney to sell
the subject lots was bereft of merit as the alleged special
power attorney was neither presented in co urt nor was it
referred to in the deeds of absolute sale. Bare allegations,
unsubstantiated by evidence, are not equivalent to proof
under the Rules of Court.

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In additon Spouses Bautista cannot be deemed


purchasers in good faith. There were several circumstances
that should have placed them on guard and prompted them
to conduct an investigation that went beyond the face of the
title of the subject lots. Their failure to take the necessary
steps to determine the status ofthe subject lots and the
extent of Nasinos authority puts them into bad light.
Spouses Bautistas claim of good faith is negated by
their failure to verify the extent and nature of Nasinos
authority. Since Spouses Bautista did not deal with the
registered owners but with Nasino, who merely represented
herself to be their agent, they should have scrutinized all
factual circumstances necessary to determine her authority
to insure that there are no flaws in her title or her capacity to
transfer the land.They should not have merely relied on her
verbal representation that she was selling the subject lots on
behalf of Spouses Jalandoni.
Moreover, Eliseos claim that he did not require Nasino
to give him a copy of the special power of attorney because
he trusted her is unacceptable. Well settled is the rule that
persons dealing with an assumed agency are bound at their
peril, if they would hold the principal liable, to ascertain not
only the fact of agency but also the nature and extent
ofauthority, and in case either is controverted, the burden of
proof is upon them to establish it.
As stated, Spouses Bautistas failure to observe the
required degree of caution in ascertaining the genuineness
and extent of Nasinos authority is tantamount to bad faith
that precludes them from claiming the rights of a purchaser
in good faith.

22.
GUTIERREZ HERMANOS VS. ORENSE, GR
NO. L-9188 04 DECEMBER 1914
FACTS:
On and before Februaru 14, 1907, Engracio Orense had
been the owner of a parcel of land in Guinobatan, Albay.
On February 14, 1907, Jose Duran, a nephew of Orense,
sold the property for P1,500 to Gutierrez Hermanos, with
Orenses knowledge and consent, executed before a notary a
public instrument. The said public instrument contained a
provision giving Duran the right to repurchase it for the same
price within a period of four years from the date of the said
instrument.
Orense continued occupying the land by virtue of a contract
of lease. After the lapse of four years, Gutierrez asked
Orense to deliver the property to the company and to pay
rentals for the use of the property.
Orense refused to do so. He claimed that the sale was
void because it was done without his authority and that he
did not authorize his nephew to enter into such contract.
During trial, Orense was presented as witness of the
defense. He states that the sale was done with his knowledge
and consent. Because of such testimony, it was ascertained
that he did give his nephew, Duran, authority to convey the
land. Duran was acquitted of criminal charges and the
company demanded that Orense execute the proper deed of
conveyance of the property.

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ISSUE: Whether or not Orense is bound by Durans act


of selling the formers property?
RULING:
Yes. It was proven during trial that he gave his consent
to the sale. Such act of Orense impliedly conferred to Duran
the power of agency. The principal must therefore fulfill all
the obligations contracted by the agent, who acted within the
scope of his jurisdiction.
Where the nephew in his own name sold a parcel of land with
a masonry house constructed thereon to the company, when
in fact it was property owned by the uncle, but in the estafa
case filed by the company against the nephew, the uncle
swore under oath that he had authorized his nephew to sell
the property, the uncle can be compelled in the civil action to
execute the deed of sale covering the property.
It having been proven at the trial that he gave his
consent to the said sale, it follows that the defendant
conferred verbal, or at least implied, power of agency upon
his nephew Duran, who accepted it in the same way by
selling the said property.
The principal must therefore fulfill all the obligations
contracted by the agent, who acted within the scope of his
authority.

23.
COSMIC LUMBER CORPORATION
and PEREZ,
G.R. No. 114311 November 29, 1996

vs.

CA

FACTS:
Cosmic Lumber Corporation through its General Manager
executed on 28 January1985 a Special Power of Attorney appointing
Paz G. Villamil-Estrada as attorney-in-fact among others to initiate,
institute and file any court action for the ejectment of third persons
and/or squatters of the entire lot 9127 and 443 and covered by TCT
Nos. 37648 and 37649, for the said squatters to remove their houses
and vacate the premises in order that the corporation may take
material possession of the entire lot, and for this purpose, to
appear at the pre-trial conference and enter into any stipulation of
facts and or compromise agreement so far as it shall protect the
rights and interest of the corporation in the aforementioned lots.
On 11 March 1985, Paz G. Villamil-Estrada, by virtue of her
power of attorney, instituted an action for the ejectment of private
respondent Isidro Perez and recover the possession of a portion of Lot
No. 443.
On November 25, 1985 Villamil-Estrada entered into a
Compromise Agreement with
respondent Perez
and on November
27, 1985 the "Compromise Agreement"
was approved by the trial court and judgment was rendered in
accordance
the
terms.
Although the decision became final and executor, it was not executed
within the 5-year period from date of its finality allegedly due to the
failure of petitioner to produce the owner's duplicate copy of Title No.
37649 needed to segregate from Lot No. 443 which is the portion
sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private
respondent under the compromise agreement. Thus on January 25,
1993 respondent filed a complaint to revive the judgment, docketed

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as CivilCase No. D-10459 Petitioner asserts that it was only when the
summons in Civil Case No. D-10459 for the revival of judgment was
served upon it that it came to know of the compromise agreement
entered into between Paz G. Villamil-Estrada and respondent Isidro
Perez upon which the trial court based its decision of 26 July 1993 in
Civil Case No. D-7750. Forthwith, upon learning of the fraudulent
transaction, petitioner sought annulment of the decision of the trial
court before respondent Court of Appeals on the ground that the
compromise agreement was void.

ISSUE:Whether Villamil-Estrada exceeded her authority as


specified in the SPA?
RULING:
The authority granted Villamil-Estrada under the special power
of attorney was explicit and exclusionary. The alienation by sale of an
immovable certainly cannot be deemed protective of the right of
petitioner more so when the land was being sold for a price of
P80.00per square meter, much less than its assessed value of
P250.00 per square meter, which was not even received by the
corporation.
When the sale of a piece of land or any interest thereon is
through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void. Thus the authority of an agent to
execute a contract for the sale of real estate must be conferred in
writing and must give him specific authority. A special power of
attorney is necessary to enter into any contract by which the
ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration. The express mandate
required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a

sale or that includes a sale as a necessary ingredient of the act


mentioned. For the principal to confer the right upon an agent to sell
real estate, a power of attorney must so express the powers of the
agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no
such construction shall be given the document. It is therefore clear
that by selling to respondent Perez a portion of petitioner's land
through a compromise agreement,Villamil-Estrada acted without or
in obvious authority. The saleIp so jureis consequently void. So is the
compromise agreement. This being the case, the judgment based
thereon is necessarily void. Antipodal to the opinion expressed by
respondent court in resolving petitioner's motion for reconsideration,
the nullity of the settlement between Villamil-Estrada and Perez
impaired the jurisdiction of the trial court to render its decision based
on the compromise agreement.
InAlviar v Court of First Instance of La Union,the Court
held --As the judgment inquestion is null and voidab initio, it is
evident that the court acquired no jurisdiction to render it, much less
to order the execution thereof . . .

Verily, when an agent is engaged in the perpetration of a fraud


upon his principal for his ownexclusive benefit, he is not really
acting for the principal but is really acting for himself,
entirely outside the scope of his agency. Indeed, the basic tenets
of agency rest on the highest considerations of justice, equity and fair
play, and an agent will not be permitted to pervert his authority to his
own personal advantage, and his act in secret hostility to the interests
of his principal transcends the power aforded him. WHEREFORE,
the petition is GRANTED.

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

34

24.
LUZ PINEDA, MARILOU MONTENEGRO,
VIRGINIA
ALARCON,
DINA
LORENA
AYO,
CELIA CALUMBAG and LUCIA LONTOK,vs.HON.
COURT OF APPEALS and THE INSULAR LIFE
ASSURANCE COMPANY, LIMITED.
FACTS:
This is an action for the payment of insurance claims
and prayer for administrative sanctions. Prime Marine
Services, Inc. (PMSI), a crewing/manning outfit, procured a
Group Policy from Insular Life Assurance Co., Ltd. to provide
life insurance coverage to its sea-based employees. During
the efectively of the policy, six covered employees perished
at sea when their vessel sunk.
They were survived by the complainants-appellees, the
beneficiaries under the policy. The beneficiaries, except the
spouses Alarcon, executed special powers of attorney
authorizing Capt. Nuval,President and General Manager of PMSI,
to , among others, followup, ask, demand, collect and receive for
theirbenefit indemnities of sums of money due them relative
to the sinking of the vessel.
By virtue of these written powers of attorney,
complainants-appellees were able to receive their respective
death benefits.
Unknown to them, however, PMSI, in its capacity as
employer and policyholder of the life insurance of its
deceased workers, filed with Insular Life formal claims for
and in behalf of the beneficiaries, through Capt. Nuval. On
the basis of the five special powers of attorney, Insular Life
drew against its account six (6) checks, four for P200,000.00
each, one for P50,000.00 and another for P40,000.00 payable

to the order of complainants-appellees. Capt. Nuval, upon


receipt of these checks endorsed and deposited them in his
own account. When the complainants-appellees learned that
they were entitled, as beneficiaries, to life insurance benefits
under a group policy, they sought to recover these benefits
from Insular Life but the latter denied their claim on the
ground that the liability to complainants-appellees was
already extinguished.
ISSUE:Whether or not Insular Life is bound by the
misconduct of the employer?
RULING:
A cursory reading of the questioned powers of attorney
would disclose that they do not contain in clear and
unequivocal terms authority to Captain Nuval to obtain,
receive, receipt from respondent company insurance proceed
arising from the death of the seaman-insured. On the
contrary, the said powers of attorney are couched in terms
which could easily arouse suspicion of an ordinary man.
Thus: We are convinced that the employer is the agent
of the insurer in performing the duties of administering
group insurance policies. It cannot be said that the employer
acts entirely for its own benefit or for the benefit of its
employees in undertaking administrative functions. While a
reduced premium may result if the employer relieves the
insurer of these tasks, and this, of course, is advantageous to
the employer and the employees, the insurer also enjoys
significant advantages from the arrangement.
The reduction in the premium which results from
employer-administration permits the insurer to realize a

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ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

larger volume of sales, and at the same time the insurers own
administrative costs are markedly reduced.
The most persuasive rationale for adopting the view
that the employer acts as the agent of the insurer, however, is
that the employee has no knowledge of or control over the
employer's actions in handling the policy or its
administration. An agency relationship is based upon consent
by one person that another shall actin his behalf and be
subject to his control. It is clear from the evidence regarding
procedural techniques here that the insurer-employer
relationship meets this agency test with regard to the
administration of the policy, whereas that between the
employer and its employees fails to reflect true agency. The
insurer directs the performance of the employer's
administrative acts, and if these duties are not undertaken
properly the insurer is in a position to exercise more
constricted control over the employer's conduct.
InNeider vsContinental Assurance Company which was
cited inElfstromit was held that: the employer owes to the
employeethe duty of good faith and due carein attending to the
policy, and that the employer should make clear to
the employee anything required of him to keep the policy in
efect, and the time that the obligations are due. In its
position as administrator of the policy, we feel also that the
employer should be considered as the agent of the insurer,
andany omission of duty to the employee in its administration
should be attributable to the insurer
In the light of the above disquisitions and after an
examination of the facts of this case, we hold that PMSI,
through its President and General Manager, Capt. Nuval,

acted as the agent of Insular Life. The latter is thus bound by


the misconduct of its agent

25.
Eduardo
Litonjua,
Jr.
and
Antonio
Litonjua
vs. Eternit Corp. (Eteroutremer, S.A. and Far
East Bank & Trust Co.G.R. No. 144805 June 8, 2006
FACTS:
Eternit Corp. is engaged in the
manufacture of roofingmaterials and pipe pro
d u c t s . I t s manufacturing operations were conducted on 8
parcels of land located in Mandaluyong City, covered by TCTs
with Far East Bank & Trust Company, as trustee. 90% of
the shares of stocks of Eternit Corp. were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation
organized and registered under the laws of Belgium. Jack
Glanville, an Australian citizen, was the General Manager
and President of Eternit Corp., while Claude Frederick
Delsaux was the Regional Director for Asia of ESAC.

In 1986, the management of ESAC grew concerned


about the political situation in the Philippines and wanted to
stop its operations in the country. The Committee for
Asia of ESAC instructed Michael Adams, a member of
Eternit Corp.s Board of Directors, to dispose of the
eight parcels of land. Adams engaged the services of
realtor/broker Lauro G. Marquez so that the properties
could be ofered for sale to prospective buyers.

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Marquez ofered the parcels of land and the


improvements thereon to Eduardo B. Litonjua, Jr. of the
Litonjua
& C o m p a n y, I n c . M a r q u e z d e c l a r e d t h a t h e
was
a u t h o r i z e d t o s e l l t h e p r o p e r t i e s f o r P27,000,000.00
and that the terms of the sale were subject to negotiation.
Eduardo Litonjua, Jr. responded to the ofer. Marquez
showed
the
property
to
Eduardo
Litonjua,
Jr.,
and his brother Antonio K. Litonjua.
The Litonjua siblings of ered to buy the
p r o p e r t y f o r P20,000,000.00 in cash.
Marquez apprised Glanville of the Litonjua siblings
ofer and relayed the same to Delsaux in Belgium, but the
latter did not respond. Glanville telexed Delsaux in Belgium,
inquiring on his position/ counterproposal to the ofer of the
Litonjua
siblings.
Delsaux
sent a
telex
to Glanville
stating that,
based on the Belgian/Swiss decision, the fi nal of er
was US$1,000,000.00 andP2,500,000.00 to cover all
existing obligations prior to final liquidation.
L i t o n j u a , J r. a c c e p t e d t h e c o u n t e r p r o p o s a l o f
D e l s a u x . M a r q u e z c o n f e r r e d w i t h G l a n v i l l e , a n d co
nfirmed that the Litonjua siblings had accepted the counterproposal of Delsaux. He also stated that the Litonjua siblings
would confirm full payment within 90 days after execution
and preparation of all documents of sale, together with
the necessary governmental clearances.

The Litonjua brothers deposited the amount of


US$1,000,000.00 with the Security Bank & Trust

Company, Ermita Branch, and drafted an Escrow Agreement


to expedite the sale.
With the assumption of Corazon Aquino as President of
RP, the political situation in the Philippines had improved.
Marquez received a telephone call from Glanville,
advising that the sale would no longer proceed. Glanville
followed it up with a letter, confirming that he had been
instructed by his principal to inform Marquez that the
decision has been taken at a Board Meeting not to sell
the properties on which Eternit Corp. is situated.
When apprised of this development, the Litonjuas,
through counsel, wrote Eternit Corp., demanding payment
for damages they had sufered on account of the aborted
sale. EC, however, rejected their demand.

ISSUE:WON Marquez, Glanville, and Delsaux were


authorized by respondent Eternit Corp. to act as its
agents relative to the sale of the properties of Eternit
Corp., and if so, what are the boundaries of their
authority as agents?

RULING:
No.A corporation is a juridical person separate and distinct
from its members or stockholders and is not afected by the
personal rights, obligations and transactions of the latter. It
may act only through its board of directors or, when
authorized either by its by-laws or by its board
resolution,
through
its
of icers
or agents in
the normal course of
business. The
general

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principles of agency govern the relation between the


corporation and its oficers or agents, subject to the articles
of incorporation, by-laws, or relevant provisions of law.

The property of a corporation is not the property of the


stockholders or members, and as such, may not be sold
without express authority from the board of directors.
Physical acts, like the ofering of the properties of the
corporation for sale, or the acceptance of a counter-ofer of
prospective buyers of such properties and the execution of
the deed of sale covering such property, can be performed by
the corporation only by of icers or agents duly
authorized for the purpose by corporate by-laws or by
specific acts of the board of directors. Absent such valid
delegation/authorization, the rule is that the declarations of
an individual director relating to the afairs of the
corporation, but not in the course of,or connected with, the
performance of authorized duties of such director,
are not binding on the corporation.
While a corporation may appoint agents to negotiate
for the sale of its real properties, the final say will have
to be with the board of directors through its of icers
and agents as authorized by a board resolution or by its
by-laws.30 An unauthorized act of an oficer of the
corporation is not binding on it unless the latter ratifi es
the same expressly or impliedly by its board of
directors. Any sale of real property of a corporation by a
person purporting to be an agent thereof but without written
authority from the corporation is null and void.
An agency may be expressed or implied from the act of
the principal, from his silence or lack of action, or his

failure to repudiate the agency knowing that another


person is acting on his behalf without autho rity.
Acceptance by the agent may be expressed, or implied
from his acts which carry out the agency, or from his
silence or inaction according to the circumstances. Agency
may be oral unless the law requires a specifi c form.
However, to create or convey real rights over
immovable property, a special power of attorney is necessary.
The Litonjuas failed to adduce in evidence any
resolution of the Board of Directors of Eternit Corp.
empowering Marquez, Glanville or Delsaux as its agents, to
sell, let alone ofer for sale, for and in its behalf, the 8 parcels
of land owned by Eternit Corp. including the improvements
thereon. The bare fact that Delsaux may have been
authorized to sell to Ruperto Tan the shares of stock of
respondent ESAC cannot be used as basis for Litonjuas claim
that he had likewise been authorized by Eternit Corp. to sell
the parcels of land.
While Glanville was the President and General
Manager of Eternit Corp., and Adams and Delsaux were
members of its Board of Directors, the three acted for and in
behalf of respondent ESAC, and not as duly authorized
agents of Eternit Corp.; a board resolution evincing
the grant of such authority is needed to bind
Eternit Corp. to any agreement regarding the sale of the
subject properties. Such board resolution is not a mere
formality but is a condition sine qua non to bind Eternit
Corp.Requisites of an agency by estoppels: (1) the principal
manifested a representation of the agents authority or
knowingly allowed the agent to assume such authority;
(2) the third person, in good faith, relied upon such
representation;

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

38

(3) relying upon such representation, such third person has


changed his position to his detriment.
26.
PURITA PAHUD VS. CA, G.R. NO. 160346,
AUGUST 25, 2009
FACTS:
Spouses Pedro San Agustin and Agatona Genil were
able to acquire a 246-square meter parcel of land situated
in Barangay Anos, Los Baos, Laguna and covered by
Original Certificate of Title . Agatona Genil and Pedro San
Agustin died , left with children: respondents, Eufemia,
Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and
Virgilio.
Eufemia, Ferdinand and Raul executed a Deed of
Absolute Sale of Undivided Shares conveying in favor of
petitioners their respective shares . Eufemia also signed the
deed on behalf of her four (4) other co-heirs, Only Isabelita
has the Power of attorney while the other three (3) co-heirs
has no written consent authorizing such sale. It was not
notarized.
The Pahuds paid the accounts into the Los Baos Rural
Bank where the property was mortgaged. The bank issued a
release of mortgage and turned over the ownership Pahuds,
the Pahuds made more payments to Eufemia and her
siblings. When Eufemia and her co-heirs drafted an extrajudicial settlement of estate to facilitate the transfer of the
title to the Pahuds, Virgilio refused to sign it.

Virgilio's co-heirs filed a complaint for judicial partition


of the subject property before the RTC of Calamba,
Laguna.In the course of the proceedings for judicial partition,
a Compromise Agreement was signed with seven (7) of the
co-heirs agreeing to sell their undivided shares to Virgilio ..
The compromise agreement was, however, not approved by
the trial court because Atty. Dimetrio Hilbero, lawyer for
Eufemia and her six (6) co-heirs, refused to sign the
agreement because he knew of the previous sale made to the
Pahuds.
Eufemia acknowledged having received the payments
from Virgilio. Virgilio then sold the entire property to spouses
Isagani Belarmino and Leticia Ocampo (Belarminos) . The
Belarminos immediately constructed a building on the
subject property.
Alarmed by the ongoing construction on the lot they
purchased, the Pahuds immediately confronted Eufemia who
confirmed to them that Virgilio had sold the property to the
Belarminos. Then the Pahuds filed a complaint in
intervention in the pending case for judicial partition.
ISSUE: Whether or not the sale of the subject property
by Eufemia and co-heirs are valid?
RULING:
The sale made by Eufemia, Isabelita and her two
brothers to the Pahuds should be valid only with respect to
the authorized share of Eufemia While the sale with respect
to the other portion of the lot representing the shares of
Zenaida, Milagros, and Minerva, is void because Eufemia

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

39

could not dispose of the interest of her co-heirs in the said lot
absent any written authority from the latter, as required by
law.
27.
SallyYoshizaki, vs. Joy Training Center of
Aurora, Inc., G.R. No. 174978; July 31, 2013
FACTS:
Richard and Linda Johnson were members of Joy
Trainings Board of Trustees who sold the real properties, a
wrangler jeep, and other personal properties in favor of the
spouses Sally and Yoshio Yoshizaki.
Joy Training filed an action for cancellation of sales
alleging that the spouses Johnson is without the requisite
authority from the Board of Directors. The RTC ruled in favor
of the spouses Yoshizaki.
It found that Joy Training owned the real properties
and it authorized he spouses Johnson to sell the real
properties.
It recognized that there were only five actual members
of the board of trustees; consequently, a majority of the board
of trustees validly authorized the
It also ruled that the sale of personal properties was
valid because they were registered in the spouses Johnsons
name.
The CA upheld the RTCs jurisdiction over the case but
reversed its ruling with respect to the sale of real properties.
It also ruled that the resolution is void because it was not
approved by a majority of the board of trustees.

ISSUE: Was there a contract of agency to sell the real


properties between Joy Training and the spouses
Johnson?
RULING:
The Supreme Court ruled that there was no contract of
agency between Joy Training and the spouses Johnson to sell
the parcel of land with its improvements. Art. 1868 of the
Civil Code defines a contract of agency as a contract whereby
a person binds himself to render some service or to do
something in representation or on behalf of another, with the
consent or authority of the latter.
It may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting
on his behalf without authority.
In this case, the presented evidence did not convince
the SC of the existence of the contract of agency to sell the
real properties.
The certification is a mere general power of attorney
which comprises all of Joy training. Art. 1877 of the Civil
Code clearly states that an agency couched in general terms
comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent
may execute such acts as he may authorize as general and
unlimited management.

28.
CITY-LITE
REALTY
COURT OF APPEALS and

CORPORATION, vs.
F.P. HOLDINGS &

ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS

40

REALTY CORP., et al.G.R. No. 138639. February


10, 2000
FACTS:
Private
Respondent
F.P.
Holdings
and
Realty
Corporation (F.P. Holdings), formerly the Sparta Holdings
Inc, was the registered owner of a parcel of land situated
along E. Rodriguez Avenue, Quezon City also known as the
Violago Property or the San Lorenzo Ruiz Commercial
Center, with an area of 71,754 sqm.
The property was ofered for sale to the general public
through the circulation of a sales brochure containing the
description of the property and the asking price of
P6,250/sqm with terms of payment negotiable. In addition,
brokers commission was 2% of selling price, net of
withholding taxes and other charges. Contact person was
Meldin Al G. Roy, Metro Drug Inc.
The front portion consisting of 9,192 sqm is the subject
of this litigation

Al G. Roy sent a sales brochure, together with the location


plan and copy of the TCT to Atty. Gelacio Mamaril, a
practicing lawyer and a licensed real estate broker. Mamaril
passed in turn passed on these documents to Antonio Teng,
Executive Vice President, and Atty Victor Villanueva, Legal
Counsel of City-Lite
City-Lite conveyed its interest to purchase a portion or
one-half (1/2) of the front lot of the Violago Property
Apparently,
Roy
subsequently
informed
City-Lites
representative that it would take time to subdivide the lot

and F.P. HOLDINGS was not receptive to the purchase of only


half of the front lot
Atty. Mamaril wrote Metro Drug (Al G. Roy) expressing
City-Lites desire to buy the entire front lot of the subject
property instead of only half thereof provided the asking
price of P6,250/sqm was reduced and that payment be in
installment for a certain period
The parties reached an agreement and Roy agreed to
sell the property to City-Lite provided only the latter submit
its acceptance in writing to the terms and conditions of the
sale
For some reason or another and despite demand, F.P.
HOLDINGS refused to execute the corresponding deed of
sale in favor of City-Lite of the front lot of the property
Trial court ruled in favor of City-Lite ordering F.P.
HOLDINGS to execute a deed of sale of the property in favor
of the former for the total consideration of P55,056,250
payable as follows: P15 M as downpayment to be payable
immediately upon execution of the deed of sale and the
balance within 6 months from downpayment without interest
CA reversed TCs decision
ISSUE: W/N there was a perfected contract of sale
between City-Lite and respondent F.P. HOLDINGS
because of a lack of definite agreement on the manner
of paying the purchase price and that Metro Drug and
Meldin Al G. Roy were not authorized to sell the
property to City-Lite, and that the authority of Roy was
only limited to that of mere liaison or contact person?
RULING:

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ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS


No, Roy is a mere contact person.

Art. 1874 of NCC: When the sale of a piece of land or


any interest therein is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shall be void.
The absence of authority to sell can be determined
from the written memorandum issued by respondent F.P.
HOLDINGS President requesting Metro Drugs assistance in
finding buyers for the property
The Memorandum indicates that Meldin G. Roy and/or
Metro Drug was only to assist F.P. Holdings in looking for
buyers and referring to them possible prospects whom they
were supposed to endorse to F.P. Holdings.
But the final evaluation, appraisal and acceptance of
the transaction could be made only by F.P. Holdings. In other
words, Roy and/or Metro Drug was only a contact person
with no authority to conclude a sale of the property
Roy and/or Metro Drug was a mere broker and Roy/s
only job was to bring parties the parties together for a
possible transaction
The Supreme Court ruled that due to the lack of a
written authority to sell the Violago Property on the part of
Roy and/or Metro Drug, the sale should be as it is declared
null and void

SECTION THREE
29.
BA Finance vs. CA GR No. 82040 (201 SCRA
157)27 August 1991

FACTS:
Private respondents Manuel Cuady and Lilia Cuady
acquired from Supercars, Inc. a credit of P39,574.80, which
covered the cost of a unit of four-door sedan, Ford Escort
1300 on July 15, 1977. A promissory note was executed by
private respondents in favor of Supercars, Inc., obligating
themselves to pay the latter or order the sum of P39,574.80,
inclusive of interest at 14% per annum, payable on monthly
installments of P1,098.00 starting August 16, 1977, and on
the 16th day of the next 35 months from September 16, 1977
until full payment thereof. It was also stipulated that a
penalty of P10.00 for every month of late installment will be
paid. To incur no delays in payment and secure compliance of
the obligation, said spouses constituted a chattel mortgage.
On July 25, 1977, the promissory note, together with
the chattel mortgage were assigned to B.A. Finance
Corporation. The Cuadys paid a total of P36,730.15 to the
B.A. Finance Corporation, thus leaving an unpaid balance of
P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys
owe B.A. Finance Corporation P460.00 representing
penalties or surcharges for tardy monthly installments.
When the Cuadys failed to renew insurance coverage of
said motor vehicle, the B.A. Finance Corporation, as the
assignee of the mortgage, obtained the renewal of its
insurance coverage for the year 1980 with Zenith Insurance
Corporation. Under the terms and conditions of the said
insurance coverage, any loss under the policy shall be
payable to the B.A. Finance Corporation. On April 18, 1980,
the motor vehicle met an accident and was badly damaged. It

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was reported to the B.A. Finance Corporation and to the


insurer, Zenith Insurance Corporation.
The Cuadys asked the B.A. Finance Corporation to
consider the same as a total loss, and to claim from the
insurer the face value of the car insurance policy and apply
the same to the payment of their remaining account and give
them the surplus thereof, if any. But instead of heeding the
request of the Cuadys, B.A. Finance Corporation prevailed
upon the former to just have the car repaired. Not long
thereafter, however, the car bogged down.
The Cuadys wrote B.A. Finance Corporation requesting
the latter to pursue their prior instruction of enforcing the
total loss provision in the insurance coverage. When B.A.
Finance Corporation did not respond favorably to their
request, the Cuadys stopped paying their monthly
installments on the promissory note .
ISSUE: WON B.A. Finance Corporation is bound by its
acceptance to carry out the agency, and is liable for
damages which, through its non-performance, the
principal may suffer?
RULING:
Yes. B.A. Finance Corporation is bound by its
acceptance to carry out the agency, and is liable for damages
which, through its non-performance, the Cuadys, the
principal may sufer. B.A. Finance Corporation was
subrogated to the rights and obligations of Supercars, Inc.
when the Supercars assigned the promissory note, together
with the chattel mortgage constituted on the motor vehicle in
question in favor of B.A.. Consequently, B.A. Finance

Corporation is bound by the terms and conditions of the


chattel mortgage executed between the Cuadys and
Supercars, Inc.
Under the deed of chattel mortgage, B.A. Finance was
constituted attorney-in-fact with full power and authority to
file, follow-up, prosecute, compromise or settle insurance
claims; to sign execute and deliver the corresponding papers,
receipts and documents to the Insurance Company as may be
necessary to prove the claim, and to collect from the latter
the proceeds of insurance to the extent of its interests, in the
event that the mortgaged car sufers any loss or damage.
In granting B.A. Finance Corporation said powers and
prerogatives, the Cuady spouses created in the former's favor
an agency. When the finance company executes a mortgage
contract that contains a provision that in the event of
accident or loss, it shall make a proper claim against the
insurance company, was in efect an agency relation, and that
under Article 1884, the finance company was bound by its
acceptance to carry out the agency, and in spite of the
instructions of the borrowers to make such claims instead
insisted on having the vehicle repaired but eventually
resulting in loss of the insurance coverage, the finance
company had breached its duty of diligence, and must
assume the damages sufered by the borrowers, and
consequently can no longer collect on the balance of the
mortgage loan secured thereby.
30.
BRITISH AIRWAYS VS. CA, GR No. 121824
(285 SCRA 450), 29 JANUARY 1998
FACTS:

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On April 16, 1989, Gop Mahtani, private respondent,


had decided to visit his relatives in Bombay, India. He
obtained the services of Mr. Gumar to arrange his travel
plans. A ticket from British Airways (BA) was purchased.
Since BA had no direct flights from Manila to Bombay, Gop
Mahtani took a flight to Hong Kong via PAL, and upon
arriving in Hong Kong he took a connecting flight to Bombay
on board BA. Before departure, Mahtani checked in at PAL
counter his two pieces of luggage containing his clothing and
personal efects, confident that upon reaching Hong Kong,
the same would be transferred to the BA f light bound for
Bombay. Upon arrival in Bombay, Mahtani discovered that his
luggage was missing and that upon inquiry from
the BA representatives, he was told that the same might have
been diverted to London. After waiting patiently for 1 week,
BA finally advised him to file a claim by accomplishing the
"Property Irregularity Report.
In the Philippines, on June 11, 1990 Mahtani filed his
complaint for damages and attorney's feesagainst BA and
Mr.Gumar before the RTC. He alleged that the reason for the
non-transfer of the luggage was due to the PALs late arrival
in Hong Kong, thus leaving hardly for the proper transfer of
his luggage to BA aircraft bound for Bombay. The RTC
rendered its decision in favor of Mahtani. BA is ordered to
pay Mahtani P7,000 for the value of the 2 suitcases of $400
and for the value of the contents of the luggage P50,000 and
for moral and exemplary damages and 20% for attorneys
fees and cost of the action. This decision was afirmed by CA.
ISSUE:WON British Airways is liable for the negligence
of it agent, PAL?

RULING:
Yes. The SC ruled in the afirmative.
Settled is the rule that an agent is also responsible for
the negligence in the performance of its function (Art. 1909
of the Civil Code) and is liable for the damages which the
principal may sufer by reason of its negligent act (Art. 1884
of the Civil Code).
BA is liable for the negligence of its agent, PAL. The
court observed that the contract of air transportation was
exclusively between the Mahtani and BA, the latter merely
endorsing the Manila to Hong Kong connecting flight to
Bombay with the PAL, acts as it agent. It is undeniable that in
transporting Mahtani from Manila to Hong Kong by PAL
acted as BAs agent. BA and PAL moreover, are members of
International Air Transport Association (IATA), wherein
member airlines are regarded as agents of each other in the
issuance of tickets and other matters pertaining to their
relationship. The contractual relationship between BA and
PAL is one of agency.

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44

31.
CERVANTES VS CA, GR No. 125138 (304
SCRA 25), 02 MARCH 1999
FACTS:
Cervantes bought a round trip ticket for ManilaHonolulu-Los Angeles-Honolulu-Manila to PAL on March 27,
1989. This ticket expressly provides that 1 year from
issuance or until March 27, 1990 it will be expired. The ticket
was issued in compliance with a Compromise Agreement
entered between PAL and Cervantes. On March 3, 1990, 4
days before the expiry date, Cervantes used it. He arrived in
LA on the same day and immediately booked his return flight
ticket with the PALs ofice which was confirmed for April 2,
1990 flight. However, he learned that the same PAL plane
would make a stop-over in San Francisco, so he made
arrangements with PALs agent for him to board flight in San
Francisco instead of boarding in LA. Cervantes believed that
everything was set for his return to PH upon confirmation of
PALs agent. On said return date, when he checked in at PAL
counter, he was not allowed to board the arranged flight due
to the expiration of the validity of the ticket. PAL personel
made annotation on his ticket TICKET NOT ACCEPTED DUE
TO EXPIRATION OF THE VALIDITY. Aggrived, Cervantes
filed a complaint for damages for Breach of Contract of
Carriage. RTC dismissed the case which was upheld by the
CA.
ISSUE:WON the act of the PAL agents in confirming the
ticket of Cervantes extended the period of validity?
RULING:

No. The SC ruled in the negative.The plane ticket itself


provides that it is not valid after March 27, 1990. It is also
stipulated in paragraph 8 of the Conditions of Contract that
this ticket is good for carriage for one year from date of
issue, except as otherwise provided. Cervantes theorized that
the confirmation by the PAL's agents in Los Angeles and San
Francisco changed the compromise agreement between the
parties. He was aware of the risk that his ticket could expire,
as it did, before he returned to the Philippines. The 2
personnel from PAL did not have an authority to extend the
validity of the ticket. Cervantes knew this from the start
when he called up the Legal Department of appellee in the
Philippines before he left for the United States of America.
He had firsthand knowledge that the ticket in question would
expire on March 27, 1990 and that to secure an extension, he
would have to file a written request for extension at the PAL's
ofice in the Philippines.
However, despite this knowledge, he persisted to use
the ticket in question. Since the PAL agents are not privy to
the said Agreement and Cervantes knew that a written
request to the legal counsel of PAL was necessary, he cannot
use what the PAL agents did to his advantage. The said
agents, according to the Court of Appeals,acted without
authority when they confirmed the flights of the petitioner.

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45

Under Article 1989of the New Civil Code, the acts


an agent beyond the scope of his authority do not bind the
principal, unless the latter ratifies the same expressly or
impliedly. Furthermore, when the third person (herein
petitioner) knows that the agent was acting beyond his power
or authority, the principal cannot be held liable for the acts of
the agent. If the said third person is aware of such limits of
authority, he is to blame, and is not entitled to recover
damages from the agent, unless the latter undertook
to secure the principal's ratification.
32.
BORJA VSSULYAP, GR No. 150718 (399 SCRA
601), 26 MARCH 2003
FACTS:
A contract of lease involving a one-story ofice building
located at New Manila, Quezon City was entered upon by the
petitioner-owner Borja, as lessor, and respondent Sulyap,
Inc., as lessee. Sulyap paid advance rentals, association dues
and deposits pursuant to lease. Upon the expiration of the
contract of lease, respondent demanded for the return of the
same, but the owner Borja declined. Thus, a complaint for
sum of money against Borja was filed by Sulyap with the RTC
of QC.
Both parties entered into and submitted to thetrial
court a Compromise agreements stating that Borja isbound
to return the advances and deposit and in case any amount
due is not paid within the period stated shall earninterest
until fully paid plus the attorneys fee. But,Borja failed to pay
said amounts. So Sulyap filed a writ of execution. Thus, the

Borja filed a motion for the quashal of said writ. But this
time, he contended that there was fraud in the execution of
the compromise agreement when he was assisted by Atty.
Leonardo Cruz, and that the agreement is void. Said
compromise agreement contained no stipulation as to the
payment of 2% monthly interest and 25% attorneys fee in
case of default in payment. He alleged that his former
counsel, Atty. Cruz, removed the page of the genuine
compromise agreement where he afixed his signature and
fraudulently attached the same to the compromise agreement
submitted to the court. So it could make appear that the
penalty clause embodied therein was consented.
Sulyap then presented Atty. Cruz as witness, who
declared that the petitioner gave his consent to the inclusion
of the penalty clause of 2% monthly interest and
25% attorneys fees in the compromise agreement. He added
that the compromise agreement approved by the court was in
fact signed by the petitioner inside the courtroom before the
same was submitted for approval. Atty. Cruz stressed that
the penalty clause of 2% interest per month until full
payment of the amount due, plus 25% thereof as attorneys
fees, in case of default in payment, was actually chosen
by the petitioner.
The trial court ruled in favored of Sulyap because it
gave credence to the testimony of Atty. Cruz and even noted
that it was more than one year from receipt of the
judgment on compromise when he questioned the inclusion
of the penalty clause in the approved compromise agreement
despite several opportunities to raise said objection.
ISSUE:WON the petitioner Borja is bound by the
penalty clause in the compromise agreement?

