DIRECTIONS

There are SIXTY (60) Multiple Choice Questions (MCQs) and FOUR (4) Essay
Questions to be answered within one hour and thirty minutes. The remaining thirty
minutes is for submitting the exam and allowance for technical problems/delays. The
MCQ portion contains questions worth 60% of the whole examination, while the Essay
portion contains questions worth 40%. For MCQs, choose the BEST answer from
among the offered choices. For Essay Questions, a mere "Yes" or "No" answer without
any corresponding explanation or discussion will not be given any credit. Thus,  always
briefly but fully explain your answers although the question does not expressly ask for
an explanation.

1. Allan invested in TB bills with BPO Bank. The placement was for 45 days at 13%
annual interest. With the assistance of bank employee, Sam, P500,000 was
withdrawn from Allan’s savings account and applied to the investment. Right
before the lapse of the 45-day period, Allan went to the bank to renew his
investment. Sam, the same bank employee who assisted him before prepared
the papers for the transaction. He was, however, required to sign a withdrawal
slip for P500,000.00 as a new requirement of the bank. After 50 days, Allan again
went back to the bank to withdraw his money but was told that based on the
records of the bank, he has already withdrawn his investment. When the bank
refused to give way to his request to withdraw, he filed a suit. Is BPO bank liable
for the acts of its employee?

A. No, Allan was solely at fault for his negligence.

B. No, there was no principal-agent relationship between the bank and the
employee
C. Yes, as principal, the bank must comply with all the obligations which its
agent may have contracted within the scope of his authority
D. Yes, the employee was acting within the scope of his employment

2. In the following instances the agent is liable for damages, except

a. There being conflict between his interest and those of the principal, he prefers
his own
b. Commission agent fails to collect the credits despite diligent efforts
c. Agent carries out the agency even if it would manifestly result in loss to the
principal
d. Commission agent receives the goods consigned to him without making a
written statement of the physical condition of the goods.

3. Which of the following statements is true?

A. The profits realized in the sale of trust properties shall belong to the
beneficiaries
 B. The trustee has the duty to account to the trustor for the affairs of the trust
and can convert the use of the trust properties for his own benefit and for the
benefit of the beneficiary
C. The trustee becomes personally liable if he fails to carry out the trust using
utmost care or extra ordinary diligence
D. The beneficiaries are entitled to receive as income the profits realized from
the sale of trust properties which are part of the capital held in trust

4. The following are the requisites for solidary liability of the principals, except:

a. multiplicity of principals
b. multiplicity of agents
c. concurrence of the principals in the appointment of the same agent/s
d. commonality of the transaction or undertaking

5. The agent is not personally liable to third persons, except

a. When he fails to act as such
b. When violates the personal instructions and orders of the principal
c. When he acts within the scope of his authority and in his own name, involving
property belonging to the principal
d. When acts in the name of the principal, exceeding the limits his authority after
giving sufficient notice of his powers

6. Which of the following statements is wrong?

A. The trustee cannot exercise acts of beneficence employing the property that
he holds for the benefit of the beneficiary
B. The trustee cannot donate the property entrusted to him
C. The trustor disposes of his full ownership of the trust properties in favor of the
beneficiary who assumes legal title thereto and the trustee, to whom
beneficial or equitable title shall pertain
D. Express trusts are created by the intention of the trustor or of the parties while
Implied trusts comes into being by operation of law

7. Nikki authorized Hayley to sell a car. Without the knowledge of Hayley, Nikki sold
the same car to Albert. It was agreed that Nikki would deliver the car the
following day. Before delivery, Hayley sold the same to Ross who bought it in
good faith and took possession thereof. Who is the owner of the car?
a. Nikki
b. Albert
c. Ross
d. Hayley

8. Peter gives power of attorney to Alex to sell the former’s goods for PHP 10,000
cash for a commission. Alex sells the goods on a 15-day credit term for PHP
 11,000 to Bert without authority from Peter. What is the right of Peter if he ratifies
the sale on credit?
a. He may demand PHP 11,000 from Alex immediately
b. He may collect PHP 11,000 upon payment of Bert
c. He may only collect PHP 10,000
d. Alex shall only account for PHP 10,000 to him

