ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 1
AGENCY
SECTION ONE. NATURE AND OBJECT OF AGENCY
1|Rallos v. Felix Go Chan & Sons Realty Corp.| G.R. No. L-24332……........ 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. L-30573..................................................... 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
SECTION TWO. FORMS AND KINDS OF AGENCY
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
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 L-25593............................................. 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. L-9188....................... 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 THREE. POWERS AND OBLIGATIONS OF THE AGENT.
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
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. L-32977.................40
3.11 | Chemphil Export vs. CA | GR Nos. 112438-39...................................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 L-22897.................41
3.15 | DBP vs. CA | GR No. L-109937......................................................42
3.16 | Eugenio vs. CA | GR No. 103737....................................................43
3.17 | Toyota Shaw vs. CA | L-116650.............................................................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. L-49395......................................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
4.3| 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
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4.6 | Manila Remnant Co., Inc. vs. CA | GR No. 82978............................. 43

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

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
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 & 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 plaintiff 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 Concepcion’s share.
MR:denied
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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) Simon’s authority as agent was extinguished
upon Concolacion’s 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 Concepcion’s 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 principal’s 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
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 affirmed RTC’s decision
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ISSUE: Whether or not Luz are liable to petitioners for the latter’s 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.
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 effects
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 effect, 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 offering 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
ISSUE: 1. Whether or not Orient Air is entitled to commissions.
2. Whether CA is correct in ordering reinstatement of Orient Air as
an agent.
RULING:
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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 effect 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 effected 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, with
application for preliminary attachment against herein respondents
By way of special and affirmative 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 effect 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
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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. L-30573 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 of the 5% commission.Thereafter,
Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower
than the price of P2.00 per square meter. Vicente directed Gregorio to tell Oscar
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 7

de Leon to raise his offer. After several conferences between Gregorio and on the sale price of P109, 000.00.Vicente stated that Gregorio is not entitled to
Oscar de Leon, the latter raised his offer to P109, 000.00 on June 20 and Vicente the 5% commission because he sold the property not to Gregorio's buyer, Oscar
agreed. de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon

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 offer 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 P 1,000 given to Gregorio as propina or gift.
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 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.

When Oscar did not see him after several weeks, Gregorio sensed 6. Manotok Bros., Inc. vs CA | GR no. 94753 (221 SCRA 224) | 7 April
something fishy. So, he went to Vicente and read a portion to the effect that 1993
Vicente was still committed to pay him 5% commission. Vicente grabbed the
original of the document and tore it to pieces. FACTS:

From his meeting with Vicente, Gregorio proceeded to the office of the Manotok Brothers, Inc. is the owner of a certain parcel of land and
Register of Deeds of Quezon City, where he discovered a deed of sale executed building. The land was leased by the City of Manila and used by the Claro M.
on September 17, 1956 by Amparo Diaz. 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
Upon thus learning that Vicente sold his property to the same buyer, aforementioned property in the amount of P425,000.00. In the same writing,
Oscar de Leon and his wife, he demanded in writing payment of his commission 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% agent’s
commission?
Holding and Ratio Decidendi
The Court ruled that when there is a close, proximate and causal
connection between the agent's efforts 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 efforts 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 Araneta Inc., through its Assistant
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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, counter-proposed 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 Architect’s
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%
Broker’s 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 realty’s contract of agency and autjprity to
sell already expired.
Issue: Whether or not the Inland realty was entiled to the broker’s
commission upon the expiration of the contract of agency and authority to
sell?
Holding and ratio Decidendi
Inland Realty was not entitled to the Broker’s Commission since the
petitioner was not efficient 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, Inc’s 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 effective for one month from June 29, 1992.
Tan accompanied Sisters Michaela Kim and Azucena Gaviola,
representing the Sisters of Mary, to see Eduardo Gullas in his office 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 efficient 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 9
buying the property through Pacana, who had been paid his commission. Private
respondent Eduardo Gullas admitted that petitioners were in his office 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 efforts.
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.
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 officer of the Ibaan Rural Bank and the person to talk to
regarding the property. While the letter-authority issued in favor of the
respondents was non-exclusive, 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 respondent’s participation in finding a buyer for
the petitioner’s property, the petitioners refuse to pay them commission,
asserting that they are not the efficient 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 10
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 efforts 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 efforts are the foundation on which the
negotiations resulting in a sale are begun. The broker must be the efficient agent
or the procuring cause of the sale. The means employed by him and his efforts
must result in the sale. He must find the purchaser, and the sale must proceed
from his efforts 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 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 offered the
land to Eduardo B. Litonjua, Jr. for P27,000,000.00. Litonjua counter offered
P20,000,000.00 cash. Marquez apprisedGlanville & Delsaux of the offer. Delsaux
sent a telex stating that, based on the "Belgian/Swiss decision," the final offer
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 Office 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 offer 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 11
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
11. │ Rallos vs Yangco │ G.R. No. 6906 (20 Phil 269) │ September 27,
1911 │ Justice Moreland
FACTS:
Defendant Yangco sent a letter to Plaintiff Rallos on November 27, 1907
offering 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 plaintiffs 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 plaintiffs 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 plaintiffs. 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 plaintiffs; and it is
conceded in the case that no notice of any kind was given by the defendant to

the plaintiffs of the termination of the relations between the defendant and his
agent. The defendant refused to pay the said sum upon demand of the plaintiffs,
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 plaintiffs. 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.,
FACTS:
Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico
who worked as brokers, offered to sell to the petitioners, Antonio K. Litonjua
and Aurelio K. Litonjua, Jr., the parcels of land covered by TCT Nos. 36754 and
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 12
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 offer 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 office 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:
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 insufficient 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 13
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 offered the
property to spouses Aggabao, who initially did not show interest due to the
rundown condition of the improvements. But Atanacio’s 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 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