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RULING:
YES. Borja is bound by the penalty clause in the
compromise agreement. While a judicial compromise may be
annulled or modified on the ground of vitiated consent or
forgery, we find that the testimony of the petitioner failed
to establish the attendance of fraud. No evidence was
presented by petitioner other than his bare allegation that his
former counsel fraudulently attached the page of the genuine
compromise agreement where he afixed his signature to
the compromise agreement submitted to the court.
Petitioner cannot feign ignorance of the existence of
the penalty clause in the compromise agreement approved by
the court. When he received the judgment reproducing the
full text of the compromise agreement he never raised the
issue of the fraudulent inclusion of the penalty clause in their
agreement. It was also noted that petitioner is a doctor of
medicine. He must have read and understood the contents of
the judgment on compromise. In fact he filed, without the
assistance of counsel, a motion praying that a certain amount
be withheld from his total obligation and instead be applied
to the expenses for the repair of the leased premises which
was allegedly vandalized by the private respondent
Even assuming that Atty. Leonardo Cruz exceeded his
authority in inserting the penalty clause, the status of the
said clause is not void but merely voidable, i.e., capable of
being ratified. Indeed, petitioners failure to question the
inclusion of the 2% monthly interest and 25% attorneys fees
in the judicial compromise despite several opportunities to do

so was tantamount to ratification. Hence, he is estopped from


assailing the validity thereof.

33.
JESUS M. GOZUN VS. JOSE TEOFILO T.
MERCADO a.k.a.DON PEPITO MERCADO, GR No.
167812 (511 SCRA 305), 19 DECEMBER 2006
FACTS:
During the local elections of 1995, Don Pepito, the
respondent, vied for gubernatorial post in Pampanga.Upon
Gozuns request, the petitioner, owner of JMG Publishing
House, a printing shop locatedin San Fernando, Pampanga,
submitted to Don Pepito draft samples and price quotation
of campaign materials.By
petitioners
(Gozun) claim,
respondents wife had told him that respondent (Don Pepito)
already approved his pricequotation, and thus, Gozun could
start printing the campaign materials, hence, he did print
campaign materials like posters bearing respondents
photograph, leaflets
containing
the
slate
of
party
candidates,sample
ballots,poll
watcher
identification
cards,and stickers. However, petitioner availed of the
services and facilities of Metro Angeles Printing and of St.
Joseph Printing Press, owned by his daughter Jennifer Gozun
and mother Epifania Macalino Gozun, due to the urgency and
limited time to do said job order.
In the meantime, on March 31, 1995, respondents
sister-in-law, Lilian Soriano obtained from petitioner "cash
advance" of P253,000 purportedly for the allowances,
seminars and for other related expenses of poll watchers. It

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was acknowledged on petitioners 1995 diary receipt of the


amount said Lilians cash advance.
However, aside from the partial payment amounting to
Php 1 million, Mercado failed to settle the total amount of
Php 2,177,906 he owed to Gozun. The debt included the cash
advance obtained by Lilian.
This prompted the Gozun to file a complaint for
collection of sum of money. In his defense, Don Pepito
claimed that he was not aware of the said liability. He
purportedly thought that the campaign materials printed
were donations from third parties.
The trial court ruled in favour of Gozun, however,
reversed by the Court of Appeals.
As to the cash advance obtained by Lilian, the court
ruled that there was no evidence that she was authorized by
Don Pepito to scrounge money on his behalf. Even on the
acknowledgement receipt, which she signed, she did not
specify in what capacity she received the money. Therefore, it
held that the Gozuns claim for Php 253,000 was
unenforceable.
ISSUE: WON Lilian R. Soriano was sanctioned by Don
Pepito to receive the cash advance from Gozun?
RULING:
No. Lilian was not empowered to receive the cash
advance from Gozun. (Art. 1868 of the Civil Code) By the
contract of agency a person binds himself to render some

service or to do something in representation or on behalf of


another, with the consent or authority of the latter. (Art. 1898
of the Civil Code) Contracts entered into in the name of
another person by one who has been given no authority or
legal representation or who has acted beyond his powers are
classified as unauthorized contract sand are declared
unenforceable, unless they are ratified.
Generally, the agency may be oral, unless the law
requires a specific form. However, a special power of
attorney is necessary for an agent to, as in this case, borrow
money, unless it be urgent and indispensable for the
preservation of the things which are under administration
(Art. 1878 of the Civil Code). Since nothing in this case
involves the preservation of things under administration, a
determination of whether Soriano had the special authority
to borrow money on behalf of respondent is in order.
It is a settled rule that in order to bind the principal by
a mortgage on real property executed by an agent,it must
upon its face purport to be made, signed and sealed in the
name of the principal, otherwise, it will bind the agent only. It
is not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the
principal.
34.
VICENTE M. DOMINGO, vs. GREGORIO M.
DOMINGO. G.R. No. L-30573 October 29, 1971
See case number 5 at Section 1.

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48

35.
Sazon vs. Vasquez-Menancio | GR No. 192085
(666 SCRA 707) 22 February 2012 |Justice Sereno
FACTS:
Respondent Letecia Vasquez-Menancio, a US resident,
entrusted the management, care and preservation of several
of her nine (9) properties to petitioner Caridad Sazon.
Letecia claimed that the said lots were all productive, and all
the fruits and income accruing therefrom were apparently
received by Caridad. In contrast, Caridad alleged that several
of the properties do not produce any fruit nor generate any
income. She claimed that any supposed income derived
therefrom was not even suficient to answer for all the
expenses incurred to maintain them.
Letecia further averred that despite repeated demands,
Caridad failed to render a proper accounting and to remit the
owners share of the profits. Thus, sometime in October
1997, she filed a complaint against Carida praying that the
lower court will order her to render an accounting and remit
all the fruits and income the latter received from the
properties as administrator.
In her defense, Caridad averred that she can turn over the
possession of certain 3 lots because they were allegedly
subject of valid lease agreements. It appeared that when the
petitioner entered into these agreements, she acted within
her authority as Letecias agent.
In its decision, the RTC ruled in favour of Letecia, and the
same was afirmed by the CA.
ISSUE: Whether or not the agent fulfilled her
obligation in rendering the accounting of properties?

Holding and Ratio:


Yes. Petitioner insisted, however, that Article 1891 of
the Civil Code contains a few of the obligations owed by an
agent to his principal, viz:
Art. 1891. Every agent is bound to render an account of his
transactions and to deliver to the principal whatever he may
have received by virtue of the agency, even though it may not
be owing to the principal.
Every stipulation exempting the agent from the obligation to
render an account shall be void.
It is evident that the reason behind the failure of
petitioner to render an accounting to respondent is
immaterial. What is important is that the former fulfill her
duty to render an account of the relevant transactions she
entered into as respondents agent.
Petitioner claims that in the course of her
administration of the properties, the letters she sent to
respondent should be considered as a fulfillment of her
obligation, as respondents agent, to render an accounting of
her administration.
Both the RTC and the CA found these letters insuficient. We
agree. Petitioner was the administrator of respondents
properties for 18 years or from 1979 to 1997, and four letters
within 18 years can hardly be considered as suficient to keep
the principal informed and updated of the condition and
status of the latters properties.

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49

36.
Hernandez vs. Hernandez | GR 158576
SCRA 24 | 9 March 2011

645

FACTS
On 11 November 1993, the owners of the Hernandez
property, which includes petitioner Cornelia Hernandez,
executed a letter indicating: (1) respondent Cecilio
Hernandez as the representative of the owners of the land;
and (2) the compensation he gets in doing such job. Such
property was subject of an expropriation case for a DPWH
project. During the course of the expropriation proceedings,
an Order was issued by the RTC, Cecilio was appointed as
one of the commissioners in the expropriation case. On 18
October 1996, Cornelia, and her other co-owners who were
also signatories of the 11 November 1993 letter, executed an
irrevocable Special Power of Attorney (SPA) appointing
Cecilio Hernandez as their "true and lawful attorney" with
respect to the expropriation of the subject property. There
was no mention of the compensation scheme for Cecilio, the
attorney-in-fact. The just compensation for the condemned
properties was fixed subsequently, with Cornelias share
amounting to P7,321,500.00the amount a pro-indiviso owner
is to receive. At this point, Cecilios SPA was revoked by
Cornelia. On 7 February 2000, however, Cornelia received
from Cecilio a check amounting to P1,123,000.00. The check
was accompanied by a Receipt and Quitclaim document in
favor of Cecilio. In essence it states that: (1) the amount
received will be the share of Cornelia in the just
compensation paid by the government in the expropriated
property; (2) in consideration of the payment, it will release
and forever discharge Cecilio from any action, damages,
claims or demands; and (3) Cornelia will not institute any

action and will not pursue her complaint or opposition to the


release to Cecilio or his heirs or assigns.
In a Letter dated 22 June 2000 after she learned of her true
share in the expropriation proceedings Cornelia demanded
the accounting of the proceeds.The letter was left
unanswered. She then decided to have the courts settle the
issue.A Complaint for the Annulment of Quitclaim and
Recovery of Sum of Money and Damages was filed before the
RTC. Cecilio was declared in default, but this was reversed
by the CA.
ISSUE Whether or not the agent exceeded the scope of
her authority?
Holding and Ratio Decidendi
A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable. In
determining whether consent is vitiated by any of the
circumstances mentioned, courts are given a wide latitude in
weighing the facts or circumstances in a given case and in
deciding in their favor what they believe to have actually
occurred, considering the age, physical infirmity, intelligence,
relationship, and the conduct of the parties at the time of the
making of the contract and subsequent thereto. Here, the
service contract of 11 November 1993 (appointing Cecilio as
representative), as well as the quitclaim and receipt, are
voidable the first due to mistake, the second due to fraud.
First, the service contract gave Cecilio compensation based
on "1998 skyrocketing" prices that essentially will give
Cecilio 83.07% of the just compensation due Cornelia as the
co-owner of the land. No evidence on record would show that

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50

Cornelia agreed, by way of the 11 November 1993 letter, to


give Cecilio 83.07% of the proceeds of the sale of her land.
Second, quitclaims are also contracts and can be voided if
there was fraud or intimidation that leads to lack of consent.
The facts show that a simple accounting of the proceeds of
the just compensation will be enough to satisfy the curiosity
of Cornelia. However, Cecilio did not disclose the truth and
instead of coming up with the request of his aunt, he made a
contract intended to bar Cornelia from recovering any
further sum of money from the sale of her property.
Moreover, when Cecilio accepted the position as
commissioner, he created a barrier that prevented his
performance of his duties under the SPA. Cecilio could not
have been a hearing oficer and a defendant at the same
time. Indeed, Cecilio foisted fraud on both the Court and the
Hernandezs when, after his appointment as commissioner,
he accepted the appointment by the Hernandez to
"represent" and "sue for" them.
37.

COSMIC LUMBER CORPORATION V CA

respondent Isidro Perez and recover the possession of a


portion of lot 443 before the RTC
Estrada entered into a Compromise Agreement with
Perez, the terms and conditions such as:
In order for Perez to buy the said lot he is presently
occupying, he has to pay to plaintif through Estada the sum
of P26,640 computed at P80/square meter and that Cosmic
Lumber recognizes ownership and possession of Perez by
virtue of this compromise agreement over said portion of 333
sqm of lot 443 and whatever expenses of subdivision,
registration and other incidental expenses shall be
shouldered by Perez
Although the agreement was approved by the trial
court and the decision became final and executory it was not
executed within the 5 year period from date of its finality
allegedly due to the failure of Cosmic Lumber to produce the
owners duplicate copy of title needed to segregate from lot
443 the portion sold by the attorney-in-fact, Paz Estrada to
Perez under the compromise agreement

FACTS:
Cosmic Corporation, through its General Manager
executed a Special Power of Attorney appointing Paz G.
Villamil-Estrada as attorney-in-fact to initiate, institute and
file any court action for the ejectment of third persons and/or
squatters of the entire lot 9127 and 443 for the said
squatters to remove their houses and vacate the premises in
order that the corporation may take material possession of
the entire lot
Paz G. Villamil Estrada, by virtue of her power of
attorney, instituted an action for the ejectment of private

ISSUE: Whether or not there is a contract of agency


between Cosmic Lumber, principal and Paz Estrada,
agent thus binding the principal over the compromise
agreement made by the agent to a third person, Perez
in selling the portion of the said property?

RULING:

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No. The authority granted Villamil-Estrada under the


special power of attorney was explicit and exclusionary: for
her to institute any action in court to eject all persons found
on lots number 9127 and 443 so that Cosmic Lumber could
take material possession thereof and for this purpose, to
appear at the pre-trial and enter into any stipulation of facts
and/or compromise agreement but only insofar as this was
protective of the rights and interests of Cosmic Lumber in
the property
Nowhere in this authorization was Villamil-Estrada
granted expressly or impliedly any power to sell neither the
subject property nor a portion thereof.
Neither can a conferment of the power to sell be validly
inferred from the specific authority to enter into a
compromise agreement because of the explicit limitation
fixed by the grantor that the compromise entered into shall
only be so far as it shall protect the rights and interest of
the corporation in the aforementioned lots.
In the context of special investiture of powers to
Villamil-Estrada, alienation by sale of an immovable certainly
cannot be deemed protective of the right of Cosmic Lumber
to physically possess the same, more so when the land was
being sold for a price of P80/sqm , very much less than its
assessed value of P250/sqm and considering further that
plaintif never received the proceeds of the sale
When the sale of a piece of land or any interest thereon
is through an agent, the authority of the latter shall be in
writing; otherwise, the sale should be void. Thus, the
authority of an agent to execute a contract for the sale of real
estate must be conferred in writing and must give him
specific authority, either to conduct the general business of

the principal or to execute a binding contract containing


terms and conditions which are in the contract he did
execute
For the principal to confer the right upon an agent to
sell real estate, a power of attorney must so express the
powers of the agent in clear and unmistakable language
It is therefore clear that by selling to Perez a portion of
Cosmic Lumbers land through a compromise agreement,
Villamil-Estrada acted without or in obvious authority. The
sale ipso jure is consequently void and so is the compromise
agreement. This being the case, the judgment based thereon
is necessarily void
When an agent is engaged in the perpetration of a
fraud upon his principal for his own exclusive benefit, he is
not really acting for the principal but is really acting for
himself, entirely outside the scope of his agency
38.
BRITISH AIRWAYS VS CA
See: Case Number 31
39.
ESCUETA VS LIM. G.R. No. 137162 January
24, 2007.
FACTS:
This case involves 10 lots owned by Ignacio Rubio and
the Heirs of Baloloy allegedly sold by Virginia Rubio Lim to
Rufina Lim. Rufina avers that she paid 102, 169.86 and
450, 000 respectively to Rubio and the heirs of Baloloy as
partial payment for these lots with the understanding that

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the Certificate of Title will be delivered to her upon payment


of the balance.
However both Rubio and the heirs refused her
payment and did not deliver the Certificate of Title. Thus,
Rufina was constrained to file an action which originally
sought to remove cloud or quiet title to real property with a
prayer for the issuance of Preliminary Injunction and a holddeparture order against Rubio which was later amended to
include Specific Performance and Damages.
Corazon Escueta was impleaded for allegedly
purchasing the same lots in spite of her knowledge that the
same were already sold and for executing a simulated Deed
of Sale which raised doubts and cloud over Rufinas title. The
heirs of Baloloy and Rubio denied the allegations and claimed
among others, that Virginia Lim was never authorized to sell
the lots as it was in fact Patricia Lllamas, Rubios daughter,
who had this authority.
The Baloloys and Rubio failed to appear at the pretrial and were declared in default. Their motion to lift the
order of default having been denied, they appealed to the
Court of Appeals which was likewise denied. Hence this
petition.

so, but he shall be responsible for the acts of the substitute


when he has not given the power to appoint oneApplying
this provision to the special power of attorney executed by
Ignacio
Rubio in favor of Patricia Llamas, it is clear that she is
not prohibited from appointing a substitute. By authorizing
Virginia Lim to sell the subject properties Patricia merely
acted within the limits of her authority. However, she will be
held responsible for the act of the sub-agent, among which is
precisely the sale in favor of the Rufina.
Virginia Serona vs Court of Appeals.G.R. No. 130423.
November 18, 2002.

40.
SERONA VS CA, G.R. No. 130423. November
18, 2002.
FACTS:

RULING:

Leonida Quilatan delivered several pieces of jewelry to


Virginia Serona to be sold on commission basis. It was
agreed upon that the jewelry will be returned within 30 days
if not sold. Virginia failed to pay for the sold items, thus
Leonida required her to execute an acknowledgment receipt
indicating their agreement and the total amount due which
was later signed by Virginia, and a certain Rufina Navarete
as witness.

Yes, Rubio is bound by the Contract of Sale. The Court


cited Art. 1892 which provides that an agent may appoint a
substitute if the principal has not prohibited him from doing

Unknown to Leonida, Virginia entrusted the jewelries


to Marichu Labrador also to be sold on commission basis.
Virginia failed to collect from Marichu as the person whom

ISSUE: Whether or not Rubio is bound by the contract


of sale considering that he did not authorize Virginia to
transact on his behalf?

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53

she sold these jewelries to absconded. Consequently, Virginia


failed to pay Leonida. Thus, an information for Estafa was
filed against the former alleging that she misappropriated the
proceeds of the jewelries and converted the same for her
personal use and benefit. The Trial Court subsequently found
Virginia guilty of Estafa and upon appeal, the Court of
Appeals merely afirmed this decision. Hence this petition.
ISSUE: Whether or not there was abuse of confidence
when Virginia entrusted the jewelry to Marichu?
RULING:
No, the Court held that Virginia did not ipso facto
commit Estafa through conversion or misappropriation by
delivering the jewelries to Marichu, her sub-agent and that it
must be pointed out that the law on agency allows the
appointment by an agent of a substitute or sub-agent in the
absence of express agreement to the contrary between the
agent and the principal under the provisions of Art. 1892.
The appointment of Marichu as sub-agent was not expressly
prohibited by Leonida as the acknowledgment receipt does
not contain any such limitation. Neither does it appear that
Virginia was verbally forbidden.
Thus, the act of entrusting the jewelry is not
characterized by abuse of confidence, was not proscribed and
is in fact legally sanctioned.
41.
ESCUETA VS LIM. G.R. No. 137162 January
24, 2007.
FACTS:
See facts in case number 39 of section 3.

ISSUE: Whether the contract of


petitioners and respondent is valid?

sale

between

RULING:
Yes, the Court held that in even assuming that Virginia
Lim had no authority to sell the subject properties, the
contract she executed in favor of respondent is not void, but
simply unenforceable, under the second paragraph of Article
1317 of the Civil Code which reads:
Art. 1317. A contract entered into in the name of
another by one who has no authority or legal representation,
or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the
other contracting party.
Ignacio Rubio merely denies the contract of sale and
claims without substantiation, that what he received was a
loan, not the down payment for the sale of the subject
properties. His acceptance and encashment of the check,
however, constituted ratification of the contract of sale and
"produce the efects of an express power of agency." His
action implies that he waived his right of action to avoid the
contract, and, consequently, it also implies the tacit, if not
express, confirmation of the said sale efected" by Virginia
Lim in favor of respondent.
In addition, the Baloloys have ratified the contract of
sale when they accepted and enjoyed its benefits. The

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doctrine of estoppel applicable here is not only that which


prohibits a party from assuming inconsistent positions, based
on the principle of election, but that which precludes him
from repudiating an obligation voluntarily assumed after
having accepted benefits therefrom. To countenance such
repudiation would be contrary to equity, and would put a
premium on fraud or misrepresentation.

42.
MUNICIPAL
EVANGELISTA

COUNCIL

OF

ILOILO

VS

FACTS:
In a previous case, Tan Ong Tze sought to recover the
value of a strip of land belonging to her which was taken by
the municipality to widen a public street. The judgment
entitled her to 42, 966.40. When the judgment became final
and executory, Atty. Jose Evangelista as counsel for the
Intestate Estate of Atty. Jose Ma. Arroyo, filed a claim for
payment of fees for professional services that he and Atty.
Arroyo rendered in the said case.
At the hearing, several other claimants appeared,
including Atty. Antero Soriano who claimed that Tan Boon
Tiong- one of Tan Ong Tzes attorney-in-fact assigned the
amount to him and that he in turn assigned this amount to
Mauricio Cruz & Co. Inc. The Court ordered that the atty.s
lien in the amount of 15% of the judgment be recorded in
favor of Jose Evangelista and directed the municipality to file
an interpleader against the claiming parties PNB, Antero
Soriano, Jose Ma. Arroyo represented by Jose Evangelista.

The CFI declared the deed of assignment of the credit valid


and binding.
As such the municipal treasurer with the approval of the
auditor of the provincial treasurer of Iloilo and of the
Executive Bureau, paid the late Antero Soriano the amount of
P6,000 in part payment of the judgment. The municipal
treasurer of Iloilo deposited a total of 12,000 with the Clerk
of Court of the CFI of Iloilo. Consequently the judgment for
42,966.40 was reduced to 30,966.40. Hence this petition.
ISSUE: Whether or not the assignment by Tan Boon
Tiong as attorney in fact of Tan Ong Tze to Atty. Antero
Soriano of all her interests was valid?
RULING:
Yes, the Court held that the Deed of Assignment in
favor of Antero Soriano was valid as Tan Boon Tiong was
authorized to employ and contract for the services of lawyers
upon such condition as he may deem convenient to defend
Tan Ong Tzes interest and as such was impliedly empowered
to pay the lawyers fees for services rendered in the interest
of the principal.
Likewise with regard to the failure of the other attorneyin-fact Tan Montano to consent to the Deed of Assignment,
Tan Boon Tiong being authorized to pay in the name of the
principal-the very fact that diferent letters of attorney were
given to each of these representatives show that it was not
the principals intention that they should act jointly in order
to make their acts valid.

43.

CHEMPIL EXPORT VS CA

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FACTS:
This is a consolidation of two petitions for review filed
by Dynetics Inc. and Antonio Gracia; one sought the judicial
declaration, construction and interpretation of the validity of
a Surety Agreement that they entered into with the
Consortium of banks while the other sought declaratory relief
and/or injunction against Security Bank & Trust Co. In both
cases Dynetics and Garcia lost. The Consortium and SBTC
filed their respective counterclaims with prayer for the
issuance of writ of attachment which the Trial Court granted
and while the writ in favor of SBTC was lifted, it was
subsequently reinstated. Consequently, various properties
owned by Dynetics and Garcia were garnished including
Garcias shares of stocks in CIP/ Chemphil.
PCIB which in a previous case against CEIC sought
the annulment of a Court of Appeals decision, filed a motion
to dismiss the complaint of Dynetics and Garcia for lack of
interest to prosecute and to submit its counterclaims for
decision. The motion to dismiss was granted but the motion
to submit its counterclaim for decision was denied. The
Consortium filed motions for reconsideration which were
denied. The consortium thus appealed to the Court of
Appeals and while the same was pending, they entered into a
compromise agreement with Garcia where it was stipulated
that Garcia will pay 145M which shall earn interest of
eighteen percent from the date of the compromise.
It appears that a year before, Garcia sold the same
shares of stock to Ferro Chemicals Inc. for 79M. It was
agreed upon that the purchase price shall be paid directly to
Security Bank. But SBTC refused the payment as it was not
suficient, as such the payment was consigned to the RTC.

Ferro in turn assigned the rights to said stock to


Chemphil Export & Import (CEIC) which was registered in
the corporate books of CEIC and the corresponding stock
certificates were issued to it.
When Garcia failed to comply with the compromise
agreement the consortium caused the shares of stocks to be
sold on execution. The Consortium acquired the same and a
certificate of sale was issued in the name of the bank
consortium. The consortium filed a motion to order the
corporate secretary of Chemphil to enter in its stock and
transfer books the sherif's certificate of sale which was
granted.As such CEIC filed a motion to intervene on the
ground that it was the rightful owner of the shares. The trial
court granted CEIC's motion allowing it to intervene. The
consortium filed a manifestation and motion to lift this order
which was denied. The consortium and PCIB filed separate
motions for reconsideration which was likewise denied thus
the consortium appealed to the Court of Appeals which
ordered theconsolidation of these cases.
ISSUE: Whether or not CEIC had been subrogated to
the rights of SBTC, its predecessor in interest?
RULING:
No, the Court held that by definition subrogation is the
transfer of all rights of the creditor to a third person who
substitutes him in all his rights. But when Ferro issued a
check in favor of SBTC it was in fact paying with Garcias
money, no longer with its own because said amount was part

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56

of the purchase price which Ferro owed Garcia in payment


for the sale of the disputed shares.
Since the money used to discharge Garcia's debt
rightfully belonged to him, FCI cannot be considered a third
party payor under Art. 1302 (2). It was but a conduit, or as
aptly categorized, merely an agent as defined in Art. 1868.
By the contract of agency a person binds himself to render
some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.
FCI was merely fulfilling its obligation under the
aforementioned Deed of Sale.
The money paid by Ferro to SBTC thus properly
belonged to Garcia. It is as if Garcia paid his own debt to
SBTC through a third party, which was Ferro.
44.
UY vs. COURT OF APPEALS, G.R.
120465, 314 SCRA 69, 09 September 1999

No.

FACTS:
Petitioners William Uy and Rodel Roxas are agents to
authorized to sell eight (8) parcels of land by the owners. By
virtue of such authority, petitioners ofered to sell the lands,
located at Benguet to respondent National Housing Authority
(NHA) to be utilized and developed as housing project.
NHA passed a resolution approving the acquisition of
said lands with an area of 31.8231 hectares, at the cost of
P23.867 million, pursuant to which the parties executed a
series of Deeds of Absolute Sale covering the subject lands.
However, only five (5) were paid for by NHA because of the
report it received from the Land Geosciences Bureau of the

DENR that the remaining area is located at an active


landslide area and therefore, not suitable for development
into a housing project.
The NHA issued two (2) resolutions cancelling the sale
over the three (3) parcels of land and subsequently ofered
the amount of P1.255 million to the landowners as daos
perjuicious.
Petitioners filed before Regional Trial Court (RTC) a
Complaint for Damages against NHA and its General
Manager Robert Balao. After trial, the RTC rendered a
decision declaring the cancellation of the contract to be
justified and awarded damages to plaintifs in the sum of
P1.255 million, the same amount initially ofered by NHA to
petitioners as damages.
Upon appeal by petitioners, the Court of Appeals
reversed the decision of the RTC and entered new one
dismissing the complaint. It held that since there was
justifiable basis cancelling the sale, it saw no reason for the
award of damages.
ISSUE: Were the petitioners the real parties in interest?
RULING:
No, petitioners are not parties to the contract of sale
between their principals and NHA. They are mere agents of
the owners of the land subject sale of the sale. As agents,
they only render some service or do something in
representation or on behalf of their principals. The rendering
of such service did not make them parties to the contracts of
sale executed in behalf of the latter. Since a contract may be
violated only by the parties thereto as against each other, the

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57

real parties-in-interest, either as plaintif or defendant, in an


action upon that contract must, generally, either be parties to
said contract.

45.
ANGELES vs. PNR, G.R. No. 150128, 500
SCRA 444, 31 August 2006
FACTS:
On May 5, 1980, respondent Philippine National
Railways (PNR) informed a certain Gaudencio Romualdez
that it has accepted the latters to buy, on an AS IS WHERE IS
basis, the PNRs scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00
per metric ton, respectively, for the total amount of
P96,600.00 Romualdez authorized Lizette R. WijancoAngeles, the wife of petitioner Laureano Angeles to be his
representative in the withdrawal of the scrap/unserviceable
rails. The PNR granted said request and allowed Lizette to
withdraw scrap/unserviceable rail in Murcia, Capas and San
Miguel, Tarlac instead in Pampanga. However, the PNR
subsequently suspended the withdrawal in view of what it
considered as documentary discrepancies coupled by
reported pilferages of over P500,000.00 worth of PNR scrap
properties in Tarlac.
Consequently, the spouses Angeles demanded the
refund of the amount of P96,000.00. The PNR, however,
refused to pay, alleging that as per delivery receipt duly
signed by Lizette, 54.658 metric tons of unserviceable rails
had already been withdrawn which, at P2,100 per metric ton,
were worth of P114,781.80, an amount that exceed the claim
for refund.

On August 10, 1988, the spouses Angeles file suit


against PNR and its corporate secretary, Rodolfo Flores,
among others, for specific performance and damages before
RTC of Quezon City, and praying that PNR be directed to
deliver 46 metric tons of scrap/unserviceable rails and to pay
them damages and attorneys fees. Meanwhile, Lizette
passed away and was substituted by her heirs, among whom
is her husband, herein petitioner Laureano Angeles.
On April 16, 1996, the trial court, on the postulate that
the spouses Angeles are not the real parties-in-interest,
rendered judgment dismissing their complaint for lack of
cause of action. As held by the court, Lizette was merely a
representative of Romualdez in the withdrawal of scrap or
unserviceable rails awarded to him and not an assignee to
the latters rights with respect to the award. Upon appeal,
the CA afirmed the trial courts decision.
ISSUE: Whether or not the petitioner merely an agent
or assignee of the rights of Romualdez interest in the
scrap rails awarded?
RULING:
Lizette was not an assignee, but merely an agent whose
authority was limited to the withdrawal of the scrap rails,
hence, without personality to sue.
Where agency exists, the third partys (PNR) liability on
a contract is to the principal and not to the agent and the
relationship of the third party to the principal is the same as
that in a contract in which there is no agent. Normally, the
agent has neither rights nor liabilities as against the third
party. He cannot thus sue and be sued on the contract. Since

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58

a contract may be violated only by the parties thereto as


against each other, the real party-in-interest, either as
plaintif or defendant in an action upon that contract must,
generally, be a contracting party.
46.
NATIONAL
POWER
CORPORATION
vs.
NAMERCO, G.R. Nos. L-33819 & L-33897 117
SCRA 789, 23 October 1982
FACTS:
On October 17, 1956, plaintif National Power
Corporation (NPC) and defendant National Merchandising
Corporation (NAMERCO), as the representative of the
International Commodities Corporation, executed a contract
for the purchase by the NPC from the New York firm of four
thousand long tons of crude sulfur with a stipulation for
liquidated damages in case of breach.
Defendant-appellant Domestic Insurance Company
executed a performance bond in favor of NPC to guarantee
the sellers obligation. In entering into another contract,
NAMERCO, however, did not disclose to NPC that
NAMERCOs principal, in a cables instruction, stated that the
sale was subject to availability of steamer, and contrary to its
principals instruction, NAMERCO agreed that nonavailability of a steamer was not a justification for nonpayment of liquidated damages.
The New York supplier was not able to deliver the
sulfur due to its inability to secure shipping space.
Consequently, the Government Corporate Counsel rescinded
the contract of sale due to the suppliers non-performance of
its obligations, and demanded payment of liquidated

damages from both NAMERCO and the surety. Thereafter,


NPC sued for recovery of the stipulated liquidated damages.
After trial, the Court of First Instance rendered judgment
ordering the defendants-appellants to pay solidarity to the
NPC reduced liquidated damages with interest.
ISSUE: Whether NAMERCO exceeded its authority?
RULING:
Yes, NAMERCO exceeded their authority. Article 1897
implies that the agent who acts in excess of his authority is
personally liable to the party with whom he contracted. And
that the rule is complimented by Article 1898 of the Civil
Code which provides that if the agent contracts, in the name
of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the
party with whom the agent contracted is aware of the limits
of the powers granted by the principal. NAMERCO never
disclosed to the NPC the cabled or written instructions of its
principal. For that reason and because NAMERCO exceeded
the limits of its authority, it virtually acted in its own name
and not as agent and it is, therefore, bound by the contract of
sale which, however, it not enforceable against its principal.
If, as contemplated in Articles 1897 and 1898, NAMERCO is
bound under the contract of sale, then it follows that it is
bound by the stipulation for liquidated damages in the
contract.
47.
BA Finance vs. Court of Appeals, G.R. No.
94566, 211 SCRA 112, 03 July 1992
FACTS:

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Renato Gaytano, doing business under the name Gebbs


International, applied for and was granted a loan with
respondent Traders Royal Bank. Philip Wong as credit
administrator of BA Finance Corporation for and in behalf of
the latter undertook to guarantee the loan of the Gaytano
spouses.
Partial payments were made on the loan leaving an
unpaid balance which the Gaytano spouses refused to pay.
Respondent bank filed with the trial court complaint for sum
of money against the Gaytano spouses and petitioner
Corporation as alternative defendant.
The trial court rendered a decision in favor of the
plaintif and against Gaytano spouses. Not satisfied with the
decision the respondent bank appealed with the Court of
Appeals, modifying the decision of the trial court, wherein
Gaytano spouses and BA Finance Corp., were solidarily
liable.
ISSUE: Whether Philip Wong as agent who exceeded his
authority is liable?
RULING:
The special power to approve loans does not carry with
it the power to bind the principal to a contract of guaranty
even to the extent of the amount for which a loan could have
been granted by the agent. Guaranty is not presumed, it
must be expressed and cannot be extended beyond its
specified limits. In one case, where it appears that a wife
gave her husband power of attorney to loan money, this
Court ruled that such fact did not authorized him to make her
liable as a surety for the payment of the debt of a third

persons. The rule is clear that an agent who exceeds his


authority is personally liable for damaged.
48.
Pineda vs. Court of Appeals, G.R.
105562, 226 SCRA 754, 27 September 1993

No.

FACTS:
Prime Marine Services, Inc. (PMSI) obtained a group
insurance policy for its sailors. During the efectivity of the
policy, six covered employees of the PMSI perished at sea
when their vessel sunk somewhere in Morocco. Petitioners
sought to claim death benefits due to them and asked for
assistance with the President and General Manager of PMSI,
Captain Roberto Nuval. They were made to execute, with the
exception of the spouses, Alarcon, special powers of attorney
authorizing Captain Nuval to follow up, ask, demand, collect
and receive for their benefit indemnities of sums money due
to them.
Petitioners were able to receive their respect death
benefits. Unknown to them, however, the PMSI, in its
capacity as employer and policyholder of the life insurance of
its deceased workers, filed with the Insular Life (respondent)
formal claims for and in behalf of the beneficiaries, through
Captain Nuval. Insular issued checks payable to the order of
the petitioners. These checks were released to the treasurer
of PMSI, and upon instructions by Captain Nuval, it was
deposited in his personal account.
Petitioners learned that they were entitled, as
beneficiaries, to life insurance benefits under a group policy
but when they sought to recover these benefits, their claims

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60

was denied on the ground that the liability to petitioners was


already extinguished upon delivery to and receipt by PMSI.
ISSUE: Whether
negligence?

or

not

Insular

Life

acted

with

RULING:
Yes. The practice in group insurance business, which is
consistent with the jurisprudence thereon in the State of
California from whose laws our Insurance Code has been
mainly patterned, is that the employer-policyholder who
takes out the insurance for its oficers and employees, is the
agent of the insurer who has authority to collect the proceeds
from the insurer. In this case, the insurer, through the
negligence of its agent, allowed a purported attorney-in-fact
whose instrument does not clearly show such power to
collect the proceeds, it was liable therefore under the
doctrine that the principal is bound by the misconduct of its
agent.
49.
BA Finance vs. CA GR No. 82040 (201 SCRA
157)27 August 1991
See case number 29
50.
DEVELOPMENT
BANK
OF
THE
PHILIPPINES,
petitioner
vs. Court of Appeals and the ESTATE OF THE
LATE JUAN B. DANS, represented by CANDIDA G.
DANS, and the DBP MORTGAGE REDEMPTION
INSURANCE POOL, respondents.
FACTS:

Juan B. Dans, 76 years of age, together with his family,


applied for a loan worth Php 500, 000 at the Development
Bank of the Philipppines on May 1987. The loan was
approved by the bank dated August 4, 1987 but in the
reduced amount of Php 300, 000. Mr. Dans was advised by
DBP to obtain a mortgage redemption insurance at DBP MRI
pool. DBP deducted the amount to be paid for MRI Premium
that is worth Php 1476.00. The insurance of Mr. Dans, less
the DBP service fee of 10%, was credited by DBP to the
savings account of DBP MRI-Pool. Accordingly, the DBP MRI
Pool was advised of the credit.
On September 3, 1987, Mr. Dans died of cardiac arrest.
DBP MRI notified DBP was not eligible for the coverage of
insurance for he was beyond the maximum age of 60. The
wife, Candida, filed a complaint to the Regional Trial Court
Branch I Basilan against DBP and DBP MRI pool for
Collection of Sum of Money with Damages. Prior to that,
DBP ofered the administratrix (Mrs. Dans) a refund of the
MRI payment but she refused for insisting that the family of
the deceased must receive the amount equivalent of the loan.
DBP also ofered and ex gratia for settlement worth Php 30,
000. Mrs. Dans refused to take the ofer. The decision of the
RTC rendered in favor of the family of the deceased and
against DBP. However, DBP appealed to the court.
ISSUE: Whether or not the DBP MRI Pool should be
held liable on the ground that the contract was already
perfected?
RULING:
No. DBP MRI Pool is not liable. Though the power to
approve the insurance is lodged to the pool, the DBP MRI
Pool did not approve the application of the deceased. There

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was no perfected contract between the insurance pool and


Mr. Dans.
DBP was wearing two legal hats: as a lender and
insurance agent. As an insurance agent, DBP made believed
that the family already fulfilled the requirements for the said
insurance although DBP had a full knowledge that the
application would never be approved. DBP acted beyond the
scope of its authority for accepting applications for MRI. If
the third person who contracted is unaware of the authority
conferred by the principal on the agent and he has been
deceived, the latter is liable for damages. The limits of the
agency carries with it the implication that a deception was
perpetratedArticles 19-21 come into play.
However, DBP is not entitled to compensate the family
of the deceased with the entire value of the insurance policy.
Speculative damages are too remote to be included in the
cost of damages. Mr. Dans is entitled only to moral damages.
Such damages do not need a proof of pecuniary loss for
assessment. The court granted only moral damages (Php 50,
000) plus attorney feess (Php 10, 000) and the
reimbursement of the MRI fees with legal interest from the
date of the filing of the complaint until fully paid.
51.
BA Finance vs. CA GR No. 82040 (201 SCRA
157)27 August 1991
See case number 29
52.
NORA S. EUGENIO and ALFREDO Y.
EUGENIO,
vs.HON. COURT OF APPEALS and PEPSI-COLA
BOTTLING COMPANY OF THE PHILIPPINES,
INC., G.R. No. 103737 December 15, 1994

FACTS:
Nora Eugenio was a dealer of Pepsi. She had one store
in Marikina but had a regular charge account in Q.C. And
Muntinlupa. Her husband Alfredo used to be a route manager
for Pepsi in its Q.C. Plant. Pepsi filed a complaint for a sum of
money against Eugenio spouses. since according to them the
spouses (1) had an outstanding balance since it purchased
and received on credit various products from both its Q.C.
and Muntinlupa plant and (2) had an unpaid obligation for
the loaned empties from Pepsi. They contend that the total
outstanding account was P94,651.xx. Eugenio's in their
defense presented four Trade Provisional Receipts (TPR)
allegedly issued to and received by them from Pepsi's Route
Manager (Malate Warehouse) Jovencio Estrada showing that
they paid a total sum of P80,500.xx. They also claim that the
signature of Nora Eugenio in a Sales Invoice (85366) for the
amount of P5,631.xx which was included in the computation
of their debt was falsified. Therefore, without these errors,
petitioner contend that (1) they do not have any outstanding
debt, and (2) it is Pepsi who owes them P3,546.02. RTC found
in favor of Pepsi. CA afirmed the decision.
ISSUE: W/N the amounts in the TPR should be credited
in favor of the spouses.?
RULING:
CA decision is annulled and set-aside. Pepsi is ordered
to pay Eugenio. Background: Eugenio submitted the TPR's to
Atty. Rosario (Pepsi's lawyer). Thereafter, Rosario ordered
Daniel Azurin (asst.personnel manager) to conduct an
investigation to verify the claim of the petitioners. According
to Azurin, Estrada denied that he issued and signed the

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TPR's. Azurin testified to this in Court (However, Estrada


never did. He failed to appear and was never found.

collections made, are turned over by the sales representative


to the appropriate company oficer.

