CIVREV2 1920 Partnership, Agency, Trusts

SAN BEDA UNIVERSITY
COLLEGE OF LAW
CIVIL LAW REVIEW II

CASE DIGESTS
Part Three – Partnership, Agency, and Trusts
I. Partnership
A. General Provisions
• Cases:
(1) Yulo v. Yang Chiaco Seng, G.R. No. L-12541, August 28, 1959
(2) Commissioner of Internal Revenue v. Suter, 27 SCRA 152
(3) Aurbach v. Sanitary Wares Manufacturing Corp., G.R. No. 75875, December 15, 1989
B. Obligations of the Partners
• Cases:
(4) Catalan v. Gatchalian, 105 Phil. 1270
(5) Liwanag v. Workmen’s Compensation Commission, 105 Phil. 741
(6) Agad v. Mabato, G.R. No. L-24193, June 28, 1968
C. Dissolution and Winding Up
• Cases:
(7) Emnace v. Court of Appeals, G.R. No. 126334, November 23, 2001
(8) Aldecoa & Co. v. Warner, Barnes & Co., 16 Phil. 423
D. Limited Partnership
II. Agency
A. Nature, Form, and Kinds
• Cases:
(9) Shell Co. v. Fireman’s Insurance Co., G.R. No. L-5169, 1957
(10) Cosmic Lumber Corp. v. Court of Appeals, 332 Phil. 948
(11) San Juan & Steel Fabricators, Inc. v. Court of Appeals, 357 Phil. 631
(12) Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R. No. 151391, November 22,
2005
(13) Philpotts v. Philippine Manufacuring Co., 40 Phil. 471
(14) Sevilla v. Court of Appeals, G.R. No. 41182-3, April 15, 1988
(15) Barretto v. Tuazon, 59 Phil. 845
B. Obligations of the Agent
• Cases:
(16) Domingo v. Domingo, 42 SCRA 131
(17) Behn, Meyer & Co. v. Nolting, 35 Phil. 274
(18) Commissioner of Internal Revenue v. Cadwallader Pacific Co., 18 SCRA 827
C. Obligations of the Principal
• Cases:
(19) Barton v. Leyte Asphalt, 46 Phil. 938
(20) Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, April 23, 2007
(21) Infante v. Cunanan, G.R. No. L-5180
D. Modes of Extinguishment
• Cases:
(22) Buason v. Panuyas, 105 Phil. 795
(23) Rallos v. Felix Go Chan & Sons, 81 SCRA 251
(24) Biasaya Land Transportation Co., Inc. v. Sanchez, G.R. No. 74623, August 31, 1987
(25) Pasno v. Ravona, 54 Phil.378
(26) Del Rosario v. Abad, G.R. No. L-10881, September 30, 1958
III. Trusts
• Cases:
(27) Ramos v. Ramos 61 SCRA 284
(28) Huang v. Court of Appeals, G.R. No. 108525
(29) Cuaycong v. Cuaycong, 21 SCRA 1192
(30) Fabian v. Fabian, 21 SCRA 213
(31) Gerona v. De Guzman, 11 SCRA 163, May 29, 1964
(32) Bueno v. Reyes, 27 SCRA 1179
(33) Tongoy v. Court of Appeals, 123 SCRA 99
(34) Caragay-Lagno v. Court of Appeals, 133 SCRA 718
1
Part Seven – January 2017 to December 2019
III. Partnership, Agency, and Trusts

• Cases:
(1) International Exchange Bank (now Union Bank of the Philippines) v. Spouses Briones, G.R.
No. 205657, March 29, 2017
(2) Citystate Savings Bank v. Tobias, G.R. No. 227990, March 7, 2018
(3) Calubad v. Ricarcen Development Corp., G.R. No. 202364, August 30, 2017
(4) Spouses Chua v. United Coconut Planters Bank, G.R. No. 215999, August 16, 2017
(5) Spouses Yulo v. Bank of the Philippine Islands, G.R. No. 217044, January 16, 2019
(6) Mabuhay Holdings Corp. v. Sembcorp Logistics Limited, G.R. No. 212734, December 05,
2018
(7) Ayala Land, Inc. v. ASB Realty Corp., G.R. No. 210043, September 26, 2018
(8) Saludo, Jr. v. Philippine National Bank, G.R. No. 193138, August 20, 2018
(9) Strickland v. Ernst & Young LLP, G.R. Nos. 193782 & 210695, August 01, 2018
(10) Lopez v. Court of Appeals, G.R. Nos. 163959 & 177855 (Resolution), August 01, 2018
2
PARTNERSHIP
General Provisions
THE FOLLOWING ARE THE REQUISITES OF PARTNERSHIP: (1) TWO OR MORE PERSONS WHO
BIND THEMSELVES TO CONTRIBUTE MONEY, PROPERTY, OR INDUSTRY TO A COMMON
FUND; (2) INTENTION ON THE PART OF THE PARTNERS TO DIVIDE THE PROFITS AMONG
THEMSELVES
1. Rosario Yulo, assisted by her husband Jose Yulo v. Yang Chiao Seng
G.R. No. L-12541, August 28, 1959
Labrador, J.
FACTS:
This is an appeal from the judgment of the CFI of Manila, dismissing plaintiff's (Yulo’s) complaint as well
as defendant's (Seng’s) counterclaim. The appeal is prosecuted by Yulo.
On June 17, 1945, defendant wrote a letter to the plaintiff, proposing the formation of a partnership
between them to run and operate a theatre on the premises occupied by former Cine Oro at Plaza Sta.
Cruz, Manila. Pursuant to the offer, which plaintiff accepted, the parties executed a partnership
agreement establishing the "Yang & Company, Limited”. It states that it will conduct and carry on the
business of operating a theatre for the exhibition of motion and talking pictures. The capital is fixed at
P100,000, P80,000 of which is to be furnished by defendant and P20,000, by plaintiff. All gains and
profits are to be distributed among the partners in the same proportion as their capital contribution and
the liability of plaintiff, in case of loss, shall be limited to her capital contribution
Plaintiff rented the land on which the theater was constructed from the Santa Marina sisters. The contract
of lease stipulated that the lease shall continue for an indefinite period of time, but may be cancelled
after 1 year by written notice of either party. Upon said written notice, plaintiff was ejected from the
premises. In view of this, defendant no longer gave plaintiff her share in the profits of the business, and
decided to retain the rentals considering that plaintiff no longer pays the landowners (the Santa Marinas).
Plaintiff instituted this action alleging the existence of a partnership.
Defendant argued that their real agreement is not a partnership but a lease. And the alleged partnership
was adopted as a subterfuge to get around the prohibition contained in the contract of lease between
the owners and the plaintiff against the sublease of the said property, and that plaintiff never invested
any capital and never acted as a partner.
ISSUE:
Did the parties enter into a partnership?
RULING:
No, they did not enter into a partnership. The agreement was a sublease.
The following are the requisites of partnership: (1) two or more persons who bind themselves to
contribute money, property, or industry to a common fund; (2) intention on the part of the partners to
divide the profits among themselves (Art. 1767, Civil Code.).
Plaintiff did not furnish the supposed P20,000 capital, she did not furnish any help or intervention in the
management of the theatre and lastly it does not appear that she has ever demanded from defendant
any accounting of the expenses and earnings of the business. Were she really a partner, her first concern
should have been to find out how the business was progressing, whether the expenses were legitimate,
whether the earnings were correct, etc. She was absolutely silent with respect to any of the acts that a
partner should have done; all that she did was to receive her share of P3,000 a month, which can not
be interpreted in any manner than a payment for the use of the premises which she had leased from the
owners. Clearly, plaintiff had always acted in accordance with the original letter of defendant of June 17,
1945, which shows that both parties considered this offer as the real contract between them.
3
PARTNERSHIP
General Provisions
PARTNERSHIP HAS A JURIDICAL PERSONALITY OF ITS OWN, DISTINCT AND SEPARATE

FROM THAT OF ITS PARTNERS
2. Commissioner of Internal Revenue v. Suter

G.R. No. L-25532, February 28, 1969
Reyes, J.B.L., J.
FACTS:
This is a petition for review of the decision of the CTA reversing the assessment of deficiency income
tax against respondent William Suter.
Suter, the general partner, and Julia Spirig and Gustav Carlson, the limited partners, engaged in the
importation and distribution of communication equipment. Suter and Spirig got married. Limited partner
Carlson sold his share in the partnership to the spouses. The limited partnership had been filing its
income tax returns as a corporation, without objection by CIR, until a determination of a deficiency
income tax against Suter in the amount of P2,678.06 for 1954 and P4,567.00 for 1955. Suter’s protest
was denied by CIR but was eventually reversed by CTA.
The CIR argued that the marriage of Suter and Spirig and their subsequent acquisition of the interests
of remaining partner Carlson in the partnership dissolved the limited partnership, and if they did not, the
fiction of juridical personality of the partnership should be disregarded for income tax purposes because
the spouses have exclusive ownership and control of the business; consequently the income tax return
of Suter should have included his and his wife's individual incomes and that of the limited partnership.
Suter contended that their marriage and acquisition of Carlson's interests is not a ground for dissolution
of the partnership. That its juridical personality had not been affected and as a limited partnership, it is
taxable on its income similarly with corporations, Suter was not bound to include in his individual return
the income of the limited partnership.
ISSUE:
Was the partnership dissolved after the marriage of the partners and the subsequent sale to them of the
remaining partners’ participation?
RULING:
No, the marriage did not dissolve the partnership nor the subsequent acquisition of the remaining
partners share.
The capital contributions of respondents-partners were separately owned and contributed by them
before their marriage; and after they were joined in wedlock, such contributions remained their respective
separate property under the Spanish Civil Code.
The change in its membership, brought about by the marriage of the partners and their subsequent
acquisition of all interest therein. is no ground for withdrawing the partnership from the coverage of tax
code, requiring it to pay income tax.
4
PARTNERSHIP
General Provisions
WHETHER THE PARTIES TO A PARTICULAR CONTRACT HAVE THEREBY ESTABLISHED

AMONG THEMSELVES A JOINT VENTURE OR SOME OTHER RELATION DEPENDS UPON THEIR
ACTUAL INTENTION WHICH IS DETERMINED IN ACCORDANCE WITH THE RULES GOVERNING
THE INTERPRETATION AND CONSTRUCTION OF CONTRACTS
3. Aurbach v. Sanitary Wares Manufacturing Corp.

G.R. No. 75875, December 15, 1989
Gutierrez, J.
FACTS:
These consolidated petitions seek the review of the CA decision that in all subsequent elections for
directors of Sanitary Wares Manufacturing Corporation (Saniwares), American Standard Inc. (ASI)
cannot nominate more than 3 directors.
Saniwares, a domestic corporation, manufactures and markets sanitary wares. Mr. Young, an
incorporator went abroad to look for partners to expand. Thereafter, ASI, a foreign corporation in
Delaware, U.S.A. entered into an Agreement with Saniwares whereby they agreed to participate with
Saniware. Its Articles of Incorporation specifically provide for Cumulative voting for directors; and that
the management of the Corporation shall be vested in a Board of Directors. As long as ASI owns at least
30% of outstanding stock, three of the nine directors shall be designated by ASI, and the others six shall
be designated by the other stockholders. Later, the 30% capital stock of ASI was increased to 40%. The
corporation was registered with the Board of Investments for availment of incentives with the condition
that at least 60% of the capital stock shall be owned by Filipinos.
In the annual stockholders' meeting, the stockholders proceeded to elect the members of the board. ASI
nominated three, while the Philippine investors nominated six. Chairman Young ruled the last two
nominations were out of order. That the consistent practice of the parties during the past annual
stockholders' meeting is to nominate only nine persons. There were protests. An appeal was made which
Young declared out of order and no vote on the ruling was taken. ASI allegedly representing 53 or 54%
of the shares continued on the meeting. On the basis of the cumulative votes cast, ASI nominated its
four nominees including Aurbach, thus the said five directors were certified as elected directors with the
explanation that there was a tie among the other 6 nominees for the 4 remaining positions. These
incidents triggered off the filing of separate petitions by the parties with the (SEC). The first petition filed
was for preliminary injunction by Saniwares. The second petition was for quo warranto and application
for receivership by Aurbach et. Al.
ISSUE:
Was the business established by the parties in the nature of a joint venture?
RULING:
Yes, the nature of the business is that of a joint venture.
The rule is that whether the parties to a particular contract have thereby established among themselves
a joint venture or some other relation depends upon their actual intention which is determined in
accordance with the rules governing the interpretation and construction of contracts.
In the instant cases, the Agreement shows that the parties agreed to establish a joint venture and not a
corporation. The history of the organization of Saniwares and the unusual arrangements which govern
its policy making body are all consistent with a joint venture and not with an ordinary corporation.
Moreover, ASI in its communications referred to the enterprise as joint venture. Mr. Young also testified
that Section 16(c) of the Agreement that "Nothing herein contained shall be construed to constitute any
of the parties hereto partners or joint venturers in respect of any transaction hereunder" was merely to
obviate the possibility of the enterprise being treated as partnership for tax purposes and liabilities to
third parties.
5
PARTNERSHIP
Obligations of Partners
A PARTNER IS AN AGENT OF THE PARTNERSHIP
4. Eligio Catalan v. Ramon Gatchalian

G.R. No. L-11248, April 22, 1958
Montemayor, J.
FACTS:
This is an appeal from the order of the CFI of Tacloban City.
Eligio Catalan and Ramon Gatchalian, as partners, mortgaged to Dr. Dionisio Marave two lots in
Tacloban City, including the improvements thereon, all belonging to the partnership, to secure the
payment of a loan. The partnership failed to pay the loan; the mortgage was foreclosed and the
properties were sold at public auction to Dr. Marave. Before the expiration of the one year period of
redemption, Catalan, on his own behalf, redeemed the properties with his private funds. The Sheriff
issued the corresponding certificate of redemption in favor of Catalan. Upon Catalan's petition, the lower
court ordered the cancellation of the title in the name of the partnership and to issue in its stead another
in the name of Catalan.
The theory of Catalan as accepted by the trial court is that he became the absolute owner of the
properties in question upon making the redemption because he was subrogated to the rights of Dr.
Marave who made the purchase at public auction
ISSUE:
Did Catalan become the absolute owner of the redeemed properties?
RULING:
No, Catalan did not become the absolute owner of the redeemed properties.
Under general principles of law, a partner is an agent of the partnership (Art. 1818, New Civil Code).
Furthermore, every partner becomes a trustee for his co-partner with regard to any benefits or profits
derived from his act as partner (Art. 1807, New Civil Code).
Consequently, when Catalan redeemed the properties in question, he became a trustee and held the
same in trust for his co-partner Gatchalian, subject to his right to demand from the latter his contribution
to the amount of redemption.
The principle of subrogation cannot be applied because at the time Catalan redeemed the property, Dr.
Marave, the purchaser at public auction, had not yet become the absolute owner of said properties. He
never received the definite and formal certificate of sale constituting muniment of title, for the reason that
redemption was made. Consequently, there was no title to the properties which he could convey to
Catalan as redemptioner.
6
PARTNERSHIP
IN COMPENSATION CASES, THE LIABILITY OF BUSINESS PARTNERS SHOULD BE SOLIDARY
5. Liwanag v. Workmen’s Compensation Commission

G.R. No. L-12164, May 22, 1959
Endencia, J.
FACTS:
This is a petition for review by certiorari of the decision of the Workmen's Compensation Commission
granting the claim for compensation of Balderama against appellants (Liwanag).
Appellants are co-owners of Liwanag Auto Supply. They employed Balderama as security guard who
was killed in the line of duty. His heirs filed a claim for compensation with the Workmen's Compensation
Commission, which was granted in an award.
Appellants claim that the compensation is divisible, hence the commission erred in ordering appellants
to pay jointly and severally the amount awarded. That there is nothing in the Compensation Act which
provides that the obligation of an employer arising from compensable injury or death of an employee
should be solidary obligation, the same should have been specifically provided, and that, in absence of
such clear provision, the responsibility of appellants should not be solidary but merely joint.
ISSUE:
Is the obligation of an employer to pay compensation for the death of an employee solidary?
RULING:
Yes, appellants’ obligation to pay compensation is solidary.
Ordinarily, the liability of the partners in a partnership is not solidary; but the law governing the liability
of partners is not applicable to the case at bar wherein a claim for compensation by dependents of an
employee who died in line of duty is involved. And although the Workmen’s Compensation Act does not
contain any provision expressly declaring solidary obligation of business partners like the herein
appellants, there are other provisions of law from which it could be gathered that their liability must be
solidary. Arts. 1711 and 1712 of the new Civil Code provide:
Owners of enterprises and other employers are obliged to pay compensation for the death of or injuries
to their laborers, workmen, mechanics or other employees, even though the event may have been purely
accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the
course of the employment (Art. 1711, New Civil Code).
If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be
solidarily liable for compensation (Art. 1712, New Civil Code).
Section 2 of the Workmen’s Compensation Act, as amended, reads in part as follows: the right to
compensation as provided in this Act shall not be defeated or impaired on the ground that the death,
injury or disease was due to the negligence of a fellow servant or employee, without prejudice to the
right of the employer to proceed against the negligent party.
The provisions of the new Civil Code above quoted taken together with those of Section 2 of the
Workmen’s Compensation Act, reasonably indicate that in compensation cases, the liability of business
partners, like appellants, should be solidary; otherwise, the right of the employee may be defeated, or at
least crippled. If the responsibility of appellants were to be merely joint and not solidary, and one of them
happens to be insolvent, the amount awarded to the appellees would only be partially satisfied, which is
evidently contrary to the intent and purposes of the Act.
Accordingly, the present controversy should be decided in favor of the appellees.
7
PARTNERSHIP
GENERALLY, A PARTNERSHIP MAY BE CONSTITUTED IN ANY FORM, EXCEPT WHERE

