JULIE MAE M.

LAGARE
Agency, Trust and Partnership Law
Consolidated Case Digests

AGAD vs. MABATO

GR No. L-24193; June 28, 1968

FACTS:
Claiming that he and the accused Severino Mabato are, as asserted in a public document
dated August 29, 1952, attached to the complaint as Annex "A," purported partners in a
fishpond enterprise, Agad alleged that he contributed P1,000 to the venture and is entitled to
50% of the profits. According to Agad, Mabato, who managed the partnership funds, provided
annual reports from 1952 to 1956. However, despite numerous requests, Mabato allegedly
refused to present accounts for the years 1957 to 1963. In the complaint filed on June 9,
1964, Agad sought judgment against Mabato and Mabato & Agad Company, requesting the
court to order Mabato to pay him P14,000 as his share in the partnership's profits from 1957
to 1963, along with P1,000 as attorney's fees. Agad also asked for the dissolution of the
partnership and the appointment of a receiver to wind up its affairs. In response, Mabato
admitted the formal allegations but contested the existence of the partnership, claiming that
the contract was not perfected.

ISSUE:
Whether or not “immovable property or real rights” have been contributed to the partnership
under consideration.

RULING:
No, none of the partners provided a fishpond or any real rights associated with a fishpond as
their contribution. Instead, each partner's contribution was limited to the amount of P1000.
Paragraph 4 of Annex A specifies that the capital of the partnership is two thousand pesos,
with one thousand pesos contributed by Severino Mabato and another one thousand pesos
contributed by Mauricio Agad.

The objective of the partnership, as stated in Annex A, was the operation of the fishpond.
However, neither the mentioned fishpond nor any real rights related to it were contributed to
the partnership or considered part of its capital. This holds true even if a fishpond or its
associated real rights could potentially be deemed as assets of the partnership. Article 1773
of the Civil Code is not applicable to this case.
 TORRES vs. CA
G. R. No. 134559; December 9, 1999

FACTS:
Petitioners Antonia Torres and Emeteria Baring collaborated with Private Respondent
Manuel Torres in a joint venture to develop a land parcel in Lapu-Lapu City into a subdivision.
The agreement involved the transfer of land ownership to the Private Respondent, who
secured a loan for the project, intending to share profits from lot sales. However, setbacks led
to the bank foreclosing on the land. After filing and subsequently losing an estafa case
against the Private Respondent, the Petitioners brought a civil case, alleging insufficient
funds and diversion of the loan for personal use. The Private Respondent defended the
project's approval and blamed the Petitioners for adverse claims hindering sales. The
Regional Trial Court (RTC) dismissed the complaint, a decision upheld by the Court of
Appeals (CA). The CA ruled that the parties formed a partnership, obligating them to share
losses proportionally to agreed-upon profit shares. The Petitioners appealed this decision.

ISSUES:
1. Whether or not the joint venture agreement entered into between the Petitioners and
Private Respondents constitutes a partnership.
2. Supposing it is a partnership, whether or not the joint venture agreement is void under
Article 1733 of the Civil Code.

RULING:
1. The Supreme Court affirmed the decision. According to Article 1767 of the Civil Code, a
partnership is formed when two or more individuals commit to contributing money, property,
or industry to a common fund with the intention of sharing the resulting profits. In the present
case, the joint venture agreement explicitly outlines the Petitioners' commitment to contribute
property to the partnership, while the Private Respondent would provide an additional amount
for general expenses and other costs. Moreover, they mutually agreed to distribute the
income from the project based on specified percentages. This establishes a clear intent to
establish a partnership between the Petitioners and the Private Respondent.

2. The Court disagreed with the assertion. Article 1773, which stipulates that a contract of
partnership is void if immovable property is contributed without an inventory, is designed to
safeguard the interests of third parties. In this particular case, there are no third parties
involved who could be adversely affected. Consequently, this provision does not preclude the
courts from regarding the agreement as a regular contract between the involved parties.
 ARBES vs. POLISTICO
G.R. No. 31057 September 7, 1929

FACTS:
This legal action seeks the liquidation of the assets and property belonging to the association
known as "Turnuhan Polistico & Co." The plaintiffs, who are members or shareholders, have
taken legal action against the defendants, who held positions as president-treasurer,
directors, and secretary within the said association. Through an agreement between the
parties, the court appointed a commissioner to thoroughly examine all the books, documents,
and accounts of "Turnuhan Polistico & Co." The commissioner submitted a report indicating a
cash balance of P24,607.80. The trial court, upon accepting the report, issued a judgment
declaring the association "Turnuhan Polistico & Co." unlawful. The court directed the
defendants to collectively and individually return the amount of P24,607.80, along with
documents evidencing the association's outstanding credits, to the plaintiffs and other
members represented by them.

While it is undisputed that "Turnuhan Polistico & Co." is an unlawful partnership, the
appellants argue that, due to its unlawful nature, a charitable institution should be included as
a party defendant. The appellants point to Article 1666 of the Civil Code, specifically the
second paragraph, which stipulates, "When the dissolution of an unlawful partnership is
decreed, the profits shall be given to charitable institutions of the domicile of the partnership,
or, in default of such, to those of the province."

ISSUE:
Whether or not a charitable institution is a necessary party in this case.

RULING:
NO, charitable institution is a necessary party in the present case of determination of the
rights of the parties. The action which may arise from said article, in the case of unlawful
partnership, is that for the recovery of the amounts paid by the member from those in charge
of the administration of said partnership,and it is not necessary for the said parties to base
their action to the existence of the partnership, but on the fact that of having contributed
some money to the partnership capital. Hence, the charitable institution of the domicile of the
partnership, and in the default thereof, those of the province are not necessary parties in this
case.

While acknowledging that "Turnuhan Polistico & Co." is an unlawful partnership, the
appellants argue that a charitable institution should be included as a party defendant,
invoking Article 1666 of the Civil Code. However, the court deems this argument untenable,
asserting that no charitable institution is necessary for determining the rights of the parties in
this case. The court explains that the action arising from Article 1666 is for the recovery of
amounts contributed to the partnership capital and does not require the involvement of
charitable institutions. Consequently, the court affirms that the dissolution of an unlawful
partnership's profits must be given to a charitable institution, as stated in the article.
 ALFREDO N. AGUILA, JR vs. HONORABLE COURT OF APPEALS
G. R. No. 127347; November 25, 1999

FACTS:
The petitioner manages A.C. Aguila & Sons, Co., a lending partnership, while Felicidad
Abrogar and her late husband owned a Marikina house and lot. On April 18, 1991, Felicidad
Abrogar, with her husband's consent, entered into an agreement with A.C. Aguila & Sons,
Co., selling the property for Php 200,000, with an option to repurchase within 90 days for Php
230,000. If not repurchased, the spouses were to surrender possession within 25 days.

On June 11, 1991, a deed of absolute sale was executed for Php 200,000, and a special
power of attorney allowed the petitioner to handle title cancellation and obtain a new one if
the property wasn't redeemed. The petitioner obtained a new title after the private respondent
failed to redeem, leading to a demand for the private respondent to vacate. The Municipal
Trial Court (MTC) ruled in favor of A.C. Aguila & Sons, Co. in the ejectment case. However,
the Regional Trial Court (RTC) dismissed the private respondent's petition to annul the deed
of sale, citing that all documents were signed on April 18, 1991, before the husband's May 8,
1991 death. On appeal, the Court of Appeals (CA) reversed the RTC, declaring the
agreement a pactum commissorium and void for legal violations. The petitioner, in this
certiorari petition, argues that he is not the real party in interest, urging the case to be against
A.C. Aguila & Co. for the deed's nullity.

ISSUE:
Whether or not the civil case (for nullity of deed of sale) was filed against the real party in
interest.

RULING:
NO. Aguila asserts that he is not the proper party involved, emphasizing that the true entity is
the partnership A.C. Aguila & Sons, Co. The Rules of Court dictate that legal actions should
be conducted in the name of the actual party with a vested interest. A real party in interest is
defined as someone who stands to gain or lose from the court's judgment and is entitled to
the benefits of the lawsuit. Any decision against a person who is not the actual party in
interest cannot be enforced. Therefore, a complaint against such an individual should be
rejected for failing to establish a valid cause of action, as seen in this case.

According to Article 1768 of the Civil Code, a partnership possesses a legal personality
distinct from that of its individual partners. The partners can only be held responsible for the
partnership's obligations if it is proven that the separate legal identity is being misused for
fraudulent, unfair, or illegal motives. In this instance, Felicidad has not demonstrated that A.C.
Aguila & Sons, Co., functioning as a distinct legal entity, is being exploited for any fraudulent,
unfair, or illegal purposes. Additionally, the title to the property in question is under the name
of A.C. Aguila & Sons, Co. In any legal dispute involving property registered in its name, it is
the partnership itself, not its officers or agents, that should be included as a party. Failing to
adhere to this rule will lead to the dismissal of the complaint.
 TAN vs. DEL ROSARIO
G.R. No. 109289; October 3, 1994

FACTS:
This consolidated case revolves around the constitutionality of RA 7496, also known as the
Simplified Net Income Taxation (SNIT) scheme. The petitioners assert that they are
taxpayers adversely affected by the ongoing implementation of SNIT. In the first case, they
argue that the House Bill, which eventually became RA 7496, is inaccurately named or
deficient because it was titled as the "Simplified Net Income Taxation Scheme for the Self-
Employed and Professionals Engaged in the Practice of their Profession." However, they
point out that the actual title includes the same words along with the additional phrase,
"...Amending Section 21 and 29 of the National Internal Revenue Code."

In the second case, the petitioners contend that the respondents have overstepped their rule-
making authority by applying SNIT to general professional partnerships. They base this
argument on the issuance of Revenue Regulation 2-93, which was introduced to implement
RA 7496.

ISSUE:
Whether or not general professional partnerships may be taxed under SNIT.

RULING:
No. A general professional partnership does not constitute an income taxpayer in itself. The
imposition of income tax does not apply directly to the partnership, as it enjoys tax-exempt
status. Instead, income tax is levied on the individual partners, calculated based on their
respective shares of partnership profits. There is no differentiation in income tax liability
between an individual practicing a profession solo and one who engages in the practice
through a partnership with others in the pursuit of a shared profession.