Therefore, his testimony- as told by Azurin- is barred by


the
Hearsay
Evidence
Rule).
Furthermore,
the
investigation conducted was really more of an interview
without any safeguards and did not give Eugenio opportunity
to object or cross-examine Estrada. The other points of
Estrada (and Pepsi) were all invalid since Estrada was
nowhere to be found and Pepsi failed to comply with the
pertinent rules for the admission of the evidence by which it
sought to prove its contentions.

53.
TOYOTA
SHAW,
INC.,
vs.COURT
OF
APPEALS and LUNA L. SOSA, G.R. No. L-116650
May 23, 1995

Pepsi therefore was unable to rebut the aforestated


presumptions in favor of valid payment by petitioners, In
relation to Agency: Assuming in this case that Pepsi never
received the amounts reflected in the TPR's, Pepsi still failed
to prove that Estrada (its duly authorized agent) did not
receive the amounts. In so far as Eugenio is concerned, their
obligation is extinguished when they paid Estrada using
Pepsi's oficial receipt.
The substantive law is that payment shall be made to
the person in whose favor the obligation has been
constituted, or his successor in interest, or any person
authorized to receive it. *TPR: Trade Provisional Receipts are
bound and given in booklets to the company sales
representatives, under proper acknowledgement by them and
with a record of the distribution thereof. After every
transaction, when a collection is made the customer is given
by the sales representative a copy of the TPR, that is, the
triplicate copy or customer's copy, properly filled up to reflect
the completed transactions. All unused TPR's,as well as the

FACTS:
Luna L. Sosa & Popong Bernardo, an agent of Toyota
Shaw, entered into an agreement stating that Luna Sosa will
give P100K as downpayment for a yellow light ace which
Toyota will release on June 17. It was agreed that the balance
would be paid through financing by BA. On June 17, Mr Sosa
was not able to get the car because according to Bernardo,
nasulot ng iba but as it turns out, the credit financing was
not approved by BA. Toyota then gave Mr Sosa the option to
purchase the unit by paying full price in cash but Sosa
refused. Furthermore, Mr. Sosa claims that Popong Bernardo
acted in his authority as agent of Toyota, thereby binding
Toyota in the agreement that they executed.
ISSUE: W/N the agreement could bind Toyota?
RULING:
No.The title of the agreement between the two parties
was AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO OF TOYOTA SHAW INC, therefore, Popong
Bernardo was acting on his personal capacity and did not
represent Toyota in said agreement, something that Mr. Sosa
should have been aware of. Mr. Sosa knew that Popong
Bernado was only a sales representative of Toyota, and thus,
a mere agent and was therefore limited in his authority to
enter into contracts of sale of Toyotas vehicles.

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A person dealing with an agent is put upon inquiry and


must discover upon his peril the authority of the agent.

54.
BACALTOS
COALMINES
HONORABLE COURT OF APPEALS,
114091, JUNE 29, 1995

within seven days after the execution of the contract, it "lets,


demises" the vessel to charterer SMC "for three round trips
to Davao."

Vs.THE
G.R. No.

Petitioners alleged that Savellon was not their Chief


Operating Oficer and that the powers granted to him are
only those clearly expressed in the Authorization which do
dot include the power to enter into any contract with SMC.

In an Authorization petitioner Bacaltos authorized


Savellon, to use the coal operating contract of Bacaltos Coal
Mine of which he is the proprietor. For any legitimate
purpose
that
it
may
serve
particularly
(1) To acquire purchase orders for and in behalf of
BACALTOS COAL MINES;(2) To engage in trading under the
style of BACALTOS COAL MINES/RENE SAVELLON;(3) To
collect all receivables due or in arrears from people or
companies having dealings under BACALTOS COAL
MINES/RENE SAVELLON;(4) To extend to any person or
company by substitution the same extent of authority that is
granted to Rene Savellon;(5) In connection with the
preceeding paragraphs to execute and sign documents,
contracts, and other pertinent papers.

ISSUE: Whether or not Savellon was duly authorized by


the petitioners to enter into the Trip Charter Party?

FACTS:

On 19 October 1988 a Trip Charter Party was executed


"by and between BACALTOS COAL MINES, represented by
its Chief Operating Oficer, RENE ROSEL SAVELLON" and
private respondent San Miguel Corporation (hereinafter
SMC), represented by Francisco B. Manzon, Jr., its "SAVP
and Director, Plant Operations-Mandaue" Thereunder,
Savellon claims that Bacaltos Coal Mines is the owner of the
vessel M/V Premship II and that for P650,000.00 to be paid

RULING:
NO., The broadest scope of Savellons authority is
limited to the use of the coal operating contract an the clase
cannot contemplate any other power not included in the
enumeration or which are unrelated either to the power to
use the coal operating contract or to those already
enumerated.
55.
Yu Eng Cho vs. PANAM | G.R. No. 123560
(328 SCRA 717) | 27 March 2000
FACTS:
Plaintif Yu Eng Cho is the owner of Young Hardware
Co. and Achilles Marketing. In connection with [this]
business, he travels from time to time to Malaysia, Taipei and
Hongkong. On July 10, 1976, plaintifs bought plane tickets

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from defendant Claudia Tagunicar who represented herself to


be an agent of defendant Tourist World Services, Inc. (TWSI).
After calling up Canilao of TWSI, defendant Tagunicar told
plaintifs that their flight is now confirmed all the way.
Thereafter, she attached the confirmation stickers on the
plane tickets. A few days before the scheduled flight of
plaintifs, their son, Adrian Yu, called the Pan Am ofice to
verify the status of the flight. According to said Adrian Yu,
personnel of defendant Pan Am told him over the phone that
plaintifs' booking[s] are confirmed.
Upon their arrival in Tokyo, they called up Pan-Am
ofice for reconfirmation of their flight to San Francisco. Said
ofice, however, informed them that their names are not in
the manifest. Since plaintifs were supposed to leave on the
29th of July, 1978, and could not remain in Japan for more
than 72 hours, they were constrained to agree to accept
airline tickets for Taipei instead, per advise of JAL oficials.
This is the only option left to them because Northwest
Airlines was then on strike, hence, there was no chance for
the plaintifs to obtain airline seats to the United States
within 72 hours. Plaintifs paid for these tickets.
Upon their return to Manila, a complaint for damages
was filed by petitioners against private respondents Pan
American World Airways, Inc. (Pan Am), Tourist World
Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia
Tagunicar (Tagunicar) for expenses allegedly incurred such
as costs of tickets and hotel accommodations when
petitioners were compelled to stay in Hongkong and then in
Tokyo by reason of the non-confirmation of their booking with
Pan-Am.

The trial court held that the defendants jointly and


severally liable, except defendant Julieta Canilao. On appeal,
the CA held private respondent Tagunicar solely liable
therefor, and absolving respondents Pan Am and TWSI from
any and all liability,
Petitioners still asserted that Tagunicar is a sub-agent
of TWSI while TWSI is a duly authorized ticketing agent of
Pan Am. Proceeding from this premise, they contend that
TWSI and Pan Am should be held liable as principals for the
acts of Tagunicar. Petitioners stubbornly insist that the
existence of the agency relationship has been established by
the judicial admissions allegedly made by respondents
herein, to wit: (1) the admission made by Pan Am in its
Answer that TWSI is its authorized ticket agent; (2) the
afidavit executed by Tagunicar where she admitted that she
is a duly authorized agent of TWSI; and (3) the admission
made by Canilao that TWSI received commissions from ticket
sales made by Tagunicar.
ISSUE: WON TWSI and Pan Am be held liable as
principals?
RULING:
No, TWSI and Pan Am should not be held liable for the
acts of Tagunicar who represented herself as their agent.
It is a settled rule that persons dealing with an
assumed agent are bound at their peril, if they would hold
the principal liable, to ascertain not only the fact of agency
but also the nature and extent of authority, and in case either
is controverted, the burden of proof is upon them to establish
it.

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In the case at bar, petitioners rely on the afidavit of


respondent Tagunicar where she stated that she is an
authorized agent of TWSI. This purported admission of
respondent Tagunicar cannot be used by petitioners to prove
their agency relationship. At any rate, even if such afidavit is
to be given any probative value, the existence of the agency
relationship cannot be established on its sole basis. The
declarations of the agent alone are generally insuficient to
establish the fact or extent of his authority.
In addition, as between the negative allegation of
respondents Canilao and Tagunicar that neither is an agent
nor principal of the other, and the afirmative allegation of
petitioners that an agency relationship exists, it is the latter
who have the burden of evidence to prove their allegation, 19
failing in which, their claim must necessarily fail.
We stress that respondent Tagunicar categorically
denied in open court that she is a duly authorized agent of
TWSI, and declared that she is an independent travel agent.
We have consistently ruled that in case of conflict between
statements in the afidavit and testimonial declarations, the
latter command greater weight.
The documents presented by the petitioner cannot
justify the decision that Tagunicar was paid a commission
either by TWSI or Pan Am. On the contrary, Tagunicar
testified that when she pays TWSI, she already deducts in
advance her commission and merely gives the net amount to
TWSI. From all sides of the legal prism, the transaction is
simply a contract of sale wherein Tagunicar buys airline
tickets from TWSI and then sells it at a premium to her
clients.

56.
Litonjua vs. Fernandez | GR No. 148116 ( 427
SCRA 478) | 14 April 2004
FACTS:
Mrs. Lourdes Alimario and Agapito Fisico who worked
as brokers, ofered to sell to the petitioners, Antonio K.
Litonjua and Aurelio K. Litonjua, Jr., the parcels of land.
The owners of the properties were represented by
Mary Mediatrix Fernandez and Gregorio T. Eleosida,
respectively. The brokers told the petitioners that they were
authorized by respondent Fernandez to ofer the property for
sale.
The petitioners and respondent Fernandez agreed that
the petitioners would buy the property consisting of 36,742
square meters, for the price of P150 per square meter, or the
total sum of P5,098,500. They also agreed that the owners
would shoulder the capital gains tax, transfer tax and the
expenses for the documentation of the sale.
The petitioners and respondent Fernandez also agreed
to meet on December 8, 1995 to finalize the sale. It was also
agreed upon that on the said date, respondent Fernandez
would present a special power of attorney executed by the
owners of the property, authorizing her to sell the property
for and in their behalf, and to execute a deed of absolute sale
thereon. The petitioners would also remit the purchase price
to the owners, through respondent Fernandez. However, only
Agapito Fisico attended the meeting. He informed the
petitioners that respondent Fernandez was encountering
some problems with the tenants and was trying to work out a
settlement with them. After a few weeks of waiting, the
petitioners wrote respondent Fernandez on January 5, 1995,

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66

demanding that their transaction be finalized by January 30,


1996.
When the petitioners received no response from
respondent Fernandez, the petitioners sent her another
Letter dated February 1, 1996, asking that the Deed of
Absolute Sale covering the property be executed in
accordance with their verbal agreement dated November
27,1995. The petitioners also demanded the turnover of the
subject properties to them within fifteen days from receipt of
the said letter; otherwise, they would have no option but to
protect their interest through legal means.
Fernandez,
petitioner.

however

rejected

the

claims

of

the

On April 12, 1996, the petitioners filed the instant


Complaint for specific performance with damages against
respondent Fernandez and the registered owners of the
property.
After trial on the merits, the trial court rendered
judgment in favor of the petitioners .
The appellate court promulgated its decision reversing
and setting aside the judgment of the trial court and
dismissing the petitioners complaint, as well as the
respondents counterclaim.
ISSUE/S:
Whether or not the agent acted within the scope
of his authority?
Whether or not Fernandez has the authority to
sell the property?

RULING:
No. The settled rule is that persons dealing with an
assumed agent are bound at their peril, and if they would
hold the principal liable, to ascertain not only the fact of
agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them
to prove it. In this case, respondent Fernandez specifically
denied that she was authorized by the respondents-owners to
sell the properties, both in her answer to the complaint and
when she testified. The Letter dated January 16, 1996 relied
upon by the petitioners was signed by respondent Fernandez
alone, without any authority from the respondentsowners. There is no evidence on record that the respondentsowners ratified all the actuations of respondent Fernandez in
connection with her dealings with the petitioners. As such,
said letter is not binding on the respondents as owners of the
subject properties.
Held:
No. The Civil Code provides that a special power of
attorney is necessary to enter into any contract involving
immovable property or real rights. Any sale of real property
by one purporting to be the registered owner's agent must
show his authority in writing otherwise the sale is null and
void. The agent's declarations alone are generally insuficient
to establish his authority. In this case, there's no
documentary evidence to show Property X's owners
specifically authorized Fernandez to sell Property X to
Litonjua. Fernandez specifically denied authority to sell
Property X. The purported letter Fernandez sent Litonjua
representing herself to have authority to do so is signed by

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67

Fernandez alone. Further, Property X's owners never ratified


any of Fernandez's actions.
57.
Manila Memorial Park Cemetery, Inc. vs.
Linsangan | GR No. 151319 443 SCRA 377 | 2
November 2004

independent contractor, and as such was not authorized to


represent MMPCI or to use its name except as to the extent
expressly stated in the Agency Manager Agreement.
ISSUE/S: Whether or not a contract of agency exists
between Baluyot and MMPCI?

FACTS:

RULING:

Florencia Baluyot ofered Atty. Pedro L. Linsangan a lot


called Garden State at the Holy Cross Memorial Park owned
by petitioner (MMPCI). According to Baluyot, a former owner
of a memorial lot under Contract No. 25012 was no longer
interested in acquiring the lot and had opted to sell his rights
subject to reimbursement of the amounts he already paid.
The contract was for P95,000.00. Baluyot reassured Atty.
Linsangan that once reimbursement is made to the former
buyer, the contract would be transferred to him. Atty.
Linsangan agreed and gave Baluyot P35,295.00 representing
the amount to be reimbursed to the original buyer and to
complete the down payment to MMPCI. Baluyot issued
handwritten and typewritten receipts for these payments.
Baluyot verbally advised Atty. Linsangan that Contract No.
28660 was cancelled for reasons the latter could not explain,
and presented to him another proposal for the purchase of an
equivalent property.

NO. The acts of an agent beyond the scope of his


authority do not bind the principal, unless he ratifies them,
expressly or impliedly. Only the principal can ratify; the agent
cannot ratify his own unauthorized acts.

He refused the new proposal and insisted that Baluyot


and MMPCI honor their undertaking. For the alleged failure
of MMPCI and Baluyot to conform to their agreement, Atty.
Linsangan filed a Complaint for Breach of Contract and
Damages against the former. For its part, MMPCI alleged
that Contract No. 28660 was cancelled conformably with the
terms of the contract because of non-payment of arrearages.
MMPCI stated that Baluyot was not an agent but an

Moreover, the principal must have knowledge of the


acts he is to ratify. No ratification can be implied in the
instant case. Atty. Linsangan failed to show that MMPCI had
knowledge of the arrangement. As far as MMPCI is
concerned, the contract price was P132,250.00, as stated in
the Ofer to Purchase signed by Atty. Linsangan and MMPCI's
authorized oficer. Likewise, this Court does not find favor in
the Court of Appeals' findings that "the authority of
defendant Baluyot may not have been expressly conferred
upon her; however, the same may have been derived
impliedly by habit or custom which may have been an
accepted practice in their company in a long period of time."
A perusal of the records of the case fails to show any
indication that there was such a habit or custom in MMPCI
that allows its agents to enter into agreements for lower
prices of its interment spaces, nor to assume a portion of the
purchase price of the interment spaces sold at such lower
price. No evidence was ever presented to this efect.

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68

58.
Green Valley vs. IAC | GR No. L-49395 133
SCRA 697 | 26 December 1984 | Justice Abad
Santos
FACTS:
E.R. Squibb and Sons Phil. Corp. appointed petitioner
Green Valley Poultry and Alliend Products Inc. as a nonexclusive distributor for Squibb Veterinary Products.
However, Green Valley defaulted in the payment of goods
delivered by Squibbs. This prompted the latter to file a
collection suit. The lower court ruled in favour of Squibbs,
which was afirmed by the Court of Appeals.
Green Valley claimed that the contract with Squibb was
a mere agency to sell; that it never purchased goods from
Squibb; that the goods received were on consignment only
with the obligation to turn over the proceeds, less its
commission, or to return the goods f not sold, and since it
had sold the goods but had not been able to collect from the
purchasers thereof, the action was premature.
Upon the other hand, Squibb claimed that the contract
was one of sale so that Green Valley was obligated to pay for
the goods received upon the expiration of the 60-day credit
period. Both lower courts ruled that there was a contract of
sale.
ISSUE/S: Should Green Valley be held liable for selling
on credit? Does the distinction whether the contract
was that of sale or contract to sell material to its
liability?
RULING:

Yes, Green Valley is liable. The Supreme Court held


that whether viewed as an agency to sell or as a contract of
sale, the liability of Green Valley is indubitable. Adopting
Green Valley's theory that the contract is an agency to sell, it
is liable because it sold on credit without authority from its
principal. The Civil Code has a provision exactly in point. It
reads:
Art. 1905. The commission agent cannot, without the
express or implied consent of the principal, sell on credit.
Should he do so, the principal may demand from him
payment in cash, but the commission agent shall be entitled
to any interest or benefit, which may result from such sale.

SECTION FOUR
59.
Bucton vs. Rural Bank of El Salvador, Inc. |
GR No. 179625 24 February 2014
FACTS:
Petitioner Nicanora G. Bucton owned a parcel of land in
Cagayan De Oro City, the title of which was borrowed by
Erlinda Concepcion on the pretext that she was only going to
show it to an interested buyer.
Little did Bucton knew that Concepcion used the said
title to mortgage the formers house lot as security for a Php
30,000 loan she sought to obtain from Rural Bank of El
Salvador. Inc., Misamis Oriental thru an SPA allegedly
executed by Bucton. Bucton defaulted in payment.
Consequently, Buctons house and lot were foreclosed.

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Aggrieved, Bucton filed with RTC a case for annulment


of mortgage, foreclosure and SPA against Concepcion, the
bank and the sherif who foreclosed her property.
Bucton furthermore alleged that she cannot be held
liable as both the promissory note and the real estate
mortgage were signed by Concepcion in her own personal
capacity. The lower court ruled in favor of Bucton. However,
the same was reversed by the CA, declaring that although the
promissory note and REM did not indicate that Concepcion
was signing for an on behalf of her principal, Bucton is
estopped from denying liability since it was her negligence in
handling her title over to Concepcion that caused the loss.
ISSUE/S: Whether or not the Real Estate Mortgage was
entered into by Concepcion in her personal capacity?
RULING:
Yes. For the principal to be bound by a deed executed
by an agent, the deed must be signed by the agent for and in
behalf of his principal.
In this case, the authorized agent failed to indicate in
the mortgage that she was acting for and on behalf of her
principal. The Real Estate Mortgage, explicitly shows on its
face, that it was signed by Concepcion in her own name and
in her own personal capacity. In fact, there is nothing in the
document to show that she was acting or signing as an agent
of petitioner. Thus, consistent with the law on agency and
established jurisprudence, petitioner cannot be bound by the
acts of Concepcion. At this point, we find it significant to
mention that respondent bank has no one to blame but itself.
Not only did it act with undue haste when it granted and
released the loan in less than three days, it also acted

negligently in preparing the Real Estate Mortgage as it failed


to indicate that Concepcion was signing it for and on behalf
of petitioner. We need not belabor that the words "as
attorney-in-fact of," "as agent of," or "for and on behalf of,"
are vital in order for the principal to be bound by the acts of
his agent. Without these words, any mortgage, although
signed by the agent, cannot bind the principal as it is
considered to have been signed by the agent in his personal
capacity.
60.
PANLILIO VS. CITIBANK
156335 November 28, 2007)

N.A.

(G.R.

No.

FACTS:
Spouses Raul and Amalia Panlilio's initial intention was
to invest money in a Citibank product which had a high
interest but since it was not available, they put their
PhP1,000,000.00 in a savings account instead. More than a
month
later,
petitioners
placed
another
amount
of PhP2,134,635.87 in the Citibanks Long-Term Commercial
Paper (LTCP), a debt instrument that paid a high interest,
issued by the corporation Camella and Palmera Homes (C&P
Homes). Months after signing with the debt instrument and
after
receiving interests, petitioners
contested the
investment contract and demanded that the respondent bank
to return their investment money. This happened when
newspaper reports came out that C&P Homes' stock had
plunged in value.
ISSUES:

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70

Whether the investment contract creates a


trusteeship or agency.
Whether the respondent is under the obligation to
return the investment money of the petitioners.

to the former buyer, the contract would be transferred to


him. Atty. Linsangan agreed and gave Baluyot P35,295.00
representing the amount to be reimbursed to the original
buyer and to complete the down payment to MMPCI.

RULING:
Having bound themselves under the contract of agency,
petitioners as principals in an agency relationship are solely
obliged to observe the solemnity of the transaction entered
into by the agent on their behalf, absent any proof that the
latter acted beyond its authority. Concomitant to this
obligation is that the principal also assumes the risks that
may arise from the transaction. Indeed, as in the instant
case, bank regulations prohibit banks from guaranteeing
profits or the principal in an investment management
account.

Baluyot issued handwritten and typewritten receipts


for these payments. Baluyot verbally advised Atty. Linsangan
that Contract No. 28660 was cancelled for reasons the latter
could not explain, and presented to him another proposal for
the purchase of an equivalent property. He refused the new
proposal and insisted that Baluyot and MMPCI honor their
undertaking.

61.
MANILA MEMORIAL PARK CEMETERY, INC.,
vs. LINSANGAN (G.R. No. 151319 November 22,
2004)
FACTS:
Florencia Baluyot ofered Atty. Pedro L. Linsangan a lot
called Garden State at the Holy Cross Memorial Park owned
by petitioner (MMPCI).
According to Baluyot, a former
owner of a memorial lot under Contract No. 25012 was no
longer interested in acquiring the lot and had opted to sell
his rights subject to reimbursement of the amounts he
already paid. The contract was for P95,000.00. Baluyot
reassured Atty. Linsangan that once reimbursement is made

For the alleged failure of MMPCI and Baluyot to


conform to their agreement, Atty. Linsangan filed a
Complaint for Breach of Contract and Damages against the
former. For its part, MMPCI alleged that Contract No. 28660
was cancelled conformably with the terms of the contract
because of non-payment of arrearages. MMPCI stated that
Baluyot was not an agent but an independent contractor, and
as such was not authorized to represent MMPCI or to use its
name except as to the extent expressly stated in the Agency
Manager Agreement.
ISSUE: Whether or not a contract of agency exists
between Baluyot and MMPCI?
RULING:
NO. The acts of an agent beyond the scope of his
authority do not bind the principal, unless he ratifies them,
expressly or impliedly. Only the principal can ratify; the agent
cannot ratify his own unauthorized acts. Moreover, the

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71

principal must have knowledge of the acts he is to ratify. No


ratification can be implied in the instant case.
Atty. Linsangan failed to show that MMPCI had
knowledge of the arrangement. As far as MMPCI is
concerned, the contract price was P132,250.00, as stated in
the Ofer to Purchase signed by Atty. Linsangan and MMPCI's
authorized oficer. Likewise, this Court does not find favor in
the Court of Appeals' findings that "the authority of
defendant Baluyot may not have been expressly conferred
upon her; however, the same may have been derived
impliedly by habit or custom which may have been an
accepted practice in their company in a long period of time."
A perusal of the records of the case fails to show any
indication that there was such a habit or custom in MMPCI
that allows its agents to enter into agreements for lower
prices of its interment spaces, nor to assume a portion of the
purchase price of the interment spaces sold at such lower
price. No evidence was ever presented to this efect.

62.
CUISON vs. CA (G.R. No. 88539 October 26,
1993)

FACTS:

Kue Cuison is a sole proprietorship engaged in the


purchase and sale of newsprint, bond paper and scrap.
Valiant Investment Associates delivered various kinds of
paper products to a certain Tan. The deliveries were made by
Valiant pursuant to orders allegedly placed by Tiac who was
then employed in the Binondo ofice of petitioner. Upon
delivery, Tan paid for the merchandise by issuing several
checks payable to cash at the specific request of Tiac. In
turn, Tiac issued nine (9) postdated checks to Valiant as
payment for the paper products. Unfortunately, sad checks
were later dishonored by the drawee bank.

Thereafter, Valiant made several demands upon


petitioner to pay for the merchandise in question, claiming
that Tiac was duly authorized by petitioner as the manager of
his Binondo ofice, to enter into the questioned transactions
with Valiant and Tan. Petitioner denied any involvement in
the transaction entered into by Tiac and refused to pay
Valiant.
Left with no recourse, private respondent filed an
action against petitioner for the collection of sum of money
representing the price of the merchandise. After due hearing,
the trial court dismissed the complaint against petitioner for
lack of merit. On appeal, however, the decision of the trial
court was modified, but was in efect reversed by the CA. CA
ordered petitioner to pay Valiant with the sum plus interest,
AF and costs.

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ISSUE: Whether or not Tiac possessed the required


authority from petitioner sufficient to hold the latter
liable for the disputed transaction?

RULING:

YES. As to the merits of the case, it is a wellestablished rule that one who clothes another with apparent
authority as his agent and holds him out to the public as such
cannot be permitted to deny the authority of such person to
act as his agent, to the prejudice of innocent third parties
dealing with such person in good faith and in the honest
belief that he is what he appears to be.It matters not whether
the representations are intentional or merely negligent so
long as innocent, third persons relied upon such
representations in good faith and for value.

Article 1911 of the Civil Code provides:Even when the


agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as
though he had full powers.

The above-quoted article is intended to protect the


rights of innocent persons. In such a situation, both the
principal and the agent may be considered as joint
tortfeasors whose liability is joint and solidary.
It is evident from the records that by his own acts and
admission, petitioner held out Tiac to the public as the
manager of his store in Binondo. More particularly, petitioner
explicitly introduced to Villanueva, Valiants manager, as his
(petitioners) branch manager as testified to by Villanueva.
Secondly, Tan, who has been doing business with petitioner
for quite a while, also testified that she knew Tiac to be the
manager of the Binondo branch. Even petitioner admitted his
close relationship with Tiu Huy Tiac when he said that they
are like brothers There was thus no reason for anybody
especially those transacting business with petitioner to even
doubt the authority of Tiac as his manager in the Binondo
branch.
Tiac, therefore, by petitioners own representations and
manifestations, became an agent of petitioner by estoppel,
an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as
against the person relying thereon (Article 1431, Civil Code
of the Philippines). A party cannot be allowed to go back on
his own acts and representations to the prejudice of the other
party who, in good faith, relied upon them. Taken in this
light,.petitioner is liable for the transaction entered into by
Tiac on his behalf. Thus, even when the agent has exceeded
his authority, the principal is solidarily liable with the agent if

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73

the former allowed the latter to fact as though he had full


powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiac defrauded his
principal (petitioner) in not turning over the proceeds of the
transaction to the latter, such fact cannot in any way relieve
nor exonerate petitioner of his liability to private respondent.
For it is an equitable maxim that as between two innocent
parties, the one who made it possible for the wrong to be
done should be the one to bear the resulting loss.

63.
PLEASANTVILLE
DEVELOPMENT
CORPORATION
VS.
CA(G.R. No. 79688 February 1, 1996)
FACTS:
Edith
Robillo
purchased
from
Pleasantville
Development Corporation, herein petitioner a parcel of land
at Pleasantville Subdivision, Bacolod City. The property was
designated as Lot 9, Phase II. In 1975, herein respondent
Eldred Jardinico bought the said subject lot from the former
purchaser. Eldred later discovered that the property he
purchased had improvements introduced therein by
respondent Wilson Kee. Kee on the other hand bought on
installments Lot 8 of the same subdivision from C.T. Torres
Enterprises, Inc. (CTTEI) which is the exclusive real estate

agent of the petitioner. Under the contract Keewas allowed to


take possession of the property even before full payment of
the price.
CTTEI through an employee, Zenaida Octaviano
accompanied Kees wife Donabelle to inspect Lot No. 8.
Octaviano however mistakenly pointed towards Lot 9. Hence
spouses Kee had their residence, an auto repair shop, a store
and other improvements constructed on the wrong lot. Upon
discovery of the blunder both Kee and Jardinico tried to
reach an amicable settlement but they failed. Jardinico
demanded that the improvements be removed but as Kee
refused, Jardinico filed acomplaint for ejectment with
damages against Kee at the Municipal Trial Court in Cities
(MTCC) of Bacolod City. Kee filed a third-party complaint
against herein petitioner and CTTEI. The MTCC found that
the error was attributable to CTTEI also since at present the
contract withKee has rescinded for Kees failure to pay
installments. Kee no longer had any right over the subject
property and must pay rentals for its use.
The Regional Trial Court (RTC) of Bacolod City ruled
that petitioner and CTTEI were not at fault or were not
negligent. It argued that Kee was a builder in bad faith. Even
if assuming that he was in good faith, he was no longer so
and must pay rentals from the time that he was given notice
to vacate the lot. The Court of Appeals ruled that Kee was a
builder in good faith as he was unaware of the mix-up when
he constructed the improvements. It was in fact due to the
negligence and wrongful delivery of CTTEI which included its
principal the herein petitioner. It further ruled that the award
of rental was without basis. Pending the resolution of the
case at the Court of Appeals Jardinico and Kee entered into a

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74

deed of sale, wherein Lot 9 was sold to Kee. In the said deed
a provision stating that regardless of the outcome of the
decision, such shall not be pursued by the parties and shall
be considered dismissed and without efect. The appellate
court was not informed of this deal.
ISSUE: Whether or not CTTEI is liable for the acts of its
agent for the damage caused to the third party?
RULING:
The principal is responsible for the acts of the agent,
done within the scope of his authority, and should bear the
damage caused to third persons. On the other hand, the
agent who exceeds his authority is personally liable for the
damages. In the present case, CTTEI was acting within its
authority as the sole real estate representative of
Pleasantville when it made the delivery to Kee. In acting
within its scope of authority, it was, however, negligent. It is
this negligence that is the basis of Pleasantvilles liability, as
principal of CTTEI, per Articles 1909 and 1910 of the Civil
Code.
Pleasantvilles liability lies in the negligence of its
agent CTTEI. For such negligence, Pleasantvilles should be
held liable for damages. The extent and/or amount of
damages to be awarded is a factual issue which should be
determined after evidence is adduced. However, there is no
showing that such evidence was actually presented in the
trial court; hence no damages could be awarded.
64.
MANILA MEMORIAL PARK CEMETERY, INC.,
vs. LINSANGAN (G.R. No. 151319 November 22,
2004)

See case number 61

65.
Filipinas Life Assurance Co. (Now Ayala Life
Assurance, Inc.) v Clemente Pedroso, Teresita
Pedroso and Jennifer Palacio, G.R. No. 159489,
February 04, 2008
FACTS:
Teresita Pedroso is a policyholder of a 20-year
endowment life insurance issued by Filipinas LifeAssurance
Co. Pedroso claims Renato Valle was her insurance agent
since 1972 and Valle collected her monthly premiums. In the
first week of January 1977, Valle told her that the Filipinas
Life EscoltaOfice was holding a promotional investment
program for policyholders. It was ofering 8% prepaid
interest a month for certain amounts deposited on a monthly
basis. Enticed, she initially invested and issued a post-dated
check for P10, 000. In return, Valle issued Pedroso his
personal check forP800 for the 8% prepaid interest and
a Filipinas Life Agent receipt.
Pedroso called the Escolta ofice and talked to
Francisco Alcantara, the administrative assistant, who
referred
her to the branch manager,
Angel Apetrior. Pedroso inquired
about the promotional
investment and Apetrior confirmed that there was such a
promotion. She was even told she couldpush through with
the check she issued. From the records, the check, with the
endorsement of Alcantara at the back, was deposited in the
account of Filipinas Life with the Commercial Bank and Trust
Company, Escolta Branch.

