Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
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Bordador vs Luz
Facts
Bordador is engaged in the business of purchase and sale of jewelry. Luz is their regular customer. On
several occasions, Deganos (respondent) received jewelry from Bordador with the responsibility to
sell the items at a profit and remit the proceeds and return the unsold items to Bordador. The jewerly
and prices were indicated in receipts stating they were received for Deganos niece and Luz. Deganos
never returned the sales proceeds or the unsold items. Luz appeared on Deganos behalf and obligated
himself to pay the amount due to Bordador on an installment basis. Luz failed to comply with his
obligation.
Issue
Is Deganos an agent of Luz?
Held
No.
The basis for agency is representation. In this case, theres no evidence to show Luz consented to
Deganos acts or authorized him to act on her behalf with respect to the particular transactions
involved. In fact, Bordador was grossly and inexcusably negligent to entrust Deganos with the jewelry
without requiring a written authorization for his alleged principal. A person dealing with an agent is
put on inquiry and must discover upon his peril the agents authority. Theres no express or implied
agency between Deganos and Luz.
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Domingo vs Domingo
Facts
Vicente Domingo (complainant) granted Gregorio Domingo (respondent) the exclusive agency to sell
Vicentes Property X. Gregorio would receive a 5% commission if Property X is sold to a purchaser
Gregorio introduces. Gregorio authorized Purisima to look for a buyer promising the latter a share of
the commission. Purisima introduced Oscar, a potential buyer to Gregorio. Negotiations took place
between Oscar and Vicente with Gregorio managing to persuade Vicente to sell Property X at a lower
price. Oscar gave Gregorio a P1,000.00 gift for Gregorios success in lowering the price. Gregorio
didnt disclose to Vicente the gift.
After some time, Oscar told Gregorio he was no longer buying the property and didnt meet Gregorio
anymore. Gregorio sensed something fishy and discovered that Vicente had actually sold Property X
to Oscars wife. When Gregorio demanded his commission, Vicente refused arguing Property X was
sold not to Gregorios buyer, but to another buyer namely Oscars wife.
Issue
Is Gregorio still entitled to his commission?
Held
No.
The Civil code demands the utmost good faith, fidelity, honesty, candor and fairness on the agents
part to his principal. The agent has an absolute obligation to make a full disclosure to his principal of
all his transactions and facts relevant to the agency. An agent who takes a secret profit from the
vendee without revealing the same to his principal is guilty of a breach of his loyalty to the principal
and forfeits his right to collect the commission from the principal.
In this case, Gregorio received a gift from Oscar but failed to disclose it to Vicente. The gift corrupted
Gregorios duty to serve his principals interest by persuading Vicente to sell Property X at a much
lower price than he intended. Art. 1891 doesnt apply if the agent acted only as middleman with the
task of bringing together the vendor and vendee. The article also wont apply if the agent had
informed his principal of the gift he received from the purchaser and the principal didnt object to it.
Here, Gregorio wasnt merely a middleman because he served as Vicentes broker and agent.
Gregorio also didnt disclose Oscars gift to Vicente. As a consequence of such breach of trust,
Gregorio has forfeited his right to the commission.
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Tan vs Gullas
Facts
Gullas owns Property X that he wants to sell. Gullas authorized Tan, a real estate broker, to negotiate
for the sale of the land with a commission if Tan does sell it. Tan found a buyer in the Sisters of Mary
Banneaux. After negotiations, Gullas agreed to sell Property X to Sisters of Mary Banneaux. Gullas
authorized his attorney to sell, transfer, and convey Property X. The transaction went smoothly and
title was issued in Sisters of Mary Banneauxs favor. Afterwards, Tan went to Gullas to collect his
commission but Gullas refused reasoning another broker introduced Sisters of Mary Banneaux to
Gullas.
Issue
Is Tan entitled to the commission?
Held
Yes.
An agent receives a commission upon the sale's successful conclusion. Meanwhile, a broker earns his
commission by merely bringing the buyer and seller together, even if no sale is eventually made.
In this case, it was Tan who first introduced Sisters of Mary Banneaux to Gullas. Gullas allegation
that he hired another broker who first introduced Sisters of Mary Banneaux to him is untenable
because he failed to provide evidence proving it. Gullas is merely avoiding paying Tan his
commission for Tans role in the transaction. Further, Tan wasn't able to participate in the
negotiations because of Gullas actions.
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Medrano vs CA
Facts
Vice-Chairman Medrano of Ibaan Rural Bank was looking for a buyer of a foreclosed bank asset.
Medrano asked Flor (complainant) to look for a buyer. Borbon, Flors associate and a real estate
broker, knew of Lee, who might be interested in the property. Medrano gave Flor and Borbon written
authority to negotiate the propertys sale. The defendants arranged for the propertys ocular inspection
with Lee but were delayed for one reason or another. After a few weeks, defendants discovered
Medrano had already sold the property to Lee. With the sale consummated, defendants asked
Medrano for their commission but Medrano refused to pay.
Issue
Are defendants entitled to their commission?
Held
Yes.
Procuring cause is meant to be the proximate cause. Procuring cause, in a brokers activity, refers to a
cause originating a series of events which, without break in their continuity, result in accomplishment
of prime object of the brokers employment - producing a purchaser ready, willing and able to buy
real estate in the owners terms. A broker will be regarded as the sales procuring cause if his efforts
are the foundation on which the negotiations resulting in sale are begun. The means he employs and
his efforts must result in the sale. He must find the purchaser and the sale must proceed from his
efforts acting as broker.
In this case, defendants are the sales procuring cause because they were the ones who informed
Buyer A leading him to its consummation. Even if defendants didnt take part in the negotiations, they
are still entitled to the commission. A brokers conventional employment is merely to find a willing
and able buyer to purchase the property. There is no agreement to the contrary that defendants also
had to negotiate the sale to get paid their commission.
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13
Rallos vs Yangco
Facts
Yangco sent Rallos a letter informing Rallos that he has a shipping and commission department for
buying and selling tobacco. The letter also states Collantes is Yangcos agent. Rallos did business
with Yangco through Collantes.
After some time, Rallos sent Collantes, as Yangcos agent, tobacco to be sold on commission.
Collantes didnt turn the commission over but rather appropriated it for his own use. It turns out
Yangco had already removed Collantes as his agent before Rallos sent the tobacco leaf. Rallos didnt
know Collantes was no longer Yangcos agent and Yangco never gave any notice of the terminations
agency. Rallos demanded payment from Yangco but the latter refused arguing Collantes acted in his
personal capacity.
Issue
Is Yangco liable?
Held
Yes.
Yangco advertised the fact Collantes was his agent and it was Yangcos duty to give due notice to
Rallos of the agencys termination. Failing to give notice, Yangco is responsible for any goods
delivered in good faith to Collantes as Yangcos agent without knowledge of the agencys
termination.
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Litonjua vs Fernandez
Facts
2 brokers offered to sell to Litonjua Property X. Respondents Fernandez and Eleosida represented
Property Xs owners. The respondents authorized the brokers to offer the property for sale.
Afterwards, Litonjua met with Fernandez and the 2 brokers where they agreed Litonjua would buy
Property X and set a date to finalize the sale. The date for the sale passed and Litonjua asked
Fernandez to execute the deed of sale and Property X be turned over to him. Fernandez refused saying
the sale will no longer push through because of alleged tenants that appeared on Property X and
causing problems. Litonjua filed a case for specific performance and damages against Fernandez and
Property Xs owners.
Issue
Does Fernandez have authority to sell Property X?
Held
No.
The Civil Code provides that a special power of attorney is necessary to enter into any contract
involving immovable property or real rights. Any sale of real property by one purporting to be the
registered owners agent must show his authority in writing otherwise the sale is null and void. The
agents declarations alone are generally insufficient to establish his authority.
In this case, theres no documentary evidence to show Property Xs owners specifically authorized
Fernandez to sell Property X to Litonjua. Fernandez specifically denied authority to sell Property X.
The purported letter Fernandez sent Litonjua representing herself to have authority do so is signed by
Fernandez alone. Further, Property Xs owners never ratified any of Fernandezs actions.
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Veloso vs CA
Facts
Veloso owns Land X with title registered in his name. Afterwards, Velosos wife sold Land X to
respondent Escario, supported by a general power-of-attorney and deed of absolute sale without
Velosos knowledge. Veloso found out when he discovered his title was cancelled and a new one
issued in Escarios name. Veloso filed a case to recover Land X. Veloso alleged in court that hes the
absolute owner of Land X and he never authorized anybody, not even his wife, to sell it. Veloso
denied ever having executed a power-of-attorney in his wifes favor.
Issue
Was there a valid sale of Land X?
Held
Yes.
A special power-of-attorney can be included in the general power when the act or transaction for
which the special power is required is specified therein.
In this case, the records show the assailed power-of-attorney was valid and regular on its face. It was
notarized and therefore carries evidentiary weight. Further, there was no need to execute a separate
and special power-of-attorney because the general power-of-attorney expressly authorized the agent
to sell Land X.
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Pineda vs CA
Facts
PMSI availed of life insurance from Insular Life for its employees. Afterwards, some of PMSIs
employees died at sea when its ship sank. Pineda, one of the dead employees relative, sought death
benefits from the Government and PMSI assisted him. PMSI made Pineda execute a special powerof-attorney authorizing PMSI Capt. Nuval to follow up, ask, demand, collect and receive on
Pinedas behalf money due him relative to the ships sinking.
Afterwards, PMSI claimed from Insular Life on Pinedas behalf. Among the documents PMSI
submitted to Insular Life to process the claim included the special power-of-attorney Pineda executed.
Insular Life released money pursuant to the insurance on the basis of these documents. PMSI then
deposited the money in Nuvals account. Afterwards, Pineda discovered he was entitled to benefits
under Insular Life and demanded these benefits but Insular Life refused arguing the money was
already released to PMSI.
Issue
Did the special power-of-attorney authorize Nuval to claim benefits from Insular Life in Pinedas
behalf?
Held
No.
The special power-of-attorney doesnt contain in unequivocal and clear terms authority to Nuval to
obtain from Insular Life insurance proceeds arising from the insureds death. A special-power-ofattorney must be strictly construed. The document is couched in terms which would easily arouse an
ordinary man suspicion because it deviated from Insular Lifes standard practice. Further, it cant
even be considered a general power-of-attorney because theres no intent to grant such power or
constitute a universal agency.
In a group insurance policy, the employer acts as the insurance companys agent. In this case, PMSI,
through Nuval, was Insular Lifes agent.
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Pineda vs CA
Facts
Pineda owns Property X in California while respondent Banez owns Property Y in White Plains.
Pineda and Banez agreed to exchange properties after the parties have cleared the mortgages on their
respective properties. The exchange agreement failed because Pineda failed to clear the mortgage on
the California property.
Afterwards, Banez found out his title to the White Plains property was cancelled and a new one issued
in Pinedas favor. There was also a deed of sale in Pinedas favor. Pineda then sold the property to
Duque.
Issue
Did Duque validly acquire the White Plains property?
Held
No.
The Civil Code provides that in a sale of a parcel of land or any interest therein made through an
agent, a special power of attorney is essential. The authority must be in writing otherwise the sale is
void. A special power of attorney is necessary to enter into any contract where ownership of an
immovable is transmitted or acquired for valuable consideration.
In this case, Banez never authorized Pineda to sell the White Plains property to Duque. Without
authority in writing, Pinedas sale of the property is void.
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Cosmic Lumber vs CA
Facts
Cosmic Lumber executed a Special Power of Attorney in Paz Vilamil-Estradas favor. Paz, as Cosmic
Lumbers attorney-in-fact, then filed an ejectment suit against respondent Perez to recover Property
X. Afterwards, Paz and Perez entered into a compromise agreement where Perez would just buy
Property X. The court approved the compromise agreement but it was never executed because Cosmic
Lumber failed to produce the needed owners duplicate copy of title over Property X. Perez then filed
a case to revive judgement.
Issue
Is the compromise agreement valid?
Held
No.
When the sale of a piece of land or any interest thereon is through an agent, the agents authority shall
be in writing; otherwise the sale shall be void.
In this case, Pazs special power-of-attorney was explicit and exclusionary and she was never granted
authority to sell Property X or any portion thereof. Such power cant be implied from her authority to
enter into a compromise agreement because such agreement should protect Cosmic Lumbers right to
physically possess Property X. Pazs alienation of Property X cant be considered protecting Cosmic
Lumbers rights, more so when Paz sold it at a loss. Without authority from Cosmic Lumber, Pazs
sale of Property X is void.
Further, the general rule the principal is charged with knowledge of his agents actions doesnt apply
here. Cosmic Lumber cant be expected to know of Pazs actions because she was acting fraudulently.
Its contrary to common sense to expect Paz to inform Cosmic Lumber of her fraudulent actions.
Excerpt from the special power-of-attorney
To initiate, institute and file any court action for the ejectment of third persons and/or squatters of
the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to
remove their houses and vacate the premises in order that the corporation may take material
possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into
any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest
of the corporation in the aforementioned lots.
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Under the Old Civil Code, a contract entered into in the name of another without authority from the latter is
void, unless ratified by the person in whose name it was executed before the other contracting party revokes it.
Under the New Civil Code, the contract wouldve been unenforceable and not void.
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BA Finance vs CA
Facts
Respondent Sps. Cuady obtained from Supercars a credit of P40 thousand to cover the cost of Car X.
The obligation was evidenced by a promissory note and to secure compliance with the promissory
note a chattel mortgage was also constituted on Car X. Supercars then assigned the promissory note
and chattel mortgage to BA Finance. BA Finance also renewed Car Xs insurance coverage when the
Sps. Cuady failed to do so and under the terms and conditions of said insurance coverage, the
proceeds shall be payable to BA Finance.
Afterwards, Car X got into an accident. Cuady wanted the car be declared a total loss under the
insurance coverage but BA Finance forced him to repair it. Not long after, the car bogged down and
Cuady again requested to have BA Finance declare Car X as a total loss. BA Finance didnt respond
favorable and Cuady stopped paying the promissory note. BA Finance filed a case to recover the
amount of the note.
Issue
Has BA Finance waived its right collect on the note by failing to enforce the total loss provision in the
insurance coverage?
Held
Yes.
BA Finance is bound by the terms and conditions of the chattel mortgage when it accepted Supercars
assignment. Under the deed of chattel mortgage, BA Finance was made attorney-in-fact with full
authority and power to follow-up, prosecute, compromise or settle insurance claims, to sign, execute
and deliver documents to the Insurance Company as may be necessary to prove the claim, and to
collect the insurance proceeds if Car X suffers any loss or damage. Cuady in fact created in BA
Finances favor an agency that BA Finance was bound by its acceptance to carry out. Consequently,
BA Finance is liable for damages that Cuady may suffer through its non-performance.
In this case, Cuady suffered loss when BA Finance stubbornly refused to enforce the insurance
coverages total loss provision.
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28
British Airways vs CA
Facts
Respondent Mahtani purchased a ticket from British Airways going to India. Mahtani would board
PAL going to Hong Kong, and then British Airways going to India. When Mahtani finally arrived in
India, he discovered his luggage was missing. Mahtani waited a week for his lugge until British
Airways advised him to file a claim.
Afterwards, back in the Philippines Mahtani filed a complaint for damages against British Airways.
British Airways claims it is PAL who should be liable because the PAL plane arrived late resulting in
the missing luggage.
Issue
Is British Airways liable to Mahtani? Is PAL liable to British Airways?
Held
Yes & Yes.
Carriage by plane although performed by successive carriers is regarded as a single operation and the
carrier issuing the passengers ticker is considered the principal party and the other carriers merely
agents.
In this case, the contract of air transportation was exclusively between Mahtani and British Airways
with PAL acting as British Airways agent. PAL acted as British Airways agent in transporting
Mahtani from Manila to Hong Kong. British Airways is liable to Mahtani but PAL is liable to British
Airways for its negligence in the performance of its function and is liable for damages that the
principal may suffer by reason of such negligence. PAL was negligent in failing to arrive in Hong
Kong on time and transfer Mahtanis luggage to his flight going to India.
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Cervantes vs CA
Facts
Respondent Philippine Air Lines issued to Cervantes a round trip ticket for Manila-Honolulu-Los
Angeles-Honolulu-Manila pursuant to a compromise agreement between the 2 parties in another case.
The ticket would expire 1-year from its issuance. Cervantes used the ticket 4 days before it expired
and arrived in Los Angeles. Cervantes then booked his return flight, which was already past the 1year expiration period. Cervantes later learned his return PAL plane would stopover in San Francisco
and he made arrangements with PAL to board his flight in San Francisco instead of Los Angeles. At
San Francisco, Cervantes wasnt allowed to board and PAL marked his ticket as expired. Cervantes
then filed a complaint against PAL.
Issue
Did the PAL agents in confirming the ticket extend its period of validity?
Held
No.
An agent who acts beyond the scope of his authority doesnt bind the principal, unless the latter
ratifies the same expressly or impliedly. Further, when the 3rd person knows the agent was acting
beyond his authority, the principal cant be held liable for the agents acts. The 3rd person is to blame
and is not entitled to recover damages from the agent, unless the latter undertook to secure the
principals ratification.
In this case, Cervantes knew his ticket would expire before he returned to the Philippines. Also, he
knew beforehand that he needed to file a written request for extension to PAL to extend the validity of
his ticket. The PAL agents didnt know about the compromise agreement and acted without authority
when they confirmed Cervantes return flight.