owner’s 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 counteroffer, 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 Plaintiff 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 affirmed 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,
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 14
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.
14. │Dominion Insurance Corp. vs CA│G.R. No. 129919 (376 SCRA
239) │February 6, 2002│ Justice Pardo
FACTS:
On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case
No. 8855 for sum of money against defendant Dominion Insurance Corporation.
Plaintiff 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
plaintiff and asserted a counterclaim for P249, 672.53, representing premiums
that plaintiff 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 Office, 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 effectual 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 Guevarra’s 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 Office.2. Full
authority is given you on TPPI claims settlement.Respondent Guevarra’s
authority is further limited by the written standard authority to pay, which states
that the payment shall come from respondent Guevarra’s revolving fund or
collection.
ISSUE:Whether or not respondent Guevarra acted within his authority as
agent for petitioner in accordance with the Special Power of Attorney?
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 15
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 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 16
relied on the general power of attorney of Irma Veloso which was sufficient in
form and substance and was duly notarized. She contended that plaintiff (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 plaintiff. She should have been impleaded in the case. In fact, Plaintiffs 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.

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 effectivity
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 respondent-appellant 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 complainants-appellees.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 17
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 complainants-appellees. 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 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 suffice 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 affairs.
17. DOMINION INSURANCE CORPORATION VS. CA G. R. NO.
129919, FEBRUARY 6, 2002
FACTS:
On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case
No. 8855 for sum of money against defendant Dominion Insurance Corporation.
Plaintiff 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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 18
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.
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 affirming 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
principal‘s 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 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.
18. HOME INSURANCE CO. VS. USL, GR L-25593,
NOVEMBER 1967
FACTS:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 19
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 plaintiff appeared,
who upon being asked for written authority to compromise, assured the court
that though he had no written authority, he had such authority verbally given by
the plaintiff. On the same day, the court dismissed the case for failure of the
plaintiff to appear at the pre-trial conference.
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?
RULING:
YES. The lower court was correct in dismissing the case. True, said
15 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 plaintiff in pre-trial is sanctioned by
the Rules. The dismissal should therefore be sustained in toto, with respect to all
the defendants.
19. ESTATE OF LIANO OLAGUER VS. ONGJOCO, GR NO. 173312
26 AUGUST 2008
FACTS:
The plaintiffs 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 20
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.
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, plaintiff 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 plaintiffs 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 plaintiffs 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 sufficient The Supreme Court
held that while the law requires a special power of attorney, the general power of
attorney was sufficient in this case, as Jose A. Olaguer was expressly empowered
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 21
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
sufficient 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, 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, offered 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 offer 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 office 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 respondents-owners binding on the latter as owners of
the subject properties?
RULING:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 22
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 insufficient 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 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.
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 offered 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.
Spouses Bautista claimed that in March 1996, a certain Teresita Nasino
(Nasino) offered 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 23
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.
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 Nasino’s authority puts them into bad
light.
Spouses Bautista’s claim of good faith is negated by their failure to verify
the extent and nature of Nasino’s 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, Eliseo’s 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 Bautista’s failure to observe the required degree of
caution in ascertaining the genuineness and extent of Nasino’s 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 24
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 Orense‘s 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.
ISSUE: Whether or not Orense is bound by Duran‘s act of selling the
former‘s 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 vs. CA and PEREZ,
G.R. No. 114311 November 29, 1996
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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 25
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 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 afforded him. WHEREFORE, the petition is
GRANTED.
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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 26
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 effectively 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 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 effect, 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”
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 27
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 ro
o f i n g m a t e r i a l s a n d p i p e p r o 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 offered for sale
to prospective buyers.
Marquez offered the parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua
&Company, Inc. Marquez declared that he 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 offer. Marquez showed the
property to Eduardo Litonjua, Jr.,
and his brother Antonio K. Litonjua.
The Litonjua siblings offered to buy the property
f o r P20,000,000.00 in cash.
Marquez apprised Glanville of the Litonjua siblings’ offer 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 offer of
the Litonjua siblings. Delsaux sent a telex to Glanville stating that,
based on the “Belgian/Swiss decision,” the final offer was
“US$1,000,000.00 andP2,500,000.00 to cover all existing obligations prior
to final liquidation.
Litonjua, Jr. accep ted the co unterproposal of Del saux.
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 confirmed that the Litonjua
siblings had accepted the counter-proposal 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 28
When apprised of this development, the Litonjuas, through counsel,
wrote Eternit Corp., demanding payment for damages they had suffered 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 affected 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 officers or agents in the normal course of business. The
general principles of agency govern the relation between the corporation
and its officers 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 offering of the properties of the corporation
for sale, or the acceptance of a counter-offer 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 officers 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 affairs 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 officers and agents as authorized by a board
resolution or by its by-laws.30 An unauthorized act of an officer of the
corporation is not binding on it unless the latter ratifies 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 authority.
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 specific 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 offer 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 Litonjua’s 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 agent’s
authority or knowingly allowed the agent to assume such authority;
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 29
(2) the third person, in good faith, relied upon such representation;
(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 Baños, 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 Baños 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 extra-judicial 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 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 Training’s 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 30
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 Johnson’s name.
The CA upheld the RTC’s 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 CORPORATION, vs. COURT OF
APPEALS and F.P. HOLDINGS & 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 offered 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,
broker’s 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-Lite’s 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-Lite’s
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 31
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 TC’s 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:
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 Drug’s 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 32
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 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 suffer. 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 suffers
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 effect 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 suffered 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:
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 33
two pieces of luggage containing his clothing and personal effects, 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 PAL’s
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 attorney’s fees and cost of the
action. This decision was affirmed by CA.
ISSUE:WON British Airways is liable for the negligence of it agent, PAL?
RULING:
Yes. The SC ruled in the affirmative.
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 suffer 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 BA’s 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.
31. CERVANTES VS CA, GR No. 125138 (304 SCRA 25), 02 MARCH
1999
FACTS:
Cervantes bought a round trip ticket for Manila-Honolulu-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 PAL’s office 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 PAL’s 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 PAL’s 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 34
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 office 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.
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 office 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 attorney’s 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% attorney’s 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 affixed 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% attorney’s 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 attorney’s 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 35
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?
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 affixed 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, petitioner’s failure to question the
inclusion of the 2% monthly interest and 25% attorney’s 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 Gozun’s 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 petitioner’s (Gozun) claim, respondent’s 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 respondent’s 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, respondent’s 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 was
acknowledged on petitioner’s 1995 diary receipt of the amount said Lilian’s 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 36
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
Gozun‘s 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.
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 sufficient 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 owner‘s 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 Letecia‘s agent.
In its decision, the RTC ruled in favour of Letecia, and the same was affirmed by
the CA.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 37
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 respondent‘s 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 respondent‘s agent, to render an accounting of
her administration.
Both the RTC and the CA found these letters insufficient. We agree. Petitioner
was the administrator of respondent‘s properties for 18 years or from 1979 to
1997, and four letters within 18 years can hardly be considered as sufficient to
keep the principal informed and updated of the condition and status of the
latter‘s properties.
36. Hernandez vs. Hernandez | GR 158576 645 SCRA 24 | 9 March
2011
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 38
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
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
officer and a defendant at the same time. Indeed, Cecilio foisted fraud on both
the Court and the Hernandez’s 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
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 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 plaintiff 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
owner’s 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
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:
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 39
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 plaintiff 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 Lumber’s
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 Ᵽ102, 169.86 and Ᵽ450, 000 respectively to Rubio and the heirs of
Baloloy as partial payment for these lots with the understanding that 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 hold-departure 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 Rufina’s 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, Rubio’s daughter, who had this authority.
The Baloloy’s and Rubio failed to appear at the pre-trial 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 40
ISSUE: Whether or not Rubio is bound by the contract of sale considering
that he did not authorize Virginia to transact on his behalf?
RULING:
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 so, but he shall be responsible for the acts of the
substitute when he has not given the power to appoint one”Applying 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:
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.
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 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 affirmed 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 sale between petitioners and respondent
is valid?
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 41
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 effects
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 effected" 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 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 COUNCIL OF ILOILO VS EVANGELISTA
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 Ᵽ42, 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 Tze’s 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 Ᵽ42,966.40 was reduced to Ᵽ30,966.40.
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 Tze’s interest and as such was impliedly empowered to pay the
lawyer’s fees for services rendered in the interest of the principal.
Likewise with regard to the failure of the other attorney-in-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 different letters
of attorney were given to each of these representatives show that it was not the
principal’s intention that they should act jointly in order to make their acts valid.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 42
43. CHEMPIL EXPORT VS CA
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 Garcia’s 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 Ᵽ145M 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 Ᵽ79M. It was agreed upon that the purchase price shall
be paid directly to Security Bank. But SBTC refused the payment as it was not
sufficient, 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 sheriff'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 Garcia’s
money, no longer with its own because said amount was part 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 43
44. UY vs. COURT OF APPEALS, G.R. No. 120465, 314 SCRA 69, 09
September 1999
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
offered 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 offered 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 plaintiffs in the sum of P1.255 million, the same
amount initially offered 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 real
parties-in-interest, either as plaintiff 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.
Wijanco-Angeles, 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 44
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
attorney’s 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 latter’s rights with respect to the
award. Upon appeal, the CA affirmed the trial court’s 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 party’s (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 a contract may be violated only by
the parties thereto as against each other, the real party-in-interest, either as
plaintiff 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, plaintiff 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 seller’s obligation. In
entering into another contract, NAMERCO, however, did not disclose to NPC
that NAMERCO’s principal, in a cables instruction, stated that the sale was
subject to availability of steamer, and contrary to its principal’s instruction,
NAMERCO agreed that non-availability of a steamer was not a justification for
non-payment 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 supplier’s 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 45
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:
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 plaintiff 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. No. 105562, 226 SCRA 754, 27
September 1993
FACTS:
Prime Marine Services, Inc. (PMSI) obtained a group insurance policy for
its sailors. During the effectivity 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 was denied on the ground that the liability to petitioners
was already extinguished upon delivery to and receipt by PMSI.
ISSUE: Whether or not Insular Life acted with negligence?
RULING:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 46
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 officers 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 offered 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
offered and ex gratia for settlement worth Php 30, 000. Mrs. Dans refused to
take the offer. 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 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 perpetrated—Articles 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 fees’s (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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 47
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 affirmed
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 TPR's. Azurin testified to this in
Court (However, Estrada never did. He failed to appear and was never found.