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Relying on the representations made by Filipinas Lifes


duly authorized representatives Apetrior andAlcantara, as
well as having known agent Valle for quite some time,
Pedroso
waited
for
the
maturity
of
her initial
investment. A month after, her
investment
of P10,000
was returned to her after shemade a written request for its
refund. To collect the amount, Pedroso personally went to the
Escoltabranch where Alcantara gave her the P10,000 in cash.
After a second investment, she made 7 to 8more investments
in varying amounts, totaling P37,000 but at a lower rate of
5% prepaid interest a month.
Upon
maturity
of
Pedrosos subsequent investments, Valle would take back
from Pedroso thecorresponding agents receipt he issued to
the latter.
Pedroso toldrespondent Jennifer
Palacio, also
a Filipinas Life insurance policyholder, about theinvestment p
lan. Palacio made a total investment of P49,550 but at only
5% prepaid interest.However, when Pedroso tried to
withdraw her investment, Valle did not want to return
some P17,000worth of it. Palacio also tried to withdraw hers,
but Filipinas Life, despite demands, refused to returnher
money.
ISSUE:WON Filipinas Life is jointly and severally liable
with Apetrior and Alcantara on the claim of Pedroso
and Palacio or WON its agent Renato Valle is solely
liable to Pedroso and Palacio?
RULING:
Yes. While it is true that a person dealing with an agent
is put upon inquiry andmust discover at his own peril the
agents authority, in this case, Pedroso and Palacio did

exercisedue diligence in removing all doubts and in


confirming the validity of the representations made byValle.
Filipinas Life, as the principal, is liable for obligations
contracted by its agent Valle. By the contract of agency, a
person binds himself to render some service or to do
something in representation or onbehalf of another, with the
consent or authority of the latter. The general rule is that the
principal isresponsible for the acts of its agent done within
the
scope
of
its
authority,
and
shouldbearthedamage caused to third persons. When the age
nt exceeds his authority, the agent becomespersonally liable
for the damage. But even when the agent exceeds
his authority, the principal is stillsolidarily liable together
with the agent if the principal allowed the agent to act as
though the agenthad full powers. The acts of an agent
beyond the scope of his authority do not bind the
principal,unless the principal ratifies them, expressly or
impliedly.
The adoption or confirmation by one person of an
act performed on his behalf by anotherwithout authority
Even if Valles representations were beyond his
authority as a debit/insurance agent, Filipinas Lifethru
Alcantara and Apetrior expressly and knowingly ratified
Valles acts. Filipinas Life benefited fromthe investments
deposited by Valle in the account of Filipinas Life.
66.
THE MANILA REMNANT CO., INC vs. THE
HONORABLE COURT OF APPEALS, OSCAR
VENTANILLA, JR. and CARMEN GLORIA DIAZ
FACTS:

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Petitioner Manila Remnant Co., Inc. is the owns parcels


of land situated in Quezon City and constituting the Capital
Homes Subdivision Nos. I and II. Manila Remnant and A.U.
Valencia & Co. Inc. entered into a contract entitled
"Confirmation of Land Development and Sales Contract" to
formalize a prior verbal agreement whereby A.U. Valencia
and Co., Inc. was to develop the aforesaid subdivision for a
consideration of 15.5% commision. At that time the President
of both A.U. Valencia and Co. Inc. and Manila Remnant Co.,
Inc. was Artemio U. Valencia. Manila Remnant thru A.U.
Valencia and Co. executed two "contracts to sell" covering
Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanilla and
Carmen Gloria Diaz. Ten days after the signing of the
contracts with the Ventanillas, Artemio U. Valencia, without
the knowledge of the Ventanilla couple, sold Lots 1 and 2 of
Block 17 again, to Carlos Crisostomo, one of his sales agents
without any consideration. Artemio Valencia then transmitted
the fictitious Crisostomo contracts to Manila Remnant while
he kept in his files the contracts to sell in favor of the
Ventanillas. All the amounts paid by the Ventanillas were
deposited in Valencia's bank account. Upon orders of Artemio
Valencia, the monthly payments of the Ventanillas were
remitted to
Manila Remnant as payments of Crisostomo
for which the former issued receipts in favor of Crisostomo.
General Manager Karl Landahl, wrote Artemio Valencia
informing him that Manila Remnant was terminating its
existing collection agreement with his firm on account of the
considerable amount of discrepancies and irregularities. As a
consequence, Artemio Valencia was removed as President by
the Board of Directors of Manila Remnant. Therefore,
Valencia
stopped
transmitting
Ventanilla's
monthly

installments. A.U. Valencia and Co. sued Manila Remnant to


impugn the abrogation of their agency agreement. The court
ordered all lot buyers to deposit their monthly amortizations
with the court. But A.U. Valencia and Co. wrote the
Ventanillas that it was still authorized by the court to collect
the monthly amortizations and requested them to continue
remitting their amortizations with the assurance that said
payments
would
be
deposited
later
in
court.
Thereafter, the trial court issued an order prohibiting
A.U. Valencia and Co. from collecting the monthly
installments. Valencia complied with the court's order of
submitting the list of all his clients but said list excluded the
name of the Ventanillas. Manila Remnant caused the
publication in the Times Journal of a notice cancelling the
contracts to sell of some lot buyers. To prevent the efective
cancellation of their contracts, Artemio Valencia filed a
complaint for specific performance with damages against
Manila Remnant
The Ventanillas, believing that they had already
remitted enough money went directly to Manila Remnant and
ofered to pay the entire outstanding balance of the purchase
price. Unfortunately, they discovered from Gloria Caballes
that their names did not appear in the records of A.U.
Valencia and Co. as lot buyers. Also, Manila Remnant refused
the ofer of the Ventanillas to pay for the remainder of the
contract price. The Ventanillas then commenced an action for
specific performance, annulment of deeds and damages
against Manila Remnant, A.U. Valencia and Co. and Carlos
Crisostomo.
The trial court found that Manila Remnant could have

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not been dragged into this suit without the fraudulent


manipulations of Valencia. Subsequently, Manila Remnant
and A.U. Valencia and Co. elevated the lower court's decision
to the Court of Appeals through separate appeals. On
October 13, 1987, the Appellate Court afirmed in toto the
decision of the lower court. Reconsideration sought by
petitioner Manila Remnant was denied, hence the instant
petition.
ISSUE: Whether or not petitioner Manila Remnant
should be RULING: solidarily liable together with A.U.
Valencia and Co. and Carlos Crisostomo for the
payment of moral, exemplary damages and attorney's
fees in favor of the Ventanillas?
RULING:
YES. In the case at bar, the Valencia realty firm had
clearly overstepped the bounds of its authority as agent
and for that matter, even the law when it undertook the
double sale of the disputed lots. Such being the case, the
principal, Manila Remnant, would have been in the clear
pursuant to Article 1897 of the Civil Code which states that
"(t)he agent who acts as such is not personally liable to that
party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving
such party suficient notice of his powers." However, the
unique relationship existing between the principal and the
agent at the time of the dual sale must be underscored. Bear
in mind that the president then of both firms was Artemio U.
Valencia, the individual directly responsible for the sale
scam. Hence, despite the fact that the double sale was
beyond the power of the agent, Manila Remnant as principal

was chargeable with the knowledge or constructive notice of


that fact and not having done anything to correct such an
irregularity was deemed to have ratified the same. More in
point, we find that by the principle of estoppel, Manila
Remnant is deemed to have allowed its agent to act as
though
it
had
plenary
powers.
Article 1911 of the Civil Code provides: "Even when the
agent has exceeded his authority, the principal
is solidarily liable with the agent if the former allowed
the latter to act as though he had full powers." In such a
situation, both the principal and the agent may be considered
as joint feasors whose liability is joint and solidary (Verzosa
vs. Lim, 45 Phil. 416). In essence, therefore, the basis for
Manila Remnant's solidary liability is estoppel which, in turn,
is rooted in the principal's neglectfulness in failing to
properly supervise and control the afairs of its agent and to
adopt
the
needed
measures
to
prevent
further
misrepresentation. As a consequence, Manila Remnant is
considered estopped from pleading the truth that it had no
direct hand in the deception employed by its agent. That the
principal might not have had actual knowledge of the agent's
misdeed is of no moment.
67.
LITONJUA JR VS ETERNITY CORP, G.R. No.
144805; June 8, 2006, PONENTE: Callejo, Sr.
See Section 1 case
68.
MANOTOK BROTHERS, INC. VS. COURT OF AP
PEALS, G.R. No. 94753, April 7, 1993.,Campos Jr., J.
See Section 1 case

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78

69.
ALFRED HAHN, vs. COURT OF APPEALS and
BAYERISCHE
MOTOREN
WERKE
AKTIENGESELLSCHAFT (BMW), G.R. No. 113074
January 22, 1997
FACTS:
Alfred Hahn is a Filipino citizen doing business under
the
name
and style "Hahn-Manila." On the other hand, BMW is a
nonresident
foreign corporation existing under the laws of the former
Federal
Republic of Germany. On March 7, 1967, Hahn executed in
favor of BMW a "Deed of Assignment with Special Power of
Attorney". Per the agreement, the parties "continue[d]
business relations as has been usual in the past without a
formal contract." BUT on February 16, 1993, in a meeting
with a BMW representative and the president of Columbia
Motors
Corporation
(CMC), Jose Alvarez, Hahn was informed that BMW was
arranging to grant the exclusive dealership of BMW cars and
products to CMC, which had expressed interest in acquiring
the
same.

On February 24, 1993, Hahn received confirmation of


the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of Hahn's business,
mentioning
among
other things,
decline
in
sales,
deteriorating services, and inadequate showroom and
warehouse facilities, and petitioner's alleged failure to
comply with the standards for an exclusive BMW dealer.
Nonetheless, BMW expressed willingness to continue
business relations with Hahn on the basis of a "standard
BMW importer" contract, otherwise, it said, if this was not
acceptable
to
Hahn,
BMW would have no alternative but to terminate Hahn's
exclusive dealership
efective
June
30,
1993.
Hahn protested, claiming that the termination of his
exclusive dealership would be a breach of the Deed of
Assignment. Hahn insisted that as long as the assignment of
its trademark and device subsisted, he remained BMW's
exclusive dealer in the Philippines because the assignment
was made in consideration of the exclusive dealership. BMW
terminated Hahns exclusive dealership, and suggested
that Hahn and CMC jointly import and distribute BMW cars
in the Philippines. Thus, Hahn filed a complaint for specific
performance and damages, application for temporary
restraining
order
and
for
writs
of preliminary, mandatory and prohibitory injunction against
BMW. RTC granted said prayers.
BMW CONTENTIONS: BMW moved to dismiss the
case, contending that the trial court did not acquire
jurisdiction over it through the service of summons on the
Department of Trade and Industry, because it (BMW) was a
foreign corporation and it was not doing business in the
Philippines. It contended that the execution of the Deed of

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Assignment was an isolated transaction; that Hahn was not


its agent because the latter undertook to assemble and sell
BMW cars and products without the participation of BMW
and sold other products; and that Hahn was an indentor or
middleman transacting business in his own name and for his
own account. Hahns contention, BMW was doing business
in the Philippines through him as its agent, as shown by the
fact that BMW invoices and order forms were used to
document his transactions; that he gave warranties as
exclusive BMW dealer; that BMW oficials periodically
inspected standards of service rendered by him; and that he
was described in service booklets and international
publications of BMW as a "BMW Importer" or "BMW Trading
Company" in the Philippines. CA enjoined the RTC from
further deciding the case. CA ruling: dismissed the
complaint.

ISSUE: Whether or not Hahn is an agent of BMW?


RULING:
YES, Hahn is an agent of BMW and not a broker.
Hahn claimed he took orders for BMW cars and
transmitted them to BMW. Upon receipt of the orders, BMW
fixed the down payment and pricing charges, notified Hahn
of
the
scheduled
production
month
for the orders, and reconfirmed the orders by signing and
returning to Hahn the acceptance sheets. Payment was made
by the buyer directly to BMW. Title to cars purchased passed
directly to the buyer and Hahn never paid for the purchase
price of BMW cars sold in the Philippines. Hahn was credited
with a commission equal to 14% of the purchase price upon

the invoicing of a vehicle order by BMW. Upon


confirmation in writing that the vehicles had been registered
in the Philippines and serviced by him, Hahn received an
additional 3% of the full purchase price. Hahn performed
after-sale services, including, warranty services, for which he
received reimbursement from BMW. This arrangement shows
an agency. An agent receives a commission upon the
successful conclusion of a sale. On the other hand, a broker
earns his pay merely by bringing the buyer and the
seller together, even if no sale is eventually made.
70.
|DOMINION INSURANCE CORPORATION VS.
COURT OF APPEALS| G. R. No. 129919, February
06, 2002| PARDO, J.:
FACTS:
On January 25, 1991, Rodolfo S. Guevarra instituted
Civil Case for sum of money against Dominion Insurance
Corporation (DIC). Guevarra sought to recover the sum of
P156,473.90 which he claimed to have advanced in his
capacity as manager of defendant to satisfy certain claims
filed by DICs clients.
In its traverse, DIC denied any liability to Guevarra and
asserted a counterclaim for P249,672.53, representing
premiums that Guevarra allegedly failed to remit.
When the case was called for pre-trial, but only Guevarra
appeared.
Guevarra moved that the DIC be declared in default for its
failure to appear in court despite due notice.

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80

Finding the motion meritorious and considering that the pretrial conference has been repeatedly postponed on motion of
the DIC, the corporation has been declared in default.
On November 18, 1992, the court a quo rendered judgment:
DIC to pay Guevarra the sum of P156,473.90 representing
the total amount advanced by Guevarra in the payment of the
claims of DICs clients;
On December 14, 1992, DIC appealed the decision to the
Court of Appeals.

the principal, there must be an actual intention to appoint or


an intention naturally inferrable from his words or actions;
and on the part of the agent, there must be an intention to
accept the appointment and act on it, and in the absence of
such intent, there is generally no agency.
A perusal of the Special Power of Attorney would show
that DIC and Guevarra intended to enter into a principalagent relationship. Despite the word special in the title of
the document, the contents reveal that what was constituted
was actually a general agency.

On July 19, 1996, the Court of Appeals promulgated a


decision afirming that of the trial court.

The agency comprises all the business of the principal,


but, couched in general terms, it is limited only to acts of
administration.

ISSUE:

A general power permits the agent to do all acts for


which the law does not require a special power.

(1) Whether or not Guevarra acted within his authority


as agent for DIC, and
(2) Whether Guevarra is entitled to reimbursement of
amounts he paid out of his personal money in settling
the claims of several insured?
HOLDING and RATIO:
Yes, Guevarra acted within his authority as agent for
DIC.
By the contract of agency, a person binds himself to
render some service or to do something in representation or
on behalf of another, with the consent or authority of the
latter. The basis for agency is representation. On the part of

Article 1878, Civil Code, enumerates the instances


when a special power of attorney is required. The pertinent
portion that applies to this case provides that: Article 1878.
Special powers of attorney are necessary in the
following cases:(1) To make such payments as are not
usually considered as acts of administration; (15) Any other
act of strict dominion.
The payment of claims is not an act of administration.
The settlement of claims is not included among the acts
enumerated in the Special Power of Attorney, neither is it of a
character similar to the acts enumerated therein. A special
power of attorney is required before Guevarra could settle
the insurance claims of the insured.

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But Guevarras authority to settle claims is embodied in


the Memorandum of Management Agreement dated February
18, 1987 which enumerates the scope of Guevarras duties
and responsibilities as agency manager as follows:
xxx xxx xxx
1. You are hereby given authority to settle and dispose of all
motor car claims in the amount of P5,000.00 with prior
approval of the Regional Ofice.
2. Full authority is given you on TPPI claims settlement.
xxx xxx xxx
In settling the claims mentioned above, respondent
Guevarras authority is further limited by the written
standard authority to pay, which states that the payment
shall come from Guevarras revolving fund or collection.
The instruction of DIC as the principal could not be any
clearer. Guevarra was authorized to pay the claim of the
insured, but the payment shall come from the revolving fund
or collection in his possession.

Yes, Guevarra is entitled to reimbursement of


amounts he paid out of his personal money in settling
the claims of several insured.
Having deviated from the instructions of the principal,
the expenses that Guevarra incurred in the settlement of the
claims of the insured may not be reimbursed from petitioner

Dominion. This conclusion is in accord with Article 1918,


Civil Code, 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 principals instructions, unless the latter
should wish to avail himself of the benefits derived from the
contract;
xxx xxx xxx
However, while the law on agency prohibits respondent
Guevarra from obtaining reimbursement, his right to recover
may still be justified under the general law on obligations and
contracts.
Article
1236,
second
paragraph,
Civil
Code,
provides:Whoever pays for another may demand from the
debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the
debtor.
In this case, when the risk insured against occurred,
DICs liability as insurer arose. This obligation was
extinguished when Guevarra paid the claims and obtained
Release of Claim Loss and Subrogation Receipts from the
insured who were paid.
Thus, to the extent that the obligation of the DIC has
been extinguished, Guevarra may demand for reimbursement
from his principal. To rule otherwise would result in unjust
enrichment of Dominion Insurance Corporation.

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71.
|ALBALADEJO VS. THE PHILIPPINE
REFINING CO., | G.R. No. 20726, December 20,
1923|STREET, J.:
FACTS:
Albaladejo y Cia., S. en C, instituted an action to
recover a sum of money from the Philippine Refining Co.
(RPC), as successor to the Visayan Refining Co., two causes
of action being stated in the complaint. Upon hearing the
cause the trial judge absolved the RPC from the first cause of
action but gave judgment for the Albaladejo to recover the
sum of P49,626.68, with costs, upon the second cause of
action. From this judgment the Albaladejo appealed with
respect to the action taken upon the first cause of action, and
the RPC appealed with respect to the action taken upon the
second cause of action.
Albaladejo y Cia. is a limited partnership, engaged in
the buying and selling of the products of the country,
especially copra.
The Visayan Refining Co. is a corporation engaged in
operating its extensive plant for the manufacture of coconut
oil.
On August 28, 1918, the Albaladejo made a contract
with the Visayan Refining Co., that during the year therein
contemplated, Albaladejo shall buy copra extensively for the
Visayan Refining Co. At the end of said year both parties
found themselves satisfied with the existing arrangement,
and they therefore continued by tacit consent to govern their
future relations by the same agreement. In this situation
afairs remained until July 9, 1920, when the Visayan

Refining Co. closed down its factory at Opon and withdrew


from the copra market.
When the contract was originally made, Albaladejo
apparently had only one commercial establishment, i. e., that
at Legaspi; but the large requirements of the Visayan
Refining Co. for copra appeared so far to justify the extension
of the plaintif's business that during the course of the next
two or three years it established some twenty agencies, or
subagencies, in various ports and places of the Province of
Albay and neighboring provinces.
After the Visayan Refining Co. had ceased to buy copra,
of which fact the Albaladejo was duly notified, the supplies of
copra already purchased by the Albaladejo were gradually
shipped out and accepted by the Visayan Refining Co., and in
the course of the next eight or ten months the accounts
between the two parties were liquidated. The last account
rendered by the Visayan Refining Co. to the Albaladejo was
for the month of April, 1921, and it showed a balance of P288
in favor of the defendant. Under date of June 25, 1921,
Albaladejo addressed a letter from Legaspi to the Philippine
Refining Co. (which had now succeeded to the rights and
liabilities of the Visayan Refining Co.), expressing its
approval of said account. In this letter no dissatisfaction was
expressed by the Visayan Refining Co.) as to the state of
afairs between the parties; but about six weeks thereafter
the present action was begun.
In the course of the appealed decision the trial judge
makes a careful examination of the proof relative to the
movements of the fleet of boats maintained by the Visayan
Refining Co. for the purpose of collecting copra from the
various ports where it was gathered for said company, as well

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as of the movements of other boats chartered or hired by said


company for the same purpose; and upon consideration of all
the facts revealed in evidence, the Trial Court found that the
Visayan Refining Co. had used reasonable promptitude in its
eforts to get out the copra from the places where it had been
deposited
for
shipment,
notwithstanding
occasional
irregularities due at times to the condition of the weather as
related to transportation by sea and at other times to the
inability of the Visayan Refining Co. to dispatch boats to the
more remote ports. This finding of the trial judge, that no
negligence of the kind alleged can properly be imputed to the
Visayan Refining Co., is in our opinion supported by the
proof.
It appears that in the first six months of the year 1919,
the Albaladejo found that its transactions with the Visayan
Refining Co. had not been productive of reasonable profit, a
circumstance which Albaladejo attributed to loss of weight or
shrinkage in. the copra from the time of purchase to its
arrival at Opon; and the matter was taken up with the
oficials of said company, with the result that a bounty
amounting to P15,610.41 was paid to the plaintif by the
Visayan Refining Co.
As already stated purchases of copra by the Visayan
Refining Co were suspended in the month of July, 1920. At
this time the Albaladejo had an expensive organization which
had been built up chiefly, we suppose, with a view to the
buying of copra; and this organization was maintained
practically intact for nearly a year after the suspension of
purchases by the Visayan Refining Co. Indeed in October,
1920, the Albaladejo added an additional agency at Gubat to
the twenty or more already in existence.

As a second cause of action Albaladejo seeks to recover


the sum of P110,000, the alleged amount expended by
Albaladejo in maintaining and extending its organization as
above stated. As a basis for the Visayan Refining Cos liability
in this respect it is alleged that said organization was
maintained and extended at the express request, or
requirement, of the defendant, in conjunction with repeated
assurances that the defendant would soon resume activity as
a purchaser of copra.
With reference to this cause of action the trial judge
found that the Albaladejo, as claimed, had incurred expenses
at the request of the Visayan Refining Co and upon its
representation that the plaintif would be fully compensated
therefor in the future. Instead, however, of allowing the
Albaladejo the entire amount claimed, his Honor gave
judgment for only thirty per centum of said amount, in view
of the fact that the plaintif's transactions in copra had
amounted in the past only to about thirty per centum of the
total business transacted by it. Estimated upon this basis, the
amount recognized as constituting a just claim was found to
be P49,626.68, and for this amount judgment was rendered
against the defendant.
ISSUE:Whether or not Visayan Refining Co is liable for
Albaladejos expenses in maintaining and extending its
organization for the purchase of copra in the period
between July, 1920, to July, 1921?
HOLDING and RATIO:
No, such liability does not exist.

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The contention is advanced that the contract between


the Albaladejo and the Visayan Refining Co. created the
relation of principal and agent between the parties, and
reliance is placed upon article 1729 of the Civil Code which
requires the principal to indemnify the agent for damages
incurred in carrying out the agency.
Attentive perusal of the contract is, however,
convincing to the efect that the relation between the parties
was not that of principal and agent in so far as relates to the
purchase of copra by Albaladejo. It is true that the Visayan
Refining Co. made Albaladejo one of its instruments for the
collection of copra; but it is clear that in making its
purchases from the producers Albaladejo was buying upon its
own account and that when it turned over the copra to the
Visayan Refining Co., pursuant to that agreement, a second
sale was efected.
The contract declared that during the continuance of
the contract, the Visayan Refining Co. would not appoint any
other agent for the purchase of copra in Legaspi; and this
gives rise indirectly to the inference that the Albaladejo was
considered its buying agent. But the use of this term in one
clause of the contract cannot dominate the real nature of the
agreement as revealed in other clauses, no less than in the
caption of the agreement itself. In some of the trade letters
also the various instrumentalities used by the Visayan
Refining Co. for the collection of copra are spoken of as
agents. But this designation was evidently used for
convenience; and it is very clear that in its activities as a
buyer the Albaladejo was acting upon its own account and
not as agent, in the legal sense, of the Visayan Refining Co.
The title to all of the copra purchased by the Albaladejo

undoubtedly remained in it until it was delivered by way of


subsequent sale to said company.
For the reasons stated, no liability on the part of the
Visayan Refining Co is shown upon the Albaladejo 's second
cause of action, and the judgment of the trial court on this
part of the case is erroneous.
The appealed judgment will therefore be afirmed in so
far as it absolves the defendant from the first cause of action
and will be reversed in so far as it gives judgment against the
defendant upon the second cause of action; and the
defendant will be completely absolved from the complaint.
72.
|DE CASTRO VS. COURT OF APPEALS |G.R.
No. 115838, July 18, 2002| CARPIO, J.:
FACTS:
Constante authorized Artigo to act as agent in the sale
of two lots in Cubao, Quezon City. The handwritten
authorization letter signed by Constante clearly established a
contract of agency between Constante and Artigo. Thus,
Artigo sought prospective buyers and found Times Transit
Corporation. Artigo facilitated the negotiations which
eventually led to the sale of the two lots.
The Trial Court and Court of Appeals decided that
Artigo is entitled to the 5% commission on the purchase price
as provided in the contract of agency; that Artigos complaint
is not dismissible for failure to implead as indispensable
parties the other co-owners of the two lots; and that it is not
necessary to implead the other co-owners since the action is

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exclusively based on a contract of agency between Artigo and


Constante.

However, the rule on mandatory joinder


indispensable parties is not applicable to the instant case.

ISSUE: Whether or not co-principals are solidary liable


in a contract of agency?

There is no dispute that Constante appointed Artigo in


a handwritten note dated January 24, 1984 to sell the
properties of the De Castros for P23 million at a 5 percent
commission.

HOLDING and RATIO:


Yes, for solidarity of the obligation, as in the liability of
co-principals in a contract of agency, each obligor may be
compelled to pay the entire obligation.
The De Castros argue that Artigos complaint should
have been dismissed for failure to implead all the co-owners
of the two lots. The De Castros claim that Artigo always knew
that the two lots were co-owned by Constante and Corazon
with their other siblings Jose and Carmela whom Constante
merely represented. The De Castros contend that failure to
implead such indispensable parties is fatal to the complaint
since Artigo, as agent of all the four co-owners, would be
paid with funds co-owned by the four co-owners.
The De Castros contentions are devoid of legal basis.
An indispensable party is one whose interest will be
afected by the courts action in the litigation, and without
whom no final determination of the case can be had. The
joinder of indispensable parties is mandatory and courts
cannot proceed without their presence. Whenever it appears
to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of the
court to stop the trial and order the inclusion of such party.

of

Constante signed the note as owner and as


representative of the other co-owners. Under this note, a
contract of agency was clearly constituted between
Constante and Artigo. Whether Constante appointed Artigo
as agent, in Constantes individual or representative capacity,
or both, the De Castros cannot seek the dismissal of the case
for failure to implead the other co-owners as indispensable
parties. The De Castros admit that the other co-owners are
solidarily liable under the contract of agency, citing Article
1915 of the Civil Code, which reads: Art. 1915. If two or more
persons have appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to the agent for
all the consequences of the agency.
The solidary liability of the four co-owners, however,
militates against the De Castros theory that the other coowners should be impleaded as indispensable parties. A
noted commentator explained Article 1915 thus
The rule in this article applies even when the appointments
were made by the principals in separate acts, provided that
they are for the same transaction. The solidarity arises from
the common interest of the principals, and not from the act of
constituting the agency. By virtue of this solidarity, the agent
can recover from any principal the whole compensation and
indemnity owing to him by the others. The parties, however,

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may, by express agreement, negate this solidary


responsibility. The solidarity does not disappear by the mere
partition efected by the principals after the accomplishment
of the agency.
If the undertaking is one in which several are
interested, but only some create the agency, only the latter
are solidarily liable, without prejudice to the efects of
negotiorum gestio with respect to the others. And if the
power granted includes various transactions some of which
are common and others are not, only those interested in each
transaction shall be liable for it.
When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract of
agency, each obligor may be compelled to pay the entire
obligation. The agent may recover the whole compensation
from any one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a
creditor may sue any of the solidary debtors. This article
reads: Art. 1216. The creditor may proceed against any one
of the solidary debtors or some or all of them simultaneously.
The demand made against one of them shall not be an
obstacle to those which may subsequently be directed
against the others, so long as the debt has not been fully
collected.
SECTION FIVE
73.
|GARCIA VS. DE MANZANO, |G.R. No. 13414,
February 04, 1919|MOIR, J.
FACTS:

Narciso Lopez Manzano was a merchant in Atimonan,


Tayabas, who went to Spain in May, 1910, and died there the
8th of September, 1913. He gave a general power-of-attorney
to his son, Angel L. Manzano on the 9th of February, 1910,
and on the 25th of March a second general power-of-attorney
to
his
wife,
Josefa
Samson.
Manzano was the owner of a half interest in a small
steamer, the San Nicolas, the other half being owned by
Ocejo, Perez & Co., with whom there was a partnership
agreement to run the steamer for a few years. When this
period expired Ocejo, Perez & Co., refused to continue the
contract and demanded that Manzano buy or sell. As he did
not want to sell at the price ofered and could not buy, Juan
Garcia bought the half interest held by Ocejo, Perez & Co., on
the 15th of October, 1910. Angel L. Manzano, acting under
his power-of-attorney, sold in July, 1911, the other half of the
boat to the Garcia.
On the 23d of July, 1912, Angel L. Manzano, by virtue of
the power-of-attorney from his father, Narciso L. Manzano,
executed a contract, by which Juan Garcia agreed to extend a
credit to Narciso L. Manzano in the sum of P12,000, and this
credit was used by the house of Manzano. To secure it a
mortgage was given in the same document on three parcels
of land in Atimonan, with their improvements.
The defendants also filed a counter-claim against Juan
Garcia and his wife, Conception Castro, in which they allege
that Narciso L. Manzano was the owner of one-half of the
small steamer San Nicolas and Juan Garcia the owner of the
other half; that Garcia taking advantage of the youth and
inexperience of Angel L. Manzano falsely and maliciously
made him believe that he had authority under the power of-

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attorney from his father to sell the half interest in the San
Nicolas, and that he did so. That Angel L. Manzano had no
authority to sell the interest in the steamer, but that since the
date of said sale, July, 1912, the plaintif had illegally
appropriated all rents and profits of the boat to his own use,
which amount to P30,000 per year, after paying for all
repairs, etc., and they ask the court to absolve them from the
complaint, to declare them the owners of one-half of the
steamer San Nicolas, and to order the plaintifs to render a
detailed account of all the profits received from the San
Nicolas, arid to order one half of the profits paid to the
defendants.
ISSUE:Whether or not that the power of attorney
executed in favor of the wife revoked the one to the
son?
HOLDING and RATIO:
"The appointment of a new agent for the same business
produces a revocation of the previous agency from the day on
which notice was given to the former agent, excepting the
provisions of the next preceding article"
son,

There is no proof in the record that the first agent, the


knew of the power-of-attorney to his mother.

It was necessary under the law for the defendants, in


order to establish their counterclaim, to prove that the son
had notice of the second power-of-attorney. They have not
done so, and it must be considered that Angel L. Manzano
was acting under a valid power-of-attorney from his father
which had riot been legally revoked on the date of the sale of

the half interest in the steamer to the plaintif's son, which


half interest was legally inherited by the plaintifs.
The defendant's next argument is that the power-of
attorney, if valid, does not authorize the sale of the half
interest in the boat to the plaintif.
There is no pretense that the boat was not sold for a
fair price, there is no denial that the value was received in
full, but the defendants allege that the power-of-attorney
under which Angel L. Manzano acted, even if a valid power,
did not authorize the sale of the boat, and they want it back
with one-half of the profits derived from its use by the
plaintif.
The power-of-attorney authorizes the sale of real
property, the buying of real property and mortgaging the
same, the borrowing of money and in fact is general and
complete.
The power does not expressly state that the agent may
sell the boat, but a power so full and complete and
authorizing the sale of real property; must necessarily carry
with it the right to sell a half interest in a small boat. The
record further shows the sale was necessary in order to get
money or a credit without which it would be impossible to
continue the business which was being conducted in the
name of Narciso L. Manzano and for his benefit.
The Court consider that the authorization is so
complete that it carries with it full authority to sell the onehalf interest in the boat which was then owned by Narciso L.
Manzano.

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74.
CMS LOGGING VS. COURT OF APPEALS|G.R.
No. L-41420, July 10, 1992|NOCON, J.
FACTS:
CMS is a forest concessionaire engaged in the logging
business, while DRACOR is engaged in the business of
exporting and selling logs and lumber. On August 28, 1957,
CMS and DRACOR 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, for a period of five (5) years.
About six months prior to the expiration of the
agreement, while on a trip to Tokyo, Japan, CMS's president,
Atty. Carlos Moran Sison, and general manager and legal
counsel, Atty. Teodoro R. Dominguez, discovered that
DRACOR had used Shinko Trading Co., Ltd. (Shinko for
brevity) as agent, representative or liaison oficer in selling
CMS's logs in Japan for which Shinko earned a commission of
U.S. $1.00 per 1,000 board feet from the buyer of the logs.
Under this arrangement, Shinko was able to collect a total of
U.S. $77,264.67.[3]
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.
CMS contended that since DRACOR had been paid the 5%
commission under the agreement, 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.

After this discovery, CMS sold and shipped logs valued


at U.S. $739,321.13 or P2,883,351.90,[4] directly to several
firms in Japan without the aid or intervention of DRACOR.
CMS sued DRACOR for the commission received by
Shinko and for moral and exemplary damages, while
DRACOR counterclaimed for its commission, amounting to
P144,167.59, from the sales made by CMS of logs to
Japanese firms. In its reply, CMS averred as a defense to the
counterclaim that DRACOR had retained the sum of
P101.167.59 as part of its commission for the sales made by
CMS. Thus, as its counterclaim to DRACOR's counterclaim,
CMS demanded DRACOR return the amount it unlawfully
retained. DRACOR later filed an amended counterclaim,
alleging that the balance of its commission on the sales made
by CMS was P42,630.82,[6] thus impliedly admitting that it
retained the amount alleged by CMS.
In dismissing the complaint, the trial court ruled that
no evidence was presented to show that Shinko received the
commission of U.S. $77,264.67 arising from the sale of CMS's
logs in Japan, though the trial court stated that "Shinko was
able to collect the total amount of $77,264.67 US Dollars
(Exhs. M and M-1)."[7] The counterclaim was likewise
dismissed, as it was shown that DRACOR had waived its
rights to the balance of its commission in a letter dated
February 2, 1963 to Atty. Carlos Moran Sison, president of
CMS.[8] From said decision, only CMS appealed to the Court
of Appeals.
The Court of Appeals, afirmed the dismissal of the
complaint since "[t]he trial court could not have made a
categorical finding that Shinko collected commissions from
the buyers of Sison's logs in Japan, and could not have held

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that Sison is entitled to recover from Dracor the amount


collected by Shinko as commissions, plaintif-appellant
having failed to prove by competent evidence its claims."
ISSUE:Whether or not the principal may revoke a
contract of agency at will, and may be availed of even if
the period fixed in the contract of agency as not yet
expired?
HOLDING and RATIO:
Yes, the principal may revoke a contract of agency at
will, and may be availed of even prior to the expiration of the
contract of agency.
The Court find merit in CMS's contention that the
appellate court erred in holding that DRACOR was entitled to
its commission from the sales made by CMS to Japanese
firms.
The principal may revoke a contract of agency at will,
and such revocation may be express, or implied,[20] and may
be availed of even if the period fixed in the contract of
agency as not yet expired. As the principal has this absolute
right to revoke the agency, the agent cannot object thereto;
neither may he claim damages arising from such revocation,
unless it is shown that such was done in order to evade the
payment of agent's commission.
In the case at bar, CMS appointed DRACOR as its agent
for the sale of its logs to Japanese firms. Yet, during the
existence of the contract of agency, DRACOR admitted that
CMS sold its logs directly to several Japanese firms. This act

constituted an implied revocation of the contract of agency


under Article 1924 of the Civil Code, which provides:
"Art. 1924 - The agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly
with third persons."
In New Manila Lumber Company, Inc. vs. Republic of
the Philippines, this Court ruled that the act of a contractor,
who, after executing powers of attorney in favor of another
empowering the latter to collect whatever amounts may be
due to him from the Government, and thereafter demanded
and collected from the government the money the collection
of which he entrusted to his attorney-in-fact, constituted
revocation of the agency in favor of the attorney-in-fact.
Since the contract of agency was revoked by CMS
when its sold its logs to Japanese firms without the
intervention of DRACOR, the latter is no longer entitled to its
commission from the proceeds of such sale and is not entitled
to retain whatever moneys it may have received as its
commission for said transactions. Neither would DRACOR be
entitled to collect damages from CMS, since damages are
generally not awarded to the agent for the revocation of the
agency, and the case at bar is not one falling under the
exception mentioned, which is to evade the payment of the
agent's commission.
The Court reversed the ruling of the Court of Appeals
with regard to DRACOR's right to retain the amount of
P101,536.77 as part of its commission from the sale of logs
by CMS, and hold that DRACOR has no right to its
commission.

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75.
CMS LOGGING VS. COURT OF APPEALS|G.R.
No. L-41420, July 10, 1992|NOCON, J.
See Case Number 74

FACTS:

The first recital of the deed is that Ong Guan Can, Jr.,
as agent of Ong Guan Can, the proprietor of the commercial
firm of Ong Guan Can & Sons, sells the rice-mill and camarin
for P13,000 and gives as his authority the power of attorney
dated the 23d of May, 1928, a copy of this public instrument
being attached to the deed and recorded with the deed in the
ofice of the register of deeds of Capiz. The receipt of the
money acknowledged in the deed was to the agent, and the
deed was signed by the agent in his own name and without
any words indicating that he was signing it for the principal.

This is a suit over a rice mill and camarin situated at


Dao, Province of Capiz. Plaintif claims that the property
belongs to its judgment debtor, Ong Guan Can, while
defendants Juan Tong and Pua Giok Eng claim as owner and
lessee of the owner by virtue of a deed dated July 31, 1931,
by Ong Guan Can, Jr.

Leaving aside the irregularities of the deed and coming


to the power of attorney referred to in the deed and
registered therewith, it is at once seen that it is not a general
power of attorney but a limited one and does not give the
express power to alienate the properties in question. (Article
1713 of the Civil Code.)

After trial the Court of First Instance of Capiz held that


the deed was invalid and that the property was subject to the
execution which has been levied on said properties by the
judgment creditor of the owner. Defendants Juan Tong and
Pua Giok bring this appeal and insist that the deed of the
31st of July, 1931, is valid.

Appellants claim that this defect is cured by Exhibit 1,


which purports to be a general power of attorney given to the
same agent in 1920.

76.
DY BUNCIO & COMPANY INC. vs ONG GUAN
CAN ET. AL./ G.R. NO. L-40681 / 2 October 1934 /
Justice Hull

ISSUE:
WoN the disputed land is subject to execution and
attachment?
RULING:
Yes. Article 1732 of the Civil Code is silent over the
partial termination of an agency. The making and accepting
of a new power of attorney, whether it enlarges or decreases
the power of the agent under a prior power of attorney, must
be held to supplant and revoke the latter when the two are

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inconsistent. If the new appointment with limited powers


does not revoke the general power of attorney, the execution
of the second power of attorney would be a mere futile
gesture.lawphi1.net
The title of Ong Guan Can not having been divested by
the so-called deed of July 31, 1931, his properties are subject
to attachment and execution.
A special power of attorney giving the son the authority
to sell the principals property is deemed revoked by a
subsequent general power of attorney that does not give such
power to the son, and any sale efected thereafter by the son
in the name of the father would be void.
77.
REPUBLIC vs. EVANGELISTA / G.R.
156015 / 11 August 2005 / Justice Puno

NO.

FACTS:
The Complaint alleged that private respondent Legaspi
is the owner of a land located in Bigte, Norzagaray, Bulacan.
In November 1999, petitioner Calimlim, representing the
Republic of the Philippines, and as then head of the
Intelligence Service of the Armed Forces of the Philippines
and the Presidential Security Group, entered into a
Memorandum of Agreement (MOA) with one Ciriaco Reyes.
The MOA granted Reyes a permit to hunt for treasure in a
land in Bigte, Norzagaray, Bulacan. Petitioner Diciano signed
the MOA as a witness. It was further alleged that thereafter,
Reyes, together with petitioners, started, digging, tunneling
and blasting works on the said land of Legaspi. The
complaint also alleged that petitioner Calimlim assigned
about 80 military personnel to guard the area and encamp

thereon to intimidate Legaspi and other occupants of the


area from going near the subject land.
On February 15, 2000, Legaspi executed a special
power of attorney (SPA) appointing his nephew, private
respondent Gutierrez, as his attorney-in-fact. Gutierrez was
given the power to deal with the treasure hunting activities
on Legaspis land and to file charges against those who may
enter it without the latters authority. Legaspi agreed to give
Gutierrez 40% of the treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a case for
damages and injunction against petitioners for illegally
entering Legaspis land. He hired the legal services of Atty.
Homobono Adaza. Their contract provided that as legal fees,
Atty. Adaza shall be entitled to 30% of Legaspis share in
whatever treasure may be found in the land. In addition,
Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance
fee per court hearing and defray all expenses for the cost of
the litigation.
On March 14, 2000, petitioners filed a Motion to
Dismiss contending: first, there is no real party-in-interest as
the SPA of Gutierrez to bring the suit was already revoked by
Legaspi on March 7, 2000, as evidenced by a Deed of
Revocation.
On March 23, 2000, the trial court granted private
respondents application for a writ of preliminary injunction
on the ground that he SPA granted to Gutierrez continues to
be valid.
On appeal, the Court of Appeals afirmed the decision
of the trial court.

