ATENEO DE MANILA LAW SCHOOL

OUTLINE ON AGENCY, TRUSTS, VILLANUEVA PARTNERSHIPS AND JOINT VENTURES1

JOSE COCHINGYAN III
First Semester, SY 2 !2"!#

ATTY.

CESAR L. ATTY.

A.

LAW ON AGENCY

I. NATURE AND O$JECT OF AGENCY

!. De%i&iti'& (Art. !)*)+, P-rties i& -& A.e&/0 Re1-ti'&s2i3 Under Article 1868 of the Civil Code, a contract of agency as one whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. ! "he #panish term for principal is mandante . Among the terms used for agent are mandatario , attorney$in$fact , pro%y , delegate or representative. 2. R''t -&4 O56e/ti7es '% A.e&/0 (Arts. !#!8 -&4 !9 #:!;+
"he right of inspection given to a stoc&holder under the law can be e%ercised either by himself or by any proper representative or attorney$in$fact, and either with or without the attendance of the stoc&holder. "his is in conformity with the general rule that what a man may do in person he may do through another. Philpotts v. Phil. Mfg. Co., '( )hil '*1 +1,1,-. "he purpose of every contract of agency is the ability, by legal fiction, to e%tend the personality of the principal through the facility of the agent. but the same can only be effected with the consent of the principal. Orient Air Service & Hotel Representatives v. Court of Appeals , 1,* #C/A 6'0 +1,,1-.

#. E1eme&ts '% t2e C'&tr-/t '% A.e&/0

Rallos v. Felix Go Chan & Sons Realty Corp. , )! SCRA 2<! (!=8)+> "he following are the essential elements of the contract of agency1 +a- Consent, e%press or implied, of the parties to establish the relationship. +b- Object, is the e%ecution of a 2uridical act in relation to third parties. +c- "he agent acts as a representative and not for himself. and +d- "he agent acts within the scope of his authority. 3 4hether or not an agency has been created is determined by the fact that one is representing and acting for another. "he law ma&es no presumption of agency. proving its e%istence, nature and e%tent is incumbent upon the person alleging it. Urban Bank, Inc. v. e!a, G.R. N'. !9<)!8, != O/t'5er 2 !!.

-. C'&se&t (Arts. !#!8 -&4 !9 #:!;+

"he basis for agency is representation. 5n the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions. and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. ominion !nsurance Corp. v. Court of Appeals , 3*6 #C/A !3, +!((!-. "oa#$asters C%sto$s Services, Inc. v. Glo#el Brokera&e Corp. , *#= SCRA *= (2 !!+.

5. O56e/t 'r S?56e/t M-tter> 'xec%tion o( )%ri#ical *cts in Behal( o( rincipal (Ser7i/e+
6n an agent$principal relationship, the personality of the principal is e%tended through the facility of the agent. 6n so doing, the agent, by legal fiction, becomes the principal, authori7ed to perform all acts which the latter would have him do. #uch a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-.

Unless otherwise indicated, all references to articles pertain to the 8ew Civil Code of the )hilippines. See Chemphil &'port v. Court of Appeals , !01 #C/A !1* +1,,0-. ominion !nsurance Corp. v. Court of Appeals , 3*6 #C/A !3, +!((!-. Repu(lic v. &vangelista, '66 #C/A 0'' +!((0-. "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-. &urotech !ndustrial )echnologies$ !nc. v. Cui*on$ 0!1 #C/A 08' +!((*-. 3 Reiterated in +u &ng Cho v. Pan American ,orld Airways$ !nc. , 3!8 #C/A *1* +!(((-. Manila Memorial Par- Cemetery$ !nc. v. "insangan, ''3 #C/A 3** +!(('-. &urotech !ndustrial )echnologies$ !nc. v. Cui*on, 0!1 #C/A 08' +!((*-.
2

/. C'&si4er-ti'&> A.e&/0 Pres?me4 t' $e %'r C'm3e&s-ti'&, U&1ess T2ere Is Pr''% t' t2e C'&tr-r0 (Art. !)8<+
Old Civil Code Rule. "he service rendered by the agent was deemed to be gratuitous, apart from the occupation of some of the house of the deceased by the plaintiff and his family. . . . for if it were true that the agent and the deceased principal had an understanding to the effect that the agent was to receive compensation aside from the use and occupation of the houses of the deceased, it cannot be e%plained how the agent could have rendered services as he did for eight years without receiving and claiming any compensation from the deceased. 'Agu/a v. "arena, 0* )hil 63( +1,3!)rescinding from the principle that the terms of the contract of agency constituted the law between the principal and the agent, then the mere fact that other agents intervened in the consummation of the sale and were paid their respective commissions could not vary the terms of the contract of agency with the plaintiff of a 09 commission based on the selling price. e Castro v. Court of Appeals$ 38' #C/A 6(* +!((!-. Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an agent does so with the e%pectation of payment according to the agreement and to the services rendered or results effected: 4hen an agent performs services for a principal at the latter;s re<uest, the law will normally imply a promise on the part of the principal to pay for the reasonable worth of those services. "he intent of a principal to compensate the agent for services performed on behalf of the former will be inferred from the principal;s re<uest for the agents. 0r(an 1an-$ !nc. v. Pe/a =>./. 8o. 1'081*, 1, 5ctober 1,, !(11.

9. Esse&ti-1 C2-r-/teristi/s '% A.e&/0 -. N'mi&-te -&4 Pri&/i3-1

6f an act done by one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called ? it will be an agency whether the parties understood the e%act nature of the relation or not. oles v. Angeles$ ',! #C/A 6(* +!((6-. @ven when it is provided under the Agreement that the agency manager is considered an independent contractor and not an agent, nonetheless when the terms thereof authori7ed the agency manager to solicit and remit offers to purchase interments spaces, it covers an agency arrangement since the agency manager represented the interest of the memorial company, and the latter in turn had authori7ed her to represent in dealings with its clientsAprospective buyers. Manila Memorial ParCemetery$ !nc. v. "insangan, ''3 #C/A 3** +!(('-.

5. U&i1-ter-1' -&4 Prim-ri10 O&er'?s /. C'&se&s?-1 (Arts. !)*= -&4 !)8 +

An agency may be e%pressed or implied from the act of the principal, from his silence or lac& of action, or failure to repudiate the agency. "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-. "he basis for agency is representation. Bere, there is no showing that Crigida consented to the acts of Deganos or authori7ed him to act on her behalf, much less with respect to the particular transactions involved. )etitioners; attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill$advised. Cesides, it was grossly and ine%cusably negligent of petitioners to entrust to Deganos, not once or twice but on at least si% occasions as evidenced by si% receipts, several pieces of 2ewelry of substantial value without re<uiring a written authori7ation from his alleged principal. A person dealing with an agent is put upon in<uiry and must discover upon his peril the authority of the agent. Bor#a#or v. "%+, 2)# SCRA #89 (!==8+. A co$owner does not become an agent of the other co$owners, and therefore, any e%ercise of an option to buy a piece of land transacted with one co$owner does not bind the other co$owners of the land. "he basis for agency is representation and a person dealing with an agent is put upon in<uiry and must discover upon his peril the authority of the agent. #ince there was no showing that the other co$owners consented to the act of one co$owner nor authori7ed her to act on their behalf with regard to her transaction with purported buyer. "he most prudent thing the purported buyer should have done was to ascertain the e%tent of the authority said co$owner. being negligent in this regard, the purported buyer cannot see& relief on the basis of a supposed agency. i*on v. Court of Appeals , 3(! #C/A !88 +1,,,-.