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32
Gozun vs Mercado
Facts
Gozun owns a printing shop. Mercado ran for governor in Pampanga and Gozun submitted to
Mercado sample campaign materials. Mercados wife told Gozun Mercado already approved the
samples and Gozun should start printing the campaign materials. Gozun printed and delivered the
campaign materials to Mercado. Afterwards, Lilian, Mercados sister-in-law, obtained a loan from
Gozun allegedly for the poll-watchers allowance. Later, Gozun demanded payment from Mercado but
the latter failed to pay in full. Gozun then filed a case to enforce payment.
Issue
Was Lilian authorized to obtain a loan from Gozun?
Held
No.
A special power of attorney is necessary for agent to borrow money unless it is urgent and
indispensable for the preservation of the things that are under administration. The special power-ofattorney refers to the authorizations nature and not to its form. A special power-of-attorney doesnt
need to be in writing provided its duly established by evidence.
In this case, Gozuns testimony failed to establish Lilian obtained the loan on Mercados behalf.
Further, Gozuns receipt of the loan indicates Lilian received the money but it neither specified what
reason the loan was obtained nor in what capacity Lilian received the money. Also, Lilian alone
signed the receipt.
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Sazon vs Vasquez-Menancio
Facts
Respondent Vasquez-Menancio is a resident of the US and she entrusted the management,
administration, care and preservation of her properties to Sazon. Vasquez avers the properties are
productive and Sazon as administrator collected and received all the fruits and income accruing
therefrom. She further alleges Sazon never rendered a full accounting of such fruits and income
derived from the properties but instead applied them for her own use and benefit.
Consequently, Vasquez revoked Sazons authority as administrator and demanded the latter return the
possession and administration of the properties. Vasquez also made repeated demands upon Sazon to
render and accounting and remit the fruits. Sazon denied all of Vasquez allegations forcing Vasquez
to file a case before the RTC.
Issue
Did Sazon fail to render accounting and return the fruits and incomes of the property under her
administration?
Held
Yes.
First, Sazon cant turn over possession of all the properties because some have been leased.
Meanwhile, other properties have already been sold to 3rd persons. Both the lease agreements and
sales are valid because Sazon was acting within her authority as Vasquez agent. However, Sazon can
still return administration over the remaining properties including the leased ones.
On the accounting issue, the reason behind Sazons failure to render accounting is immaterial. Whats
important is Sazon failed to fulfill her duty to render accounting of the transactions she entered into as
Vasquez agent. Sazons claims she sent letters to Vasquez to comply with her obligation to render
accounting. Such claim is insufficient because Sazon was administrator for 18 years and 4 letters
within 18 years can hardly be considered as sufficient to keep Vasquez informed and updated of her
properties condition.
As to the fruits and incomes, the Civil Code states every agent is bound to deliver the principal
whatever the former may have received by virtue of the agency, even though the amount may not be
owed to the principal. In this case, the evidence shows the properties under Sazons administration
generated fruits and income but Sazon failed to turn them over. However, theres insufficient
evidence to show how much income the properties actually generated and how much expenses Sazon
incurred administering said properties. The Court now orders both parties to present evidence as to:
1. The total income generated by the properties
2. The total expenses Sazon incurred that should be borne by Vasquez as owner of the
properties.
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34
Hernandez vs Hernandez
Facts
Cornelia Hernandez (petitioner) is a co-owner of a piece of property the DPWH wants to buy. DPWH
negotiated with the 3 co-owners but it broke down and DPWH was forced to file an expropriation
case. Later, the co-owners executed a letter appointing Cecilio Hernandez (respondent) as their
representative and fixing his compensation for such job. The expropriation proceedings continued
with the judge appointing Cecilio as one of the commissioners to determine just compensation.
Afterwards, the co-owner executed an irrevocable special power of attorney appointing Cecilio as
their true and lawful attorney with respect to the expropriation of the property. The expropriation
proceedings concluded with the co-owners being entitled to P21 million in just compensation. Later,
Cornelia revoked Cecilios SPA and moved to withdraw her share in the just compensation worth P7
million. The judge granted Cornelias motion and released the entire P21 million to Cecilio.
Afterwards, Cecilio sent Cornelia a check for P1.1 million accompanied by a Receipt and Quitclaim
document. The Quitclaim documents states
1. The check represents Cornelias share of the just compensation
2. Cecilio is forever discharged from any action, damages, claims, or demands
3. Cornelia wont institute any action and pursue her opposition to release of the P21 million to
Cecilio.
Cornelia accepted the check because she badly needed the money. A few days later, Cornelia got hold
of the judges decision and found out she was entitled to P7 million and demanded an accounting of
the proceeds from Cecilio. Cecilio didnt reply and so Cornelia filed a case to annul the Quitclaim and
recover her share in the just compensation.
Issue
Is Cecilio entitled to his share of the compensation in the just compensation?
Held
No.
In this case, under the compensation scheme that the co-owners approved, Cecilio would obtain 83%
of the just compensation due to Cornelia as co-owner. This is because Cecilio is allowed to obtain the
excess of anything beyond P300 per square meter. The judge pegged just compensation at P1500 per
square meter, the reason being the propertys value skyrocketed during the proceedings. Cornelia
asked for an accounting of the just compensation from Cecilio several times, but the request remained
unheeded. Until that point, Cecilio violated the fiduciary relationship of an agent and a principal.
Instead of an accounting, Cornelia received a receipt and quitclaim document ready for signing.
Cecilio didnt disclose the truth as to Cornelias share in the just compensation and consequently the
Quitclaim document is fraudulent. Further, the compensation scheme that the co-owners approved is
also vitiated by mistake.
Further, Cecilio cant claim any authority to collect payment from the just compensation based on the
SPA the co-owners executed. Because Cecilio was appointed as commissioner and proceeded to
perform the duties of a commissioner until he completed his mandate. He created a barrier that
preventing him from performing his duties under the SPA. Cecilio couldnt have been a hearing
officer as commissioner and defendant as agent for the co-owners at the same time.
Cecilio is entitled only to be compensated for his services as commissioner.
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35
Escueta vs Lim
Facts
Respondent Rufina Lim filed an action to quiet title to real property with preliminary injunction and
issuance of an HDO against petitioner Rubio. Rufina alleges she bought land from Rubio and heirs of
Luz Baloloy. That she made a downpayment as earnest money with an agreement the remaining
balance of the purchase price would be paid once the sellers turn over the Certificate of Title.
However, both Ignacio and the heirs refused to deliver the Certificate of Title even if she was willing
to pay. Further, Ignacio made a simulate sale in Escuetas favor despite the former knowing of the
sale to Rufina.
For Ignacio, he denies the allegations arguing he never entered into a contract of sale with Rufina. He
argues he appointed his daughter, Llamas, as his attorney-in-fact and not Virginia Lim who was the
one who represented him in the sale with Rufina. Further, he alleges the downpayment was actually a
loan with Rufina.
Issue
Is the Contract of Sale between Rufina and Ignacio valid?
Held
Yes.
The Civil Code allows an agent to appoint a substitute if the principal hasnt prohibited him from
doing so; but he shall be responsible for the substitutes acts if he wasnt given the power to appoint
one.
In this case, Ignacio executed a special power of attorney in Llamas favor who in turn appointed
Virginia as her substitute. Llamas was acting within her authority in appointing Virginia but she will
be responsible for Virginias acts. Among these is Virginias sale of the property to Rufina.
Further, even if Virginia had no authority to sell the property, the contract she executed was
unenforceable and not void pursuant to Art. 1317. Ignacios acceptance of part of the purchase price
constitutes ratification of the contract of sale. Similarly, the heirs have also ratified the sale in
accepting part of the purchase price.2
If Virginia had no authority, it would be void and not subject to ratification because in the sale of real property
or any interest therein through an agent, the latters authority shall be in writing otherwise the sale is void.
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36
Serona vs CA
Facts
Quilatan delivered jewelry to Serona to be sold on commission basis. The parties agreed Serona will
remit payment or return the unsold jewelry within 30 days from receipt of the item. Serona failed to
pay
or return the jewelry after 30 days. Quilatan then required Serona to execute an
acknowledgement receipt indicating their previous agreement and the amount due. Serona and a
witness, Navarette, signed the receipt. Unknown to Quilatan, Serona entrusted the jewelry to Labrador
to sell on commission basis. Serona failed to collect from Labrador causing the former to fail to pay
her obligation to Quilatan. Quilatan then filed a case for estafa against Serona.
Issue
Is Serona guilty of estafa?
Held
No.
Missing is the element of misappropriation or conversion of such money or property by the offender
or denial on his part of such receipt. Serano didnt ipso facto commit the crime of estafa by delivering
the jewelry to a sub-agent for sale on commission basis.
An agent is allowed to appoint a sub-agent in the absence of an express agreement to the contrary
between the agent and principal. In this case, Serano was neither expressly prohibited from appointing
Labrador as her sub-agent nor passing on the jewelry to a 3rd person.
Serano passed along the jewelry to Labrador for the very same purpose she received it. Consequently,
there was no conversion because the jewelry wasnt devoted to a purpose different from that agreed
upon. Also, Serano didnt dispose of the jewelry without right because she was within her rights to
appoint a sub-agent and to give the jewelry to the sub-agent for selling.
However, Serano is responsible for Labradors actions as her sub-agent and consequently is civilly
liable to Quilatan for the value of the jewelry.
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Smith Bell vs CA
Facts
Chua bought and imported to the Philippines 50 metric tons of Dicalcium Phospate. These were
shipped from Taiwan on board the ship S.S. Golden Wealth bound for Manila. First Insurance Co
insured the shipment against all risks at port of departure. Smith Bell was stamped at the lower left
side of the policy as Claim Agent. The cargo arrived in Manila and the cargo was discharged to the
local arrastre operator, Metroport Services Inc. Some of the cargo was in bad condition with some
damaged and contents partly empty. Chua then filed before Smith Bell a formal claim for the value of
the loss. Smith Bell conveyed the claim to First Insurance Co. but the latter offered only 50% of the
claim. Chua didnt accept the offer and filed a case to enforce payment. Smith Bell denied any
liability arguing its a mere claim agent of First Insurance Co. and as agent; it isnt personally liable
under the policy.
Issue
Can a claim agent of a disclosed principal be held solidarily liable with said principal under the
principals marine cargo insurance policy given the agent isnt a party to the insurance contract?
Held
No.
An adjustment and settlement agents function doesnt include personal liability. His function is
merely to settle and adjust claims in his principals behalf if those claims are proven and undisputed.
If the principal disapproves the claim, the agent doesnt assume any personal liability.
Further, Smith Bells only participation in the contract is limited to having its name stamped at the
bottom left portion of the policy as Claim Agent. Smith Bell isnt a real party-in-interest being a
mere agent. Also, theres no proof Smith Bell is First Insurances resident agent. Even if theres proof,
a resident agent is tasked only to receive legal processes on its principals behalf and not to answer
personally for insurance claims.
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Chemphil Export vs CA
Facts
Dynetics and Antonio Garcia filed a complaint before the RTC against the consortium (a collection of
banks) regarding a surety agreement Dynetics and Garcia entered into with the consortium. The
complaint seeks to prevent the consortium from enforcing any obligation Dynetics and Garcia may
have under the surety agreement. Meanwhile, Dynetics and Garcia also filed a similar complaint
before the RTC against Security Bank.
The RTC in both cases issued a writ of garnishment against Garcias Chemphil shares, but the writ
was issued first in the Security Bank case. Later, the consortium and Garcia entered into a
compromise agreement with the former agreeing to limit Garcias debt to P145 million immediately
demandable. Later, Garcia sold his Chemphil shares to Ferro Chemicals with the understanding part
of the purchase price will be paid to Security Bank. Ferro Chemicals then assigned the shares to
CEIC.
Meanwhile, Garcia failed to comply with the Compromise Agreement and so the consortium filed a
motion for execution that the RTC granted. Among Garcias properties levied upon on execution were
his Chemphil shares. The consortium acquired Garcias shares at the public auction. The RTC ordered
Chemphil to register the shares in the consortiums name. This caused CEIC to intervene in the case
on the grounds its the shares rightful owner. The trial court then revoked its earlier order transferring
the shares to the consortium. Later, the consortium, except for PCIB, assigned all its rights and
interest to the shares to Gonzales. The case now centers on who is the shares rightful owner; CEIC or
PCIB and Gonzales?
Issue
Was CEIC subrogated to the rights of Security Bank against Garcia and acquired the latters
attachment to the disputed shares?
Held
No.
CEIC traces its claim over the disputed shares to the attachment claim the RTC issued in Security
Banks favor against Garcia. It argues that when FCI paid Security Bank the obligations due to
Garcia, FCI was subrogated to Security Banks rights. In turn, CEIC was subrogated to FCIs rights
by virtue of FCIs assignment in its favor. Further, Security Banks attachment is superior to the
consortiums because it was issued first and duly recorded in Chemphils books, unlike the
consortiums.
However, the facts show FCI is a mere agent because it paid Security Bank with Garcias own money.
Payment was to be taken from the purchase price that FCI owed Garcia by virtue of the sale over the
Chemphil shares. Its as if Garcia paid Security Bank himself but through an agent, namely FCI. FCI
then cant be considered a 3rd party payor for purposes of legal subrogation. Further, FCI isnt a
disinterested party as required by legal subrogation because the benefits of the extinguishment would
redound to its benefit. Payment would result in Security Bank no longer having any claim to the
Chemphil shares; FCI would then have a clean slate to the titles.
Consequently, CEIC wasnt subrogated to Security Banks rights against Garcia and didnt acquire
the latters attachment over the disputed shares.
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Uy vs CA
Facts
Petitioners Uy and Roxas are agents authorized to sell 8 parcels of land by the owners thereof. The
petitioners then offered to sell the lands to the NHA to be used for a housing project. The NHA agreed
to buy the 8 parcels of land. However, NHA only paid for 5 out of 8 parcels of lands because the
DENR reported the 3 unpaid lands were at an active landslide area and not suitable for a housing
project. The NHA then cancelled the sale over the 3 parcels of land and offered P1 million to the
landowners as danos perjuicios. The petitioners then filed before the RTC a complaint for damages
against NHA and its general manager.
Issue
Do petitioners possess the right to seek damages?
Held
No.
Every action must be prosecuted and defended in the name of the real party-in-interest. The real
party-in-interest is the party who stands to be benefited or injured by the judgement or the party
entitled to the avails of the suit. The party, who by substantive law, has the right sought to be
enforced.
In this case, petitioners arent parties to the contract of sale between the principals and the NHA. They
are mere agents and their rendering of service didnt make them parties to the contracts of sale
executed in the principals behalf. The real parties-in-interest in an action upon the contract are the
parties to the contract.
Further, petitioners arent assignees to the rights under the contract of sale. The petitioners havent
established any agreement granting them the right to receive payment and out of the proceeds to
reimburse themselves for advances and commissions before turning the balance over to the
principals. Otherwise, the agents couldve brought an action on the contract as assignee of such
contract. Also, theres no stipulation pour autrui benefitting petitioners.
Consequently, petitioners arent real parties-in-interest.
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Angeles vs PNR
Facts
PNR informed Romualdez that it has accepted the latters offer to buy on an As is, Where is basis
the PNRs scrap rails located in Del Carmen and Lubao respectively for a total amount of P96
thousand. Romualdez then addressed a letter authorizing Angeles to withdraw the scrap rails to PNRs
acting purchasing agent.
Later, Angeles requested PNR to transfer the location of withdrawal because the scrap rails located in
the original areas werent ready for hauling. The PNR granted the request and chose another location.
However, the PNR subsequently suspended the withdrawal because of documentary discrepancies
coupled by pilferages in the new locations.
Consequently, Angeles demanded a refund in the amount of P96 thousand but PNR refused to pay
alleging the Angeles already withdrew scrap rails worth P114 thousand. Angeles then filed suit
against PNR for specific performance and damages.
Issue
Did the letter Romualdez sent to PNR designate Angeles as mere agent or as assignee of Romualdezs
interest in the scrap rails?
Held
Agent.
Normally, an agent has neither rights nor liabilities against 3rd parties to a contract because only the
parties to the contract may violate a contract; the real party-in-interest is generally a contracting party.
However, the legal situation is different where an agent is constituted as an assignee. In such case, the
agent may in his own behalf sue on a contract made for his principal as an assignee of such contract.
A person who has a right assigned to him is a real party-in-interest and can maintain an action upon
such right.
In this case, Angeles was constituted as a mere agent and not assignee. The mere fact the letter
doesnt contain the words agent or attorney-infact doesnt matter because other terms are used to
designate the parties in an agency, such as representative. Further, the letter used the verb authorized
indicating Romualdez intention to limit Angeles role as agent. Also, the letters 2nd paragraph was
qualified by the phrase For this reason which reinforces the idea that Angeles is a mere agent.
Further, Angles own actions after the letter was sent confirm the agency. She referred to herself as an
authorized representative and signed receipts indicating she was doing so in a representative capacity.
Consequently, the letter is a power of attorney that merely authorized Angeles to withdraw the scrap
rails and didnt allow her to sue in her own name in the contract.
Excerpt from the letter:
This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer,
LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful representative in
the withdrawal of the scrap/unserviceable rails awarded to me.
For this reason, I have given her the ORIGINAL COPY of the AWARD, dated May 5, 1980 and O.R.
No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation
in favor of LIZETTE R. WIJANCO.