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.
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 official 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 collections made, are turned over by the sales representative to the
appropriate company officer.
53. TOYOTA SHAW, INC., vs.COURT OF APPEALS and LUNA L.
SOSA, G.R. No. L-116650 May 23, 1995
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 48
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 Toyota’s vehicles.
A person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent.
54. BACALTOS COALMINES Vs.THE HONORABLE COURT OF
APPEALS, G.R. No. 114091, JUNE 29, 1995
FACTS:
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.
On 19 October 1988 a Trip Charter Party was executed "by and between
BACALTOS COAL MINES, represented by its Chief Operating Officer, 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 within seven days after the execution of the contract, it "lets, demises"
the vessel to charterer SMC "for three round trips to Davao."
Petitioners alleged that Savellon was not their Chief Operating Officer
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.
ISSUE: Whether or not Savellon was duly authorized by the petitioners to
enter into the Trip Charter Party?
RULING:
NO., The broadest scope of Savellon’s 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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 49
Plaintiff 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, plaintiffs bought plane tickets
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 plaintiffs 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 plaintiffs, their son, Adrian Yu, called
the Pan Am office to verify the status of the flight. According to said Adrian Yu,
personnel of defendant Pan Am told him over the phone that plaintiffs'
booking[s] are confirmed.
Upon their arrival in Tokyo, they called up Pan-Am office for
reconfirmation of their flight to San Francisco. Said office, however, informed
them that their names are not in the manifest. Since plaintiffs 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 officials. This is the only option left to them because
Northwest Airlines was then on strike, hence, there was no chance for the
plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffs
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 affidavit 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.
In the case at bar, petitioners rely on the affidavit 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 affidavit 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
insufficient 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
affirmative 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 50
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 affidavit 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,
offered 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 offer 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,
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, however rejected the claims of the petitioner.
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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 51
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 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.
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 insufficient 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 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
FACTS:
Florencia Baluyot offered 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.
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 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?
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 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 Offer to Purchase signed by
Atty. Linsangan and MMPCI's authorized officer. 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 52
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 effect.
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 non-exclusive 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 affirmed 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 ff 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 former‘s 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, Bucton‘s
house and lot were foreclosed.
Aggrieved, Bucton filed with RTC a case for annulment of mortgage,
foreclosure and SPA against Concepcion, the bank and the sheriff 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 53
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 N.A. (G.R. No. 156335 November 28,
2007)
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 Citibank’s
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:
• Whether the investment contract creates a trusteeship or agency.
• Whether the respondent is under the obligation to return the
investment money of the petitioners.
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.
61. MANILA MEMORIAL PARK CEMETERY, INC., vs.
LINSANGAN (G.R. No. 151319 November 22, 2004)
FACTS:
Florencia Baluyot offered 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 54
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. 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
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
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 Offer to Purchase signed by Atty. Linsangan and MMPCI's

authorized officer. 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 effect.
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 office 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 office, 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 55
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 effect reversed by the CA. CA ordered petitioner to pay
Valiant with the sum plus interest, AF and costs.
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 well-established 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, Valiant’s
manager, as his (petitioner’s) 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 petitioner’s 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 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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 56
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 Kee’s
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 Kee’s 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 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 effect. 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 Pleasantville’s liability, as principal of CTTEI, per
Articles 1909 and 1910 of the Civil Code.
Pleasantville’s liability lies in the negligence of its agent CTTEI. For such
negligence, Pleasantville’s 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.,
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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 57
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 EscoltaOffice
was holding a promotional investment program for policyholders. It was offering
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 office 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.
Relying on the representations made by Filipinas Life’s 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
vs.
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 Pedroso’s subsequent investments, Valle would
take back from Pedroso thecorresponding agent’s receipt he issued to the latter.
Pedroso toldrespondent Jennifer Palacio, also
a Filipinas Life insurance policyholder, about theinvestment plan. 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 agent’s 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 agent exceeds his autho
rity, 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 Valle’s representations were beyond his authority as a
debit/insurance agent, Filipinas Lifethru Alcantara and Apetrior expressly and
knowingly ratified Valle’s 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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 58
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
effective 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 offered 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 offer 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 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 affirmed 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 59
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 sufficient 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 affairs 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 APPEALS, G.R. No.
94753, April 7, 1993.,Campos Jr., J.

See Section 1 case
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
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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
effective 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 Hahn’s 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 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. Hahn’s 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 officials 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 DIC’s 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.
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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.
Finding the motion meritorious and considering that the pre-trial 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 DIC’s clients;
On December 14, 1992, DIC appealed the decision to the Court of Appeals.
On July 19, 1996, the Court of Appeals promulgated a decision affirming that of
the trial court.
ISSUE:
(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
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 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.
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.
But Guevarra’s authority to settle claims is embodied in the
Memorandum of Management Agreement dated February 18, 1987 which
enumerates the scope of Guevarra’s 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 Office.
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“2. Full authority is given you on TPPI claims settlement.
“xxx xxx xxx”
In settling the claims mentioned above, respondent Guevarra’s authority
is further limited by the written standard authority to pay, which states that the
payment shall come from Guevarra’s 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 principal’s
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, DIC’s 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.
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 affairs remained until July 9, 1920, when the Visayan
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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
plaintiff'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 affairs 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 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 efforts 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 officials of said company, with
the result that a bounty amounting to P15,610.41 was paid to the plaintiff 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
Co’s 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 plaintiff 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 plaintiff'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
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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 Albaladejo’s
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.
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 effect
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 effected.
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 affirmed 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 Artigo’s 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 exclusively based on a contract
of agency between Artigo and Constante.
ISSUE: Whether or not co-principals are solidary liable in a contract of
agency?
HOLDING and RATIO:
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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 Artigo’s 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 affected by the
court’s 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.
However, the rule on mandatory joinder of indispensable parties is not
applicable to the instant case.
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.
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
Constante’s 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 co-owners 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, may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear by the mere partition effected 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
effects 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
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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 offered 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-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 plaintiff
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 plaintiffs 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"
There is no proof in the record that the first agent, the son, 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 plaintiff's son, which half interest was legally inherited by the plaintiffs.
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 plaintiff.
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 plaintiff.
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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 one-half interest in the boat which was then
owned by Narciso L. Manzano.
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 officer 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, affirmed 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
that Sison is entitled to recover from Dracor the amount collected by Shinko as
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 68
commissions, plaintiff-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 it’s 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.
75. CMS LOGGING VS. COURT OF APPEALS|G.R. No. L-41420,
July 10, 1992|NOCON, J.
See Case Number 74
76. DY BUNCIO & COMPANY INC. vs ONG GUAN CAN ET. AL./
G.R. NO. L-40681 / 2 October 1934 / Justice Hull
FACTS:
This is a suit over a rice mill and camarin situated at Dao, Province of
Capiz. Plaintiff 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.
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 69
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.
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 office 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.
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.)
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.
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 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
principal’s property is deemed revoked by a subsequent general power of
attorney that does not give such power to the son, and any sale effected
thereafter by the son in the name of the father would be void.
77. REPUBLIC vs. EVANGELISTA / G.R. NO. 156015 / 11 August
2005 / Justice Puno
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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 70
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 affirmed the decision of the trial court.
Issue:
WoN the contract of agency between Legaspi and Guiterrez has been
effectively 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 affected. 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 agency shall now
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 71
follow the condition of the bilateral agreement. Consequently, the Deed of
Revocation executed by Legaspi has no effect. The authority of Gutierrez to file
and continue with the prosecution of the case at bar is unaffected.
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
office. 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 office 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 efforts 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 office was anyhow
losing, the Tourist World Service considered closing down its office. 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 office 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 office. It further
appears that on Jan. 3, 1962, the contract with the appellees for the use of the
Branch Office premises was terminated and while the effectivity 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
office, 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 appellee TWS with offices at the
Ermita branch office 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 affirmance.
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:
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 72
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 office, 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 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 officers, 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,
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 73
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 plaintiff Arturo P.
Valenzuela as one of defendant PHILAMGEN's General Agent by making it
appear that plaintiff 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 plaintiff Arturo P. Valenzuela as one of their
General Agents.
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
effected 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 plaintiff as General Agent of defendant Philamgen was his
refusal to share his Delta commission.
ISSUE:

WoN Philamgen and/or its officers 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 affirm 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 difficult and
frustrating period is the solicitation and persuasion of the prospective clients to
buy insurance policies. Normally, agents would encounter much embarrassment,
difficulties, and oftentimes frustrations in the solicitation and procurement of the
insurance policies. To sell policies, an agent exerts great effort, 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,
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 74
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 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 Ynares-Santiago|
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 effective 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 75
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 Office of the President which affirmed the decision
of the Secretary of Justice.
Thereafter, petitioners filed a petition for review with the Court of
Appeals, alleging, inter alia, that the Office 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.
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 offsetting the subject remittances to alleged
accounts of NASUTRA with PNB and PHILEX is legal and valid.
81. |Ching vs. Bantolo |G.R. No. 177086| December 5, 2012| Justice
Del Castillo|
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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 effective 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 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
month’s 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.”
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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:
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 co-partnership 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 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. L-6906| September 27, 1911| Justice
Moreland|
FACTS:
Defendant Yangco sent a letter to Plaintiff Rallos on November 27, 1907
offering 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.
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Accepting this invitation, the plaintiffs 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 plaintiffs 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 plaintiffs. 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 plaintiffs; and it is
conceded in the case that no notice of any kind was given by the defendant to
the plaintiffs of the termination of the relations between the defendant and his
agent. The defendant refused to pay the said sum upon demand of the plaintiffs,
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 plaintiffs. 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.
Where principal had expressly revoked the agent’s 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 effective 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. 111924| January 27, 1997| Justice
Francisco|
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
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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 court’s decision. Hence, this petition.
ISSUE:Whether or not the revocation of agent’s general powers effective
against the mortgagee bank?
HOLDING and RATIO:
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 effect 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
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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.
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 plaintiffs.
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 latter’s 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 PNB’s foreclosure, however, as it did
not sufficient 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:
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,
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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
plaintiffs. 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
plaintiffs to vacate and turn all the fisheries to defendants. Said motion was
granted by Judge Carandang-Villalon on the ground that the plaintiffs 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.
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 difference 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
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87. MORALES V. COURT OF APPEALS, G.R. No. 117228, June 19,
1997
FACTS:
Celso Avelino, plaintiffs’ 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 plaintiffs, who are the purchasers of the other properties
of Celso Avelino, were also offered 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. Plaintiffs 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, plaintiffs 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
thereon, vacate the premises and pay for damages and other fees.
Both the trial court and appellate courts ruled in favour of plaintiffs.
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 affirmed 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 84
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 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 court’s