4. Pre3-r-t'r0 -&4 Re3rese&t-ti7e

Agency is basically personal, representative, and derivative in nature. "he authority of the agent to act emanates from the powers granted to him by his principal. his act is the act of the principal if done
4 A unilateral contract has been defined as 2A contract in which one party ma-es a promise or underta-es a performance.3 "hus, it was observed that 24M5any unilateral contacts are in reality gratuitous promises enforced for good reason with no element of (argain.3 =CEACFG# EA4 D6C"658A/H 3!6 +1,,(-I 6t is perhaps in this sense that agency is unilateral because it is the agent who underta&es the performance of the agency. Bowever, one must not forget that agency is still a contract with a bilateral character. Janresa e%plains1 2As regards whether the agency has a unilateral or (ilateral character$ it is evident$ in our considered opinion$ from the point of view of the Code$ that the totality of cases involving agency will always (e (ilateral$ not (ecause$ as one ordinarily supposes$ there will (e o(ligations e'clusively for the agent and rights e'clusively for the principal. !t is clear that at times it happens this way$ (ut what is common in agency with other contracts is the mutuality and the reciprocity that arises from the e'istence of an o(ligation against another o(ligation$ a right against another right.3 11 JA8/@#A. C5J@8"A/65# AE C5D6>5 C6K6E @#)AL5E ''3 +1,0(-

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within the scope of the authority. 6ui facit per alium facit per se . Be who acts through another acts himself. Rallos v. Felix Go Chan & Sons Realty Corp. , )! SCRA 2<! (!=8)+. "he essence of agency being the representation of another, it is evident that the obligations contracted are for and on behalf of the principalOa conse<uence of this representation is the liability of the principal for the acts of his agent performed within the limits of his authority that is e<uivalent to the performance by the principal himself who should answer therefor. )an v. &ngineering Services$ ',8 #C/A ,3 +!((6-. "he other conse<uence of the doctrine of representation are1 4hen an agent purchases the property in bad faith, the principal should also be deemed a purchaser in bad faith. Caram$ %r. v. "aureta, 1(3 #C/A * +1,81-. 8otice to the agent is notice to the principal. Air 7rance v. Court of Appeals, 1!6 #C/A ''8 +1,83-. "he basis for agency is representation and a person dealing with an agent is put upon in<uiry and must discover upon his peril the authority of the agent. Safic Alcan & Cie v. !mperial 8egeta(le Oil Co.$ !nc., 300 #C/A 00, +!((1-. 6t is clear from Article 1868 that the basis of agency is representation. 5n the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions. and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. 5ne factor which most clearly distinguishes agency from other legal concepts is control. one person $ the agent $ agrees to act under the control or direction of another $ the principal. 6ndeed, the very word PagencyP has come to connote control by the principal. ,ictorias -illin& Co. v. Co%rt *ppeals, ### SCRA **# (2 + .0 6n a situation where two agents enter into a contract of behalf of their principals, even if the principals do not actually and personally &now each other, such ignorance does not affect their 2uridical standing as agents, especially since the very purpose of agency is to e%tent the personality of the principal through the facility of the agent. oles v. Angeles$ ',! #C/A 6(* +!((6-.

(i+

rinciples Flo.in& (ro$ *&ency Characteristics o( / reparatory an# Representative0 (Art. !)=8+
6t is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally e%ecuted by the principal. Cy this legal fiction, the actual or real absence of the principal is converted into his legal or 2uridical presence ? 9ui facit per alium facit per se. '%rotech In#%strial 1echnolo&ies, Inc. v. C%i+on, <2! SCRA <)9 (2 8+ Article 18,* reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. "he same provision, however, presents two instances when an agent becomes personally liable to a third person. "he first is when he e%pressly binds himself to the obligation and the second is when he e%ceeds his authority. 6n the last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. '%rotech In#%strial 1echnolo&ies, Inc. v. C%i+on, <2! SCRA <)9 (2 8+. 8otice to the agent should always be construed as notice binding on the principal, even when in fact the principal never became aware thereof. Air 7rance v. Court of Appeals , 1!6 #C/A ''8 +1,83-.

e. Pers'&-1, Fi4?/i-r0 -&4 Re7'/-51e

"he relations of an agent to his principal are fiduciary and in regard to the property forming the sub2ect matter of the agency, he is estopped from ac<uiring or asserting a title adverse to that of the principal. Severino v. Severino, '' )hil. 3'3 +1,!3-. Cy reason of the personal$ representative and derivative nature of agency, agency is e%tinguished by the death of the principal or agent. Rallos v. 7eli' :o Chan & Sons Realty Corp. , 81 #C/A !01 +1,*8-. A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by the principal on his agent. As the power of the agent to act depends on the will and license of the principal he represents, the power of the agent ceases when the will or permission is withdrawn by the principal. )hus$ generally$ the agency may (e revo-ed (y the principal at will. Repu(lic v. &vangelista, '66 #C/A 0'' +!((0-. 6n an agency, the principalGs personality is e%tended through the facility of the agentOthe agent, by legal fiction, becomes the principal, authori7ed to perform all acts which the latter would have him do. #uch a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. "he Agreement itself between the parties states that either party may terminate the Agreement without cause by giving the other 3( daysG notice by letter, telegram or cable. Orient *ir Services v. Co%rt o( *ppeals, !=8 SCRA *9< (!==!+.6

<. Disti&.?is2e4 %r'm Ot2er Simi1-r C'&tr-/ts>

5 6

Amon )rading Corp. v. Court of Appeals$ '** #C/A 00! +!((0-. "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-.

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-. Fr'm Em31'0me&t C'&tr-/t

"he relationship between the corporation which owns and operates a theatre, and the individual it hires as a security guard to maintain the peace and order at the entrance of the theatre is not that of principal and agent, because the principle of representation was in no way involved. "he security guard was not employed to represent the defendant corporation in its dealings with third parties. he was a mere employee hired to perform a certain specific duty or tas&, that of acting as special guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the premises. ela Cru* v. ;orthern )heatrical &nterprises, ,0 )hil *3, +1,0'-. Cut to set the record straight, the concept of a single person having the dual role of agent and employee while doing the same tas& is a novel one in our 2urisprudence, which must be viewed with caution especially when it is 4e7'i4 '% -&0 6?ris3r?4e&ti-1 s?33'rt 'r 3re/e4e&t . All these, read without any clear understanding of fine legal distinctions, appear to spea& of control by the insurance company over its agents. "hey are, however, controls aimed only at specific results in underta&ing an insurance agency, and are, in fact, parameters set by law in defining an insurance agency and the attendant duties and responsibilities an insurance agent must observe and underta&e. "hey do not reach the level of control into the means and manner of doing an assigned tas& that invariably characteri7es an employment relationship as defined by labor law. 1on&ko v. 1he -an%(act%rers "i(e Ins%rance Co. 2 hils.3, Inc. , *9 SCRA #=< (2 !!+.

5. Fr'm C'&tr-/t %'r - Pie/e"'%"W'r@

"a&ing into consideration the facts that the operator owed his position to the company and the latter could remove him or terminate his services at will. that the service station belonged to the company and bore its tradename and the operator sold only the products of the company. that the e<uipment used by the operator belonged to the company and were 2ust loaned to the operator and the company too& charge of their repair and maintenance. that an employee of the company supervised the operator and conducted periodic inspection of the company;s gasoline and service station. that the price of the products sold by the operator was fi%ed by the company and not by the operator. and that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the company and not an independent contractor should not be disturbed. Shell v. 7iremen<s !ns. Co., 1(( )hil *0* +1,0*-.