IMMOVABLE PROPERTY OF REAL RIGHTS ARE CONTRIBUTED, IN WHICH CASE A PUBLIC
INSTRUMENT SHALL BE NECESSARY
6. Agad v. Mabato
G.R. No. L-24193, June 28, 1968
Concepcion, C.J.
FACTS:
This case is an appeal by Mauricio to the Supreme Court from the order of dismissal of the Court of First
Instance of Davao, as to the applicability of Art. 1773 of the NCC to the contract of partnership of this
case.
Evidenced by a public instrument, “Annex A”, parties were partners in a fishpond business, the capital
of which Agad contributed P1,000, with the right to receive 50% of the profits; that from 1952 up to and
including 1956, Mabato who handled the partnership funds, had yearly rendered accounts of the
operations of the partnership; and that, despite repeated demands, Mabato had failed and refused to
render accounts for the years 1957 to 1963.
Agad prayed in his complaint against Mabato and their Company, to pay him his share of the profits.
Subsequently, Mabato filed a motion to dismiss, upon the ground that the complaint states no cause of
action and that the lower court had no jurisdiction over the subject matter of the case, because it involves
principally the determination of rights over public lands.
Mabato filed a motion to dismiss on the ground that the complaint states no cause of action. Which was
granted. The conclusion was based on the theory of partnership that, “Annex A”, is null and void,
pursuant to Art. 1773 of the NCC, because an inventory of the fishpond in said instrument had not been
attached.
ISSUE:
Is the partnership valid even if the inventory of the said fishpond had not been attached in the instrument?
RULING:
Yes, the partnership is valid even if the said inventory had not been attached in the instrument.
Art. 1773 of the NCC provides that: “A contract of partnership is void, whenever immovable property is
contributed thereto, if inventory of said property is not made, signed by the parties, and attached to the
Public instrument."
Such provision shall not apply in this case because after a careful reading of the instrument, the
operation of the fishpond mentioned was the purpose of the partnership. Neither said fishpond nor a real
right thereto was actually contributed to the partnership or became part of the capital thereof, even if a
fishpond or a real right thereto could become part of its assets. The instrument only states the P1,000
contribution of Agad and Mabato, without mention to any other assets. There was no need to attach an
inventory of the real property when it was not included in the instrument as part of the capital.
8
PARTNERSHIP
Dissolution and Winding Up
PRESCRIPTIVE PERIOD BEGINS TO RUN ONLY AFTER FINAL ACCOUNTING
7. Emnace v. Court of Appeals

G.R. No. 126334, November 23, 2001
Ynares-Santiago, J.
FACTS:
This is a petition for review on certiorari of a decision of the CA which dismissed the petition for certiorari
of petitioner.
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto Divinagracia were partners in a business
concern known as Ma. Nelma Fishing Industry. Later, they decided to dissolve their partnership and
executed an agreement of partition and distribution of the partnership properties, consequent to
Divinagracia’s withdrawal from the partnership. Throughout the partnership, petitioner failed to submit to
Tabanao’s heirs any statement of assets and liabilities of the partnership, and to render an accounting.
Petitioner also reneged on his promise to turn over to Tabanao’s heirs the deceased’s 1/3 share in the
total assets of the partnership.
Tabanao’s heirs, respondents herein, filed an action for accounting, payment of shares, division of
assets and damages. Respondents also filed an amended complaint, incorporating the additional prayer
that petitioner be ordered to "sell all (the partnership’s) assets and thereafter pay to the plaintiffs" their
corresponding share in the proceeds thereof.
Petitioner assailed the complaint on the ground of prescription arguing that respondents’ action
prescribed four (4) years after it accrued in 1986, the time of dissolution.
ISSUE:
Did the period of prescription begin in 1986?
RULING:
No, the prescriptive period does not begin to run unless there is a final accounting.
The three (3) final stages of a partnership are: (1) dissolution; (2) winding-up; and (3) termination. The
partnership, although dissolved, continues to exist and its legal personality is retained, at which time it
completes the winding up of its affairs, including the partitioning and distribution of the net partnership
assets to the partners. For as long as the partnership exists, any of the partners may demand an
accounting of the partnership’s business. Prescription of the said right starts to run only upon the
dissolution of the partnership when the final accounting is done.
The right to demand an accounting accrues at the date of dissolution in the absence of any agreement
to the contrary. When a final accounting is made, it is only then that prescription begins to run.
In the case at bar, no final accounting has been made, and that is precisely what respondents are
seeking in their action before the trial court, since petitioner has failed or refused to render an accounting
of the partnership’s business and assets.
Hence, the said action is not barred by prescription.
9
PARTNERSHIP
Dissolution and Winding Up
THE MANAGER OF THE PARTNERSHIP HAS THE DUTY TO RENDER ACCOUNTS
8. Aldecoa & Co. v. Warner, Barnes & Co.

G.R. No. L- 5242, August 6, 1910
Torres, J.
FACTS:
This is a petition for Mandamus filed by petitioner Aldecoa & Co. which seeks to compel respondent
Warner, Barnes & Co. to render accounts pertaining to the management of the joint-account partnership
between them.
Petitioner and respondent, on December 1, 1989, entered into a joint – account partnership for the
gathering and storing hemp in Albay and selling it in Manila for exportation were respondent was
designated as the manager. both parties were to share equally in the gains and losses of the business.
Alleging that respondent neglected to comply with its inherent duty as manager of the joint-account
partnership, which is that of rendering an account with vouchers, and that of liquidating the said business,
for it refuses to furnish the petitioner the documents required for their examination and verification, and
also refuses to realize the firm assets by selling the warehouses, houses, and other property which
constitute the capital, petitioner filed a petition for mandamus.
Respondent, on its defense, alleged that that the partnership was formed on June 30, 1899 and starting
therefrom, has rendered just and true accounts of the partnership.
ISSUE:
Did respondent render accounts, duly verified by vouchers, of its management from the date of the
organization of the partnership?
RULING:
Yes, respondent rendered accounts, duly verified by vouchers.
It is a rule of law generally observed that he who takes charge of the management of another's property
is bound immediately thereafter to render accounts covering his transactions; and that it is always to be
understood that all accounts rendered must be duly substantiated by vouchers.
Although the defendant has not proved, as it should have done, that it complied with its duty of rendering
accounts of its management, since the letters themselves exhibited by the plaintiff, and duly
authenticated as being written by the latter, prove that the defendant did render accounts from June 30,
1899, to December 31, 1902, no legal reason whatever exists for not accepting the finding of the lower
court which decided that it had been proved that accounts were rendered pertaining to the period
mentioned and that the said accounts were approved by the plaintiff.
Hence, respondents complied with its duty to render accounts of its management of the joint-account
partnership.
10
AGENCY
Nature, Form, and Kinds
TO DETERMINE THE NATURE OF A CONTRACT, COURTS DO NOT HAVE OR ARE NOT BOUND
TO RELY UPON THE NAME OR TITLE GIVEN IT BY THE CONTRACTING PARTIES
9. Shell Co. of the Philippines, Ltd. v. Firemen’s Insurance Co. of Newark

G.R. No. L-8169, January 29, 1957
Padilla, J.
FACTS:
This is a petition for review under Rule 45 assailing the judgment of the CA, which reversed the dismissal
of CFI and thereby sentenced petitioner jointly and severally liable with private respondent Profirio de la
Fuente for the damages sustained by private respondent Salvador Sison and paid for by private
respondent Firemen’s Insurance Company.
Sison brought his car for washing, greasing and spraying to Shell Gasoline and Service Station, which
is owned by petitioner and operated by de la Fuente. The car was damaged in the course of Shell’s
service and underwent repairs costing ₱1,651.38. The amount of repairs was paid for by the car’s insurer,
Firemen’s Insurance Company. Thereafter, Sison and Firemen’s Insurance filed an action to recover
damages from petitioner and de la Fuente.
Petitioner argues that de la Fuente is an independent contractor based on their agreement and not an
agent, hence it cannot be held liable for the negligent acts of the latter.
ISSUE:
Can de la Fuente be considered an agent of petitioner?
RULING:
Yes, de la Fuente is considered as an agent of petitioner.
To determine the nature of a contract, courts do not have or are not bound to rely upon the name or title
given it by the contracting parties, should there be a controversy as to what they really had intended to
enter into, but the way the contracting parties do or perform their respective obligations stipulated or
agreed upon may be shown and inquired into, and should such performance conflict with the name or
title given the contract by the parties, the former must prevail over the latter.
Taken into consideration are the following facts: that the operator of a gasoline and service station owed
his position to the company and the latter could remove him or terminate his services at will; that the
service station belonged to the company and bore its tradename and the operator sold only the products
of the company; that the equipment used by the operator belonged to the company and were just loaned
to the operator and the company took charge of their repair and maintenance; that an employee of the
company supervised the operator and conducted periodic inspection of the company’s gasoline and
service station; that the price of the products sold by the operator was fixed by the company and not by
the operator; and that the receipts signed by the operator indicated that he was a mere agent.
11
AGENCY
AGENT’S AUTHORITY TO SELL REAL ESTATE MUST BE CONFERRED SPECIFICALLY IN

WRITING, OTHERWISE, THE SALE IS VOID
10. Cosmic Lumber Corp. v. CA

G.R. No. 114311, November 29, 1996
Bellosillo, J.
FACTS:
This is a petitioner for review on certiorari filed by Cosmic Lumber Corp. (Cosmic) challenging the
decision of CA, which denied the petition for annulment of judgment on the ground that not one of the
grounds for annulment was shown to exist.
Cosmic, through its General Manager, executed a Special Power of Attorney (SPA) appointing Paz G.
Villamil-Estrada as attorney-in-fact (Paz). The SPA provided that Paz shall have the authority to file any
court action for the ejectment of squatters in a lot owned by Cosmic, as well as to appear at the pre-trial
conference and enter into compromise agreement. Paz then filed an action for ejectment. After some
time, Paz entered into a compromise agreement with respondent Isidro Perez (Perez), which was
approved by the trial court. However, the compromise agreement also contained a sale of a portion of
Cosmic’s land to Perez at a lower value. The judgment became final and executory, but it was not
executed due to Paz’ failure to produce the title of the lot. Cosmic was unaware of the said sale until 5
years later, summons was served against it for the revival of the judgment. Upon learning of the
fraudulent transaction, Cosmic filed a complaint for annulment of judgment.
Cosmic argued that Paz did not have the authority to sell its lot, and her authority to enter into a
compromise agreement is only in connection with the ejectment of the squatters.
ISSUE:
Was the sale executed by the agent Paz and respondent Perez valid?
RULING:
No, the sale is invalid because Paz does not have the authority to sell the lot owned by the principal,
Cosmic.
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.
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.
Hence, the “Compromise Agreement” entered into between Paz and Perez is void in view of the former’s
lack of authority.
12
AGENCY
UNLESS DULY AUTHORIZED, A TREASURER, WHOSE POWERS ARE LIMITED, CANNOT BIND
THE CORPORATION IN A SALE OF ITS ASSETS
11. San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals
G.R. No. 129459, September 29, 1998
Panganiban, J.
FACTS:
This is a petition for review on certiorari of a decision of the Court of Appeals dismissing the complaint
of petitioner San Juan Structural & Steel Fabricators, Inc..
Petitioner alleged that it entered into an agreement with Motorich (represented by its treasurer,
Gruenberg) for the transfer to it of a parcel of land in Quezon City; that as stipulated in the Agreement,
petitioner paid the down payment worth P100,000.00; that petitioner was supposed to meet with
Gruenberg for the payment of the balance but the latter did not appear in the meeting; that Motorich
despite repeated demands had refused to execute the Transfer of Rights/Deed of Assignment which is
necessary to transfer the certificate of title.
Motorich and Gruenberg interposed as defense that the President and Chairman of Motorich did not
sign the said Agreement and that Gruenberg's signature on the agreement is inadequate to bind
Motorich.
Petitioner insists that when Gruenberg and Co affixed their signatures on the contract, they both
consented to be bound by the terms thereof, hence the contract is binding on the two corporations.
ISSUE:
Is the Agreement of Sale executed between San Juan Structural and Motorich binding upon the latter?
RULING:
No, the Agreement of Sale is not binding upon Motorich.
A corporation may act only through its board of directors or, when authorized either by its bylaws 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, bylaws, or relevant provisions of law.
True, Gruenberg and Co signed the Agreement, according to which a lot owned by Motorich Sales
Corporation was purportedly sold. Such contract, however, cannot bind Motorich, because it never
authorized or ratified such sale.
The Court has also recognized the rule that persons dealing with an assumed agent, whether the
assumed agency be a general or special one, 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. Unless duly authorized, a
treasurer, whose powers are limited, cannot bind the corporation in a sale of its assets.
Motorich denies that it ever authorized Gruenberg to sell the subject parcel of land. Consequently,
petitioner had the burden of proving that Gruenberg was in fact authorized to represent and bind Motorich
in the transaction. Petitioner failed to discharge this burden. It has not shown any provision of said
respondent's articles of incorporation, bylaws or board resolution to prove that Nenita Gruenberg
possessed such power.
Because Motorich had never given a written authorization to Gruenberg to sell its parcel of land, we hold
that the Agreement entered into by the latter with petitioner is void under Article 1874 of the Civil Code.
13
AGENCY
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
12. Manila Memorial Park Cemetery, Inc. v. Linsangan

G.R. No. 151391, November 22, 2005
Tinga, J.
FACTS:
This is a Petition for Review assailing the Decision of the CA finding Manila Memorial Park Cemetery,
Inc. (MMPCI) jointly and severally liable with Florencia C. Baluyot to respondent Atty. Pedro L.
Linsangan.
Baluyot offered Atty. 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 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. Baluyot issued handwritten and
typewritten receipts for these payments. Contract No. 28660 has a listed price of P132,250.00. Atty.
Linsangan objected to the new contract price. To convince Atty. Linsangan, Baluyot executed a
document confirming that while the contract price is P132,250.00, Atty. Linsangan would pay only the
original price of P95,000.00. Later, Baluyot verbally advised Atty. Linsangan that Contract was cancelled
for reasons the latter could not explain. Atty. Linsangan filed a Complaint for Breach of Contract and
Damages against the former.
MMPCI alleged that Contract 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. Moreover, MMPCI was not aware of the arrangements
entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment and monthly
installments as indicated in the contract.
ISSUE:
Was there a contract of agency between Baluyot and MMPCI?
RULING:
Yes, there is a contract of agency between Baluyot and MMPCI.
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. Thus, the elements of
agency are (i) consent, express or implied, of the parties to establish the relationship; (ii) the object is
the execution of a juridical act in relation to a third person; (iii) the agent acts as a representative and
not for himself; and (iv) the agent acts within the scope of his authority.
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency Manager
Agreement; an agency manager such as Baluyot is considered an independent contractor and not an
agent. However, in the same contract, Baluyot as agency manager was authorized to solicit and remit
to MMPCI offers to purchase interment spaces belonging to and sold by the latter. Notwithstanding the
claim of MMPCI that Baluyot was an independent contractor, the fact remains that she was authorized
to solicit solely for and in behalf of MMPCI.
As properly found both by the trial court and the Court of Appeals, Baluyot was an agent of MMPCI,
having represented the interest of the latter, and having been allowed by MMPCI to represent it in her
dealings with its clients/prospective buyers.
14
AGENCY
BY THE CONCEPT OF AGENCY, RIGHTS GIVEN TO A STOCKHOLDER CAN BE EXERCISED BY

A PROPER REPRESENTATIVE OR AN ATTORNEY IN FACT
13. W. G. Philpotts v. Philippine Manufacturing Co.