In this case, SNIT was not intended by Congress to encompass corporations or partnerships
that are already independently obligated to pay income tax.
 MENDIOLA vs. CA
GR No. 159333; July 31, 2006

FACTS:
Pacific Forest Resources, Phils., Inc. (Pacfor), a corporation based in California, USA,
entered into a "Side Agreement on Representative Office" with Arsenio T. Mendiola (ATM),
appointing ATM as President of Pacfor Phils., a representative office in the Philippines. The
agreement outlined that operational expenses would be shared equally, but a dispute arose
in 2000 when Pacfor claimed that Pacfor Phils. was not a separate entity and ATM was not a
co-owner.

ATM sought confirmation of his 50% equity, leading to disagreements and demands for
unpaid commissions and rentals. Pacfor, through legal action, ordered ATM to turn over
documents and funds. ATM interpreted this as a severance of their partnership and the
termination of his employment. Despite this, evidence suggested an employer-employee
relationship.

Pacfor placed ATM on preventive suspension, alleging willful disobedience and serious
misconduct for not surrendering assets. ATM, viewing it as constructive dismissal, filed a
complaint. The Labor Arbiter ruled in favor of ATM, citing constructive dismissal. Pacfor
appealed to the NLRC, claiming lack of jurisdiction and merit. The NLRC, based on
agreements, concluded ATM was not an employee but a co-owner, denying his Motion for
Reconsideration.

ATM argued being an industrial partner and employee simultaneously, depending on the
agreement. The case involves the conflicting interpretation of the nature of the relationship
between ATM and Pacfor, with Pacfor asserting co-ownership, while ATM claims an
employer-employee relationship.

ISSUE:
Whether or not partnership or co-ownership exists between the parties.

RULING:
NO. In the context of a partnership, individuals become joint owners of the capital contributed
to the firm and any property acquired through their collective efforts. The partnership's assets,
or stock, create a shared pool of resources in which each party holds a distinct proprietary
interest. According to the New Civil Code, a partner is recognized as a co-owner of specific
partnership property, emphasizing a shared interest among partners in the entirety of
partnership assets. Without this crucial element of shared interest or joint ownership in
partnership property, a relationship cannot be classified as a partnership.

The absence of a shared interest or joint ownership in property is evident in the dealings
between the petitioner and private respondent Pacfor. Contrary to the characteristics of a
partnership, Pacfor's President, William Gleason, clarified that Pacfor Phils. is essentially a
"theoretical company" created solely for the purpose of evenly distributing income. Gleason
emphasized that the petitioner was well aware of this arrangement from the outset, as it was
the petitioner who proposed the establishment of a representative office rather than a branch
office in the Philippines to achieve tax savings. Consequently, the parties in this case simply
shared profits, which, on its own, does not constitute a partnership.

Furthermore, a corporation cannot become a member of a partnership unless expressly

authorized by statute or charter. This principle is grounded in two key considerations: first,
the mutual agency between partners would entail the corporation being bound by the actions
of individuals not duly appointed as its authorized agents and officers, contradicting the law's
policy that a corporation should manage its affairs separately; second, such an arrangement
would expose corporate property to risks not contemplated by the stockholders during their
initial investment in the corporation. In the present case, there is no evidence to support such
authorization.

Nonetheless, despite these considerations, the evidence presented indicates the presence of
an employer-employee relationship in this case.
 ANGELES vs. SECRETARY OF JUSTICE
G.R. No. 142612; 29 July 2005
FACTS:
In November 1982, Felino Mercado persuaded Oscar and Emerita Angeles to enter into an
antichresis contract for eight parcels of land with fruit-bearing lanzones trees owned by Juana
Suazo. The agreement was set to last for five years with ₱210,000 as consideration. After
three years, the Angeleses requested an accounting from Mercado, but when none was
provided in 1995, they discovered that Mercado had placed the antichresis contract under his
and his spouse's names. Consequently, they filed a criminal estafa complaint against
Mercado.

Mercado defended himself, asserting the existence of an industrial partnership where he and
his spouse were the industrial partners, and the Angeleses were the financiers. He claimed
that the earnings were used as part of the capital in the business transaction, and the
contract was registered under his name due to the Angeleses' reluctance to be identified as
financiers. The Provincial Prosecution Office initially recommended filing estafa charges
against Mercado, but later, in an amended resolution, dismissed the complaint. On appeal,
the Secretary of Justice upheld the dismissal, stating that the Angeleses failed to prove
deliberate deception by Mercado. The Secretary concluded that a partnership existed,
evidenced by their contributions to a common fund and the intention to share profits.

The Angeleses contested this decision, arguing that there was no partnership due to the
absence of a public instrument and registration with the Securities and Exchange
Commission. Therefore, the petition was filed to challenge the dismissal of the estafa
complaint.

ISSUE:
Whether or not a partnership between the Petitioners and the Private Respondents exists.

RULING:
Yes. Article 1771 of the Civil Code expressly states that a partnership can be formed in any
manner, except when immovable property or real rights are contributed, in which case a
public instrument is required. Additionally, Article 1772 specifies that every partnership
contract with a capital of three thousand pesos or more must be in a public instrument,
recorded with the Securities and Exchange Commission.

However, the court emphasized that the failure to register the partnership contract with the
SEC or formalize it in a public instrument does not invalidate the contract if it possesses the
essential elements of a partnership. The primary purpose of registration is to provide notice
to third parties. The omission of registration does not impact the liability of the partnership
and its partners to third parties, nor does it affect the legal standing of the partnership. In this
specific case, it is evident that the petitioners contributed both money and industry to a
shared fund, with profits to be distributed among them and the respondent. Consequently,
the court affirmed the existence of a partnership between the parties.
 LIM TANHU vs. HON. JOSE R. RAMOLETE
G.R. No. L-40098; August 29, 1975

FACTS:
Tan asserted that she is the widow of Tee Hoon Lim Po Chuan, who was a partner in the
business venture, Glory Commercial Company, alongside Antonio Lim Tanhu and Alfonso Ng
Sua. According to Tan, the defendants—Antonio Lim Tanhu, Alfonso Leonardo Ng Sua, Lim
Teck Chuan, and Eng Chong Leonardo—engaged in fraudulent activities and manipulation to
assume direct and active control over the partnership. Despite Tee Hoon Lim Po Chuan
being the designated manager of Glory Commercial Company, the defendants allegedly
diverted partnership funds to acquire properties in various locations, including Cebu,
Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla.

Tan contended in her complaint that following Tee Hoon Lim Po Chuan's demise, the
defendants continued the operations of Glory Commercial Company without proper
liquidation. They purportedly established a corporation called Glory Commercial Company,
Incorporated, and in November 1967, particularly Antonio Lim Tanhu, allegedly employed
fraud, deceit, and misrepresentations to induce Tan into signing a quitclaim relinquishing her
rights and interests in the partnership's assets.

Subsequently, during 1968-69, despite earlier assurances from the defendants regarding the
liquidation of the aforementioned properties and assets to benefit Tan among others, by mid-
1970, when Tan formally requested an account of the real and personal properties of Glory
Commercial Company, the defendants refused, declaring their intention to withhold Tan's
share.

ISSUE:
Whether Tan has a right over the liquidated properties of the partnership.

RULING:
No, Tan has no right over the liquidated properties of the partnership. The Supreme Court
held that there is no alternative but to hold that plaintiff Tan Put's allegation that she is the
widow of Tee Hoon Lim Po Chuan has not been satisfactorily established and that, on the
contrary, the evidence on record convincingly shows that her relation with said deceased was
that of a common-law wife.

Moreover, the Supreme Court said that the lower courts committed an error by awarding 1/3
of the partnership properties to Tan because there has been no liquidation proceedings yet.
And if there has not yet been any liquidation of the partnership, the only right plaintiff could
have would be to what might result after much liquidation to belong to the deceased partner
(her alleged husband) and before this is finished, it is impossible to determine, what rights or
interest, if any the deceased had. In other words, no specific amounts or properties may be
adjudicated to the heir or legal representative of the deceased partner without the liquidation
being first terminated.
 LIWANAG v. CA
G.R. No. 114398; October 24, 1997

FACTS:
Carmen Liwanag and Thelma Tabligan proposed a business deal to Isidora Rosales,
suggesting they engage in the buying and selling of cigarettes. Rosales agreed, contributing
funds while Liwanag and Tabligan acted as agents. The agreement stipulated a 40%
commission for Rosales if the goods were sold, with a return of the money if not. Rosales
provided cash advances amounting to P633,650.00. When Liwanag stopped communicating
about their business, Rosales suspected misappropriation and filed an estafa case.

Liwanag claims the intention was a partnership, with Rosales contributing funds and Liwanag
handling the buying and selling, later sharing the profits. Alternatively, Liwanag argues it
could be seen as a simple loan with Rosales lending her the amount on an installment basis.
The RTC found Liwanag guilty of estafa, a decision affirmed by the Court of Appeals.

ISSUE:
Whether or not Liwanag can be acquitted from the crime of estafa because she and Rosales
formed a partnership.

RULING:
No, Liwanag cannot be acquitted of the estafa charge.

The Supreme Court clarified that estafa is a criminal offense committed when an individual
defrauds another, causing damage through unfaithfulness, abuse of confidence, false
pretenses, or fraudulent acts.

In this particular case, even if it is assumed that a partnership agreement was established
between the parties, the Court has previously ruled that if a partner receives money or
property for a specific purpose (as in the present situation) and subsequently misappropriates
it, that partner is deemed guilty of estafa.
 US vs. CLARIN
G.R. No. 5840; September 17, 1910

FACTS:
Pedro Larin provided Pedro Tarug with P172 for the purpose of buying and selling mangoes,
forming a business partnership with Eusebio Clarin and Carlos de Guzman. Larin anticipated
earning profits from this venture, and an agreement was made to distribute the profits equally
among all parties. Despite engaging in mango trading and generating P203 from the
business, Tarug, Clarin, and de Guzman failed to fulfill the contractual terms by neglecting to
deliver Larin's share of the profits. Additionally, they did not provide any account of the initial
capital.

Larin accused them of estafa, but the provincial fiscal filed charges only against Eusebio
Clarin, alleging that he not only misappropriated the P172 but also Larin's share of the profits,
totaling P15.50. Pedro Tarug and Carlos de Guzman participated in the case as witnesses,
assuming that the presented facts pertained to the defendant and themselves collectively.

ISSUE:
Whether or not there is partnership between Clarin, Tarug, Larin and De Guzman.