9. Statement A - An express trust is not susceptible to charges of prescription or

laches.
Statement B - in implied trust, it is possible that the cause of action of the cestui que
trust maybe extinguished by prescription or laches.
A. Both statements are true
B. Both statements are wrong
C. Only statement A is true
D. Only statement B is true

10. The following are obligations of the principal to the agent, except:

A. To advance to the agent sums necessary for the execution of the agency
B. To be solidarily liable with the agent for all the consequences of the agency
C. To comply with all the obligations contracted by the agent
D. To indemnify the agent for all the damages with the execution of the agency
may have caused the agent

11. Which of the following is the best manifestation of an agency to sell goods
delivered by Ping to Isko for sale to third parties?
a. Isko earns a commission equivalent to 5 percent of the selling price.
b. Isko determines the selling price to third parties.
c. Ping determines the selling price to third parties.
d. Ping gets back unsold goods.

12. Which of the following statements is wrong?

A. There can be no express trusts among individuals unless some property lies
in the middle of such relationship
B. There can be no implied trusts among individuals unless some property lies in
the middle of such relationship
C. There can be no express or implied trusts among individuals unless some
property lies in the middle of such relationship
D. Express trusts and implied trusts must be supported by a written instrument
because they are within the operative coverage of the Statute of Frauds

13. Baby and Emma appointed Serah as their agent to sell their property. Can Baby
alone revoke the special power of attorney?
 A. Yes, a principal has power to revoke provided that it is agreed upon in the
SPA
B. No, she needs the conformity of Emma as joint principal
C. Yes, as the SPA refers to a common transaction
D. No, unilateral revocation prejudices an agent

14. Leni appointed Sara to sell her car for P300,000 payable in cash. Which of the
following statements is not correct?
a. Sara’s authority is express and special.
b. If Leni gave a private instruction that Sara should not consummate the sale
but only to find out if there is a willing buyer, a sale made by Sara will still bind
Leni.
c. Sara may validly sell the car for P350,000.
d. Sara is not entitled to a commission if she sells at P350,000 for exceeding
her authority.

15. There is neither a promise nor any fiduciary relation which arises and the trustee
neither accepts any trust nor intends holding the property for the beneficiary.
a. Typical trust
b. Constructive trust
c. Express trust
d. Implied trust

16. Piolo constituted Alex as his agent to sell his land on April 9, 2019. Piolo sold the
same land to Bob. Such contract was not registered. On April 4, 2020, Alex sold
the land to Candice, who registered the deed of sale and obtained a title. When
Bob discovered the sale and transfer, he went to court and asked for
reconveyance. Will the action prosper?

A. Yes, as the first buyer, Bob has a better right to the land
B. Yes, as Bob purchased the land from the owner
C. No, as Bob was not the first registrant in good faith
D. No, as there is no incompatibility between the two dispositions

17. What is the degree of liability of two or more agents if they have been appointed
simultaneously?
a. Joint and severally unless agreed otherwise
b. Joint or proportionate unless agreed otherwise
c. Solidary unless agreed otherwise
d. No joint liability unless agreed otherwise

18. Which of the following statements is true?

a. No trust shall exist if the trustee appointed declines the designation, unless
the contrary should appear in the instrument constituting the trust
b. If the trust imposes no onerous condition upon the beneficiary, his
acceptance shall be presumed, if there is no proof to the contrary
 c. No express trusts concerning a property or any interest therein may be
proved by parol evidence
d. Specific words are required for the creation of an express trust

19. What is the status of the contract entered into by the agent in excess of the
authority of his principal and in the name of the principal or by a person without
authority of another but in the latter’s behalf?
a. Rescissible unless ratified by the principal
b. Voidable unless ratified by the principal
c. Unenforceable unless ratified by the principal
d. Null and void unless ratified by the principal

20. Which is not one of the circumstances when the principal is not liable for the
expenses of the agent?

A. When the agent incurred them with the knowledge that an unfavorable result
would ensue, if the principal was not aware thereof
B. When it was stipulated that the expenses would be borne by the agent, or that
the latter would be allowed only a certain sum
C. When the expenses were not due to the fault of the agent
D. If the agent acted in contravention of the principal’s instructions, unless the
latter should wish to avail himself of the benefits derived from the contract.