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 held that petitioner’s allegations as to the
existence of an express trust agreement with respondent spouses Ramos,
supported by her own testimonies and her son, do not hold 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 sufficient 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 offered to prove the alleged
verbal trust agreement between and petitioner. Consequently, the testimonies
were admissible in evidence. Nevertheless, while admissibility of evidence is an
affair 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.
SECTION SEVEN
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89. VICTORIA JULIO V. EMILIANO DALANDAN and MARIA
DALANDAN, G.R. No. L-19012, October 30, 1967
FACTS:
On September 8, 1950, Clemente Dalandan, deceased father of
defendants Emiliano and Maria duly subscribed and sworn an affidavit 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 affidavit 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.
After the death of Clemente, plaintiff Victoria requested from
defendants, Clemente’s 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 plaintiff’s
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 plaintiff’s
complaint.
Hence, this appeal.
ISSUE: Whether or not the statement (salaysay) entered into between
Clemente and Victoriana constitute a trust?
RULING:
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 sufficient 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 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 effective as against defendants and in favor of the
beneficiary thereof, plaintiff 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 86
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 effect 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 different barangays within the same city or
municipality. Lupon shall have no authority over disputes “involving parties who
actually reside in barangays of different 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 different barangays within the same city or
municipality, or in different barangays of different 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 father’s 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 Canezo did
not protest meaning she abandoned herright assuming Canezo’scontentions 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 trust–
trustee cannot acquire by prescription a property entrusted to him unless he
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 87
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.Canezo’s only evidence was her self-serving testimony of the
petitioner. Express trust may not be established by parol evidence. One
exception–when there was a clear intention of such. However, it cannot be inferred from
Canezo’s 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
In plaintiffs’ (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 plaintiffs 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 was a trust contract between RISCO and
Aznar?
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 plaintiffs-
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 plaintiffs-appellees 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
plaintiffs. We are not persuaded by the contention of Aznar, et al., that the
language of the subject Minutes created an express trust.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 88
93. HEIRS OF TRANQUILINO LABISTE v HEIRS OF JOSE LABISTE
587 SCRA 417 (May 8, 2009)
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 Affidavit in Spanish dated on 1923
affirming 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, Lino’s heirs fled the city. Whenthey came
back after the war, they found their homes and possessions and therecords in the
government offices burned and destroyed with squatters occupying their entire
property.Lino’s 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, re-conveyance of property with damages.
Jose’s heirs however said that the action of Lino’s heirs had long prescribed or barred
by laches.
ISSUE:
a) Whether or not Lino’s 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 sufficient that a trust is clearly intended
(Article 144, Civil Code). An implied trust comes into being by operation of law.
The Affidavit of Emilio which is genuine and authentic beyond cavil is in the nature of an
express trust. In said affidavit, 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.
Jose’s 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 Jose’s heirs filed the petition
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 89
for reconstitution in October 1993. And since Lino’s 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:
Plaintiff 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
plaintiff 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 offered 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 plaintiff 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.
. property was already in the name of Crispulo Rojas.
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 father’s
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
Affidavit 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 90
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
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.
Issue:Whether or not there exist a trust relationship between the petitioner
and Father, Express or implied?
Holding and Ratio Decidendi
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 relationship. And petitioner sadly failed to discharge that burden.
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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 91
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 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 Affidavit 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 Officio Sheriff and his Deputy, and Register of Deeds of Pangasinan.
The Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but
their effort were unsuccessful. Upon the expiration of one-year redemption
period. The Certificate of Final Sale and Affidavit of Consolidation covering all
three foreclosed properties were executed. New certificates of title were issued in
name of Banco Filipino.
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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 affirmed 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 different 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, 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.
Rosario’s 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 93
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 sufficient 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 effect 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.
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. Rosario’s name under TCT No. 52751
and Dr. Rosario kept possession of said property, together with the
improvements.
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.
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. 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
trustee’s possession is, therefore, not adverse to the beneficiary, until and unless
the latter is made aware that the trust has been repudiated.
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97. Heirs of Tranquilino Labiste vs. Heirs of Jose Labiste / G.R. No.
162033, 587 SCRA 417 / May 08, 2009 / Justice Quisumbing
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 affirming that he, as one
of the heris of Jose, and his uncle Tranquilino Labiste (petitioner), then co-
owned 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 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 Office of Register of Deeds, Office of the City Assessor and
other government offices 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 Affidavit 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 affirming petitioners right to the
property, nevertheless reversed the RTCs decision on the ground of prescription
and laches. Affirmed the RTCs findings that the Affidavit and the Calig-onan 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 95
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 either expressly or impliedly evincing
an intention to create a trust. The Affidavit of Epifanio is in the nature of trust
agreement. Epifanio affirmed 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.
½ 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 judge’s 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. Plaintiffs 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 martin’s 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.
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ISSUE: Whether or not the plaintiffs’ action was barred by prescription, laches
and res judicata to the effect that they were denied of their right to share in their
father’s estate.
HELD: YES, there was inexcusable delay thereby making the plaintiffs’ 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
plaintiffs’ 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
plaintiffs 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 father’s 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
Affidavit [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, 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 97
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.
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.
½ 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 judge’s 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. Plaintiffs 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 martin’s 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 plaintiffs’ action was barred by prescription, laches
and res judicata to the effect that they were denied of their right to share in their
father’s estate.
RULING: YES, there was inexcusable delay thereby making the plaintiffs’
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
plaintiffs’ 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
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plaintiffs 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. L-11229
March 29, 1958
DOCTRINE: 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… although the concealment must be adequately
pleaded by the plaintiff 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 sheriff executed a final deed of sale in favor of Gorricho;
however, the sheriff wrongfully conveyed to Gorricho the whole of the two lots,
instead of only the half-interest of Sevilla therein. In 1951, Sevilla died. A year
later, Sevilla’s children, plaintiffs 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 sheriff to Gorricho. The siblings
Diaz contend that Gorricho acquired their father’s half of the disputed property
through an error of the provincial sheriff, 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 plaintiffs' 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 sheriff in conveying to her the whole of
the lots and obtained title in herself, the action of plaintiffs was, however, barred
by laches and prescription. So, the plaintiffs 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 sheriff, 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 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 99
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 plaintiff in a
suit to declare a trust, where the delay is apparent on the face of his pleading.
The reason for the difference 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 sheriff's deed and cancel
the transfer certificates of title issued to spouses Gorricho and Aguado accrued
since its issuance and recording in 1937, and plaintiffs 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 sufficient 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 plaintiffs sought for remedy, then their
action for reconveyance was barred by prescription. The judgment appealed
from is affirmed.
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 father’s 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
Affidavit [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, 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 100
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.
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.
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 Alexander’s
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 temporary restraining order. Plaintiff
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
Alexander’s brothers and sisters in case plaintiff dies. Plaintiff 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 plaintiff 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 purchaser’s child. They agreed that plaintiff partly paid
for the EDSA property. Plaintiff appealed.
ISSUE:
Whether or not there was an implied trust under Art. 1448 of the Civil Code?
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 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 plaintiff failed to prove that he did not intend a donation.
Regarding the Meridien Condo and Wack Wack property, the court said that
plaintiff 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
plaintiff had paid for said properties.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 101
103. G.R. No. 202247 June 19, 2013SIME DARBY PILIPINAS,
INC., Petitioner, vs. JESUS B. MENDOZA, Respondent.
FACTS:
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 By-Laws6 of ACC state that only natural persons may own a club share.7 As
part of the arrangement, Mendoza endorsed the 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 Mendoza’s 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 club’s 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 ORDOÑO, 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 offered 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 to acquire the lot. The latter then
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 102
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 Julian’s children regarding the ownership of the
lot, Julian executed an affidavit clarifying the nature of Felipe and his wife’s
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 wife’s 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 Felipe’s
other siblings to give their conformity as co-owners to such sale.
Second, Julian said in his affidavit 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 company’s deadline for the purchase.
Notably, Felipe, acting through his wife, countersigned Julian’s affidavit 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 Julian’s
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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 103
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 plaintiff
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
plaintiff despite repeated demands. Plaintiff brought an action in the CFI for a
complaint for reconveyance of real
property. Thelower court however dismissed the case on theground that an expre
ss 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:
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 104