RULING:
Yes. When individuals agree to contribute money, property, or industry to a shared fund with
the intent of dividing profits, it constitutes a partnership (Civil Code, Art. 1665). The First
Instance of Pampanga trial court sentenced Eusebio Clarin to six months of arresto mayor,
imposing accessory penalties. Additionally, Clarin was directed to return P172 to Pedro Larin,
along with P30.50 representing Larin's share of the profits. In case of insolvency, Clarin was
subject to subsidiary imprisonment, and he was also ordered to cover the costs. Clarin
appealed the decision, and the subsequent conclusions were reached:

By placing P172 into the partnership formed with Tarug, Clarin, and Guzman, Larin invested
capital in the risks and benefits of the mango trading business. Even if Larin reserved
ownership of the capital and only conveyed the usufruct, the responsibility to return the
capital lies with the partnership or, specifically, with Tarug, who directly received the money
from Larin. If the partnership received the P172, commenced business, and generated profits,
the appropriate action for the partner who provided the capital is not a criminal estafa charge
but a civil one arising from the partnership contract. This involves the liquidation of the
partnership and the seizure of its assets if available. Article 535, No. 5 of the Penal Code,
which pertains to estafa, does not encompass money received for a partnership. This
omission prevents the partnership from facing estafa charges, especially if it experiences
losses. Holding the partnership liable civilly for the share of a capitalist partner who retained
ownership of the money brought in would be illogical and lead to unjust consequences.

Consequently, Eusebio Clarin is acquitted, and the costs are covered by the government.
The estafa complaint is dismissed, allowing for the possibility of initiating a civil action.
 PANG LIM vs. LO SENG
G.R. No. L-16318; October 21, 1921

FACTS:
Lo Seng and Pang Lim were partners in a distillery business called "El Progreso," with the
distillery located on land leased to their firm for three years. Upon the lease expiration, a new
contract extended it for fifteen years, with Lo Yao represented by Lo Shui as attorney in fact.
Pang Lim sold his interest to Lo Seng, making the latter the sole owner. However, Lo Shui,
again representing Lo Yao, executed a deed conveying the distillery to Pang Lim and Benito
Galvez, but the document was never recorded. Pang Lim and Galvez demanded possession
from Lo Seng, who refused, leading to an unlawful detainer action. Pang Lim, as a plaintiff,
played dual roles as a lessee and purchaser seeking to terminate the lease, creating a
conflict of interest and violating principles of good faith and contractual integrity.

ISSUE:
Whether or not Pang Lim, being involved in the lease contract under consideration, has the
authority to terminate it.

RULING:
No. While still a partner in the Lo Seng and Co. firm, Pang Lim actively participated in
establishing the lease in question. When he subsequently sold his stake in the firm to Lo
Seng, this effectively transferred Pang Lim's interest in the firm's assets, including the lease,
to Lo Seng. Therefore, Pang Lim cannot now, in the role of a purchaser of the estate, nullify
an interest that originated from himself and for which he received full value.

The plaintiffs' lack of good faith becomes apparent in their attempt to deprive the defendant of
the lease. Before acquiring the property, Pang Lim had been a partner with Lo Seng, and
Benito Galvez was an employee. Both had held positions of trust with Lo Seng and gained
knowledge about the property's potential, possibly acquiring valuable experience that could
be used to profitably exploit the distillery. It would be morally reprehensible if the law allowed
Pang Lim, after benefiting from the sale of his interest in a business that was essentially
worthless without the lease, to intervene as the purchaser and confiscate the property he had
sold to Lo Seng for a valuable consideration.

In business relationships, partners are held to the highest standard of good faith. The
partnership is inherently fiduciary, considering each partner, both legally and practically, as
the confidential agent of the other. If a partner secures the renewal of a lease for the benefit
of the firm in their name, that partner is deemed a constructive trustee of the firm concerning
that lease. As Lo Seng holds the possessory right against Pang Lim, he cannot be ousted by
either Pang Lim or Benito Galvez. With lawful possession against one co-tenant, Lo Seng is
entitled to retain it against both.
 CATALAN vs. GATCHALIAN
G. R. No. L-11648, April 22, 1959

FACTS:
Catalan and Gatchalian, as partners, pledged two parcels of land along with their
improvements to Dr. Marave as collateral for a credit arrangement with him. Unfortunately,
the partnership defaulted on its obligation, leading to the properties being auctioned off to Dr.
Marave. In response, Catalan redeemed the property and asserts that the existing title should
be voided, advocating for the issuance of a new title in his name.

ISSUE:
Whether or not Catalan’s redemption of the properties make him the absolute owner of the
lands.

HELD:
No. In accordance with Article 1807 of the NCC, each partner assumes the role of a trustee
for their copartner concerning any benefits or profits resulting from their actions as a partner.
Therefore, when Catalan carried out the redemption of the properties in question, he took on
the role of a trustee and retained the properties in trust for his copartner, Gatchalian. This
arrangement is contingent upon Gatchalian's entitlement to request contribution from Catalan
for the redemption amount.
 RAMON RALLOS vs. FELIX GO CHAN & SONS REALTY CORPORATION
G.R. No. L-24332; January 31, 1978

FACTS:
Concepcion and Gerundia Rallos, sisters and co-owners of a parcel of land, granted
a power of attorney to their brother, Simeon Rallos, for selling the land. After
Concepcion's death, Simeon sold their shares to Felix Go Chan & Sons Realty
Corporation. A legal dispute ensued, with Ramon Rallos, the administrator of
Concepcion's estate, seeking to declare the sale unenforceable and requesting the
reconveyance of Concepcion's share. The trial court ruled in favor of Felix Go Chan &
Sons Realty Corporation, ordering the administrator of Simeon Rallos's estate to pay
for Concepcion's share. The Court of Appeals upheld the decision, prompting a
petition for review.

ISSUE:
Whether or not the death of the principal or of the agent extinguishes the agency, subject to
exceptions under Article 1930 and 1931 of the Civil Code.

RULING:
No. Article 1919 of the Civil Code states that agency is terminated by the death, civil
interdiction, insanity, or insolvency of the principal or agent, except as provided in Articles
1930 and 1931. However, Article 1930 does not apply in this case, as the special power of
attorney granted to Simeon Rallos was not coupled with an interest. The agent, Simeon
Rallos, was aware of the death of his principal when he sold her share to the respondent
corporation. Article 1931, which requires the agent to be unaware of the principal's death for
its application, is not relevant in this context. The Civil Code provides two exceptions to the
general rule that the death of the principal automatically revokes the agency: (1) when the
agency is coupled with an interest (Article 1930), and (2) when the agent acted without
knowledge of the principal's death, and the third party also acted in good faith (Article 1931).

Exception No. 2, as applied in Cassiday, emphasizes the necessity that the agent must act
without knowledge of the principal's death. In this case, the agent, Ramon Rallos, executed
the sale with awareness of his principal's death, making the agent's act unenforceable
against the estate of the principal.

In light of the foregoing, the decision of the appellate court is overturned, and the judgment of
the Court of First Instance of Cebu, rendered by Hon. Amador E. Gomez, is affirmed in its
entirety.
 ORIENT AIR SERVICES vs. CA
G.R. No. 76931; May 29, 1991

FACTS:
American Air, a carrier providing passenger and air cargo services, engaged in a General
Sales Agency Agreement with Orient Air, granting exclusive authority to Orient Air as its
general sales agent for air passenger transportation. Orient Air failed to remit the net
proceeds of sales for several months, leading to American Air pursuing the collection of the
proceeds from tickets sold by Orient Air and terminating their agreement.

In response, American Air filed a lawsuit against Orient Air to settle outstanding funds in the
latter's possession. Orient Air argued that it retained the sales proceeds due to unpaid
overriding commissions, while American Air insisted that sales must be conducted by Orient
Air using American Air's ticket stocks for the entitlement of overriding commissions. Orient Air
contended that the contractual stipulation of a 3% overriding commission covers the total
revenue of American Air, not just that from ticketed sales handled by Orient Air, given its role
as an exclusive General Sales Agent. The Court of Appeals determined that Orient Air is
entitled to commissions and directed American Air to reinstate Orient Air as its General Sales
Agent.

ISSUES:
1) Whether or not Orient Air is entitled to commissions.
2) Whether CA is correct in ordering reinstatement of Orient Air as an agent.

RULING:
1.)Yes. Orient Air had a legitimate claim to an overriding commission based on the total flown
revenue. Contrary to American Air's perception that Orient Air was neglectful or in breach of
the Agreement, Orient Air was, in fact, adhering to the Agreement by withholding its accrued
commissions from the sales proceeds before remitting the balance to American Air. As
American Air was still indebted to Orient Air for these commissions, Orient Air was justified in
retaining and refusing to remit the sums sought by American Air. Consequently, American
Air's termination of the Agreement lacked a valid cause and foundation, making it liable to
Orient Air.

2.) No. The Court of Appeals essentially compels American Air to attribute its personality to
Orient Air. This contravenes the principles and essence of agency, as legally defined as a
contract where "a person binds himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE
LATTER." In an agent-principal relationship, the principal's personality extends through the
agent, and by legal fiction, the agent assumes the role of the principal, empowered to
perform all acts the principal would authorize. This relationship requires the explicit consent
of the principal, and it must not be compelled by law or any court.
 UY AND ROXAS VS. CA
G.R. No. 120465; September 9, 1999

FACTS:
William Uy and Rodel Roxas, acting as authorized agents to sell eight parcels of land on
behalf of the owners, offered the lands located in Benguet to the National Housing Authority
(NHA) for a housing project. On February 14, 1989, the NHA Board passed Resolution 1632
approving the acquisition of 31.8231 hectares of land at a cost of P23.867 million.
Subsequently, a series of Deeds of Absolute Sale were executed. However, only five out of
the eight parcels were paid for by the NHA due to a report from the Land Geosciences
Bureau indicating that the remaining area was situated in an active landslide zone and
unsuitable for development.

On November 22, 1991, the NHA issued Resolution 2352 canceling the sale over the three
parcels of land. The NHA then, through Resolution 2394, offered P1.225 million as damages
to the landowners. In response, on March 9, 1992, Uy and Roxas filed a Complaint for
Damages against NHA and its General Manager Robert Balao before the RTC Quezon City.
The trial court justified the cancellation of the contract but awarded damages to the plaintiffs
in the amount of P1.255 million, matching the initial offer by NHA as damages. On appeal,
the Court of Appeals reversed the trial court's decision, dismissing the complaint, citing
"sufficient justifiable basis" for the cancellation of the sale and questioning the petitioners'
standing as mere attorneys-in-fact, not the real parties-in-interest. The petitioners now seek
relief from the Supreme Court after their motion for reconsideration was denied.