21. Which of the following is not a characteristic of an express trust?

a. Unilateral and Gratuitous contract
b. Essentially a real contract
c. Merely a consensual contract
d. Preparatory contract

22. Which of the following is not an obligation of an agent?

a. To be responsible for fraud or negligence causing injury to the property of his

principal.
b. To render an accounting of his transactions even if exempted by stipulation.
c. To lend money to the principal at the legal rate of interest if authorized to
borrow.
d. Not to loan to himself if authorized to lend money at an interest.

23. Sugar appointed Honey as her agent to sell her house and lot. One week
thereafter, Sugar appointed Candy as her agent to sell the same house and lot.
What is the effect of the appointment of Candy with respect to the agency of
Honey?

A. Honey and Candy have been given joint agencies

B. Honey and Candy are now solidary agents
C. Candy’s agency is null and void
 D. Honey’s agency is effectively revoked

24. Maria executed a notarial will, where she expressed that she wished to constitute
a trust fund for her paraphernal properties to be administered by her husband
Jose, where 2/3 of the income from rental of her properties were to answer for
the education of deserving but needy honor students while 1/3 was to shoulder
the expenses and fees of the administrator. However, the properties were
excluded and instead adjudicated to the husband as sole heir. The trust created
is a description of:
a. Charitable or Eleemosynary trust
b. Implied trust
c. Constructive trust
d. Contractual trust

25. Tito authorized Kiko to sell his cat to Lito, who was in search of a pet. Kiko talked
to Lito showing pictures of the cat, but Lito told Kiko that he does not want a cat
but a dog. Without informing Tito, Kiko sold his own dog to Lito.

a. Kiko shall be liable for damages to Tito for preferring his own interest over
that of Tito.
b. Kiko is not liable for damages because he did not breach any obligation.
c. Kiko should have asked Tito’s consent before selling his own dog to Lito
because Tito might have a dog for sale too.
d. Tito can seek annulment or opt to ratify the sale of Kiko’s dog to Lito.

26. X, agent of Y, authorized to secure grocery stores to sell Y’s lambanog

exclusively, guaranteed on Y’s behalf the payment of any rent due from the
grocer. Y, informed of this, did nothing. Is Y liable to pay the rents due from the
grocers?
A. No, X acted without authority
B. Yes, Y is obliged to comply with the obligations contracted by X
C. Yes, Y impliedly acquiesced and ratified the acts of X
D. No, X’s acts are invalid

27. Maria executed a notarial will, where she expressed that she wished to constitute
a trust fund for her paraphernal properties to be administered by her husband
Jose, where 2/3 of the income from rental of her properties were to answer for
the education of deserving but needy honor students while 1/3 was to shoulder
the expenses and fees of the administrator. However, the properties were
excluded and instead adjudicated to the husband as sole heir. Which of the
following statements is wrong?
a. The registration in the name of Jose would be erroneous
b. Jose’s possession would be that of a trustee
c. An implied trust is created
d. The properties were inherited by Jose as the sole heir
28. Manny authorized Bong to sell his land at a price of P1,000 per square meter
with a 3% commission. Leodie who was interested in acquiring the lot
approached Bong but the latter said he already talked to someone else. Leodie
promised to give Bong P100,000 bonus if he will sell it to him instead. Which of
the following statements is correct?

a. The sale to Leodie is valid but Bong should give the P100,000 bonus to
Manny.
b. The sale to Leodie is voidable unless ratified by Manny.
c. Bong is entitled to the bonus because it was not violative of the authority
given to him.
d. Bong is entitled to the bonus provided he will not claim his commission to
avoid double compensation.