Where the grantee takes the property under from PNB by executing a mortgage on the land, while Homero Adaza, brother
an agreement to convey to another on certain conditions, a trust results for the of Violeta remainedad ministrator of the same.
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 In 1971, Horacio invited his brothers and sisters for a family gathering
takes conveyance thereof in the name of another. In such a case, the property is where he asked Violeta to sign a Deed of Waiver with respect to the property
held on a resulting trust in favor of the one furnishing the consideration for the inSinonok. The Deed stated that the land was owned in common by Violeta and
transfer. This kind of trust is from equity and arises by implication or operation Horacio even though the OCT was in her name only. The Deed also providedfor
of law. In the present case, it is apparent that Emilio furnished the consideration the waiver, transfer and conveyance of Violeta to Horacio of ½ of the property
intending to obtain a beneficial interest in the property in question. Having and its improvements.Violeta and Horacio signed the Deed with Homero as a
supplied the money, it is presumed that he intended to purchase the witness. A few months later, Violeta and husband Lino filed a complaint for
lot for his own benefit. Moreover, by entering into an agreement with Emilio annulment of the Deed of waiver and for damages against Horacio and wife
that “the necessary documents of transfer will be made later,” 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
Lucas acknowledged the he merely held was registered owner; (3) she signed the Deed of waiver because of fraud,
the property in trust for his brother with the understanding that it will eventually misrepresentation and undue influence; and (4) because of such malicious acts,
be conveyed tothe plaintiff’s predecessor in interest. Lastly, by acknowledging she is entitled to damages from Horacio.
the presence of trust, the plaintiff’s action cannot be said to have been barred by
lapse of time. The case is therefore remanded for further proceedings. Trial Court

Declared Deed of Waiver as valid and binding upon Violeta, that

Horacio was co-owner of ½ of the land, and ordering Violeta to pay Horacion
106. G.R. No. 47354 March 21, 1989 HORACIO G. ADAZA and the proceeds of his share.
FELICIDAD MARUNDAN, petitioners, vs.THE HONORABLE
COURT OF APPEALS and VIOLETA G. ADAZA, assisted by her CA
husband LINO AMOR, respondents.
Reversed Trial court decision, declaring that though the deed was signed
FACTS: voluntarily, such Deed was without consideration or cause because the land had
been unconditionally donated to Violeta alone.
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 ISSUE:
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 Who owns the disputed parcel of land?
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 RULING:

Petitioners owned the parcel of land.
Deed of donation had a crossed-out provision: That the donee shall share ½
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 Horacio—implied 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 105
115. VDA. DE OUANO vs. REPUBLIC, G.R. NO. 168770, 9 FEBRUARY
2011
FACTS:
In 1949, the National Airport Corporation (NAC), MCIAA’s 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 plaintiff.
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 attorney’s 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
affirmed 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
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 106

tenable. Expropriated lands should be differentiated from a piece of land, new purpose. If not, then it behooves the condemnor to return the said property
ownership of which was absolutely transferred by way of an unconditional to its private owner, if the latter so desires.
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 Hence, equity and justice demand the reconveyance by MCIAA of the litigated
really comes into play. There is really no occasion to apply the “fee simple lands in question to the Ouanos and Inocians. In the same token, justice and fair
concept” if the transfer is conditional. play also dictate that the Ouanos and Inocian return to MCIAA what they
received as just compensation for the expropriation of their respective properties
The taking of a private land in expropriation proceedings is always conditioned plus legal interest to be computed from default, which in this case should run
on its continued devotion to its public purpose. Once the purpose is terminated from the time MCIAA complies with the reconveyance obligation.
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 necessity—
the very reason or condition as it were—allowing, at the first instance, the
expropriation of a private land ceases or disappears, then there is no more cogent
point for the government’s retention of the expropriated land. The same legal
situation should hold if the government devotes the property to another public
use very much different 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 citizen’s own private gain,
is offensive 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

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.
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 Juliana’s 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 offer a project of partition. Then, Jose listed those properties
which he alleged were registered in both his and Juliana’s 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 one-
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 107
half (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 Juliana’s 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 Jose’s 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.
Petitioner’s father, Enrique Lopez, also assumed the trusteeship of Juliana’s
estate. On 30 August 1984, the RTC of Batangas, Branch 9 appointed petitioner
as trustee of Juliana’s 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 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