G.R. No. L-15568, November 8, 1919
Street, J.
FACTS:
This is a proceeding to obtain a writ of mandamus filed by W. G. Philpotts (petitioner) to compel
Philippine Manufacturing Company and F. N. Berry (respondents) to permit the it, in person or by some
authorized agent or attorney, to inspect and examine the records of the business transacted by said
company since January 1, 1918.
The respondents interposed a demurrer wherein they conceded that there is a right of examination in
the stockholder granted under Section 51 of the Corporation Law, but it is insisted that this right must be
exercised in person.
ISSUE:
Can a stockholder exercise his right of inspection through an agent or representative?
RULING:
Yes, a stockholder can exercise his right of inspection through an agent or representative.
The Court ruled that the right of inspection given to a stockholder can be exercised either by himself or
by any proper representative or attorney in fact, and either with or without the attendance of the
stockholder.
This is in conformity with the general rule that what a man may do in person he may do through another;
and we find nothing in the statute that would justify us in qualifying the right in the manner suggested by
the respondents.
This conclusion is supported by the undoubted weight of authority in the United States, where it is
generally held that the provisions of law conceding the right of inspection to stockholders of corporations
are to be liberally construed and that said right may be exercised through any other properly authorized
person. The right may be regarded as personal, in the sense that only a stockholder may enjoy it; but
the inspection and examination may be made by another. Otherwise it would be unavailing in many
instances. The possession of the right in question would be futile if the possessor of it, through lack of
knowledge necessary to exercise it, were debarred the right of procuring in his behalf the services of
one who could exercise it.
15
AGENCY
AGENCIES COUPLED WITH AN INTEREST CANNOT BE REVOKED AT WILL BY ONE OF THE

CONTRACTING PARTIES
14. Sevilla v. Court of Appeals

G.R. Nos. L-41182-3, April 16, 1988
Sarmiento, J.
FACTS:
This is an appeal by certiorari to review the decision of the CA which affirmed the decision of the RTC
and held that the private respondents has the prerogative to terminate the lease and padlock the
premises as petition Lina Sevilla was a mere employee of the respondent.
Tourist World Service, Inc. (TWS), represented by Eliseo Canilao, entered into a contract of lease of
office space at Manila with the owner of the building, Mrs. Segundina Noguera. The office branch was
run by herein appellant Lina Sevilla. Later, TWS appears to have been informed that Sevilla was
connected with a rival firm, the Philippine Travel Bureau, and, since the branch office was anyhow losing,
TWS considered closing down its office. This was firmed up by two resolutions of the board of directors
of TWS, 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
TWS then located at the said branch office. Thereafter, the contract with the appellees for the use of the
Branch Office premises was terminated and while the effectivity thereof had not yet ended, the appellees
no longer used it. The corporate secretary of TWS, Canilao went over to the branch office, and, finding
the premises locked and, being unable to contact Sevilla, he padlocked the premises to protect the
interests of TWS. When neither Sevilla nor any of her employees could enter the locked premises, a
complaint was filed by the herein appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction.
ISSUE:
Can the agency between Sevilla and TWS be terminated or revoked unilaterally by the latter?
RULING:
No, the agency between the parties cannot be terminated or revoked unilaterally by TWS.
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.
Hence, 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.
16
AGENCY
SALE MADE BY AGENT THROUGH POWER OF ATTORNEY RATIFIED BY A JUDGE OF A COURT

OF FIRST INSTANCE, IN THE ABSENCE OF A NOTARY PUBLIC, IS VALID
15. Barreto v. Tuason

G.R. Nos. L-36811, 36827, 36840, 36872, March 31, 1934
Imperial, J.
FACTS:
These are four (4) consolidated appeals of the defendants and intervenors assailing the decision of the
CFI of Manila which first dismissed the complaint and the counterclaim filed, and then appointed Bank
of the Philippine Islands as receiver of all the properties constituting the mayorazgo.
The mayorazgo was founded by Don Tuason. The properties of the mayorazgo consist of the Haciendas
de Santa Mesa y Diliman, Hacienda de Mariquina, and two urban properties situated on Rosario Street,
Manila. The trial court ruled that this mayorazgo was a fideicomiso. After the promulgation of the
decision in the principal case, the CFI granted the motion of the defendant-intervenors’ for new trial. The
case was remanded to the court of origin. The defendants and intervenors filed the four appeals.
In G. R. No. 36827, the appellants are descendants of the younger daughter Eustaquia Ma. Tuason. All
of them, with the exemption of Tomas Barcinas y Reyes, are descendants of Tomas Barcinas, who, with
the said Tomas Barcinas y Reyes, sold all their rights, interest, and participation in one-fifth of the
revenue of the mayorazgo through their attorney-in-fact Manuel de los Reyes, in favor of the estate of
Teresa de la Paz.
The appellants contended that the sale is null and void because the power of attorney which the vendors
conferred on their agent was not ratified before a notary but before a judge of first instance. Records
show that there was no such notary in the district, hence, the judge of first instance acted in that capacity.
ISSUE:
Is the sale made by the attorney-in-fact Manuel de los Reyes null and void for not being ratified before
a notary but only before a judge of a court of first instance?
RULING:
No, the sale is not null and void for not being ratified before a notary but only before a judge of first
instance.
The sale made by agent through power of attorney ratified by a judge of a court of first instance, in the
absence of a notary public, is valid.
It was sufficient that it be executed before the judge of first instance acting in the capacity of notary
public. The sale executed by the intervenors Barcinas in favor of the estate of Doña Teresa de la Paz is
valid. The power conferred upon Manuel de los Reyes is valid although no notary public intervened in
its execution. And the sale executed by said attorney-in-fact is likewise valid because in the execution
of the corresponding deed the essential requisites provided by law were complied with.
Therefore, the sale is valid even if it was merely ratified before a judge of first instance.
17
AGENCY
Obligations of the Agent
AN AGENT WHO TAKES A SECRET PROFIT IN THE NATURE OF A BONUS, GRATUITY OR

PERSONAL BENEFIT FROM THE VENDEE, WITHOUT REVEALING THE SAME TO HIS
PRINCIPAL, THE VENDOR, IS GUILTY OF A BREACH OF HIS LOYALTY TO THE PRINCIPAL AND
FORFEITS HIS RIGHT TO COLLECT THE COMMISSION FROM HIS PRINCIPAL
16. Domingo v. Domingo

G.R. No. L-30573, October 29, 1971
Makasiar, J.
FACTS:
This is a petition for review on certiorari of a decision of the CA.
Vicente hired Gregorio as an agent to sell his parcel of land. The latter, with the help of Teofilo, found a
prospective buyer who was Oscar. Oscar wanted to lower the buying price to 1.20 per sqm. Gregorio
convinced vicente to lower his demand to which he agreed to. As a gift for convincing Vicente, Oscar
gave Gregorio P1,000. However, later on, Gregorio found that Oscar’s wife and Vicente directly dealt
with each other, cutting him out. The TCT was already in the name of Oscar’s wife due to a deed of sale.
Feeling aggrieved, Gregorio sued Vicente for the collection of his commission for facilitating the sale.
ISSUE:
Can Gregorio can still collect the commission?
RULING:
No, Gregorio cannot collect the commission.
An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee,
without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal
and forfeits his right to collect the commission from his principal, even if the principal does not suffer any
injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it; because the rule is to prevent the possibility of any
wrong, not to remedy or repair an actual damage.
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.
Hence, as a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo

must forfeit his right to the commission and must return the part of the commission he received from his
principal.
18
AGENCY
A BROKER IS AN AGENT
AN OCCASIONAL LOAN OF MONEY, SECURED BY A MORTGAGE, IN THE DUE COURSE OF

THEIR BUSINESS WILL NOT CONSTITUTE A PERSON A REAL-ESTATE BROKER
17. Behn, Meyer & Co. (Ltd.) v. W. T. Nolting

G.R. No. 10620, November 8, 1916
Johnson, J.
FACTS:
This action was brought by the plaintiff Behn, Meyer & Co against the defendants W. T. Nolting and
Angel Garcia for the purpose of recovering the sum of P580 which had been paid by the plaintiff to said
treasurer of the city of Zamboanga under protest.
Plaintiff is a corporation organized under the laws of Singapore, engaged in business as a wholesale
liquor dealer, manufactured tobacco dealer, merchant, and exporter and importer. On the other hand,
defendant, as part of the CIR, demanded that the plaintiff obtain a license as a real-estate broker and
pay the sum of PHP580. Plaintiff paid PHP580 to the treasurer of the city of Zamboanga coupled with a
written protest. Defendant denied the written protest of the plaintiff.
Plaintiff argues that from the year 1906 to the year 1912, it was engaged in the business, among other
things, of buying and selling copra, hemp, and other native products of the Islands, and in such business
it advanced money for the future delivery of copra, hemp, and took as security for the future delivery of
such copra or hemp so contracted for a mortgage on the land upon which said copra or hemp was
produced, and charging a discount on the future deliveries of said copra or hemp, which was
compensation for the money so advanced.
ISSUE:
Do the transactions or business which the plaintiff was engaged in constituted said plaintiff as a real-
estate broker?
RULING:
No, the taking of said mortgage was a mere incident to the business of the plaintiff in buying and selling
agricultural products, and was not a business in itself.
A real-estate broker is one who is engaged, for others, on a commission, negotiating contracts relative
to property with the custody of which he has no concern; the negotiator between other parties, never
acting in his own name, but in the name of those who employed him; he is strictly a middleman and for
some purposes the agent of both parties. Judge Storey, in his work on Agency, defines a broker as an
agent employed to make bargains and contracts between other persons, in matters of trade, commerce
or navigation, for a compensation commonly called brokerage. A real-estate broker negotiates the
purchase or sale of real property. He may also procure loans on mortgage security, collect rents, and
attend to the letting and leasing of houses and lands. A broker acts for another.
In the present case the plaintiff was acting for itself. Whatever was done with reference to the taking of
the mortgages in question was done as an incident of its own business. By the contract of brokerage a
person binds himself to render some service or to do something in behalf of or at the request of another
person.
It may be said that a man's business, or the business of a corporation, is that which busies or occupies
his time, attention, or labor, as his principal concern or occupation. Many persons make an occasional
loan of money, secured by a mortgage, in the due course of their business. That fact, however, will not
constitute such a person a real-estate broker.
19
AGENCY
THE BROKER, UNLIKE THE COMMISSION MERCHANT, HAS NO RELATION WITH THE THING HE
SELLS OR BUYS; MERELY AN INTERMEDIARY BETWEEN THE PURCHASER AND THE VENDOR
18. Commissioner of Internal Revenue v. Cadwallader Pacific Co.

G.R. No. L-20343, September 29, 1976
Makasiar, J.
FACTS:
This is an appeal taken by petitioner CIR from the decision of the CTA holding that respondent
Cadwallader Pacific Company is not embraced in the term commercial broker or commission merchant
set out in Section 194 (t) of the National Internal Revenue Code.
Respondent is a domestic corporation the primary purpose of which is to buy, manufacture, produce, or
otherwise sell, import, export and deal in general merchandise. It is empowered to act as a general agent
or to enter or make a contract either as principal or agent, upon commission or otherwise.
From 1949 to 1954, respondent was able to secure from its local customers orders evidenced by a
contract which expressly admitted respondent as a “broker.” For taxable years 1955 to 1957, the contract
expressly provided instead “Cadwallader Pacific Company as the seller’s representative authorized and
empowered to bring suit in the name of the seller”.
Petitioner assessed and demanded payment from respondent its fixed and percentage taxes as a
commercial broker from 1949 to 1954. Upon protest of respondent of the assessment, the petitioner on
reduced the 1955 assessment but increased the 1957. The CTA held that respondent is not embraced
in the term commercial broker or commission merchant set out in Section 194 (t) of the NIRC Code, and
hence not liable to pay the fixed and percentage taxes imposed on commercial brokers.
ISSUE:
Does respondent act within the statutory definitions of a commercial broker?
RULING:
Yes, the respondent acted as a commercial broker in effecting the transactions involved in this present
appeal.
Paragraph 14 of the contract used and prepared by respondent clearly defines its participation in
effecting the said transactions as that of a commercial broker. Aforesaid paragraph speaks of three
parties: buyer, seller and/or shipper and Cadwallader Pacific Company in the capacity of a broker and
as seller's and/or shipper's representative. By the very wording of the said paragraph, seller is a different
entity from Cadwallader Pacific Company, but said company also acts as the seller's and/or shipper's
representative for certain specified purposes. It cannot therefore now be successfully claimed by
respondent that it is itself the seller in the said transactions for it expressly names itself in the contract
in paragraph 14 thereof, as the representative of the seller and/or shipper.
By statutory definition, "(t) Commercial broker includes all persons, other than importers, manufacturers,
producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or
purchases of merchandise for other persons, or bring proposed buyers and sellers together, or negotiate
freights or other means of transportation, or for the shippers, or consignors or consignees of freight
carried by vessels or other means of transportation. The term includes commission merchants."
By judicial interpretation, it was held that: "A commission merchant is one engaged in the purchase or
sale for another of personal property which, for this purpose, is placed in his possession and at his
disposal. x x x The broker, unlike the commission merchant, has no relation with the thing he sells or
buys. He is merely an intermediary between the purchaser and the vendor. He acquires neither the
possession nor the custody of the things sold. His only office is to bring together the parties to the
transaction. x x x"
20
AGENCY
Obligations of the Principal
ARTICLE 267 OF THE CODE OF COMMERCE DECLARES THAT NO AGENT SHALL PURCHASE
FOR HIMSELF OR FOR ANOTHER THAT WHICH HE HAS BEEN ORDERED TO SELL
19. Barton v. Leyte Asphalt & Mineral Oil Co., Ltd

G.R. No. L-21237, March 22, 1924
Street, J.
FACTS:
This action was instituted in the CFI of Manila by petitioner James D. Barton, to recover from respondent
Leyte Asphalt & Mineral Oil Co., Ltd., as damages for breach of contract, the sum of $318,563.30, and
further to secure a judicial pronouncement to the effect that the plaintiff is entitled to an extension of the
terms of the sales agencies.
The plaintiff is a citizen of the United States, resident in the City of Manila, while the defendant is a
corporation organized under the law of the Philippine Islands with its principal office in the City of Cebu,
Province of Cebu, Philippine Islands. Said company appears to be the owner by a valuable deposit of
bituminous limestone and other asphalt products, located on the Island of Leyte and known as
the Lucio mine. On April 21, 1920, one William Anderson, as president and general manager of the
defendant company, addressed a letter Exhibit B, to the plaintiff Barton, authorizing the latter to sell the
products of the Lucio mine in the Commonwealth of Australia and New Zealand upon a scale of prices
indicated in said letter.
In the third cause of action stated in the complaint the plaintiff alleges that during the life of the agency
indicated in Exhibit B, he rendered services to the defendant company in the way of advertising and
demonstrating the products of the defendant and expended large sums of money in visiting various parts
of the world for the purpose of carrying on said advertising and demonstrations, in shipping to various
parts of the world samples of the products of the defendant, and in otherwise carrying on advertising
work.
This led to the filing of the cases. The original contract by which the plaintiff was appointed sales agent
for a limited period of time in Australia and the United States contemplated that he should find reliable
and solvent buyers who should be prepared to obligate themselves to take the quantity of bituminous
limestone contracted for upon terms consistent with the contract. These conditions were not met by the
taking of these orders from the plaintiff's own subagents, which was as if the plaintiff had bought for
himself the commodity which he was authorized to sell to others.
ISSUE:
Can an agent purchase for himself or for another that which he has been ordered to sell?
RULING:
No, an agent cannot purchase for himself or for another that which he has been ordered to sell.
Article 267 of the Code of Commerce declares that no agent shall purchase for himself or for another
that which he has been ordered to sell. The law has placed its ban upon a broker's purchasing from his
principal unless the latter with full knowledge of all the facts and circumstances acquiesces in such
course; and even then the broker's action must be characterized by the utmost good faith. A sale made
by a broker to himself without the consent of the principal is ineffectual whether the broker has been
guilty of fraudulent conduct or not.
We think, therefore, that the position of the defendant company is indubitably sound in so far as it rest
upon the contention that the plaintiff has not in fact found any bona fide purchasers ready and able to
take the commodity contracted for upon terms compatible with the contract which is the basis of the
action.
21
AGENCY
IN CASE OF EXCESS OF AUTHORITY BY THE AGENT, THE LAW DOES NOT SAY THAT A THIRD
PERSON CAN RECOVER FROM BOTH THE PRINCIPAL AND THE AGENT
20. Eurotech Industrial Technologies, Inc., v. Cuizon