29. Statement I. “An agency coupled with interest survives the death of the principal.”
Statement II. “An agent cannot retain in his possession the property object of an
agency.”

A. Both statements are true

B. Only Statement I is true
C. Only Statement II is true
D. Both statements are false

30. When property is sold, and the legal estate is granted to one party but the price is
paid by another for the purpose of having the beneficial interest of the property,
which of the following is wrong?
a. The grantee is the trustee
b. The payor is the beneficiary
c. The seller is the trustor
d. There is an implied trust

31. Chel authorized Chiz to manage his rent-a-car business for a month while Chel is
on vacation. After 2 weeks, Chiz, who became busy with his own business,
engaged Migz to operate Migz’s business for the next two weeks. Which of the
following statements is most accurate?

a. Chiz will be responsible for the acts of Migz only if Chel prohibited the
engagement of a sub-agent.
b. If Chel expressly prohibited the appointment of a sub-agent, all the acts of
Migz shall be void.
c. Chiz shall be released from his obligations provided Migz is not notoriously
incompetent or insolvent.
d. Chel shall be obliged to compensate Migz to avoid unjust enrichment.

32. In the following acts done by the agent in the name of the principal, but outside
the scope of his authority, the principal would still be bound personally, except:
 A. When the principal has allowed the purported agent to act as though he had
full powers
B. When the principal has revoked the agency, but the third party has acted in
good faith without notice of such revocation
C. When the principal ratifies such contract, expressly or tacitly
D. When the agency was established in favor a third person who has accepted
the benefit of such agency

33. The following are the rights and obligations of third persons who have contracted
with an agent who has exceeded his authority, except
a. As to third persons, an act is deemed to have been performed within the
scope of the agent’s authority, if such act is within the power of attorney, as
written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent
b. A third person cannot set up the fact that the agent has exceeded his powers,
if the principal has ratified or has signified his willingness to ratify the agent’s
acts
c. A third person may require the agent to present his power of attorney or the
instructions as regards the agency
d. Private or secret orders and instructions of the principal prejudice third
persons who have relied upon the power of attorney or instructions shown to
them

34. When property is sold and the person to whom the title is conveyed is a child of
the one paying the price of the sale, which of the following statements is true?
a. There is an express trust
b. There is a gift in favor of the child
c. There is an implied trust
d. The child is the trustee

35. In 2015, Percy appointed Alfonso as “as his sole and exclusive export sales
agent with full power and authority to sell and export abaca fibers under a firm
sales contract for a period of five years commencing upon the execution of the
agreement and for which the agent shall receive five percent (5%) commission.”
During the five-year period following the execution of the contract, Percy sold
abaca directly to China, and for which Alfonso is now seeking to recover
commission under the exclusive agency arrangement. Is Alfonso entitled to the
commission?

A. Yes, the contract is the law between the parties

B. Yes, the sales were made during the effectivity of the exclusive agency
contract
C. No, Percy effectively revoked the agency
D. No, Alfonso did not execute the agency
36. The following are the rules that shall be observed as regards to the liability of
agent when he appoints a substitute, except
a. If the agent is not prohibited to appoint a substitute, the agent may appoint a
substitute but he shall be responsible for the acts of the substitute
b. If the agent is authorized to appoint a substitute and the principal designated
the person to be appointed as substitute, the agent is not responsible for the
acts of the substitute
c. If the agent is authorized to appoint a substitute and the principal does not
designate the person to be appointed as a substitute, the agent shall be liable
if the person appointed as substitute is notoriously incompetent or insolvent
man
d. If the agent is prohibited to appoint a substitute, the agent cannot appoint a
substitute. If he appoints one, all the acts of the substitute shall be voidable

37. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law.
a. Considered a beneficiary of an implied trust
b. Considered a trustee of an implied trust
c. Considered a trustor for the benefit of the person from whom the property
comes
d. Considered a beneficiary of an express trust for the benefit of the person
from whom the property comes

38. Without authority, X entered a contract of fire insurance purportedly on behalf of

Y. Thereafter, a fire broke. Y now seeks to ratify X’s unauthorized act. May Y
validly ratify X’s contract of insurance?

a. Yes, since neither X nor the insurance company has revoked the insurance
contract.
b. Yes, ratification retroacts to the time before the fire occurred.
c. No, the occurrence of the fire changed the nature of the contract originally
entered by X, rendering it incapable of ratification.
d. No, insurance contracts cannot be ratified.