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BA Finance vs CA
Facts
Gebbs International applied for and was granted a loan from respondent Traders Royal Bank in the
amount of P60 thousand. As security, Gaytano became a surety promising to pay jointly and severally
to Traders Royal Bank the loan. BA Finances credit administrator, Wong, sent a letter to Traders
Royal Bank binding BA Finance as guarantor to the loan. Later, Gaytano failed to pay the loan
causing Traders Royal Bank to filed a case to recover the loan against Gaytano and BA Finance. BA
Finance argues its credit administrator had no authority to bind it as guarantor.
Issue
Is BA Finance liable as guarantor?
Held
No.
A person dealing with an agent is bound at his peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the agents authority. The burden of proof is on the
person claiming an agency exists and the agent acted within his authority.
In this case, Traders Royal only presented Wong to prove the agency that in turn testified that he
acted within his authority based on a memorandum BA Finance gave to him on his lending authority.
Granting Wong was authorized to approve loans up to P350 thousand without any security
requirement, nothing in the memorandum authorizes Wong to issue guarantees. The word contingent
commitment in the memorandum cant be held to mean guarantees. A power of attorney shouldnt be
inferred from vague or general words. Guaranty isnt presumed; it must be express and cant extend
beyond its specified limits.
Wong sole testimony he acted within his authority in the absence of other proof shouldnt be given
weight. More likely, Wong is testifying to save himself from personal liability for damages to Traders
Royal considering he exceeded his authority. An agent who exceeds his authority is personally liable
for damages.
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DBP vs CA
Facts
Respondent Dans applied for a P500 thousand loan with DBP. DBP advised Dans, then 76 years old,
to obtain a mortgage redemption insurance with the DBP MRI pool. Later, DBP approved a P300
thousand loan in Dans favor from which it deducted P1.5 thousand as insurance premium. Dans
accomplished the MRI application for Insurance and Health Statement for DBP MRI pool.
Later, DBP credited the DBP MRI pool with Dans MRI premium. Dans then died of cardiac arrest
and DBP notified the DBP MRI pool. The DBP MRI pool then informed DBP that Dans wasnt
eligible for MRI coverage because he was over the accepted age limit of 60 when he applied. DBP
then apprised Dans family of Dans disapproved MRI application. DBP offered to pay back the P1.5
thousand premium plus P30 thousand as ex gratia settlement. Dans family refused DBPs offer
demanding the MRIs face value or an amount equivalent to the loan. Later, Dans family filed a case
before the RTC to collect the amount demanded.
Issue
Is DBP liable to the Dans family?
Held
Yes,
An agent isnt personally liable to the party with whom he contracts unless he expressly binds himself
or exceeds the limit of his authority without giving such party sufficient notice of his powers. An
agents liability who exceeds the scope of his authority depends if the 3rd person is aware of the limits
of the agents powers.
In dealing with Dans, DBP was acting both as lender and as insurance agent. DBP compelled Dans to
secure a DBP MRI pool coverage instead of allowing Dans to look for his own insurer. DBP released
the loan deducting already the MRI premium and 4 days later made Dans complete an MRI
application form as well as a health statement. The DBP then submitted both forms to the DBP MRI
pool. DBP made Dans believe he had already fulfilled all the requirements for an MRI and the
insurance policy was forthcoming.
Further, DBP had full knowledge Dans application would be denied because they knew of the age
limit and Dans age. DBP isnt authorized to accept MRI applications when the application is over 60.
Consequently, DBP exceeded the scope of its authority in accepting Dans MRI application. Also,
theres no showing Dans knew of the limitation on DBPs authority to accept MRI applications.
DBP is liable to Dans for damages in making the latter believe the former had authority to accept his
MRI application.
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Eugenio vs CA
Facts
Eugenio was a dealer of soft drink products of respondent Pepsi-Cola corp. She had a regular charge
account in both the Quezon City plant and Muntinlupa plant. Meanwhile, her husband and copetitioner used to be a route manager of Pepsi-Cola corp. in the Quezon City plant. Later,
Pepsi-Cola filed a complaint for a sum of money against Eugenio and her husband for various
products and empties totaling P96 thousand because they failed to pay despite repeated demands.
In their defense, the petitioners presented 4 trade provisional receipts (TPR) allegedly issued to them
from Pepsi-Colas route manager Estrada showing payments totaling P80.5 thousand. The TPRs
shouldve been credited in their favor. However, Estrada denied issuing the TPRs.
Issue
Should the amounts in the TPRs be credited in Eugenios favor?
Held
Yes.
Payment shall be made to the person in whose favor the obligation has been constituted, or his
successor-in-interest or any person authorized to receive it. As far as third persons are concerned, an
act is deemed to have been performed within the scope of the agent's authority, if such is within the
terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his
authority according to an understanding between the principal and his agent.
In this case, Pepsi-Cola failed to prove that Estrada, its duly authorized agent with respect to Eugenio,
didnt receive the amounts reflected in the TPRs from Eugenio. So long as Pepsi-Colas customers
are concerned, for as long as they pay their obligations to Pepsi-Colas sales representative using the
official receipt, said payment extinguishes their obligations. Pepsi-Cola itself admitted its the
collectors, in this case Estrada, responsibility to turn over the collection.
Simply put, Eugenio paid the right person, Pepsi-Colas agent, and if Pepsi-Cola received the
payment is no longer Eugenios problem. Payment should be credited.
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Toyota Shaw vs CA
Facts
Respondent Sosa and his son, Gilbert, went to Toyota Shaw to purchase a car. They met Bernardo,
Toyotas sales representative, who talked to them. Sosa emphasized that he needed the car not later
than 17 June 1989. Bernardo assured Sosa the car would be ready by the assigned date. The parties
signed an Agreement stipulating:
1. Sosa will make a downpayment of P100 thousand and
2. The car will be delivered on 17 June 1989. The rest of the balance will be paid by credit
financing through BA Finance.
On the assigned date, Bernardo told Sosa the car cant be delivered. Toyota denied the sale because
Sosas credit finance application in BA Finance was denied and required Sosa to pay the full purchase
price in cash. Sosa refused and demanded a refund that Toyota granted, with Sosa reserving his right
to damages. Later, Sosa made repeated demands against Toyota for a sum of money for damages but
the latter refused.
Issue
Did Bernardo have authority to bind Toyota Shaw?
Held
No.
A person dealing with an agent is put upon inquiry and must discover upon his peril the agents
authority.
In this case, the Agreement explicitly states Agreements between Mr. Sosa & Popong Bernardo of
Toyota Shaw, Inc. Sosa knew he wasnt dealing with Toyota but with Bernardo, who was merely
Toyotas sales representative and hence agent. Sosa shouldve acted with ordinary prudence and
reasonable diligence to know the extent of Bernardos authority as Toyotas agent in selling cars.
Normal business practice doesnt warrant a sales representative to have power to enter into a valid and
binding contract of sale for the company.
Consequently, Bernardo had no authority to enter into a contract of sale in Toyotas behalf.
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principals ratification. Baluyot is liable for damages but is mitigated because Linsangan himself was
negligent.
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Air France vs CA
Facts
Respondent Gana and his family purchased from Air France through Imperial Travels, a duly
authorized travel agent, air tickers for the Manila/Osaka/Tokyo/Manila route. The tickets were valid
until 8 May 1971 and werent valid anymore after said date. The Ganas booked a flight on 8 May
1970 but didnt depart on said date. Later, Gana sought to extend the validity of the tickets with help
from Teresita and Ella, Ella being manager of the Philippine Travel Bureau.
However, both of them discovered its impossible to extend the validity without paying more. The
Ganas still booked their flight on 7 May 1971 but Ella warned Teresita the tickets could be used to
leave Manila but would no longer be valid for the rest of the flight. Teresita assured Ella the Ganas
would make arrangements and on this assurance Ella, on his own, attached to the tickets validating
stickers for the Osaka/Tokyo flight. Despite the warning, the Ganas still left on 7 May 1971 and were
forced to purchase new tickets for the Osaka/Tokyo flight and the return trip. Gana then filed suit
against Air France.
Issue
Is Air France liable to Gana?
Held
No.
In this case, the Gana cant claim ignorance to the non-extension of the tickets because the evidence
shows Ella informed Teresita the tickets cant be extended without making additional payments. Here,
Teresita was Ganas agent and notice to her of the rejection of the requests extension of the tickets
validity is notice to Gana as well.
Further, there was no implied ratification when Air France personnel at the ticket counter allowed the
Ganas to leave on 7 May 1971. At the time, the tickets were still valid.
The Ganas brought this predicament upon them and consequently cant hold Air France liable for
validly refusing the tickets past 8 May 1971.
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Cuison vs CA
Facts
Cuison is engaged in the purchase and sale of newsprint, bond paper, and scrap. During a certain
period, respondent Valiant Investment delivered various kinds of paper products amounting to P297
thousand to Tan of LT Trading. Valiant Investment made the deliveries pursuant to orders Tiac,
Cuisons employee, gave. Tiac paid Valiant Investment with checks as payment for the paper
products but said checks were dishonored. Valiant Investment then made several demands to Cuison
to pay the delivered paper products. Cuison refused claiming no involvement in Tiacs transaction.
Valiant Investment then filed suit to recover the P297 thousand.
Issue
Did Cuison authorize Tian to execute the disputed transaction?
Held
Yes.
A person who clothes another with apparent authority as his agent and holds him out to the public as
such cant be permitted to deny such persons authority to act as his agent, to the prejudice of
innocent 3rd parties dealing with such person in good faith and in honest belief that hes what he
appears to be.
In this case, Cuison held out Tiac to the public as his store manager. More particuarly, Cuison
explicitly introduced Tiac to Villanueva, Valiant Investments manager, as his branch manager.
Further, Tan also testified she knew Tiac to be Cuisons manager. This general perception is made
more manifest by the fact Tiac is known as Cuisons godbrother and the close relationship between
the two.
Consequently, there was no reason for anybody, especially those transacting business with Cuison, to
doubt Tiacs authority as Cuisons store manager. Cuison is now estopped from disclaiming liability
for the transaction Tiac entered into on his behalf.
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Pleasantville Dev. vs CA
Facts
Pleasantville sold Lot 9 to Robillo who in turn sold it to respondent Jardinico which at the time, Lot 9
was vacant. Jardinico then secured a TCT over Lot 9 when he later discovered Kee already introduced
improvements to Lot 9 and possessed it.
It appears Kee bought Lot 8 from Torres Enterprises, Pleasantvilles exclusive real estate agent.
Unfortunately, Torres Enterprises mistakenly pointed Lot 9 to Kee instead of Lot 8. Jardinico then
confronted Kee but the parties couldnt reach an amicable settlement. Jardinico demanded Kee
remove all improvement on Lot 9 and vacate the same but Kee refused to do so. Jardinico then filed a
complaint for ejectment with damages against Kee before the MTC. Kee then filed a 3rd party
complaint against Pleasantville and Torres Enterprises.
Issue
Is Pleasantville liable for Torres Enterprises delivering the wrong lot to Kee?
Held
Yes.
The rule is the principle is responsible for the agents act done within the scope of his authority, and
should bear the damage causes to 3rd persons. On the other hand, the agent who exceeds his authority
is personally liable for the damage.
In this case, Torres Enterprises was acting within its authority as Pleasantvilles sole real estate agent
when it delivered Lot 9 to Kee. However, Torres Enterprises was negligent and this negligence is the
basis of Pleasantvilles liability, as the principal.
Further, despite the fact Jardinico sold Lot 9 to Kee pending the cases resolution, Pleasantville is still
liable because its liability is grounded on its agents negligence.
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Manila Remnants vs CA
Facts
Manila Remnant owns Property X and entered into a Confirmation of Land Development and Sales
Contract with Valencia Inc. Valencia was to develop Property X and had authority to manage the
sales thereof, execute contracts to sell to lot buyers, and issue official receipts. The President of both
corporations is Artemio Valencia. Artemio, thru Manila Remnant, executed a contract to sell covering
Lot 1 in Property X in respondent Ventanillas and Diazs favor (VD).
Later, Artemio again sold Lot 1 to Crisostomo without consideration and VDs knowledge. Valencia
transmitted Crisostomos fictitious contract to Manila Remnant while retaining VDs contract. All this
time, VD regularly paid the installment on Lot 1 to Valencia Inc.
However, Valencia credited the VD payments to Crisostomo. Later, Manila Remnant removed
Valencia as its President and stopped the collection agreement with Valencia Inc. Valencia Inc. then
sued Manila Remnant. The court ordered Valencia Inc. to submit a list of lot buyers that the latter did
but said list excluded VD.
Meanwhile, VD went directly to Manila Remnant to pay the rest of the balance on Lot 1 when to their
shock they discovered Manila Remnant had no records of them as lot buyers. Here they discovered
Crisostomos contract. VD then filed suit for specific performance against Crisostomo, Manila
Remnant, and Valencia Inc.
Issue
Should Manila Remnant be held solidarily liable with Valencia Inc. and Crisostomo in paying
damages to VD?
Held
Yes.
In this case, it is undisputed Valencia Inc. had exceeded its authority and even the law when it
undertook the double sale of Lot 1 to VD and Crisostomo. Ordinarily, Manila Remnant would be in
the clear because the principal is not liable for the agent who acts outside of his authority. However,
the unique circumstances of this case make for an exception. It must noted at the time Artemio
perpetrated his scam, he was President of both Manila Remnant and Valencia Inc.
Manila Remnant is estopped to raise the defense Valencia Inc exceeded its authority by allowing its
agent to act as though it had plenary powers. Manila Remnants negligence allowed Valencia Inc to
exercise powers not granted to it. First, Manila Remnant gave Valencia Inc. carte blance authority in
the sale and disposition of lots in Property X. Second, Manila Remnant wast prudent in conducting
its business as subdivision owner. When it revoked the agency contract with Valencia Inc, the former
published the cancelled contracts to sell only 3 years after the agency agreement was revoked.
Further, it failed to check its agents records immediately after revoking the agency despite the fact
the reason for revoking such agency was anomalies in Valencia Inc. collection.
All in all, Manila Remnant was negligent in managing its business and monitoring its agents actions
thereby allowing its agent to deceive unsuspecting 3rd persons.
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Hahn vs CA
Facts
Hahn and respondent BMW entered into a Deed of Assignment with Special Power of Attorney
with the latter constituting Hahn as its exclusive dealer of BMW cars and parts in the Philippines.
Later, BMW notified Hahn the former was arranging to grant the exclusive dealership of BMW cards
and products to Columbia Motors. Hahn protested and BMW offered to make Hahn a standard BMW
importer otherwise it would simply terminate Hahns dealership. Hahn rejected such offer and BMW
terminated the exclusive dealership agreement with Hahn.
Later, BMW proposed Hahn and Columbia Motors jointly import and distribute BMW cars and parts
but Hahn still refused. Hahn then filed suit for specific performance against BMW to compel the latter
to execute the exclusive dealership. The lower courts dismissed the case on the ground it has no
jurisdiction because BMW isnt considered doing business in the Philippines.
Issue
Is Hahn BMWs agent?
Held
Yes.
In this case, a corporation is considered doing business in the Philippines if it appoints representatives
or distributors in the Philippines provided said representative or distributor transacts business in the
corporations name.
The question now is if Hahn can be considered BMW agent.
Here, Hahn claimed he took orders for BMW cars and transmitted the same to BWM. BMW would
fix the downpayment and pricing charges, notifying Hahn of the scheduled production month for the
orders, and reconfirmed orders by signing and returning to Hahn the acceptance sheets. Further, the
buyer paid directly to BMW and Hahn simply received a commission upon the sales successful
conclusion. Any after-sale and warranty service Hahn performed were on BMW invoices and forms.
Further, the fact Hahn used his own money to set up service centers and showrooms dont necessarily
mean he isnt BMWs agent. BMW exercised control over Hahns activities by making regular
inspections on Hahns premises to see if they complied with BMW standards.
Also, BMW held out Hahn as its exclusive distributor in the Philippines announcing in the Asian
Region that Hahn was the official BMW agent in the Philippines.
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De Castro vs CA
Facts
De Castro co-owns 4 lots and he, representing the other co-owners authorized respondent Artigo to
sell these lots as their real estate broker with a 5% commission. Artigo then found Times Transit
Corp, a prospective buyer who desired to buy 2 lots only. Eventually, the 2 lots were sold to Times.
Artigo received his commission worth P50 thousand.
Later, Artigo complained apparently feeling short-changed demanding he deserves more than P50
thousand as commission. He argues he was the one to first introduced Times to De Castro and
facilitated the negotiations between the 2.
However, De Castro argues Artigo was just one many agents authorized to sell the lots. True. Artigo
first introduced Times to De Castro but his 1st negotiation failed and it was other agents who
successfully brokered. the sale. De Castro simply gave Artigo the P50 thousand commission out of
gratuity. Artigo then filed suit against De Castro alone.
Issue
Should Artigos complaint be dismissed for failing to include the other co-owners in the complaint?
Held
No.
In this case, its undisputed De Castro appointed Artigo as his agent to sell the 4 lots with a 5%
commission and such authority was on a first-come first-serve basis. De Castro admits he was
authorized by the other co-owners to appoint Artigo as their agent. Further, De Castro admits the
other co-owners are solidarily liable under the contract of agency because when 2 or more persons
have appointed an agent for a common transaction, they shall be solidarily liable to the agent for the
agencys consequences. The solidarity arises from the principals common interest and not from the
act of constituting the agency. Solidarity may arise even if the principals constituted the agencies in
separate acts provided they are all for the same transaction.