G.R. No. 167552, April 23, 2007
Chico-Nazario, J.
FACTS:
This is a petition for review by certiorari assailing the decision of the CA and its Resolution affirming the
Order rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon
(EDWIN) as a party defendant in a civil case.
From January to April 1995, petitioner Eurotech 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 is owned 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:
Can petitioner recover from both respondents ERWIN, the principal, and EDWIN, the agent?
RULING:
No, petitioner cannot recover from EDWIN, the agent.
It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim
against respondent EDWIN "does not hold that in case of excess of authority, both the agent and the
principal are liable to the other contracting party." To reiterate, the first part of Article 1897 declares that
the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the
agent is completely absolved of any liability. The second part of the said provision presents the situations
when the agent himself becomes liable to a third party when he expressly binds himself or he exceeds
the limits of his authority without giving notice of his powers to the third person. However, it must be
pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the
law does not say that a third person can recover from both the principal and the agent.
As we declare that respondent EDWIN 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 trial court.
22
AGENCY
A PRINCIPAL IN WITHDRAWING THE AUTHORITY GIVEN TO AN AGENT CANNOT TAKE

ADVANTAGE OF THE SERVICES RENDERED BY THE LATTER AND THEN EVADE PAYMENT OF
THEIR COMMISSION
21. Infante v. Cunanan

G.R. No. L-5180, August 31, 1953
Bautista Angelo, J.
FACTS:
This is a petition for review of a decision of the CA affirming the ruling of the RTC which orders the
defendant (petitioner) to pay the plaintiffs (respondents) the sum of P2,500 with legal interest.
Peitioner Consejo Infante, the owner of two parcels of land with a house built thereon, contracted the
services of respondents Jose Cunanan and Juan Mijares to sell his property. She agreed to pay them a
commission of five (5) percent on the purchase price plus whatever overprice they may obtain for the
property. The respondents found one Pio S. Noche who was willing to buy the property under the terms
agreed upon with defendant, but when they introduced him to petitioner, the latter informed them that
she was no longer interested in selling the property and succeeded in making them sign a document
stating therein that the written authority she had given them was already cancelled. However, petitioner
dealt directly with Pio Noche. Hence, respondents demanded from the petitioner the payment of their
commission, but the latter refused to do so.
Petitioner contends that the condition that they buy her a property in Taft Avenue was not met, and
because of this failure it was agreed that the authority she had given them be cancelled.
ISSUE:
Can the principal withdraw the authority given to the agent and evade the payment of commission after
the latter found a buyer even though the principal dealt directly with the buyer?
RULING:
No, petitioner Infante, the principal, cannot withdraw the authority of the respondents Cunanan and
Mijares, the agents, and then evade the payment of commission.
As a general rule, under Article 1733, the principal may withdraw the authority given to an agent at will.
However, if one of the parties takes advantage of the benevolence of the other and acts in a manner
that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act
cannot be sanctioned without according to the party prejudiced the reward, which is due him.
The Court of Appeals found that after petitioner had given the written authority to respondents to sell her
land, respondents found a buyer in the person of one Pio S. Noche who was willing to buy the property
under the terms agreed upon, and this matter was immediately brought to the knowledge of petitioner.
But the latter, perhaps by way of strategy, advised respondents that she was no longer interested in the
deal and was able to prevail upon them to sign a document agreeing to the cancellation of the written
authority. Petitioner took advantage of the services rendered by respondents. This act of subversion
cannot be sanctioned and cannot serve as basis for petitioner to escape payment of the commission
agreed upon.
23
AGENCY
Modes of Extinguishment
ANYTHING DONE BY THE AGENT, WITHOUT KNOWLEDGE OF THE DEATH OF THE PRINCIPAL
OR OF ANY OTHER CAUSE WHICH EXTINGUISHES THE AGENCY, IS VALID AND SHALL BE
FULLY EFFECTIVE WITH RESPECT TO THIRD PERSONS WHO MAY HAVE CONTRACTED WITH
HIM IN GOOD FAITH
22. Buason v. Panuyas

G.R. No. L-11415, May 25, 1959
Padilla, J.
FACTS:
This is an appeal from a judgment of the CFI of Nueva Ecija dismissing an action brought by the
petitioner spouses Manuel Buason and Lolita M. Reyes for annulment of a deed of sale in favor of the
defendant Panuyas, cancellation of transfer certificate of title issued in the name of the defendant and
his wife, declaration that the sale in their favor is valid, recovery of possession of the parcel of land
described in the complaint from the defendant, damages, attorney’s fees and cost.
Spouse Buenaventura Dayao and Eugenia Vega acquired by homestead patent a 14.8413 ha-parcel of
land in Muñoz, Nueva Ecija. In 1930, they executed a power of attorney authorizing Eustaquio Bayuga
to prosecute a case for annulment of a contract of sale over the same property and after the termination
of the case in their favor to sell it, and from the proceeds of the sale to deduct whatever expenses he
had incurred in the litigation.
In 1934, Dayao died leaving Vega and their children. In 1939, the children executed a deed of sale and
conveyed 12.8413 hectares (ha) to spouses Manuel Buason and Lolita Reyes. Buason and Reyes took
possession of the land parcel through their tenants in the same year. In 1944, Bayuga sold 8 ha of the
same parcel of land (sold by Dayao children to Buason) to spouses Mariano Panuyas and Sotera Cruz.
Bayuga died in 1946 and Vega died in 1954. Spouses Buason and Spouse Panuyas claim ownership
to the same parcel of land.
ISSUE:
Was the sale made by the authorized agent valid and binding on the heirs, notwithstanding the death of
the principal and consequently the extinguishment of the agency?
RULING:
Yes, the sale made by the authorized agent is valid.
The Buason spouses did not register the sale of 12.8413 ha of land in question executed in their favor
by the Dayao children after the death of their father. On the other hand, the power of attorney executed
by Dayao authorizing Bayuga to sell the parcel of land was annotated or inscribed on the back of the
original certificate of title; and the sale executed by Bayuga in favor of spouses Panuyas under the said
power of attorney was annotated or inscribed on the back of the same original certificate of title.
It does not appear that Panuyas and his wife had actual knowledge of the previous sale. In the absence
of such knowledge, they had a right to rely on the face of the certificate of title of the registered owners
and of the authority conferred by them upon the agent also recorded on the back of the certificate of title.
As this is a case of double sale of land registered under the Land Registration Act, he who recorded the
sale in the Registry of Deeds has a better right than he who did not.
As to Buason’s contention that the death of the principal in 1934 ended the authority of the agent, the
sale of 8 ha by the agent to the Panuyas was null and void; it has not been shown that the agent knew
of his principal's demise, and for that reason article 1931, new Civil Code applies:
Anything done by the agent, without knowledge of the death of the principal or of any other cause which
extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have
contracted with him in good faith is the law applicable to the point raised by the appellant.
24
AGENCY
THE GENERAL RULE IN ARTICLE 1919 THAT THE DEATH OF THE PRINCIPAL OR OF THE
AGENT EXTINGUISHES THE AGENCY IS SUBJECT TO EXCEPTION
23. Rallos v. Felix Go Chan & Sons

G.R. No. L-24332, January 31, 1978
Muñoz Palma, J.
FACTS:
This is a Petition for Review on certiorari of the decision of the CA upholding the validity of the sale made
by Simeon Rallos (attorney-in-fact) in favor of respondent Felix Go Chan & Sons of the undivided share
of Concepcion Rallos (principal and deceased) in a parcel of land pursuant to a special power of attorney
(SPA) which the principal executed in his favor.
Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of
land. The sisters executed an SPA in favor of their brother, Simeon Rallos, authorizing him to sell for
and in their behalf said lot. Concepcion Rallos died. Simeon Rallos then sold the undivided shares of his
sisters to respondent.
Ramon Rallos (petitioner) as administrator of the Intestate Estate of Concepcion Rallos filed a complaint
praying, among others, that the sale of the undivided share of the deceased Concepcion Rallos the lot
be declared unenforceable.
The trial court ruled in favor of petitioner. Respondent appealed. The CA sustained the sale in question.
ISSUE:
Does the attorney-in-fact Simeon Rallos have the authority to sell the undivided share of Concepcion
(deceased) even after the latter’s death?
RULING:
No, Simeon Rallos does not have the authority to sell the undivided share of Concepcion (deceased)
after the latter’s death as the agency is extinguished.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule that the death of the
principal or of the agent extinguishes the agency. Article 1931 is the applicable law. Under this provision,
an act done by the agent after the death of his principal is valid and effective only under two conditions,
viz: (1) that the agent acted without knowledge of the death of the principal, and (2) that the third person
who contracted with the agent himself acted in good faith.
In the instant case, the agent, Simeon Rallos, knew of the death of his principal at the time he sold the
latter's share to respondent. That Simeon Rallos knew of the death of his sister Concepcion is also a
finding of fact of the court a quo and of respondent appellate court. On the basis of the established
knowledge of Simeon Rallos concerning the death of his principal, Article 1931 of the Civil Code is
inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of
the death of his principal; it is not enough that the third person acted in good faith.
Hence, Simeon had no authority to sell the undivided share as the death of Concepcion extinguished
the agency, and that the exceptions to this rule are not applicable in this case.
25
AGENCY
AGENCY CANNOT BE REVOKED IF A BILATERAL CONTRACT DEPENDS UPON IT, OR IF IT IS

THE MEANS OF FULFILLING AN OBLIGATION ALREADY CONTRACTED
24. Bisaya Land Transportation Co., Inc. v. Sanchez

G.R. No. 74623, August 31, 1987
Padilla, J.
FACTS:
This is a petition for certiorari to review the decision of respondent IAC which affirmed the decision of
the RTC which was a suit for Specific Performance with Preliminary Injunction and Damages.
Bisaya Land Transportation Company, Inc. (BISTRANCO) has been engaged in the shipping business
and one of its ports of call is found in Butuan City. When BISTRANCO was under receivership, Marciano
Sanchez (Sanchez) was appointed by BISTRANCO as its acting shipping agent for its vessels in Butuan
City by its Receiver Atty. Adolfo V. Amor (Amor) “pending the execution of the formal contract of agency.”
Thereafter a formal Contract of Agency was executed between BISTRANCO, represented by Receiver
Atty. Amor and Sanchez. Sanchez then executed a Supplemental Shipping Agency Contract after finding
that a paragraph of the Contract of Agency was quite prejudicial to him which was then signed by both
parties. However both the Contract of Agency and the Supplemental Shipping Agency Contract
(Contracts) were never submitted by Atty. Amor to the receivership court for its approval.
By virtue of the Contracts, Sanchez performed his duties as shipping agent of BISTRANCO. Under
Sanchez’s endeavors, he had managed to increase the volume of the shipping business of BISTRANCO
at Butuan City. Thereafter, BISTRANCO wrote Sanchez that they would commence operating its branch
office at Butuan City and later actually operated a branch office which in effect allegedly repudiate the
Contracts. Under these circumstances, the business of Sanchez, as shipping agent of BISTRANCO in
Butuan City, was seriously impaired and he could not solicit as many passengers as he used to, because
the passenger tickets issued to him by BISTRANCO were limited.
ISSUE:
Can BISTRANCO, the principal, unilaterally repudiate the contract of agency executed in favor of
Sanchez, the agent?
RULING:
No, BISTRANCO cannot unilaterally repudiate the contract of agency executed in favor of Sanchez.
It is clear that BISTRANCO received material benefits from the contracts of agency of Sanchez, based
upon the monthly statements of income of BISTRANCO, upon which the commissions of Sanchez were
based. A perusal of the Contracts will also show that there is no single provision therein that can be
said as prejudicial or not beneficial to BISTRANCO. Besides, the doctrine of estoppel precludes
BISTRANCO from repudiating an obligation voluntarily assumed by it, after having accepted benefits
therefrom. To countenance such, repudiation would be contrary to equity and would put a premium on
fraud or misrepresentation, which this Court will not sanction. It may be true that there is no express
prohibition for BISTRANCO to open its branch in Butuan City. But, the very reason why BISTRANCO
agreed not to employ or appoint another agent in Butuan City was to prevent competition against
Sanchez' agency, in order that he might recover what he invested and eventually maximize his profits.
In the case at bar, good faith required that BISTRANCO refrain from opening its branch in Butuan City
during the effectivity of the agency contract with Sanchez, or until 27 July 1981. Moreover, the opening
of the branch office which, in effect, was a revocation of the contracts of agency is not sanctioned by law
because the agency was the means by which Sanchez could fulfill his obligations under Exhibits "F" and
"G". Article 1927 of the Civil Code, among others, provides: "An agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an obligation already contracted”.
26
AGENCY
POWER OF SALE GIVEN IN A REAL ESTATE MORTGAGE IS A POWER COUPLED WITH AN

INTEREST WHICH SURVIVES THE DEATH OF THE GRANTOR; HOWEVER, IT IS SUSPENDED AS
NOT TO INTERFERE WITH THE ORDERLY ADMINISTRATION OF THE ESTATE
25. Pasno v. Ravina

G. R. No. 31581, February 3, 1930
Malcolm, J.
FACTS:
There are two appeals in this case. One appeal has been taken by the oppositors to the legalization of
the will of Gabina Labitoria, and concerns the validity of that will. The other appeal has been taken by
the Philippine National Bank and concerns the survivability of the right of sale of the mortgaged property
under special power while the mortgaged property is in custodia legis.
Gabina Labitoria mortgaged three parcels of land to the PNB to secure an indebtedness of P1,600. It
was stipulated in the mortgage that the mortgagee "may remove, sell or dispose of the mortgaged
property or any buildings, improvements or other property in, on or attached to it and belonging to the
mortgagor in accordance with the provisions of Act No. 3135 or take other legal action that it may deem
necessary." The mortgagor died, and during the pendency of the probate proceedings, a special
administrator was appointed by the lower court who took possession of the estate of the deceased. The
estate failed to comply with the conditions of the mortgage, hence, PNB, pursuant to the stipulations,
asked the sheriff to proceed with the sale of the parcels of land. When the attorney for the special
administrator received notice of the proposed action, he filed a motion in court in which an order was
asked requiring the sheriff to vacate the attachment over the mortgaged properties and to abstain from
selling the same. The lower court granted the petition in an order of February 14, 1929, and later denied
a motion for reconsideration presented on behalf of the Philippine National Bank.
ISSUE:
With the power of sale given in a real estate mortgage, can the mortgagee foreclose the mortgaged
property while it is in the hands of the administrator?
RULING:
No, the mortgagee cannot foreclose the mortgaged property while it is in the hands of the administrator.
The power of sale given in a mortgage is a power coupled with an interest which survives the death of
the grantor. One case, that of Carter vs. Slocomb ([1898], 122 N. C, 475), has gone so far as to hold
that a sale after the death of the mortgagor is valid without notice to the heirs of the mortgagor. However
that may be, conceding that the power of sale is not revoked by the death of the mortgagor, nevertheless
in view of the silence of Act No. 3135 and in view of what is found in Section 708 of the Code of Civil
Procedure, it would be preferable to reach the conclusion that the mortgagee with a power of sale should
be made to foreclose the mortgage in conformity with the procedure pointed out in section 708 of the
Code of Civil Procedure. That would safeguard the interests of the estate by putting the estate on notice
while it would not jeopardize any rights of the mortgagee. The only result is to suspend temporarily the
power to sell so as not to interfere with the orderly administration of the estate of a decedent. A contrary
holding would be inconsistent with the portion of our law governing' the settlement of estates of deceased
persons.
Note: Act No. 3135 regulate the sale of property under special powers inserted in or annexed to real-
estate mortgages. It fails to make provision regarding the sale of mortgaged property which is in
custodies legis. Under these circumstances, it would be logical to suppose that the general provisions
of Philippine law would govern this latter contingency. It is a familiar rule that statutes in pari materia are
to be read together. The legislative body which enacted Act No. 3135 must be presumed to have been
acquainted with the provisions of such a well-known law as the Code of Civil Procedure and to have
passed Act No. 3135 with reference thereto.
27
AGENCY
MERE STATEMENT IN THE POWER OF ATTORNEY THAT THE AGENCY IS COUPLED WITH
INTEREST NOT ENOUGH
26. Del Rosario v. Abad