39. The general rule is that the agent who acts in the name of the principal shall not
be liable to the party with whom he contracts. The following are the exceptions to
the general rule, except
a. If the agent binds himself
b. If the agent exceeds the limits of his authority without giving such party
sufficient notice of his powers
c. If the agent acts without the authority of the principal
d. If the principal ratifies the acts of the agent which exceed the limits of his
authority
40. When any trustee, guardian or other person holding a fiduciary relationship uses
trust funds for the purchase of property and causes the conveyance to be made
to him or to a third person, a trust is established by operation of law in favor.
a. Of the trustee
b. Of the guardian
c. Of the person from whom the property was purchased
d. Of the person to whom the funds belong

41. Pablo borrows money from Anya and as security authorized Anya to sell his land
if the loan is not repaid and pay herself from the proceeds. Can Pablo revoke the
authority he gave to Anya?
A. Yes, the principal’s power to revoke is absolute
B. Yes, the agent will not be prejudiced thereby
C. No, the “agency” does not cover a true agency as it is coupled with interest
D. No, the circumstance requires the application of the law on mortgages

42. Which of the following statements is false?

a. The agent owes interest on the sums he has applied to his own use from the
day the principal made a demand
b. The agent is liable for interest for sums he still owes after the extinguishment
of the agency even without demand from the principal
c. The principal can set up the ignorance of the agent as to matters he himself
ought to have been aware of
d. A del credere agent bears the risk of collection and shall the pay the principal
even if failed to exercise due diligence in collection.

43. If five persons agree to purchase property and by common consent the legal title
is taken in the name of one of them for the benefit of all, a trust is created by
force of law in favor of the others.
a. In equal shares
b. In proportion to the interest of each
c. Who are of legal age
d. Who are minors at the time of purchase

44. Paul executed in favor of Alma a power of attorney authorizing her, among other
things, to collect and receive moneys becoming due from any person to Paul and
to execute discharges therefor. Subsequently, Paul died. Alma received payment
from Dianne, a mortgagor, and although Alma knew at the time of the death of
Paul, did not disclose the fact to Dianne. Is the payment made by Dianne to Alma
binding upon the estate of Paul?
A. Yes, the agency is coupled with interest
B. No, the death of Paul put an end to the agency
C. No, the estate assumes the risks of the non-payment
D. Yes, to prevent further prejudice on a third person
45. Which of the following statements is true?
 a) No Implied trust may be proved by oral evidence
b) Express trust concerning an immovable, or any interest therein maybe proved
by parol evidence
c) No particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended
d) The two types of implied trusts are conventional trust and legal trust

46. Amor, a real estate developer, asked her best friend Roma, a well-known
influencer, for help in selling subdivision lots for which reason, a special power of
attorney to sell was issued to the latter. Roma started posting on her FB and
twitter about the lots and the volume of sales tripled since then.
a. Roma shall earn commission on every lot sold after she began advertising
the same.
b. Roma is entitled to commission only on lots she actually sold.
c. Roma is not entitled to any commission because she was only helping as a
friend.
d. Roma is only entitled to compensation pursuant to a contract for services.
e. Roma is not entitled to a compensation in the absence of a stipulation.

47. A special power of attorney is needed in the following, except:

a. Payment by the agent of the MERALCO bills of the business being
managed.
b. Payment by the agent of the consideration of a parcel of land acquired for
business expansion.
c. Waiver of a claim against a debtor.
d. Execution of a contract of partnership.
e. None of the choices.