However, this admission of solidarily liability actually prejudices De Castro because in a solidarily
liability, a solidary obligor isnt an indispensable party in a suit the creditor filed. The agent, Artigo in
this case, can go after any 1 of the principals.
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Garcia vs De Manzano
Facts
Narciso Manzano gave a general power-of-attorney to his son, Angel, on 9 Feb. and a second general
power-of-attorney to his wife, Josefa on 25 March. Narciso later died in May and Josefa was
appointed administratix of Narcisos estate.
Before Narciso died, he owned 1/2 interest in a steamer with the other half owned by Ocejo, Perez &
Co. Narciso and Ocejo had a partnership agreement and when the agreement expired, Ocejo
demanded Narciso either buy Ocejos share or sell his share. Narciso neither had funds to buy nor
wanted to sell at the price Ocejo offered. Instead, Garcia bought Ocejos interest.
Later, Angel sold Narcisos interest in the steamer to Garcia under the power-of-attorney. Angel, also
by virtue of the power-of-attorney, executed a contract with Garcia. Under the contract, Garcia agreed
to extend a credit to Narciso secured by a mortgage on some of Narcisos properties.
Afterwards, Garcia filed suit to foreclose Narcisos properties but Josefa resisted the foreclosure.
Issue
Did Josefas power-of-attorney revoke Narcisos power-of-attorney?
Held
No.
Its necessary under the law for the appointment of a new agent for the same business to revoke the
previous agency for the former agent to be notified.
In this case, theres no proof Angel even knew of Josefas second power-of-attorney. Consequently,
Angel was validly acting under the 1st power-of-attorney when he sold Narcisos share in the steamer.
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CMS Logging vs CA
Facts
CMS Logging and Dracor entered into a contract of agency with the former appointing the latter as its
exclusive export and sales agent for all logs the former may produce for 5 years. Pursuant to the
agreement, CMS sold through Dracor logs in Japan.
Later, CMS discovered that Dracor had actually used Shinko Corp. as agent in selling the logs.
Further, Shinko received a commission from such sale of the logs. CMS claims the commission paid
to Shinko violated the agency agreement and the Shinko commission rightfully belonged to it.
Further, Dracor in effect received a double commission.
CMS then sold its logs in Japans without Dracors intervention any longer. CMS also filed suit to
recover the Shinko commission but Draco counter-sued saying its entitled to commissions when
CMS sold the logs directly without its intervention.
Issue
Is Dracor entitled to its commission from sales CMS made to Japan directly without the formers
intervention?
Held
No.
The principal can revoke the agency at will, either expressly or impliedly. The revocation may be
made even if the contract of agency hasnt expired yet. The agent cant object to such revocation and
he cant claim damages arising from such revocation unless it was done to evade the payment of the
agents commission.
In this case, it is undisputed Dracor is CMS agent in selling logs to Japan. Further, Dracor admits
CMS sold logs directly to Japanese firms without the formers intervention. Such constituted an
implied revocation of the agency. An agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with 3rd persons.
Consequently, CMS revoked Dracors agency and the latter is no longer entitled to commission for
the sale. Dracor cant even claim damages because the case doesnt fall under the exception, evading
paying the agents commission.
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72
Republic vs Evangelista
Facts
Respondent Legaspi owns Property X. Later, the RP entered into a MOA with a certain Reyes. the
MOA granted Retes a permit to hunt for treasure in Property X. Reyes then started digging, tunneling,
and blasting on Property X.
Legaspi then executed an SPA appointing respondent Gutierrez as his attorney-in-fact. The SPA gave
Gutierrez the power to deal with the treasure-hunting activities on Property X and to file suit against
those who enter the same without authority. Further, Gutierrezs compensation is 40% of the treasure
on Property X.
Afterwards, Gutierrez filed suit against petitioners and hired the legal services of Atty. Adaza. Atty.
Adazas compensation is 30% of Legaspis share in the treasure on Property X. However, Legaspi
unilaterally executed a Deed of Revocation.
Issue
Has Legaspi revoked the contract of agency between him and Gutierrez?
Held
No.
General rule:
An agency can be revoked at the sole will of the principal
Exception:
1. A bilateral contract depends upon the agency
2. Means of fulfilling...
3. A partner is appointed...
In this case, the agency contract between Legaspi and Gutierrez is coupled with interest as a bilateral
contract depends on it. Here, Gutierrez and Azada have an interest in the agencys subject matter,
namely the treasure on Property X.
When an agency is constituted as a clause in a bilateral contract, that is when the agency is inserted in
another agreement, the agency follows the conditions of the bilateral agreement.
Consequently, Legaspis unilateral revocation of the agency is ineffective.
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Sevilla vs CA
Facts
Respondent Noguera and Tourist World Service entered into a contract with the former leasing her
property to the latter. Petitioner Sevilla bound her solidarily liable for the payment of monthly rentals.
Shel also ran the office in the leased premises and she received a commission for every ticket she
sold.
Later, Tourist World was informed that Sevilla was connected to a rival company and because
Sevillas brach was losing, it considered closing down its office. Tourist World then terminated the
lease contract and padlocked the premises. Sevilla, unable to enter the locked premises, filed suit
against petitioners.
Issue
What is the relationship between Sevilla and Tourist World?
Held
Agency.
In this case, Sevilla solicited airline fares on Tourist Worlds behalf, her principal. And as
compensation, Sevilla received a commission for every ticket she sold. Sevilla herself concedes the
principals authority as owner of the business undertaking.
However, the agency in this case cant be revoked at the principals will. The agency here is coupled
with interest, it having been created for mutual interest of the agent and principal. Sevilla is a bona
fide travel agent and as such, acquired an interest in the business entrusted to her. Moreover, she
assumed a personal obligation for the operation thereof, holding herself solidarily liable to pay rentals.
Her interest isnt the commissions she earned as a result of the business transactions, but one that
extends to the very subject matter of the power of management delegated to her.
Further, Tourist World itself padlocked the premises and deprived Sevilla of her business maliciously.
Tourist World performed these acts after learning Sevilla allegedly was moonlighting for a rival firm.
Consequently, there was an unwarranted revocation of the agency and Sevilla is entitled to damages.
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Valenzuela vs CA
Facts
Valenzuela is a general agent of respondent Philamgen. As such, Valenzuela was authorized to solicit
and sell in Philamgen behalf insurance and in return was entitled to receive commission. Valenzuela
solicited insurance from Delta Motors for which he was entitled to commission. However, Valenzuela
didnt receive his full commission and also those for the following years.
Later, Philamgen wanted to share in Valenzuelas commission on a 50-50 basis but Valenzuela
refused. Because of Valenzuelas refusal, Philamgen cancelled his General Agency Agreement.
Valenzuela then filed suit.
Issue
Can Philamgen unilaterally revoke the agency with Valenzuela?
Held
No.
In this case, the evidence shows Philamgen terminated the agency because Valenzuela refused to
share his Delta commission. Further, the agency involved here is one coupled with interest and
therefore not revocable at the principals will.
Here, Valenzuela was able to build up his Agency from scratch to a highly productive enterprise in
over 13 years of work. With the agencys termination, Philamgen appropriated for itself the entirety
of Valenzuelas insurance business. Valenzuela would no longer receive commission on the renewal
of insurance policies of clients sourced from him. Further, Valenzuela continues to be solidarily liable
with the insured for unpaid premiums even with the agencys termination. Clearly, Valenzuela has an
interest in the agencys continuation.
Further, Philamgen is liable for damages to Valenzuela because the agencys termination was tainted
with bad faith. The principal who acts in bad faith and with abuse of right in terminating an agency is
liable for damages.
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76
Ching vs Bantolo
Facts
Bantolo owns Property X and he executed in Chings favor an SPA authorizing the latter to obtain a
loan using Property X as collateral. Later and without notice to Ching, Bantolo executed a revocation
of power of attorney effective at the end of business hours, July 17. On July 18, PVB approved
Chings loan application and Ching later informed Bantolo of the loans approval.
Later, Ching learned of the SPAs revocation and demanded Bantolo annul the SPAs revocation, but
Bantolo refused. Ching then filed suit to do just that.
Issue
Is the agency one coupled with interest?
Held
Yes.
In this case, its undisputed the contract of agency is one coupled with interest because the bilateral
contract depends on the agency. Ching agreed to defray the costs and expenses involved in processing
the loan because Bantolo promised Ching would have an equal share of the proceeds of the loan or the
subject properties.
Further, Ching isnt entitled to exemplary damages because although the agency was revoked in bad
faith, Bantolo didnt act in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The SPA
was revoked because Bantolo wasnt satisfied with the amount of the loan approved.
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Bacaling vs Muya
Facts
Bacaling owns Property X. Later, Bacaling took out a loan from GSIS secured by Property X.
However, Bacaling failed to pay the amortizations on the loan and GSIS foreclosed Property X. Later,
a judicial decision restored Bacaling ownership of Property X.
In the meantime, Muya took advantage of the problematic peace and order situation during martial
law and the fiasco with GSIS to occupy Property X. Later, petitioner Tong bought Property X from
Bacaling. To secure the performance of the contract of sale and facilitate transfer of title to Tong,
Bacaling appointed Tong as her attorney-in-fact under an irrevocable SPA.
Tong then filed suit against Muya. During pendency of the case, Bacaling revoked the SPA in Tongs
favor.
Issue
Can Bacaling unilaterally revoke the SPA in Tiongs favor?
Held
No.
In this case, Bacaling cant revoke at her pleasure the irrevocable SPA duly executed in Tongs favor.
The agency is one coupled with interest because the agency was constituted with a view to completing
the contract of sale over Property X; a sale with Tong as buyer and Bacaling as seller. Its for this
reason the agencys mandate constituted Tong as the real party in interest to remove all clouds on
Bacalings title and once that is resolved, to use the SPA to ultimately transfer Property X and all
pertinent documents to Tong.
Here, the fiduciary relationship inherent in ordinary contracts of agency is replaced by material
consideration and with this replacement the principal is barred from unilaterally revoking the agency.
Further, Bacalings allegation of fraud in the agencys performance to justify its revocation is
insufficient. Fraud must be proven and mere allegations arent enough, and such proof requires the
courts intervention. Bacaling cant vest in herself, like in ordinary contracts, the unilateral authority
to determine if theres sufficient ground to rescind the SPA.
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Coleongco vs Claparols
Facts
Claparols operated a nail factory and he imported raw material from abroad to produce the nails.
Later, due to financial difficulty, he needed to find someone to finance the import of his raw
materials. He found Kho To who in turn introduced him to Coleongco. Coleongco agreed to finance
the funds for importation. Later, Claparols executed an SPA in Coleongcos favor at the latters
insistence.
Afterwards, Claparols was surprised when the PNB served upon him a writ of execution to enforce
judgement, despite the fact he settled his account with the latter. Claparols then learned the executed
was procured because of derogatory information Coleongco sent to PNB without his knowledge.
Further investigation revealed Coleongco was in connivance with Kho To to swindle Claparols, and
possible take his factory.
Fortunately, Claparols managed to settle the matter with PNB. Enraged, he revoked the SPA in
Coleongcos favor and demanded a full accounting at the same time. Coleongco protested and filed
suit against Claparols.
Issue
Can Claparols revoke the SPA in Coleongcos favor?
Held
Yes.
Granting arguendo the SPA in Coleongcos favor is one coupled with interest, the same simply means
Claparols cant revoke the same at his pleasure. However, coupled with interest or not, such agency
can be revoked for just cause, such as when the agent betrays the principals interest, as in this case.
An irrevocable SPA cant be used as a shield to perpetrate the agents fraudulent acts and betrayal of
trust.
Here, the evidence clearly shows Coleongco sabotaged Claparols with the ultimate goal of owning the
latters factory. Coleongco secretly diverted funds to his personal benefit, sold equipment without
Claparols knowledge, and sent letters to PNB to undermine Claparols credit.
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Lustan vs CA
Facts
Lustan owns Property X and he leased the same to respondent Parangan. During the lease, Parangan
regularly extended small loans to Lustan. Later, Lustan executed in Parangans favor an SPA to
secure loans from PNB with Property X as collateral. Again Lustan executed another SPA by virtue
of which Parangan secured 4 additional loans. The last 3 were without Lustans knowledge and
Parangan used them to his benefit.
Lustan then entered into a deed of pacto de retro in Parangans favor over Property X. The deed was
superseded by a deed of definite sale that Lustan signed on Parangans representation the same was
merely evidences for the loans the latter extended to the former.
Lustan, fearing Property X may be prejudiced with Parangans continued borrowing, demanded its
return but Parangan refused. Lustan filed suit, hence this case.
Issue
Can the mortgage on Property X be enforced against Lustan?
Held
Yes.
An SPA is a continuing one and absent a valid revocation duly furnished to the 3rd person, the same
continues to have force and effect as against the 3rd persons who had no knowledge of such lack of
authority.
The SPA Lustan executed in Parangans favor clothed the latter with authority to deal with PNB on
the formers behalf. In the absence of proof PNB knew the last 3 loans were without Lustans express
authority, it cant be prejudiced thereby. As far as 3rd persons are concerned, an act is deemed to have
been performed within the scope of the agents authority if such authority is within the power-ofattorney as written, even if the agent did in fact exceed his authority.
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Perez vs PNB
Facts
Vicente Perez owns Property X that was mortgaged to PNB to secure the formers loan. Later,
Vicente died and his estate was distributed accordingly. Later, Vicentes widow inquired from PNB
the status of her husbands account. The widow discovered of the outstanding mortgage and loan.
Pursuant to the mortgage, PNB foreclosed Property X and a new title was issued in PNBs name.
Later, the petitioners, heirs of Perez, filed suit against PNB to annul the foreclosure.
Issue
Is PNB barred from foreclosing Property X?
Held
No.
The argument that agency is extinguished by the principals death neglects to take into account the
fact the power to foreclose isnt an ordinary agency that contemplates exclusively the representation
of the principal by the agent. Rather, its primarily an authority conferred upon the mortgagee for the
latters own protection. In fact, its an ancillary stipulation supported by the same consideration for
the mortgage and forms an essential part of the bilateral agreement. The mortgagees power to
foreclose survived the mortgages death.
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Terrado vs CA
Doctrine
The contract of management and administration between the Municipality and Lacuesta is one of
agency. In this case, Lacuesta bound himself as Manager-Administrator to render service in the
Municipalitys behalf. Consequently, Lacuestas death completely changes the legal controversy in
the instant case. Agency is extinguished by the agents death and his rights and obligations arising
from the contract are non-transmissible to his heirs.
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82
Morales vs CA
Facts
Celso Avelino purchased Property X from Mendiola and Bartolome. Celso had tax declarations issued
in his name for Property X and built his residential house on it. He then took in his parents, Rosendo
and Juana, along with his sister, Aurea.
Celsos Niece, Morales, built a beauty parlor on Property X without Celsos knowledge. Later, Celso
sold Property X to respondent Sps. Ortiz. The Sps. Ortiz demanded Morales vacate Property X but the
latter refused demanding in turn reimbursement for the beauty parlor. Despite repeated demands,
Morales refused to vacate and so the Sps. Ortiz filed suit.
Issue
Was there an implied trust with Celso as trustor and Rosendo as beneficiary?
Held
No.
A trust is the legal relationship between 1 person having an equitable ownership in property and
another person owning the legal title to such property. The characteristics of a trust are
1. Its a relationship
2. Of fiduciary character
3. With respect to property, not one involving merely personal duties
4. Involving the existence of equitable duties imposed upon the holder of title to the property to
deal with it for anothers benefit
5. Arises as a result of a manifestation of intention to create the relationship.
A trust can be either express or implied. Express means created by the parties intention while Implied
means by operation of law. In turn, implied trusts are either resulting or constructive trusts. Resulting
trust is based on the equitable doctrine that valuable consideration and not legal title determines the
equitable title and the parties are presumed to always contemplate it. Meanwhile, constructive trusts
are created in order to satisfy the demands of justice and prevent unjust enrichment.
An example of implied trust is Art. 1448 Civil Code, also called purchase money resulting trust. It has
2 requisites namely
1. Actual payment or valuable consideration
2. Furnished by the alleged beneficiary of a resulting trust.
The 2 exceptions to establishing an implied trust here are
1. If title was vested in the child of the person paying the purchase price, a gift is presumed
2. The actual contrary intention is proved.
Here, Morales alleges Rosendo owned the purchase money and requested his son, Celso, to buy it in
trust for him. However, title was vested in Celso and this situations falls under the exception in Art.
1448 where title is conveyed to a child of the one paying the purchase price. Consequently, law
implies no trust.
Further, Celso treated the property as his exclusive property paying taxes on it and building his house
there. Also, the alleged trustee, Rosendo, never even demanded Celso return Property X and Celsos
siblings never demanded Property X be partitioned after Rosendo died. These omissions clearly show
Celsos family considered Celso as the absolute owner of Property X.
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Penalber vs Ramos
Facts
This case involves 2 causes of actions but the Trust issue is discussed only in the 2nd cause of action
2nd cause of action
Penalber claims that for many years prior to 1984, she operated a hardware store in a building she
owned. Maria owned the lot on which the building stood, which Penalber rented. Later, Penalber
allowed Ramos to manage the hardware store. Afterwards, Maria put the lot for sale but Penalber
didnt have enough cash to buy the lot. Penalber then entered into a verbal agreement with Ramos
with the following terms:
1. Ramos would buy the lot in Penalbers behalf
2. Ramos would pay the purchase price using the hardware stores earnings
3. Ramos would appear as the buyer in the deed of sale and use the title issued in his name to
secure a loan to expand the hardware stores business
In accordance with the agreement, Ramos entered into a contract of sale with Mendoza over the lot.