/. Fr'm $r'@er
"he <uestion as to what constitutes a sale so as to entitle a real estate bro&er to his commissions is e%tensively annotated in the case of "unney vs. Healey +8ebras&a- . . . '' Eaw /ep. Ann. 0,3 :, and the long line of authorities there cited support the following rule1 Q "he business of a real estate bro&er or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in the absence of an e%press contract between bro&er and his principal, the implication generally is that the bro&er becomes entitled to the usual commissions whenever he brings to his principal a party who is able and willing to ta&e the property and enter into a valid contract upon the terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. Macondray & Co. v. Sellner, 33 )hil. 3*( +1,16-. "he duties and liability of a bro&er to his employer are essentially those which an agent owes to his principal. Conse<uently, the decisive legal provisions on determining whether a bro&er is mandated to give to the employer the propina or gift received from the buyer would be Articles 18,1 and 1,(, of the Civil Code. +Het the facts did indicate clearly that the real estate bro&er was appointed as an e%clusive agent.- 4o$in&o v. 4o$in&o, 92 SCRA !#! (!=8!+. 4here the purported agent was orally given authority to follow up the purchase of the fire truc& with the municipal government, there is no authority to sell nor has the purported agent been empowered to ma&e a sale for and in behalf of the seller. :uarde' v. ;"RC, 1,1 #C/A '8* +1,,(-. 4hen the terms of the agency arrangement is to the effect that entitlement to the commission was contingent on the purchase by a customer of a fire truc&, the implicit condition being that the agent would earn the commission if he was instrumental in bringing the sale about. #ince the agent had nothing to do with the sale of the fire truc&, and is not therefore entitled to any commission at all. :uarde' v. ;"RC, 1,1 #C/A '8* +1,,(-. A (ro-er is one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern. the negotiator between the other parties, never acting in his own name but in the name of those who employed him. Bis occupation is to (ring the parties together , in matter of trade, commerce or navigation. Sch$i# an# Oberly, Inc. v. R)" -artine+, !** SCRA 9=# (!=))+. An agent receives a commission upon the successful conclusion of a sale. 5n the other hand, a (ro-er earns his pay merely (y (ringing the (uyer and the seller together, even if no sale is eventually made. 1an v. G%llas, #=# SCRA ##9 (2 2+. 6n relation thereto, we have held that the term procuring cause in describing a bro&erGs activity, refers to a cause originating a series of events which, without brea& in their continuity, result in the accomplishment of the prime ob2ective of the employment of the bro&erOproducing a purchaser ready, willing and able to buy on the ownerGs terms. "o be regarded as the procuring cause of a sale as to be entitled to a commission, a bro&erGs efforts must have been the foundation on which the negotiations resulting in a sale began. -e#rano v. Co%rt o( *ppeals, 9<2 SCRA 88 (2 <+.*
*

Reiterated in Phil. Health=care Providers >Ma'icare? v. &strada, 0'! #C/A 616 +!((8-.

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A real estate bro&er is one who negotiates the sale of real properties. Bis business, generally spea&ing, is only to find a purchaser who is willing to buy the land upon terms fi%ed by the owner. Be has no authority to bind the principal by signing a contract of sale. 6ndeed, an authority to find a purchaser of real property does not include an authority to sell. "itonj%a, )r. v. 'ternit Corp., 9= SCRA 2 9 (2 *+. #ince bro&erage relationship is necessary a contract for the employment of an agent, principles of contract law also govern the bro&er$principal relationship. 'A(acus Securities Corp. v. Ampil$ '83 #C/A 310 +!((6-. Contrary to the appellate court;s conclusion, this arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. 5n the other hand, a bro&er earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. +O(iter @ the issue was whether it was an independent distri(utor of 1M, cars in the Philippines 'Hahn v. Court of Appeals, !66 #C/A 03* +1,,*-.

4. Fr'm S-1e
4hen the terms of the agreement compels the purported agent to pay for the products received from the purported principal within the stipulated period, even when there has been no sale thereof to the public, the underlying relationship is not one of contract of agency to sell, but one of actual sale. A real agent does not assume personal responsibility for the payment of the price of the ob2ect of the agency. his obligation is merely to turn$over to the principal the proceeds of the sale once he receives them from the buyer. Conse<uently, since the underlying agreement is not an agency agreement, it cannot be revo&ed e%cept for cause. 6uiroga v. Parsons, 38 )hil 0(! +1,18-. 4hen under the agreement the purported agent becomes responsible for any changes in the ac<uisition cost of the ob2ect he has been authori7ed to purchase from a supplier in the United #tates, the underlying agreement is not an contract of agency to buy, since a true agent does not bear any ris& relating to the sub2ect matter or the price. Ceing a contract of sale and not agency, any profits reali7ed by the purported agent from discounts received from the American supplier pertained to it with no obligation to account for it, much less to turn it over, to the purported principal. :on*alo Puyat v. Arco, *! )hil. '(! +1,'1-. "he distinctions between a sale and an agency are not difficult to discern and this Court, as early as 1,*(, had already formulated the guidelines that would aid in differentiating the two +!- contracts. : that the primordial differentiating consideration between the two +!- contracts is the transfer of ownership or title over the property sub2ect of the contract. 6n an agency, the principal retains ownership and control over the property and the agent merely acts on the principal;s behalf and under his instructions in furtherance of the ob2ectives for which the agency was established. 5n the other hand, the contract is clearly a sale if the parties intended that the delivery of the property will effect a relin<uishment of title, control and ownership in such a way that the recipient may do with the property as he pleases. Spouses 8iloria v. Continental Airlines$ !nc. , >./. 8o. 188!88. 16 Nanuary !(1!.

II. FORMS AND AINDS OF AGENCY

!. H'B A.e&/0 M-0 $e C'&stit?te4 (Art. !)*=+
"here are some provisions of law which re<uire certain formalities for particular contracts1 the first is when the form is re<uired for the validity of the contract. the second is when it is re<uired to ma&e the contract effective as against third parties. and the third is when the form is re<uired for the purpose of proving the e%istence of the contract. A contract of agency to sell on commission basis does not belong to any of these three categories, hence it is valid and enforceable in whatever form in may be entered into. Conse<uently, when the agent signs her signature on any face of the receipt showing that she receives the 2ewelry for her to sell on commission, she is bound to the obligations of an agent. "he e%act position of the agentGs signature in the receipt +in this case near the description of the goods and not on top of her printed name- is immaterial. "im v. Court of Appeals, !0' #C/A 1*( +1,,6-.

-. Fr'm Si4e '% t2e Pri&/i3-1 (Art. !)*=+

4hen the buyers$a=retro failed for several years to clear their title to the property purchased and allowed the seller$a=retro to remain in possession in spite of the e%piration of the period of redemption, then the e%ecution of the memorandum of repurchase by the buyersG son$in$law, which stood unrepudiated for many years, constituted an implied agency under Article 186, of the Civil Code, from their silence or lac& of action, or their failure to repudiate the agency. Conde v. Court of Appeals, 11, #C/A !'0 +1,8!-. 4here the principal has ac<uiesced in the act of his agent for a long period of time, and has received and appropriated to his own use the benefits result in from the acts of his agent, courts should be slow in declaring the acts of the agent null and void. "inan v. Puno, 31 )hil. !0, +1,10-.

