Lets talk about...

EDWARD
MODES OF EXTINGUISHMENT OF
AGENCY

Articles 1919-1932
Article 1919
Agency is extinguished:
(1) By its revocation; BY THE SUBSEQUENT ACTS OF
(2) By the withdrawal of the THE PARTIES
agent;
(3) By the death, civil
interdiction, insanity or
insolvency of the principal or BY OPERATION OF LAW
of the agent
(4) By the dissolution of the
firm or corporation which
entrusted or accepted the
agency
(5) By the accomplishment
of the object or the purpose of
the agency BY AGREEMENT
(6) By the expiration of the
period for which the agency
was constituted
 EDWARD
EXPIRATION DEAT WITHDRAWAL ACCOMPLISHMENTREVOCATIO DISSOLUTION
H N
Presumption of
Continuance of
Agency
Termination of agency even if the period
has yet to expire

Death

civil interdiction

Insanity

insolvency
GENERAL RULE:
Agency is extinguished ipso jure by
the death of either the principal or
the agent

Article
1931

EXCEPTIONS:
Power to foreclose survives
the death of the mortgagor
CIVIL INTERDICTION
shalldeprive the offender during the
time of his sentence of the rights of
parental authority, or guardianship,
either as to the person or property of
any ward, of marital authority, of the
right to manage his property and of
the right to dispose of such property
by any act or any conveyance inter
vivos (RPC Art. 34)
The authority of the agent to act for his
principal generally ceases by operation of
law upon an adjudication of INSOLVENCY.
Dissolution of the firm or the corporation
extinguishes its juridical existence.
The fulfilment of the purpose for which
the agency has been created ipso facto
terminates the agency, EVEN IF
EXPRESSED TO BE SO IRREVOCABLE.
Expiration of the term

Speci
fied
Not
specifi
Impli
ed
ed
OTHER MODES:
By ordinary extinguishment of obligations
War
Legal Impossibility
Termination of agents authority
Occurrence of specified event
Loss or destruction of the
subject matter
 Change of conditions

Exceptions
When original circumstances
are restored at a reasonable
time;
Reasonable acts by the agent;
Principals knowledge of the
change.
Confidential Relationship between
Principal and Agent

Restriction As To The Use Of Knowledge

Acquired From The Agency:

Whenthe knowledge or information

sought to be enjoined is confidential;
and

When its use ought to be prevented to

protect the business of the principal.
Principles to remember in the use of
knowledge acquired from the contract of
agency
An employee is enjoined from use of trade secrets
or processes from a former employer upon entry to
a competing business;
If information be imparted privately, the character
of the secret is immaterial-use of such with a rival
business is contrary to good faith;
Employee is enjoined from pleading title to the
accomplished work as against his employer;
An employee, who learns by reason of his
employment that the premises where his
employers business is conducted are of peculiar
value to his employer has no to take a lease of
those premises .
 Sample cases:

Facts:
Anafe was employed for several years
as manager of Celvers store and was
discharged when the business became
unprofitable. Celver rented the
premises from Rico under a written
lease which expired about two (2) years
before the controversy.
After his discharge, Anafe procured a
lease covering the same premises and
Rico ousted Celver through ejectment
proceedings. The lease was obtained by
 Issue:
Did Anafe procure the lease
through any secret or confidential
information obtained by him in
the course of his employment?

Held:
No. The fact that Celver
had been operating on a
month-to-month tenancy
was generally known. It
was not a secret of the
 FACTS:

Ceddi, was a newspaper reporter who

had by reason of his employment
learned that the premises on which the
paper was published were of peculiar
value to Sarah, his employer, because
the printing press was situated in the
basement upon a foundation of
concrete, embedded in the earth
underneath the building, and could not
be removed from said basement and set
up in some other place in less than two
(2) weeks time and at a very
considerable expense.
 ISSUE:
Is Sarah entitled to an
assignment of the lease?

HELD:
Yes. Ceddi has made use of
information which has come
to him in his employment to
the detriment of Sarah. This is
enough to entitle Sarah to
equitable relief.
 Former employee put up a
competitive business,
soliciting the patronage of
customers of his former
employer, whose names and
addresses were made known
to the former only for the
purpose of the latters
business.
 Article 1920
The principal may revoke
the agency at will, and
compel the agent to return
the document evidencing
the agency. Such
revocation may be express
or implied.
 Liability of principal for damage
caused by revocation.

Where agency constituted for a fixed period

The principal shall be liable for damages
occasioned by the wrongful discharge of the
agent before the expiration of the period fixed.