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Issue:
WoN the contract of agency between Legaspi and
Guiterrez has been efectively revocked by Legaspi?
Ruling:
No. petitioners claim that the special power of attorney
of Gutierrez to represent Legaspi has already been revoked
by the latter. Private respondent Gutierrez, however,
contends that the unilateral revocation is invalid as his
agency is coupled with interest.
The Court agrees with private respondent.
Art. 1868 of the Civil Code provides that by the
contract of agency, an agent binds himself to render some
service or do something in representation or on behalf of
another, known as the principal, with the consent or
authority of the latter.
A contract of agency is generally revocable as it is a
personal contract of representation based on trust and
confidence reposed by the principal on his agent. As the
power of the agent to act depends on the will and license of
the principal he represents, the power of the agent ceases
when the will or permission is withdrawn by the principal.
Thus, generally, the agency may be revoked by the principal
at will.
However, an exception to the revocability of a contract
of agency is when it is coupled with interest, i.e., if a bilateral
contract depends upon the agency. The reason for its
irrevocability is because the agency becomes part of another
obligation or agreement. It is not solely the rights of the

principal but also that of the agent and third persons which
are afected. Hence, the law provides that in such cases, the
agency cannot be revoked at the sole will of the principal.
In the case at bar, we agree with the finding of the trial
and appellate courts that the agency granted by Legaspi to
Gutierrez is coupled with interest as a bilateral contract
depends on it. It is clear from the records that Gutierrez was
given by Legaspi, inter alia, the power to manage the
treasure hunting activities in the subject land; to file any case
against anyone who enters the land without authority from
Legaspi; to engage the services of lawyers to carry out the
agency; and, to dig for any treasure within the land and enter
into agreements relative thereto. It was likewise agreed upon
that Gutierrez shall be entitled to 40% of whatever treasure
may be found in the land. Pursuant to this authority and to
protect Legaspis land from the alleged illegal entry of
petitioners, agent Gutierrez hired the services of Atty. Adaza
to prosecute the case for damages and injunction against
petitioners. As payment for legal services, Gutierrez agreed
to assign to Atty. Adaza 30% of Legaspis share in whatever
treasure may be recovered in the subject land. It is clear that
the treasure that may be found in the land is the subject
matter of the agency; that under the SPA, Gutierrez can enter
into contract for the legal services of Atty. Adaza; and, thus
Gutierrez and Atty. Adaza have an interest in the subject
matter of the agency, i.e., in the treasures that may be found
in the land. This bilateral contract depends on the agency
and thus renders it as one coupled with interest, irrevocable
at the sole will of the principal Legaspi. When an agency is
constituted as a clause in a bilateral contract, that is, when
the agency is inserted in another agreement, the agency
ceases to be revocable at the pleasure of the principal as the

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agency shall now follow the condition of the bilateral


agreement. Consequently, the Deed of Revocation executed
by Legaspi has no efect. The authority of Gutierrez to file
and continue with the prosecution of the case at bar is
unafected.

78.
SEVILLA vs. CA / G.R. NO. L- 41182-3 / 16
April 1988 / Justice Sarmento
FACTS:
On the strength of a contract (Exhibit A for the
appellant Exhibit 2 for the appellees) entered into on Oct. 19,
1960 by and between Mrs. Segundina Noguera, party of the
first part; the Tourist World Service, Inc., represented by Mr.
Eliseo Canilao as party of the second part, and hereinafter
referred to as appellants, the Tourist World Service, Inc.
leased the premises belonging to the party of the first part at
Mabini St., Manila for the former-s use as a branch ofice. In
the said contract the party of the third part held herself
solidarily liable with the party of the part for the prompt
payment of the monthly rental agreed on. When the branch
ofice was opened, the same was run by the herein appellant
Una 0. Sevilla payable to Tourist World Service Inc. by any
airline for any fare brought in on the eforts of Mrs. Lina
Sevilla, 4% was to go to Lina Sevilla and 3% was to be
withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the
Tourist World Service, Inc. appears to have been informed
that Lina Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch ofice was

anyhow losing, the Tourist World Service considered closing


down its ofice. This was firmed up by two resolutions of the
board of directors of Tourist World Service, Inc. dated Dec. 2,
1961 (Exhibits 12 and 13), the first abolishing the ofice of
the manager and vice-president of the Tourist World Service,
Inc., Ermita Branch, and the second,authorizing the
corporate secretary to receive the properties of the Tourist
World Service then located at the said branch ofice. It
further appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Ofice premises was
terminated and while the efectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of fact
appellants used it since Nov. 1961. Because of this, and to
comply with the mandate of the Tourist World Service, the
corporate secretary Gabino Canilao went over to the branch
ofice, and, finding the premises locked, and, being unable to
contact Lina Sevilla, he padlocked the premises on June 4,
1962 to protect the interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a complaint wall
filed by the herein appellants against the appellees with a
prayer for the issuance of mandatory preliminary injunction.
Both appellees answered with counterclaims. For apparent
lack of interest of the parties therein, the trial court ordered
the dismissal of the case without prejudice.
The
appellee
Segundina
Noguera
sought
reconsideration of the order dismissing her counterclaim
which the court a quo, in an order dated June 8, 1963,
granted permitting her to present evidence in support of her
counterclaim.
In this appeal, appealant Lina Sevilla claims that a joint
bussiness venture was entered into by and between her and

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appellee TWS with ofices at the Ermita branch ofice and


that she was not an employee of the TWS to the end that her
relationship with TWS was one of a joint business venture.
The trial court held for the private respondent on the
premise that the private respondent, Tourist World Service,
Inc., being the true lessee, it was within its prerogative to
terminate the lease and padlock the premises. It likewise
found the petitioner, Lina Sevilla, to be a mere employee of
said Tourist World Service, Inc. and as such, she was bound
by the acts of her employer. The respondent Court of Appeal
rendered an afirmance.
ISSUE:
WoN the private respondent has the prerogative to
terminate the lease and padlock the premisses since Lina
Sevilla is a mere employee of the private respondent and was
bound by the acts of her employer?
Ruling:
No. It is the Court's considered opinion, that when the
petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita ofice, she
must have done so pursuant to a contract of agency. It is the
essence of this contract that the agent renders services "in
representation or on behalf of another. In the case at bar,
Sevilla solicited airline fares, but she did so for and on behalf
of her principal, Tourist World Service, Inc. As compensation,
she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself based on her
letter of November 28, 1961, pre-assumed her principal's
authority as owner of the business undertaking. We are

convinced, considering the circumstances and from the


respondent Court's recital of facts, that the ties had
contemplated a principal agent relationship, rather than a
joint managament or a partnership.
But unlike simple grants of a power of attorney, the
agency that we hereby declare to be compatible with the
intent of the parties, cannot be revoked at will. The reason is
that it is one coupled with an interest, the agency having
been created for mutual interest, of the agent and the
principal. It appears that Lina Sevilla is a bona fide travel
agent herself, and as such, she had acquired an interest in
the business entrusted to her. Moreover, she had assumed a
personal obligation for the operation thereof, holding herself
solidarily liable for the payment of rentals. She continued the
business, using her own name, after Tourist World had
stopped further operations. Her interest, obviously, is not to
the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter
of the power of management delegated to her. It is an agency
that, as we said, cannot be revoked at the pleasure of the
principal. Accordingly, the revocation complained of should
entitle the petitioner, Lina Sevilla, to damages.
79.
VALENZUELA vs CA / G.R. NO. 83122 / 19
October 1990
FACTS:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is
a General Agent of private respondent Philippine American
General Insurance Company, Inc. (Philamgen for short) since
1965. As such, he was authorized to solicit and sell in behalf
of Philamgen all kinds of non-life insurance, and in

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consideration of services rendered was entitled to receive the


full agent's commission of 32.5% from Philamgen under the
scheduled commission rates (Exhibits "A" and "1"). From
1973 to 1975, Valenzuela solicited marine insurance from one
of his clients, the Delta Motors, Inc. (Division of Electronics
Airconditioning and Refrigeration) in the amount of P4.4
Million from which he was entitled to a commission of 32%
(Exhibit "B"). However, Valenzuela did not receive his full
commission which amounted to P1.6 Million from the P4.4
Million insurance coverage of the Delta Motors. During the
period 1976 to 1978, premium payments amounting to
P1,946,886.00 were paid directly to Philamgen and
Valenzuela's commission to which he is entitled amounted to
P632,737.00.
In 1977, Philamgen started to become interested in and
expressed its intent to share in the commission due
Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty basis
(Exhibit "C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President,
Bienvenido M. Aragon insisted on the sharing of the
commission with Valenzuela (Exhibit E). This was followed by
another sharing proposal dated June 1, 1978. On June
16,1978, Valenzuela firmly reiterated his objection to the
proposals of respondents stating that: "It is with great
reluctance that I have to decline upon request to signify my
conformity to your alternative proposal regarding the
payment of the commission due me. However, I have no
choice for to do otherwise would be violative of the Agency
Agreement executed between our goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its
oficers, namely: Bienvenido Aragon, Carlos Catolico and

Robert E. Parnell took drastic action against Valenzuela.


They: (a) reversed the commission due him by not crediting
in his account the commission earned from the Delta Motors,
Inc. insurance (Exhibit "J" and "2"); (b) placed agency
transactions on a cash and carry basis; (c) threatened the
cancellation of policies issued by his agency (Exhibits "H" to
"H-2"); and (d) started to leak out news that Valenzuela has a
substantial account with Philamgen. All of these acts resulted
in the decline of his business as insurance agent (Exhibits
"N", "O", "K" and "K-8"). Then on December 27, 1978,
Philamgen terminated the General Agency Agreement of
Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court dated
June 23, 1986, Civil Case No. 121126, Annex I, Petition).
The petitioners sought relief by filing the complaint
against the private respondents in the court a quo (Complaint
of January 24, 1979, Annex "F" Petition). After due
proceedings, the trial court found:
xxx

xxx

xxx

Defendants tried to justify the termination of plaintif


Arturo P. Valenzuela as one of defendant PHILAMGEN's
General Agent by making it appear that plaintif Arturo P.
Valenzuela has a substantial account with defendant
PHILAMGEN particularly Delta Motors, Inc.'s Account,
thereby prejudicing defendant PHILAMGEN's interest
(Exhibits 6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the Civil
Code of the Philippines (Article 1868) and the provisions of
the General Agency Agreement as their basis for terminating
plaintif Arturo P. Valenzuela as one of their General Agents.

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In its questioned decision the Court of Appeals


observed that:
In any event the principal's power to revoke an agency
at will is so pervasive, that the Supreme Court has
consistently held that termination may be efected even if the
principal acts in bad faith, subject only to the principal's
liability for damages.
The lower court, however, thought the termination of
Valenzuela as General Agent improper because the record
will show the principal cause of the termination of the
plaintif as General Agent of defendant Philamgen was his
refusal to share his Delta commission.
ISSUE:
WoN Philamgen and/or its oficers can be held liable for
damages due to the termination of the General Agency
Agreement it entered into with the petitioners?
RULING:
Yes. After a painstaking review of the entire records of
the case and the findings of facts of both the court a quo and
respondent appellate court, the court is constrained to afirm
the trial court's findings and rule for the petitioners.
It is also evident from the records that the agency
involving petitioner and private respondent is one "coupled
with an interest," and, therefore, should not be freely
revocable at the unilateral will of the latter.
In the insurance business in the Philippines, the most
dificult and frustrating period is the solicitation and

persuasion of the prospective clients to buy insurance


policies.
Normally,
agents
would
encounter
much
embarrassment, dificulties, and oftentimes frustrations in
the solicitation and procurement of the insurance policies. To
sell policies, an agent exerts great efort, patience,
perseverance, ingenuity, tact, imagination, time and money.
In the case of Valenzuela, he was able to build up an Agency
from scratch in 1965 to a highly productive enterprise with
gross billings of about Two Million Five Hundred Thousand
Pesos (P2,500,000.00) premiums per annum. The records
sustain the finding that the private respondent started to
covet a share of the insurance business that Valenzuela had
built up, developed and nurtured to profitability through over
thirteen (13) years of patient work and perseverance. When
Valenzuela refused to share his commission in the Delta
account, the boom suddenly fell on him.
The private respondents by the simple expedient of
terminating the General Agency Agreement appropriated the
entire insurance business of Valenzuela. With the termination
of the General Agency Agreement, Valenzuela would no
longer be entitled to commission on the renewal of insurance
policies of clients sourced from his agency. Worse, despite
the termination of the agency, Philamgen continued to hold
Valenzuela jointly and severally liable with the insured for
unpaid premiums. Under these circumstances, it is clear that
Valenzuela had an interest in the continuation of the agency
when it was unceremoniously terminated not only because of
the commissions he should continue to receive from the
insurance business he has solicited and procured but also for
the fact that by the very acts of the respondents, he was
made liable to Philamgen in the event the insured fail to pay
the premiums due. They are estopped by their own positive

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97

averments and claims for damages. Therefore, the


respondents cannot state that the agency relationship
between Valenzuela and Philamgen is not coupled with
interest. "There may be cases in which an agent has been
induced to assume a responsibility or incur a liability, in
reliance upon the continuance of the authority under such
circumstances that, if the authority be withdrawn, the agent
will be exposed to personal loss or liability".
Furthermore, there is an exception to the principle that
an agency is revocable at will and that is when the agency
has been given not only for the interest of the principal but
for the interest of third persons or for the mutual interest of
the principal and the agent. In these cases, it is evident that
the agency ceases to be freely revocable by the sole will of
the principal.
80.
|National Sugar Trading vs. PNB |G.R. No.
151218|January
28,
2003|
Justice
YnaresSantiago|
FACTS:
Sometime in February 1974, then President Ferdinand
E. Marcos issued Presidential Decree No. 388 constituting
the Philippine Sugar Commission (PHILSUCOM), as the sole
buying and selling agent of sugar on the quedan permit level.
In November of the same year, PD 579 was issued,
authorizing the Philippine Exchange Company, Inc.
(PHILEXCHANGE), a wholly owned subsidiary of Philippine
National Bank (PNB) to serve as the marketing agent of
PHILSUCOM. Pursuant to PD 579, PHILEXCHANGE's
purchases of sugar shall be financed by PNB and the

proceeds of sugar trading operations of PHILEXCHANGE


shall be used to pay its liabilities with PNB.
Similarly, in February 1975, PD 659 was issued,
constituting PHILEXCHANGE and/or PNB as the exclusive
sugar trading agencies of the government for buying sugar
from planters or millers and selling or exporting them. PNB
then extended loans to PHILEXCHANGE for the latter's sugar
trading operations.
At first, PHILEXCHANGE religiously
paid its
obligations to PNB by depositing the proceeds of the sale of
sugar with the bank. Subsequently, however, with the fall of
sugar prices in the world market, PHILEXCHANGE defaulted
in the payments of its loans amounting to P206, 070,172.57.
In July 1977, the National Sugar Trading Corporation
(NASUTRA) replaced PHILEXCHANGE as the marketing
agent of PHILSUCOM. Accordingly, PHILEXCHANGE sold
and turned over all sugar quedans to NASUTRA. However, no
physical inventory of the sugar covered by the quedans was
made.
To finance its sugar trading operations, NASUTRA
applied for and was granted a P408 Million Revolving Credit
Line by PNB in 1981. Every time NASUTRA availed of the
credit line, its Executive Vice-President, Jose Unson,
executed a promissory note in favor of PNB.
Despite
the
liquidation
scheme,
NASUTRA/PHILSUCOM still failed to remit the interest
payments to PNB and its branches, which interests amounted
to P65, 412,245.84 in 1986.
As a result thereof, then
President Marcos issued PD 2005 dissolving NASUTRA

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efective January 31, 1986. NASUTRA's records of its sugar


trading operations, however, were destroyed during the Edsa
Revolution in February 1986.
On May 28, 1986, then President Corazon C. Aquino
issued Executive Order (EO) No. 18 creating the Sugar
Regulatory
Administration
(SRA)
and
abolishing
PHILSUCOM. All the assets and records of PHILSUCOM
including its beneficial interests over the assets of NASUTRA
were transferred to SRA.
On January 24, 1989, before the completion of the
three-year winding up period, NASUTRA established a
trusteeship to liquidate and settle its accounts. This
notwithstanding, NASUTRA still defaulted in the payment of
its loans amounting to P389, 246,324.60 (principal and
accrued interest) to PNB.
In the meantime, PNB received remittances from
foreign banks totaling US$36,564,558.90 or the equivalent of
P696, 281,405.09 representing the proceeds of NASUTRA's
sugar exports. Said remittances were then applied by PNB to
the unpaid accounts of NASUTRA/PHILSUCOM with PNB
and PHILEXCHANGE.
Subsequently, PNB applied the P19, 688,763.29 to
PHILSUCOM's account with PHILEXCHANGE which in turn
was applied to PHILEXCHANGE's account with PNB.
Accordingly, NASUTRA requested PNB to furnish it
with the necessary documents and/or explanation concerning
the disposition/application, accounting and restitution of the
remittances in question.

Dissatisfied, and believing that PNB failed to provide


them with said documents, NASUTRA and SRA filed a
petition for arbitration with the Department of Justice which
held that the act of PNB was valid and legal. Both parties
appealed before the Ofice of the President which afirmed
the decision of the Secretary of Justice.
Thereafter, petitioners filed a petition for review with
the Court of Appeals, alleging, inter alia, that the Ofice of
the President erred when it relied solely on the documents
submitted by PNB to determine the amount of the subject
remittances and in not ordering PNB to render an accounting
of the said remittances; in declaring as valid and legal PNB's
application of the subject remittances to alleged NASUTRA's
accounts
with
PNB
and
PHILEXCHANGE
without
NASUTRA's knowledge, consent and authority. Consequently,
the appellate court dismissed the petition. Hence, this
petition.
ISSUE: Whether or not the agency NASUTRA/SRA and
PNB can be cancelled and revoked at will by any
parties?
HOLDING and RATIO:
NO, the agency being coupled with interest is an
exception of revocability of a contract of agency.
The relationship between NASUTRA/SRA and PNB
when the former constituted the latter as its attorney-in-fact
is not a simple agency. NASUTRA/SRA has assigned and
practically surrendered its rights in favor of PNB for a
substantial consideration.

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99

To reiterate, NASUTRA/SRA executed promissory notes


in favor of PNB every time it availed of the credit line. The
agency established between the parties is one coupled with
interest which cannot be revoked or cancelled at will by any
of the parties.
Obligations arising from contract have the force of law
between the contracting parties and should be complied with
in good faith.
Verily, parties may freely stipulate their duties and
obligations which perforce would be binding on them. Not
being repugnant to any legal proscription, the agreement
entered into by NASUTRA/SRA and PNB must be respected
and have the force of law between them.
Therefore, the act of PNB in ofsetting the subject
remittances to alleged accounts of NASUTRA with PNB and
PHILEX is legal and valid.
81.
|Ching vs. Bantolo |G.R. No.
December 5, 2012| Justice Del Castillo|

177086|

FACTS:
Respondents Felix M. Bantolo (Bantolo), Antonio O.
Adriano and Eulogio Sta. Cruz, Jr. are owners of several
parcels of land situated in Tagaytay City. On April 3, 2000,
respondents executed in favor of petitioners Albert Ching
(Ching) and Romeo J. Bautista a Special Power of Attorney
(SPA] authorizing petitioners to obtain a loan using
respondents properties as collateral. Without notice to
petitioners, respondents executed a Revocation of Power of

Attorney efective at the end of business hours of July 17,


2000.
On July 18, 2000, the Philippine Veterans Bank (PVB)
approved the loan application of petitioner Ching in the
amount of P25 million for a term of five years subject to
certain conditions. On July 31, 2000, petitioner Ching thru a
letterinformed respondents of the approval of the loan.
Sometime in the first week of August 2000, petitioners
learned about the revocation of the SPA. Consequently,
petitioners sent a letterto respondents demanding that the
latter comply with the agreement by annulling the revocation
of the SPA.
On September 8, 2000, petitioners filed before the
Regional Trial Court (RTC) of Quezon City a Complaint for
Annulment of Revocation of SPA, Enforcement of SPA and/or
interest in the properties covered by said SPA and Damages
against
respondents.
Petitioners
later
amended the
Complaint to include an alternative prayer to have them
declared as the owners of one-half of the properties covered
by the SPA.
Petitioners alleged that the SPA is irrevocable because
it is a contract of agency coupled with interest.According to
them, they agreed to defray the costs or expenses involved in
processing the loan because respondents promised that they
would have an equal share in the proceeds of the loan or the
subject properties.
In
their
Answer, respondents
contended
that
petitioners have no cause of action.Respondents alleged that
they executed the SPA in favor of petitioners because of their

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assurance that they would be able to get a loan in the amount


of P50 million and that P30 million would be given to
respondents within a months time. When the one-month
period expired, respondents complained to petitioner Ching
and asked him to advance the amount of P500, 000.00.
Petitioner Ching acceded to their request on the condition
that they hand over to him the original titles for
safekeeping.Respondents, in turn, asked petitioner Ching to
give them P1 million in exchange for the titles. Petitioner
Ching agreed and so they gave him the titles. However, he
never gave them the money. They asked him to return the
titles, but he refused. Later, they were informed that the loan
was approved in the amount of P25 million and that their
share would be P6 million.Since it was not the amount
agreed upon, respondents revoked the SPA and demanded
the return of the titles.
The RTC in its decision upheld the validity of the SPA
and declared its revocation illegal and unjust. But although
the SPA was declared valid, the RTC held that it could no
longer be enforced because the circumstances present at the
time of its execution have changed. The RTC also held
petitioners owners of one-half of the subject properties.
On appeal, the appellate court declared the revocation
of the SPA null and void. It further ruled that petitioners are
not entitled to one-half of the subject properties and that
they are not entitled to reimbursement for their failure to
show that the receipts presented in evidence were incurred
in relation to the loan application.Hence, this petition.

ISSUE:Whether or not the revocation of the SPA by the


principal is done in bad faith, thus, petitioner is
entitled to the award of exemplary damages?
HOLDING and RATIO:
NO.There is no question that the SPA executed by
respondents in favor of petitioners is a contract of agency
coupled with interest. This is because their bilateral contract
depends upon the agency. Hence, it cannot be revoked at
the sole will of the principal.
Article 2229of the Civil Code provides that exemplary
damages may be imposed by way of example or correction
for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. They are, however,
not recoverable as a matter of right. They are awarded only if
the guilty party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.
In this case, we agree with the CA that although the
revocation was done in bad faith, respondents did not act in a
wanton, fraudulent, reckless, oppressive or malevolent
manner. They revoked the SPA because they were not
satisfied with the amount of the loan approved. Thus,
petitioners are not entitled to exemplary damages.
82.
|Coleongco vs. Claparols|G.R. No. L-18616|
March 31, 1964| Justice J.B.L. Reyes|
FACTS:

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Since 1951, defendant-appellee, Eduardo L. Claparols,


operated a factory for the manufacture of nails in Talisay,
Occidental Negros, under the style of "Claparols Steel & Nail
Plant". The raw material, nail wire, was imported from
foreign sources, especially from Belgium; and Claparols had
a regular dollar allocation therefor, granted by the Import
Control Commission and the Central Bank. The marketing of
the nails was handled by the "ABCD Commercial" of Bacolod,
which was owned by a Chinaman named Kho To
The Chinaman introduced his compadre, appellant
Vicente Coleongco, to the appellee, recommending said
appellant to be the financier in the stead of Kho To. Claparols
agreed, a contract was perfected between them whereby
Coleongco undertook to finance and put up the funds
required for the importation of the nail wire, which Claparols
bound himself to convert into nails at his plant.
It was agreed that Coleongco would have the exclusive
distribution of the product, and the "absolute care in the
marketing of these nails and the promotion of sales all over
the Philippines", except the Davao Agency; that Coleongco
would "share the control of all the cash" from sales or
deposited in banks; that he would have a representative in
the management; that all contracts and transactions should
be jointly approved by both parties; that proper books would
be kept and annual accounts rendered; and that profits and
losses would be shared "on a 50-50 basis". The contract was
renewed from one year to year until 1958, and Coleongco's
share subsequently increased by 5% of the net profit of the
factory.

Two days after the execution of the basic agreement,


Claparols executed in favor of Coleongco, at the latter's
behest a special power of attorney to open and negotiate
letters of credit, to sign contracts, bills of lading, invoices,
and papers covering transactions; to represent appellee and
the nail factory; and to accept payments and cash advances
from dealers and distributors. Thereafter, Coleongco also
became the assistant manager of the factory, and took over
its business transactions, while Claparols devoted most of his
time to the nail manufacture processes.
Claparols was disagreeably surprised by service of an
alias writ of execution to enforce a judgment obtained
against him by the Philippine National Bank, despite the fact
that on the preceding September he had submitted an
amortization plan to settle the account. Worried and alarmed,
Claparols immediately left for Manila to confer with the bank
authorities. Upon arrival, he learned to his dismay that the
execution had been procured because of derogatory
information against appellee that had reached the bank from
his associate, appellant Coleongco.
Incensed at what he regarded as disloyalty of his
attorney-in-fact, he consulted lawyers. The upshot was that
appellee revoked the power of attorney, and informed
Coleongco thereof, by registered mail, demanding a full
accounting at the same time. Coleongco, as could be
expected, protested these acts of Claparols, but the latter
insisted, and dismissed Coelongco as assistant manager of
the plant and asked C. Miller & Company, auditors, to go
over the books and records of the business with a view to
adjusting the accounts of the associates.

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These last steps were taken in view of the revelation


made by his machinery superintendent, Romulo Agsam, that
in the course of the preceding New Year celebrations
Coleongco had drawn Agsam aside and proposed that the
latter should pour acid on the machinery to paralyze the
factory.
As the parties could not amicably settle their accounts,
Coleongco filed a suit against Claparols charging breach of
contract, asking for accounting, and praying for P528, 762.19
as damages, and attorney's fees, to which Claparols
answered, denying the charge, and counter-claiming for the
rescission of the agreement with Coleongco for P561, 387.99
by way of damages.
The trial court dismissed the action for damages. On
appeal, Coleongco contended that the power of attorney was
made to protect his interest under the financing agreement
and was one coupled with an interest that Claparols had no
legal power to revoke.
ISSUE:Whether or not the power of attorney coupled
with an interest can be revoked?
HOLDING and RATIO:
YES.
It must not be forgotten that a power of attorney can
be made irrevocable by contract only in the sense that the
principal may not recall it at his pleasure; but coupled with
interest or not, the authority certainly can be revoked for a
just cause, such as when the attorney-in-fact betrays the

interest of the principal, as happened in this case. It is not


open to serious doubt that the irrevocability of the power of
attorney may not be used to shield the perpetration of acts in
bad faith, breach of confidence, or betrayal of trust, by the
agent for that would amount to holding that a power coupled
with an interest authorizes the agent to commit frauds
against the principal.
Our new Civil Code, in Article 1172, expressly provides
the contrary in prescribing that responsibility arising from
fraud is demandable in all obligations, and that any waiver of
action for future fraud is void. It is also on this principle that
the Civil Code, in its Article 1800, declares that the powers of
a partner, appointed as manager, in the articles of copartnership are irrevocable without just or lawful cause; and
an agent with power coupled with an interest cannot stand
on better ground than such a partner in so far as
irrevocability of the power is concerned.
That the appellee Coleongco acted in bad faith towards
his principal Claparols is, on the record, unquestionable. His
letters to the Philippine National Bank attempting to
undermine the credit of the principal and to acquire the
factory of the latter, without the principal's knowledge;
Coleongco's letter to his cousin, Kho To, instructing the latter
to reduce to one-half the usual monthly advances to
Claparols on account of nail sales in order to squeeze said
appellee and compel him to extend the contract entitling
Coleongco to share in the profits of the nail factory on better
terms, and ultimately "own his factory", a plan carried out by
Kho's letter, reducing the advances to Claparols; Coleongco's
attempt to, have Romulo Agsam pour acid on the machinery;
his illegal diversion of the profits of the factory to his own

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103

benefit; and the surreptitious disposition of the Yates band


resaw machine in favor of his cousin's Hong Shing Lumber
Yard, made while Claparols was in Baguio in July and August
of 1956, are plain acts of deliberate sabotage by the agent
that fully justified the revocation of the power of attorney by
Claparols and his demand for an accounting from his agent
Coleongco.
83.
|Rallos
vs.
Yangco|G.R.
No.
September 27, 1911| Justice Moreland|

L-6906|

FACTS:
Defendant Yangco sent a letter to Plaintif Rallos on
November 27, 1907 ofering a consignment agreement. In
such letter, Yangco made known that he conferred upon
Florentino Collantes a public power of attorney notarized by
Mr.Perfecto Salas Rodriguez dated November 16, 1907 to
perform in his name and on his behalf all acts necessary for
carrying out his plans.
Accepting this invitation, the plaintifs proceeded to do
a considerable business with the defendant through the said
Collantes, as his factor, sending to him as agent for the
defendant a good deal of produce to be sold on commission.
Later, and in the month of February, 1909, the plaintifs sent
to the said Collantes, as agent for the defendant, 218 bundles
of tobacco in the leaf to be sold on commission, as had been
other produce previously. The said Collantes received said
tobacco and sold it for the sum of P1,744. The charges for
such sale were P206.96. leaving in the hands of said
Collantes the sum of P1,537.08 belonging to the plaintifs.

This sum was apparently, converted to his own use by said


agent.
It appears, however, that prior to the sending of said
tobacco the defendant had severed his relations with
Collantes and that the latter was no longer acting as his
factor. This fact was not known to the plaintifs and it is
conceded in the case that no notice of any kind was given by
the defendant to the plaintifs of the termination of the
relations between the defendant and his agent. The
defendant refused to pay the said sum upon demand of the
plaintifs, placing such refusal upon the ground that at the
time the said tobacco was received and sold by Collantes he
was acting personally and not as agent of the defendant. This
action was brought to recover said sum.
ISSUE:Whether or not the revocation of power of
attorney is valid against clients whom the agent is
specified to deal with?
HOLDING and RATIO:
NO.
Having advertised the fact that Collantes was his agent
and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of
the relationship of principal and agent to give due and timely
notice thereof to the plaintifs. Failing to do so, he is
responsible to them for whatever goods may have been in
good faith and without negligence sent to the agent without
knowledge, actual or constructive, of the termination of such
relationship.

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Where principal had expressly revoked the agents


power to handle business, but such revocation was not
conveyed to a long standing client to whom the agent had
been specifically endorsed in the past by the principal, the
revocation was not deemed efective as to such client and the
contracts entered into by the agent in the name of the
principal after the revocation would still be valid and binding
against his principal.
84.
|Lustan vs. CA et.al.|G.R. No.
January 27, 1997| Justice Francisco|

111924|

FACTS:
Petitioner Adoracion Lustan leased a parcel of land in
Iloilo, which he owns, to Nicolas Parangan for a term of ten
(10) years and an annual rent of One Thousand (P1,000.00)
Pesos.
During the period of lease, Parangan was regularly
extending loans in small amounts to petitioner to defray her
daily expenses and to finance her daughter's education. On
July 29, 1970, petitioner executed a Special Power of
Attorney in favor of Parangan to secure an agricultural loan
from private respondent Philippine National Bank (PNB) with
the aforesaid lot as collateral.
On February 18, 1972, a second Special Power of
Attorney was executed by petitioner, by virtue of which,
Parangan was able to secure four (4) additional loans, to wit:
the
sums
of P24,000.00, P38,000.00, P38,600.00
and P25,000.00 on December 15, 1975, September 6, 1976,
July 2, 1979 and June 2, 1980, respectively.

The last three loans were without the knowledge of


herein petitioner and all the proceeds therefrom were used
by Parangan for his own benefit. These encumbrances were
duly annotated on the certificate of title. On April 16, 1973,
petitioner signed a Deed of Pacto de Retro Sale in favor of
Parangan which was superseded by the Deed of Definite
Sale dated May 4, 1979 which petitioner signed upon
Parangan's representation that the same merely evidences
the loans extended by him unto the former.
For fear that her property might be prejudiced by the
continued borrowing of Parangan, petitioner demanded the
return of her certificate of title. Instead of complying with the
request, Parangan asserted his rights over the property
which allegedly had become his by virtue of the
aforementioned Deed of Definite Sale. Under said document,
petitioner conveyed the subject property and all the
improvements thereon unto Parangan absolutely for and in
consideration of the sum of Seventy Five Thousand
(P75,000.00) Pesos.
Aggrieved, petitioner filed an action for cancellation of
liens, quieting of title, recovery of possession and damages
against Parangan and PNB in the Regional Trial Court of
Iloilo City.
The trial court rendered its judgment in favor of the
petitioner. On appeal, the appellate court reversed the trial
courts decision. Hence, this petition.
ISSUE:Whether or not the revocation of agents general
powers effective against the mortgagee bank?
HOLDING and RATIO:

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105

NO.
Third persons who are not parties to a loan may secure
the latter by pledging or mortgaging their own property. So
long as valid consent was given, the fact that the loans were
solely for the benefit of Parangan would not invalidate the
mortgage with respect to petitioner's property. In consenting
thereto, even granting that petitioner may not be assuming
personal liability for the debt, her property shall nevertheless
secure and respond for the performance of the principal
obligation. It is admitted that petitioner is the owner of the
parcel of land mortgaged to PNB on five (5) occasions by
virtue of the Special Powers of Attorney executed by
petitioner in favor of Parangan. Petitioner argues that the last
three mortgages were void for lack of authority. She totally
failed to consider that said Special Powers of Attorney are a
continuing one and absent a valid revocation duly furnished
to the mortgagee, the same continues to have force and
efect as against third persons who had no knowledge of such
lack of authority. Article 1921 of the Civil Code provides:
"Art. 1921. If the agency has been entrusted for the purpose
of contracting with specified persons, its revocation shall not
prejudice the latter if they were not given notice thereof."
The Special Power of Attorney executed by petitioner in
favor of Parangan duly authorized the latter to represent and
act on behalf of the former. Having done so, petitioner
clothed Parangan with authority to deal with PNB on her
behalf and in the absence of any proof that the bank had
knowledge that the last three loans were without the express
authority of petitioner, it cannot be prejudiced thereby.

As far as third persons are concerned, an act is deemed


to have been performed within the scope of the agent's
authority if such is within the terms of the power of attorney
as written even if the agent has in fact exceeded the limits of
his authority according to the understanding between the
principal and the agent.
The Special Power of Attorney particularly provides
that the same is good not only for the principal loan but also
for subsequent commercial, industrial, agricultural loan or
credit accommodation that the attorney-in-fact may obtain
and until the power of attorney is revoked in a public
instrument and a copy of which is furnished to PNB. Even
when the agent has exceeded his authority, the principal is
solidarily liable with the agent if the former allowed the
latter to act as though he had full powers (Article 1911, Civil
Code).
The mortgage directly and immediately subjects the
property upon which it is imposed. The property of third
persons which has been expressly mortgaged to guarantee
an obligation to which the said persons are foreign, is
directly and jointly liable for the fulfilment thereof; it is
therefore subject to execution and sale for the purpose of
paying the amount of the debt for which it is liable.
However, petitioner has an unquestionable right to
demand proportional indemnification from Parangan with
respect to the sum paid to PNB from the proceeds of the sale
of her propertyin case the same is sold to satisfy the unpaid
debts.

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85.
AMPARO G. PEREZ ET AL. VS. THE
PHILIPPINE NATIONAL BANK G.R. No. L-21813,
July 30, 1966

FACTS:
Vicente Perez, mortgaged Lot No. 286-E of the
Kabankalan Cadastre to the appellant Philippine National
Bank-Bacolod Branch. Said mortgaged was made to secure
payment of a loan plus interests, payable in yearly
instalments. Subsequently, Vicente died intestate, survived
by his widow and children and leaving behind outstanding
balance on the mortgaged indebtedness. The widow of Perez
instituted Special Proceedings with the CIF for the
settlement of the estate where the widow was appointed as
Administratix and notice to the creditors was duly published,
however, PNB did not file a claim.
In 1956, the bank pursuant to the authority granted it
in the mortgaged deed, caused the mortgaged properties to
be extra-judicially foreclosed, however, the widow and the
heirs were not notified. Hence, they instituted a case against
PNB seeking to annul the extrajudicial foreclosure sale and
the transfer of the Certificate of Title as well as to recover
damages, claiming that the bank had acted illegally and in
bad faith. Using the decision set in Pasno V. Ravina, the Trial
Court (TC) declared null and void the extrajudicial
foreclosure sale, the cancellation of the Certificate of Title of
Perez and ordered payment of damages to the plaintifs.
The bank appealed directly to the Supreme Court.
ISSUE: Whether or not the extra-judicial foreclosure by
PNB under its power of sale is extinguished by the
death of Perez?