5. Fr'm Si4e '% t2e A.e&t (Arts. !)8 , !)8! -&4 !)82+
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/. Fr'm Si4e '% T2ir4 P-rtiesCP?51i/ (Arts. !)8# -&4 !9 ), !=2! -&4 !=22+
A long$standing client, acting in good faith and without &nowledge, having sent goods to sell on commission to the former agent of the defendant, can recover of the defendant, when no previous notice of the termination of agency was given said client. Baving advertised the fact that Collantes was his agent and having given special notice to the plaintiff of that fact, and having given them a special invitation to deal with such agent, it was the duty of the defendant on the termination of the relationship of principal and agent to give due and timely notice thereof to the plaintiffs. Railing to do so, he is responsible to them for whatever goods may have been in good faith and without negligence sent to the agent without &nowledge, actual or constructive, of the termination of such relationship. Rallos v. 5an&co, 2 P2i1 2*= (!=!!+ 4hen the owner of a hotelAcafS business allows a person to use the title managing agent and during his prolonged absences allows such person to ta&e charge of the business, performing the duties usually entrusted to managing agent, then such owner is bound by the act of such person. 5ne who clothes another apparent authority as his agent, and holds him out to the public as such, can not be permitted to deny the authority of such person to act as his agent, to the pre2udice of innocent third parties dealing with such person in good faith and in the following pre$assumptions or deductions, which the law e%pressly directs to be made from particular facts, are deemed conclusive. "he hotel owner is bound by the contracts entered into by said managing agent that are within the scope of authority pertinent to such position, including the purchasing such reasonable <uantities of supplies as might from time to time be necessary in carrying on the business of hotel bar. Mac-e v. Camps, * )hil 0!! +1,(*-. 4hen the law firm has allowed for <uite a period the messenger of another office to receive mails and correspondence on their behalf, an implied agency had been duly constituted, specially when there is no showing that counsel had ob2ected to such practice or too& step to put a stop to it. &9uita(le PC!=1an- v. Au, 300 #C/A 3(, +!((1-.

2. Ai&4s '% A.e&/0 -. $-se4 '& $?si&ess 'r Tr-&s-/ti'&s E&/'m3-sse4 (Art. !)8*+ (!+ Ge&er-1 'r U&i7ers-1 A.e&/0
An agent may be +1- universal. +!- general, or +3- special. A %niversal a&ent is one authori7ed to do all acts for his principal which can lawfully be delegated to an agent. #o far as such a condition is possible, such an agent may be said to have universal authority. A &eneral a&ent is one authori7ed to do all acts pertaining to a business of a certain &ind or at a particular place, or all acts pertaining to a business of a particular class or series. Be has usually authority either e%pressly conferred in general terms or in effect made general by the usages, customs or nature of the business which he is authori7ed to transact. An agent, therefore, who is empowered to transact all the business of his principal of a particular &ind or in a particular place, would for this reason, be ordinarily deemed a general agent. A special a&ent is one authori7ed to do some particular act or to act upon some particular occasion. Be acts usually in accordance with specific instructions or under limitations necessarily implied from the nature of the act to be done. Siasat v. !AC, 13, #C/A !38 +1,80-.

(2+ S3e/i-1 'r P-rti/?1-r A.e&/0

"he right of an agent to indorse commercial paper +chec&s- is a very responsible power and will not be lightly inferred. A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse chec&s received in payment. Any person ta&ing chec&s made payable to a corporation which can act only by agents does so at his peril, and must abide by the conse<uence if the agent who indorses the same is without authority. !nsular rug v. P;1, 08 )hil. 68' +1,33-.

5. W2et2er It C'7ers Le.-1 M-tters (!+ Att'r&e0"-t"L-B

5nly the employee, not his counsel, can impugn the consideration of the compromise as being unconscionable. "he relation of attorney and client is in many respects one of agency, and the general rules of agency apply to such relationOthe circumstances of this case indicate that the employeeGs counsel acted beyond the scope of his authority in <uestioning the compromise agreement. "hat a client has undoubtedly the right to compromise a suit without the intervention of his lawyer cannot be gainsaid, the only <ualification being that if such compromise is entered into with the intent of defrauding the lawyer of the fees 2ustly due him, the compromise must be sub2ect to the said fees. %=Phil Marine$ !nc. v. ;"RC, 061 #C/A 6*0 +!((8-. An attorney cannot, without a clientGs authori7ation, settle the action or sub2ect matter of the litigation even when he believes that such a settlement will best serve his clientGs interest. Philippine Aluminum ,heels$ !nc. v. 7AS:! &nterprises$ !nc. , 3'! #C/A *!! +!(((-.

(2+ Att'r&e0"i&"F-/t
"he relationship of attorney and client is in many respects one of agency, and the general rules of agency apply to such relation. "he acts of an agent are deemed the acts of the principal only if the agent acts within the scope of his authority. "hus, when the lawyer files an opposition to A")MNK 5utline Page 6 of 66

the compromise agreement that has been validly entered into by his client, he is acting beyond the scope of his authority. )%=Phil. Marine$ !nc. v. ;"RC$ 061 #C/A 6*0 +!((8?.

/. W2et2er It C'7ers A/ts '% A4mi&istr-ti'& 'r A/ts '% D'mi&i'&> D o.ers o( *ttorneyE (!+ F'rm '% P'Bers '% Att'r&e0
6n a case involving authority to act in baranggay conciliation cases covering an e2ectment for failure to pay rentals1 A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts or &inds of acts on behalf of the principal. "he written authori7ation itself is the power of attorney, and this is clearly indicated by the fact that it has also been called a letter of attorney. ,ee v. e Castro, 06! #C/A 6,0, *1! +!((8-. "he Eetter dated Nanuary 16, 1,,6 relied upon by the petitioners was signed by respondent Rernande7 alone, without any authority from the respondents$owners. "here is no actuation of respondent Rernande7 in connection with her dealings with the petitioners. As such, said letter is not binding on the respondents as owners of the sub2ect properties. "itonj%a v. Fernan#e+, 928 SCRA 98) (2 9+.

(2+ Ge&er-1 P'Ber '% Att'r&e0 (Art. !)88+

A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon his the authority to perform certain acts or &inds of acts on behalf of the principal. ,ee v. e Castro, 06! #C/A 6,0 +!((8-. 8onetheless, we stress that the power of administration does not include acts of disposition or encumbrance, which are acts of strict ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be e%ercised by an agent by following the provisions on agency of the Civil Code +from Article 18*6 to Article 18*8-. *&&abao v. ar%lan )r., *2= SCRA <*2 (2 ! +.