ISSUES:
1. Whether or not there was legal basis for rescinding the sale.
2. Whether or not the respondent CA erred in dimissing the subject complaint, finding that the
petitioners failed to join as indispensable party plaintiff the selling lot-owners.

RULING:
1. Yes. The right of rescission, specifically resolution, according to Article 1191, is based on a
breach of faith by one party that violates the reciprocity between them. The power to rescind
is granted to the injured party, who can choose between fulfilling the obligation or rescinding
it, with the payment of damages in either case. The injured party may also seek rescission
even after opting for fulfillment if the latter becomes impossible. In the case at hand, the
National Housing Authority (NHA) did not rescind the contract because the vendors did not
breach their obligation to deliver the parcels of land. The cancellation was not a rescission
under Article 1191 but was based on the realization that the lands were unsuitable for
housing.

The term "cause" refers to the essential reason that motivates the contracting parties to enter
into an agreement, and it distinguishes itself from motive, which is the specific reason of a
party that does not affect the other party. While motives typically do not impact the contract, if
a motive predetermines the cause, it may be considered as the cause.
In this case, the NHA would not have entered the contract if the lands were unsuitable for
housing, making the quality of the land an implied condition for the contract. The Supreme
Court held that the NHA was justified in canceling the contract due to the mistake regarding
the land's quality, which negated the motive or cause and rendered the contract nonexistent.
Consequently, the Supreme Court denied the petition.

2. No. Section 2, Rule 3 of the Rules of Court mandates that every legal action should be
pursued and defended in the name of the real party-in-interest. The real party-in-interest is
the party who stands to gain or lose from the judgment, or the party entitled to the benefits of
the lawsuit. "Interest" in this context refers to a material interest in the issue and being
affected by the decree, as opposed to a mere interest in the question or an incidental interest.
To interpret the real party-in-interest provision, one can understand it as requiring that an
action be pursued in the name of the party who, according to substantive law, possesses the
right being sought for enforcement.

In the current case, the dismissal of the action brought by an attorney-in-fact on behalf of a
landowner is deemed appropriate because every action must be prosecuted in the name of
the real parties-in-interest, as per Section 2, Rule 3 of the Rules of Court.

The petitioners assert that they filed the complaint not on behalf of their principals but in their
own names as agents directly harmed by the contract termination. However, an action must
be pursued in the name of the party entitled to enforce the right by substantive law. The
petitioners, as agents, are not parties to the sale contract between their principals and the
National Housing Authority (NHA). They serve as representatives or perform services on
behalf of their principals but are not directly involved in the contract.

Since a contract can typically only be violated by the parties to it, either as plaintiffs or
defendants, in a lawsuit concerning that contract, the real parties-in-interest are usually those
who are parties to the contract. The petitioners have not demonstrated that they are
assignees of their principals to the subject contracts. Despite claiming advances and loss of
commissions, they have not proven any agreement granting them the right to receive
payment and reimburse themselves for advances and commissions before turning the
balance over to their principals.
 Macke v. Camps
G.R. No. L-2962; February 27, 1907

FACTS:
Macke and Chandler operate as business partners under the firm name of Macke,
Chandler & Company. They conducted sales of various goods to Ricardo Flores, who
claimed to be the agent of Jose Camps in relation to the Washington Café. Flores
made a partial payment of P174, leaving an outstanding balance, and conveyed that
he lacked the necessary funds at the moment, intending to wait for Jose Camps to
return. However, Jose Camps did not fulfill the payment, disputing Flores' authority. A
written contract was presented as evidence, revealing that Galmes, the building
owner, had subleased the premises where the business took place. In the contract,
Jose Camps signed as the "sublessee," and Ricardo Flores signed as the "managing
agent."

ISSUE:
Whether or not Ricardo Flores is an agent of Jose Camps.

RULING:
Certainly. If someone grants another person apparent authority, presenting them as an agent
and representing them as such to the public, they should not be allowed to disavow the
authority of that individual to act as their agent. This prohibition exists to prevent harm to
innocent third parties engaging with such an agent in good faith and with the sincere belief
that the agent possesses the authority they appear to have.
 PRUDENTIAL BANK vs. COURT OF APPEALS
G.R. No. 125536, March 16, 2000

FACTS:
Leticia Tupasi-Valenzuela, the private respondent, opened an account with Prudential Bank.
On June 1, 1988, she deposited P35,271.60 drawn against the Philippine Commercial
International Bank (PCIB). Subsequently, she issued a post-dated Prudential Bank check
amounting to P11,500 in favor of Belen Legaspi. Legaspi, involved in the jewelry trade,
endorsed the check to Philip Lhuiller, another businessman in the same field. When the
check was presented to PCIB, it was dishonored due to insufficient funds.

Upon inquiring why her check was dishonored when there were adequate funds, the bank
officer assured Valenzuela that there was no need to review the passbook, as the bank
ledger was considered the best proof of insufficient funds. The bank officer then abruptly
turned to his typewriter and began typing. It was later discovered that the bank had
misposted Valenzuela's check deposit to another account and delayed its posting to the
correct account. The bank admitted fault, but as this was not the first occurrence for
Valenzuela, she initiated a legal action seeking damages.

ISSUE:
Whether or not the bank, as principal, should be held liable for the acts of Quimbo, its agent.

RULING:
Yes. defendant bank's lack of supervision. The appellate court concurred, acknowledging that
while the bank's negligence in dishonoring a properly funded check may not have been
malicious, it resulted from a deficiency in the expected due care and caution required in a
highly sensitive and precise task such as banking.

In previous cases like Simex International vs. CA (183 SCRA 360,367, 1990) and BPI vs. IAC
(206 SCRA 408), this court emphasized the fiduciary nature of the relationship between a
bank and its depositors, underscoring the level of diligence expected from the bank in
managing entrusted accounts.

Referring to the PNB vs. CA case, it was held that a bank is obligated to handle its
depositors' accounts with meticulous care, regardless of the account's value. The court
stressed that negligence in fulfilling any obligation, even if not malicious, is still subject to
accountability, causing significant anxiety, embarrassment, and humiliation.
 EDUARDO V. LITONJUA, JR. v. ETERNIT CORPORATION
G.R. No. 144805, June 8, 2006

FACTS:
The Eternit Corporation (EC), a Philippine corporation engaged in manufacturing roofing
materials and pipe products, owned properties in Mandaluyong City. Concerns about the
political situation in the Philippines prompted EC's majority shareholder, Eteroutremer S.A.
Corporation (ESAC), to instruct the disposal of these properties. Realtor Lauro G. Marquez
offered the land to Eduardo B. Litonjua, Jr. Litonjua made a cash offer of P20,000,000.00,
which was later counterproposed by ESAC's representative, Claude Frederick Delsaux, to
US$1,000,000.00 and P2,500,000.00. Litonjua accepted the counterproposal, deposited
US$1,000,000.00, and drafted an Escrow Agreement. However, the sale was later called off
by EC.

The Litonjua siblings demanded damages, and upon EC's rejection, they filed a complaint for
specific performance and damages. The trial court declared the sale void due to the absence
of written authority for the agents involved. The Court of Appeals affirmed this decision,
emphasizing that Marquez, a real estate broker, required specific authority under the
Corporation Code to bind EC. Delsaux, as a representative of ESAC, lacked authority to bind
EC, and the sale involved a substantial portion of EC's assets, requiring authorization through
board resolutions and stockholder consent.

ISSUE:
Whether or not CA erred in holding that Marquez needed a written Authority from respondent
Eternit before the sale can be perfected.

RULING:
No. Section 23 of the Corporation Code of the Philippines (Batas Pambansa Bilang 68)
outlines the governance and authority structure for corporations. It specifies that corporate
powers are vested in the board of directors or trustees, elected from among stockholders or
members, who serve for a specified term. A corporation is a separate entity from its members,
and its actions are conducted through its board of directors or officers, authorized by by-laws
or board resolutions. The general principles of agency govern the relationship between the
corporation and its officers or agents. The property of a corporation, including real estate,
cannot be sold without explicit authority from the board of directors. Physical acts related to
the sale of properties must be performed by officers or agents duly authorized by the board
or corporate by-laws. Declarations by individual directors not connected with authorized
duties are not binding. While a corporation can appoint agents for property negotiations, the
final decision rests with the board of directors, and any unauthorized sale by an agent without
written authority is considered null and void.
 SPOUSES VILORIA vs. CONTINENTAL AIRLINES
GR No. 188288; January 01, 2012
FACTS:
On September 23, 2012, while in the United States, the Viloria spouses sought assistance
from Holiday Travel, a travel agency affiliated with Continental Airlines, to purchase tickets for
their journey from Newark to San Diego. The travel agent, Margaret Mager, advised them
that train travel was fully booked, emphasizing the necessity to buy plane tickets for
Continental Airlines, asserting that failure to do so would result in them not reaching their
destination on time. Trusting Mager's guidance, the couple bought two plane tickets
amounting to $800. However, they later discovered that the train was not fully booked,
prompting them to purchase train tickets for their journey. Subsequently, the Viloria spouses
contacted Mager to request a refund for the plane tickets, but she directed them to
Continental Airlines. Back in the Philippines, they filed a refund request with Continental
Airlines' Ayala office, alleging that Mager's misrepresentation led them to purchase expensive
tickets. Despite their claim, Continental Airlines, arguing that the tickets were non-refundable
and disclaiming any agency relationship with Mager, refused to reimburse the ticket amount.
Consequently, the spouses initiated legal action against the airline. While the trial court ruled
in favor of the Viloria spouses, the Court of Appeals reversed the decision of the Regional
Trial Court (RTC).

ISSUE:
Whether or not a contract of agency exists between Continental Airlines and Mager.