RULING:
No. The SC overruled the decision in Pasno v. Ravina
as it virtually wipes out the third alternative given to
creditor-mortgagee, that is to rely on the mortgage
exclusively, foreclosing the same at any time before it is
barred by prescription, without a claim for any deficiency.
Such is not in accord with reason and law, as said option
presents undoubted advantages for the estate of the
mortgagor.
The argument that foreclosure by the bank under its
power of sale is barred upon the death of the debtor, because
agency is distinguished by the death of the principal neglects
to take into account that the power to foreclose is not an
ordinary
agency
that
contemplates
exclusively
the
representation of the principal by the agent is primarily an
authority conferred upon the mortgagee for the latters own
protection. It is an ancillary stipulation supported by the
same causa or consideration for the mortgage and forms an
essential and inseparable part of that bilateral agreement.
The SC also upheld the validity of PNBs foreclosure,
however, as it did not suficient notice to the heirs of Vicente
Perez, the court permitted them to redeem the foreclosed
property within the reasonable time.
86.
TERRADO ET AL. V. COURT OF APPEALS ET
AL., G.R. No. L-58794; August 24, 1984
FACTS:

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In connection with Resolution No. 35, enacting


Ordinance No. 8, private respondent Geruncio Lacuesta was
designated, appointed and constituted by the Sangggunian
Bayan of Bayambang, Pangasinan as Manager-Administrator
of the Bayambang Fishery and Hunting Park and Municipal
Watershed for a period of 25 years. However, as the
ordinance was disapproved by the Secretary of Agriculture
and Natural Resources, Lacuesta was directed to refrain and
desist from acting as Administrator-Manager, which the
latter refused. Meanwhile, spouses Lydia Terrado and Martin
Del Rosario and Domingo Fernandez were awarded the right
for four years over the Mangabul Fisheries.
Lacuesta
obtained a restraining order prohibiting the execution of the
contract of lease awarded to winning bidders by the
municipality. Upon appeal, the CA set aside the order of
Judge Saroca thereby upholding the possession of Lydia
Terrado and Martin Rosario.
In the meantime, the Municipality of Bayambang,
represented by the Mayor and the Sangguniang Bayan filed
with the CIF of Pangasinan against Geruncio Lacuesta for
annulment of the contract entered into between the
Municipality and Lacuesta under Ordinance No.8. The TC
ruled in favour of the plaintifs. Lacuesta, went straight to
the SC who denied his motion for reconsideration. Lacuesta,
then filed another case, this time with the CIF of Pangasinan,
Dagupan City, a Motion to Dissolve the Injunction and to
order plaintifs to vacate and turn all the fisheries to
defendants. Said motion was granted by Judge CarandangVillalon on the ground that the plaintifs have recognized and
confirmed the validity of the resolution and the contract.
During the course of litigation, private respondent Geruncio
Lacuesta died.

Having reached the Supreme Court, the Highest


Tribunal traced the origin of the protracted legal controversy
in the enactment and implementation of Municipal Ordinance
No. 8.
ISSUES:
Whether or not Municipal Ordinance No.8 is
valid?
Whether or not the death of private respondent
Lacuesta extinguished the Management and
Administration Contract entered into in relation
to Municipal Ordinance No. 8?
RULING:
No, the ordinance is invalid for it is clearly against the
provisions of the law for it granted exclusive fishery
privileges to the private respondent for a period exceeding
five (5) years without benefit of public bidding. Under the
Fisheries Act, the Municipality may not delegate to a private
individual as Manager-Administrator. The said ordinance and
the contract of management executed in accordance
therewith were null and void ab initio.
From the foregoing, perforce the contract of
management and administration between the Municipality
and Lacuesta is likewise null and void. It also follows that
the complaint filed by Lacuesta to enjoin the Municipal
Council of Bayambang from leasing the Mangabul Fisheries
upon public bidding is without basis and merit for Lacuesta
has no right or interest under the void ordinance and
contract.

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108

Ruling on the death of Lacuesta, the Supreme Court


held that his death is an irreversible fact that throws an
entirely new bearing on the legal controversy at hand. For
essentially, the contract of management and administration
between the Municipality and Lacuesta is one of agency
whereby a person binds himself to render some service or to
do something in representation or on behalf of another, with
the consent or authority of the latter. In the case, Lacuesta
bound himself as Manager-Administrator of the Bayambang
Fishing and Hunting Park and Municipal Watershed to render
service
or
perform
duties
and responsibilities
in
representation or on behalf of the Municipality of
Bayambang, with the consent or authority of the latter
pursuant to Ordinace No. 8. Under Article 1919 of the New
Civil Code, agency is extinguished by the death of the agent.
His rights and obligations arising from the contract are not
transmissible to his heirs.
As correctly ruled by the CA, the resulting diference in
the beginning inventory of the stocks of the hardware store
(before management was transferred to respondent spouses
Ramos) and the second inventory thereof (after management
was returned to petitioner), by itself, is not conclusive proof
that the said amount was used to pay the purchase price of
the Bonifacio property, such as would make it the property of
petitioner held in trust by respondent spouses Ramos.
SECTION SIX
87.
MORALES V. COURT OF APPEALS, G.R. No.
117228, June 19, 1997
FACTS:

Celso Avelino, plaintifs predecessor in interest,


purchased the land in question consisting of two adjoining
parcels while he was still a bachelor, through a escritura de
venta. He then caused the transfer of the tax declarations of
the two parcels in his name, had the area surveyed and built
therein a residential house. He subsequently took in his
parents, Rosendo Avelino and Juana Ricaforte, and his sister,
Aurea, who took care of the couple, to live there until their
deaths. He later became a Judge of the Court of First
Instance in Cebu, resulting to his sister, Aurea, taking care of
the premises in question. In spite of the transfer, Celso paid
the corresponding realty taxes, keeping intact receipts which
he comes to get or Aurea would go to Cebu to give it to him.
Without the knowledge and consent of Celso, the defendant,
constructed a small beauty shop in the questioned property.
Meanwhile, the plaintifs, who are the purchasers of
the other properties of Celso Avelino, were also ofered to
buy the questioned property. After visiting the premises and
talked with the defendant of said intended sale by Celso, they
paid the purchased price and subsequently a deed of sale
was executed between the parties. However, despite due
notice from Celso, defendants refused to vacate the
premises.
Plaintifs demanded, orally and in writing to
vacate the premises, the defendant also refused. As they
were to undertake urgent repairs on the dilapidated
residential building, the defendant had already occupied the
same, taking in paying boarders and claiming already
ownership of the premises in question, hence, plaintifs filed
an action for recovery of land, praying therein that they be
declared owners of the questioned property, defendants be
ordered to remove whatever improvements constructed

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thereon, vacate the premises and pay for damages and other
fees.
Both the trial court and appellate courts ruled in favour
of plaintifs. Undaunted with said decision, defendants filed
a petition alleging errors committed by both courts. The High
Court, nevertheless, granted the defendants motion for
reconsideration.
ISSUES:
Whether or not an implied trust is created
between Celso Avelino and his parents in relation
to the questioned property?
Whether or not the disputed property is a trust
property?
RULING:
NO. Article 1448 of the Civil Code states 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 of the property.
The former is the trustee, while the latter is the beneficiary.
However, if the person to whom the title is conveyed is a
child, legitimate or illegitimate, of the one paying the price of
the sale, no trust is implied by law, it being disputably
presumed that there is a gift in favour of the child.
In the case, it is petitioners contention that Rosendo
Avelino owned the money for the purchase of the property
and that he requested Celso, his son, to buy the property
allegedly in trust for the former. The fact remains, however,
that title to the property was conveyed to Celso. Accordingly,

the situation is governed by or falls within the exception


under the third sentence of Article 1448. The SC held that
on this basis alone, the case for petitioners must fall. The
preponderance of evidence, as found by the trial court and
afirmed by the CA, established positive acts of Celso
indicating, without doubt, that he considered the property
purchased from the Mendiolas as his exclusive property. He
had its tax declaration transferred in his name, caused the
property surveyed for him by the Bureau of Lands, and
faithfully pad the realty taxes. Finally, he sold the property to
private respondents.

88.
PEALBER V. RAMOS ET AL., G. R. No.
178645, January 30, 2009
FACTS:
Petitioner Lina Pealber, for many years, owned and
operated a hardware store prior to 1984 in a building she
owned along Bonifacio St., Tugueguerao, Cagayan (Bonifacio
Property). However, the lot on which the building is erected
is owned by Maria Mendoza (Mendoza), from whom
petitioner rented the same. On March 22, 1982, petitioner
allowed Spouses Ramos, the wife being her daughter, to take
over the management of the business with the verbal
agreement that that the accumulated earnings of the store
would be used to purchase the lot which Mendoza was selling
that time. Petitioner further alleged that based on the same
agreement, the Ramos spouses having the better credit
standing, they would be made to appear as vendees so that
the title to be issued in their names could be used to secure

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a loan with which to build a bigger building and expand the


hardware business.
Consequently respondent spouses
Ramos allegedly entered in to a contract of sale with
Mendoza over the Bonifacio property as a result of which a
Transfer Certtificate Title over said lot was issued in their
names.
In 1984, spouses Ramos returned the management of
the business to petitioner. She later found out that the
Bonifacio Property was already fully paid.
Petitioner
demanded from the spouses the reconveyance of the title of
the property, however the latter refused. Petitioner asserted
that respondent spouses Ramos were mere trustees, thus,
they were under moral and legal obligation to reconvey title
over the said property. She then filed a petition with the RTC
of Cagayan with the prayer that she be declared the owner of
the Bonifacio property. Respondents countered that they
acquired the questioned property after redeeming it from
DBP to avoid foreclosure of the mortgage debt of the
petitioner. Allegedly, after said incident, petitioner executed
a Deed of Donation of the questioned property on their favor.
The trial court held that petitioner is the owner of the
Bonifacio property and ordered the respondents to reconvey
the same to her. On appeal to the Court of Appeals, said
decision was reversed and the lower courts decision was
assailed on the ground that the alleged express trust created
between the parties involving the questioned property could
not be proven by parol evidence. Thus, petitioner elevated
her case to the Supreme Court.
ISSUE:Whether or not an express trust was created by
the parties over the Bonifacio property?

RULING:
No.
The Supreme Court
allegations as to the existence of an
with respondent spouses Ramos,
testimonies and her son, do not hold

held that petitioners


express trust agreement
supported by her own
water.

Express trusts are those which are created by the


direct and positive acts of the parties, by some writing or
deed, or will or by words either expressly or impliedly
evincing an intention to create a trust. No particular words
are required for the creation of an express trust, it being
suficient that a trust is clearly intended.
However, in
accordance with Article 1443 of the Civil Code, when an
express trust concerns an immovable property or any interest
therein, the same may not be proved by parol or oral
evidence.
Though the SC held that Article 1443 takes the nature
of a statue of frauds, spouses Ramos did indeed fail to
interpose their objections regarding the admissibility of the
testimonies when the same were ofered to prove the alleged
verbal
trust
agreement
between
and
petitioner.
Consequently, the testimonies were admissible in evidence.
Nevertheless, while admissibility of evidence is an afair of
logic and law, determined as it is by relevance and
competence, the weight to be given to such evidence, once
admitted, still depends on judicial intervention. The court
holds that the same carried little weight in proving the
alleged verbal trust agreement between petitioner and
respondent spouses.

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111

SECTION SEVEN
89.
VICTORIA JULIO V. EMILIANO DALANDAN
and MARIA DALANDAN, G.R. No. L-19012,
October 30, 1967

Hence, this appeal.


ISSUE: Whether or not the statement (salaysay)
entered into between Clemente and Victoriana
constitute a trust?

FACTS:

RULING:

On September 8, 1950, Clemente Dalandan, deceased


father of defendants Emiliano and Maria duly subscribed and
sworn an afidavit which terms indicated that a four-piece of
Riceland in Las Pinas, Rizal belonging to Victoriana Dalandan
was posted as security for an obligation which Clemente
assumed but, however, Victoriana failed to fulfill. As said
land was foreclosed, the pertinent provisions of the afidavit
stated that the riceland is owned by Victoriana and she used
the same to secure an obligation; that Victoriana held herself
liable to Victoria Julio, her sole heir, for the foreclosure of
said land; that herein defendants may not be forced to give
up the harvest of the said farm nor the return of said land be
demanded immediately. Victoriana attested to the truth of all
the statements in the document.

Yes. The contention of the defendants that recognition


of trust may not be proved by evidence allunde is of no
moment. They likewise argue that by the express terms of
Article 11443 of the Civil Code, no express trust concerning
an immovable or any interest therein may be proved by parol
evidence. Such argument overlooks the fact the no oral
evidence is necessary . The expressed trust imposed upon
defendants by their predecessor appears in the document
itself. For while it is true that said deed did not in definitive
words institute defendants as trustees, a duty is therein
imposed them when the proper time comes to turn over
the fruits and possession of the property to Victoria Julio.
Not that this view is without statutory support. Article 1444
of the Civil Code states that: No particular words are
required for the creation of an express trust, it being
suficient that a trust is clearly intended. In reality the
development of the trust as a method of disposition of
property, so jurisprudence teaches, seems to its freedom
from formal requirements. This principle perhaps account
for the provisions in Article 1444 just quoted. For technical
or particular forms of words or phrases are not essential to
the manifestation of intention to create a trust or the
establishment thereof.Nor would the use of the word trust
or trustee essential to the constitution of a trust.
Conversely, the mere fact that the word trust or trustee was

After the death of Clemente, plaintif Victoria requested


from defendants, Clementes legitimate and surviving heirs
to deliver the same to her. Defendants argued that based on
the agreement, neither delivery of the land nor the fruits
thereof could be immediately demanded. The trial court
granted the motion to dismiss filed by defendants on the
ground of prescription of plaintifs action; pendency of
another suit between the same parties for the same cause;
and release and/or abandonment of the claim set forth in the
plaintifs complaint.

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112

employed would not necessarily prove an intention to create


a trust. What is important is whether the trustor manifested
an intention to create the kind of relationship which in law is
known as trust. It is unimportant that the trustor should
know that the relationship which he intends to create is
called a trust, or whether or not he knows the precise
characteristics of the relationship which is called a trust.
Here the trust is efective as against defendants and in favor
of the beneficiary thereof, plaintif Victoria Julio, who
accepted it in the document itself.
90.
Torbela vs. Spouses Rosario [GR No. 140528,
December 7, 2011]
FACTS:
Petitioner Torbela siblings filed before the RTC of
Urdaneta, Pangasinan a Complaint for recovery of ownership
and possession of a parcel of land in Urdaneta City,
Pangasinan, plus damages, against the spouses Rosario. RTC
and CA, on appeal, ordered Rosario to reconvey land to
Torbela siblings and to pay damages. Rosario, on appeal to
SC, avers that Torbela siblings failed to avail of barangay
conciliation, a pre-requisite to filing above civil case.
ISSUE: Whether or not the case is covered by barangay
conciliation requirement?
RULING:
No. Sections 2 and 3 of PD No. 1508, which was then
still in efect when the case was instituted, state that the
Lupon of each barangay shall have the authority to bring

together the parties actually residing in the same barangay


for amicable settlement, or in diferent barangays within the
same city or municipality. Lupon shall have no authority over
disputes involving parties who actually reside in barangays
of diferent cities or municipalities, except where such
barangays adjoin each other. Torbela siblings and the
spouses Rosario do not reside in the same barangay, or in
diferent barangays within the same city or municipality, or in
diferent barangays of diferent cities or municipalities but
are adjoining each other. The Lupon had no jurisdiction over
the dispute and barangay conciliation was not a pre-condition
for the filing of the said civil case.
91.
CAEZO v ROJAS, G.R. No. 148788 (November 23,
2007)
FACTS:
Soledad Canezo filed a complaint for the recovery of
real property plus damages against Conception Rojas (2nd wife of
her father). Canezo alleged thatshe bought the said land from
Crisogono Limpiado although the transaction was not in
writing. Then she entrusted it to her father when she and her
husband had to go Mindanao. The father took possession of the said
land and then one day Canezo found out that Rojas was in
possession of the said land and the taxdeclarations were
under his fathers name.
Rojas contends that her husband (father of Canezo)
bought the land from the same seller. The father took
possession and cultivated it. Canezo has knowledge of it
because it was included in the estate of the father (father died) and

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Canezo did not protest meaning she abandoned herright


assuming Canezoscontentions were true. Canezo is barred
by laches and estoppel.
MTC was in favor of Canezo. Rojas appealed to RTC,
decision was reversed because action has not yet prescribed
because it is a trust. Canezo filed a motion for
reconsideration; RTC reversed again the decision (in favor of
Canezo). Rojas filed a motion to reconsider the decision but denied by
RTC. Rojas then filed a petition for review with CA - reversed
the decision of RTC(ground is laches and prescription).
ISSUEWhether or not there was a trust exist?
HELD / RATIO:
No.The court said, the grant or denial of a motion from
extension of time is addressed to the sound discretion of the court
and there was a reasonable basis for the said extension.
Trust is a legal relationship between one person having an
equitable ownership of property and another person owning
the legal title to such property, the equitable ownership of the former
entitling him to the performance of certain duties
and exercise of certain powers by the latter. Trusts are either
express or implied. Express trust is those which are created by the
direct and positive acts of the parties by some writing or deed, or will,
or by words evidencing and intention to create a trust. Implied
trusts are those which, without being expressed, are deducible from
the nature of the transaction as matters of intent or,
independently, of the particular intention of the parties, as
being super induced on the transaction by operation of law
basically by reason of equity. It can be either resulting trust
or constructive trust.

Resulting trust is presumed always to have been


contemplated. The intention as to which can be found in the nature
of their transaction although not expressed in a deed or
instrument based on the equitable doctrine that it is more
valuable consideration than the legal title that determines the
equitable interest in property. Trustworthy evidence is
required in here. Express trust and resulting trusttrustee
cannot acquire by prescription a property entrusted to him
unless he repudiates a trust. This is because, in an express
trust, the possession of a trustee is not adverse, therefore, he
does not acquire by prescription the property. The burden of
proving the existence of trust is on the party asserting it. In
this case, Canezo failed to provide clear and satisfactorily
proof of its existence. Elements: (1) trustor who executes the
instrument creating the trust; (2) a trustee who is the person
expressly designated to carry out the trust; (3) the trust res
consisting of duly identified and definite real property; and
(4)
beneficiaries
whose
identity
must
be
clear.Canezos only evidence was her self-serving testimony
of the petitioner. Express trust may not be established by
parol evidence. One exceptionwhen there was a clear intention
of such. However, it cannot be inferred from Canezos testimony
and the attendant facts and circumstances.What they agreed is to
give Canezo a share of the copra in land.
92.
PNB v. Aznar, et al. [G.R. 171805 May 30,
2011]
FACTS:
Rural Insurance and Surety Company, Inc. (RISCO)
ceased operation due to business reverses

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In plaintifs (Anzar et al.) desire to rehabilitate RISCO, they


contributed a total amount of P212, 720.00. This was used to
purchase 3 parcels of land in Cebu, two (2)in the
Municipality of Talisay and one (1) in the District of Lahug,
Cebu City. After the purchase of the lots, titles were issued in
the name of RISCO.
The amount contributed by plaintifs constituted as
liens and encumbrances on the properties as annotated in
the titles of said lots. Such annotation was made pursuant to
theMinutes of the Special Meeting of the Boardof
Directors of RISCO on March 14, 1961, and a part of it says:
And that the respective contributions above-mentioned
(Aznar et al.) shall constitute as their lien or interest on the
property described above, if and when said property are
titled in the name of RISCO, subject to registration as their
adverse claim in pursuance of the Provision of Land
Registration
Act,
until
such
time
their
respective contributions are refunded to them completely
Thereafter, various subsequent annotations were made on
the same titles, including theNotice of Attachment and
Writ of Execution both dated August 3, 1962 in favour
of Philippine National Bank (PNB). As a result, a
Certificate of Sale was issued in favor of PNB, being the lone
and highest bidder of the 3 parcels of land. This prompted
Aznar et al. to file the instant case seeking the quieting of
their supposed title to the subject properties.
Trial court ruled against PNB on the basis that there was an
express trust created over the subject properties whereby
RISCO was the trustee and the stockholders, Aznar, et al.,
were the beneficiaries.

Court of Appeals opined that the monetary contributions


made by Aznar, et al. to RISCO can only be characterized as a
load secured by a lien on the subjected lots, rather than an
expressed trust.
ISSUE:Whether or not there
between RISCO and Aznar?

was a

trust

contract

RULING:
NO.At the outset, the Court agrees with the Court of
Appeals that the agreement contained in the Minutes of the
Special Meeting of the RISCO Board of Directors held on
March 14, 1961 was a loan by the therein named
stockholders to RISCO. Careful perusal of the Minutes relied
upon by plaintifs-appellees in their claim, showed that their
contributions shall constitute as lien or interest on the
property. The term lien as used in the Minutes is defined as
"a discharge on property usually for the payment of some
debt or obligation. Hence, from the use of the word "lien" in
the Minutes, We find that the money contributed by plaintifsappellees was in the nature of a loan, secured by their liens
and interests duly annotated on the titles. The annotation of
their lien serves only as collateral and does not in any way
vest ownership of property to plaintifs. We are not
persuaded by the contention of Aznar, et al., that the
language of the subject Minutes created an express trust.

93.
HEIRS OF TRANQUILINO LABISTE v HEIRS OF
JOSE LABISTE
587 SCRA 417 (May 8, 2009)

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DOCTRINE
If a trust relationship has been created between the parties
whether expressly or impliedly, prescription does not run
until the said trust is repudiated.
FACTS:
The case involved a parcel of Friar Land with an area of
13,308 square meters known at Cebu City which was purchased
from the Bureau of Lands way back on 1919 by Emilio in his own
behalf and on behalf of his brothers and sisters who were
the heirs of Jose. (Collectively known as Heirs of Jose)The
money that was used to purchase the land came from both
Emilio and their Uncle Lino so after full payment of the
purchase price but prior to the issuance of the deed of
conveyance by the Bureau of Lands, Emilio executed an
Afidavit in Spanish dated on 1923 afirming that he, as one
of the heirs of Jose and his Uncle Lino then co-owned the lot.
Thereafter or on 1924 the Bureau of Lands executed the
Deed of Conveyance in favor of Emilio and his siblings, or the
heirs of Jose by virtue of which a TCT was issued by the
Register of Deeds. On 1928, the lot was subdivided by
Deputy Land Surveyor, Engineer Bunag into two (2) equal
parts with an area of 6,664 square meters for Lino and an
area of 6,664 square meters for Emilio and the other heirs of
Jose. This was approved by the Director of Lands on 1928.On
1939, the heirs of Lino purchased the share of the lot of the
heirs of Jose as evidenced by the Calig-onan sa Panagpalit
executed by the parties in Visayan dialect. So the heirs of
Lino immediately took possession of the entire13, 308 sq.m. lot.

When World War II broke out however, Linos heirs fled the
city. Whenthey came back after the war, they found their
homes and possessions and therecords in the government
ofices burned and destroyed with squatters occupying their
entire property.Linos heirs subsequently learned that one of the
heirs of Jose filed apetition for reconstitution of title over the Lot on
September 17, 1993. So in October 1993 they opposed the said
petition but later on withdrew the same on the basis of a
compromise agreement they entered with the heirs of Jose to
expedite the reconstitution of title. So on December 14, 1994,
the Register of Deed issued the reconstituted Title in the
names of the heirs of Jose. The heirs of Jose however did not
honor the compromise agreement. Soon January 13, 1995,
the heirs of Lino filed a complaint for annulment of title, reconveyance of property with damages. Joses heirs however said that
the action of Linos heirs had long prescribed or barred by
laches.
ISSUE:
a) Whether or not Linos heirs had long prescribed or barred
by laches.
HELD / RATIO:
No. The rules on prescription and the principle of laches
cannot be applied here because of the existence of a trust
relationship. b) Trust is the right to the beneficial enjoyment
of property, the legal title to which is vested in another. It
may either be express or implied. An express trust is created by
direct and positive acts of the parties, by some writing or deed or
will. No particular words are required for the creation of an
express trust it being suficient that a trust is clearly
intended (Article 144, Civil Code). An implied trust comes

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into being by operation of law. The Afidavit of Emilio which is


genuine and authentic beyond cavil is in the nature of an express
trust. In said afidavit, Emilio confirmed that Lot1054 bought in his
name was co-owned by him as one of the heirs of Jose, and
his uncle Lino. And by agreement, each of them has been in
possession of half of the property as corroborated by the
subdivision plan prepared by Engineer Bunag and approved
by the Bureau of Lands. As such prescription and laches will
run only if it is shown that: (a) the trustee has performed unequivocal
acts of repudiation amounting to an ouster of the beneficiary;
(b) such positive acts of repudiation have been made known
to the beneficiary, and (c) the evidence thereon is clear
and conclusive.
Joses heirs cannot rely on the fact that the Torrens title was
issued intheir names. Trustees who obtain a Torrens title
over a property held in trust by them for another cannot
repudiate the trust by relying on the registration. Theonly act
that can be construed as repudiation was when one of Joses
heirs filed the petition for reconstitution in October 1993. And since
Linos heirs filed theircomplaint in January 1995 their cause of
action has not yet prescribed.
94.
TAN SENGUIAN & CO., INC VS. PHILIPPINE
TRUST COMPANY, G.R. NO. L-38810, November 6,
1933
FACTS:
Plaintif Tan Sen Guan & Co. secured a judgment for a
sum of P21,426 against the Mindoro Sugar Co. of which the
Philippine Trust is the trustee. The plaintif entered into an
agreement with the defendant Philippine Trust Co. wherein

the former assigned, transferred, and sold to the latter the


full amount of said judgment against Mindoro Sugar Co.
together with all its rights thereto and the latter ofered
satisfactory consideration thereto. The agreement further
stipulated that upon signing of the agreement, Phil Trust
shall pay Tan Sen the sum of P5000; should the Mindoro
Sugar
be sold or its ownership be transferred, an additional
P10,000pesos will be paid to TanSen upon perfection of the
sale; in case any other creditor of Mindoro Sugar obtains
inthe payment of his credit a greater proportion than the
price paid to Tan Sen, the Phil Trust shall pay to the latter
whatever sum may be necessary to be proportioned the claim
of the creditor. However, if the Mindoro Sugar is sold to any
person who does not pay anything to the creditors or pay
them equal or less than 70 percent of their claim, or should
the creditors obtain from other sources the payment of their
claim equal to or less than 70 percent, the Phil Trust will only
pay to Tan Sen the additional sum of P10,000 upon the sale
or transfer of the Mindoro Sugar as above stated. The
properties of Mindoro Sugar were later on sold at public
auction to the Roman Catholic Archbishop of Manila and base
on the agreement plaintif Tan Sen brought suit against
defendant Phil Trust for the sum of P10,000.
Issues:
(1) Whether or Not the defendant is
personally
responsible
for
the
claim
of
the
plaintiff based on the deed of assignment because of
having executed the same in its capacity as trustee of
the properties of the Mindoro Sugar.
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117

Held:
(1) YES, The Phil Trust Company in its individual
capacity is responsible for the contract as there was no
express stipulation that the trust estate and not the trustee
should be held liable on the contract in question. Not only is
there no express stipulation that the trustee should not be
held responsible but the Wherefore clause of the contract
states the judgment was expressly assigned in favor of Phil
Trust Company and not Phil Trust Company, the trustee. It
therefore follows that appellant had a right to proceed
directly against the Phil Trust on its contract and has no
claim against either Mindoro Sugar or the trust estate.
Section Seven
95.
Caezo vs. Rojas / G.R. No. 148788538 SCRA
242 / November 23, 2007/ Justice Ynares-Santiago
FACTS:
The petitioner Soledad Caezo filed a complaint against
her fathers second wife, respondent Concepcion Rojas for
the recovery of real property. The subject property is an
unregistered land with an area of 4,169 square meters
situated at Higatangan, Naval, Biliran. Caezo attached to the
complaint o Joint Afidavit executed by Isidro Catandijan and
Maximina Caezo attesting to her acquisition of the property.
The petitioner alleged that she bought the parcel of
land in 1939 from Crisogono Limpiado,although the
transaction was not reduced into writing. Thereafter, she
immediately took possession of the property. 1948, Soledad
Caezo and her husband left for Mindanao. She entrusted the

said land to her father, Crispulo Rojas, who took possession


of, and cultivated the property. She found out in 1980, her
stepmother, was in possession of the property and was
cultivating the same. She also discovered that the tax
declaration over the property was already in the name of
Crispulo Rojas.
The respondent asserted that her husband, Crispulo
Rojas, who bought the property from Crisgono Limpiado in
194, which for the tax declaration named in Crispulo Rojas.
Her husband possessed and cultivated the property until he
died in 1978. The petitioner, as heir, even received her share
her share in the produce of the estate. The respondent
further contended that the petitioner filed the complaint only
in 1997 means that she had already abandoned her right over
the property.
The MTC rendered a Decision in favour of the
petitioner.
The respondent appealed to RTC of Naval. The RTC
reversed the decision on the ground that the action had
already prescribed and acquisitive prescription had set in.
The petitioner filed a motion for reconsideration, the
RTC amended its original decision on the ground that the
action not yet prescribed considering that the petitioner my
entrusted the property to her father.
The ten year
prescription for the recovery of property held in trust would
commence to run only from the time the trustee repudiated
the trust.
The respondent filed a motion to reconsider but RTC denied.
She filed a petition for review with the Court of Appeals.

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Issue:Whether or not there exist a trust relationship


between the petitioner and Father, Express or implied?

relationship. And petitioner sadly failed to discharge that


burden.

Holding and Ratio Decidendi

In light of the disquisitions, we hold that there was no


express trust or resulting trust established between the
petitioner and her father. Thus, in the absence of a trust
relation, we can only conclude that Crispulos uninterrupted
possession of the subject property for 49 years, coupled with
the performance of acts of ownership, such as payment of
real estate taxes, ripened into ownership. The statutory
period of prescription commences when a person who has
neither title nor good faith, secures a tax declaration in his
name and may, therefore, be said to have adversely claimed
ownership of the lot. While tax declarations and receipts are
not conclusive evidence of ownership and do not prove title
to the land, nevertheless, when coupled with actual
possession, they constitute evidence of great weight and can
be the basis of a claim of ownership through prescription.
Moreover, Section 41 of Act No. 190 allows adverse
possession in any character to ripen into ownership after the
lapse of ten years. There could be prescription under the said
section even in the absence of good faith and just title.

A trust is the legal relationship between one person


having an equitable ownership of property and another
person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of
certain duties and the exercise of certain powers by the
latter. Trusts are either express or implied. Express trusts are
those which are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by words
evincing an intention to create a trust. Implied trusts are
those which, without being expressed, are deducible from the
nature of the transaction as matters of intent or,
independently, of the particular intention of the parties, as
being super induced on the on the transaction by operation
of law basically by reason of equity. An implied trust may
either be a resulting trust or a constructive trust.
As a rule, however, the burden of proving the existence
of a trust is on the party asserting its existence, and such
proof must be clear and satisfactorily show the existence of
the trust and its elements. The presence of the following
elements must be proved: (1) a trustor or settlor who
executes the instrument creating the trust; (2) a trustee, who
is the person expressly designated to carry out the trust; (3)
the trust res, consisting of duly identified and definite real
properties; and (4) the cestio que trust, or beneficiaries
whose identity must be clear. Accordingly, it was incumbent
upon petitioner to prove the existence of the trust

96.
Torbela V. Spouses Rosario/ G. R. No.
140528, 661 SCRA 633/ December 7, 2011/ Justice
C. J. Corona
FACTS:
The controversy began with a parcel of land, with an
area of 374 square meters located in Urdaneta City,
Pangasinan (Lot No. 356-A). It was part of larger parcel
which given by Valeriano Semilla to his sister Marta Semilla

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wife of Eugenio Torbela. Upon death of of the Spouses


Torbela, Lot No 356-A was adjudicated in equal shares
among their children, the Torbela siblings, by virtue of Deed
of Extrajudicial Partition dated December 3, 1962.
After the partition, the Torbela siblings executed a Deed of
Absolute Quitclaim on December 12, 1964 I which they
transferred and conveyed the Lot to Dr. Rosario for the
consideration of P 9.00. However, the Torbela siblings
explained that they only executed the Deed as an
accommodation so that Dr. Rosario could have Lot registered
in his name and used said property to secure a loan from
DBP, the proceeds of which would be used for construction of
improvements.
On May 16, 1967, Cornelio T. Tosino executed an
Afidavit of Adverse Claim, on behalf of the Torbela siblings.
The very next day the Adverse claim was annotated on TCT
No. 52721 respectively.
The construction of a four-storey building was eventually
completed. The building was initially used as a hospital, but
later on converted into a commercial building.
Dr. Rosario was able to fully pay his loan from DBP and
was cancelled as per Cancellation and Discharge of Mortgage
executed by DBP in favor of Dr. Rosario and ratified before
the notary public.
Sometime in 1979-1981, Dr. Rosario acquired another loan
from the Philippine National Bank (PNB) amounting to
P450,000.00. the loan secured by three (3) properties
including Lot No. 356-A.
Five days later, on March 11, 1981, another annotation was
made, cancelling the adverse claim on Lot No. 356-A on the

basis of the Cancellation and Discharge of Mortgage


executed by Dr. Rosario.
December 8, 1981, Dr. Rosario and his wife, acquired a
third loan in the amount of P1,200,000.00 from Banco
Filipino Savings and Mortgage Bank. To secure said loan, the
spouses Roasario again constituted mortgages three (3) lots.
Since the construction of a two-storey commercial building
still incomplete, the value reduce to P830,064.00 as
maximum loan value.
On February 13, 1986, the Torbela sibling filed a Complaint
for recovery of ownership and possession of Lot No 356-A,
plus damages before the Regional Trial Court of Urdanete,
Pangasinan against the Spouses Rosario.
The spouses Rosario afterwards failed to pay their loan
from Banco Filipino. Due to failure to pay, Banco Filipino
extrajudicially foreclosed the mortgage Lots, through public
auction Banco Filipino was the lone bidder for the three
foreclosed properties. The Certificate of Sale in favor of
Banco Filipino was annotated.
On December 9, 1987, The Torbela siblings filed before the
RTC their Amended Complaint, impleading Banco Filipino as
additional defendant in Civil Case and praying that the
spouses Rosario be ordered to redeem Lot No. 356-A from
Banco Filipino.
The spouses Rosario instituted before the RTC a case
for annulment of extrajudicial foreclosure and damages, with
prayer for writ of preliminary injunction and temporary
restraining order against Banco Filipino, the Provincial Ex
Oficio Sherif and his Deputy, and Register of Deeds of
Pangasinan.

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The Torbela siblings tried to redeem Lot No. 356-A from


Banco Filipino, but their efort were unsuccessful. Upon the
expiration of one-year redemption period. The Certificate of
Final Sale and Afidavit of Consolidation covering all three
foreclosed properties were executed. New certificates of title
were issued in name of Banco Filipino.
The Torbela siblings filed before the RTC a complaint for the
annulment of the Certificate of Final Sale, judicial
cancelation of TCT No. 165813 and damages. The Decision of
RTC in favor of Banco Filipino.
Court of Appeals afirmed the Decision of RTC with
modification. They appeal via Petition for Review.
Issue: Whether or not is express trust susceptible to
prescription?
Holding and Ratio Decidendi:
Among the notable evidence presented by the Torbela
siblings is the testimony of Atty. Alcantara, who had no
apparent personal interest in the present case. When she still
a boarder at the house of Eufrosina Torbela Rosario (Dr.
Rosarios mother), was consulted by the Torbela siblings as
regards the extrajudicial partition of Lot No. 356-A. she also
witnessed the execution of the two Deeds of Absolute
Quitclaim by the Torbela siblings and Dr. Rosario.
Upon presented the title by Dr. Rosario, the court made
a clear distinction between title and the certificate of title:
The certificate referred to is that document issued by the
Register of Deeds known as the Transfer Certificate of Title.
By title, the law refers to ownership which is represented by
that document. Petitioner apparently confuses certificate

with title. Placing a parcel of land under the mantle of the


Torrens system does not mean that ownership thereof can no
longer be disputed.
Ownership is diferent from a certificate of title. The
TCT is only the best proof of ownership of a piece of land.
Besides, the certificate cannot always be considered as
conclusive evidence of ownership. Mere issuance of the
certificate of title in the name of any person does not
foreclose the possibility that the real property may be under
co-ownership with persons not named in the certificate or
that the registrant may only be a trustee or that other parties
may have acquired interest subsequent to the issuance of the
certificate of title. To repeat, registration is not the
equivalent of title, but is only the best evidence thereof. Title
as a concept of ownership should not be confused with the
certificate of title as evidence of such ownership although
both are interchangeably used.
Registration does not vest title; it is merely the evidence of
such title. Land laws do not give the holder any better title
than what he actually has.
Dr. Rosario testified that he obtained Lot No. 356-A
after paying the Torbela siblings, pursuant to a verbal
agreement with the latter. The Court though observes that
Dr. Rosarios testimony on the execution and existence of the
verbal agreement with the torbela siblings lacks significant
details and is not corroborated by independent evidence.
The Parol of Evidence Rule provides that when the
terms of the agreement have been reduced into writing, it is
considered as containing all the terms agreed upon and there
can be, between the parties and their successors in interest,

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no evidence of such terms other than the contents of the


written agreement. Dr. Rosario may not modify, explain, or
add to the terms in the two Deeds of Absolute Quitclaim
since he did not put in issue in his pleadings (1) an intrinsic
ambiguity, mistake, or imperfection in the Deeds; (2) failure
of the Deeds of Express the true intent and the agreement of
the parties thereto; (3) the validity of the Deeds; or (4) the
exercise of other terms agreed to by the Torbela siblings and
Dr. Rosario after the execution of the Deeds.
It can also be said that Sr. Rosario is estopped from
claiming or asserting ownership over Lot no. 356-A based on
his Deed of Absolute Quitclaim. Dr. Rosarios Admission in
the said Deed that he merely borrowed Lot No. 356-A is
deemed conclusive upon him. Under Article 1431 of the Civil
Code, through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon.
That admission cannot now be denied by Sr. Rosario as
against the Torbela siblings, the latter having relied upon his
representation.
Considering the foregoing, the Court agrees with the
RTC and the Cour of Appeals that Dr. Rosario only holds Lot
No. 356-A in Trust for the Torbela siblings.
Trust is the right to the beneficial enjoyment of
property, the legal title to which is vested in another. It is a
fiduciary relationship that obliges the trustee to deal with the
property for the benefit og the beneficiary. Trust relations
between parties may either be express or implied. An express
trust is created by the intention of the trust or of the parties,
while an implied trust comes into being by operation of law.