(#+ S3e/i-1 P'Ber '% Att'r&e0

@ven if a document is designated as a general power of attorney, the re<uirement of a special power of attorney is met if there is a clear mandate from the principal specifically authori7ing the performance of the act. &state of "ino Ola9uer v. Ong#oco, 063 #C/A 3*3 +!((8-. 6t is a general rule that a power of attorney must be strictly construed. the instrument will be held to grant only those powers that are specified, and the agent may neither go beyond nor deviate from the power of attorney. Olaguer v. Purugganan$ %r., 010 #C/A '6( +!((*-. Although a #pecial )ower of Attorney was issued by the insurance company to its agency manager, it wordings show that it sought only to establish an agency that comprises all the business of the principal within the designated locality, but couched in general terms, and conse<uently was limited only to acts of administration. A general power permits the agent to do all acts for which the law does not re<uire a special power. "hus, the acts enumerated in or similar to those enumerated in the #pecial )ower of Attorney + i.e., really a general power of attorneydid not re<uire a special power of attorney, and could only cover acts of administration. 4o$inion Ins%rance Corp. v. Co%rt o( *ppeals, #8* SCRA 2#= (2 2+. @ven when the title given to a deed is as a >eneral )ower of Attorney, but its operative clause contains an authority to sell, it constituted the re<uisite special power of attorney to sell a piece of land. "hus, there was no need to e%ecute a separate and special power of attorney since the general power of attorney had e%pressly authori7ed the agent or attorney in fact the power to sell the sub2ect property. "he special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is re<uired. ,eloso v. Co%rt o( *ppeals, 2* SCRA <=# (!==*+. 4hen an agent has been given general control and management of the business, he is deemed to have power to employ such agents and employees as are usual and necessary in the conduct of the business, and needs no special power of attorney for such purpose. +u Chuc- v. 2Aong "i Po, '6 )hil. 6(8 +1,!'-. An attorney$in$fact empowered to pay the debts of the principal and to employ legal counsel to defend the principalGs interest, has certainly the implied power to pay on behalf of the principal the attorneyGs fees charged by the lawyer. Municipal Council of !loilo v. &vangelista , 00 )hil. !,( +1,3(-. A co$owner who is made an attorney$in$fact, with the same power and authority to deal with the property which the principal might or could have had if personally present, may adopt the usual legal means to accomplish the ob2ect, including acceptance of service and engaging of legal counsel to preserve the ownership and possession of the principalGs property. :overnment of P! v. ,agner, 0' )hil. 13! +1,!,-. Contracts of agency, as well as a general power of attorney, must be interpreted in accordance with the language used by the parties. "he real intention of the parties is primarily to be determined from the language used. "he intention is to be gathered from the whole instrument. 6n case of doubt, resort must be had to the situation, surroundings, and relations of the parties. 4henever it is possible, effect is to be given to every word or clause used by the parties. 6t is to be presumed that the parties said what they intended to say and that they used each word or clause A")MNK 5utline Page 7 of 66

with sole purpose, and that purpose is, if possible, to be ascertained and enforced. 6f the contract be open to two constructions, one of which would while the other would overthrow it, the former is to be chosen. 6f by one construction the contract would be illegal, and by another e<ually permissible construction would be lawful, the latter must be adopted. "he acts of the parties will be presumed to be done in conformity with and not contrary to the intent of the contract. "he meaning of general words must be construed with reference to the specific ob2ect to be accomplished and limited by the recitals made in reference to such ob2ect. "inan v. Puno, 31 )hil. !0, +1,10-.

(9+ EF3ress P'Ber '% Att'r&e0 EF/1?4es P'Bers '% A4mi&istr-ti'& ( e.&., Ge&er-1 P'Ber '% Att'r&e0+
"he instrument which grants to the agent the power "o follow$up, as&, demand, collect and receipt for my benefit indemnities or sum due me relative to the sin&ing of J.K. 8@J5# in the vicinity of @l Nadida, Casablanca, Jorocco on the evening of Rebruary 1*, 1,86, is a special power of attorney, e%cludes any intent to grant a general power of attorney or to constitute a universal agency. Ceing special powers of attorney, they must be strictly construed. "he instrument cannot be read to give power to the attorney$in$fact to obtain, receive, receipt from the insurance company the proceeds arising from the death of the seaman$insured, especially when the commercial practice for group insurance of this nature is that it is the employer$ policyholder who too& out the policy who is empowered to collect the proceeds on behalf of the covered insured or their beneficiaries. ine#a v. Co%rt o( *ppeals, 22* SCRA 8<9 (!==#+.

4. C-ses W2ere S3e/i-1 P'Bers '% Att'r&e0 Are Ne/ess-r0 (Art. !)8)+ (!+ T' M-@e P-0me&ts D*s *re 6ot Us%ally Consi#ere# as *cts o( *#$inistrationE
6n the case of the area manager of an insurance company, it was held that the payment of claims is not an act of administration, and that since the settlement of claims was not included among the acts enumerated in the #pecial )ower of Attorney issued by the insurance company, nor is of a character similar to the acts enumerated therein, then a special power of attorney was re<uired before such area manager could settle the insurance claims of the insured. Conse<uently, the amounts paid by the area manager to settle such claims cannot be reimbursed from the principal insurance company. 4o$inion Ins%rance Corp. v. Co%rt o( *ppeals , #8* SCRA 2#= (2 2+.

(2+ T' E%%e/t N'7-ti'&s W2i/2 P?t -& E&4 t' O51i.-ti'&s A1re-40 i& EFiste&/e -t t2e Time t2e A.e&/0 W-s C'&stit?te4 (#+ T' C'm3r'mise, T' S?5mit G?esti'&s t' Ar5itr-ti'&, T' Re&'?&/e t2e Ri.2t t' A33e-1 %r'm - J?4.me&t, T' W-i7e O56e/ti'&s t' t2e Ve&?e '% -& A/ti'&, 'r T' A5-&4'& - Pres/ri3ti'& A1re-40 A/H?ire4 T2e 3'Ber t' /'m3r'mise eF/1?4es t2e 3'Ber t' s?5mit t' -r5itr-ti'&. It B'?14 -1s' 5e re-s'&-51e t' /'&/1?4e t2-t t2e 3'Ber t' s?5mit t' -r5itr-ti'& 4'es &'t /-rr0 Bit2 it t2e 3'Ber t' /'m3r'mise. +Art. !)) 4hen an agent has been empowered to sell hemp in a foreign country, that e%press power carries with it the implied power to ma&e and enter into the usual and customary contract for its sale, which sale contract may provide for settlement of issues by arbitration. 4e are clearly of the opinion that the contract in <uestion is valid and binding upon the defendant =principalI, and that authority to ma&e and enter into it for and on behalf of the defendant =principalI, but as a matter of fact the contract was legally ratified and approved by the subse<uent acts and conducts of the defendant =principalI. Ro(inson 7leming v. Cru*, ', )hil '! +1,!6-. "rue, said counsel asserted that he had verbal authority to compromise the case. "he /ules, however, re<uire, for attorneys to compromise the litigation of their clients, a special authority +#ection !3, /ule 138, /ules of Court-. And while the same does not state that the special authority be in writing, the court has every reason to e%pect, that, if not in writing, the same be duly established by evidence other than the self$serving assertion of counsel himself that such authority was verbally given to him. Ror, authority to compromise cannot lightly be presumed. 7o$e Ins%rance Co. v. US", 2! SCRA )*# (!=*8+. Old Civil Code1 "he power to bring suit in order to collect sums of money accruing in the ordinary course of business as properly belonging to the class of acts described in article 1*13 of the Civil Code as acts of Tstrict ownershipG. 6t seems rather to be something which is necessarily a part of the mere administration of such a business as that described in the instrument in <uestion and only incidentally, if at all, involving a power to dispose of the title to property. =6n any event, the provision to e%act the payment of sums of money by legal means was construed to be e%press power to sue.I :ermann v. onaldson, 1 )hil 63 +1,(1-.