RULING:
Yes. All the essential elements of agency are satisfied, including:
1. Consent, whether expressed or implied, between the parties establishing the agency
relationship.
2. The objective of the agency is the execution of a legal act involving a third party.
3. The agent acts on behalf of the principal and not for personal interests.
4. The agent operates within the bounds of their granted authority.
The first and second elements are evident, as Continental Airlines acknowledges entering
into an agreement with Holiday Travel, which includes Mager, empowering Holiday Travel to
engage in contracts of carriage with third parties on behalf of the airline. The third element is
likewise met, as it is undisputed that Holiday Travel serves in a representative capacity, with
Continental Airlines being legally bound by contracts of carriage entered into by Holiday
Travel on its behalf. The fourth element is affirmed by the absence of any claim from
Continental Airlines regarding Holiday Travel exceeding its granted authority. Moreover,
Continental Airlines has not contested the validity of the transaction between Mager and the
Viloria spouses. Consequently, Continental Airlines is estopped from adopting a contrary
stance and disavowing Holiday Travel's agency, as this would be inconsistent and prejudicial
to the Viloria spouses, who relied in good faith on Continental Airlines' actions recognizing
Holiday Travel's authority. Given that estoppel is grounded in the principles of good faith and
the avoidance of harm to innocent parties due to their reliance, failure to apply it in this case
would result in a manifest injustice.
 ANGELES vs. PHIL. NATIONAL RAILWAYS
G.R. No. 150128; August 31, 2006
FACTS:
The PNR informed Gaudencio Romualdez that it accepted his offer to purchase
scrap/unserviceable rails on an "AS IS, WHERE IS" basis for a total amount of P96,600. After
Romualdez paid the purchase price, he authorized Lizette Wijangco (Lizette Wijanco-
Angeles, now deceased and substituted by petitioner Laureno T. Angeles) to act as his
representative for the withdrawal of the awarded scrap/unserviceable rails. Lizette requested
the PNR to change the withdrawal location due to unavailability, and the PNR granted the
request. However, the PNR later suspended the withdrawal, citing documentary
discrepancies and reported pilferages.

The spouses Angeles, including petitioner Laureno T. Angeles, demanded a refund of

P96,000, but the PNR refused, claiming that 54.658 metric tons of rails worth P114,781.80
had already been withdrawn based on a delivery receipt signed by Lizette. The spouses filed
a suit for specific performance and damages against the PNR and others. The trial court
ruled that the spouses Angeles were not the real parties-in-interest, dismissing their
complaint for lack of cause of action. The court concluded that Lizette was only a
representative of Romualdez and not an assignee of Romualdez's rights regarding the award.
The Court of Appeals affirmed the trial court's decision.

ISSUE:
Whether or not Lizette W. Angeles is agent or an assignee of his (Romualdez's) interest in
the scrap rails awarded to San Juanico Enterprises.

RULING:
Yes, the Court of Appeals (CA) affirmed the trial court's conclusion that Lizette was not an
assignee but merely an agent with limited authority for the withdrawal of scrap rails, lacking
the personality to sue. The legal principle is that when agency exists, the third party's liability
is to the principal, and generally, the agent has no rights or liabilities against the third party.
The situation changes when an agent is constituted as an assignee, allowing the agent to
sue on a contract made for the principal.

Upon examination of Romualdez's letter, it is evident that Lizette was appointed as a

representative, not an assignee. The terms "agent" or "attorney-in-fact" need not be explicitly
used; other designations like "representative" are valid. Romualdez's use of "authorized"
instead of "assigned" indicates an intent to retain his interest in the transaction. The
subsequent acts of the parties, as well as the withdrawal receipt signed by Lizette, confirmed
her agency role.The petitioner's argument that the letter was not in the form of a special
power of attorney is dismissed, as no specific form is required for a valid power of attorney.
The letter is sufficient to constitute a power of attorney, and its purpose is to evidence the
agent's authority to third parties. The petitioner's claim that Lizette paid the amount to the
PNR is dismissed as an afterthought and contradicted by earlier admissions. The Supreme
Court affirmed the CA's decision.
 JIMENEZ vs. RABOT
G.R. No. L-12579; July 27, 1918

FACTS:
This lawsuit was initiated by Gregorio Jimenez to reclaim a piece of land from the defendant,
Pedro Rabot. The said land, along with two others, originally belonged to Gregorio Jimenez.
While residing in Vigan in 1911, Gregorio entrusted the subject property to the care of his
elder sister, Nicolasa Jimenez.

On February 7, 1911, Gregorio wrote a letter to his sister from Vigan, expressing his financial
difficulties and requesting her to sell one of his parcels of land. The letter did not specify
which land was to be sold, using the phrase "one of my parcels of land." Acting upon this
letter, Nicolasa approached the defendant, Rabot, who agreed to purchase the specified
parcel. A year later, Gregorio demanded the return of the subject parcel from his sister,
Nicolasa, who refused. Gregorio, along with his other siblings, then filed a legal action to
recover their land, which resulted in a favorable judgment for the plaintiffs. Meanwhile,
Nicolasa executed and delivered a deed to defendant Rabot, purportedly conveying the
subject parcel of land. The defendant took possession, and the property was in his hands
when the final judgment favored the plaintiffs.

ISSUE:
Whether or not the authority conferred on Nicolasa by Gregorio’s letter sufficient to enable
her to bind her brother.

RULING:
Yes. The underlying principle does not, in the Court’s view, apply to the current case, which
pertains to the adequacy of the authorization rather than the sufficiency of the contract or
conveyance. There is substantial precedent indicating that an individual may, through a
general power of attorney, empower an agent to sell "all" the land owned by the principal, or
all the property within a specific city, county, or state. In this instance, the agent was
specifically granted the authority to sell either of the plaintiff's land parcels. We find no
rationale for why the execution of an act within the bounds of this authority should not legally
bind the plaintiff to the same extent as if he had granted the agent the authority to sell "any or
all," and the agent had conveyed only one. The judgment is hereby reversed.
 CITY-LITE vs. CA
G.R. No. 138639; February 10, 2000
FACTS:
Private respondent F.P. Holdings and Realty Corp. owned a parcel of land in Quezon City,
advertised for sale through a brochure with Meldin Al G. Roy as the contact person.
Petitioner expressed interest in purchasing half of the front lot, but F.P. Holdings was not
receptive. After a second offer to buy the entire front lot, an agreement was reached with Roy,
but F.P. Holdings refused to execute the deed of sale. Petitioner registered an adverse claim,
leading to a court petition by F.P. Holdings for its cancellation. The Regional Trial Court
dismissed F.P. Holdings' petition, affirming the validity of the adverse claim. Petitioner then
sued for specific performance. During the case, respondent Viewmaster became the property
owner. The trial court ruled in favor of petitioner, but the Court of Appeals reversed the
decision. Petitioner sought redress through a certiorari petition, challenging the appellate
court's ruling.

ISSUE:
Whether or not a contract of sale was perfected between petitioner CITY-LITE and
respondent F.P. HOLDINGS acting through its agent Meldin Al G. Roy of Metro Drug.

RULING:
No. The petitioner, CITY-LITE REALTY CORPORATION, argued that a contract of sale was
established with respondent F.P. HOLDINGS through its agent, Meldin Al G. Roy of Metro
Drug. However, Article 1874 of the Civil Code stipulates that the authority of an agent in the
sale of land must be in writing; otherwise, the sale is void. Despite petitioner's contentions
based on witness testimonies, a sales brochure, a property guard's statement, and common
knowledge among brokers, the absence of a written authority was evident in a memorandum
from F.P. HOLDINGS' President. The memorandum requested Metro Drug's assistance in
finding buyers but specified that the final evaluation and acceptance of any transaction rested
with F.P. HOLDINGS. As Meldin Al G. Roy lacked a written authority to sell, the sale was
deemed null and void. The Court of Appeals' decision affirming this nullity was upheld, and
costs were imposed on petitioner CITY-LITE REALTY CORPORATION.
 COSMIC LUMBER vs. CA
G.R. No. 114311; November 29, 1996

FACTS:
Cosmic Corporation, under the authority of its General Manager, utilized a Special Power of
Attorney to designate Paz G. Villamil-Estrada as an attorney-in-fact. This empowered her to
initiate legal actions for the removal of third parties or squatters from the entire lots 9127 and
443, ensuring the evacuation of structures so that the corporation could assume physical
control of the entire property. Subsequently, Villamil-Estrada initiated legal proceedings to
eject Isidro Perez, a private respondent, and regain possession of a portion of lot 443 before
the Regional Trial Court (RTC).

Later on, Estrada and Perez entered into a Compromise Agreement, stipulating that Perez
could acquire the occupied lot by paying P26,640 to the plaintiff, facilitated through Estrada,
at a rate of P80 per square meter. The agreement recognized Perez's ownership and
possession of a 333 sqm portion of lot 443, with Perez undertaking the expenses related to
subdivision, registration, and other incidental costs.

Although the trial court approved the agreement, and the decision attained finality, its
execution did not occur within the prescribed five-year period. Allegedly, this lapse was
attributed to Cosmic Lumber's failure to produce the owner's duplicate copy of Title No.
37649, crucial for segregating the portion sold by Villamil-Estrada to Perez in accordance
with the compromise agreement. Upon discovering this alleged fraudulent transaction, the
petitioner sought the annulment of the trial court's decision before the Court of Appeals,
contending that the compromise agreement was void.

ISSUE:
Whether or not the acts of Paz Estrada are binding to Cosmic Lumber.

RULING:
No. Villamil-Estrada was granted explicit and limited authority through a special power of
attorney to take legal action for the removal of individuals from specific lots owned by Cosmic
Lumber. The authorization did not include the power to sell the property or any part of it. The
lack of such authority was emphasized by the specific limitation that any compromise
agreement entered into should protect only the rights and interests of Cosmic Lumber in the
mentioned lots.

Selling the land, especially at a substantially lower price than its assessed value and without
the plaintiff receiving the proceeds, went beyond the protective scope defined by the grantor.
According to legal principles, the sale of real estate by an agent requires specific, written
authority, and the power of attorney must clearly express the agent's powers.

In this case, the sale of a portion of Cosmic Lumber's land to Perez through a compromise
agreement was deemed unauthorized, rendering the sale and the compromise agreement
void. Consequently, any judgment based on this transaction is also considered void. The
argument is supported by the assertion that when an agent engages in fraudulent activities
for personal gain, acting outside the scope of the agency, the actions are not on behalf of the
principal but solely for the agent's benefit.
 SAN JUAN STRUCTURAL STEEL vs. CA
G.R. No. 129459; September 29, 1998

FACTS:
San Juan Structural and Steel Fabricators engaged in an agreement with Motorich Sales
Corporation, represented by Nenita Gruenberg, the corporate treasurer of Motorich, for the
transfer of a parcel of land. The agreement involved a P100,000 earnest money, with the
balance due by March 2, 1989. After paying the earnest money and requesting a
computation of the remaining balance on March 1, 1989, San Juan claimed that Motorich,
despite repeated demands, refused to execute the Deed of Assignment for the land. San
Juan later discovered that Motorich had sold the land to ACL Development Corporation
through a Deed of Absolute Sale. Consequently, San Juan filed a complaint with the
Regional Trial Court (RTC).