Where no time fixed for continuance of

agency
The principal is at liberty to terminate it at will
subject only to the requirements of good faith.
 Notice of revocation

As to the agent
Not always necessary so long as the
agent knows of the circumstances
indicating termination of the agency

As to third persons
Actual notice must be brought to the
customers while notice of publication is
sufficient to other persons.
 Agency is also
terminable at will of the
agent through express or
implied
RENUNCIATION.
Effect of Revocation in relation to 3rd Persons
Pacman authorized Andoy to
especially transact the purchase of a
parcel of land belonging to Binoy who
was given a notice of the
authorization given to Andoy. Pending
negotiations, Pacman revoked the
authority of Andoy but Pacman did
not give notice of the revocation to
Binoy.

If the purchase is pushed through,

Pacman is still liable for the price
assuming Binoy acted in good faith
(Central Surety & Insurance Co. vs. C.N.
Hodges) 38 SCRA 159 [1971]

No notice was given to a regular

customer, nor a publication of
revocation of a branch
managers authority to issue
surety bonds was made,
furthermore, subsequent surety
bonds issued by the latter have
been honoured by the principal.
 Article 1923

The appointment of a new agent

for the same business or
transaction revokes the previous
agency from the day on which
notice thereof was given to the
former agent, without prejudice
to the provisions of the two
preceding articles.
 Substitution of counsel of record
There must be a written request for
substitution;
It must be filed with the written consent of
the client;
It must be with the written consent of the
attorney to be substituted; and
In case, the consent of the attorney to be
substituted cannot be obtained, there must
be at least a proof of notice, that the motion
for substitution was served on him in the
manner prescribed by the Rules of Court.
 Article 1924

The agency is revoked if

the principal directly
manages the business
entrusted to the agent,
dealing directly with third
persons
 Article 1925

When two or more

principals have granted a
power of attorney for a
common transaction, any
one of them may revoke
the same without the
consent of the others.
 Article 1926

A general power of
attorney is revoked by a
special one granted to
another agent, as regards
the special matter involved
in the latter.
Carbo appoints Nara as manager of
Carbos business. The authority of Nara
to manage Carbos business includes the
authority to enter into reasonable
contracts of employment of such
personnel as are usual and necessary in
the conduct of the business.

If subsequently, Carbo grants special

power to Zenki to hire personnel for his
business, then as regards this matter of
hiring employees, the general power
granted to Nara is revoked. As to matters
 Property was sold under a
special power of attorney
not giving authority to sell,
executed after a general
power was previously
granted.
 Property was sold
under a general power
of attorney by agent
without notice of a
second general power
of attorney given later
to another.
 ART.
1927

General Rule:

A principal can revoke a contract of

agency at will.
Exception:

1. When the agency is created not only for the

interest of the principal but also for the interest
of When
2. third persons.
the agency is created for the mutual
interest of both the principal and agent.
ART.
1927
3 Instances of Irrevocability:
1. If a bilateral contract depends upon it
2. If it is the means of fulfilling an
obligation already contracted
3. If a partner is appointed manager of a
partnership in the contract of
partnership and his removal from the
management is unjustifiable
 ART.
1927
Examples:

1. P sold to B a factory for P1M. B paid only P 800,000. It was

stipulated that the ownership in the factory would be
transferred to B only after the payment of the balance of
P200,000to be made within 6 months. It was further
agreed that P would appoint A to manage the factory and
that any profits would be used to pay off the balance of
the purchase price.

Q: Can P revoke the agency at will?

A: No, because a bilateral contract depends upon it.

 ART.
1927
2. P borrowed from B P50,000. As security for
the debt, P gives A a power of attorney to
collect rents due from tenants of P and
authorizes A to apply the same to the debt
of P50,000.

Q: Can P revoke the agency at will?

A: No because such agency is a means of

fulfilling his obligation to B.
 ART.
1927

3. A, B and C are partners in business. By common

agreement, A was appointed a manager in the articles of
partnership .

Q: Can the appointment of A be revoked?

A: No, if his removal from the management is unjustifiable.