(9+ T' W-i7e A&0 O51i.-ti'& Gr-t?it'?s10 (<+ T' E&ter I&t' A&0 C'&tr-/t 50 W2i/2 t2e OB&ers2i3 '% -& Imm'7-51e Is Tr-&smitte4 'r A/H?ire4 Eit2er Gr-t?it'?s10 'r %'r - V-1?-51e C'&si4er-ti'&
Also, under Article 18*8 of the Civil Code, a special power of attorney is necessary for an agent to enter into a contract by which the ownership of an immovable property is transmitted or ac<uired, either gratuitously or for a valuable consideration. Pahud v. Court of Appeals , 0,* #C/A 13 +!((,-.

A")MNK 5utline Page 8 of 66

According to the provisions of Article 18*' on Agency, when the sale of a piece of land or any interest therein is made through an agent, the authority of the latter shall be in writing. Absent this re<uirement, the sale shall be void. Also, under Article 18*8, a special power of attorney is necessary in order for an agent to enter into a contract by which the ownership of an immovable property is transmitted or ac<uired, either gratuitously or for a valuable consideration. 'state o( "ino Ola&%er v. On&joco, <*# SCRA #8#, #=#"#=9 (2 )+. 4hile the law re<uires a special power of attorney, the general power of attorney was sufficient in this case, as 5laguer was e%pressly empowered to sell any of KirgilioGs properties. and to sign, e%ecute, ac&nowledge and delivery any agreement therefor. @ven if a document is designated as a general power of attorney, the re<uirement of a special power of attorney is met if there is a clear mandate from the principal specifically authori7ing the performance of the act. =1ravo=:uerrero v. 1ravo, '60 #C/A !'' +!((0-I. "he special power of attorney can be included in the general power when the act or transaction for which the special power is re<uired is specified therein. 'state o( "ino Ola&%er v. On&joco, <*# SCRA #8# (2 )+.

(<"A+ S-1e '% - Pie/e '% L-&4 'r I&terest T2erei& (Art. !)89, City8 "ite Realty Inc. v. Co%rt o( *ppeals, #2< SCRA #)< :2 ;+.
Absence of a written authority to sell a piece of land is ipso #ure void, precisely to protect the interest of an unsuspecting owner from being pre2udiced by the unwarranted act of another. Pahud v. Court of Appeals, 0,* #C/A 13 +!((,-. Under Article 18*', when a sale of a piece of land or any interest therein is through an agent, the authority of the agent shall be in writing, otherwise the sale shall be void. = See "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-.I 8otice that the article does not declare the agency to be void, but the resulting contract of sale effected by the agent. !s the agency itself voidB Agency may be oral unless the law re<uires a specific form. Bowever, to create or convey real rights over immovable property, a special power of attorney is necessary. "hus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-. "he Civil Code provides that in the sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential. =Article 18*8I. "his authority must be in writing, otherwise the sale shall be void. =Article 18*'I ine#a v. Co%rt o( *ppeals, #8* SCRA 222, 22) (2 2+. 4here in the special power of attorney the agent was primarily empowered by the corporation to bring an e2ectment case against the occupant and also to compromise . . . so far as it shall protect the rights and interest of the corporation in the aforementioned lots, and that the agent did e%ecute a compromise in the legal proceedings filed which sold the lots to the occupant, the compromise agreement that effected a sale of the lots is void for the power to sale by way of compromise could not be implied to protect the interests of the principal to secure possession of the properties. Cos$ic "%$ber v. Co%rt o( *ppeals, 2*< SCRA !*) (!==*+. "he e%press mandate re<uired by Article 18*' to enable an appointee of an agency couched in general terms to sell must be one that e%pressly mentions a sale of a piece of land or that includes a sale as a necessary ingredient of the act mentioned. "he power of attorney need not contain a specific description of the land to be sold, such that giving the agent the power to sell any or all tracts, lots, or parcels of land belonging to the principal is ade<uate. omingo v. omingo, '! #C/A 131 +1,*1-. 4hen no particular formality is re<uired by law, rules or regulation, then the principal may appoint his agent in any form which might suit his convenience or that of the agent, in this case a letter addressed to the agent re<uesting him to file a protest in behalf of the principal with the Collector of Customs against the appraisement of the merchandise imported into the country by the principal. Auen*le and Streiff v. Collector of Customs, 31 )hil 6'6 +1,10-. 4here the nephew in his own name sold a parcel of land with a masonry house constructed thereon to the company, when in fact it was property owned by the uncle, but in the estafa case filed by the company against the nephew, the uncle swore under oath that he had authori7ed his nephew to sell the property, the uncle can be compelled in the civil action to e%ecute the deed of sale covering the property. 6t having been proven at the trial that he gave his consent to the said sale, it follows that the defendant conferred verbal, or at least implied, power of agency upon his nephew Duran, who accepted it in the same way by selling the said property. "he principal must therefore fulfill all the obligations contracted by the agent, who acted within the scope of his authority. +Arts. 1*(,, 1*1( and 1*!*- G%tierre+ 7er$anos v. Orense, 2) P2i1. <82 (!=!9+. Under #ec. 330 of the Code of Civil )rocedure, an agreement for the leasing for a longer period than one year, or for the sale of real property, or of an interest therein, is invalid if made by the agent unless the authority of the agent be in writing and subscribed by the party sought to be charged. Rio y Ola((arrieta v.+utec, ', )hil !*6 +1,!6-. A power of attorney to convey real property need not be in a public document, it need only be in writing, since a private document is competent to create, transmit, modify, or e%tinguish a right in real property. %imene* v. Ra(ot, 38 )hil 3*8 +1,18-.

(i+ C'r3'r-te S-1e '% L-&4

A")MNK 5utline Page 9 of 66

4hen the sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing. otherwise, the sale shall be void. City=lite Realty Corporation v. Court of Appeals, 3!0 #C/A 380 +!(((-. 4hen the corporationGs primary purpose is to mar&et, distribute, e%port and import merchandise, the sale of land is not within the actual or apparent authority of the corporation acting through its officers, much less when acting through the treasurer. Ei&ewise Articles 18*' and 18*8 of Civil Code re<uires that when land is sold through an agent, the agentGs authority must be in writing, otherwise the sale is void. San %uan Structural v. CA, !,6 #C/A 631 +1,,8-.8

(<"$+ A.e&ts C-&&'t $?0 Pr'3ert0 '% Pri&/i3-1 U&1ess A?t2'riIe4 (Art. !9=!:2;+
"he prohibition against agents purchasing property in their hands for sale or management is, however, clearly, not absolute. 4hen so authori7ed by the principal, the agent is not dis<ualified from purchasing the property he holds under a contract of agency to sell. Olaguer v. Purugganan$ %r., 010 #C/A '6( +!((*-.

(*+ T' Le-se Re-1 Pr'3ert0 %'r M're T2-& O&e Ye-r
Article 18*8 of the Civil Code e%presses that a special power of attorney is necessary to lease any real property to another person for more than one year. "he lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its e%ecution through an agent. Shopper9s ara#ise Realty v. Ro:%e, 9!= SCRA =# (2 9+. 4here the lease contract involves the lease of real property for a period of more than one year, and it was entered into by the agent of the lessor and not the lessor herself, in such a case, Article 18*8 of the Civil Code re<uires that the agent be armed with a special power of attorney to lease the premises. Conse<uently, the provisions of the contract of lease, including the grant therein of an option to purchase to the lessee, would be unenforceable. ,#a. 4e Ch%a v. I*C, 22= SCRA == (!==9+. 4hen the attorney$in$fact was empowered by his principal to ma&e an assignment of credits, rights, and interests, in payment of debts for professional serviced rendered by laws, and the hiring of lawyers to ta&e charge of any actions necessary or e%pedient for the interests of his principal, and to defend suits brought against the principal, such powers necessarily implies the authority to pay for the professional services thus engaged, which includes assignment of the 2udgment secured for the principal in settlement of outstanding professional fees. Municipal Council of !loilo v. &vangelista, 00 )hil. !,( +1,3(-.