Motorich argued that Nenita Gruenberg, being only the treasurer, lacked the authority to bind
the corporation in the agreement since the president, Reynaldo Gruenberg, did not sign it.
Motorich further contended that, as San Juan failed to pay within the stipulated period, no
deed of assignment could be executed. Nenita claimed that the deed was supposed to be
executed only after receiving the cash payment, and as no payment was made on the
specified date, no deed could have been executed. The RTC dismissed the case, stating that
Nenita Gruenberg lacked authorization from Motorich to enter into the contract with San Juan.
The court also emphasized that a majority vote of the Board of Directors was necessary to
sell corporate assets, as per Section 40 of the Corporation Code. The Court of Appeals (CA)
affirmed this decision, leading to the current petition before the Supreme Court (SC).

ISSUE:
Whether or not the veil of corporate fiction could be pierced.

RULING:
No.THERE IS NO JUSTIFICATION TO PIERCE THE CORPORATE VEIL IN THIS CASE. —
It is crucial to emphasize that the concept of piercing the corporate veil should only be
invoked when the corporate structure is misused as a shield to evade liability for fraud,
illegality, or inequity committed against third parties. The decision to pierce the corporate veil
ultimately hinges on the presentation of compelling evidence.

In the present legal matter, the Court finds no basis to disregard the corporate veil of
Respondent Motorich. The petitioner has failed to demonstrate that the formation or
operation of the corporation was intended to protect any alleged fraudulent or illegal activities
of its officers or stockholders. Additionally, there is no indication that the corporate veil was
utilized to conceal fraud, illegality, or inequity at the detriment of third parties such as the
petitioner.

RESPONDENT CORPORATION DOES NOT QUALIFY AS A CLOSE CORPORATION

UNDER SECTION 96 OF THE CORPORATION CODE. — The articles of incorporation of
Motorich Sales Corporation lack provisions specifying that (1) the number of stockholders
should not exceed 20, (2) preemption of shares is restricted in favor of any stockholder or the
corporation, or (3) the listing of stocks on any stock exchange or making a public offering of
such stocks is prohibited. Based on the articles, it is evident that Respondent Motorich does
not meet the criteria of a close corporation. The mere fact that Spouses Reynaldo and Nenita
Gruenberg own 99.866% of the subscribed capital stock does not automatically categorize
Motorich as a close corporation. It is emphasized that the concentrated ownership of capital
stock or ownership by a single stockholder, in itself, does not provide sufficient grounds for
disregarding the distinct corporate identities.
 DE LOS REYES vs. CA
G.R. No. 129103; September 3, 1999

FACTS:
Daluyong Gabriel owned a 5,010sqm land in Tagum, Davao Del Norte, administered by his
sister Maria Rita Gabriel de Rey while he resided in Mandaluyong, Metro Manila. Lydia Delos
Reyes leased 176sqm for one year. In 1985, Daluyong's son, Renato, took over as
administrator, and they extended Lydia's lease to six years. In 1987, Lydia verbally agreed to
buy 300sqm at P300 per sqm, paying in installments. Upon learning of construction,
Daluyong demanded the Delos Reyes cease and vacate. The Delos Reyes claimed
agreements were made with Maria Rita and Renato. In 1989, Daluyong sued for land
recovery, and the Delos Reyes counterclaimed for specific performance. The RTC ordered
the Gabriels to convey the land. On appeal, the CA reversed, instructing the Delos Reyes to
vacate the land.

ISSUE:
1. Whether or not the sale made by Renato Gabriel of the land registered to his deceased
father during the lifetime of the latter, to the spouses Delos Reyes is null and void.

2. Whether or the sale made by Renato Gabriel of the land registered to hisdeceased father
during the lifetime of the latter, in favor of the spouses Delos Reyes, by operation of law
automatically vest title on the latter under the principle of estoppel as provided in Article 1433
and 1434 of the Civil Code.

RULING:
1. SC agrees with CA that Renato Gabriel was in no capacity to give consent on the sale of
the subject land. According to Article 1874 of the Civil Code, when the sale of a piece of land
or any interest therein, is through an agent, the authority of the latter shall be in writing,
otherwise the sale shall be null and void. The verbal agreement made by Renato Gabriel and
Lydia Delos Reyes lacks one of the essential requisites for its validity; Renato Gabriel does
not have authority to enter into contract of sale of the subject land.

2. Article1433 and 1434 of the Civil Code is not applicable, Renato Gabriel never acquired
ownership of the subject land. Before Daluyong Gabriel died, he donated the entire lot to his
daughter Maria Rita Bartolome. If there was no donation made by Daluyong Gabriel, Renato
Gabriel will become the owner and acquired title by way of hereditary succession.
 AF REALTY vs. DIESELMAN FREIGHT
G.R. No. 1114448; January 16, 2002

FACTS:
Dieselman Freight Service Co. owns a commercial lot in Pasig City. Manuel C. Cruz, Jr., a
board member, issued a letter authorizing Cristeta N. Polintan to find a buyer for the lot at
P3,000.00 per sqm, without written authority from Dieselman. Polintan, in turn, authorized
Felicisima Noble to sell the lot. Noble offered it to AF Realty & Development, Inc. at
P2,500.00 per sqm, accepted by Zenaida Ranullo. Ranullo sought a board resolution
authorizing the sale, but Polintan could only provide documents like the title, tax declaration,
tax receipt, and a copy of Dieselman's Articles of Incorporation. Despite receiving
P300,000.00 as "earnest money," Dieselman's president, Cruz, Sr., demanded P4,000.00 per
sqm to finalize the sale. AF Realty agreed but Cruz, Sr. terminated the offer, demanding the
return of the lot's title. AF Realty, claiming a perfected contract, sued for specific performance.

Dieselman argued it didn't authorize anyone for the sale. Meanwhile, Dieselman and Midas
Development Corporation executed a Deed of Absolute Sale for the same property on July
30, 1988. The Court of Appeals ruled that Cruz, Jr. lacked written authorization, making the
sale to AF Realty imperfect. It also declared the Deed of Absolute Sale with Midas valid,
finding no bad faith on Midas's part.

ISSUE:
Whether or not respondent Midas has a right over the subject lot.

RULING:
Yes. AF Realty contends that the unauthorized agent's sale of the land can be ratified,
asserting that the P300,000.00 receipt by Cruz, Jr. from AF Realty as partial payment
effectively binds Dieselman. However, we disagree. This case involves a land sale through
an agent, and Article 1874 of the Civil Code stipulates that "When a sale of a piece of land or
any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void." Since Cruz, Jr., Polintan, and Noble lacked written
authorization from Dieselman for the lot sale, the purported contract is void. As a void
contract, it cannot be ratified.

On the contrary, the legitimacy of the sale to Midas is beyond question. As indicated, the sale
received authorization through a board resolution of Dieselman dated May 27, 1988.
 Deluao vs Casteel
G.R. No. L-21906; December 24, 1968

FACTS:
In 1940, Nicanor Casteel faced three rejections while attempting to register a fishpond on a
vast swampy land of 178.76 hectares in the then-sitio of Malalag, municipality of Padada,
Davao. The Bureau of Fisheries had not acted on his previous applications. Undeterred by
these rejections, Casteel remained interested, recognizing the urgent need to expand his
occupation due to the threat from other applicants who had entered and spread within the
area. To address this, Casteel sought financial assistance from his uncle, Felipe Deluao, as
he lacked the financial means to undertake the necessary construction of dikes and
cultivation of marketable fishes.

Upon discovering that rival applicants had occupied portions of the applied area, Casteel
promptly filed a protest, leading to two administrative cases related to the contested land.
Despite the findings in these administrative cases, the Director of Fisheries rejected Casteel's
application on October 25, 1949. The rejection mandated the removal of all improvements on
the land, with the directive to lease the land through public auction.

On November 25, 1949, Inocencia Deluao (wife of Felipe Deluao) and Nicanor Casteel
executed a "contract of service." Simultaneously, Inocencia Deluao granted a special power
of attorney to Jesus Donesa. Despite the rejection of Felipe Deluao's application on
November 29, 1949, he persisted in claiming the same area in two administrative cases,
seeking a reinvestigation of Nicanor Casteel's application for the fishpond.

The Secretary of Agriculture and Natural Resources issued a decision ordering Casteel's
reinstatement in the area and specifying that he should compensate for the improvements
made. In January 1951, Nicanor Casteel prohibited Inocencia Deluao from further
administering the fishpond and expelled her representative, Jesus Donesa, from the
premises.

ISSUE:
Whether or not the reinstatement of Casteel over the subject land constitute a dissolution of
the partnership between him and Deluao.

RULING:
Yes, the reinstatement of Casteel resulted in the dissolution of his partnership with Deluao.
The Supreme Court determined that the arrangement established through the "contract of
service" persisted until the issuance of decisions on September 15, 1950, in DANR Cases
353 and 353-B by the Secretary of Agriculture and Natural Resources.

This development inherently led to the dissolution of the partnership. Given that the
partnership aimed to divide the fishpond into two equal parts between the parties after its
award to Casteel, the unauthorized transfer of one-half to parties other than Casteel,
following the approval of his application and the award of the fishpond to him, rendered the
partnership unlawful. The approval of Casteel's application became an event making it
impermissible for the members to continue the partnership. Furthermore, subsequent events
indicated the mutual intent of both parties to terminate the partnership, as each refused to
share the fishpond with the other.
 ADVENT CAPITAL & FINANCE CORP. vs. ALCANTARA
G.R. No. 183050; January 25, 2012

FACTS:
Petitioner Advent Capital and Finance Corporation (Advent Capital) initiated rehabilitation
proceedings by filing a petition with the Regional Trial Court (RTC) of Makati City. Atty.
Danilo L. Concepcion was appointed as the rehabilitation receiver by the RTC. During the
examination of Advent Capital's books, Atty. Concepcion discovered that the Alcantaras,
Nicasio, and Editha, owed the company trust fees for managing their various trust accounts.