G.R. No. L-10881, September 30, 1958
Padilla, J.
FACTS:
This is an appeal from the decision rendered by the Court of First Instance of Nueve Ecija, where it ruled
in favor of plaintiffs-appellants Del Rosario.
The plaintiffs-appellants are the heirs of the late Tiburcio del Rosario. In 1936, Homestead Patent No.
40596 was issued under his name, covering a land with an area of 9 hectares, 43 ares, and 14 centares
which is situated in Barrio San Mauricio, San Jose, Nueva Ecija. Later, the Registrar of Deeds issued
OCT No. 4820 under his name. In 1937, Tiburcio obtained a loan from Primitivo Abad, one of the
defendant-appellee, in the sum of P2,000 with interest at 12% per annum, payable on Dec. 31, 1941.
As security for the payment, Tiburcio mortgaged the improvements made in his land in favor of Primitivo.
He also executed an “irrevocable special power of attorney coupled with interest” in favor of his creditor,
which authorizes the latter to sell and convey the parcel of land. Tiburcio and his family later moved to
Isabela and, in 1945, Tiburcio died. Two years later, Primitivo Abad, acting as Tiburcio’s attorney-in-fact,
sold the said land to his son and co-defendant-appellee, Teoderico Abad, for P1.00 and the payment of
Tiburcio’s debt to him. Immediately, Teoderico took possession of the land and registered the land in his
name. The Registrar of Deeds cancelled Tiburcio’s title and issued TCT No. 1882 in Teoderico’s favor.
Thus, plaintiff filed a suit against defendants to recover possession and ownership of the said land, with
damages while defendants prayed for its dismissal. The CFI ordered defendants to reconvey the
property back o the plaintiffs. The matter was brought before the Court of Appeals, which certified the
case to the High Court. Hence, this appeal.
ISSUE:
Is Primitivo authorized to sell the land of Tiburcio after the latter’s death?
RULING:
No, Primitivo is not authorized to do so.
The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad providing, among
others, that is coupled with an interest in the subject matter thereof in favor of the said attorney and are
therefore irrevocable, and . . . conferring upon my said attorney full and ample power and authority to
do and perform all things reasonably necessary and proper for the due carrying out of the said powers
according to the true tenor and purport of the same, . . ." does not create an agency coupled with an
interest nor does it clothe the agency with an irrevocable character.
A mere statement in the power of attorney that it is coupled with an interest is not enough. In what does
such interest consist must be stated in the power of attorney. The fact that Tiburcio del Rosario, the
principal, had mortgaged the improvements of the parcel of land to Primitivo Abad, the agent is not such
an interest as could render irrevocable the power of attorney executed by the principal in favor of the
agent. In fact no mention of it is made in the power of attorney. The mortgage on the improvements of
the parcel of land has nothing to do with the power of attorney and may be foreclosed by the mortgagee
upon failure of the mortgagor to comply with his obligation.
Hence, as the agency was not coupled with an interest, it was terminated upon the death of Tiburcio del
Rosario, the principal, sometime in December 1945, and Primitivo Abad, the agent, could no longer
validly convey the parcel of land to Teodorico Abad on 9 June 1947.
28
TRUSTS
Trusts
WHETHER THE TRUST IS RESULTING OR CONSTRUCTIVE, ITS ENFORCEMENT MAY BE

BARRED BY LACHES
27. Ramos v. Ramos

G.R. No. L-19872, December 3, 1974
Aquino, J.
FACTS:
The parties appealed from the decision of the CFI of Negros Occidental, dismissing plaintiffs’ complaint
and holding that the intestate estate of Martin Ramos was settled in a civil case which was terminated,
and that the judgment therein is res judicata and bars any litigation regarding the same estate.
Spouses Ramos were survived by their 3 children. The husband, Martin Ramos (Martin), was survived
by 7 natural children. A special proceeding for the settlement of the intestate estate of said spouses was
conducted. A partition project was submitted which was signed by the 3 legitimate children, and 2 of the
7 natural children. A certain representative signed in behalf of the other 5 natural children who were
minors. The conjugal hereditary estate was appraised and it was determined that the shares of the 7
natural children were to be taken from a computed 1/3 free portion. The partition project was approved.
Thereafter, the administrator was ordered to submit a report showing that the shares of the heirs had
been delivered to them. Certain lots were registered in equal shares, when in fact the administrator was
supposed to pay the cash adjudications to each of them as enshrined in the partition project. Petitioners
were then constrained to bring the suit before the court seeking for the reconveyance in their favor their
corresponding participation in said parcels of land. A portion of the said 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
respondents. Nonetheless, no Deed of Trust was alleged and proven. The lower court dismissed the
complaint on the grounds of res judicata, prescription and laches.
ISSUE:
Was the action for reconveyance barred by prescription, laches and res judicata?
RULING:
Yes, the action is barred.
There was inexcusable delay thereby making the action unquestionably barred by prescription and
laches and also by res judicata. The petitioners allowed more than forty years to elapse. The Supreme
Court discussed the nature of trusts and on the availability of prescription and laches to bar the action
for reconveyance of property allegedly held in trust. In its technical legal sense, a trust is defined as the
right, enforceable solely in equity, to the beneficial enjoyment of property, the legal title to which is vested
in another. Trusts are either express or implied. Express trusts are created by the intention of the trust
or of the parties. Implied trusts come into being by operation of law. Implied trusts are ordinarily
subdivided into resulting and constructive trust. A resulting trust is a trust raised by implication of law
and presumed always to have been contemplated by the parties, the intention as to which is to be found
in the nature of their transaction, but not expressed in the deed or instrument of conveyance; on the
other hand, a constructive trust is a trust raised by construction of law, or arising by operation of law. It
is a trust not created by any words, either expressly or impliedly evincing a direct intention to create a
trust, but by the construction of equity in order to satisfy the demands of justice. It does not arise by
agreement or intention but by operation of law.
In this case, the petitioners 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.
29
TRUSTS
Trusts
AN IMPLIED RESULTING TRUST IS CREATED WHEN PROPERTY IS SOLD AND THE LEGAL
ESTATE IS GRANTED TO ONE PARTY BUT THE PRICE IS PAID BY ANOTHER FOR THE
PURPOSE OF HAVING THE BENEFICIAL INTEREST FOR THE PROPERTY
28. Spouses Huang v. Court of Appeals

G.R. No. 108525 September 13, 1994
Bellosillo, J.
FACTS:
In the year 1965, private respondent Dolores Sandoval wanted to buy two (2) lots in Dasmarinas village
in Makati, however, petitioner Milagros Huang made it appear to Dolores that the policy of the subdivision
owner prohibits the acquisition of two (2) lots by a single individual. Hence, because of her eagerness
to purchase the two lots, namely lot 20 and lot 21, Dolores purchased Lot 21 using her own money and
registered it in her name, and she also purchased the Lot 20 but the deed of sale was placed in the
name of Milagros Huang’s husband Ricardo and registered in his name. Thereafter, with the consent of
Dolores, Ricardo constructed a small residential house in said lot, and even mortgaged the land to SSS
to secure Ricardo’s loan obligation with it.
As her own protection, Dolores demanded from Ricardo the execution of a deed of sale and assumption
of mortgage in her favor. When Ricardo thereafter challenged Dolores’ ownership over the property,
Dolores decided to file a complaint before the office of the barangay captain demanding for the
cancellation of the TCT previously issued to Ricardo, and the issuance of a new TCT this time in the
name of Dolores Sandoval. A formal complaint was later on filed before the CFI of Rizal asking for the
same relief as prayed for previously before the Barangay, and invoking that the said transaction and
arrangement between her and Ricardo pertaining to the said property resulted to the creation of an
implied resulting trust having him as the trustor thereof and Ricardo as a mere trustee. In his defense
however, aside from questioning the existence of implied resulting trust, Ricardo raised the issue of
prescription, wherein according to him, the action is already barred by prescription contending that
jurisprudence has established the rule that the prescriptive period for an action for reconveyance based
on fraud is ten (10) years.
ISSUES:
1. Is there an implied resulting trust existing between Dolores and spouses Huang regarding Lot 20?
2. Has the action to compel the trustee to convey the property already prescribed?
RULING:
1. Yes, the court is in conformity with the common finding of the trial court and respondent court that a
resulting trust was created between them, wherein Ricardo became the trustee of Lot 20 and its
improvements for the benefit of Dolores as owner.
Trust is a fiduciary relationship with respect to property which involves the existence of equitable duties
imposed upon the holder of the title to the property to deal with it for the benefit of another. A person
who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for
the benefit of another person is known as the trustee; and the person for whose benefit the trust has
been created is referred to as the beneficiary. And trust is either express or implied, and implied could
also either be constructive or resulting trust.
In this case, the pertinent law is Art. 1448 of the New Civil Code which provides that there is an implied
trust when property is sold and the legal estate is granted to one party but the price is paid by another
for the purpose of having the beneficial interest for the property, a resulting trust arises because of the
presumption that he who pays for a thing intends a beneficial interest therein for himself.
2. No, the action is not yet barred by prescription. The 10-year prescriptive period commences to run
only from the time of the repudiation of the trust by the trustee. It is ten (10) years because a resulting
30
trust is an offspring of the law. However, before the period of prescription may start, 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.
The action filed by Dolores has not prescribed. Firstly, Ricardo has not performed any unequivocal act
of repudiation amounting to an ouster of Dolores. The only acts which may be considered as indicative
of his intention not to respect the trust anymore were his leasing the house without the prior knowledge
of Dolores; his refusal to carry out the demand of Dolores that he must ask the lessees to vacate the
house; and, his refusal to give the necessary papers to Dolores to enable her to get the title from the
SSS. Secondly, the foregoing acts are not positive acts of repudiation; and, thirdly, the evidence on such
acts is unclear and inconclusive. But even if the foregoing acts were manifest acts of repudiation made
known to Dolores, the fact remains that they were done at the earliest only on 15 March 1980.
Dolores' complaint before the trial court was filed on 19 February 1981, or within the 10-year prescriptive
period.
31
TRUSTS
Trusts
IF THE INTENTION TO ESTABLISH A TRUST IS CLEAR, THE TRUST IS EXPRESS; IF THE INTENT
TO ESTABLISH A TRUST IS TO BE TAKEN FROM CIRCUMSTANCES OR OTHER MATTERS
INDICATIVE OF SUCH INTENT, THE TRUST IS IMPLIED
29. Cuaycong v. Cuaycong

G.R. No. L-21616, December 11, 1967
Bengzon, J.P., J.
FACTS:
Eduardo Cuaycong, who is married to Clotilde de Leon, died without any issue but with three brothers
and a sister surviving him namely Lino, Justo, Meliton and Basilisa. As to the two brothers Meliton and
Basilisa, they both died without any issue, while Justo has a son named Luis Cuaycong. As to Lino, he
was survived by Gertrudes, Carmen, Paz, Carolina, and Virgilio.
The properties involved in this case are the two haciendas named as Hacienda Sta. Cruz and Hacienda
Pusod which are all found to be titled in the name of Luis Cuaycong, the son of Justo. However, Eduardo
Cuaycong had on several occasions, made known to his brothers and sisters that he and his wife Clotilde
de Leon had an understanding and made arrangements with Luis Cuaycong and his father Justo
Cuaycong, that it was their desire to divide Haciendas Sta. Cruz and Pusod among his brothers and
sister and his wife Clotilde. With the consent of his wife, Eduardo had asked his brothers and sister to
pay his wife P75,000 and then divide equally the remaining one-half share of Eduardo. The brothers and
sister failed to pay the 1/2 share of Clotilde over the two haciendas which were later acquired by Luis
Cuaycong thru clever strategy, fraud, misrepresentation and in disregard of Eduardo's wishes by causing
the issuance in his name of certificates of title covering said properties. As the two haciendas were the
subject of transactions between the spouses and Justo and Luis Cuaycong, Eduardo told Justo and
Luis, and the two agreed, to hold in trust what might belong to his brothers and sister as a result of the
arrangements and deliver to them their share when the time comes.
ISSUE:
Is the trust created in this case an express trust rather than an implied trust?
RULING:
Yes, the trust created is an express trust.
Plaintiffs alleged an express trust over an immovable, especially since it is alleged that the trustor
expressly told the defendants of his intention to establish the trust. Such a situation definitely falls under
Article 1443 of the Civil Code. Our Civil Code defines an express trust as one created by the intention
of the trustor or of the parties, and an implied trust as one that comes into being by operation of
law. Express trusts are those created by the direct and positive acts of the parties, by some writing or
deed or will or by words evidencing an intention to create a trust. On the other hand, implied trusts are
those which, without being expressed, are deducible from the nature of the transaction by operation of
law as matters of equity, in dependently of the particular intention of the parties. Thus, if the intention to
establish a trust is clear, the trust is express; if the intent to establish a trust is to be taken from
circumstances or other matters indicative of such intent, then the trust is implied.
Article 1453 on implied trust would apply if the person conveying the property did not expressly state
that he was establishing the trust, unlike the case at bar where he was alleged to have expressed such
intent. Besides, even assuming the alleged trust to be an implied one, the right alleged by plaintiffs would
have already prescribed since starting in 1936 when the trustor died, plaintiffs had already been allegedly
refused by the aforesaid defendants in their demands over the land, and the complaint was filed only in
1961 — more than the 10-year period of prescription for the enforcement of such rights under the trust.
32
TRUSTS
Trusts
LACHES MAY BAR AN ACTION BROUGHT TO ENFORCE A CONSTRUCTIVE TRUST
30. Fabian v. Fabian

G.R. No. L-20449, January 29, 1968
Castro, J.
FACTS:
The case involves an appeal taken by Esperanza Fabian of the CFI decision which dismissed their
complaint for reconveyance filed against defendants spouses Silbina Fabian and Feliciano Landrito and
others.
Pablo Fabian bought from the Philippine Government Lot 164 of the Friar Lands Estate in Muntinlupa,
Rizal for the sum of P112 payable in installments. By virtue of this purchase, he was issued Sale
Certificate 547. He died on August 2, 1928, survived by four children, namely, Esperanza, Benita I,
Benita II, and Silbina. Thereafter, Silbina and Teodora Fabian executed an affidavit reciting that the late
Pablo Fabian left no other heir other than declarants. Because of such affidavit, the sale certificate was
assigned to them. Then, the Director of Lands, on behalf of the Government, sold the lot to Silbina and
to Teodora.
Plaintiffs filed the present action for reconveyance against the defendants spouses, averring that Silbina
and Teodora, through fraud perpetrated in their affidavit. Plaintiffs contend that said affidavit contained
a false narration of facts because Silbina knew that she is not the only daughter and heir of the deceased
Pablo Fabian, and Teodora likewise knew all along that, as a mere niece of the deceased, she was
precluded from inheriting from him in the presence of his four surviving daughters; that by virtue of this
affidavit, the said defendants succeeded in having sale certificate 547 assigned to them and thereafter
in having lot 164 covered by said certificate transferred in their names; and that by virtue also of these
assignment and transfer, the defendants succeeded fraudulently in having lot 164 registered in their
names under TCT 33203.
As an answer, defendants spouses claim that Pablo Fabian was not the owner of lot 164 at the time of
his death on August 2, 1928 because he had not paid in full the amortizations on the lot; that they are
the absolute owners thereof, having purchased it from the Government for the sum of P120, and from
that year having exercised all the attributes of ownership thereof up to the present; and that the present
action for reconveyance has already prescribed. The dismissal of the complaint is prayed for. The CFI
rendered judgment declaring that the defendants spouses had acquired a valid and complete title to the
property by acquisitive prescription. Hence, this petition.
ISSUES:
1. May laches constitute a bar to an action to enforce a constructive trust?
2. Has title to the land vested in the appellees through the mode of acquisitive prescription?
RULING:
1. Yes, laches may constitute a bar to an action to enforce a constructive trust.
This Court, speaking through Mr. Justice J.B.L. Reyes, declared in no uncertain terms that laches may
bar an action brought to enforce a constructive trust such as the one in the case at bar. Article 1456 of
the new Civil Code, while not retroactive in character, merely expresses a rule already recognized by
our courts prior to the Code's promulgation. Appellants are, however, in error in believing that like
express trust, such constructive trusts may not be barred by lapse of time.
The American law on trusts has always maintained a distinction between express trusts created by the
intention of the parties, and the implied or constructive trusts that are exclusively created by law, the
latter not being 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 or cestui que trust. For this
33
reason, the old Code of Civil Procedure (Act 190) declared that the rules on adverse possession does
not apply to "continuing and subsisting" (i.e., unrepudiated) trusts. But in constructive trusts, . . . the rule
is that laches constitutes a bar to actions to enforce the trust, and repudiation is not required, unless
there is a concealment of the facts giving rise to the trust. The assignment of sale certificate 547 was
effected on October 5, 1928; and the actual transfer of lot 164 was made on the following November 14.
It was only on July 8, 1960, 32 big years later, that the appellants for the first time came forward with
their claim to the land. The record does not reveal, and it is not seriously asserted, that the appellees
concealed the facts giving rise to the trust.
2. Yes, title to the land vested in the appellees through the mode of acquisitive prescription.
This Court, in an excellently-phrased decision penned by Chief Justice, then Associate Justice, Roberto
Concepcion, unequivocally reaffirmed the rule, overruling previous decisions to the contrary, that "an
action for reconveyance of real property based upon a constructive or implied trust, resulting from fraud,
may be barred by the statute of limitations," and further that "the action therefor may be filed within four
years from the discovery of the fraud," the discovery in that case being deemed to have taken place
when new certificates of title were issued exclusively in the names of the respondents therein. Upon the
undisputed facts in the case at bar, not only had laches set in when the appellants instituted their action
for, reconveyance in 1960, but as well their right to enforce the constructive trust had already prescribed.
It logically follows from the above disquisition that acquisitive prescription has likewise operated to vest
absolute title in the appellees, pursuant to the provisions of section 41 of Act 190 that:
Ten years actual adverse possession by any person claiming to be the owner for that time of
any land or interest in land, uninterruptedly continued for ten years by occupancy, descent,
grants, or otherwise, in whatever way such occupancy may have commenced or continued,
shall vest in every actual occupant or possessor of such land a full and complete title. . . .
Although paragraph 13 of the stipulation of facts herein before adverted to does not explicitly employ the
word "adverse" to characterize the possession of the defendants from 1928 up to the filing of the
complaint in 1960, the words, "defendants have been in possession of the land since 1928 up to the
present [1960] publicly and continuously under claim of ownership; they have cultivated it, harvested
and appropriated the fruits for themselves," clearly delineate, and can have no other logical meaning
than, the adverse character of the possession exercised by the appellees over the land.
34
TRUSTS
Trusts
REGISTRATION OF THE DEED OF EXTRA-JUDICIAL SETTLEMENT CONSTITUTES