(8+ T' Cre-te 'r C'&7e0 Re-1 Ri.2ts '7er Imm'7-51e Pr'3ert0
"here is no documentary evidence on record that the respondents$owners specifically authori7ed respondent Rernande7 to sell their properties to another, including the petitioners. Article 18*8 of the 8ew Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or ac<uired either gratuitously or for a valuable consideration, or to create or convey real rights over immovable property, or for any other act of strict dominion. Any sale of real property by one purporting to be the agent of the registered owner without any authority therefore in writing from the said owner is null and void. "he declarations of the agent alone are generally insufficient to establish the fact or e%tent of her authority. "itonj%a v. Fernan#e+, 928 SCRA 98), 9=# (2 9+.

()+ T' M-@e Gi%ts (=+ T' L'-& 'r $'rr'B M'&e0 EF/e3t> "he agent may borrow money when it s urgent and indispensable for the preservation of the things which are under administration. P'Ber t' Se11 EF/1?4es P'Ber t' M'rt.-.e -&4 ,ice ,ersa (Art. !)8=+
A special power of attorney is necessary for an agent to borrow money, unless it be urgent and indispensable for the preservation of the things which are under administration. +asuma v. Heirs of Cecilio S. e 8illa$ ',, #C/A '66 +!((6-., 6t is a general rule in the law agency that, in order to bind the principal by a mortgage on real property e%ecuted by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. :o*un v. Mercado 011 #C/A 3(0 +!((6-. A power of attorney, li&e any other instrument, is to be construed according to the natural import of its language. and the authority which the principal has conferred upon his agent is not to be e%tended by implication beyond the natural and ordinary significance of the terms in which that authority has been given. "he attorney has only such authority as the principal has chosen to confer upon him, and one dealing with him must ascertain at his own ris& whether his acts will bind the principal. "hus, where the power of attorney which vested the agent with authority for me and in my name to sign, seal and e%ecute, and as my act and deed, delivery any lease, any other deed for conveying any real or personal property or any other deed for
8 A7 Realty & ev.$ !nc. v. ieselman 7reight Services Co.$ 3*3 #C/A 380 +!((!-. 7irme v. 1u-al &nterprises and #C/A 1,( +!((3-. 9 :o*un v. Mercado 011 #C/A 3(0 +!((6-.

ev. Corp. , '1'

A")MNK 5utline Page 10 of 66

the conveying of any real or personal property, it does not carry with it or imply that the agent for and on behalf of his principal has the power to e%ecute a promissory note or a mortgage to secure its payment. ;ational 1an- v. )an Ong S*e, 03 )hil. '01 +1,!,-. 4here the power of attorney e%ecuted by the principal authori7ed the agent Cy means of a mortgage of my real property, to borrow and lend sums in cash, at such interest and for such periods and conditions as he may deem property and to collect or to pay the principal and interest thereon when due, while it did not authori7e the agent to e%ecute deeds of sale with right of repurchase over the property of the principal, nonetheless would validate the main contract of loan entered into with the deed of sale with right of repurchase constituting merely an e<uitable mortgage, both contracts of which were within the scope of authority of the agent to enter into in the name of the principal. Rodrigue* v. Pamintuan and e %esus, 3* )hil 8*6 +1,18-. A special power of attorney to mortgage real estate is limited to such authority to mortgage and does not bind the grantor personally to other obligations contracted by the grantee +in this case the personal loan obtained by the agent in his own name from the )8Cin the absence of any ratification or other similar act that would estop the grantor from <uestioning or disowning such other obligations contracted by the grantee. Philippine ;ational 1an- v. Sta. Maria, !, #C/A 3(3 +1,6,-. 6n other words, the power to mortgage does not include the power to obtain loans, especially when the grantors allege that they had no benefit at all from the proceeds of the loan ta&en by the agent in his own name from the ban&. 6t is not unusual in family and business circles that one would allow his property or an undivided share in real estate to be mortgaged by another as security, either as an accommodation or for valuable consideration, but the grant of such authority does not e%tend to assuming personal liability, much less solidary liability, for any loan secured by the grantee in the absence of e%press authority so given by the grantor. Philippine ;ational 1an- v. Sta. Maria, !, #C/A 3(3, 31( +1,6,-. 4here the power of attorney given to the husband by the wife was limited to a grant of authority to mortgage a parcel of land titled in the wifeGs name, the wife may not be held liable for the payment of the mortgage debt contracted by the husband, as the authority to mortgage does not carry with it the authority to contract obligation. e 8illa v. 7a(ricante, 1(0 )hil. 6*! +1,0,-.

(! + T' $i&4 t2e Pri&/i3-1 t' Re&4er S'me Ser7i/e Wit2'?t C'm3e&s-ti'& (!!+ T' $i&4 t2e Pri&/i3-1 i& - C'&tr-/t '% P-rt&ers2i3 (!2+ T' O51i.-te t2e Pri&/i3-1 -s - G?-r-&t'r 'r S?ret0
4here a power of attorney is e%ecuted primarily to enable the attorney$in$fact, as manager of a mercantile business, to conduct its affairs for and on behalf of the principal, who is the owner of the business, and to this end the attorney$in$fact is authori7ed to e%ecute contracts relating to the principalGs property =act and deed delivery, any lease, or any other deed for the conveying any real or personal property and act and deed delivery, any lease, release, bargain, sale, assignment, conveyance or assurance, or any other deed for the conveying any real or personal property I , such power will not be interpreted as giving the attorney$in$fact power to bind the principal by a contract of independent guaranty or surety unconnected with the conduct of the mercantile business. >eneral words contained in such power will not be interpreted to e%tend power to the ma&ing of a contract of suretyship, but will be limited, under the well$&now rule of construction indicated in the e%press in e#usdem generis, as applying to matters similar to those particularly mentioned. irector v. Sing %uco, 03 )hil !(0 +1,!,-.

(!#+ T' A//e3t 'r Re3?4i-te -& I&2erit-&/e (!9+ T' R-ti%0 'r Re/'.&iIe O51i.-ti'&s C'&tr-/te4 $e%'re t2e A.e&/0
4here it appears that a wife gave her husband a power of attorney to loan and borrow money and to mortgage her property, that fact does not carry with it or imply that he has a legal right to sign her name to a promissory note which would ma&e her liable for the payment of a pre$e%isting debt of the husband or that of his firm, for which she was not previously liable, or to mortgage her property to secure the pre$e%isting debt. 1an- of P.!. v. e Coster , '* )hil 0,' +1,!0-. 4here the terms of the power granted to the substituted attorney$in$fact was to the end that the principal$seller may be able to collect the balance of the selling price of the printing establishment sold, such substitute agent had no power to enter into new sales arrangements with the buyer, or to novate the terms of the original sale. 8illa v. :arcia 1os9ue, ', )hil 1!6 +1,!6-.

e. N't-riIe4 P'Ber '% Att'r&e0

A notari7ed power of attorney carries with it the evidentiary weight conferred upon it with respect to its due e%ectuion. 8elso v. Court of Appeals, !6( #C/A 0,3 +1,,6-. 4hen the document under scrutiny is a special power of attorney that is duly notari7ed, the notarial ac&nowledgment is prima facie evidence of the fact of its due e%ecutionOa buyer has every reason to rely on a personGs authority to sell a particular property owned by a corporation A")MNK 5utline Page 11 of 66

on the basis of a notari7ed board resolutionOundeniably the buyer is an innocent purchaser for value in good faith. St. Mary<s 7arm$ !nc. v. Prima Real Properties$ !nc. , 06( #C/A *(' +!((8-.