Express trusts are created by direct and positive acts of


the parties, by some writing or deed, or will, or by words
either expressly or impliedly evincing an intention to create a
trust. Under Article 1444 of the Civil Code, no particular
words are required for the creation of an express trust, it
being suficient that a trust is clearly intended. It is possible
to create a trust without using the word trust or trustee.
Conversely , mere fact that these words are used does not
necessarily indicate an intention to create a trust. The
question in each case is whether the trustor manifested an
intention to create the kind of relationship which to lawyers
is known as trust. It is immaterial whether or not he knows
that the relationship which he intends to create is called a
trust, and whether or not he knows the precise
characteristics of the relationship which is called trust.
In Tamayo v. Callejo, the Court recognized that a trust
may have a constructive or implied nature in the beginning,
but
the
registered
owners
subsequent
express
acknowledgement in a public documents of a previous sale of
the property to another party, had the efect of imparting to
the aforementioned trust the nature of an express trust. The
same situation exist in this case. When Dr. Rosario was able
to register Lot No. 356-a I his name under TCT No 52751, an
implied trust was initially established between himand the
Torbela siblings under Article 1451 of the civil Code.
Article 1451. When land passed by succession to any person
and he causes the legal title to be put in the name of another,
a trust is established by implication of law for the benefit of
the true owner.

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Dr. Rosario execution of the Deed of Absolute Quitclaim


containing his express admission that he only borrowed Lot
no. 356-A from the Torbela siblings, eventually transformed
the nature of the trust to an express one. The express trus
continued despite Dr. Rosario stating in his Deed of Absolute
Quitcalim that he was already returning Lot No. 356-A to the
Torbela siblings as Lot No. 356-A remained registered in Dr.
Rosarios name under TCT No. 52751 and Dr. Rosario kept
possession of said property, together with the improvements.

In an express trust, the delay of the beneficiary is directly


attributable to the trustee who undertakes to hold the
property for the former, or who is linked to the beneficiary by
confidential or fiduciary relations. The trustees possession
is, therefore, not adverse to the beneficiary, until and unless
the latter is made aware that the trust has been repudiated.

On the issue of prescription, we had the opportunity to


rule in case Bueno v. Reyes that unrepudiated written
express are imprescriptible. While there are some decisions
ehich hold that an action upon a trust is imprescriptible,
without distinguishing between express ans implied trusts,
the better rule, as laid down by this court in other decisions,
is that prescription does supervene where the trust is merely
an implied one.

97.
Heirs of Tranquilino Labiste vs. Heirs of Jose
Labiste / G.R. No. 162033, 587 SCRA 417 / May 08,
2009 / Justice Quisumbing

The prescriptive period for the enforcement of an


express trust of ten(10) years starts upon the repudiation of
the trust by the trustee.
To apply the 10 years prescription period, which would bar a
beneficiarys action to recover in an express trust, the
repudiation of the trust must be proven by clear and
convincing evidence and made known to the beneficiary. The
express trust disables the trustee from acquiring for his own
benefit the property committed to hid management or
custody, at least while he does not openly repudiate the trust,
and makes such repudiation known to the beneficiary or
cestui que trust. For this reason, the old Code of Civil
Procedure (Act 190) declared that the rules on adverse
possession do not apply to continuing and subsisting trusts.

FACTS:
The late Epifanio Labiste, on his own and behalf of his
brothers and sisters who were the heirs of Jose Labiste,
purchased from th Bureau of Lands Lot No. 1054 of the
Banilad Friar Lands Estate, with an area of 13,308 square
meters, located at Guadalupe, Cebu City. The Bureau of Land
Director Jorge Vargas executed Deed of Conveyance in favor
to Epifanio and his brothers and sisters who were the heirs of
Jose Labiste.
After full payment of the purchase price but prior to the
issuance of the deed of conveyance, Epifanio executed an
Afidavit in Spanish afirming that he, as one of the heris of
Jose, and his uncle Tranquilino Labiste (petitioner), then coowned the said Lot because the money that was paid to the
government came from the two of them.
The Register of Deeds of Cebu City issued Original
Certificate of Title No. 3878. The lot subdivided into lots: Lot

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1054-A for Tranquilino and Lot 1054-B for Epifanio, both


with an area of 6,664 square meters. The subdivision plan
prepared by Engr. Buangan was approved by Jose Dan,
Acting Director of Lands.
Subsequently, the heirs of Tranquilino purchased the one-half
interest of the heirs of Jose over the Lot No, 1054, as
evidenced by the Calig-onan sa Panagpalit executed by the
parties in the Visayan dialect. The heirs of Tranquilino
immediately took possession of the entire lot.
When World War II broke out, the heirs of Tranquilino
fled Cebu City and when they came back they found their
homes and possessions destroyed. The records in the Ofice
of Register of Deeds, Ofice of the City Assessor and other
government ofices were also destroyed during the war.
Squatters have practically overrun the entire property, such
that neither petitioners nor respondents possess it.
Asuncion Labiste filed a petition for reconstitution of title
over Lot No. 1054 against the petitioners. Petitioners
opposed the petition and end up by a comprise agreement.
Under comprise agreement, petitioners were to be given time
to file a complaint so that the issues could be litigated in an
ordinary action and the reconstituted title was to be
deposited with the clerk of court for a period of sixty (60)
days to allow petitioners to file an action for reconveyance
and to a notice of lis pendens. Register of Deeds issued
reconstituted title in the name of Epifanio Labiste , his
brothers and sisters, heirs of Jose Labiste.
However, respondents did not honor the compromise
agreement.
Petitioners filed a complaint for annulment of title seeking
the reconveyance of property and damages. Respondents

claimed that the Afidavit of Epifanio and the Calig-onan sa


Panagpalit were forgeries and that petitioners action had
long prescribed or barred by laches.
The RTC decision ruled in favor of petitioners
evaluating the documents presented was genuine and
authentic as ancient documents and that they are valid and
enforceable.
On appeal, the Court of Appeals, while afirming
petitioners right to the property, nevertheless reversed the
RTCs decision on the ground of prescription and laches.
Afirmed the RTCs findings that the Afidavit and the Caligonan sa Panagpalit are genuine and authentic, and that the
same are valid and enforceable documents.
Issue: Whether or not the court can resolve the case
applying the rules on prescription and principle of
laches involving express trust?
Holding and Ratio Decidendi:
Citing Article 1144 of the Civil Code, it held that
petitioners cause of action had prescribed for the action
must be brought within ten(10) years from the time of right
of actions accrues upon the written contract which in this
case was when petitioners predeccessors-in-interest lost
possession over the property after World War II. Also, the
lapse of time to file the action constitutes neglect on
petitioners part so the principle of laches is applicable.
Express trust are created by direct and positive acts of
the parties, by some writing or deed, or will, or by words

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either expressly or impliedly evincing an intention to create a


trust. The Afidavit of Epifanio is in the nature of trust
agreement. Epifanio afirmed that the lot brought in his name
was co-owned by him, as one of the heirs of Jose, and his
uncle Tranquilino. And by agreement, each of them has been
in possession of half of the property. Their arrangement was
corroborated by the subdivision plan.
As such, prescription and laches will run only from the
time the express trust is repudiated. The court has held that
for acquisitive prescription to bar the action of the
beneficiary against trustee in an express trust for the
recovery of the property held in trust it must be shown that:
(a) the trustee has performed
unequivocal acts of
repudiation amounting to an ouster of the cestui que trust;
(b) such positive acts of repudiation have been made known
to the cestui que trust, and (c) the evidence thereon is clear
and conclusive. Respondents cannot rely on the fact that the
Torrens title was issued in the name of Epifanio and the other
heirs of Jose. It has been held that a trustee who obtains a
Torrens title over property held in trust by him for another
cannot repudiation of the trust duly communicated to the
beneficiary. The only act that can be construed as repudiation
was when respondents filed the petition for reconstitution.
And since petitioners filed their complaint, their cause of
action has not yet prescribed, laches cannot be attributed to
them.
RAMOS VS. RAMOS
FACTS:

Spouses Martin Ramos and Candida Tanate died on October


4, 1906 and October 26, 1880, respectively. They were
survived by their 3 children. Moreover, Martin was survived
by his 7 natural children. In December 1906, a special
proceeding for the settlement of the intestate estate of said
spouses was conducted. Rafael Ramos, a brother of Martin,
administered the estate for more than 6 years. Eventually, a
partition project was submitted which was signed by the 3
legitimate children and 2 of the 7 natural children. A certain
Timoteo Zayco signed in representation of the other 5 natural
children who were minors. The partition was sworn to before
a justice of peace.
The conjugal hereditary estate was appraised at P74,984.93,
consisting of 18 parcels of land, some head of cattle and the
advances to the legitimate children. thereof represented
the estate of Martin. 1/3 thereof was the free portion or
P12,497.98. The shares of the 7 natural children were to be
taken from that 1/3 free portion. Indeed, the partition was
made in accordance with the Old Civil code. Thereafter,
Judge Richard Campbell approved the partition project. The
court declared that the proceeding will be considered closed
and the record should be archived as soon as proof was
submitted that each he3ir had received the portion
adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the
administrator to submit a report showing that the shares of
the heirs had been delivered to them as required by the
previous decision. Nevertheless, the manifestation was not in
strict conformity with the terms of the judges order and with
the partition project itself. 8 lots of the Himamaylan Cadastre
were registered in equal shares in the names of Gregoria

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(widow of Jose Ramos) and her daughter, when in fact the


administrator was supposed to pay the cash adjudications to
each of them as enshrined in the partition project. Plaintifs
were then constrained to bring the suit before the court
seeking for the reconveyance in their favor their
corresponding participations in said parcels of land in
accordance with Article 840 of the old Civil Code. Note that
1/6 of the subject lots represents the 1/3 free portion of
martins shares which will eventually redound to the shares
of his 7 legally acknowledged natural children. The
petitioners action was predicated on the theory that their
shares were merely held in trust by defendants. Nonetheless,
no Deed of Trust was alleged and proven. Ultimately, the
lower court dismissed the complaint on the grounds of res
judicata, prescription and laches.
ISSUE: Whether or not the plaintifs action was barred by
prescription, laches and res judicata to the efect that they
were denied of their right to share in their fathers estate.
HELD: YES, there was inexcusable delay thereby making the
plaintifs action unquestionably barred by prescription and
laches and also by res judicata. Inextricably interwoven with
the questions of prescription and res judicata is the question
on the existence of a trust. It is noteworthy that the main
thrust of plaintifs action is the alleged holding of their
shares in trust by defendants. Emanating from such, the
Supreme Court elucidated on the nature of trusts and the
availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust. It is said
that trust is the right, enforceable solely in equity to the
beneficial enjoyment of property, the legal title to which is
vested in another. It may either be express or implied. The

latter ids further subdivided into resulting and constructive


trusts. Applying it now to the case at bar, the plaintifs did
not prove any express trust. Neither did they specify the kind
of implied trust contemplated in their action. Therefore, its
enforcement maybe barred by laches and prescription
whether they contemplate a resulting or a constructive trust.
98.

SOLEDAD CAEZO VS. CONCEPCION ROJAS

Facts:
On January 29, 1997, petitioner Soledad Caezo filed a
Complaint for the recovery of real property plus damages
with the Municipal Trial Court (MTC) of Naval, Biliran,
against her fathers second wife, respondent Concepcion
Rojas. The subject property is an unregistered land with an
area of 4,169 square meters, situated at Higatangan, Naval,
Biliran. Caezo attached to the complaint a Joint Afidavit
[executed on May 10, 1979 by Isidro Catandijan and
Maximina Caezo attesting to her acquisition of the property.
Petitioner alleged that she bought the parcel of land in 1939
from Crisogono Limpiado, although the transaction was not
reduced into writing. Thereafter, she immediately took
possession of the property. When she and her husband left
for Mindanao in 1948, she entrusted the said land to her
father, Crispulo. Rojas, who took possession of, and
cultivated, the property. In 1980, she found out that the
respondent, her stepmother, was in possession of the
property and was cultivating the same. She also discovered
that the tax declaration over the property was already in the
name of his father Crispulo Rojas. They contented that
contrary to the petitioners claim, it was her husband,

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Crispulo Rojas, who bought the property from Crisogono


Limpiado in 1948, which accounts for the tax declaration
being in Crispulos name. From then on, until his death in
1978, Crispulo possessed and cultivated the property. Upon
his death, the property was included in his estate. The
petitioner, as heir, even received her share in the produce of
the estate. The respondent further contended that the
petitioner ought to have impleaded all of the heirs as
defendants. She also argued that the fact that petitioner filed
the complaint only in 1997 means that she had already
abandoned her right over the property. MTC Ruled in Favor
of Soledad. On appeal to the RTC, the Decision of MTC was
reversed and ruled in favour of Conception, but subsequently,
amended its decision and ruled in favour of Soledad.
Issue: Whether or not there exist a trust relationship between
the petitioner and her Father, Express or implied?
Held: No. A trust is the legal relationship between one
person having an equitable ownership of property and
another person owning the legal title to such property, the
equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain
powers by the latter. Trusts are either express or implied.
Express trusts are those which are created by the direct and
positive acts of the parties, by some writing or deed, or will,
or by words evincing an intention to create a trust. Implied
trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of
intent or, independently, of the particular intention of the
parties, as being superinduced on the transaction by
operation of law basically by reason of equity. An implied
trust may either be a resulting trust or a constructive trust.

- As a rule, however, the burden of proving the existence of a


trust is on the party asserting its existence, and such proof
must be clear and satisfactorily show the existence of the
trust and its elements. The presence of the following
elements must be proved: (1) a trustor or settlor who
executes the instrument creating the trust; (2) a trustee, who
is the person expressly designated to carry out the trust; (3)
the trust res, consisting of duly identified and definite real
properties; and (4) the cestui que trust, or beneficiaries
whose identity must be clear. Accordingly, it was incumbent
upon petitioner to prove the existence of the trust
relationship. And petitioner sadly failed to discharge that
burden.

99.

RAMOS VS. RAMOS

FACTS:
Spouses Martin Ramos and Candida Tanate died on October
4, 1906 and October 26, 1880, respectively. They were
survived by their 3 children. Moreover, Martin was survived
by his 7 natural children. In December 1906, a special
proceeding for the settlement of the intestate estate of said
spouses was conducted. Rafael Ramos, a brother of Martin,
administered the estate for more than 6 years. Eventually, a
partition project was submitted which was signed by the 3
legitimate children and 2 of the 7 natural children. A certain
Timoteo Zayco signed in representation of the other 5 natural
children who were minors. The partition was sworn to before
a justice of peace.

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The conjugal hereditary estate was appraised at P74,984.93,


consisting of 18 parcels of land, some head of cattle and the
advances to the legitimate children. thereof represented
the estate of Martin. 1/3 thereof was the free portion or
P12,497.98. The shares of the 7 natural children were to be
taken from that 1/3 free portion. Indeed, the partition was
made in accordance with the Old Civil code. Thereafter,
Judge Richard Campbell approved the partition project. The
court declared that the proceeding will be considered closed
and the record should be archived as soon as proof was
submitted that each he3ir had received the portion
adjudicated to him.
On February 3, 1914, Judge Nepumoceno asked the
administrator to submit a report showing that the shares of
the heirs had been delivered to them as required by the
previous decision. Nevertheless, the manifestation was not in
strict conformity with the terms of the judges order and with
the partition project itself. 8 lots of the Himamaylan Cadastre
were registered in equal shares in the names of Gregoria
(widow of Jose Ramos) and her daughter, when in fact the
administrator was supposed to pay the cash adjudications to
each of them as enshrined in the partition project. Plaintifs
were then constrained to bring the suit before the court
seeking for the reconveyance in their favor their
corresponding participations in said parcels of land in
accordance with Article 840 of the old Civil Code. Note that
1/6 of the subject lots represents the 1/3 free portion of
martins shares which will eventually redound to the shares
of his 7 legally acknowledged natural children. The
petitioners action was predicated on the theory that their
shares were merely held in trust by defendants. Nonetheless,
no Deed of Trust was alleged and proven. Ultimately, the

lower court dismissed the complaint on the grounds of res


judicata, prescription and laches.
ISSUE: Whether or not the plaintifs action was barred by
prescription, laches and res judicata to the efect that they
were denied of their right to share in their fathers estate.
RULING: YES, there was inexcusable delay thereby making
the plaintifs action unquestionably barred by prescription
and laches and also by res judicata. Inextricably interwoven
with the questions of prescription and res judicata is the
question on the existence of a trust. It is noteworthy that the
main thrust of plaintifs action is the alleged holding of their
shares in trust by defendants. Emanating from such, the
Supreme Court elucidated on the nature of trusts and the
availability of prescription and laches to bar the action for
reconveyance of property allegedly held in trust. It is said
that trust is the right, enforceable solely in equity to the
beneficial enjoyment of property, the legal title to which is
vested in another. It may either be express or implied. The
latter ids further subdivided into resulting and constructive
trusts. Applying it now to the case at bar, the plaintifs did
not prove any express trust. Neither did they specify the kind
of implied trust contemplated in their action. Therefore, its
enforcement maybe barred by laches and prescription
whether they contemplate a resulting or a constructive trust.
100.
DIAZ V. GORRICHO & AGUADO G.R. No. L11229 March 29, 1958
DOCTRINE: In constructive trusts, laches constitutes a bar to
actions to enforce the trust, and repudiation is not required,

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unless there is concealment of the facts giving rise to the


trust although the concealment must be adequately
pleaded by the plaintif in a suit to declare a trust, where the
delay is apparent on the face of his pleading.
FACTS: Spouses Francisco Diaz and Maria Sevilla originally
owned Lot Nos. 1941 and 3073. Francisco Diaz died in 1919,
survived by his widow Maria Sevilla and their three children
Manuel, Lolita and Constancia. In 1935, defendant Carmen
J. Gorricho filed an action against Sevilla, wherein a writ of
attachment was issued upon the shares of Sevilla in said lots,
which were later on sold at a public auction to Gorricho.
Since Sevilla failed to redeem the lots in one year, the acting
provincial sherif executed a final deed of sale in favor of
Gorricho; however, the sherif wrongfully conveyed to
Gorricho the whole of the two lots, instead of only the halfinterest of Sevilla therein. In 1951, Sevilla died. A year later,
Sevillas children, plaintifs Manuel, Constancia and Lolita
filed an against defendants Gorricho and her husband
Francisco Aguado, compelling the latter to execute in their
favor a deed of reconveyance over an undivided one-half
interest over the two lots the share of their deceased father,
Francisco Diaz, which was illegally conveyed by the
provincial sherif to Gorricho. The siblings Diaz contend that
Gorricho acquired their fathers half of the disputed property
through an error of the provincial sherif, so it was subject to
an implied trust, under Article 1456 of the New Civil Code.
Furthermore, they allege that since the trust is continuing
and subsisting, the siblings Diaz may compel reconveyance of
the property despite the lapse of time, because prescription
does not run against titles registered under Act 496.
Defendants denied and alleged that plaintifs' action had
prescribed. The trial court held that while a constructive

trust in siblings Diaz favor arose when defendant Gorricho


took advantage of the error of the provincial sherif in
conveying to her the whole of the lots and obtained title in
herself, the action of plaintifs was, however, barred by
laches and prescription. So, the plaintifs appealed.
ISSUES: 1. Whether or not a constructive trust was created
in favor of the siblings Diaz.
2. Whether or not the action for reconveyance of the two lots
to siblings Diaz was barred by laches. 3. Whether or not the
action for reconveyance of the two lots to siblings Diaz was
barred by prescription.
HELD: 1. YES. Art. 1456 of the NCC provides that if
property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the
property comes. Since Gorricho acquired the whole of the
disputed lots through the error of the sherif, when in fact
Gorricho was only entitled to the half of it, then a
constructive trust was created in favor of the siblings Diaz.
2. YES. The action for reconveyance of the two lots to siblings
Diaz was barred by laches. Express trusts are created by
intention of the parties, while implied or constructive trusts
are exclusively created by law and are not trusts in their
technical sense. The express trusts disable the trustee from
acquiring for his own benefit the property committed to his
management or custody, at least while he does not openly
repudiate the trust, and makes such repudiation known to
the beneficiary. Thus, the oldCode of Civil Procedure (Act
190) declared that rules on adverse possession do not apply
to "continuing and subsisting" (i.e., unrepudiated) trusts. In

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the case of an express trust, a beneficiary is entitled to rely


upon the fidelity of the trustee. No laches exists until a
reasonable time after a beneficiary is notified of a breach or
other cause of suit against the trustee. However, laches
exists where suit is not commenced within such reasonable
time. In constructive trusts, laches constitutes a bar to
actions to enforce the trust, and repudiation is not required,
unless there is concealment of the facts giving rise to the
trust. Time runs from the moment that the law creates the
trust, which is the time when the cause of action arises. But
laches does not exist while the trustee, fraudulently and
successfully conceals the facts giving rise to the trust,
although the concealment must be adequately pleaded by the
plaintif in a suit to declare a trust, where the delay is
apparent on the face of his pleading. The reason for the
diference in treatment is that on one hand, in express trusts,
the delay of the beneficiary is directly attributable to the
trustee who holds the property for the former, thus creating a
fiduciary relation between them. The trustee's possession is,
therefore, not adverse to the beneficiary, until and unless the
latter is made aware that the trust has been repudiated. On
the other hand, in constructive trusts, there is neither
promise nor fiduciary relation; the trustee does not recognize
any trust and has no intent to hold for the beneficiary;
therefore, the beneficiary is not justified in delaying action to
recover his property. It is his fault if he delays; hence, he may
be estopped by his own laches. Since the cause of action of
siblings Diaz to attack the sherif's deed and cancel the
transfer certificates of title issued to spouses Gorricho and
Aguado accrued since its issuance and recording in 1937,
and plaintifs had allowed fifteen (15) years to elapse before
seeking remedy in 1952, then the dismissal of the case must
be upheld. Even considering that Constancia only became of

age in 1939, more than suficient time (thirteen years) had


been allowed to elapse to extinguish appellant's action.
3. YES. Under the old Code of Civil Procedure in force at the
time, the longest period of extinctive prescription was only
ten years. Since 15 years lapsed from the time the cause of
action arose before plaintifs sought for remedy, then their
action for reconveyance was barred by prescription. The
judgment appealed from is afirmed.
101.

SOLEDAD CAEZO VS. CONCEPCION ROJAS

Facts: -On January 29, 1997, petitioner Soledad Caezo filed a


Complaint for the recovery of real property plus damages
with the Municipal Trial Court (MTC) of Naval, Biliran,
against her fathers second wife, respondent Concepcion
Rojas. The subject property is an unregistered land with an
area of 4,169 square meters, situated at Higatangan, Naval,
Biliran. Caezo attached to the complaint a Joint Afidavit
[executed on May 10, 1979 by Isidro Catandijan and
Maximina Caezo attesting to her acquisition of the property.
Petitioner alleged that she bought the parcel of land in 1939
from Crisogono Limpiado, although the transaction was not
reduced into writing. Thereafter, she immediately took
possession of the property. When she and her husband left
for Mindanao in 1948, she entrusted the said land to her
father, Crispulo. Rojas, who took possession of, and
cultivated, the property. In 1980, she found out that the
respondent, her stepmother, was in possession of the
property and was cultivating the same. She also discovered
that the tax declaration over the property was already in the
name of his father Crispulo Rojas. They contented that
contrary to the petitioners claim, it was her husband,

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Crispulo Rojas, who bought the property from Crisogono


Limpiado in 1948, which accounts for the tax declaration
being in Crispulos name. From then on, until his death in
1978, Crispulo possessed and cultivated the property. Upon
his death, the property was included in his estate. The
petitioner, as heir, even received her share in the produce of
the estate. The respondent further contended that the
petitioner ought to have impleaded all of the heirs as
defendants. She also argued that the fact that petitioner filed
the complaint only in 1997 means that she had already
abandoned her right over the property. MTC Ruled in Favor
of Soledad. On appeal to the RTC, the Decision of MTC was
reversed and ruled in favour of Conception, but subsequently,
amended its decision and ruled in favour of Soledad.

- As a rule, however, the burden of proving the existence of a


trust is on the party asserting its existence, and such proof
must be clear and satisfactorily show the existence of the
trust and its elements. The presence of the following
elements must be proved: (1) a trustor or settlor who
executes the instrument creating the trust; (2) a trustee, who
is the person expressly designated to carry out the trust; (3)
the trust res, consisting of duly identified and definite real
properties; and (4) the cestui que trust, or beneficiaries
whose identity must be clear. Accordingly, it was incumbent
upon petitioner to prove the existence of the trust
relationship. And petitioner sadly failed to discharge that
burden.

Issue: Whether or not there exist a trust relationship between


the petitioner and her Father, Express or implied?

102.
G.R. No. 165696
April 30, 2008
ALEJANDRO B. TY, petitioner, vs. SYLVIA S. TY, in
her capacity as Administratrix of the Intestate
Estate of Alexander Ty, respondent.

Held: No. A trust is the legal relationship between one


person having an equitable ownership of property and
another person owning the legal title to such property, the
equitable ownership of the former entitling him to the
performance of certain duties and the exercise of certain
powers by the latter. Trusts are either express or implied.
Express trusts are those which are created by the direct and
positive acts of the parties, by some writing or deed, or will,
or by words evincing an intention to create a trust. Implied
trusts are those which, without being expressed, are
deducible from the nature of the transaction as matters of
intent or, independently, of the particular intention of the
parties, as being superinduced on the transaction by
operation of law basically by reason of equity. An implied
trust may either be a resulting trust or a constructive trust.

FACTS:
Alexander Ty, son of Alejandro Ty and husband of
Sylvia Ty, dies of cancer at the age of 34. Sylvia files petition
for the settlement of Alexanders intestate estate. She also
asks court to sell or mortgage properties in order to pay the
estate tax amounting to P4,714,560.02 assessed by the BIR.
The properties include a parcel of land in EDSA Greenhills, a
residential land in Wack Wack, and the Meridien condo unit
in Annapolis, Greenhills.
Alejandro Ty opposed the move and filed for recovery of the
property with prayer for preliminary injunction and/or

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temporary restraining order. Plaintif Alejandro claims that


he owns the EDSA, Wack Wack and Meridien condo unit
because he paid for them. The property was supposedly
registered in trust for Alexanders brothers and sisters in
case plaintif dies. Plaintif also claimed that Alex had no
financial capacity to purchase the disputed property, as the
latter was only dependent on the former.
Sylvia countered that Alexander had purchased the property
with his money. Alexander was financially capable of
purchasing it because he had been managing the family
corporations since he was 18 years old and was also engage
in other profitable businesses.
The RTC granted the application for preliminary injunction
and decides in favor of plaintif regarding the recovery of the
property. CA reversed the RTC stating that the implication
created by law under Art. 1448 does not apply if the property
was in the name of the purchasers child. They agreed that
plaintif partly paid for the EDSA property. Plaintif appealed.

exception: if the person to whom the title is conveyed is a


child, legitimate or illegitimate, of the one paying the price of
the sale, NO TRUST is IMPLIED by LAW, it being disputable
presumed that there is a gift in favor of the child. The Court
also noted that plaintif failed to prove that he did not intend
a donation.
Regarding the Meridien Condo and Wack Wack property, the
court said that plaintif failed to prove that purchase money
came from him. They also said that Alexander was capable of
purchasing the property as he had been working for nine
years, had a car care business, and was actively engaged in
the business dealings of several family corporations from
which he received emoluments and other benefits. Hence, no
implied trust created because there was no proof that
plaintif had paid for said properties.
103.
G.R. No. 202247 June 19, 2013SIME DARBY
PILIPINAS,
INC., Petitioner, vs.
JESUS
B.
MENDOZA, Respondent.

ISSUE:

FACTS:

Whether or not there was an implied trust under Art. 1448 of


the Civil Code?

Petitioner Sime Darby Pilipinas, Inc. (Sime Darby)


employed Jesus B. Mendoza (Mendoza) as sales manager to
handle sales, marketing, and distribution of the company's
tires and rubber products. On 3 July 1987, Sime Darby
bought a Class "A" club share4 in Alabang Country Club
(ACC) from Margarita de Araneta as evidenced by a Deed of
Absolute Sale.5 The share, however, was placed under the
name of Mendoza in trust for Sime Darby since the ByLaws6 of ACC state that only natural persons may own a club
share.7 As part of the arrangement, Mendoza endorsed the

RULING:
No. There was no implied trust created in relation to
the EDSA property. If the person to whom the title is
conveyed is the child of the one paying the price of the sale,
no trust is implied by law under Art. 1448, the so-called
purchase money resulting trust. The said article provides an

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Club Share Certificate8 in blank and executed a Deed of


Assignment,9 also in blank, and handed over the documents
to Sime Darby. From the time of purchase in 1987, Sime
Darby paid for the monthly dues and other assessments on
the club share.
When Mendoza retired in April 1995, Sime Darby fully
paid Mendoza his separation pay amounting to more
thanP3,000,000. Nine years later, or sometime in July 2004,
Sime Darby found an interested buyer of the club share
for P1,101,363.64. Before the sale could push through, the
broker required Sime Darby to secure an authorization to sell
from Mendoza since the club share was still registered in
Mendozas name. However, Mendoza refused to sign the
required authority to sell or special power of attorney unless
Sime Darby paid him the amount of P300,000, claiming that
this represented his unpaid separation benefits. As a result,
the sale did not push through and Sime Darby was compelled
to return the payment to the prospective buyer.
On 13 September 2005, Sime Darby filed a complaint10 for
damages with writ of preliminary injunction against Mendoza
with the Regional Trial Court (RTC) of Makati City.
ISSUE:
Whether or not there is trust arises in favor of one who pays
for the purchase price?
RULING:
Yes. While the share was bought by Sime Darby and
placed under the name of Mendoza, his title is only limited to

the usufruct, or the use and enjoyment of the clubs facilities


and privileges while employed with the company.
In Thomson v. Court of Appeals,20 we held that a trust
arises in favor of one who pays the purchase price of a
property in the name of another, because of the presumption
that he who pays for a thing intends a beneficial interest for
himself. While Sime Darby paid for the purchase price of the
club share, Mendoza was given the legal title. Thus, a
resulting trust is presumed as a matter of law. The burden
then shifts to the transferee to show otherwise.

104.
G.R. No. 181844
September 29,
2010SPS.
FELIPE
and
JOSEFA
PARINGIT, Petitioner,
vs.
MARCIANA
PARINGIT
BAJIT,
ADOLIO
PARINGIT
and
ROSARIO
PARINGIT
ORDOO, Respondents.
FACTS:
During their lifetime, spouses Paringit leased a lot in
Sampaloc, Manilafrom Terocel Realty. They built their home
there and raised five children. For having occupied the lot for
years, Terocel Realty ofered to sell it to Julian but he did not
have enough money at that time to meet the payment
deadline. Julian sought the help of his children so he can buy
the property but only his so nFelipe and wife Josefa had the
financial resources he needed at that time. To bring about the
purchase, Julian executed a deed of assignment of lease hold
right in favor of Felipe and his wife that would enable them

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to acquire the lot. The latter then bought the same from
Terocel Realty and a TCT was subsequently issued in favor of
spouses Felipe and Josefa.
Later on, due to issues among Julians children regarding the
ownership of the lot, Julian executed an afidavit clarifying
the nature of Felipe and his wifes purchase of the lot. He
claimed that it was bought for the benefit of all his children.
Despite the title being under their name, the spouses moved
to another house on the same street in 1988. Marciana, et al,
on the other hand, continued to occupy the lot with their
families without paying rent. This was the situation when
their father died in 1994. A year later, Felipe and his wife
sent a demand letter to his siblings who occupy the lot,
asking them to pay rental arrearages for occupying the
property. They refused to pay or reply to the letter, believing
that they had the right to occupy the house and lot, it being
their inheritance from their parents. Because of this, Felipe
and his wife filed an ejectment suita gainst them. The suit
prospered, resulting in the ejectment of Marciana, et a land
their families from the property.
To vindicate what they regarded as their right to the lot and
the house, the other children filed the present action against
Felipe and his wife for annulment of title and reconveyance
of property.
ISSUE:
Whether or not Felipe and his wife purchased the subject lot
under an implied trust for the benefit of all the children of
Julian?

RULING:
Yes, the Court ruled that the case at bar falls under the
rubric of the implied trust provided in Article 1450 of the
Civil Code. Implied trust under Article 1450 presupposes a
situation where a person, using his own funds, buys property
on behalf of another, who in the meantime may not have the
funds to purchase it. Title to the property is for the time
being placed in the name of the trustee, the person who pays
for it, until he is reimbursed by the beneficiary, the person for
whom the trustee bought the land. It is only after the
beneficiary reimburses the trustee of the purchase price that
the former can compel conveyance of the property from the
latter. The circumstances of this case are actually what
implied trust is about. Although no express agreement
covered
Felipe and his wifes purchase of the lot for the siblings
and their father, it came about by operation of law and is
protected by it. The nature of the transaction established the
implied trust and this in turn gave rise to the rights
and obligations provided by law. Implied trust is a rule
of equity, independent of the particular intention of the
parties. Here, the evidence shows that Felipe and his wife
bought the lot for the benefit of Julian and his children,
rather than for themselves. There is no question that the
house originally belonged to Julian and Aurelia who built it.
First, if Julian really intended to sell the entire house
and assign the right to acquire the lot to Felipe and his wife,
he would have arranged for Felipes other siblings to give
their conformity as co-owners to such sale.

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Second, Julian said in his afidavit that Felipe and his


wife bought the lot from Terocel Realty on his behalf and on
behalf of his other children. Felipe and his wife advanced the
payment because Julian and his other children did not then
have the money needed to meet the realty companys
deadline for the purchase. Notably, Felipe, acting through his
wife, countersigned Julians afidavit the way his siblings did.
Third, if Felipe and his wife really believed that they
were the absolute owners of the lot, then their moving out of
the house in 1988 and letting Marciana, et al continue to
occupy the house did not make sense. Fourth, Felipe and his
wife demanded rent from Marciana, et al only a year
following Julians death. This shows that for over 10 years,
Felipe and his wife respected the right of the siblings to
reside on the property. This is incompatible with their claim
that they bought the house and lot for themselves back in
1984. Until they filed the suit, they did nothing to assert their
supposed ownership of the house and lot.

105.
G.R. No. L-12149 September 30, 1960 HEIRS
OF EMILIO CANDELARIA, ETC.,
vs. LUISA
ROMERO, ET AL.,
FACTS:
Parties
to this
case
are
the
heirs
of Emilio
Candelaria as plaintif and Luisa Romero, and the heirs of
Lucas as defendants. Emilio and Lucas Candelaria bought a
lot
on
an installment basis. Lucas paid the first two
installments but because of sickness which caused him to be

bedridden, he sold his share to his brother Emilio who


continued to pay the purchase price until the obligation to
pay had been fully satisfied. The TCT was however issued
under
the
name
of
Lucas.Nevertheless, Lucas acknowledges that he merelyheld
the title in trust for his brother with theunderstanding
that the necessary documents of transfer will be made later
and this fact was known not only to him but also to the
defendants. However upon his death, his heirs refused to
reconvey the lotto plaintif despite repeated demands.
Plaintif
brought
an
action
in
the
CFI
for
a
complaint for reconveyance of real
property. Thelower court however dismissed the case on theg
round that an express trust, and not an impliedtrust,
was
created and that the action had already prescribed.
ISSUE:
What kind of trust was created? Express or implied trust?
Implied trust.
RULING:
Where the grantee takes the property under
an agreement to convey to another on certain
conditions,
a trust results for the benefit of such other or his heirs. It is
also the rule that there is an implied trust when a person
purchases
land
with
his
own
money and
takes conveyance thereof in the name of another. In such a
case, the property is held on a resulting trust in favor of the
one furnishing the consideration for the transfer. This kind of
trust is from equity and arises by implication or operation
of law.
In the present case, it is apparent that
Emilio

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furnished
the
consideration
intending
to
obtain
a beneficial interest in the property in question.
Having
supplied the money, it is presumed that he intended
to purchase the lot for his own benefit. Moreover, by entering
into an agreement with Emilio that the necessary documents
of transfer will be made later,
Lucas
acknowledged
the
he
merely
held
the property in trust for his brother with the
understanding
that
it
will
eventually
be
conveyed
tothe plaintifs predecessor in interest. Lastly, by
acknowledging the presence of trust, the plaintifs action
cannot be said to have been barred by lapse of time. The case
is therefore remanded for further proceedings.