48. Which of the following is not a characteristic of a contract of agency?

a. Bilateral
b. Consensual
c. Formal in an agency to sell a parcel of land
d. Control by the principal
e. Preparatory
f. Nominate
g. None of the choices

49. In what instance will there be agency between Ben and Jen?
a. Ben hires Jen to keep his house in habitable condition.
b. Ben asks Jen to campaign for BBM-Sara.
c. Ben asks Jen to pay his Meralco bill.
d. Ben authorizes Jen to sign his will.
e. Ben permits Jen to use his car in the performance of her obligations to Leni.
50. The true distinguishing characteristic of Agency from lease of services is the:
a. Principle of Delectus personae or choice of a person (agent) based on trust
b. Element of affectio societatis or the common will to merge into one entity
c. Principal’s exercise of control over the agent.
d. Payment of compensation.
e. Agent’s performance of juridical acts on behalf of the principal.

51. Regine appointed Sarah as her agent to execute a contract with Mori. Unknown
to Sarah, Regine is insane. What is the status of the contract if Sarah is a minor
while Mori is fully capacitated?
a) Void.
b) Voidable.
c) Unenforceable.
d) Rescissible.

52. Amboy appointed Samboy as his agent to sell his car to Pamboy for P500,000.
Amboy, who was abroad at the time the agency and the sale were executed
wants to file an action to disregard the contract of sale executed by Samboy in
favor of Pamboy for P550,000. Which of the following grounds may be used by
Amboy’s counsel?
a. Sale is void because the authority is not in writing.
b. Sale is void because Samboy exceeded his authority.
c. Sale is void because Pamboy only paid P525 to Samboy.
d. Sale is voidable because Samboy was insane at the time of the sale.
e. None of the choices.

53. Which of the following is the best manifestation of an agency to sell goods
delivered by P to A for sale to third parties?
a. A earns a commission equivalent to 5 percent of the selling price.
b. A determines the selling price to third parties but must inform P of his
decision.
c. P determines the selling price to third parties.
d. A returns unsold goods to P.
e. All of the choices

54. Peter specifically authorized Paul to sell his grazing land in Batangas to Mary,
who is represented by her brother Mario. Which of the following is true?

a. The sale of the land is void if the authority of Mario is not in writing.
b. The sale of the land is valid provided the buyer is in good faith.
c. The sale of the land is valid if the authority of Paul is in writing even if the
authority of Mario is not.
d. The sale of the land is unenforceable but it can be ratified.

55. Regine, who was on an extended quarantine due to COVID 19, sent a letter
appointing her neighbor, Sarah, as her agent to manage her dog breeding
 business, but the letter was lost by the mailman. In the meantime, Sarah started
taking care of Regine’s dogs after noticing that the dogs were not fed for days
already. She even delivered one puppy to Regine’s regular customer who
showed a receipt for her payment in advance. Which of the following statements
is most accurate?

a) Regine should pay Sarah a commission for the sale of the puppy even if the
selling price was only half of the regular price.
b) Sarah became an agent of Regine because of her acts in carrying out the
agency.
c) Sarah is not an agent of Regine because they are not bound by any contract.
d) Sarah is an agent be estoppel.
e) There is an agency between Regine and Sarah arising from a quasi-contract.

56. In a contractual dispute with Obob Bato, Ogag Toba, authorized his agent in a
special power of attorney to submit the controversy to a panel of experts by way
of arbitration. To save on the cost of arbitration however, the agent instead
entered into a compromise agreement with Obob. Which of the following
statements is correct?

a. The agent acted within the scope of his authority because the compromise
was more beneficial to Ogag than an arbitration in terms of costs.
b. The agent did not exceed his authority because the law does not expressly
provide that the power to submit to arbitration excludes the power to
compromise.
c. The authority of the agent to amicably settle a dispute necessarily includes
compromise, arbitration and the other modes of settling disputes.
d. The agent exceeded the scope of his authority regardless of the beneficial
results of the settlement.
e. All of the statements are wrong.

57. Which of the following is not an obligation of an agent?

a) To be responsible for fraud or negligence causing injury to the property of his

principal.
b) To render an accounting of his transactions even if exempted by stipulation.
c) To lend money to the principal at the legal rate of interest if authorized to
borrow.
d) Not to loan to himself if authorized to lend money at an interest.
e) All are obligations of the agent.