Atty. Concepcion, as the rehabilitation receiver, formally requested Belson Securities, Inc.
(Belson) to release the cash dividends held under the Alcantaras' Trust Account. However,
Belson declined, citing objections from the Alcantaras and the absence of a specific order
from the rehabilitation court. Consequently, Atty. Concepcion filed a motion with the
rehabilitation court, seeking a directive for Belson to release the funds. The rehabilitation
court granted Atty. Concepcion's motion, and in compliance with the court's order, Belson
handed over the relevant dividends to him.

Subsequently, the Alcantaras initiated a special civil action of certiorari before the Court of
Appeals (CA), aiming to annul the rehabilitation court's order. The CA granted the petition,
instructing Atty. Concepcion to account for the dividends and deliver them to the Alcantaras.
Advent Capital filed a motion for reconsideration, which the CA denied, leading to the present
review through certiorari. Hence, this petition seeks a review of the CA's decision.

ISSUE:
Whether or not the cash dividends held by Belson and claimed by both the petitioner and the
respondents, could be claimed by the Advent Capital upon the order of the rehabilitation
court.

RULING:
No. The rehabilitation court lacks jurisdiction to adjudicate conflicting claims over dividends
held by Belson in trust for their respective owners. The court is not empowered to settle
ownership disputes between Advent Capital and third parties, as neither Belson nor the
Alcantaras are debtors or creditors with a stake in the rehabilitation proceedings. Advent
Capital should pursue a separate collection action to recover the alleged trust fees,
depositing the funds in escrow, if necessary, pending court authorization for rightful
distribution.

Since Advent Capital failed to collect trust fees quarterly, as per the contract, its claim against
the Alcantaras is essentially a demand for payment, suitable for an ordinary collection action.
Seeking delivery of funds from a third party through a motion in the rehabilitation case is
inappropriate. Rehabilitation proceedings, characterized by their summary and non-
adversarial nature, do not entertain the adjudication of claims better suited for regular court
processes.

The commercial nature of a rehabilitation case necessitates expeditious resolution. The

Interim Rules reflect this by prohibiting certain pleadings, allowing affidavit evidence, opting
for clarificatory hearings, and granting the court authority to decide based on affidavits and
documents. Advent Capital's disputed claim requires a full trial in a separate action, where
the Alcantaras can present their claims and defenses. Consequently, the petition is denied
for lack of merit, and the Court of Appeals' decision and resolution are affirmed.
 Goyanko vs. UCPB
G.R. No. 179096; February 06, 2013

FACTS:
In 1995, Joseph Goyanko, Sr. invested ₱2,000,000.00 with PALII, leading to conflicting
claims from Goyanko, Sr.'s legitimate and illegitimate families. PALII deposited the proceeds
with UCPB under the name “Phil Asia: ITF The Heirs of Joseph Goyanko, Sr.” As of
September 27, 1997, the deposit was ₱1,509,318.76. On December 11, 1997, UCPB allowed
PALII to withdraw ₱1,500,000.00, leading to a balance of ₱9,318.76. UCPB declined
reimbursement, prompting the petitioner to file a complaint before the RTC.

UCPB admitted the opening and withdrawal from the ACCOUNT. The RTC dismissed the
complaint, stating that "ITF HEIRS" didn't sufficiently indicate a trust relation between PALII
and Goyanko’s heirs. It concluded that UCPB merely acted as a depository bank. The
petitioner appealed to the CA, claiming PALII established a trust with them as beneficiaries.
The CA ruled no express trust existed, citing the absence of essential elements. The deposit
contract involved only PALII and UCPB, and the designation “ITF HEIRS” was deemed
insufficient to prove a trust. Consequently, the CA held UCPB not liable for the withdrawn
amount.

ISSUE:
Whether or not UCPB should be held liable for the amount withdrawn because a trust
agreement existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the
ACCOUNT with UCPB.

RULING:
No. A trust, whether express or implied, denotes a fiduciary relationship between an
individual with equitable ownership and another holding legal title, where the former is
entitled to specific duties and powers from the latter. Express trusts result from direct and
affirmative actions, and written words are not obligatory but the establishment of an express
trust necessitates clear and firm evidence, precluding assumptions from ambiguous
statements or circumstances susceptible to varied interpretations.

In the case of Rizal Surety & Insurance Co. v. CA [329 Phil. 789], the court outlined
prerequisites for recognizing an express trust. These include the presence of a competent
trustor and trustee, an identifiable trust res, and sufficiently defined beneficiaries. Each of
these elements must be convincingly demonstrated, and the absence of any renders the trust
invalid. Moreover, a present and complete disposition of the trust property is required, despite
the actual enjoyment by beneficiaries occurring in the future. The purpose of the trust must
be active, avoiding execution into a legal estate or interest and complying with statutory or
public policy prohibitions. Additionally, there must be an administration power beyond a mere
contractual duty, even if the contract is on behalf of a third-party beneficiary. A clear
declaration of terms is vital for the trustee's administration, ensuring enforceability by the
court.

Applying these standards, it is concluded that no express trust was established in the present
case. Despite the potential existence of an identifiable trust res and sufficiently certain
beneficiaries, there is a deficiency in a competent trustor and trustee. UCPB, as the trustee of
the ACCOUNT, never held an equitable duty or administration power over it; instead, PALII
assumed the responsibility to hold the title for the benefit of the HEIRS. Moreover, PALII, as
the trustor, lacked the right to the beneficial enjoyment of the ACCOUNT, and the terms
governing UCPB's administration were not clearly specified. While beneficiaries need not be
explicitly identified for a trust to exist, the intention to create an express trust must be firmly
established, along with the other requisite elements. In the absence of these elements, no
express trust is deemed to exist.
 IGLESIA FILIPINA INDEPENDIENTE vs. TAEZA
G. R. No. 197597; February 3, 2014

FACTS:
IFI, a legally registered religious corporation, was the owner of a 31,038 sqm land in
Tuguegarao, consisting of Lots A, B, C, and D. Supreme Bishop Rev. Ga separately sold Lot
D to Bienvenido de Guzman and Lots A and B to Taeza, with the latter making a P100k
installment payment and agreeing to a mortgage. However, Taeza defaulted on the
payments.

The Parish Council, represented by Laymen Committee officers, attempted to file a complaint
for the annulment of the sale to Taeza, but it was dismissed due to a lack of legal standing.
Following the expiration of Ga's term, he filed an action with the SEC to nullify the elections of
his successor, Bishop dela Cruz. During this period, IFI, represented by Supreme Bishop
Ganno, initiated an annulment of sale case against Ga and Taeza. Still, it was dismissed
without prejudice as the election case remained unresolved.

Afterward, the SEC eventually resolved the case against Ga. Meanwhile, Taeza registered
the lots in his name, obtained Transfer Certificates of Title (TCTs), and occupied a portion of
the land. Despite IFI's demand for him to vacate, Taeza refused. Subsequently, another
annulment of sale case was filed, this time through Supreme Bishop Most Rev. Pasco,
against Taeza. The court ruled that the sale was null and void. However, the Court of
Appeals (CA) reversed this decision, asserting that as a corporation sole, there was a valid
sale through the Supreme Bishop, who had the authority to administer all properties and act
as the official representative. The CA further argued that IFI's constitution did not grant other
officers the authority to enter into contracts. IFI then filed the present petition for review on
certiorari.

ISSUE:
Whether or not Supreme Bishop Ga have authority to enter into a contract of sale on behalf
of IFI.

RULING:
NO. IFI argues that the sale lacked authority and consent as required by Art IV (a) of their
Canons, which mandates approval from the laymen’s committee, parish priest, Diocesan
Bishop, and the Supreme Council with the endorsement of the Supreme Bishop. In the
absence of unanimous approval, IFI contends that the sale should be unenforceable.
Although witness testimony suggests that the Canons don't specify the manner of approval,
the opposition from the Council was overlooked by the Court of Appeals (CA), and therefore,
the contract is unenforceable unless ratified under Art. 1403, CC (contracts entered into
without authority).

Given the absence of authority, IFI claims that the transfer of the property to Taeza's name
was a mistake. According to Art. 1456, CC, if a property is acquired through mistake or fraud,
Taeza is considered a trustee of an implied trust for the benefit of the original owner. This
type of trust, a constructive trust, is not based on a promise or fiduciary relationship, but
rather on equity and fairness.

In constructive trusts, Taeza could acquire the property through prescription even without
repudiating the relationship. However, the beneficiary must file an action for reconveyance
within 10 years. Taeza's Transfer Certificate of Title (TCT) was issued on 7 February 1990,
and the action was filed on 19 January 1990, well within the 10-year period. Therefore, IFI
asserts that the subject property must be returned.
 TORBELA vs. ROSARIO
G.R. No. 140528; December 7, 2011

FACTS:
The Torbela Siblings initially conveyed a lot to Dr. Rosario through a Deed of Absolute
Quitclaim (DAQ), resulting in the issuance of a Transfer Certificate of Title (TCT) in Dr.
Rosario's name. Subsequently, another DAQ was executed by Dr. Rosario, acknowledging a
mere loan arrangement for the lot. Although this subsequent deed was notarized, it was not
annotated in the TCT. The Torbela siblings, concerned about Dr. Rosario's actions, submitted
an Affidavit of Adverse Claim expressing their intent to register ownership over the lot,
especially since Dr. Rosario had mortgaged the property to Banco Filipino.

Dr. Rosario's loan from Banco Filipino was secured by a mortgage, and this encumbrance
was duly annotated on the TCT. The Torbela siblings then filed a complaint with the Regional
Trial Court (RTC) seeking recovery of ownership and possession. Following Dr. Rosario's
failure to repay the loan, Banco Filipino foreclosed the mortgage, leading to the issuance of a
new TCT in the bank's favor. Subsequently, Banco Filipino sought a Writ of Possession
before the RTC, a decision that the Court of Appeals (CA) upheld.

In their petition, the Torbela siblings contested the CA's ruling, asserting that the property,
despite Dr. Rosario's TCT presentation, should not be considered clean and free due to the
annotation of encumbrances and their adverse claim on the TCT.

ISSUE:
Whether or not the registration of the TCT issued in Dr. Rosario’s name vests the title of the
lot to him.