Later, Penalber demanded Ramos reconvey the title to the lot to her but Ramos refused.
Issue
Was there a trust agreement between Penalber and Ramos?
Held
No.
A trust is defined as the right, enforceable solely in equity to the beneficial enjoyment of property, the
legal title of which is vested in another. A person who establishes a trust is called the trustor, the
person in whom confidence is reposed as trustee, and the person for whose benefit the trust has been
created the beneficiary.
Generally, no particular words are required to create an express trust, it being sufficient that a trust is
clearly intended. However, Art. 1443 declares that an express trust involving immovables or any
interest therein may not be proved by parol evidence. Art. 1443 requires the express trust to be in
writing for purposes of proof, and not for the trust agreements validity. The article is in the nature of
a statute of frauds and goes into the contracts enforceability.
Here, the alleged verbal trust agreement between Penalber and Ramos is an express trust. Generally,
Penalbers testimony shouldve been declared inadmissible being parol evidence. However, Ramos
waived his objection to the parol evidence in failing to timely object during trial.
Nevertheless, while Penalbers parol testimony is admissible, its weight as evidence is still subject to
judicial evaluation. Here, such parol evidence carries little weight in proving the alleged verbal trust
agreement. Penalber failed to prove that Ramos indeed used the earnings from the hardware store to
purchase the lot from Maria.
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85
Julio vs Dalandan
Facts
Clemente, Dalandans deceased father, executed an affidavit stating the following:
1. Clemente acknowledges that Land X, belonging to Victoria, was made security for an
obligation that Clemente failed to fulfill. As a result, Land X was foreclosed.
2. As restitution, Clemente holds himself liable to Victoria and will replace Land X with another
piece of land.
3. However, Victoria cant demand neither the fruits nor possession of Land Y immediately.
At the time Clemente executed the affidavit, he only possessed Land Y that Dalandan inherited. Julio,
Victorias heir, demanded delivery of Land Y but Dalandan refused arguing possession cant be
demanded immediately according to Clementes affidavit. Julio required Dalandan to fix a date for
delivery but Dalandan refused. Julio then filed suit to claim Land Y.
Issue
Was there a trust created between Clemente and Victoria?
Held
Yes.
The affidavit Clemente executed conveys the idea that naked ownership over Land Y was transferred
to Victoria. This is based on the affidavits provisions declaring the fruits and possession as not
immediately demandable. In effect, Clemente was made usufructuary over Land Y and in turn
Dalandan inherited only Clementes usufructuary rights.
Further, the affidavit itself creates the express trust. True, the deed didnt in definitive words institute
Dalandan as trustee, but a duty was imposed upon him to turn over both fruits and possession of the
property to Victoria when the time comes. No particular words are necessary to create an express
trust, its sufficient that a trust is clearly intended.
Next, the mere fact the affidavit itself doesnt clearly refer to Land Y doesnt prejudice Julio. Insofar
as the lands identity involved in a trust is concerned, writings are to be considered in their settings
and parol evidence is admissible to clarify the terms of a trust established by writing. Here, Julio
clarified the affidavit by declaring that at the time it was executed, Clementes only property was
Land Y.
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Canezo vs Rojas
Facts
Canezo alleges she bought Land X from Crisogono, although the transaction wasnt reduced into
writing. Afterwards, Canezo took possession of Land X. Canezo entrusted Property X to her father,
Crispulo, who took possession of the same and cultivates it. About 40 years later, Canezo found out
that Roxas, her stepmother, possessed Land X and tax declarations over it were already in Crispulos
name. Canezo then filed suit to recover Land X.
Issue
Was there an express trust between Canezo and Crispulo?
Held
No.
For a trust relationship to be created the following elements must be proved:
1. A trustor who executed the instrument creating the trust
2. A trustee, who is the person expressly designated to carry out the trust
3. The trust res, consisting of duly identified and definite real properties
4. The cestui que trust, or beneficiaries whose identity must be clear
An express trust concerning real property cant be established by parol evidence. It must be proven by
some writing or deed. Here, the only evidence to support the existence of an express trust between
Canezo and Crispulo is Canezos self-serving testimony.
Further, an intention to create a trust cant be inferred from Canezos testimony and the attending
facts and circumstances. Canezo testified her agreement with Crispulo was Canezo will be given a
share in the produce of Land X. This allegation, standing alone, is inadequate to establish the
existence of a trust because profit sharing per se doesnt necessarily translate to a trust relation.
What distinguishes a trust from other relations is legal title is vested in the trustee while equitable
ownership in the beneficiaries. Here, Canezo made much of the fact that the tax declaration was in
Crispulos name. If Canezo truly did intend to create a trust this shouldnt have been an issue because
its expected for such tax declaration to be in Crispulos name in a trust relationship.
Further, even if a trust was indeed created, the same ceased upon Crispulos death. And when Land X
was transferred to Rojas, the latter had no right to retain the same and hence a constructive trust was
created. But in a constructive trust, prescription may supervene even if the trustee doesnt repudiate
the trust relationship because such trust isnt based on a fiduciary relationship and the holding of the
thing object of the trust is always adverse.
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PNB vs Aznar
Facts
RISCO ceased operations due to business reverses. Aznar, RISCO stockholder and desiring to
rehabilitate RISCO, contributed P212 thousand to it so the latter can purchase 3 parcels of land
(Lands). Titles over the Lands were issued in RISCOs name with Aznars contribution annotated as
liens and encumbrances on the Titles over the Lands. The annotations were made pursuant to the
Minutes of the RISCO Board of Directors meetings. Afterwards, various subsequent annotations were
made on the titles, including a Notice of Attachment and Writ of Execution, in PNBs favor.
Consequently, the Lands were sold in auction with PNB as the highest bidder. Titles over the Lands
were then issued in PNBs name. This caused Aznar to file suit to recover the Lands arguing PNBs
subsequent annotations are subject to his prior annotation.
Issue
Was there an express trust between Aznar and RISCO?
Held
No.
Here, the Minutes of the meeting doesnt offer any indication the parties intended Aznar to be a
beneficiary under an express trust and RISCO to serve as trustor. The creation of an express trust must
be manifested with reasonable certainty and cant be inferred from loose and vague declarations or
from ambiguous circumstances susceptible of other interpretations.
Aznars contribution is actually just a loan to RISCO and the annotations on the Titles serve only as
collateral and doesnt in any way vest ownership over the Lands to Aznar.
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89
Pacheco vs Arro
Facts
Arro filed an answer in a cadastral case claiming certain lots as his property and began to present
evidence for that purpose. However, Yulo declared in open court that he promises to convey the lots
Arro is claiming to Arro. Relying on this promise, Arro withdrew his claim and the cadastral court
confirmed Title to the lots in Yulos name.
This instant case involves Pacheco, as guardian of the Heirs of Yulo, challenging the CA decision
ordering him to execute deeds of assignment for the lands Arro claimed in the cadastral case.
Issue
Was there an express trust between Yulo and Arro?
Held
Yes.
Here, when Arro withdrew his claim to Land X in the cadastral case relying upon Yulos promise, a
trust or fiduciary relationship was created.
The trustee cant invoke the statute of limitations to bar the action and defeat the right of the
beneficiary. Pachecos argument that Yulos promise cant prevail over the cadastral courts final
decree declaring the Heirs of Yulo as the owners of Land X cant be sustained because it would
prevent Arro from claiming his rightful share to Land X.
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90
Goyanko vs UCPB
Facts
Goyanko invested P2 million with Philippine Asia Lending Investors Inc. Later, Goyankos family
and illegitimate family presented conflicting claims to Asia Lending for the investments release.
Pending investigation of the conflicting claims, Asian Lending deposited the investment with UCPB
under the name Phil Asia: In Trust For the Heirs of Goyanko.
Afterwards, UCPB allowed Asia Lending to withdraw the investment. Petitioner demanded UCPB
restore the amount plus interest but the latter refused.
Issue
Is UCPB liable for the amount withdrawn because a trust agreement existed between Asia Lending
and UCBP, in favor of the Heirs of Goyanko?
Held
No.
An express trust requires the following namely:
1. A competent trustor and trustee
2. An ascertainable trust res
3. Sufficiently certain beneficiaries.
Even if any one of them is missing, its fatal to the trust. Further, there must be a present and
complete disposition of the trust property, notwithstanding the beneficiarys enjoyment will take place
in the future. There must also be some power of administration other than a mere duty to perform a
contract although the contract is for a 3rd party beneficiary. A declaration of terms is essential and
these must be stated with reasonable certainty in order that the trustee may administer.
Here, there was no express trust created between UCBP and Asia Lending in favor of Goyankos
heirs. First, while an ascertainable trust res and sufficiently certain beneficiaries exist, a competent
trustor and trustee dont. Second, UCPB, as the accounts trustee, was never under any equitable duty
to administer the account. Third, Asia Lending, as trustor, didnt have the right to the accounts
beneficial enjoyment. Finally, the terms by which UCPB is to administer the account isnt shown with
reasonable certainty.
Next, the evidence shows UCPB was merely a depository and the account a mere ordinary savings
account. The mere fact the account used the words in trust for didnt immediately convert the
account into a trust. Further, the mere act of opening an account with a bank doesnt create a trust
relationship between the depositor and bank. The relationship created is only one of simple loan with
the bank required to exercise extraordinary diligence in performing the loan.
Consequently, UCBP was merely performing its contractual obligation under the simple loan in
allowing Asia Lending to withdraw from the account.
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92
Alejandro Ty vs Sylvia Ty
Facts
Alexander Ty died and was survived by his wife and daughter, Sylvia and Krizia respectively. Sylvia
then filed a petition to settle Alexanders intestate estate. Alexanders estate contained the following
real estate properties:
1. EDSA property
2. Meridien Property
3. Wack-Wack property.
Later, Sylvia asked the intestate Court to sell or mortgage the estates properties to pay the estate
taxes.
However, this action didnt sit well with her father-in-law, Alejandro, because he filed suit to recover
the properties. Alejandro alleges that he was the one who provided the purchase money and simply
placed the Titles in Alexanders name so in case Alejandro dies, Alexander can divide the properties
among his siblings. Simply put, Alejandro alleges a trust was created between him and Alexander.
Issue
Was there a trust between Alejandro and Alexander?
Held
No.
Here, no express trust can be invoked because nothing in writing was presented to prove such trust
and the case involves real property. Art. 1448 cant apply to save Alejandro because the very same
article provides for an exception if the Titleholder is the child of the person paying the purchase price.
Consequently, even assuming Alejandro truly paid the purchase price, the law only presumes a gift in
Alexanders favor.
EDSA Property
Applying Art. 1448 of the CC, there can be no implied trust presumed because the person to whom
Title was conveyed is the child of the person paying the purchase price. Instead of an implied trust,
the law presumes a gift in the childs favor.
Meridien Condominium and Wack-Wack property
Theres no implied trust because theres no evidence to show Alejandro paid part of the purchase
price. Instead, evidence shows that Alexander had the means to pay for the properties.
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94
Government vs Abadilla
Facts
Luis Palad owns Land X. He executed a holographic will and later died without any descendants,
leaving only his widow Dorotea Lopez. Luis also has collateral heirs namely Leopoldo and
Policarpio. His will contains a clause which provides that when Dorotea dies or remarries, Land X
will be donated to the Secondary College to be erected in Tayabas and for this purpose delivered to
the Ayuntamiento or the Civil Governor of the province.
Later, Doroteo remarried and the collateral heirs demanded Land X be partitioned arguing her 2nd
marriage terminated her right to Land X. In the same action, the Municipality intervened claiming
Land X pursuant to Luis will. During the action, the parties reached an agreement where the
Municipality would inherit part of Land X while the remainder would be left with Doroteo. Such
partition however is without prejudice to the collateral heirs to bring another action. Pursuant to this
agreement, the court dismissed the action.
Issue
Was there an effective trust created in the will?
Held
Yes.
In private trust, it isnt always necessary for be beneficiary to be named, or even exist at the time the
trust is created in his favor.
Here, its argued there are no trustee and beneficiary because theres no Ayuntamiento, Civil
Governor, or even the purported Secondary College. An Ayuntamiento is the equivalent of a
municipal corporation and it can be conceded that theres no such equivalent in the Philippines.
However, the Provincial Governor can be considered the equivalent of the Civil Governor being the
legal successor of the latter.
Next, even if the purported Secondary College hasnt been created yet, the same isnt fatal to the trust
because a beneficiary doesnt need to actually exist at the time the trust is created.
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This is an Express Trust due to the Agreement, with Marcelino and Telesfora expressly recognizing their
obligation to return Land X.
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96
DBP vs COA
Facts
DBP created the DBP Gratuity Plan that provides for a retirement fund to cover the benefits due to
DBP retiring officials. Later, a Trust Indenture was entered into between DBP and the Board of
Trustees of the Gratuity Plan Fund, vesting in the latter the administration of the fund. The trustee
then appointed the DBP Trust Services Department (TSD) as investment manager through an
investment manager agreement (Agreement).
The DBP then established a Special Loan Program (SLP) availed thru the DBP Provident Fund and
Gratuity Plan Fund. Under the SLP, a prospective retiree has the option to utilize in the form of a loan
a portion of his outstanding equity in the Gratuity Fund and invest the same in a profitable investment.
Pursuant to the investment scheme, TSD paid the investors a total of P11 million representing the
investment earnings. However, the COA disallowed the payments arguing the distribution of the
income of the Gratuity Fund to future retirees is irregular and constituted the use of public funds for
private purposes, which is prohibited.
Issue
Is the Gratuity Fund a trust fund?
Held
Yes.
Here, the Gratuity Plan Fund is an express trust, specifically an employees trust. An employees trust
is a trust maintained by an employer to provide retirement, pension, or other benefits to its employees.
The DBP intended to establish a trust fund to cover the employees retirement benefits, such fund
being separate and distinct from DBP funds.
The Trust in this case constitutes DBP as Trustor, the Funds trustees as the Trustee, the prospective
retirees as beneficiary, and the Fund + Funds income as the res. The DBP vested the trustees with
legal title over the Fund as well as administration over the same under the Agreement.
The Agreement clearly transferred legal title over the Fund to the Funds trustees. Consequently, the
COAs directive to record the Funds income in DBPs books is wrong because such income from the
Fund doesnt form part of DBPs revenues; such income of the Funds constituting the subject matter
of the trust.
Further, COA is correct in claiming the employees right to claim retirement benefits is still inchoate,
due to the simple fact the employees havent retired yet. However, a beneficiary in a trust doesnt
need to be named or even exist at the time the trust is created. Its sufficient the beneficiarys are
sufficiently certain or identifiable.
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98
Diaz vs Gorricho
Facts
Francisco and Maria are married and part of their conjugal properties is Lots 1 and 2. Later, Francisco
died and was survived by Maria and Diaz. Gorricho then filed suit against Maria causing a writ of
attachment be issued upon Marias shares in Lots 1 and 2. Both lots were sold at public auction with
Gorricho emerging as the winning bidder. Maria failed to redeem within the redemption period
causing the sheriff to execute a Final Deed of Sale in Gorrichos name. However, the sheriff
mistakenly conveyed the entire Lots 1 and 2, instead of just Marias 1/2 interest in each. Gorricho
obtained TCTs for both Lots 1 and 2 as a result.
Later, Maria died and her child, Diaz, filed suit to recover the 1/2 interest in Lots 1 and 2 on the basis
of an implied constructive trust. The suit was instituted 15 years after both Lots were conveyed to
Gorricho.
Issue
Assuming a constructive trust exists, can Diaz still recover the Lots?
Held
No.
Unlike an Express trust, Constructive trust is subject to both prescription & laches.
The reason for the difference is as follows:
1. Express trust - the beneficiarys delay is directly attributable to the trustee who holds the res
for the beneficiary. The trust is fiduciary and the trustees possession isnt adverse. It
becomes adverse only when the trustee repudiates the same and the beneficiary becomes
aware of such repudiation.
2. Constructive trust- theres no fiduciary relationship. The trustee neither recognizes any trust
nor intends to hold the res for the beneficiary. The trustees possession is adverse.
Consequently, Diaz is barred from recovering both Lots because his action has already prescribed.
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100
Lopez vs CA
Facts
Juliana and Jose are married with no children. Juliana exclusively owned the disputed properties in
this case as her paraphernal properties. Later, Juliana executed a will expressing her wish to constitute
a trust fund over her paraphernal properties with Jose as administrator. Once Jose dies or renounces
the obligation, then Lopez would become the administrator. As to Julianas share in the conjugal
properties, she bequeath the same to Jose.
Juliana initiated the probate of her will but before the probate court can hear the petition, she died.
Instead, Jose pursued the petition and submitted to the probate court a proposed project of partition of
the properties. In said partition, Jose made it appear that some of Julianas paraphernal properties
were registered in both their names. The probate court approved the partition.
In 1969, the probate court ordered that the Titles for properties under the Trust be cancelled and new
ones issued to Jose as trustee. The rest of the properties not under the Trust were adjudicated to Jose
as Julianas heir. Some of Julianas paraphernal properties werent made part of the trust. Afterwards,
Jose died disposing his properties to his Heirs.
In 1984, Lopez then assumed the trusteeship of Julianas estate and later filed suit in his capacity as
trustee to recover Julianas paraphernal properties included in Joses estate.
Issue
Has Lopezs action to recover Julianas paraphernal properties prescribed?
Held
Yes.