58. P authorized A, a registered real estate broker, to find a buyer of his land in
Tagaytay City with a promise of paying a 3% commission computed on the
selling price. The engagement was not however reduced in writing. After a sale
was executed with X, who was introduced by A to P for the transaction, P refused
 to pay the promised commission claiming that a verbal agreement relative to the
sale of a parcel of land is void. Which of the following statements is most
accurate?

a. The contention of P is tenable.

b. The contention of P is not correct.
c. There is an agency by estoppel in this case.
d. P and A are governed by a quasi-contract.

59. In a written instrument, P authorized A to sell, subject to a commission of 2%,

his land in La Union at the best price mutually agreed upon by the latter and the
buyer. However, P instructed A not to sell at less than P1,000 per square meter.
X, who was interested in acquiring the lot, approached A and was able to
negotiate a price of P900 per square meter. A contract of sale was thereafter
executed and payment was made in full to A. Which of the following statements
is most accurate?

a) The sale to X is valid but A should not be entitled to his commission.

b) The sale to X is voidable.
c) A is entitled to his commission but will be liable to P for damages.
d) The sale is void because A exceeded his authority.
e) The sale is unenforceable because it can be ratified by P.

60. P authorized A to sell his car for P200,000 payable in cash. The authority of A to
receive the purchase price from the buyer, even if not mentioned in the contract
of agency is an example of an authority by necessity.

a) TRUE
b) FALSE
c) It depends under the circumstances.

Part 2: Essay

I.
In 2020, spouses Max and Penny Gulan (Spouses Gulan) took out a loan from
MetroPhil Bank (MPB) to purchase a SuperGrandia Van. The Spouses Gulan
executed a promissory note that required them to take out an insurance policy on
the vehicle. The promissory note also gave MPB, as the Spouses’ attorney-in-fact,
an authority to file an insurance claim in case of loss or damage to the vehicle.   The
insurance proceeds were to be made payable to MPB.
In February 2022, the car was involved in a freak accident and was
completely damaged by a stampede after one of the election rallies. The Spouses
Gulan were thus forced to declare the total loss to MPB, which instructed them to
nonetheless continue paying the monthly installments for two more months as a sign
of good faith. The Spouses Gulan complied. In April 2022, however, they received a
 letter from MPB demanding the payment of the entire loan amount. At this juncture,
the Spouses Gulan submitted a notice of claim with the insurance company but the
claim was denied for having been filed out of time specified in the policy. On April
24, 2022, the MPB filed a Complaint for collection of sum of money against the
Spouses Gulan, claiming that the latter failed to pay the loan and unreasonably
revoked the bank’s authority to file an insurance claim. Will the action prosper, why
or why not?

Suggested Answer: No. The action will not prosper.

The Spouses Gulan’s claim for loss cannot be seen as an
implied revocation of the agency or their way of excluding MPB. They did not disregard
or bypass MPB when they made an insurance claim; rather, they had no choice but to
personally do it because of their agent's negligence. This is not the implied termination
or revocation of an agency provided for under Article 1924 of the Civil Code.
On the other hand, MPB failed to comply with its duties as an agent. Instead of
going after the insurance proceeds, as expected of it as the agent, MPB opted to claim
the full amount from the Spouses Gulan and put its own interests before those of its
principal. Having been negligent in its duties as the duly constituted agent, petitioner
must be held liable for the damages suffered by the Spouses Gulan because of non-
performance of its obligation as the agent, and because it prioritized its interests over
that of its principal.  Thus, it will be inequitable to compel the Spouses Gulan to pay the
full amount of the lost property to MPB. (International Exchange Bank v. Spouses
Briones, G.R. No. 205657, [March 29, 2017], 808 PHIL 223-236)