RULING:
No. The act of registration does not confer ownership; rather, it serves as proof of existing
ownership. Land registration statutes do not confer a superior title upon the holder compared
to their actual ownership. The document in question is the Transfer Certificate of Title (TCT)
issued by the Register of Deeds, which represents ownership. The petitioner appears to
misconstrue the certificate as synonymous with title. Placing a piece of land under the
Torrens system doesn't preclude the possibility of disputing ownership. Ownership and a
certificate of title are distinct concepts; the TCT serves as the strongest evidence of
ownership. However, it does not always serve as conclusive proof of ownership. The mere
issuance of a certificate of title to an individual does not rule out the potential for co-
ownership with unnamed individuals or the registrant acting as a trustee. Additionally, others
may acquire interests subsequent to the certificate's issuance. To reiterate, registration does
not equate to ownership; it is merely the most reliable evidence thereof. The concept of title,
denoting ownership, should be distinguished from the certificate of title, which serves as
evidence of such ownership, even though the terms are often used interchangeably.
 LOPEZ vs. CA
G.R. No. 163959; August 01, 2018

FACTS:
In 1920, Fermin Lopez occupied and declared, for tax purposes, a public land parcel in
Makatubong, Barrio De la Paz, Antipolo, Rizal, covering approximately 19 hectares, 48 ares,
88 centares. Although he filed a homestead application, it remained unresolved until his
death. Survived by Hermogenes Lopez, Eleuterio Lopez, Juan Lopez, and the late Nazario,
Fermin's heirs included Marcelino, Felisa, Zoilo, and Leonardo Lopez (respondents),
Guillermo, Lorenzo, Domingo, Amado, and Victoria Lopez (heirs of Juan), and Anatalia,
Joselito, Rogelio, Evangeline, and Noel Lopez (heirs of Nazario).

Hermogenes, unaware of being granted a homestead patent, applied for it and cultivated the
land. Hermogenes then executed an Extra-Judicial Partition with Eleuterio, Juan, and Nazario,
followed by a Deed of Absolute Sale of their share to Hermogenes. After resolving a dispute
involving Ambrocio Aguilar, the Lopezes (respondents) sold a significant portion of the
property to the Amurao spouses.

Heirs of Juan and Nazario (petitioners) initiated legal action against respondents, seeking co-
ownership declaration and either reconveyance of 3/5 or payment of its value. Respondents,
in their Answer with Compulsory Counterclaim, asserted absolute ownership based on the
homestead grant to their predecessor, Hermogenes.

ISSUE:
Whether or not the remedy of partition is available to petitioners.

RULING:
No. The petition was rejected by the Court on the grounds of lacking merit. It emphasized
that Fermin Lopez's homestead application remained unresolved until his demise, as it was
neither approved nor denied by the Director of Lands, resulting in the absence of a valid
homestead application. Consequently, Fermin Lopez did not acquire any vested right or full
ownership of the land, leaving no property for his heirs to inherit.

When Hermogenes Lopez applied for a homestead grant over the contested property, it was
still classified as alienable public land. As he applied in his name, the homestead patent
granted to him after fulfilling cultivation and residency requirements made him the exclusive
and absolute owner. Thus, his brothers had no ownership stake.

Due to the lack of co-ownership among Hermogenes and his brothers, the executed Deed of
Absolute Sale from the brothers to Hermogenes was deemed invalid. Given the absence of
co-ownership, the petitioners' claim for land partition was dismissed.

Partition, as a legal concept, involves separating, dividing, and assigning a jointly held
property among its potential owners to terminate co-ownership. Its purpose is to end joint
ownership, allowing each co-owner an individual, undivided interest in specific property
without interference from others. Since the petitioners were not co-owners of the disputed lot,
they lacked the grounds to demand its partition, as they held no interest or share in the
property.
 Jarantilla vs Jarantilla
GR 154486; Dec. 1, 2010

FACTS:
Antonieta Jarantilla contended that in 1946, she entered into an agreement with the
defendants to conduct business, as reflected in a document titled "Acknowledgement of
Participating Capital." She asserted that she contributed to managing the joint business
without receiving compensation. Additionally, Antonieta claimed co-ownership of specific
properties (referred to as the subject real properties) held in the defendants' names, arguing
that the acquisition of these properties was only possible through their joint business venture
since the defendants had no other income source. The defendants did not dispute the
existence and validity of the "Acknowledgement of Participating Capital" but argued that
Antonieta's 8% share was confined to the businesses specified in the document. They also
denied using the partnership's earnings to acquire the subject real properties.

During the trial at the RTC, petitioner Federico Jarantilla, Jr., an original defendant, entered
into a compromise agreement with Antonieta Jarantilla. In this agreement, he supported
Antonieta's claims and asserted his entitlement to a six percent (6%) share in the alleged
partnership, mirroring Antonieta's position. The current case arises from Antonieta Jarantilla's
complaint against Buenaventura and other defendants, addressing the issues related to their
alleged business agreement and the co-ownership of certain properties.

ISSUE:
Whether or not the partnership subject of the Acknowledgement of Participating Capital
funded the subject real properties.

RULING:
No. According to Article 1767 of the Civil Code, a contract of partnership requires two
essential elements: (a) an agreement to contribute money, property, or industry to a common
fund; and (b) an intent to divide the profits among the contracting parties. In this case, all
parties involved acknowledged and agreed to contribute capital to a shared fund with the
intention of later sharing the profits. This agreement is supported by a common documentary
piece of evidence, the Acknowledgement of Participating Capital. However, the petitioner
overlooks that this document specifically delineates the businesses covered by the
partnership, namely Manila Athletic Supply, Remotigue Trading in Iloilo City, and Remotigue
Trading in Cotabato City. As there is a clear agreement that the contributed capital is
designated for these three businesses, there is no justification to deviate from this agreement
and extend beyond the stipulations in the document.

Crucially, there is no evidence indicating that the subject real properties were considered
assets of the partnership mentioned in the Acknowledgement of Participating Capital. As
such, the petition is denied.
 ESTATE OF CABACUNGAN vs. LAIGO
GR 175073; August 15, 2011

FACTS:
Margarita was the owner of three parcels of unregistered land in La Union, each covered by a
tax declaration in her name. In 1968, her son, Roberto Laigo, Jr., sought a non-immigrant
visa to the United States and allegedly requested Margarita to transfer the tax declarations to
his name in support of his application. Without the knowledge of her other children, Margarita
executed an Affidavit of Transfer of Real Property in favor of Roberto, who successfully
obtained the visa and traveled to the U.S. Roberto later sold the properties to Spouses Mario
and Julia Campos and Marilou and Pedro, respectively, without Margarita or her other
children being aware of these transactions. The revelation of these sales occurred during
Roberto's wake.

Margarita accused Pedro, Marilou, and the Spouses Campos of bad faith, asserting that they
were aware that Roberto was not the rightful owner of the properties. The Spouses Campos
argued that they were bona fide buyers for value, relying on Roberto's representation that he
had the authority to sell the property. They contended that any agreement between Margarita
and her son did not bind them.

Similarly, Marilou and Pedro claimed to be buyers in good faith and for value. They raised the
defenses of laches and prescription, arguing that Margarita's cause of action was time-barred.

ISSUE:
Whether or not there is an implied trust created between Margarita and her son Roberto.

RULING:
Yes. The inscription of Roberto’s name in the Affidavit of Transfer was not intended to
transfer ownership to him but rather to enable him to hold the property in trust for Margarita.
A trust, defined as a legal relationship between equitable and legal owners, can be express
or implied. Implied trusts include constructive trusts and resulting trusts, the latter arising from
the nature of the transaction and the equitable obligation to hold the legal title for another's
benefit.

Resulting trusts may be imposed when property is gratuitously conveyed for a particular
purpose, and the court may affirm the trust if the purpose is fulfilled or frustrated. The
intention is inferred from the parties' acts, and parole evidence is admissible. In this case, Luz
and Hilaria testified that Roberto borrowed the properties to show financial capacity for his
U.S. trip, with the understanding that he would return them upon his return. Despite the
absence of a written commitment, trust and confidence were placed in Roberto.

The ownership records in the names of the respondents lacked probative value against the
credible testimony of Luz and Hilaria. Roberto, as a trustee of a resulting trust, had no duties
regarding property management, control, or disposition, and his sales to respondents
constituted wrongful conversion and a breach of trust.
 AZNAR BROTHER REALTY vs. AYING
G. R. No. 144773; May 16, 2005

FACTS:
Lot No. 4399, spanning 34,325 square meters in Dapdap, Lapu-Lapu City, became the
subject of a petition for a cadastral decree filed by Crisanta Maloloy-on. Following her demise
in 1930, the Cadastral Court issued a Decision ordering the issuance of a decree in favor of
Crisanta Maloloy-on's eight children—Juan, Celedonio, Emiliano, Francisco, Simeon,
Bernabe, Roberta, and Fausta, all bearing the surname Aying. Unfortunately, the certificate
of title was lost during the war. Subsequently, the siblings engaged in an extra-judicial sale of
the lot, excluding Roberta, Emiliano, and Simeon Aying from the partition. The lot was
eventually sold after the partition, and almost three decades later, Roberta, Emiliano, and
Simeon initiated legal action seeking the ejectment of the current occupants.

ISSUE:
Whether or not respondents’ cause of action is imprescriptible.

RULING:
The factual circumstances reveal that the petitioner acquired the entire land parcel under the
mistaken belief that all heirs had executed the relevant document. Therefore, the trial court
correctly applied Article 1456 of the Civil Code, which stipulates that if property is obtained
through mistake or fraud, the acquirer is considered a trustee of an implied trust for the
benefit of the original owner. The rule that a trustee cannot gain ownership through
prescription without repudiating the trust applies to express and resulting implied trusts.
However, in constructive implied trusts, prescription can occur even without repudiation, and
the prescriptive period is ten years for actions of reconveyance based on implied or
constructive trusts. The argument that Article 1104 of the Civil Code, pertaining to the
rescission of partitions with preterition, is applicable is dismissed. The Extra-Judicial Partition
of Real Estate with Deed of Absolute Sale is not being rescinded; its validity is upheld, but
only as to the participating parties. Consequently, petitioner, having acquired ownership over
the shares of the heirs who executed the document, is obliged to act as a trustee for the
benefit of the respondent heirs of Emiliano and Simeon Aying, who, having filed their action
within the prescriptive period, are entitled to the reconveyance of their share in the disputed
land.