Here, there was no express trust created because the disputed properties were expressly excluded from
the trust. Instead, these properties were adjudicated to Jose as his exclusive share. Further, such
partition bore the probate courts approval.
However, an implied constructive trust was created because the disputed properties were mistakenly
excluded from the trust and adjudicated to Jose. The provision on implied trust governing this case is
CC Art. 1456. This is the opposite of what Lopez claims that the disputed properties were intended
for the trust.
Now that a constructive trust has been established, can prescription apply?
A constructive trust is subject to extinctive prescription that is 10 years. In this case, the prescriptive
period must begin in 1969, when the disputed properties were registered in Joses name. At that point
there was already constructive notice of the mistake to Lopez or any other interested party.
Considering the instant case was filed in 1984, obviously the same is beyond the 10-year prescriptive
period.
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102
Municipality of Victorias vs CA
Facts
Gonzalo Ditching owns Land X. Gonzalo died and was survived by his widow, Simeona, and
daughter, Isabel. Later, Isabel likewise died leaving her child, respondent Norma. When Simeona
died, Norma inherited Land X from her.
Norma then donated a portion of Land X to the Municipality to be used for a certain high school and
had the remaining portion be surveyed. In the survey, she discovered that a portion of Land the
Municipality uses as a cemetery formed part of Land X. She then demanded from the Municipality
payment for past rentals and delivery of the portion allegedly illegally occupied. The Municipality
refused causing Norma to file suit. The Municipality alleges it bought the disputed Land from
Simeona.
Issue
Can Norma recover the disputed portion from the Municipality?
Held
No.
Here, the evidence shows the Municipality actually bought the disputed Land from Simeona.
However, the Municipality failed to register the Deed of Sale and when Simeona died, Norma
claimed to have inherited the whole of Land X, including the disputed Land, and successfully
registered the same under the Torrens system.
Further, Norma herself admitted she inherited Land X from Simeona, who already sold the disputed
portion to the Municipality beforehand. Consequently, Norma had no legal right to register the
disputed portion in her name because Simeona, and therefore her as well, never owned it.
When Land is decreed in a persons name through fraud or mistake, such person is by operation of
law considered a trustee of an implied trust for the benefit of the propertys true owner. The
beneficiary has the right to enforce the trust and recover the res even if the trustee has a Torrens title
in his name.
Consequently, Norma merely held the disputed portion in trust for the Municipality and the latter can
neither be deprived of possession nor made to pay rentals simply because Norma possessed a Torrens
title in her name.
In fact, the Municipality can demand Norma to convey the disputed portion in its name pursuant to
the Implied Trust.
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PNB vs CA
Facts
Mata & Co. Inc. (Mata) is a private corporation engaged in providing goods and services to shipping
companies. One of Matas customers is Star Krist Foods, Inc. (StarKrist). As part of an agreement,
Mata would advance StarKrists shipping expenses and StarKrist would later reimburse Mata by
sending a telegraphic transfer through banks for credit to Matas account.
This is the set-up when Security Pacific National Bank (SEPAC), PNBs agent, transmitted a cable to
PNB to pay $14k to Mata by crediting Matas account with the Insular bank of Asia and America
(IBAA) per StarKirsts order. However, PNB noticed an error and found out the amount should only
be $1.4k and not $14k. Afterwards, PNB issued a check worth $1.4k.
14 days later, PNB issued another check worth $14k in Matas favor purporting to be another
transmittal of reimbursement from StarKrist. PNB discovered the error 7 years later and requested
Mata return the $14k after discovering the error but the latter refused. PNB then filed suit.
Issue
Is Matas obligation to return the 14k governed by implied constructive trust or solutio indebiti?
Held
Both || But barred by Laches
Here, Mata received the $14k with no intention of holding the same in trust for PNB as the
beneficiary. Consequently, an implied constructive trust was created.
However, the instant case also fulfills the requirements of solutio indebiti, so which is which?
Undoubtedly, the $14k was paid by mistake and Mata had no right to receive the same.
The instant case is both a constructive trust and solutio indebiti. PNB had the choice of the 2 initially
but the remedy of solutio indebiti is already barred by prescription. However, it cant seek remedy
through implied trust because the same is already barred by laches.5
Its important to distinguish between the 2 because the prescriptive periods are different for each. Trust: 10
years || Solutio Indebiti = 6 years.
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105
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Horacio Adaza vs CA
Facts
Victor and Rosario are married with 6 children, including Horacio, Homero, and Violeta. Later Victor
donated Land X to Violeta that the latter accepted. Land X was originally alienable disposable land
and Violate filed a homestead application over the same. The application was approved and an OCT
issued in Violetas name. Later Violeta took out a loan from PNB secured by Land X. Currently
Homero administers Land X.
Later, Horacio invited the Family, including Violeta, for a gathering. At said gather, Horacio asked
Violeta to sign a Deed of Waiver concerning Land X. The Deed stipulates Land X was co-owned by
Horacio and Violate even through the OCT was only in Violetas name. The Deed also provides for
Violetas transfer of 1/2 interest in Land X and improvements existing thereon on Horacios favor.
Violata signed the Deed.
Later, Violata filed suit to annul the Deed.
Issue
Does Horacio have any interest in Land X?
Held
Yes.
Here, the Deed of Donation contains a provision that was crossed out stipulating that:
The donee shall share 1/2 of Land X with one of her siblings after the donors death
The next succeeding provision reads:
The donee receives Land X, not subject to any condition...
Horacios testimony shows Victors intention was to donate Land X to him and Violeta as shown by
the crossed-out provision. The provision was crossed out in order to facilitate the issuance of title,
Land X at the time being alienable disposable public land. However, Horacio was still to have 1/2
interest in Land X despite the provision being crossed out.
Is Horacio telling the truth? There are circumstances that indicate so
1. The Deed of Waiver which Violeta voluntarily signed in full view of her siblings and other
family members
2. Its the parents practice to Title Lands they acquire in the name of only 1 child.
3. Violeta sent Horacio 2 letters acknowledging the latters 1/2 interest in Land X. The letter
contained a request for Horacio to not be hasty in dividing Land X to get his share.
4. Horacio was relaxed in the fact Violeta solely had Title to Land X, and it was only when
Violetas husband started showing undue interest in Land X that he filed suit.
Consequently, the Deed of Donation created an implied trust in Horacios favor with respect to half of
Land X. Such Trust falls under the CC Art. 1449.
Lastly, an implied resulting trust isnt subject to prescription. Further, the same isnt barred by laches
because of the existence of a confidential relationship, namely, consanguinity, in this case. The parties
in the instant case are brother and sister and the same excuses the long delay.
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Emilia physically possessed her half of Land Z, meaning her action is one to quiet title, which is
imprescriptible. Further, it seems the court treated the trust, as resulting, rather than constructive.
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Pasino vs Monterroyo
Facts
Land Z is a 24-hectare parcel of land that Laureano Pasino cultivated and cleared. Land Z formed part
of the public domain and the Government later declared it alienable and disposable. Laureano then
filed a homestead application over Land Z that the Director of Lands granted.
Laureano died before the Director of Lands issued an order to have a homestead patent issued in the
formers name. Laureanos heirs didnt receive the order and therefore Land Z remained unregistered.
Later, a cadastral survey on Land Z revealed that a small creek divided it into 2 portions, Land X and
Land Y.
Later, Laureanos heirs executed a Deed of Quitclaim in favor of a co-heir, Jose, over Land Z. Jose
then alienated Land X in his childrens (Petitioners) favor that then filed a Free Patent application.
The Land Management Bureau granted the application and the Petitioners received their OCTs. After
some time, Monterroyo forcibly took possession of Land X.
Monterroyo alleges his predecessors-in-interest bought Land X from the previous owners. He traced
the sale from Larumbe-Petra-Vicente-Arturo-Monterroyo.
Issue
Can Monterroyo compel Pasino to reconvey Land X to him despite the fact Pasino already has a
Torrens title registered in his name?
Held
Yes.
Under the principle of constructive trust, registration of property by one person in his name, whether
by mistake or fraud, the real owner being another person, impresses upon the title so acquired the
character of a constructive trust for the real owner, which would justify an action for reconveyance.
If the registration of land is fraudulent, the person in whose name the land is registered holds it as
mere trustee, and the real owner is entitled to file an action for reconveyance.
Here, the evidence shows Monterroyo is Land Xs rightful owner having possessed Land X in the
concept of an owner by themselves or through their predecessors-in-interest since 1947.
Consequently, although Pasino has a Torrens title in his name, Monterroyo can still compel them to
reconvey Land X to him.
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Escobar vs Locsin
Facts
A cadastral proceeding was instituted over Land X. Escobal alleges hes the owner of Land X but he
was illiterate and so asked Sumangil to claim the same for her. However, Sumangil committed a
breach of trust by claiming Land X for himself causing the same to be adjudicated to him. Sumangil
died leaving Land X to Juana. Later, Juana died and Locsin now administers her estate.
The CFI found Escobar had equitable title and Juana only legal title but still dismissed the case on the
ground the period of 1-year to review a decree had elapsed.
Issue
Can the trust still be enforced despite the lapse of 1-year from the time the decree was entered?
Held
Yes.
Here, the complaint doesnt seek to review the decree issued over Land X but rather to enforce a trust.
Therefore, the 1-year period for reviewing a decree doesnt apply.
Juanas estate, as the trustees successor in interest, is in equity bound to execute a deed of
conveyance over Land X to Escobar, the beneficiary. A constructive trust was created with Escobar as
beneficiary, Juana as trustee, and Land X as the res.
The Land Registration Act was never intended to cut off, through the issuing of a decree of
registration, equitable rights or remedies. Further, the Torrens system was never intended to aid
betrayal in the performance of a trust.
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113
There was a constructive trust created between Jose and Estrella with Estrella as beneficiary, Jose as trustee,
and Land X as res. The trust was created from the moment Jose executed the Affidavit of Adjudication.
Further, the SC clarified the rule on prescription when the equitable owner has possession; the prescriptive
period runs from the moment the equitable owners possession is actually disturbed. Here, filing an ejectment
suit constitutes sufficient disturbance to start prescription.
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114
The action for reconveyance when the beneficiary has possession is imprescriptible in the sense that unless his
possession is disturbed, the 10-year prescriptive period wont run. Once possession is disturbed, then the 10year period starts.
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Yu vs NLRC
Facts
Jade Mountain Products Company Ltd. is a partnership originally organized with Lea and Rhodora
as general partners and Chin and Chen as limited partners. The partnership has its main office in
Makati. The Partnership through a Partnership Resolution hired Yu as Assistant General Manager
with a fixed salary. However, Yu only received half of his fixed salary with the understanding the
Partnership would pay the balance once it secures additional funds from abroad.
Afterwards, Lea and Rhodora, as well as some limited partners, sold their interest in the partnership to
respondent Willy and Emmanuel. Willy and Emmanuel now solely constitute the partnership and
moved the office from Makati to Mandaluyong.
Yu then reported for work in Mandaluyong but Willy dismissed him and refused to pay his unpaid
salaries. Yu then filed suit for illegal dismissal.
Issue
Has the partnership that hired Yu been extinguished and replaced by the partnership composed of
Willy and Emmanuel? If a new partnership had indeed come into existence, can Yu still assert his
rights under his employment contract with the previous partnership against the new partnership?
Held
Yes || Yes
Here, the CC Art. 1828 and 1830 govern on the 1st issue. Just about all the partners had sold their
partnership interest (amounting to 82% of the total partnership interest) to Willy and Emmanuel. Such
acquisition coupled with the retirement or withdrawal of the selling partners is enough to constitute a
new partnership.
However, simply because events occur which would legally result in the partnerships termination
doesnt automatically mean the old partnerships legal personality is terminated. The CC Art. 1829
declares the partnership isnt terminated but continues until the winding up of partnership affairs is
completed.
In this case, the new partnership didnt even bother to dissolve and wind up the old partnerships
affairs. The new partnership simply took over and continued the old partnerships business.
Important to underscore here is both the old and new partnership are liable for the old partnerships
debts. The old partnership is liable because it was the one who incurred the liability. The new
partnership is liable by express provision of CC Art. 1840 because the new partnership continued the
business of the old partnership without liquidating the old partnerships affairs. In fact, Yu is entitled
to priority against any claim of the previous partners in the partnership.
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117
The name the parties give to a contract isnt controlling, but rather what the law deems it to be.
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10
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Pascual vs CIR
Facts
Petitioners bought Land X from Santiago and Land Y from Juan. Later, Petitioners sold Land X to
Marenir Development Corp. and land Y to Erlinda and Maria. From these sales, Petitioners made a
hefty profit. Petitioners paid the corresponding capital gains tax.
However, the CIR required Petitioners to pay an additional corporate income tax. The CIR treated
Petitioners as an unregistered Partnership taxable as a corporation. Pascual filed suit to challenge the
CIRs tax assessment.
Issue
Have Petitioners become a partnership in buying and selling land they co-owned?
Held
No.
Here, theres no evidence to show Petitioners entered into an agreement to contribute money,
property, or industry to a common fund, and they intended to divide the profits among themselves. In
fact, the evidence shows a co-ownership between the Petitioners. The mere fact they purchased the 2
lands, co-owned them, and sold the same a few years later didnt make them partners.
Petitioners bought Land X in 1965 and neither sold the same nor made any improvements thereon. In
1966, Petitioners then bought Land Y and sold Land X in 1968 without buying other properties. Land
Y was eventually sold in 1970. The foregoing shows the transactions were isolated and cant be
treated as business transaction for purpose of gain.
An isolated transaction where 2 or more people contribute funds to buy certain real estate for profit
cant be considered a partnership in the absence of other circumstances showing a contrary intention.
Further, merely sharing in the profit of co-owned property sold doesnt form a partnership. A clear
intent to form a partnership must exist.11
11
This case is different from Evangelista due to the bevy of circumstances present in that case clearly showing
the intent was to engage in a business and derive profits.
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12
There was provision on Bastida asking for leave, which is inconsistent with a partnership
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Anton vs Oliva
Facts
Oliva entered into 3 Memoranda of Agreement (MOA) with Gladys and Jose, the Antons, to set up a
business partnership covering 3 fast food stores to be established in SM Malls. Under the MOA, Oliva
would get 20%-30% of the profit depending on the Mall. Oliva would give 3 loans to the Antons.
Initially, the Antons gave Oliva her share in the profits for 2 branches but not for the 3rd. Further, the
Antons didnt giver her any accounting of the operations of the 3 stores until finally, the Antons
stopped giving Oliva her share in the profits altogether.
Oliva then demander her share in the profits and accounting but the Antons refused. Olive then filed
suit.
The CA found there was no partnership agreement between Oliva and the Antons, but the Antons
were still liable to pay Oliva her share of the profits.
Issue
Is the CA correct?
Held
Yes.
Here, the relationship between Oliva and the Antons was of creditor-debtor, not of partnership. True,
the MOA refers to Oliva as partner, but the amount Oliva gave wasnt capital contribution to establish
the business. In fact, the business had to pay Oliva back with interest. Further, the MOA forbade
Oliva from interfering with running the business.
Now, is Oliva still entitled to the profits despite the absence of a partnership? Yes, because the Antons
agreed to compensate Oliva for the risk she had taken. Oliva gave the loan with no security and she
was to be paid only if the stores made a profit. It doesnt matter the Antons already paid for 2 of the
loans because their obligation to share the profits with Oliva wasnt extinguished by such payment.
Next, as Oliva wasnt a partner, she had no right to demand an accounting. However, she does have
the right to know how many profits the stores are making in order to know her just share.
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Tocao vs CA
Summary
This case is a MR involving a previous decision that declared a partnership existed between Petitioner
William and Respondent Nenita.
Here, William acted merely as guarantor of Geminesse Enterprise that Nenitas own witness,
Elizabeth, affirmed on cross-examination. Further, Elizabeth testified a certain Peter was the
companys financier.
The business relationship created between William and Nenita was an informal partnership, that
wasnt even recorded in the SEC. Therefore, its understandable for William, who was Marjories
good friend and confidante, to occasionally participate in the business affairs, although never in an
official capacity.
Next, no evidence shows William never even participated in the business profits.
Doctrine:
The essence of partnership is for the partners to share the profit and loss.
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Ortega vs CA
Facts
The law firm of Ross, Lawrence, Selph and Carrascoso was duly registered in the Mercantile Registry
and reconstituted with the SEC. The SEC records show there were several amendments to the articles
of partnership to change the firm name. The law firm ended up with the name Bito, Misa & Lozada.
Later, Petitioner informed the Respondents of his intention to retire from the firm and have his
participation liquidated. Petitioner then filed with the SECs Securities Investigation and Clearing
Dept. (SICD) a petition for dissolution and liquidation of partnership.
Issue
Did Petitioners retirement from the Partnership dissolve the same?
Held
Yes.
A partnership that doesnt fix its term is a partnership at will. Such partnership is predicated on the
mutual desire and consent of the partners. Truly, one of the partners may, at his sole pleasure, dictate
dissolution of the partnership at will. He must however act in good faith, not that attendance of bad
faith can prevent the dissolution of the partnership liability for damages can result.
In fact, even if the partnership is one with a specific period or purpose, the partner by his act or will
can still dissolve the partnership. Among partners, mutual agency arises and the doctrine of delectus
personae allows them to have the power, although not necessarily the right, to dissolve the
partnership. An unjustified dissolution of the partnership can subject the guilty party to damages.
A partnerships dissolution is the change in relation of the parties caused by a partner ceasing to be
associated in carrying on the business. Meanwhile, winding up happens after the partnership is
dissolved but the partnership retains its legal personality until its affairs are finished.