Jose’s 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.
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 108
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
only child. Valentin Salao. After Valentina’s 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. ½ 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 Victorina’s 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 Ambrosia’s one-half share.
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 109

Benita Salao and her nephews and niece asked for the annulment of the donation convincing as if the act giving rise to the trust obligation were proven by an
to Juan S. Salao, Jr. and for the reconveyance to them of the Calunuran fishpond authentic document. Such a trust cannot be established upon testimony
as Valentin Salao’s supposed one-third share in the 145 hectares of fishpond consisting in large part of insecure surmises based on ancient hearsay. (Syllabus,
registered in the names of Juan Y. Salao, Sr. and Ambrosia Salao. Santa Juana vs. Del Rosario 50 Phil. 110).
Issue: Whether or not the Calunuran fishpond was held in trust for Valentin The foregoing rulings are good under article 1457 of the Civil Code which, as
Salao by Juan Y. Salao, Sr. and Ambrosia Salao. 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
Held: easily fabricated.
There was no resulting trust in this case because there never was any intention on On the other hand, a Torrens title is generally a conclusive of the ownership of
the part of Juan Y. Salao, Sr., Ambrosia Salao and Valentin Salao to create any the land referred to therein (Sec. 47, Act 496). A strong presumption exists. that
trust. There was no constructive trust because the registration of the two Torrens titles were regularly issued and that they are valid. In order to maintain
fishponds in the names of Juan and Ambrosia was not vitiated by fraud or an action for reconveyance, proof as to the fiduciary relation of the parties must
mistake. This is not a case where to satisfy the demands of justice it is necessary be clear and convincing.
to consider the Calunuran fishpond ” being held in trust by the heirs of Juan Y.
Salao, Sr. for the heirs of Valentin Salao. 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
A Torrens Title is generally a conclusive evidence of the ownership of the land portals of the court, or sitting in the mirador de su casa, to avoid the possibility
referred to therein. (Sec. 47, Act 496). A strong presumption exists that Torrens of losing his land”.
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.
The plaintiffs 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 sufficiently 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.
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
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 110

118. MUNICIPALITY OF VICTORIAS VS. CA 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
Facts: of sale, the Court held that it was a sufficient evidence of the Deed of Sale. Thus,
Norma Leuenberger, respondent, inherited aparcel of land from her when Norma inherited the land from her grandmother, a portion of it has
grandmother, Simeona Vda.de Ditching in 1941. 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
In 1963, she discovered that apart of the parcel of land was being used by confirmed it. As the civil code provides, where the land is decreed in the name of
petitioner Municipality of Victorias as a cemetery. By reason of the discovery, a person through fraud or mistake, such person is by operation of law considered
respondent wrote a letter to the Mayor of Victorias demanding payment of a trustee of an implied trust for the benefit of the persons from whom the
pastrentals over the land used a cemetery and requesting delivery of the illegally property comes. Consequently, she only held the land in dispute in trust for the
occupied land by the petitioner. petitioner hence private respondent is inequity bound to reconvey the subject
The Mayor replied that themunicipality bought the land but however refused to land to the cestui que trust , the Municipality of Victorias.
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 sufficient
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 sufficient to substantiate the
municipality’s claim that it acquired the disputed land by means of a Deed of
Sale.
Held:
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 111

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 Domingo’s 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
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

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,

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 plaintiff is the owner of the subject lot; and that in
the course of the cadastral proceedings, plaintiff being illiterate, asked Sumangil
to claim the same for her (plaintiff) 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 plaintiff is the real owner of the
lot which she had acquired in 1914 by donation propter nuptias from Pablo
Ringor; that plaintiff 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 plaintiff 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 plaintiff had not
availed herself of this remedy.
ISSUE Does the possession of legal title preclude the operation of a trust
agreement?
HELD
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 plaintiff-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 off, through the issuance of a decree of registration, equitable
rights or remedies such as those here in question. On the contrary, section 70 of
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 112
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 affect in any other way any other rights or
liabilities created by law and applicable to unregistered land, except as otherwise
expressly provided in this Act or in the amendments hereof. A trust — such as
that which was created between the plaintiff 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 plaintiff within fifteen days from the
entry of final judgment herein; and upon his failure or refusal to do so, this
judgment shall constitute sufficient 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 plaintiff 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 castor’s 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 113
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 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 affecting 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 Office
of the RD, she discovered that, sometime in 1974, the NEPHEW had already
executed an Affidavit of Adjudication declaring that he is the only 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 Jose’s
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
affidavit of adjudication. The CA AFFIRMED.
ISSUE Who has a better right to the properties?
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 114
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 plaintiff 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, Estrella’s 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 NEPHEW’s 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
NEPHEW’s 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 Affidavit 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 13,752-
square 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), Ciriaco’s predecessor-
ininterest.
The RTC found that said 2.5002-hectare lot was erroneously included in
Antonio’s 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 Ciriaco’s 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 PNB’s 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
ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 115
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 offered to it as security for a loan must be a
standard and indispensable part of its operations. PNB’s 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 2.5002-
hectare portion of the mortgaged property has been adjudged in favor of
Ciriaco’s predecessor-in-interest in Civil Case No. 2514.
Hence, PNB has the burden of evidence that it acted in good faith from the time
the land was offered 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
 ATP 2016-2017- DIGESTED CASES: AGENCY AND TRUSTS 116

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 Antonio’s 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 offered 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. Ciriaco’s 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
effect 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 effect on his own title, which right can be claimed only by one who is in
possession.34 In Ciriaco’s 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 effect an action for quieting
of title. Hence, petitioner’s defense of prescription against Ciriaco does.