CONSTRUCTIVE NOTICE TO THE WHOLE WORLD
31. Gerona v. De Guzman

G.R. No L-19060, May 29, 1964
Concepcion, J.
FACTS:
This is an appeal by certiorari from a decision of the Court of Appeals, affirming that of the Court of First
Instance of Bulacan.
On September 4, 1958, petitioners Ignacio Gerona, et al. alleged that they are the legitimate children of
Domingo Gerona and Placida de Guzman. Placida, who was already deceased, was a legitimate
daughter of Marcelo de Guzman and his first wife, Teodora de la Cruz. After the death of his first wife,
Marcelo married Camila Ramos, who begot him several children, the respondents Carmen De Guzman,
et al. After Marcelo died, respondents executed a deed of extra-judicial settlement of the estate of
Marcelo. The respondents fraudulently misrepresented that they are the only surviving heirs of Marcelo
and succeeded in causing the transfer of certificated of title to 7 parcels of land, issued in the name of
Marcelo, to be cancelled and new certificates of title be issued in their own name. The said fraud was
discovered by the petitioners only the year before the institution of the case. The petitioners are now
demanding from the respondents their share in said properties. In their answer, the respondents
maintained that petitioners’ mother was not entitled to share in the estate of Marcelo, she being merely
a spurious child of the latter, and that the petitioners’ action is barred by statute of limitations.
The trial court dismissed the complaint on the ground that the petitioners’ action has already prescribed.
The CA affirmed the decision of the trial court.
The petitioners maintain that since they and respondents are co-heirs of the deceased Marcelo, the
present action for partition of the latter's estate is not subject to the statute of limitations of action. If
affected, the 4-year prescription period did not begin to run until actual discovery of fraud perpetrated by
respondents, which took place in 1956 or 1957.
ISSUE:
Did the 4-year prescriptive period begin to run only upon the actual discovery of fraud, and hence said
period has not yet expired when the present action was commenced on November 4, 1958?
RULING:
No, the 4-year prescriptive period has already expired.
Although, as a general rule, an action for partition among co-heirs does not prescribe, this is true only
as long as the defendants do not hold the property in question under an adverse title. The statute of
limitations operates as in other cases, from the moment such adverse title is asserted by the possessor
of the property. When respondents excluded the petitioners from the estate of the deceased, they set
up a title adverse to them. And this is why petitioners have brought this action for the annulment of said
deed upon the ground that the same is tainted with fraud.
It is already settled in this jurisdiction that an action for reconveyance of real property based upon a
constructive or implied trust, resulting from fraud, may be barred by the statute of limitations. Inasmuch
as petitioners seek to annul the aforementioned deed of "extra-judicial settlement" upon the ground of
fraud in the execution thereof, the action therefor may be filed within four (4) years from the discovery of
the fraud. Such discovery is deemed to have taken place, in the case at bar, on June 25, 1948, when
said instrument was filed with the Register of Deeds and new certificates of title were issued in the name
of respondents exclusively, for the registration of the deed of extra-judicial settlement constitute
constructive notice to the whole world.
35
TRUSTS
Trusts
IMPLIED TRUST IS CREATED FOR THE BENEFIT OF PERSON FROM WHOM PROPERTY COMES
32. Bueno v. Reyes

G.R. No. L-2258, April 28, 1969
Makalintal, J.
FACTS:
This is an appeal from the order of dismissal by Court of First Instance of Ilocos Norte in a civil case.
On January 7, 1936, Francisco Reyes filed an answer in Cadastral Case No. 47 of Ilocos Norte, claiming
Lot No. 2857 of the Laoag Cadastre as property belonging to himself and to his two brothers, Juan and
Mateo. The case was heard without opposition, and the lot was adjudicated in favor of the claimants on
March 27, 1939, in whose names original Certificate of Title No. 19074 was issued.
Twenty three years thereafter, the plaintiffs filed the action below for reconveyance of the lot. They
alleged in their complaint that: (1) the said lot originally belonged to Jorge Bueno who died leaving three
children namely, Brigada, Eugenia, and Rufino, to whom the property descended by intestate
succession; and (2) Francisco H. Reyes was Eugenia’s husband and the father of the plaintiffs surnamed
Reyes, "who by agreement among the heirs of Jorge Bueno was entrusted in filing the answer in the
cadastral proceedings and in obtaining the title thereto for and in behalf of all the heirs of Jorge Bueno,
including his wife Eugenia Bueno. Subsequently, Brigida and Eugenia died leaving their children, who
are now the plaintiffs-appellants together with Rufino Bueno. The defendants Juan and Mateo Reyes
filed their answer, in which they raised a number of defenses, including laches, imprescriptibility of title,
and prescription of action.
ISSUE:
Was an implied trust created, and hence subject to prescription?
RULING:
Yes, an implied trust was created.
Where what was apparently designed to be an express trust as alleged in Par. V of the complaint was
for the late Francisco H. Reyes to file an answer in the cadastral proceeding and to obtain title to the
land for and in behalf of all the heirs of Jorge Bueno, but such express trust failed to materialize and in
the next paragraph of the complaint, Reyes is charged with "either bad faith or mistake" in filing the
cadastral answer and obtaining title to the property in his own name and in the names of his two brothers,
Juan and Mateo, "who connived and consented to the (said) malicious or erroneous acts," the trust, if
any can be deduced at all from the foregoing facts, was an implied one arising by operation of law not
from any presumed intention of the parties but to satisfy the demands of justice and equity and as a
protection against unfair dealing or downright fraud. Indeed, in this kind of implied trust, commonly
denominated constructive, as distinguished from resulting, trust, there exists a certain antagonism
between the cestui que trust and the trustee. Thus, under Article 1456 of the Civil Code, "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.
While there are some decisions which hold that an action upon a trust is imprescriptible, 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 reason has been expressed in J.M. Tuason and Co., Inc. v. Magdangal:
"Under Section 40 of the old Code of the Civil Procedure, all actions for recovery of real property
prescribed in 10 years, excepting only actions based on continuing or subsisting trusts that were
considered by Section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, however, the
continuing or subsisting trusts contemplated in Section 38 of the Code of Civil Procedure referred only
to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law) where
no fiduciary relation exists and the trustee does not recognize the trust of all." virtua1aw
36
TRUSTS
Trusts
SIMULATED TRANSFER OF LOT CREATES IMPLIED TRUST
33. Tongoy v. Court of Appeals

G.R. No. L-45645, June 28, 1983
Makasiar, J.
FACTS:
This is a petition for certiorari to review the decision of respondent CA in case entitled “Mercedes T.
Sonora, et al vs Francisco Tongoy et al.
This is a case anchored on action for reconveyance of titled land from a simulated contract of
conveyance. Hacienda Pulo was owned by five co-owners who had succeeded it from their late father,
three of whom died without issues, Jose, Ana, and Teresa while the other two, Francisco and Jovita
have their own.
In 1918, the hacienda was mortgaged by the registered co-owners above mentioned to Phil. National
Bank (PNB) for a loan payable in 10 years. In 1935, after having been in default of the loan, the Hacienda
was judicially declared by SC for foreclosure in favor of PNB. Consequently, to avoid the actual seeding
of the hacienda by PNB, the co-owners had agreed to make a simulated transfer of their rights as co-
owners to Luis Tongoy.
Thereafter, Luis Tongoy in 20 years, was able to pay the obligations with PNB. In 1958, PNB officially
released the hacienda from the mortgage. On February 1966, Luis died leaving as heirs, his son,
Francisco and his wife. However, a month before Luis’ death, Jesus Tongoy (son of Jovita) demanded
from him the shares of all co-owners
ISSUE:
Was there a trust constituted on Hacienda Pulo?
RULING:
Yes, there is an implied/ tacit trust.
The Court does not think that the trial court erred in its ultimate conclusion that the transfers of the two
lots in question made in favor of the late Luis Tongoy by his co-owners created an implied trust in favor
of the latter.
The court finds that there is preponderance of evidence in support of the existence of constructive,
implied, or tacit trust. The hacienda could have been leased to a third person and the rentals would have
been sufficient to liquidate the outstanding obligation in favor of PNB. But, the co-owners agreed to give
the administration of property to Atty. Tongoy so that the latter can continue giving support to Tongoy-
Sonora family.
Strongly supported the theory that the transfers were only simulated to enable Luis D. Tongoy to have
effective control and management of the hacienda for the benefit of all the co-owners is preponderant
evidence to the effect that he was in no financial condition at the time of the purchase of the hacienda.
The financial incapacity of Luis Tongoy intertwines, and together gains strength, with proof that the co-
owners as transferors in the several deeds of sale did not receive the consideration stated therein.
Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a
transfer of it to another, he does not really intend to divest himself of his title and control of the property;
hence, the deed is but a sham.
37
TRUSTS
Trusts
MERE POSSESSION OF A CERTIFICATE OF TITLE UNDER THE TORRENS SYSTEM IS NOT

CONCLUSIVE AS TO THE HOLDER'S TRUE OWNERSHIP
34. Caragay-Layno v. Court of Appeals

G.R. No. L-52064, December 26, 1984
Melencio-Herrera, J.
FACTS:
The Disputed Portion is a bigger parcel of sugar and coconut land situated at Pangasinan. The entire
parcel is covered by an Original Certificate of Title and includes adjoining lots under the name of
deceased De Vera. His intestate estate was administered first by his widow and later by her nephew,
respondent Estrada. As Administratrix, De Vera’s widow filed in Special Proceedings an Inventory of all
properties of the deceased, which included "a parcel of land in the poblacion of Calasiao, Pangasinan.
A discrepancy in area was mentioned in the Inventory in the Disputed Property and found that the
northwestern portion, was occupied by petitioner-spouses Caragay Layno and Layno. Estrada
demanded that they vacate the Disputed Portion since it was titled in the name of deceased De Vera,
but petitioners refused claiming that the land belonged to them and, before them, to Petitioner’s father.
Estrada instituted suit against Petitioner for the recovery of the Disputed Portion mainly on the ground
that the Disputed Portion had been fraudulently or mistakenly included so that an implied or constructive
trust existed in her favor. Estrada then counterclaimed for reconveyance of property in the sense that
title be issued in her favor. RTC rendered judgment, ordering Petitioner to vacate the Disputed Portion.
The CA affirmed the Decision in toto.
ISSUE:
Was there an implied or constructive trust in favor of Estrada?
RULING:
No, there is no such implied trust.
Evidence discloses that the Disputed Portion was originally possessed openly, continuously and
uninterruptedly in the concept of an owner by the father of Petitioner and had been declared in his name
since 1921. Upon the demise of her father in 1914, Petitioner adjudicated the property to herself as his
sole heir and declared it in her name under Tax Declaration since 1959. Realty taxes were also
religiously paid from 1938 to 1972. Tackling the previous possession of her father to her own, they had
been in actual open, continuous and uninterrupted possession in the concept of owner for about 45
years, until said possession was disturbed in 1966 when Estrada informed Juliana that the Disputed
Portion was registered in De Vera's name.
Of significance is the fact, as disclosed by the evidence, that for 20 years from the date of registration of
title in 1947 up to 1967 when this suit for recovery of possession was instituted, neither the deceased
De Vera up to the time of his death in 1951, nor his successors-in-interest, had taken steps to possess
or lay adverse claim to the Disputed Portion. They may, therefore be said to be guilty of laches as would
effectively derail their cause of action.
Administrator Estrada took interest in recovering the said portion only when he noticed the discrepancy
in areas in the Inventory of Property and in the title. The foregoing conclusion does not necessarily wreak
havoc on the indefeasibility of a Torrens title. Mere possession of a certificate of title under the Torrens
System is not conclusive as to the holder's true ownership of all the property described therein for he
does not by virtue of said certificate alone become the owner of the land illegally included.
38
CASES DECIDED WITHIN JANUARY 2017 TO DECEMBER 2019
Partnership, Agency, and Trusts
A PRINCIPAL AND AN AGENT ENJOY A FIDUCIARY RELATIONSHIP MARKED WITH TRUST AND
CONFIDENCE
REVOCATION AS A FORM OF EXTNGUISHING AGENCY ONLY APPLIES IN CASES OF

INCOMPATIBILITY
1. International Exchange Bank (now Union Bank of the Philippines) v. Spouses Briones
G.R. No. 205657, March 29, 2017
Leonen, J.
FACTS:
This is a Petition for Review on Certiorari filed by petitioner International Exchange Bank (iBank), now
Union Bank of the Philippines, assailing the CA's Decision and Resolution which upheld the RTC in
dismissing the complaint filed against respondent spouses Jerome and Quinnie Briones (Sps. Briones).
Respondent Sps. Briones availed a loan (to be paid in monthly installments for a period of 2 years) from
iBank in order to purchase a BMW Z4 Roadster. Together with the loan is the execution of a promissory
note with chattel mortgage that required them to take out an insurance policy on the vehicle. The
promissory note also gave iBank, as the the Sps. Briones’ attorney-in-fact, irrevocable authority to file
an insurance claim in case of loss or damage to the vehicle. The insurance proceeds were to made
payable to iBank. Unfortunately, after 4 months from the time they availed the loan, the mortgaged BMW
was carnapped. This was immediately reported by the Sps. to the PNP Traffic Management Group and
thereafter declared the loss to iBank, which instructed them to continue paying the next 3 monthly
installments as a a sign of good faith. However, as they finished the 3 payments, iBank sent them a
letter demanding full payment of the lost vehicle. The Sps. Briones submitted a notice of claim with their
insurance company, which denied the claim due to the delayed reporting of the lost vehicle.
Thereafter, iBank filed a complaint for replevin and/or sum of money against the Sps. Briones. RTC
dismissed iBank’s complaint. On appeal, iBank asserts that the Sps. Briones effectively revoked the
agency granted under the promissory note when they filed a claim with the insurance company.
However, the CA upheld the RTC’s ruling and stated that as the Sps. Briones’ agent, iBank was bound
by its acceptance to carry out the agency. However, instead of filing an insurance claim, iBank opted to
collect the balance of Spouses Briones' loan. iBank’s motion for reconsideration was denied. Hence, this
petition.
ISSUES:
1. Does an agency relationship exist between the parties?
2. Was the agency relationship revoked or terminated?
RULING:
1. Yes, an agency relationship exists between the parties.
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 consent or authority of the latter." Furthermore, Article
1884 of the Civil Code provides that "the agent is bound by his acceptance to carry out the agency, and
is liable for the damages which, through his non-performance, the principal may suffer. All the elements
of agency exist in this case. Under the promissory note with chattel mortgage, Sps. Briones appointed
iBank as their attorney-in-fact, authorizing it to file a claim with the insurance company if the mortgaged
vehicle was lost or damaged. Petitioner was also authorized to collect the insurance proceeds as the
beneficiary of the insurance policy.
2. No, the agency was not revoked or terminated.
Revocation as a form of extinguishing an agency under Article 1924 of the Civil Code only applies in
cases of incompatibility, such as when the principal disregards or bypasses the agent in order to deal
39
with a third person in a way that excludes the agent. Sps. Briones' claim for loss cannot be seen as an
implied revocation of the agency or their way of excluding petitioner. They did not disregard or bypass
petitioner when they made an insurance claim; rather, they had no choice but to personally do it because
of their agent's negligence. While a contract of agency is generally revocable at will as it is primarily
based on trust and confidence, Article 1927 of the Civil Code provides the instances when an agency
becomes irrevocable. A bilateral contract that depends upon the agency is considered an agency
coupled with an interest, making it an exception to the general rule of revocability at will. In the
promissory note with chattel mortgage, the Sps. Briones authorized petitioner to claim, collect, and apply
the insurance proceeds towards the full satisfaction of their loan if the mortgaged vehicle were lost or
damaged. Clearly, a bilateral contract existed between the parties, making the agency irrevocable.
Petitioner was also aware of the bilateral contract; thus, it included the designation of an irrevocable
agency in the promissory note with chattel mortgage that it prepared for the Sps. Briones to sign.
A principal and an agent enjoy a fiduciary relationship marked with trust and confidence; therefore, the
agent has the duty to act in good faith to advance the interests of its principal. If petitioner was indeed
acting in good faith, it could have timely informed the Sps. Briones that it was terminating the agency
and its right to file an insurance claim, and could have advised them to facilitate the insurance proceeds
themselves. Petitioner's failure to do so only compounds its negligence and underscores its bad faith.
Therefore, having been negligent in its duties as the duly constituted agent, petitioner must be held liable
for the damages suffered by the Sps. Briones because of non-performance of its obligation as the agent,
and because it prioritized its interests over that of its principal.
40
THE BANK, IN ITS CAPACITY AS A PRINCIPAL, MAY BE ADJUDGED LIABLE UNDER THE
DOCTRINE OF APPARENT AUTHORITY
2. Citystate Savings Bank v. Tobias