II.
Maganda and Makisig are siblings who established a lending business through a
common fund they inherited from their mother. Whenever the business gave a loan, a
property is mortgaged to one of the siblings. Should the debtor fail to pay, a deed of
sale is executed in the name of one of them. Maganda claims that the property in issue
came from one such transaction. The property was mortgaged to one of the siblings,
Maganda, by one Mayumi, a debtor off the lending business. The owner's duplicate
copy off the Torrens title was in fact given to Maganda. Makisig claims that subsequent
to the loan and mortgage, Mayumi allegedly sold the property to him and that he used
his own funds to pay for it. He further alleged that he cancelled the debt she owed from
the lending business and also discharged the mortgage. A petition for the issuance of a
second owner’s duplicate copy of the Torrens title was filed in the RTC and eventually
granted in Makisig’s name.
Makisig, however failed to prove that Mayumi conveyed the property exclusively in his
name. Testimonial and documentary evidence point toward Maganda’s argument that
although the property was registered solely in Makisig’s name, they are co-owners of
the property because it was acquired through the siblings’ lending business.
Question:
To whom will the equitable or beneficial ownership of the property belong?

Suggested Answer:
Although the property was titled under the name of Makisig, the surrounding
circumstances as to its acquisition speak of the intent that the equitable or beneficial
ownership pf the property should belong to the siblings. A trust, which derives it strength
from the confidence one reposes on another especially between families, does not lose
that character simply because of what appears in a legal document.

III.
Paul authorized Ronald and Mark as his agents to sell his car for P1Million. Ronald and
Mark, acting in the name of Paul, sold the car to Gordon for P800,000.
a. What’s the status of contract as far as Paul is concerned, and what’s the
nature and extent of liability of Ronald and Mark to Paul? Discuss your
answers. (5 points)
b. What’s the status of contract as far as Gordon is concerned, and what’s the
liability of the two agents, Ronald and Mark to Gordon? How about Paul is he
liable to Gordon. Explain fully your answers. (5 points)
Suggested answers: Any answers based on the following:
a. Contract is unenforceable but may be ratified by Paul under Art. 1403 no. 1 in
relation to Art. 1897, Art. 1898, Art. 1910 and Art. 1901. Samboy and Mark are
jointly liable under Art. 1894 unless there is a stipulation that they are solidarily
liable, then apply Art. 1895.
b. Contract is void under Art. 1898 (correlate with Art. 1902, 3 rd person may require
presentation of authority) if Gordon is aware of the limits of the powers granted
by the principal. Paul is not liable but he may ratify under Art. 1898 and 1897,
1403 no. 1. Ronald and Mark are liable to Gordon if they undertook to secure the
principal’s ratification under Art. 1898.

IV.

Pedro authorized Juan to buy the vintage car of Maria for P900,000. It was agreed that
Pedro will transfer the amount for the purchase on March 26, 2022. On March 25, 2022,
Pedro remitted P800,000 to Juan and it was agreed that Juan will first advance the
amount of P100,000 to be paid by Pedro in 30 days with 6% interest. On March 26,
2022, Juan entered into a contract of sale with Maria, but without disclosing the fact that
he was buying the car as an agent of Pedro. He did this because of fear that Maria
might backout of the transaction if she will learn that her former sweetheart, Pedro, was
the true buyer. After receiving the car from Maria, Juan caused the registration of the
sale in his name and a certificate of registration was issued also in his name. Juan, who
realized that the vintage car is the only one of its kind in the world, wanted to keep it,
and thus offered to return the money of Pedro. Pedro refused to accept the money and
insisted on paying the amount of P100,00 plus interest to Juan, who also refused to
accept the payment. How must the controversy be resolved? (10%)
 Suggested answer: The car must be transferred by Juan to Pedro. While the
transaction was entered into by Juan acting in his own name, the exception in Article
1883 will apply since the money used to buy the car was the money of Pedro. It does
not matter that part of the purchase price came from Juan, as this was covered by a
stipulation that the agent will be advancing the amount of P100,000. The transaction is
therefore between the Principal, as owner of the purchase money, and the seller. Thus,
the rights of the buyer relative to the contract of sale, belong to Pedro, as principal. (Sy
juco and Viardo vs. Sy Juco)