106.
G.R. No. 47354 March 21, 1989 HORACIO G.
ADAZA
and
FELICIDAD
MARUNDAN, petitioners, vs.THE
HONORABLE
COURT OF APPEALS and VIOLETA G. ADAZA,
assisted
by
her
husband
LINO
AMOR,
respondents.
FACTS:
In 1953, Victor Adaza Sr. executed a Deed of Donation,
covering the disputed land in this case,located in Sinonok,
Zamboanga del Norte in favor of Respondent Violeta. The
land being disposable publicland had been held and
cultivated by Victor, Sr. With the help of her brother, Horacio,
Violeta filed a homestead application over the land and a free
patent was issued in 1956. An OCT was issued in1960. In

1962, Violeta and husband, Lino obtained a loan from PNB


by executing a mortgage on the land, while Homero Adaza,
brother of Violeta remainedad ministrator of the same.
In 1971, Horacio invited his brothers and sisters for a
family gathering where he asked Violeta to sign a Deed of
Waiver with respect to the property inSinonok. The Deed
stated that the land was owned in common by Violeta and
Horacio even though the OCT was in her name only. The
Deed also providedfor the waiver, transfer and conveyance of
Violeta
to
Horacio
of

of
the
property
and
its improvements.Violeta and Horacio signed the Deed with
Homero as a witness. A few months later, Violeta and
husband Lino filed a complaint for annulment of the Deed
of waiver and for damages against Horacio and wife Felisa.
The complaint alleged that (1) she was absolute owner of the
land by virtue of an unconditional donation executed by her
father in her favor; (2) she was registered owner; (3) she
signed
the
Deed
of waiver
because
of
fraud,
misrepresentation and undue influence; and (4) because of
such malicious acts, she is entitled to damages from Horacio.
Trial Court
Declared Deed of Waiver as valid and binding upon
Violeta, that Horacio was co-owner of of the land, and
ordering Violeta to pay Horacion the proceeds of his share.
CA
Reversed Trial court decision, declaring that though
the deed was signed voluntarily, such Deed was without

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consideration or cause because the


unconditionally donated to Violeta alone.

land

had

been

ISSUE:
Who owns the disputed parcel of land?
RULING:
Petitioners owned the parcel of land.
Deed of donation had a crossed-out provision: That the donee
shall share of the entire property with one of her brothers
and sisters after the death of the donor. The record is bereft
of any indication of any evil intent or malice on the part of
Homero, Victor, Jr. and Teresita (siblings of Violeta) that
would suggest deliberate collusion against Violeta. Their
father had executed the Deed of Donation with the
understanding that the same would be divided between
Horacio and Violeta and that Violeta had signed the Deed of
Waiver freely and voluntarily. Victor Adaza, Sr. left 4 parcels
of land divided among the 6 children through the practice
of having the lands acquired by him titled to the name of one
of his children. The property involved in the instant case is
owned in common by Violeta and brother, Horacio even
though the OCT was only in her name. She held half of the
land in trust for petitioner Horacioimplied trust based on
Article 1449 of the Civil Code: There is also an implied
trust when a donation is made to person but It appears that
although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest of only a
part thereof. The doctrine of laces is not to be applied
mechanically as between near relatives.

115. VDA. DE OUANO vs. REPUBLIC, G.R. NO. 168770,


9 FEBRUARY 2011
FACTS:
In 1949, the National Airport Corporation (NAC), MCIAAs
predecessor agency pursued a program to expand the Lahug
Airport in Cebu City. As an assurance from the government,
there is a promise of reconveyance or repurchase of said
property so long as Lahug ceases its operation or transfer its
operation to Mactan Cebu Airport. Some owners refused to
sell, and that the Civil Aeronautics Administration filed a
complaint for the expropriation of said properties for the
expansion of the Lahug Airport.
The trial court then declared said properties to be used upon
the expansion of said projects and order for just
compensation to the land owners, at the same time directed
the latter to transfer certificate or ownership or title in the
name of the plaintif.

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At the end of 1991, Lahug Airport completely ceased its


operation while the Mactan-Cebu airport opened to
accommodate incoming and outgoing commercial flights.
This then prompted the land owners to demand for the
reconveyance of said properties being expropriated by the
trial court under the power of eminent domain. Hence these
two consolidated cases arise.
In G.R. No. 168812 MCIAA is hereby ordered by court to
reconvey said properties to the land owners plus attorneys
fee and cost of suit, while in G.R. No. 168770, the RTC ruled
in favor of the petitioners Oaunos and against the MCIAA for
the reconveyance of their properties but was appealed by the
latter and the earlier decision was reversed, the case went up
to the CA but the CA afirmed the reversed decision of the
RTC.
ISSUE:Should MCIAA reconvey the lands to petitioners?
HELD:
Yes. The notion that the government via expropriation
proceedings acquires unrestricted ownership over or a fee
simple title to the covered land is no longer tenable.
Expropriated lands should be diferentiated from a piece of
land, ownership of which was absolutely transferred by way
of an unconditional purchase and sale contract freely entered
by two parties, one without obligation to buy and the other
without the duty to sell. In that case, the fee simple concept
really comes into play. There is really no occasion to apply
the fee simple concept if the transfer is conditional.
The taking of a private land in expropriation proceedings is
always conditioned on its continued devotion to its public
purpose. Once the purpose is terminated or peremptorily

abandoned, then the former owner, if he so desires, may seek


its reversion subject of course to the return at the very least
of the just compensation received.
In expropriation, the private owner is deprived of property
against his will. The mandatory requirement of due process
ought to be strictly followed such that the state must show, at
the minimum, a genuine need, an exacting public purpose to
take private property, the purpose to be specifically alleged
or least reasonably deducible from the complaint.
Public use, as an eminent domain concept, has now acquired
an expansive meaning to include any use that is of
usefulness, utility, or advantage, or what is productive of
general benefit [of the public]. If the genuine public
necessitythe very reason or condition as it wereallowing,
at the first instance, the expropriation of a private land
ceases or disappears, then there is no more cogent point for
the governments retention of the expropriated land. The
same legal situation should hold if the government devotes
the property to another public use very much diferent from
the original or deviates from the declared purpose to benefit
another private person. It has been said that the direct use
by the state of its power to oblige landowners to renounce
their productive possession to another citizen, who will use it
predominantly for that citizens own private gain, is ofensive
to our laws.
The government cannot plausibly keep the property it
expropriated in any manner it pleases and in the process
dishonor the judgment of expropriation. A condemnor should
commit to use the property pursuant to the purpose stated in
the petition for expropriation, failing which it should file
another petition for the new purpose. If not, then it behooves

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the condemnor to return the said property to its private


owner, if the latter so desires.
Hence, equity and justice demand the reconveyance by
MCIAA of the litigated lands in question to the Ouanos and
Inocians. In the same token, justice and fair play also dictate
that the Ouanos and Inocian return to MCIAA what they
received as just compensation for the expropriation of their
respective properties plus legal interest to be computed from
default, which in this case should run from the time MCIAA
complies with the reconveyance obligation.

116. LOPEZ v. CA G.R. No. 157784 December 16, 2008


FACTS:
On 23 March 1968, Juliana executed a notarial will, whereby
she expressed that she wished to constitute a trust fund for
her paraphernal properties, denominated as Fideicomiso de
Juliana Lopez Manzano (Fideicomiso), to be administered by
her husband. If her husband were to die or renounce the
obligation, her nephew, Enrique Lopez, was to become
administrator and executor of the Fideicomiso. Two-thirds
(2/3) of the income from rentals over these properties were
to answer for the education of deserving but needy honor
students, while one-third 1/3 was to shoulder the expenses
and fees of the administrator.

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As to her conjugal properties, Juliana bequeathed the portion


that she could legally dispose to her husband, and after his
death, said properties were to pass to her biznietos or great
grandchildren. Juliana initiated the probate of her will five (5)
days after its execution, but she died on 12 August 1968,
before the petition for probate could be heard.
The petition was pursued instead in Special Proceedings
(S.P.) No. 706 by her husband, Jose, who was the designated
executor in the will. On 7 October 1968, the Court of First
Instance, Branch 3, Balayan,Batangas, acting as probate
court, admitted the will to probate and issued the letters
testamentary to Jose. Jose then submitted an inventory of
Julianas real and personal properties with their appraised
values, which was approved by the probate court. Thereafter,
Jose filed a Report dated 16 August 1969, which included a
proposed project of partition.
Jose proceeded to ofer a project of partition. Then, Jose
listed those properties which he alleged were registered in
both his and Julianas names, totaling 13 parcels in all. The
disputed properties consisting of six (6) parcels, all located in
Balayan, Batangas, were included in said list. On 25 August
1969, the probate court issued an order approving the
project of partition.
As to the properties to be constituted into the Fideicomiso,
the probate court ordered that the certificates of title thereto
be cancelled, and, in lieu thereof, new certificates be issued
in favor of Jose as trustee of the Fideicomiso covering onehalf (1/2) of the properties listed under paragraph 14 of the
project of partition; and regarding the other half, to be
registered in the name of Jose as heir of Juliana.

The properties which Jose had alleged as registered in his


and Julianas names, including the disputed lots, were
adjudicated to Jose as heir, subject to the condition that Jose
would settle the obligations charged on these properties.
The probate court, thus, directed that new certificates of title
be issued in favor of Jose as the registered owner thereof in
its Order dated 15 September 1969. On even date, the
certificates of title of the disputed properties were issued in
the name of Jose. The Fideicomiso was constituted in S.P No.
706 encompassing one-half (1/2) of the Abra de Ilog lot on
Mindoro, the 1/6 portion of the lot in Antorcha St. in Balayan,
Batangas and all other properties inherited ab intestato by
Juliana from her sister, Clemencia, in accordance with the
order of the probate court in S.P. No. 706. The disputed lands
were excluded from the trust. Jose died on 22 July 1980,
leaving a holographic will disposing of the disputed
properties to respondents. The will was allowed probate on
20 December 1983 in S.P. No. 2675 before the RTC of Pasay
City.
Pursuant to Joses will, the RTC ordered on 20 December
1983 the transfer of the disputed properties to the
respondents as the heirs of Jose. Consequently, the
certificates of title of the disputed properties were cancelled
and new ones issued in the names of respondents.
Petitioners father, Enrique Lopez, also assumed the
trusteeship of Julianas estate. On 30 August 1984, the RTC
of Batangas, Branch 9 appointed petitioner as trustee of
Julianas estate in S.P. No. 706.
On 11 December 1984, petitioner instituted an action for
reconveyance of parcels of land with sum of money before
the RTC of Balayan, Batangas against respondents. The

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complaint essentially alleged that Jose was able to register in


his name the disputed properties, which were the
paraphernal properties of Juliana, either during their
conjugal union or in the course of the performance of his
duties as executor of the testate estate of Juliana and that
upon the death of Jose, the disputed properties were included
in the inventory as if they formed part of Joses estate when
in fact Jose was holding them only in trust for the trust estate
of Juliana.
The RTC dismissed the petition on the ground of
prescription. The CA denied the appeals filed by both parties.
ISSUE: Whether an implied trust was constituted over the
disputed properties when Jose, the trustee, registered them
in his name?
HELD:
The disputed properties were excluded from the Fideicomiso
at the outset. Jose registered the disputed properties in his
name partly as his conjugal share and partly as his
inheritance from his wife Juliana, which is the complete
reverse of the claim of the petitioner, as the new trustee, that
the properties are intended for the beneficiaries of the
Fideicomiso. Furthermore, the exclusion of the disputed
properties from the Fideicomiso was approved by the probate
court and, subsequently, by the trial court having jurisdiction
over the Fideicomiso. The registration of the disputed
properties in the name of Jose was actually pursuant to a
court order. The apparent mistake in the adjudication of the
disputed properties to Jose created a mere implied trust of
the constructive variety in favor of the beneficiaries of the
Fideicomiso.

117. SALAO VS SALAO, G.R. NO. L-26699, March 16,


1976
Facts:
The spouses Manuel Salao and Valentina Ignacio of Barrio
Dampalit, Malabon, Rizal begot four children named Patricio,
Alejandra, Juan (Banli) and Ambrosia. Manuel Salao died in
1885. His eldest son, Patricio, died in 1886 survived by his

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only child. Valentin Salao. After Valentinas death, her estate


was administered by her daughter Ambrosia. The
documentary evidence proves that in 1911 or prior to the
death of Valentina Ignacio her two children, Juan Y. Salao, Sr.
and Ambrosia Salao, secured a Torrens title, OCT No. 185 of
the Registry of Deeds of Pampanga, in their names.
The property in question is the forty-seven-hectare fishpond
located at Sitio Calunuran, Lubao, Pampanga, wherein Benita
Salao-Marcelo daughter of Valentin Salao claimed 1/3
interest on the said fishpond. The defendant Juan Y. Salao Jr.
inherited from his father Juan Y. Salao, Sr. of the fishpond
and the other half from the donation of his auntie Ambrosia
Salao.
It was alleged in the said case that Juan Y. Salao, Sr and
Ambrosia Salao had engaged in the fishpond business. Where
they obtained the capital and that Valentin Salao and
Alejandra Salao were included in that joint venture, that the
funds used were the earnings of the properties supposedly
inherited from Manuel Salao, and that those earnings were
used in the acquisition of the Calunuran fishpond. There is no
documentary evidence to support that theory.
The lawyer of Benita Salao and the Children of Victorina
Salao in a letter dated January 26, 1951 informed Juan S.
Salao, Jr. that his clients had a one-third share in the two
fishponds and that when Juani took possession thereof in
1945, in which he refused to give Benita and Victorinas
children their one-third share of the net fruits which
allegedly amounted to P200,000. However, there was no
mention on the deeds as to the share of Valentin and
Alejandra. Juan S. Salao, Jr. in his answer dated February 6,
1951 categorically stated that Valentin Salao did not have

any interest in the two fishponds and that the sole owners
thereof his father Banli and his aunt Ambrosia, as shown in
the Torrens titles issued in 1911 and 1917, and that he Juani
was the donee of Ambrosias one-half share.
Benita Salao and her nephews and niece asked for the
annulment of the donation to Juan S. Salao, Jr. and for the
reconveyance to them of the Calunuran fishpond as Valentin
Salaos supposed one-third share in the 145 hectares of
fishpond registered in the names of Juan Y. Salao, Sr. and
Ambrosia Salao.
Issue: Whether or not the Calunuran fishpond was held in
trust for Valentin Salao by Juan Y. Salao, Sr. and Ambrosia
Salao.
Held:
There was no resulting trust in this case because there never
was any intention on the part of Juan Y. Salao, Sr., Ambrosia
Salao and Valentin Salao to create any trust. There was no
constructive trust because the registration of the two
fishponds in the names of Juan and Ambrosia was not vitiated
by fraud or mistake. This is not a case where to satisfy the
demands of justice it is necessary to consider the Calunuran
fishpond being held in trust by the heirs of Juan Y. Salao, Sr.
for the heirs of Valentin Salao.
A Torrens Title is generally a conclusive evidence of the
ownership of the land referred to therein. (Sec. 47, Act 496).
A strong presumption exists that Torrens titles were
regularly issued and that they are valid. In order to maintain
an action for reconveyance, proof as to the fiduciary relation
of the parties must be clear and convincing.

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The plaintifs utterly failed to prove by clear, satisfactory and


convincing evidence. It cannot rest on vague and uncertain
evidence or on loose, equivocal or indefinite declarations.
Trust and trustee; establishment of trust by parol evidence;
certainty of proof. Where a trust is to be established by
oral proof, the testimony supporting it must be suficiently
strong to prove the right of the alleged beneficiary with as
much certainty as if a document proving the trust were
shown. A trust cannot be established, contrary to the recitals
of a Torrens title, upon vague and inconclusive proof.

The real purpose of the Torrens system is, to quiet title to


land. Once a title is registered, the owner may rest secure,
without the necessity of waiting in the portals of the court, or
sitting in the mirador de su casa, to avoid the possibility of
losing his land.

Trusts; evidence needed to establish trust on parol testimony.


In order to establish a trust in real property by parol
evidence, the proof should be as fully convincing as if the act
giving rise to the trust obligation were proven by an
authentic document. Such a trust cannot be established upon
testimony consisting in large part of insecure surmises based
on ancient hearsay. (Syllabus, Santa Juana vs. Del Rosario 50
Phil. 110).
The foregoing rulings are good under article 1457 of the Civil
Code which, as already noted, allows an implied trust to be
proven by oral evidence. Trustworthy oral evidence is
required to prove an implied trust because, oral evidence can
be easily fabricated.
On the other hand, a Torrens title is generally a conclusive of
the ownership of the land referred to therein (Sec. 47, Act
496). A strong presumption exists. that Torrens titles were
regularly issued and that they are valid. In order to maintain
an action for reconveyance, proof as to the fiduciary relation
of the parties must be clear and convincing.

118. MUNICIPALITY OF VICTORIAS VS. CA


Facts:

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Norma Leuenberger, respondent, inherited aparcel of land


from her grandmother, Simeona Vda.de Ditching in 1941.
In 1963, she discovered that apart of the parcel of land was
being used by petitioner Municipality of Victorias as a
cemetery. By reason of the discovery, respondent wrote a
letter to the Mayor of Victorias demanding payment of
pastrentals over the land used a cemetery and requesting
delivery of the illegally occupied land by the petitioner.
The Mayor replied that themunicipality bought the land but
however refused to show the papers concerning the sale.
Apparently, the municipality failed to register the Deed of
Sale of the lot in dispute.
Respondent filed a complaint in the Court of First Instance of
Negros Occidental for recovery of possession of the parcel of
land occupied by the municipal cemetery. In its answer,
petitioner Municipality alleged ownership of the lot having
bought it from Simeona Vda. de Ditching sometime in 1934.
The lower court decided in favor of the petitioner
municipality. On appeal, petitioner presented an entry in the
notarial register form the Bureau of Records Management in
Manila of a notary public of a sale purporting to be that of
the disputed parcel of land. Included within it are the parties
to the sale, Vda. De Ditching, as the vendor and the
Municipal Mayor of Victorias in 1934, as vendee.
The Court of Appeals however claimed that this evidence is
not a suficient Deed of Sale. It therefore reversed the ruling
of the CFI and ordered the petitioner to deliver the
possession of the land in question to respondents.

Issue:
W/N the notary public of sale is suficient to
substantiate the municipalitys claim that it acquired the
disputed land by means of a Deed of Sale.
Held:
Yes.The fact that the notary public of sale showed the nature
of the instrument, the subject of the sale, the parties of the
contract, the consideration and the date of sale, the Court
held that it was a suficient evidence of the Deed of Sale.
Thus, when Norma inherited the land from her grandmother,
a portion of it has already been sold by the latter to the
Municipality of Victorias in1934. Her registration of the
parcel of land did not therefore transfer ownership but
merely confirmed it. As the civil code provides, where the
land is decreed in the name of a person through fraud or
mistake, such person is by operation of law considered a
trustee of an implied trust for the benefit of the persons from
whom the property comes. Consequently, she only held the
land in dispute in trust for the petitioner hence private
respondent is inequity bound to reconvey the subject land to
the cestui que trust , the Municipality of Victorias.

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130. ROSARIOGAYONDATO , vs.THE TREASURER OF


THE PHILIPPINE ISLANDS, ET AL., G.R. No. L-24597
August 25, 1926
FACTS:
Three parcels of land (subject lots) were inherited by
Domingo Gayondato from his mother. Domingo then
married Adela Gasataya (Adela) and they had one
child, Rosario Gayondato. Domingo died in 1902 and six
years later, Adela married Domingo Cuachon.The subject lots
were included in a cadastral case where Domingo appeared on
behalf of Adela and Rosario, who was then fifteen years old.
Despite Domingos claims that the subject lots were owned by both
Adela andRosario, Court of First Instance erroneously decreed
the registration of the aforesaid lots in the name of Adela
Gasataya alone. Subsequently Adela, with the consent of her
husband, mortgaged the property to the National Bank and in
the year 1920, sold it to the Francisco Rodriguez (Francisco),
the latter assuming the liability for the mortgage and for
certain other debts. Rosario filed a complaint against Adela,
Domingo, Francisco, and Insular Treasurer to recover
damages for the erroneous registration of the subject lots in
the name of Adela. Trial court ruled in favor of Rosario
ordering Adela and Domingo tosolidarily indemnify Rosario,
but absolving Insular Treasurer and Francisco
ISSUE
WON Insular Treasurer should be held secondarily liable?
HELD

The Attorney-General in his brief for the Insular Treasurer


raises the point that Domingo and Adela prior to the
registration must be considered to have held the property in
trust and for the benefit of Rosario; thus, the relation of
trustee and cestui que trust was created making this case fall
under Section106 of the Land Registration Act, which
provides that "the assurance fund shall not be liable to pay
for any loss or damage or deprivation occasioned by breach of
trust, whether express, implied, or constructive, by any registered
owner who is a trustee, or by the improper exercise of any
sale in mortgage-foreclosure proceedings. The use of the
word "trust" in this sense is not technically accurate. As Perry
says, such trusts "are not trusts at all in the strict and proper
signification of the word "trust"; but as courts are agreed in
administering the same remedy in a certain class of frauds
as are administered in fraudulent breaches of trusts, and as
courts and the profession have concurred in calling such
frauds constructive trusts, there can be no misapprehension in
continuing the same phraseology, while a change might lead to
confusion and misunderstanding. If this is the kind of
constructive trust referred to in Section 106, it must be
conceded that Rosario cannot recover damages from the assurance
fund. But that such is not the case, becomes quite apparent
upon an examination of sections 101 and 102, of the same
Act, in which the right of recovery from the assurance fund in
cases of registration through fraud or wrongful acts is expressly
recognized, then it clearly shows that the term trust as
used in section106 must be taken in its technical and more
restricted sense. Indeed, if it were to be regarded in its
broadest sense, the assurance fund would, under the
conditions here prevailing, be of little or no value

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ISSUE Does the possession of legal title preclude the
operation of a trust agreement?
HELD

131. EUSEBIA ESCOBARVS RAMON LOCSIN, in his


capacity as special administrator of the intestate estate
of Juana Ringor, G.R. No. L-48309 January 30, 1943
FACTS
The complaint alleges that the plaintif is the owner of the
subject lot; and that in the course of the cadastral
proceedings, plaintif being illiterate, asked Sumangil to
claim the same for her (plaintif) but Sumangil committed a
breach of trust by claiming the lot for himself, so it was
adjudicated in favor of Sumangil. The defendant is the
special administrator of the estate of Juana Ringor, to whom
the parcel of land in question was assigned by partition in the
intestate estate of Sumangil and Duque. The CFI found that
the plaintif is the real owner of the lot which she had
acquired in 1914 by donation propter nuptias from Pablo
Ringor; that plaintif had since that year been in possession
of the land; and that the same had been decreed in the
cadastral proceedings in favor of Domingo Sumangil. The
trial court, while recognizing that the plaintif had the
equitable title and the defendant the legal title, nevertheless
dismissed the complaint because the period of one year
provided for in section 38 of the Land Registration Act for the
review of a decree had elapsed and the plaintif had not
availed herself of this remedy.

No. The trial court plainly erred. The complaint did not seek
the review of the decree or the reopening of the cadastral
case, but the enforcement of a trust. Hence, section 38 of Act
No. 496 does not apply. The estate of Juana Ringor as the
successor in interest of the trustee, Domingo Sumangil, is in
equity bound to execute a deed of conveyance of this lot to
the plaintif-appellant. The remedy herein prayed for has
been upheld by this Court in previous cases, one of which is
Severino vs. Severino (44 Phil., 343, year 1923). There is no
indication there of an intention to cut of, through the
issuance of a decree of registration, equitable rights or
remedies such as those here in question. On the contrary,
section 70 of the Act provides: Registered lands and
ownership therein, shall in all respects be subject to the
same burdens and incidents attached by law to unregistered
land. Nothing contained in this Act shall in any way be
construed to relieve registered land or the owners thereof
from any rights incident to the relation of husband and wife,
or from liability to attachment on mesne process or levy on
execution, or from liability to any lien of any description
established by law on land and the buildings thereon, or the
interest of the owner in such land or buildings, or to change
the laws of descent, or the rights of partition between
coparceners, joint tenants and other cotenants, or the right
to take the same by eminent domain, or to relieve such land
from liability to be appropriated in any lawful manner for the
payment of debts, or to change or afect in any other way any
other rights or liabilities created by law and applicable to
unregistered land, except as otherwise expressly provided in

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this Act or in the amendments hereof. A trust such as that


which was created between the plaintif and Domingo
Sumangil is sacred and inviolable. The Courts have
therefore shielded fiduciary relations against every manner
of chicanery or detestable design cloaked by legal
technicalities. The Torrens system was never calculated to
foment betrayal in the performance of a trust. The judgment
appealed from is hereby reverse, and the defendant is
ordered to convey that lot in question to the plaintif within
fifteen days from the entry of final judgment herein; and
upon his failure or refusal to do so, this judgment shall
constitute suficient authorization for the Register of Deeds
of Nueva Ecija, in lieu of a deed of conveyance, to transfer
the certificate of title for said lot No. 692 to the plaintif
Eusebia Escobar. The defendant shall pay the costs of both
instances

132. CAVILE v LITANIA-HONG


FACTS
A deed of partition was entered into by the heirs of spouses
Bernardo Cavile and Tranquilina Galon. Subject of the deed
of partition were several parcels of lant all under the name of
Bernardo. Some of the legal heirs sold their shares to Castor
(father of Perfecta petitioner) making him sole owner of the
properties. Castor and Susana (legal heir, sister of castor)
executed a confirmation of extrajudicial partition, it was
recognized and confirmed in the document that Susana has a
just and lawful share on the said properties and she was in
actual possession of the said properties. 14 years after, heirs

of susana filed a complaint for reconveyance and recovery of


the said property with damages before RTC against Perfecta
(daughter of castor). Heirs of susana contends that Perfecta
intruded upon and excluded them from the subject lots
unlawful occupancy Perfecta planted and harvested crops
on the land. In addition, the land was registered under the
name of Perfecta. (Perfecta was in possession of the land)
Perfecta then contends that the land sold by castors heir to
him and castor has possession and lots covered by tax
declaration. Then castor sold it to perfecta who took
possession and filed with the Bureau of Lands an application
for the issuance of title over her name and it was granted.
Furthermore, the Confirmation of Extrajudicial Partition was
a nullity. The intention of such document was to
accommodate susana who thenneeded security for the loan
she was trying to obtain from the Rural bank. RTC was in
favor of Perfecta because her evidence was more worthy of
credence. Heirs of susana appealed before CA and it
reversed the decision alleging that the confirmation of
extrajudicial partition was not a simulated document. It was
susana who paid the taxes before. Perfecta then filed a
motion for reconsideration but was denied. Perfecta then
filed this petition.
ISSUE Whether or not Perfecta has a the better right to the
subject lots?
HELD
Yes. In civil cases, the party having the burden of proof must
establish his case by a preponderance of evidence. It is the
weight, credit, and value of the aggregate evidence on either
side and is usually considered to be synonymous with the
term greater weight of the evidence or greater weight of the

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credible evidence. It is the probability of truth. The heirs of


Susana were only able to provide as evidence the document
of the Confirmation of Extrajudicial Partition and the tax
declaration. Tax declarations are not conclusive evidence of
ownership but it can be used to support such claim. In
addition, Susana failed to shed light on why or how the said
properties wholly pertained to her when her parents
Bernardo and Tranquilina clearly had other heirs who also
had shares in the inheritance. No information was provided
as to how said possession of the lots was actually exercised
or demonstrated by Susana. On the side of perfecta, the land
was registered under her name; a patent was legally issued
by the government in her name. Possession of lots was
established not just by the testimony of Perfecta but was
corroborated by the testimony of Luciana Navarra, whose
husband was a tenant working on the subject lots. Moreover,
they planted coconuts, rice, and corn on which the heirs of
Susana were unable to refute. Therefore, the court was
convinced that the evidence adduced by perfecta
preponderated over that of the heirs of Susanna. It is
important to note that the heirs of Susana brought the action
for reconveyance of the subject lots before RTC only more
than 12 years after the Torrens titles were issued in favor of
perfecta. The remedy then was already time-barred (implied
or constructive trust 10 years from the date of the issuance
of certificate of title over the property provided not
transferred to innocent purchaser for value). And even if it
has not been barred, still perfecta will win because of the
preponderance of evidence.
In addition, the heirs of Susana alleged fraud and breach of
trust in the part of perfecta. But the court said that mere

allegation of fraud is not enough. Intentional acts to deceive


and deprive another party of his right must be proved.

133. Estrella Tiongco Yared vs Jose B. Tiongco, (G.R.


No. 161360 October 19, 2011
FACTS:
Matilde, Jose, Vicente, Felipe are the HEIRS OF MARIA LUIS
DE TIONGCO. Although the HEIRS OF MARIA LUIS DE
TIONGCO have all died, there were survived by their
children and descendants. Among them are the legitimate
children of Jose, Estrella Tiongco Yared and Carmelo
Tiongco, father of the respondent Jose. In 1965, Estrella built
a house on Lot 1404 and sustained herself by collecting
rentals from the tenants of Lots 3244 and 3246. In 1968,
Estrella, as one of the heirs of Jose, filed an adverse claim
afecting all the rights, interest and participation of her
deceased father on the disputed lots, but the adverse claim
was only annotated on the OCTs covering Lots 3244 and
1404. In 1983, the NEPHEW prohibited Estrella from
collecting rentals from the tenants of Lots 3244 and 3246.
The NEPHEW filed a suit for recovery of possession against
several tenants of Lots 324 and 3246 wherein he obtained a
judgment in his favour. The NEPHEW also filed a case for
unlawful detainer against Estrella as she was staying on Lot
1404. The RTC ruled in favour of the NEPHEW.
The CA reversed and ruled in favour of Estrella. As such, the
NEPHEW never took possession of the properties. In 1988,
when Estrella inquired at the Ofice of the RD, she discovered
that, sometime in 1974, the NEPHEW had already executed
an Afidavit of Adjudication declaring that he is the only

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surviving heir of the registered owners and adjudicating unto


himself Lots 3244, 3246, and 1404. The OCTs were cancelled
and new TCTs were issued in respondent Joses name. Based
on the records of the RD, the NEPHEW sold Lots 3244 and
1404 to Catalino Torre. Lot 3246 was sold to Antonio
Doronila. Torre sold the Lots 3244 and 1404 to Doronila.
Doronila sold back to Jose Lots 1404, 3244, and 3246. In
1990, Estrella filed a complaint against the NEPHEW and
Doronila. RTC ruled in favour of Jose for prescription has set
since the complaint was filed in 1990 or some 16 years after
the NEPHEW caused to be registered the afidavit of
adjudication. The CA AFFIRMED.
ISSUE Who has a better right to the properties?
RULING The CA decision is reversed and set aside. The RD
is ordered to restore the OCTs under the name/s of the
registered original owners.
HELD
Generally, an action for reconveyance can barred by
prescription. An action for reconveyance based on implied or
constructive trust must perforce prescribe in 10 years from
the issuance of the Torrens title over the property. However,
there is an exception to this rule: when the plaintif is in
possession of the land to be reconveyed, prescription cannot
be invoke in an action for reconveyance. The action is
imprescriptible so long as the land has not passed to an
innocent buyer for value. This is based on the theory that
registration proceedings cannot be used as a shield for fraud
or enriching a person at the expense of another. In this case,
Estrellas possession was disturbed in 1983 when the
NEPHEW filed a case for recovery of possession. The RTC
ruled in favour of Estrella. Estrella never lost possession of

the properties, as such, she is in a position to file the


complaint to protect her rights and clear whatever doubts
had been cast on her title by the issuance of the TCTs in the
NEPHEWs name. The circuitous sale transaction of the
properties from the NEPHEW to Torre to Doronilla, and back
again to the NEPHEW were unusual. However, these
successive transfers of title from one hand to another could
not cleanse the illegality of the NEPHEWs act of
adjudicating to himself all the disputed properties so as to
entitle him the protection of the law as a buyer in good faith.
The NEPHEW cannot claim lack of knowledge of the defects
surrounding the cancellation of the OCTs over the properties
and benefit from his fraudulent actions. The subsequent sales
will not cure the nullity of the certificates of title obtained by
the NEPHEW on the basis of the false and fraudulent
Afidavit of Adjudication.

134. PNB v JUMANOY

FACTS:
On December 27, 1989, the RTC, Branch 19, of Digos City,
Davao del Sur, rendered a Decision5 in Civil Case No. 2514 (a
case for Reconveyance and Damages), ordering the exclusion
of 2.5002 hectares from Lot 13521. The trial court found that
said 2.5002 hectares which is part of Lot 13521, a 13,752square meter parcel of land covered by Original Certificate of
Title (OCT) No. P- 49526 registered in the name of Antonio
Go Pace (Antonio) on July 19, 1971 actually pertains to
Sesinando Jumamoy (Sesinando), Ciriacos predecessorininterest.

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The RTC found that said 2.5002-hectare lot was erroneously


included in Antonios free patent application which became
the basis for the issuance of his OCT. It then ordered the
heirs of Antonio (the Paces [represented by Rosalia Pace
(Rosalia)]) to reconvey said portion to Ciriaco. In so ruling,
the RTC acknowledged Ciriacos actual and exclusive
possession, cultivation, and claim of ownership over the
subject lot which he acquired from his father Sesinando, who
occupied and improved the lot way back in the early 1950s.7
The December 27, 1989 ruling then became final but could
not be annotated since the OCT was already cancelld.
Apparently, Antonio and his wife Rosalia mortgaged Lot
13521 to PNB as security for a series of loans which Antonio
defaulted and PNB foreclosed the mortgage on July 14,
198610 and the title was transferred to PNB.
Thus, in February 1996, Ciriaco filed the instant complaint
against PNB and the Paces for Declaration of Nullity of
Mortgage, Foreclosure Sale, Reconveyance and Damages,
docketed as Civil Case No. 3313 and raffled to Branch 18 of
RTC, Digos City, Davao del Sur. In his complaint, Ciriaco
averred that Antonio could not validly mortgage the entire
Lot 13521 to PNB as a portion thereof consisting of 2.5002
hectares belongs to him (Ciriaco), as already held in Civil
Case No. 2514. He claimed that PNB is not an innocent
mortgagee/purchaser for value because prior to the
execution and registration of PNBs deed of sale with the
Register of Deeds, the bank had prior notice that the
disputed lot is subject of litigation. It would appear that
during the pendency of Civil Case No. 2514, a notice of lis
pendens was annotated at the back of OCT No. P-4952 as
Entry No. 16554712 on November 28, 1988.

The RTC and CA ruled that Ciriaco is correct and that PNB
must reconvey the land to Ciriaco. Thus PNB filed this case to
question the ruling of the RTC and CA.
ISSUE Whether or not PNB canrecover the land to Ciriaco?
HELD
Yes. PNB is not an innocent purchaser/ mortgagee for value.
PNB In this case is considered a trustee in a constructive
trust holding the land in trust for Ciriaco. Also, since Ciriaco
is in possession of the land, the action based on constructive
trust is imprescriptible. Undoubtedly, our land registration
statute extends its protection to an innocent purchaser for
value, defined as "one who buys the property of another,
without notice that some other person has a right or interest
in such property and pays the full price for the same, at the
time of such purchase or before he has notice of the claims or
interest of some other person in the property."25 An
"innocent purchaser for value" includes an innocent lessee,
mortgagee, or other encumbrancer for value .26 Here, we
agree with the disposition of the RTC and the CA that PNB is
not an innocent purchaser for value. As we have already
declared: A banking institution is expected to exercise due
diligence before entering into a mortgage contract. The
ascertainment of the status or condition of a property ofered
to it as security for a loan must be a standard and
indispensable part of its operations. PNBs contention that
Ciriaco failed to allege in his complaint that PNB failed to
take the necessary precautions before accepting the
mortgage is of no moment. It is undisputed that the 2.5002hectare portion of the mortgaged property has been
adjudged in favor of Ciriacos predecessor-in-interest in Civil
Case No. 2514.

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Hence, PNB has the burden of evidence that it acted in good


faith from the time the land was ofered as collateral.
However, PNB miserably failed to overcome this burden.
There was no showing at all that it conducted an
investigation; that it observed due diligence and prudence by
checking for flaws in the title; that it verified the identity of
the true owner and possessor of the land; and, that it visited
subject premises to determine its actual condition before
accepting the same as collateral.
Both the CA and the trial court correctly observed that PNB
could not validly raise the defense that it relied on Antonios
clean title. The land, when it was first mortgaged, was then
unregistered under our Torrens system. The first mortgage
was on February 25, 197128 while OCT No. P-4952 was
issued on July 19, 1971. Since the Paces ofered as collateral
an unregistered land, with more reason PNB should have
proven before the RTC that it had verified the status of the
property by conducting an ocular inspection before granting
Antonio his first loan. Good faith which is a question of fact
could have been proven in the proceedings before the RTC,
but PNB dispensed with the trial proper and let its

opportunity to dispute factual allegations pass. Had PNB


really taken the necessary precautions, it would have
discovered that a large portion of Lot 13521 is occupied by
Ciriaco. Ciriacos action for reconveyance is imprescriptible.
If a person claiming to be the owner thereof is in actual
possession of the property, as the defendants are in the
instant case, the right to seek reconveyance, which in efect
seeks to quiet title to the property, does not prescribe. 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, the reason for the rule
being, 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 efect on his own title, which right can be claimed
only by one who is in possession.34 In Ciriacos case, as it
has been judicially established that he is in actual possession
of the property he claims as his and that he has a better right
to the disputed portion, his suit for reconveyance is in efect
an action for quieting of title. Hence, petitioners defense of
prescription against Ciriaco does.