XPN:
If there is a just and lawful cause and upon the vote of
the partners representing the controlling interest.
 ART.
1927
Termination of Agency:

1. Interest in the subject matter of power conferred

a. Where the agent has parted with value or incurred liability at
the principals request, looking to the exercise of the power as
the means of reimbursement or indemnity

b. Where the interest in the thing concerning which the power is

to be exercised arises from an assignment, pledge or lien
created by the principal with the agent being given the power
to deal with the thing in order to make the assignment,
pledge or lien effectual.
 ART.
1927

2. Sufficiency of interest.
Must be a present interest
An interest in the proceeds of the powers exercise
as compensation is insufficient

NOTE
:

An agents interest in earning his agreed

compensation is an ordinary incident of
agency.
ART.
1927
Terminology used by parties not controlling.
Entire agreement
Facts and circumstances
Revocability of agency coupled with an
interest.
1. No just cause- abridges the right of the principal
to revoke and not his power to revoke
2. With just cause
When the agent betrays the interest of the
principal
Perpetration of acts in bad faith
Breach of confidence
Betrayal of trust
ART.
1927

Nature of Agents interest in power

given as security to him.

1.Revocable by death of principal when

without interest in the subject
matter.
2.Contrary View
ART.
1927
Agency Coupled with an Interest is
not a true agency.

If the principal cannot terminate the

relation , he has surrendered that
degree of control which an agency
requires.

If the power holder holds an interest

for the benefit of the person other
than the creator of the power, he is
 ART.
1928

Right of agent to withdraw

-Based on the constitutional prohibition against involuntary servitud

1. Without just cause

Requirements:
1. due notice to the principal
2. indemnification should the principal suffer
damages for failure of the agent in his obligation
2. With Cause
Impossibility of continuing without grave detriment
to himself
Due to fortuitous event
 ART.
1929

Obligation of agent
To continue to act as an agent until the principal has had
reasonable opportunity to take the necessary steps to remedy
the situation caused by the withdrawal.

WHY?
To prevent damage or prejudice to
the principal.
 ART.
1930

Death of the principal does not terminate

agency
1. If the agency has been constituted in the
common interest of the principal and the
agent
2. It has been constituted in the interest of a
third person who has accepted the
stipulation in his favor.
 ART.
1931

Nature of agents authority after death of

principal
GR: Termination

However, the agent is required to finish the

business already begun on the DEATH of the
principal should DELAY entail any DANGER.

Validity of acts of agent after termination of

agency
 ART.
1932

Duty of agents heirs to protect interest of

principal.

Notify the principal

To give reasonable opportunity to take such
steps as may be necessary to meet the
situation and to adopt such measures as the
circumstances may demand in the interest of
the principal.
 ART.
1932

Continuation by agents heirs of agency.

General Rule: Agency calls for personal

services.
Agents duties cannot be performed by his
personal representatives
Hence, the termination of the contract upon
death
 ART.
1931

Exceptions:
1. Agency by operation of law (Presumed or
Tacit Agency)
2. Agency is coupled with an interest in the
subject matter of the agency
 ART.
1440 TRUS
T
- Fiduciary relationship between one person having an
equitable ownership in property and another owning the
legal title to such property
- The equitable ownership of the former entitling him to the
performance of certain duties and the exercise of
certain powers by the latter for the benefit of the former.

Trust implies confidence in a relationship.

Trust cannot be established in violation of law for it is
founded in equity.
No trust can result from a contract of partnership formed
for an illegal purpose.
 ART.
1440

TRUSTS
Trustor
-A person who establishes a trust
-One in whom confidence is reposed as
regards property for the benefit of another

Trustee
-the person for whose benefit the trust has
been created
-referred to as the beneficiary
 ART.
1440

Trust distinguished from

Bailment:
A delivery of a
Trust- a delivery of property involves a
property necessarily transfer of the
legal title,has
Bailment- bailee
involves a transfer of or at least a of,
the possession
legal title or at least a
Trust
separation of equitable
separation
without of to, the
legal title
propertyinterest
equitable subject to the
and
interest and legal title,
bailment.
legal title , with the
with the legal title in the
trustee. legal title in the
trustee
 ART.
1440

Trust distinguished from

Donation:

Donation- a gift
which is a transfer
Trust- an existing of property and
legal relationship except in the case
involving separation of a gift in trust,
of legal and involves a
equitable title disposition of both
legal and equitable
ownership.
 ART.
1440
Trust distinguished from
Contract:

Trus Contrac
t -A legal
t
-always involves an obligation
ownership embracing a -based on an
set of rights and duties
fiduciary in character
undertaking
supported by a
maybe created by consideration
a declaration which obligation
without a may or may not
consideration be fiduciary in
character
 ART.
1440

Trust distinguished from Debt:

Trust- beneficiary has a beneficial interest
in the trust property
Fiduciary relation between a trustee and
beneficiary
Duty to deal with a specific property for the
benefit of another
Debt- Creditor has merely a personal claim
against the debtor
No fiduciary relation between creditor and debtor
Obligation to pay a certain sum of money
 ART.
1440

Persons Involved:

Trustor (creator/ Trustee Beneficiary

settlor/ grantor) Takes and holds (cestui que trust)
- intentionally creates the legal title to Has the equitable
or establishes the the property in title or interest in the
trust trust solely for the property
-transfers legal benefit of another, Enjoys the benefit of
ownership of with certain the administration of
property to a person powers and the trust by the
for the benefit of a subject to certain trustee
third party, who owns Maybe a natural
the equitable little
duties
person or a legal
entity
 ART.
1440

Trustor as trustee or beneficiary.

Trustor may establish a trust with him as the

trustee or the beneficiary.
However, he cannot be the sole trustee and
the sole beneficiary of a single trust.
In such case, both the legal and equitable
titles to the trust property would be merged in
the trustee and he would hold the property
free of any trust.
 ART.
1440

Trust property.
1. Subject-matter
-may be any property of value (real, personal,
funds or money, or choces in action)
-trust property or trust res
-corpus and principal

2. Trust property
- in existence in which the trustor has a
transferable interest or title although it may, as a
rule, be any kind of transferable property either
realty or personal including undivided, future or
contingent interest therein
 ART.
1440
Nature of Ownership of Trustee and
Beneficiary

1. Ownership by two persons at the same time.

-trust property owned by two persons at the
same time
TRUSTEE
- has a legal title under obligation to use his
ownership for the benefit of the other
-his ownership is TRUST- OWNERSHIP
BENEFICIARY
-his ownership is beneficial ownership
 ART.
1440

Nature of Ownership of Trustee and

Beneficiary

2. Ownership of trustee, a mere matter of form

and nominal.
-Trustee is a destitute of any right of
enjoyment of the trust property.
- His ownership is a matter of form rather
than of substance, and nominal rather than
real
 ART.
1440

Nature of Ownership of Trustee and

Beneficiary

3. Trustee, not mere agent.

- a person to whom the property of someone
else if fictitiously attributed by the law, to
the extent that the rights and powers thus
vested in a nominal owner shall be used by
him on behalf of the real owner.
 ART.
1440
Nature of Ownership of Trustee and
Beneficiary

4. Transfer of Equitable Title.

- beneficiary can transfer only the interests
he holds the equitable title.
 ART.
1440

Nature of Ownership of Trustee and

Beneficiary

5. Rights of beneficiary.
- the beneficiary may receive the income from
the assets of the trust, the assets themselves,
or both.
 ART.
1440

Character of office of Trustee.

1. As principal.
-he acts for himself in the administration of the
trust estate, although subject to the terms of
the trust and the law of trusts.
2. As agent.
-a trustee is a general agent for the trust
property and that his acts within the scope of
his authority bind the trust estate to the same
extent as the acts of an gent bind his principal.
 ART.
1440

Character of office of Trustee.

3. As fiduciary.
-the duties of a trustee are usually governed
by the intention of the trustor or of the
parties, if established by a contract.
 ART.
1440

Necessity of existence of beneficiary.

It is not necessary
The trustor can that the cestui que
simply specify as trust be named or
the beneficiaries a identified or even be
class of persons who in existence at the
are readily time of its creation
identifiable. in regard to
charitable trust.

A devise of a land to afather in trust for his children lawfully

begotten at the time of his death is valid although the father
had no children at the time of the creation of the trust.
 ART.
1441 CLASSIFICATION OF TRUSTS

Creation

Express trust- execution of an intention to create it by

trustor or the parties Resulting trust- Constructive
implied or
Implied trust- by operation of law trust- imposed
presumed in law by law

Effectivity

Testamentary trust- takes effect upon trustors death

Trust inter vivos- established effective during the
owners life.
Revocability

Revocable trust- can be cancelled by the trustor or

another individual given the power
Irrevocable trust- may not be terminated during the
specified term of the trust
ART.
1441
Elements of Express Trust

A competent trustor
and trustee;
An ascertainable
trust res;
Sufficiently certain
beneficiary
 ART.
1442

The principles of the general law of trusts,

insofar as they are not in conflict with this
Code, the code of commerce, the Rules of
Court and special laws are hereby adopted.
 ART.
1442

Termination of express trust.

1. Expiration of period.
2. Accomplishment of purpose.
3. Mutual agreement of beneficiaries.
4. Exercise of power to terminate.