G.R. No. 227990, March 7, 2018
Reyes, Jr., J.
FACTS:
This is a petition for review on certiorari under Rule 45 seeking to annul and set aside the Decision and
Resolution issued by the CA.
Sometime in 2002, respondent Teresita Tobias (Tobias) was introduced by her youngest son to Rolando
Robles (Robles), branch manager of petitioner Citystate Savings Bank in its Baluiag, Bulacan branch.
Robles was able to persuade Tobias to open an account with petitioner. Later, Robles offered Tobias to
sign up in petitioner’s back-to-back scheme. Enticed, Tobias signed the pertinent documents and
invested P1,800,000.00 in petitioner through Robles. In 2005, Robles failed to remit the interest.
Respondents tried to reach Robles but he could no longer be found. It was later found out that Robles
had appropriated the money for personal use. Hence, respondents filed a Complaint for sum of money
and damages against Robles and petitioner. RTC found Robles liable but absolved petitioner from any
liability. CA reversed the RTC’s decision. It found both Robles and petitioner jointly and solidarily liable.
Petitioner alleges that it should not be held liable considering that it has exercised a high degree of
diligence in the selection and supervision of its employees, including Robles, and that it took proper
measures in hiring the latter. Petitioner also argues that Robles acted in his personal capacity in dealing
with Tobias, who agreed with full knowledge and consent to the back-to-back loans and that it was not
privy to the transactions between them. Therefore, petitioner submits that the CA erred in applying the
doctrine of apparent authority.
ISSUE:
Should petitioner be held jointly and solidarily liable with Robles?
RULING:
Yes, petitioner should be held jointly and solidarily liable with Robles.
The bank, in its capacity as principal, may also be adjudged liable under the doctrine of apparent
authority. The principal's liability in this case however, is solidary with that of his employee. The doctrine
of apparent authority or what is sometimes referred to as the "holding out" theory, or the doctrine of
ostensible agency, imposes liability, not "as the result of the reality of a contractual relationship, but
rather because of the actions of a principal or an employer in somehow misleading the public into
believing that the relationship or the authority exists."
In the case at bar, petitioner acknowledged Robles' authority and it honored the accounts so opened
outside the bank premises. To recall, prior to the alleged back-to-back scheme entered into by the
respondents, Robles has consistently held himself out as representative of the petitioner in seeking and
signing respondents as depositors to various accounts. It bears to stress that in the course of the said
investment, the practice has been for Tobias to surrender the passbook to Robles' for updating. All of
which accounts have been in order until after the respondents was lured into entering the back-to-back
scheme. In this light, respondents cannot be blamed for believing that Robles has the authority to
transact for and on behalf of the petitioner and for relying upon the representations made by him. After
all, Robles as branch manager is recognized "within his field and as to third persons as the general
agent and is in general charge of the corporation, with apparent authority commensurate with the
ordinary business entrusted him and the usual course and conduct thereof." Therefore, petitioner is
estopped from denying Robles' authority. As the employer of Robles, petitioner is solidarily liable to the
respondents for damages caused by the acts of the former, pursuant to Article 1911 of the Civil Code.
41
CORPORATION WHO CLOTHES AGENT WITH APPARENT AUTHORITY IS ESTOPPED FROM

DENYING SUCH APPARENT AUTHORITY
3. Calubad v. Ricarcen Development Corp.

G.R. No. 202364, August 30, 2017
Leonen, J.
FACTS:
This resolves the Petition for Review on Certiorari filed by petitioner Arturo C. Calubad (Calubad),
assailing the of the CA which upheld the Decision of RTC.
Respondent Ricarcen Development Corporation (Ricarcen) took out a loan secured by a Real Estate
Mortgage (REM) from Calubad on October 15, 2001 through its President, Marilyn. Subsequently,
Ricarcen executed 2 additional loans and secured it with same property. To prove her authority, Marilyn
presented Calubad with a Board Resolution and Secretary's Certificates. After failure to pay, Calubad
initiated extrajudicial foreclosure proceedings on the REM. Ricarcen claimed that upon learning of the
foreclosure, Ricarcen removed her as president and appointed a new president. Ricarcen initiated the
Complaint for Annulment of REM and Extra Judicial Foreclosure.
The RTC granted Ricarcen's complaint and annulled the mortgage contracts. On appeal, CA dismissed
Calubad's appeal and affirmed the RTC. Petitioner asserts that even if Marilyn Soliman had acted
without or in excess of her actual authority, if she acted within the scope of an apparent authority with
which Ricarcen has clothed her by holding her out to appear as having such authority, Ricarcen is bound
thereby in favor of petitioner who in good faith relied on such apparent authority.
ISSUE:
Is Ricarcen Development Corporation estopped from denying or disowning the authority of Marilyn R.
Soliman, its former President, from entering into a contract of loan and mortgage with Arturo C. Calubad?
RULING:
Yes, Ricarcen is estopped from denying authority of Marilyn Soliman to enter into contracts of loan.
The doctrine of apparent authority provides that even if no actual authority has been conferred on an
agent, his or her acts, as long as they are within his or her apparent scope of authority, bind the principal.
However, the principal's liability is limited to third persons who are reasonably led to believe that the
agent was authorized to act for the principal due to the principal's conduct.
In this case, it was within Marilyn's scope of authority to act for and enter into contracts in Ricarcen's
behalf. Her broad authority from Ricarcen can be seen with how the corporate secretary entrusted her
with blank yet signed sheets of paper to be used at her discretion. She also had possession of the
owner's duplicate copy of the land title covering the property mortgaged to Calubad, further proving her
authority from Ricarcen. Calubad could not be faulted for continuing to transact with Marilyn, even
agreeing to give out additional loans, because Ricarcen clearly clothed her with apparent authority.
Likewise, it reasonably appeared that Ricarcen's officers knew of the mortgage contracts entered into
by Marilyn in Ricarcen's behalf as proven by the issued Banco De Oro checks as payments for the
monthly interest and the principal loan. Ricarcen claimed that it never granted Marilyn authority to
transact with Calubad or use the Quezon City property as collateral for the loans, but its actuations say
otherwise. It appears as if Ricarcen and its officers gravely erred in putting too much trust in Marilyn.
However, Calubad, as an innocent third party dealing in good faith with Marilyn, should not be made to
suffer because of Ricarcen's negligence in conducting its own business affairs.
42
BREACH OF UNDERTAKINGS IN THE DEED OF TRUST BY TRUSTEE IN CONTRAVENTION OF

THE EXPRESS PROHIBITION THEREIN AGAINST DISPOSITION/MORTGAGE OF PROPERTIES
MAKES THE MORTGAGE BY TRUSTEE NULL AND VOID
4. Spouses Chua v. United Coconut Planters Bank

G.R. No. 215999, August 16, 2017
Bersamin, C.J.
FACTS:
This case is a motion for reconsideration seeking to modify the decision of the SC declaring that
respondent Revered’s REM covering the properties owned by petitioners was null and void.
Petitioners entered into a Joint Venture Agreement (JVA) with Gotesco Properties, Inc. (Gotesco), for
the development of their properties into a subdivision. Pursuant to the JVA, a deed of absolute sale was
executed to transfer lands to Revere Realty and Development Corporation (Revere), a corporation
controlled and represented by respondent Go, but there was also a deed of trust confirming that Chuas
retained absolute ownership over the land. Prior to the execution of JVA, petitioner and Go had separate
loans with UCPB. Thereafter, petitioners, with Lucena Grand Central Terminal Inc. (LGCTI), secured a
loan with UCPB, and executed a Real Estate Mortgage to secure the loan in favor of the latter through
a Memorandum of Agreement (MOA), where both parties agreed to consolidate the outstanding
obligations of Chua and LGCTI. Unknown to the petitioners, UCPB and Revere executed another REM
involving the properties supposedly held in trust by Revere on the same day. Later, UCPB foreclosed
the mortgages with the Chuas and Revere.
Petitioners informed UCPB that Go’s debts were mistakenly secured by a mortgage of properties they
owned and further requested that the proceeds of the foreclosure sale of the properties be applied only
to their obligation. However, UCPB did not heed petitioners' requests.
Petitioner contends that the Revere’s REM and its subsequent foreclosure were void since it involves
the properties which the former owed by virtue of the deed of trust. On the other hand, respondent
argued that the fact that the Revere REM and petitioners' REM had been executed on the same date
indicated and that the titles of the parcels of land subject of the Revere REM were then in the name of
Revere expressly show petitioner’s express consent to Revere REM.
ISSUE:
Did petitioners give their express consent to the Revere REM from the fact that the titles of the parcels
of land subject of the Revere REM were then in the name of Revere?
RULING:
No, petitioners did not give their express consent to Revere REM.
By virtue of the DOA, the subject properties were only held in trust for petitioner by respondents REVERE
and GO. Not being owners of the properties covered by the deeds of trust, they did not have any authority
to constitute a mortgage over them to secure their personal and corporate obligations.
Further, the Court cannot agree with Justice Caguioa view that petitioners had given their express
consent to the Revere REM since Revere REM and petitioners' REM had been executed on the same
date indicated and that the titles of the parcels of land subject of the Revere REM were then in the name
of Revere. He theorizes that the only way petitioners could have "conveyed and transferred the parcels
of land to UCPB were for petitioners to cause Revere to execute the Revere REM." The assumption
lacks factual basis. The written agreements of the parties contained no express stipulation to support
the assumption. Also, UCPB presented no evidence during the trial to establish the giving of petitioners'
consent - whether express or implied - to the Revere REM. On the contrary, the MOA nowhere expressly
authorized Revere to enter into and execute the REM in favor of UCPB in order to implement the terms
of the MOA or realize the object of the MOA.
43
A CONTRACT OF AGENCY IS CREATED WHEN A PERSON ACTS FOR OR ON BEHALF OF

A PRINCIPAL
5. Spouses Yulo v. Bank of the Philippine Islands

G.R. No. 217044, January 16, 2019
Leonen, J.
FACTS:
In this petition for review on certiorari, the Spouses Yulo assails the CA Decision upheld the RTC
Decision which ruled that BPI successfully proved by preponderance of evidence that the Yulo
Spouses failed to comply with the Terms and Conditions of their contract.
BPI issued Rainier Yulo a pre-approved credit card. His wife, Juliet, was also given a credit card
as an extension of his account. Rainier and Juliet used their respective credit cards by regularly
charging goods and services on them. The spouses regularly settled their accounts with BPI at
first, but started to be delinquent with their payments. Their outstanding balance ballooned.
Demand letters were sent but they still failed to pay. Thus, BPI filed a complaint for sum of money.
The Yulo Spouses admitted that they used the credit cards issued by the BPI but claimed that their
total liability was only P20,000.00. They also alleged that BPI did not fully disclose to them the
Terms and Conditions on their use of the issued credit cards. These terms and conditions were
never presented as evidence.
Respondent, on the other hand, asserts that when petitioners used their credit cards, they bound
themselves to its Terms and Conditions in the credit card packet's Delivery Receipt. They further
alleged the Delivery Receipt for the credit card packet was signed by Rainier's authorized
representative, Jessica Baitan (Baitan). It therefore, successfully discharged its burden, as the
signed Delivery Receipt and Rainier's use of credit card were proof that Rainier agreed to be bound
by its Terms and Conditions.
ISSUE:
Is Rainier Jose M. Yulo and Juliet L. Yulo bound by the Terms and Conditions on their use of credit
cards issued by respondent despite the fact that these were not fully disclosed to them but to an
alleged agent, Baitan?
RULING:
No, Spouses Yulo are not bound by the said Terms and Conditions.
While the Delivery Receipt showed that Baitan received the credit card packet for petitioner Rainier,
it failed to indicate Baitan's relationship with him. Respondent also failed to substantiate its claim
that petitioner Rainier authorized Baitan to act on his behalf and receive his pre-approved credit
card. The only evidence presented was the check mark in the box beside "Authorized
Representative" in the Delivery Receipt. This self-serving evidence is obviously insufficient to
sustain respondent's claim.
A contract of agency is created when a person acts for or on behalf of a principal, with the latter's
consent or authority. Unless required by law, an agency does not require a particular form, and
may be express or implied from the acts or silence of the principal. Respondent fell short in
establishing an agency relationship between petitioner Rainier and Baitan, as the evidence
presented did not support its claim that petitioner Rainier authorized Baitan to act on his behalf.
Without proof that petitioner Rainier read and agreed to the Terms and Conditions of his pre-
approved credit card, petitioners cannot be bound by it.
44
USE OF A JOINT VENTURE CORPORATION ALLOWS THE CO-VENTURERS TO TAKE FULL

ADVANTAGE OF THE LIMITED LIABILITY NOT AVAILABLE IN A PARTNERSHIP
6. Mabuhay Holdings Corp. v. Sembcorp Logistics, Ltd.

G.R. No. 212734, December 05, 2018
Tijam, J.
FACTS:
This is an appeal from the Decision dated November 19, 2013 and the Resolution dated June 3, 2014
of the CA reversing and setting aside the Decision of the RTC which ruled that a “simple contractual
payment obligation" of Mabuhay and IDHI to Sembcorp had been rescinded and modified by the merger
or confusion of the person of IDHI into the person of Sembcorp.
Mabuhay and IDHI incorporated Water Jet Shipping Corporation (WJSC) in the Philippines to engage in
the venture of carrying passengers on a common carriage by inter-island fast ferry. Subsequently,
Mabuhay, IDHI, and Sembcorp entered into a Shareholders' Agreement setting out the terms and
conditions governing their relationship in connection with a planned business expansion of WJSC and
WJNA. Sembcorp decided to invest in the said corporations. As a result of Sembcorp's acquisition of
shares, Mabuhay and IDHI's shareholding percentage in the said corporations were reduced. Sembcorp
requested for the payment of its Guaranteed Return from Mabuhay and IDID. Mabuhay admitted its
liability but asserted that since the obligation is joint, it is only liable for fifty percent (50%) of the claim.
Demand letters were sent to no avail. Sembcorp then filed a Request for Arbitration before the
International Court of Arbitration of the International Chamber of Commerce (ICC) in accordance with
the Agreement. On April 20, 2004, a Final Award was rendered by Dr. Anan Chantara-Opakom, the Sole
Arbitrator appointed by the ICC which directed Mabuhay to pay half of the guaranteed return plus
interests.
Mabuhay alleges that Sembcorp became the controlling stockholder of IDHI by acquiring substantial
shares of stocks. It claimed that it has already been released from the joint obligation with IDHI as
Sembcorp assumed the risk of loss when it acquired absolute ownership over the aforesaid shares.
ISSUE:
Can Sembcorp demand the payment of the guaranteed return notwithstanding the fact that it became a
controlling stockholder of IDHI?
RULING:
No, Sembcorp cannot demand payment of the guaranteed return.
Mabuhay contends that it entered into a joint venture, which is akin to a particular partnership, with
Sembcorp. Applying the laws on partnership, the payment of the Guaranteed Return to Sembcorp is a
violation of Article 1799 of the Civil Code, as it shields the latter from sharing in the losses of the
partnership. Ergo, enforcement of the Final Award would be contrary to public policy as it upholds a void
stipulation.
The joint venture between Mabuhay, IDHI, and Sembcorp was pursued under the Joint Venture
Corporations, WJSC and WJNA. By choosing to adopt a corporate entity as the medium to pursue the
joint venture enterprise, the parties to the joint venture are bound by corporate law principles under
which the entity must operate. Among these principles is the limited liability doctrine. The use of a joint
venture corporation allows the co-venturers to take full advantage of the limited liability feature of the
corporate vehicle which is not present in a formal partnership arrangement.
45
A LETTER AUTHORIZING CORPORATE OFFICERS TO TRANSACT BUSINESS FOR THE

CORPORATION DOES NOT SUFFICE FOR THE APPLICATION OF THE DOCTRINE OF APPARENT
AUTHORITY
7. Ayala Land, Inc. v. ASB Realty Corp.