Here, the law firm is a partnership at will. The term retirement as used in the Articles of Partnership
means the partners dissociation, inclusive of resignation or withdrawal, from the partnership that
thereby dissolves it.
Lastly, Petitioner wasnt in bad faith because he was justified, i.e. interpersonal conflict among
partners that caused him to retire.
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Lyons vs Rosenstok
Facts
Respondent Elser is engaged in the buying, selling, and administering of real estate. In several of his
ventures, Lyons joined him with profits shared equally between the 2. Later, Lyons went on leave to
the US and at the time he co-owned with Elser, each with 1/2 share, 3 properties (A,B,C). Lyons
executed a general power of attorney in Elsers favor authorizing the latter to manage and dispose the
properties. During Lyons absence, Elser sold Property A & B.
Afterwards, Elser discovered Property X that represented a fine business opportunity. Elser was able
to gather, by his own means, and through loans from others, to acquire Property X. During his
borrowings, one of the lenders required Elser to mortgage Property C as security, which he did.
Eventually, Elser replaced Property C with his own property as security but eventually reverted the
security back to Property C with Lyons consent.
With enough money, Elser was able to purchase Property X. In order to develop the property, a
limited partnership was organized between Elser and 3 other associates, under the name of J.K.
Pickering & Company (Pickering). Elser offered Lyons to join him in developing Property X but the
latter refused.
Issue
In mortgaging Property C, was there a partnership created between Elser and Lyons?
Held
No.
Here, the mortgaging of Property C never resulted in damage to Lyons and any risk involved was
negligible. Further, no money derived from the mortgage was ever applied to purchasing Property X.
Elser bough Property X entirely upon his account.
Lyons alleges that when Elser mortgaged Property C, Lyons as co-owner at the time of 1/2, he
involuntarily became the owner of an undivided interest in Property X acquired partly by that money.
Consequently, Lyons demands a certain number of shares from Pickering.
The evidence shows Lyons consented to Property C being mortgaged because he thought the same
was done in order to buy another property, Property Z.
Further, Lyons allegations are untenable. No money belonging to Lyons was ever used to purchase
Property X. Further, theres no partnership between Lyons and Elser because Ester, in buying
Property X, wasnt acting for any partnership composed of himself and Lyons.13
13
This case involves a limited partnership because it involved only Property X. Further, there was no
partnership between Lyons and Ester because there was no:
1. Common fund
2. Sharing of profits and loss.
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Woodhouse vs Halili
Facts
Woodhouse and Halili entered into a written agreement containing, among others, the following
stipulations:
1. They shall organize a partnership with Woodhouse to act as industrial partner and Halili as
capitalist
2. Woodhouse would receive 30% of the profits from the business.
The parties signed the contract and went to the US to meet up with Mission Dry Corp. Mission Dry
Corp. then granted them the exclusive right to distribute Mission beverages in the Philippines.
Simply put, Woodhouse and Halili agreed to enter into a partnership to sell Mission Soft drinks, a USbased brand, in the Philippines.
When the bottling plant was already operating, Woodhouse demanded Halili to execute the
partnership papers. Halili kept on putting the matter off causing Woodhouse to file suit to compel
Halili to execute the partnership papers.
Issue
Can Woodhouse compel Halili to execute the agreement despite the fact the same may not be declared
null and void?
Held
No.
Here, the evidence shows that no partnership existed at the time the bottling plant was operating. In
fact, the agreement shows the parties intended to execute the partnership at a later date. Woodhouse
himself, after they obtained the Franchise from Mission Corp, demanded Halili to execute the
partnership.
However, Woodhouse can't compel Halili to execute the partnership because the same is an obligation
to do, not to give. The law recognizes the individual's freedom or liberty to do an act he has promised
to do, or not to do it, as he pleases. It's a personal act of which courts may not compel compliance.
Consequently, granting Woodhouse relief would amount to involuntary servitude against Halili. But
Halili is liable for damages to Woodhouse.
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129
Ma vs Fernandez Jr.
Doctrine
In a contract of partnership, we said that registration's purpose is to give notice to 3rd parties; that
failure to register the contract doesn't affect the liability of the partnership and of the partners to 3rd
persons; and that neither does such failure to affect the partnership's juridical personality. An
unregistered contract of partnership is valid as among the partners, so long as it has the essential
requisites, because the main purpose of registration is to give notice to 3rd persons, and it can be
assumed that members themselves knew of the contents of their contract.
Registration isn't a requirement for a contract's validity as between the parties, for the effect of
registration serves chiefly to bind 3rd persons.
Registration then is the confirmation of the existence of a fact.
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130
Torres vs CA
Facts
The Sisters Antonia Torres and Emeteria Baring (Petitioners) entered into a JVA with Manuel Torres
(Respondent) to develop Land X into a subdivision. Pursuant to the contract, the parties executed a
Deed of Sale in Manuels favor registering Land X in Manuels name. Manuel then mortgaged Land
X to Equitable Bank as security for a loan, which under the JVA was to be used to develop the
subdivision. Further, the parties agreed to share the proceeds from the sale of Land X under the JVA
under a 60-40 share with Petitioners getting 60%.
However, the project didnt push through and Land X was subsequently foreclosed. Petitioners filed a
criminal case against Respondent but the latter was acquitted. Petitioners then filed a civil case against
Respondent.
Issue
Did a Partnership exist? Was the same valid despite the fact the immovable property werent
inventoried in a public instrument? How much of the loss should Petitioner & Respondent bear?
Held
Yes || Yes || Petitioner 60% and Respondent 40%
A reading of the JVA clearly shows the partnerships existence as provided in the CC Art. 1767.
Under the JVA, Petitioners would contribute property to the partnership in the form of land that was
to be developed into a subdivision. Meanwhile, Respondent would give the amount needed for
general expenses and other cost in addition to his industry. Further, the income from said project
would be divided according to the stipulated percentage.
Here, Respondent contributed to the partnership by developing the roads, curbs, gutters, and entering
into a contract to construct low-cost housing units on Land X.
Next, the Petitioners contend the partnership is void under the CC Art. 1773. However, this
contention is wrong in 2 ways. First, Art. 1773 was intended primarily to protect 3rd persons but the
instant case doesnt involve 3rd persons. Second, Petitioners themselves declare the contract as void
but at the same time use it as their basis for making Respondent pay 60% of the value of Land X.
Petitioners cant deny or uphold the contract depending on what suits them.14
Lastly, Petitioners must bear 60% of the loss because CC Art. 1797 applies.
14
It seems Art. 1773 applies only when 3rd persons will be prejudiced.
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133
Rojas vs Maglana
Facts
Rojas and Maglana executed their Articles of Co-Partnership (Articles) called Eastcoast Development
Enterprises (EDE) with only 2 of them as partners. EDE had an indefinite term of existence and was
duly registered with the SEC. EDE was constituted to secure timber licenses. Under the Articles,
Maglana was to manage EDEs business affairs while Rojas would be the logging superintendent and
manage EDEs logging operations. The profits and losses would be divided share and share alike
between the partners.
EDE secured a timber of license from the Bureau of Forestry but EDE encountered difficulties forcing
it to avail of Pahamotangs services as industrial partner. The 3 parties then executed a 2nd Articles,
practically the same in all respects with the 1st Articles, for a 2nd partnership also called EDE. EDE
then operated and realized profits. Later, Rojas and Maglana bought Pahamotangs shares in the
partnership and the equipment Pahamotang contributed, and dissolved the 2nd EDE. After
Pahamotangs withdrawal, Rojas and Maglana continued the partnership without any written
agreement or reconstitution of the Articles.
Afterwards, Rojas entered into a management contract with CMS Estate and abandoned EDE.
Maglana reminded Rojas of the latters obligation to the partnership but Rojas replied saying he wont
continue his obligations anymore. Rojas also withdrew his equipment from EDE. Further, Rojas took
funds from the partnership worth more than his contribution causing Maglana to dissolve the
partnership. Rojas then filed suit against Maglana.
Issue
Did the 2nd partnership dissolve the 1st partnership?
Held
No.
The evidence shows the partners never intended to dissolve the 1st partnership upon constitution of
the 2nd partnership. The 1st and 2nd partnership are the same except for the fact that:
1. Pahamotang was added as an industrial partner
2. Pahamotang had an equal share in the profits
3. The 2nd partnerships term was fixed at 30 years.
Both partnerships had the same name, purpose and capital contributions from Rojas and Maglana.
Further, all subsequent renewals of Timber licenses were secured in the 1st partnerships name.
Practically speaking, the 2nd Articles only amended the 1st Articles and all business transactions were
carried out under the 1st Articles.
Next, its undisputed the 2nd partnership was dissolved by common consent but such dissolution
didnt affect the 1st partnership that continued to exist. The partners actions subsequent to the 2nd
partnerships dissolution (Maglanas reminder and Rojas reply) leave no room for doubt that both
parties considered themselves governed by the 1st Articles.
Lastly, Maglana can unilaterally dissolve the 1st partnership despite the same being one with a period.
There were only 2 parties and Maglanas notice of dissolution can be considered a notice of
withdrawal. Maglana can dissolve the partnership with or without just cause and the Articles will
guide such dissolution. But if without just case, Maglana is liable for damages. Here, Maglanas
dissolution was justified because of Rojas actions (abandoning the partnership, withdrawing
equipment, etc.)
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134
Pioneer Insurance vs CA
Facts
Jacob Lim is engaged in the airline business as owner-operator of Southern Air Lines, a single
proprietorship. Later, Lim and Japan Domestic Airlines (JDA) entered into a sales contract with the
former purchasing from the latter airplanes and spare parts. Pioneer Insurance executed a surety bond
in JDAs favor on Lims behalf to cover the purchase price.
Border Machinery and Heavy Equipment Company (Bormaheco), Cervantes, and Maglana also
contributed funds to purchase the goods. The funds were supposedly part of their contributions to a
new corporation Lim proposed to expand his airline business. Bormaheco, Cervantes and Maglana
also executed indemnity agreements in Pioneers favor. Lim also executed a chattel mortgage over the
purchased airplanes in Pioneers favor..
Later, Lim defaulted in paying JDA forcing the latter to demand from Pioneer. Pioneer paid JDA then
filed suit to foreclose the chattel mortgage. The lower courts found only Lim liable to Pioneer and
absolved Bormaheco, Cervantes, and Maglana. Further, Lim was ordered to reimburse Bormaheco,
Cervantes, and Maglana for the losses the latter incurred.
Issue
Did Respondents failure to incorporate result in a de facto partnership among them and as a
consequence, all must share in the loss and/or gains of the venture in proportion to their contribution?
Held
No.
The evidence shows Jacob never had the intention to form a corporation with Respondents despite his
representations to them. This gives credence to Respondents claims that Jacob induced them to
contribute to a proposed corporation that was never formed because Jacob reneged on the agreement.
Its also undisputed that Jacob received from Respondents a sum certain in money to purchase the
airplanes and spare parts. Respondents believing the same would be their contribution to the proposed
corporation.
Generally, when persons attempt but fail to form a corporation and carry on the business under the
corporate name occupy the position of partners. A general partnership is formed, as a punitive
measure. However, such partnership is implied only when necessary to do justice among the parties
because persons cant be treated as partners to each other when no intent to form a partnership exists.
Consequently, no de facto partnership resulted among the parties that entitled Jacob to reimbursement
of supposed losses from the proposed corporation. Jacob was acting on his own and not in behalf of
his would-be incorporators in transacting the sale of airplanes and spare parts.15
15
There was never any intention on Jacobs part to form a corporation and to imply a partnership would result in
injustice to Respondents.
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136
16
Hill & Ceron is engaged in the business of brokerage in general and Littons transaction involved the sale of
mining shares, part of the partnerships ordinary business.
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137
Goquiolay vs Sycip
Facts
Tan Sin An and Antonio C. Goquiolay entered into a general commercial partnership to deal in real
estate. Both Tan and Antonio contributed to the partnerships capital. The agreement lodged in Tan
the sole management of the partnerships affairs and Antonio executed a general power of attorney to
this effect. Further, if a partner dies, the partnership will continue but the heirs of the deceased partner
will represent him in the partnership.
Later, the partnership purchased Land X and assumed the mortgage, payable to La
Urbana..Prestamos. Tan also purchased Land Y but in his individual capacity and assumed the
mortgage thereon. The 2 mortgage obligations were consolidated in an instrument executed by the
partnership and Tan where they agreed to bind themselves solidarily to pay the mortgage.
Tan then died leaving his Heirs. Meanwhile, La Urbana demanded payment from the partnership and
Tan. Respondent Sing Yee and Cuan Co. instead paid the mortgage. Sing Yee then filed their claims
in the intestate proceedings of Tan arising from the partnerships obligations and the mortgage.
Tans Heirs, namely his widow Kong Chai Pin, then sold Land X & Y to Sycip and Lee to settle
Tans debts. Sycip and Lee in turn sold Land X & Y to Insular Development Co. Antonio, learning
about the sale, moved to annul the sale to the extent of his interest in both Lands.
Issue
Was Kongs sale of Land X & Y valid despite Antonios lack of consent to the sale?
Held
Yes.
Upon Tans death, Kong, by her affirmative actions, manifested her intent to be bound by the
partnership agreement not only as a limited partner, but as a general partner. She managed and
retained the possession of the partnership properties and was deriving income from the same. In
selling Land X & Y in the partnerships name, she was acting as a managing partner.
Now, was Kongs sale valid despite the lack of Antonios consent? Yes.
Strangers dealing with a partnership have the right to assume, in the absence of restrictive clauses in
the co-partnership agreement, that every general partner has power to bind the partnership, specially
those partners acting with ostensible authority.
The provisions of Art. 129 of the Code of Commerce (agreement among all the members) imposes
such obligations only among the partners, and doesnt necessarily affect a partners acts, acting within
the scope of the ordinary business of the partnership, as regards 3rd persons without notice. A 3rd
person may rightfully assume that the contracting partner was duly authorized to contract on the
partnerships behalf. Such 3rd person isnt required to inquire the partners authority or if the other
partners gave their consent.
Here, the presumption prevails because Sycip & Lee bought Land X & Y from Kong without notice
that Antonio didnt gave his consent.
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138
US vs Clarin
Facts
Pedro Larin delivered to Pedro Tarug P172, in order for the latter, in company with Eusebio Clarin
and Carlos de Guzman, might buy and sell mangoes. Larin made an agreement with the other 3 by
which the profits were to be divided equally between him and them.
Clarin, Guzman, and Tarud traded the mangoes earning a profit but they didnt comply with the
agreement by neither delivering to Larin his share of the profits nor rendering any account of the
capital.
Larin then filed suit for estafa against them.
Issue
Is a criminal action for estafa the proper remedy in case a co-partner fails to give the other co-partners
their shares in the profits and capital?
Held
No.
Here, a partnership was formed among the parties. Larin invested his P172 in the partnership, but his
partners didnt have the duty to return to him his capital. That duty devolves upon the partnership of
which he himself formed part, or if it were to be done by one of the 3 other partners specifically, it
would be Tarug, who according to the evidence was the person who received the money directly from
Larin.
The partnership having received Larins P172, the business commenced and profits accrued, the
action that lies with the partner who furnished the capital to recover his money isnt a criminal action
for estafa, but a civil one arising from the partnership contract for a liquidation of the partnership and
a levy on its assets if there should be any.
Estafa doesnt include as its object money received for a partnership.
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140
Moran Jr. vs CA
Facts
Pecson and Moran entered into an agreement where both would contribute P15k each to print 95k
posters with Moran actually supervising the work. Pecson would receive a commission of P1k a
month starting from April up to December. On December, a liquidation of the accounts in the
distribution and printing of the posters would be made.
Pecson gave Moran P10k and only a few posters were printed. Later, Moran executed in Pecsons
favor a promissory note promising to pay Pecson P20k in 2 equal installments with the whole sum
becoming due upon failure to pay the 1st installment.
Later, Pecson filed suit to recover his contribution in the partnership + profits, as well as the value of
the promissory note. The lower court awarded Pecson P47k representing his share in the partnerships
unrealized profits.
Issue
Is such award proper despite being highly speculative and without taking into account the risks
involved in the business undertaking?
Held
No. The award is speculative and has no basis in fact and law.
Here, its undisputed that a partnership exists between Pecson and Moran. Further, both parties
committed a breach of their partnership obligations, Pecson giving only P10k out of 15k, while Moran
printed only P2k posters out of P95k posters.
In a partnership, each partner must share in the profits and losses of the venture, thats the
partnerships essence. And even with an assurance made by one of the partners that they would earn a
huge amount of profits, in the absence of fraud, the other partner cant claim a right to recover the
highly speculative profits. Here, Pecson was promised P1k a month and P142k on the posters
themselves. However, various factors and hidden risks must be considered in tempering such
expectation of profits.
But it doesnt follow that Pecson isnt entitled to recover anything from Moran. Pecson is still entitled
to his share in the profits.
Next, Pecson isnt entitled to his P1k monthly commission because the basis of the same was the
extravagant profits. Considering the partnership was a failure, there are no profits to get the P1k a
month from.17
17
Simply put, Moran promised too much but the partnership fell flat on its face. But such promise doesnt
justify awarding Pecson the expected extravagant profits.