G.R. No. 210043, September 26, 2018
Del Castillo, J.
FACTS:
This is a Petition for review on certiorari to assail the Decision and Resolution of the CA affirming the
Decision of the RTC which (a) declared null and void and unenforceable the May 18, 1994 Contract to
Sell entered into between ALI and the Ramos children for the latter's lack of authority to sign the Contract
to Sell on behalf of respondent EMRASON; and, (b) declared valid, binding and enforceable the May
21, 1994 Letter-Agreement entered into between respondent E.M. Ramos & Sons, Inc. (EMRASON)
and ASB Realty Corporation (ASBRC).
ALI and the Ramos children entered into a Contract to Sell dated May 18, 1994, under which ALI agreed
to purchase the Dasmariñas Property. However, a Letter-Agreement dated May 21, 1994 and a Real
Estate Mortgage respecting the Dasmariñas Property had been executed by Ramos, Sr. (President of
EMRASON) and Antonio for and in behalf of EMRASON, on one hand, and ASBRC on the other. Prior
to the execution of the Letter-Agreement, a special stockholders' meeting was held on May 17, 1994
during which EMRASON's stockholders "authorized, approved, confirmed and ratified" the Resolution
of EMRASON's Board of Directors (Board Resolution), which approved the Letter-Agreement and
authorized Ramos, Sr. and Antonio to sign the same.
ASBRC and EMRASON filed a Complaint for the nullification of the Contract to Sell executed between
ALI and the Ramos children and the cancellation of the annotations on the TCTs over the Dasmariñas
Property.
ALI insists that the August 3, 1993 letter of Ramos, Sr. to ALI authorizing the Ramos children to negotiate
with them was proof that EMRASON had acknowledged the authority of the Ramos children to transact
with ALI and that such letter met the requisites for the application of the doctrine of apparent authority.
ISSUE:
Is a letter of a corporate President authorizing its officers to transact business with another corporation
sufficient to clothe said officers the apparent authority to enter into a contract with that corporation?
RULING:
No, a letter authorizing corporate officers to transact business for the corporation does not suffice for the
application of the doctrine of apparent authority.
"A contract is void if one of the essential requisites of contracts under Article 1318 of the New Civil Code
is lacking." Consent, being one of these requisites, is vital to the existence of a contract "and where it is
wanting, the contract is non-existent." For juridical entities, consent is given through its board of directors.
As this Court held in First Philippine Holdings Corporation v. Trans Middle East (Phils.) Equities, Inc ., a
juridical entity, like EMRASON, "cannot act except through its board of directors as a collective body,
which is vested with the power and responsibility to decide whether the corporation should enter into a
contract that will bind the corporation, subject to the articles of incorporation, by-laws, or relevant
provisions of law."
Although the general rule is that "no person, not even its officers, can validly bind a corporation" without
the authority of the corporation's board of directors, this Court has recognized instances where third
persons' actions bound a corporation under the doctrine of apparent authority or ostensible agency.
"Acts done by the corporate officers beyond the scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or is estopped from denying them."
46
A PARTNERSHIP FOR THE PRACTICE OF LAW HAS A SEPARATE AND DISTINCT JURIDICAL
PERSONALITY
8. Saludo, Jr. v. Philippine National Bank

G.R. No. 193138, August 20, 2018
Jardeleza, J.
FACTS:
This is a petition for review on certiorari assailing the decision of the CA which affirmed with modification
the Omnibus Order issued by the RTC Makati ruling that respondent Philippine National Bank (PNB)
counterclaims against petitioner Saludo and the Saludo Agpalo Fernnadez and Aquino Law Office
(SAFA Law Office) should be reinstated in its answer.
SAFA Law office entered into a contract of lease with PNB whereby it agreed to lease the 2nd floor of
the PNB Financial Center Building in Quezon City. When the contract expired, SAFA Law Office
continued to occupy the premises but discontinued paying its monthly rentals. PNB sent several demand
letters for payment of unpaid rentals. Having failed to negotiate, Saludo, in his capacity as managing
partner of SAFA Law Office, filed an amended complaint for accounting/recomputation of unpaid rentals
and damages against PNB.
The latter filed a motion to include SAFA Law Office as principal plaintiff arguing that it is the lessee in
the contract of lease and that Saludo merely signed as managing partner of the law firm. Later on, it filed
a compulsory counterclaim against SAFA Law Office for overdue rentals arguing that it should be
solidarily liable with Saludo. RTC issued an omnibus order denying PNB’s motion to include as
indispensable party the law firm and granted Saludo’s motion to dismiss the counterclaims ruling that
SAFA Law Office is a sole proprietorship and a non-legal entity that cannot sue or be sued.
ISSUE:
Is SAFA Law Office a partnership which has a separate and distinct juridical personality?
RULING:
Yes, SAFA Law Office was constituted as a partnership and has thus acquired juridical personality by
operation of law.
Article 1767 of the Civil Code provides that by a contract of partnership, two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the intention of dividing
the profits among themselves. Two or more persons may also form a partnership for the exercise of a
profession. Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a
partnership at the time its partners signed the Articles of Partnership wherein they bound themselves to
establish a partnership for the practice of law, contribute capital and industry for the purpose, and receive
compensation and benefits in the course of its operation.
Having settled that SAFA Law Office is a partnership, we hold that it acquired juridical personality by
operation of law. The perfection and validity of a contract of partnership brings about the creation of a
juridical person separate and distinct from the individuals comprising the partnership. SAFA Law Office
entered into a contract of lease with PNB as a juridical person to pursue the objectives of the partnership.
The terms of the contract and the manner in which the parties implemented it are a glaring recognition
of its juridical personality. Saludo's claims that SAFA Law Office is his sole proprietorship and not a
legal entity fail in light of the clear provisions of the law on partnership. To reiterate, SAFA Law Office
was created as a partnership, and as such, acquired juridical personality by operation of law. Hence, its
rights and obligations, as well as those of its partners, are determined by law and not by what the
partners purport them to be.
Therefore, SAFA Law Office is a juridical person that is the real party-in-interest in the case filed by
Saludo against PNB.
47
ARBITRATION CLAUSE APPLIES TO AGENT EVEN IF NOT SIGNATORY
9. Strickland v. Ernst & Young LLP

G.R. No. 193782, August 1, 2018
Jardeleza, J.
FACTS:
These are consolidated petitions for review on certiorari under Rule 45 both filed by Dale Strickland
(Strickland) first against Ernst & Young LLP (EYLLP) assailing the decision of CA which referred the
dispute between Strickland and EYLLP to arbitration. Second, against Punongbayan & Araullo (PA)
assailing the decision of CA which directed the suspension of the proceedings against PA.
On March 26, 2002, National Home Mortgage Finance Corporation (NHMFC) and PA entered into
Financial Advisory Services Agreement (FASA) for NHMFC’s Unified Home Lending Program (UHLP).
At time of engagement, PA was the PH member of EYLLP. Strickland, as partner of EYLLP was part of
the team which handled the FASA. In July 2004, the transactional relationship between parties went
awry. NHMFC learned of EYLLP’s intention to remove Strickland from the team which caused Strickland
to resign. However, since NHMFC was intent on retaining Strickland’s services despite separation from
EYLLP, they negotiated. At the end of the project, Strickland filed the case against both EYLLP and PA
asking for ‘equitable compensation for professional services’ which PA refused to pay.
The CA annulled the RTC decision which denied EYLLP’s Motion to Refer to Arbitration. PA filed a
Motion to Suspend on the ground that any settlement during the arbitration between EYLLP and
Strickland may cause prejudice to PA. This was subsequently granted in the CA.
ISSUES:
1. Is PA an agent of EYLLP?
2. Did the CA err in suspending the proceedings against PA pending the arbitrartion between Strickland
and EYLLP
RULING:
1. Yes, PA was unequivocally an agent of EYLLP at the time it executed the FASA with NHMFC for the
UHLP Project.
At least two documents that PA represented EYLLP/EYAPFS in the FASA with NHMFC for the UHLP
Project. The March 26, 2002 letter covering the FASA between NHMFC and PA, where PA, as one of
the parties, was designated in all references as "P&A/ERNST & YOUNG" or "P&A/E&Y." This fact of
agency relationship between PA and EYLLP cannot be denied and avoided by Strickland, given Articles
1868 and 1873 of the Civil Code which provides, thus:
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.
Art. 1873. If a person specially informs another or states by public advertisement that he has given a
power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former
case with respect to the person who received the special information, and in the latter case with regard
to any person.
2. No, the suspension of the proceedings is proper.
Having established the fact of agency, there is no question that P&A derives its authority for the UHLP
liquidation from Ernst & Young Asia. As such agent, P&A cannot sue and be sued on the contract of
employment between Strickland and Ernst & Young Asia. Moreover, that PA is not a signatory to the
Partnership Agreement containing the arbitration clause is of no moment. The arbitration clause is
applicable to PA and effectively stays the proceedings against it.
48
ONE OF THE MODES OF EXTINGUISHING A CONTRACT OF AGENCY IS BY THE DEATH OF

EITHER THE PRINCIPAL OR THE AGENT
10. Lopez v. Court of Appeals

G.R. No. 177855, August 1, 2018
Bersamin, J.
FACTS:
PRIMEX, as vendee, entered into a Deed of Conditional Sale (DCS) relative to a portion of land
particularly designated. The parties agreed at a purchase price of P39,208,120.00.
The company had dutifully complied with all its monetary obligations under the said contract and was
again ready to pay another P2,000,000.00 upon presentation by the defendants-appellees, among
others, of a valid certificate of title in the name of one or all of the vendors as sanctioned under paragraph
II(d) of the DCS.
However, instead of delivering a valid title to PRIMEX, the defendants-appellees delivered to the former
Transfer Certificate of Title. PRIMEX refused to accept delivery a Transfer Certificate of Title as a valid
and sufficient compliance with the terms of the DCS which would warrant the release of another
P2,000,000.00 in accordance with the schedule of payments stipulated by the parties. Hence, PRIMEX
filed a complaint for specific performance and preliminary injunction. Where it was ultimately ruled that
the Deed of Conditional Sale was rescinded and ordered the restitution of the parties.
The parties submitted the Compromise Agreement with Joint Motion to Dismiss and Withdrawal of
Petition. The Court issued the resolution: (1) noting the Compromise Agreement with Joint Motion to
Dismiss and Withdrawal of Petition; (2) granting the Joint Motion to Dismiss and Withdrawal of Petition.
Thereafter, the heirs of Marcelino Lopez filed their oppositions, arguing that Atty. Angeles no longer had
the authority to enter into and submit the Compromise Agreement because the special power of attorney
in his favor had ceased to have force and effect upon the death of Marcelino Lopez.
ISSUE:
Did Atty. Angeles have the authority to enter into and submit the compromise agreement?
RULING:
No, Atty. Angeles did not have the authority to enter into and submit the compromise agreement.
The authority of Atty. Angeles was terminated upon the death of Marcelino Lopez. One of the modes of
extinguishing a contract of agency is by the death of either the principal or the agent. In Rallos v. Felix
Go Chan & Sons Realty Corporation, the Court declared that because death of the principal extinguished
the agency, it should follow a fortiori that any act of the agent after the death of his principal should be
held void ab initio unless the act fell under the exceptions established under Article 1930 and1931 of
the Civil Code. The exceptions should be strictly construed. In other words, the general rule is that the
death of the principal or, by analogy, the agent extinguishes the contract of agency, unless any of the
circumstances provided for under Article 1930 or Article 1931 obtains; in which case, notwithstanding
the death of either principal or agent, the contract of agency continues to exist.
The Compromise Agreement, was entered into more than two years after the death of Marcelino Lopez.
Considering that Atty. Angeles had ceased to be the agent upon the death of Marcelino Lopez, Atty.
Angeles' execution and submission of the Compromise Agreement in behalf of the Lopezes by virtue of
the special power of attorney executed in his favor by Marcelino Lopez were void ab initio and of no
effect. The special power of attorney executed by Marcelino Lopez in favor of Atty. Angeles had by then
become functus officio. For the same reason, Atty. Angeles had no authority to withdraw the petition for
review on certiorari as far as the interest in the suit of the now-deceased principal and his successors-
in interest was concerned.
49

CIVREV2 1920 Partnership, Agency, Trusts

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SAN BEDA UNIVERSITY

CIVIL LAW REVIEW II

III. Partnership, Agency, and Trusts

PARTNERSHIP HAS A JURIDICAL PERSONALITY OF ITS OWN, DISTINCT AND SEPARATE

2. Commissioner of Internal Revenue v. Suter

WHETHER THE PARTIES TO A PARTICULAR CONTRACT HAVE THEREBY ESTABLISHED

3. Aurbach v. Sanitary Wares Manufacturing Corp.

A PARTNER IS AN AGENT OF THE PARTNERSHIP

4. Eligio Catalan v. Ramon Gatchalian

IN COMPENSATION CASES, THE LIABILITY OF BUSINESS PARTNERS SHOULD BE SOLIDARY

5. Liwanag v. Workmen’s Compensation Commission

Accordingly, the present controversy should be decided in favor of the appellees.

GENERALLY, A PARTNERSHIP MAY BE CONSTITUTED IN ANY FORM, EXCEPT WHERE

PRESCRIPTIVE PERIOD BEGINS TO RUN ONLY AFTER FINAL ACCOUNTING

7. Emnace v. Court of Appeals

Hence, the said action is not barred by prescription.

THE MANAGER OF THE PARTNERSHIP HAS THE DUTY TO RENDER ACCOUNTS

8. Aldecoa & Co. v. Warner, Barnes & Co.

9. Shell Co. of the Philippines, Ltd. v. Firemen’s Insurance Co. of Newark

AGENT’S AUTHORITY TO SELL REAL ESTATE MUST BE CONFERRED SPECIFICALLY IN

10. Cosmic Lumber Corp. v. CA

BY THE CONTRACT OF AGENCY, A PERSON BINDS HIMSELF TO RENDER SOME SERVICE OR

12. Manila Memorial Park Cemetery, Inc. v. Linsangan

BY THE CONCEPT OF AGENCY, RIGHTS GIVEN TO A STOCKHOLDER CAN BE EXERCISED BY

13. W. G. Philpotts v. Philippine Manufacturing Co.

AGENCIES COUPLED WITH AN INTEREST CANNOT BE REVOKED AT WILL BY ONE OF THE

14. Sevilla v. Court of Appeals

SALE MADE BY AGENT THROUGH POWER OF ATTORNEY RATIFIED BY A JUDGE OF A COURT

15. Barreto v. Tuason

AN AGENT WHO TAKES A SECRET PROFIT IN THE NATURE OF A BONUS, GRATUITY OR

16. Domingo v. Domingo

Hence, as a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo

AN OCCASIONAL LOAN OF MONEY, SECURED BY A MORTGAGE, IN THE DUE COURSE OF

17. Behn, Meyer & Co. (Ltd.) v. W. T. Nolting

18. Commissioner of Internal Revenue v. Cadwallader Pacific Co.

19. Barton v. Leyte Asphalt & Mineral Oil Co., Ltd

20. Eurotech Industrial Technologies, Inc., v. Cuizon

A PRINCIPAL IN WITHDRAWING THE AUTHORITY GIVEN TO AN AGENT CANNOT TAKE

21. Infante v. Cunanan

22. Buason v. Panuyas

23. Rallos v. Felix Go Chan & Sons

AGENCY CANNOT BE REVOKED IF A BILATERAL CONTRACT DEPENDS UPON IT, OR IF IT IS

24. Bisaya Land Transportation Co., Inc. v. Sanchez

POWER OF SALE GIVEN IN A REAL ESTATE MORTGAGE IS A POWER COUPLED WITH AN

25. Pasno v. Ravina

26. Del Rosario v. Abad

WHETHER THE TRUST IS RESULTING OR CONSTRUCTIVE, ITS ENFORCEMENT MAY BE

27. Ramos v. Ramos

28. Spouses Huang v. Court of Appeals

29. Cuaycong v. Cuaycong

LACHES MAY BAR AN ACTION BROUGHT TO ENFORCE A CONSTRUCTIVE TRUST

30. Fabian v. Fabian

REGISTRATION OF THE DEED OF EXTRA-JUDICIAL SETTLEMENT CONSTITUTES

31. Gerona v. De Guzman

32. Bueno v. Reyes

SIMULATED TRANSFER OF LOT CREATES IMPLIED TRUST

33. Tongoy v. Court of Appeals

MERE POSSESSION OF A CERTIFICATE OF TITLE UNDER THE TORRENS SYSTEM IS NOT

34. Caragay-Layno v. Court of Appeals

REVOCATION AS A FORM OF EXTNGUISHING AGENCY ONLY APPLIES IN CASES OF

2. No, the agency was not revoked or terminated.

2. Citystate Savings Bank v. Tobias

CORPORATION WHO CLOTHES AGENT WITH APPARENT AUTHORITY IS ESTOPPED FROM

3. Calubad v. Ricarcen Development Corp.