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18
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142
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143
Idos vs CA
Facts
Complainant Eddie supplied chemicals and rawhide to Idos for use in the latter's business of
manufacturing leather. Later, he formed a partnership with Idos. But the partnership was short-lived
because soon after, the partners agreed to terminate the partnership. The partnership's assets were
liquidated and Idos gave Eddie 4 checks representing his share in the partnership. But upon deposit,
only 3 out of 4 checks were honored.
Eddie then filed a complaint for BP 22.
Issue
Were the checks issued as payment for Eddie's share in the partnership?
Held
No.
The evidence shows the parties agreed to dissolve the partnership but such agreement didn't
automatically end the partnership, because they still had to sell the goods on hand and collect the
receivables from debtors. In short, the partnership was still in the process of 'winding up' its affairs,
when the check in question was issued. Because the partnership hasn't been terminated, Eddie and
Idos remained as co-partner. The checks were therefore issued as from a partner to another, not as
payment from a debtor to creditor.
The 3 final stages of a partnership are:
1. Dissolution;
2. Winding-up;
3. Termination.
Dissolution is defined in the CC Art. 1828. Winding up is the process of settling business affairs of
dissolution. Termination is the point in time after all the partnership affairs have been wound up.
These final stages in the life of a partnership are recognized under the Civil Code that explicitly
declares that upon dissolution, the partnership is not terminated, as provided in Art. 1828 & 1829.
Here, the checks were issued merely to evidence the complainant's share in the partnership property,
or to assure the latter that he would receive in time his due share therein. The check wasn't intended to
apply on account or for value; rather it should be deemed as having been drawn without consideration
at the time of issue. Payment of the share in the partnership, using the checks, was conditioned on the
subsequent realization of profits from the unsold goods and collection of the receivables of the firm.
This situation would hold true until after the winding up, and subsequent termination of the
partnership. For only then, when the goods were already sold and receivables paid the erstwhile
partners could avail of that cash money.19
19
Idos was acquitted of Estafa because the checks were never issued as payment, but rather to evidence Eddie's
interest in the partnership.
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Villereal vs Ramirez
Facts
Villereal, Carmelito Jose and Jesus Jose formed a partnership with a capital of P750k to operate a
restaurant business under the name Aquarius Food House and Catering Services. Villareal was
appointed general manager and Carmelito, operations manager.
Respondent Donaldo Ramirez later joined as a partner in the business. His parents, respondent Sps.
Ramirez, paid his capital contribution of P250k. Meanwhile Jesus withdrew from the partnership and
his capital contribution was refunded to him. Further, the restaurant was closed down and its contents
stored in the Sps. Ramirez storage house.
Later, the Sps. Ramirez informed Villereal and the other partners that they were no longer interested
in continuing the partnership and reopening the restaurant, and they were accepting the latters offer
to return their capital contribution. Afterwards, the Sps. Ramirez made another demand, reiterating
the request for the return of their share in the partnership. The demands however were unheeded
causing the Sps. Ramirez to file suit.
Issues
Are the other partners liable to refund the Sps. Ramirez their share in the partnership?
Held
No.
The evidence shows a partnership existed but was subsequently dissolved when the Sps. Ramirez
informed the other partners of their intent to discontinue the partnership. Further, the Sps. Ramirez
demanded from the other partners their share in the partnership.
However, the Sps. Ramirez have no right to demand from the partners the return of their share.
Except as managers of the partnership, the other partners didn't personally hold its assets. The
partnership has a juridical personality separate and distinct from each of the partners. Because the
capital was contributed to the partnership, not to the partners, it's the partnership that must refund the
share of the Sps. Ramirez.
And because it's the partnership that is liable to return the Sps. Ramirez's shares, the amount to be
refunded is necessarily limited to its total resources. In other words, it can only pay out what it has in
its coffers, which consists of all its assets. However, before the partners can be paid their shares, the
creditors of the partnership must first be compensated. After all the creditors have been paid,
whatever is left of the partnership assets becomes available for the payment of the partners shares.
Here, the exact amount of the Sps. Ramirez share in the assets can't be determined until all the
partnership's assets have been liquidated and the creditors have been paid. The basis of such share
can't be the initial capital because in pursuit of a business, the capital is either increased by profits or
decreased by losses.
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Claudio vs Zandueta
Facts
This dispute is a civil case Zandueta and co-respondents instituted asking, among others, for:
1. The dissolution of the association named Cotabato & Cagayan Mining Association
2. Accounting from Claudio and co-petitioners, as members of the associations executive
committee
3. Appointment of a receiver to take charge of the associations properties.
The Judge issued an order appointing the receiver causing Claudio to appeal such order.
Issue
Did the Judge act with grave abuse of discretion in appointing a receiver despite the absence of other
interested parties to the case, such as the Cotabato & Cagayan Mining Assocation?
Held
Yes.
In order that a receiver may be appointed in a case, an application under oath to that effect must be
filed, alleging all the facts necessary to convince the court to grant the same, for the purpose of
preserving the property which is the subject of litigation and protecting thereby the rights of all the
parties interested therein. Before a receiver is appointed, the consequences or effects thereof should be
considered or, at least, estimated in order to avoid causing irreparable injustice to others who are
entitled to as much consideration as those seeking it.
In the complaint itself, it has been emphatically alleged that the "Cotabato & Cagayan Mining
Association" is composed of 279 members; but in spite thereof, Zandueta failed to include them as
parties in said case, except only Claudio and co-petitioners, in both their personal and official
capacity, despite bringing the action not only for their own benefit but also for the benefit of the other
members. Neither did they include said association, in spite of the fact that their principal purpose is
to obtain the dissolution of the same. The association, as a party affected thereby, is undoubtedly as
much entitled, if not more entitled than the plaintiffs and defendants, to be heard in the case, in
matters affecting its existence as well as the appointment of a receiver applied for.
Here, the defendants acted for the benefit of the "Cotabato & Cagayan Mining Association" or all the
members thereof, much less that the plaintiffs, in turn, sued not only for their own benefit but also for
the benefit of all the other members.
It necessarily follows from the foregoing that in order that the respondents judge could exercise his
authority to appoint a receiver, he should have required the inclusion therein, as necessary parties, of
the Cotabato & Cagayan Mining Association or of the other members not included as such parties;
or at least, the plaintiffs should have brought the action for themselves and in the name of the
association in question, or for the benefit of the other members. Not having done so, and it appearing
clearly that the persons who might be affected by the remedy applied for were not parties to the case,
the respondents judge undoubtedly acted in excess of his jurisdiction and abused his discretion.
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Elmo Munasque vs CA
Facts
Elmo, on behalf of the partnership Galan and Munasque, entered into a contract with Respondent
Tropical to remodel a portion of the latters Cebu branch building with the partnership being paid in
installments. Later, Tropical made its 1st payment through a check in Elmos name. Elmo indorsed
the same to Galan so the latter can deposit it and use the amount to pay their suppliers. However,
Galan misused the money for his personal affairs. When Tropical made its 2nd payment, Elmo
refused to indorse the check. Galan then informed Tropical that there was a misunderstanding
between him and Elmo causing Tropical to change the payee from Elmo to Galan and Associates.
Galan and Associates is the partnerships duly registered name. Galan was then able to deposit the
2nd check.
Due to Galans mischief, Elmo experienced financial difficulty as the money from the 2nd check was
supposed to be paid to the suppliers and workers. Elmo managed to finish the contract but at great
expense to himself and by borrowing from 3rd party creditors. Elmo then filed suit to recover the
value of the check and make Galan solely liable to the 3rd party creditors.
Issue
Can Tropicals payment to Galan be considered as good payment as to the partnership? Who is liable
to the 3rd party creditors?
Held
Yes || The partnership, Elmo, and Galan are liable solidarily - But Galan must reimburse Elmo
Here, the evidence shows that the partnership between Galan and Munasque was a genuine one. If
there was a falling out or misunderstanding between the partners, such doesnt convert the partnership
into a sham organization.
When Elmo received the 1st check with him as payee, he indorsed the check in Galans favor.
Therefore, Tropical had every right to presume that Elmo and Galan were true partners. If they
werent partners as Elmo claims, then he has only himself to blame for making the relationship appear
otherwise, not only to Tropical but to their other creditors as well. The payment Tropical made to the
partnership was good payment which binds both Galan and Elmo. Further, because the two were
partners when the debts were incurred, they are also both liable to the partnerships 3rd party
creditors.
Next, while its true that under Article 1816 of the Civil Code, the partners liability is pro rata, this
provision should be construed together with Article 1824. Meaning, while the liability of the partners
are merely joint in transactions entered into by the partnership, a 3rd person who transacted with said
partnership can hold the partners and partnership itself solidarily liable for the whole obligation if the
case falls under Articles 1822 or 1823.
Here, Tropical had every reason to believe that a partnership existed between Elmo and Galan and
cant be faulted for paying "Galan and Associates" and delivering the same to Galan because as far as
it was concerned, Galan was a true partner with real authority to transact on the partnerships begalf.
This is also true for the partnerships 3rd party creditors. However. Galan should reimburse Munasque
for the latters payments on the partnerships behalf because the former acted in bad faith in dealing
with Munasque.
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Tocao vs CA
Facts
Respondent Nenita Anay, Petitioner William Belo and Marjorie Tocao entered into a joint venture for
importing and distributing kitchenware. Belo acted as capitalist, Marjorie as President and General
Manager, and Nenita as head of marketing and Vice-President. Nenita was responsible for marketing
the product considering her experience and established relationship with West Bend Company, a USbased manufacturer of kitchenware. Further, the parties agreed on Nenitas compensation, consisting
of commissions, and that Belos name shouldnt appear on any document concerning transactions
with West Bend. The agreement wasnt reduced in writing because Belo assured the parties he was an
honest man in his financial commitments.
Nenita secured the distributorship from West Bend and the business was successful. They operated
under the name Geminesse Enterprise, a sole proprietorship registered in Marjories name. Nenita
continued doing her job well until one day, Marjorie removed Nenita as Vice-President barred her
from holding office. Nenita then demanded from Belo her commission but such demand went
unanswered.
Nenita then filed suit.
Issue
Was there a partnership among the parties? And was such partnership dissolved upon Nenitas
removal as Vice-President?
Held
Yes || Yes
Here, the evidence shows the parties established a business partnership despite the fact the same was
only oral. An oral contract of partnership is as good as a written one provided no immovable property
or real rights are involved. The fact theres no record in the SEC of a public instrument embodying
the partnership agreement pursuant to the CC Article 1772 didnt nullify the partnership.
Next, Nenita is an industrial or managing partner because she contributed her expertise in marketing
to the partnership. It was through her relationship with West Bend Company, to secure the
distributorship, and her marketing skills that the business was propelled to financial success. Further,
by the business set-up, 3rd persons were made to believe that a partnership had indeed been forged
between petitioners and private respondents. Both Belo and Marjorie merged their respective capital
and infused the amount into the partnership of distributing cookware, with Nenita as the managing
partner.
The business venture operating under Geminesse Enterprise didnt result in an employer-employee
relationship between Nenita and Petitioners. First, Nenita had a voice in the management of the affairs
of the business. Second, Marjorie admitted that like her, who was President, Nenita received only
commissions and not a fixed salary.
Undoubtedly, Marjorie unilaterally excluded Nenita from the partnership to reap for herself and Belo
the financial gains resulting from Nenitas efforts in making the business venture a success. Marjorie
believed that Nenita was no longer necessary in the business operation and resulted in a falling out
between the two. However, a mere falling out or misunderstanding between partners doesnt convert
the partnership into a sham organization. The partnership exists until dissolved under the law. Since
the partnership created by petitioners and private respondent has no fixed term and is therefore a
partnership at will predicated on their mutual desire and consent, it may be dissolved by the will of a
partner.
Here, Tocao unilaterally excluding Nenita from the partnership resulted in her own withdrawal from
the partnership. Nevertheless, the partnership was not terminated thereby; it continues until the
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winding up of the business. The partnership hasnt yet undertaken the winding up of partnership
affairs.
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Realubit vs Jaso
Facts
Realubit entered into a Joint Venture Agreement with Biondo, a French National, to operate an ice
manufacturing business. The parties agreed on the sharing of profits and manner of acquiring the
machines.
Later, Biondo executed a Deed of Assignment transferring all his rights in the business in Jasos
favor. With Biondos departure from the Philippines, Jaso informed Realubit of the assignment and
demanded an accounting as well as their portion of the profits.
The demand however went unheeded causing Jaso to file suit.
Issue
Whether or not Jaso become a partner when Biondo transferred his interest in the partnership to the
former.
Whether or not the partnership was properly dissolved upon Jasos motion pursuant to the CC Art.
1831.
Held
Jaso didn't become a partner || The partnership was dissolved
Generally understood to mean an organization formed for some temporary purpose, a joint venture is
likened to a particular partnership or one that has for its object determinate things, their use or fruits,
or a specific undertaking, or the exercise of a profession or vocation. The rule is settled that the law
on partnerships governs joint ventures, and partnerships in turn are based on mutual agency or
delectus personae. Insofar as a partners conveyance of the entirety of his interest in the partnership is
concerned, the CC Article 1813 governs.
From the foregoing provision, it is evident that the transfer by a partner of his partnership interest
doesnt make the assignee of such interest a partner of the firm, nor entitle the assignee to interfere in
the management of the partnership business or to receive anything except the assignees profits. The
assignment doesnt purport to transfer an interest in the partnership, but only a future contingent right
to a portion of the ultimate residue as the assignor may become entitled to receive by virtue of his
proportionate interest in the capital. Since a partners interest in the partnership includes his share in
the profits, Jaso is entitled to Biondos share in the profits, despite Realubits lack of consent to the
assignment of Biondos interest in the joint venture.
Although Jaso didnt, moreover, become a partner as a consequence of the assignment and/or acquire
the right to require an accounting of the partnership business, her prayer for dissolution of the joint
venture conformably with the right granted to the purchaser of a partners interest under Article 1831
of the Civil Code is proper.
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Ames vs Downing
Excerpt:
The system of limited partnerships, which was introduced by statute into this state, and subsequently
very generally adopted in many other states of the Union, was borrowed from the French Code. 3
Kent, 36; Code de Commerce. It has existed in France from the time of the Middle Ages; mention
being made of it in the most ancient commercial records and in the early mercantile regulations of
Marseilles and Montpellier. In the vulgar Latinity of the middle ages it was styled commenda, and in
Italy acommenda. In the statute of Pisa and Florence, it is recognized as far back as the year 1160;
also in the ordinance of Louis-le-Huton, of 1315; the statutes of Marseilles, 1253; of Geneva of 1588.
In the middle ages it was one of the most frequent combinations of trade and was the basis of the
active and widely extended commerce of the opulent maritime cities of Italy. It contributed largely to
the support of the great and prosperous trace carried along the shores of the Mediterranean; was
known in Languedoc, Provence, and Lombardy, entered into most of the industrial occupations and
pursuits of the age and even traveled under the protection of the arms of the Crusaders to the City of
Jerusalem. At a period when capital was in the hands of nobles and clergy, who from pride or caste, or
canonical regulations, could not engage directly in commercial enterprises and reaping the profits of
such lucrative pursuits without personal risks, and thus the vast wealth, which otherwise would have
lain dormant in the coffers or the rich, became the foundation by means of this ingenious idea of that
great commerce which made princes of the merchants, elevated the trading classes and brought the
commons into position as an influential estate of the common wealth.
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20
Most of the case is a discussion on the requirements of the Code of Commerce on partnerships, a law that has
already been repealed.
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Mendoza vs Paule
Facts
Paule, the proprietor of E.M. Paule Construction and Trading (EMPCT) executed an SPA in
Mendozas favor authorizing the latter to participate as his representative in the bidding of an NIA
project. Mendoza won the bidding and NIA awarded the contract to EMPCT. Later, Cruz learned that
Mendoza needed heavy equipment to use in the NIA project. Mendoza and Cruz then signed a Job
Order/Agreement to lease the latters heavy equipment to EMPCT.
Later, Paule revoked Mendozas SPA causing NIA to stop paying Mendoza. As a result, Mendoza
also couldnt pay Cruz for the lease. Cruz demanded payment from NIA but the latter refused
reasoning payment would be made only to EMPCT. Cruz then demanded payment from Mendoza and
EMPCT but both refused to pay.
Cruz then filed suit.
Issue
Did Paule validly revoke Mendozas SPA? If no, is Paule liable for damages to Mendoza?
Held
Yes || Yes
The evidence shows that EMPCT and Mendoza entered into a partnership concerning the NIA
project. EMPCTs contribution is the contractors license and expertise, while Mendoza would
provide and secure the needed funds for labor, materials and services and in general oversee the
projects effective implementation. EMPCT would receive as its share 3% of the project cost while
the rest of the profits go to Mendoza.
Next, there was no valid reason for Paule to revoke Mendozas SPA. The SPA was necessary for
Mendoza to properly perform her role in the partnership, and to discharge the obligations she had
already contracted prior to revocation. Without the SPA, she couldnt collect from NIA, because as
far as it is concerned, EMPCT and not the partnership is the entity it had contracted with. Without
these payments from NIA, there would be no source of funds to complete the project and to pay off
obligations incurred. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal from the management is unjustifiable.
Paules revocation of the SPA was done in evident bad faith. He knew full well that 97% of the
amount collected from NIA went to Mendoza and used to pay the suppliers and laborers. Yet, he
deliberately revoked Mendozas authority preventing the latter from collecting from NIA and
continuing with the project. From the way he conducted himself, Paule committed a willful and
deliberate breach of his contractual duty to his partner and those with whom the partnership had
contracted. Paule effectively cut off Mendozas source of funds and left the latter to fend for her own.
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