III. POWER AND O$LIGATIONS OF THE AGENT

!. Ge&er-1 O51i.-ti'& '% A.e&t W2' A//e3ts t2e A.e&/0 (Art. !))9+ -. U3'& A//e3t-&/e '% A33'i&tme&t> A.e&t Is $'?&4 t' C-rr0 '& A.e&/0 t' Its C'm31eti'& -&4 %'r t2e $e&e%it '% Pri&/i3-1 OTHERWISE1 A.e&t Wi11 $e Li-51e %'r D-m-.es B2i/2 T2r'?.2 His N'&" Per%'rm-&/e t2e Pri&/i3-1 M-0 S?%%er D-m-.es 5. I& E7e&t '% De-t2 '% Pri&/i3-1> A.e&t M?st Fi&is2 $?si&ess A1re-40 $e.?& S2'?14 De1-0 E&t-i1 A&0 D-&.er +BU1 S''> Art. !=!=(#+ " De-t2 EFti&.?is2es A.e&/06n construing the original version of Article 188' +Article 1*18 of the old Civil Code-, the #upreme Court held that the burden is on the person who see&s to ma&e an agent liable to show that the losses and damage caused were occasioned by the fault or negligence of the agent. mere allegation without substantiation is not enough to ma&e the agent personally liable. Heredia v. Salina, 1( )hil 10* +1,(8-. 4here the holder of an e%clusive and irrevocable power of attorney to ma&e collections, failed to collect the sums due to the principal and thereby allowed the allotted funds to be e%hausted by other creditors, such agent was ad2udged to have failed to act with the care of a good father of a family re<uired under Article 188* and became personally liable for the damages which the principal may suffer through his non$performance. P;1 v. Manila Surety, 1' #C/A **6 +1,60-. 4here the prevailing statutory rule then was Article !6* of the Code of Commerce which declared that no agent shall purchase for himself or for another that which he has been ordered to sell, the Court held that a sale by a bro&er to himself without the consent of the principal would be void and ineffectual whether the bro&er has been guilty of fraudulent conduct or not. Conse<uently, such bro&er is not entitled to receive any commission under the contract, much less any reimbursement of e%penses incurred in pursuing and closing such sales. "he same prohibition is now contained in Article 1',1+1- of the Civil Code. 1arton v. "eyte Asphalt, '6 )hil ,38 +1,!'-. 4hen the finance company e%ecutes a mortgage contract that contains a provision that in the event of accident or loss, it shall ma&e a proper claim against the insurance company, was in effect an agency relation, and that under Article 188', the finance company was bound by its acceptance to carry out the agency, and in spite of the instructions of the borrowers to ma&e such claims instead insisted on having the vehicle repaired but eventually resulting in loss of the insurance coverage, the finance company had breached its duty of diligence, and must assume the damages suffered by the borrowers, and conse<uently can no longer collect on the balance of the mortgage loan secured thereby. B* Finance v. Co%rt o( *ppeals, 2 ! SCRA !<8 (!==!+. "he well$settled rule is that an agent is also responsible for any negligence in the performance of its function +Art. 1,(,- and is liable for the damages which the principal may suffer by reason of its negligent act. +Art. 188'-. British *ir.ays v. Co%rt o( *ppeals, 2)< SCRA 9< (!==)+.

2. O51i.-ti'& '% A.e&t W2' De/1i&es A.e&/0 (Art. !))<+ -. I% G''4s Are F'rB-r4e4 t' Him> 5bserve diligence of a good father of a family in custody and preservation of goods until new agent appointed 5. C'm3-re Bit2 Art. !=2= ? 5bligation of an agent who withdraws form an agency ? he must continue to act until principal ta&es necessary steps to meet situation #. Ge&er-1 R?1e '& EFer/ise '% P'Ber -. A.e&t M?st A/t DWit2i& t2e S/'3e '% His A?t2'rit0E (Art. !))!+ (!+ -eanin& o( / er(or$ance ;ithin the Scope o( *%thority0 (Art. != + (2+ 7e -ay er(or$ *cts Con#%cive to *cco$plish$ent o( *&ency %rpose
Under Article 1881 of the Civil Code, the agent must act within the scope of his authority to bind his principal. #o long as the agent has authority, e%press or implied, the principal is bound by the acts of the agent on his behalf, whether or not the third person dealing with the agent believes that the agent has actual authority. "hus, all signatories in a contract should be clothed with authority to bind the parties they represent. Sargasso Construction & evelopment CorporationCPic- & Shovel$ !nc.$CAtlantic &rectors$ !nc. >%oint 8enture? v. Philippine Ports Authority, 6!3 #C/A !6( +!(1(-. Article 1881 of the Civil Code provides that Pthe agent must act within the scope of his authority.P )ursuant to the authority given by the principal, the agent is granted the right Pto affect the legal relations of his principal by the performance of acts effectuated in accordance A")MNK 5utline Page 12 of 66

with the principal;s manifestation of consent.P aci(ic Reho%se Corp. v. 'IB Sec%rities, Inc., *## SCRA 2!9 (2 ! +.

5. C'm3-re Bit2 Art. !))8 ? A.e&t M?st F'11'B I&str?/ti'&s '% t2e Pri&/i3-1 /. A?t2'rit0 '% A.e&t N't Deeme4 EF/ee4e4 I% Per%'rme4 i& - M-&&er M're A47-&t-.e'?s t' Pri&/i3-1 (Art. !))2+ (!+ C'm3-re> *&ent Sho%l# 6ot *ct I( It ;o%l# -ani(estly Res%lt in "oss or 4a$a&e to rincipal (Art. !)))+.
Article 188! of the Civil Code provides that the limits of an agentGs authority shall not be considered e%ceeded should it have been performed in a manner advantageous to the principal than that specified by him. Olaguer v. Purugganan$ %r., 010 #C/A '6( +!((*-. "he admissions obtained by the agent from the adverse party prior to the formal amendment of the complaint that included the principal as a party to the suit, can be availed of by the principal since an agent may do such acts as may be conducive to the accomplishment of the purpose of the agency, admissions secured by the agent within the scope of the agency ought to favor the principal. "his has to be the rule, for the act or declarations of an agent of the party within the scope of the agency and during its e%istence are considered and treated in turn as declarations, acts and representations of his principal and may be given in evidence against such party 1ay 8iew Hotel v. Aer & Co. , 116 #C/A 3!* +1,8!-.

4. E%%e/ts '% N'&"R-ti%ie4 A/ts D'&e 50 A.e&t i& EF/ess '% His A?t2'rit0> U&e&%'r/e-51e, N't V'i4 (Arts. !#!8, !9 #, -&4 !)=)+
4hen money is received as a deposit by an agent, and that money is turned over by the agent to the principal, with notice that it is the money of the depositor, the principal is bound to deliver to the depositor, even if his agent was not authori7ed to receive such deposit. ="here has, in effect, ratification of the unauthori7ed act of the agent, thereby binding the principalI. Cason v. Ric-ards, 0 )hil 63, +1,(6-. 4hen the administrator enters into a contract that are outside of the scope of authority, the contract would nevertheless not be an absolute nullity, but simply voidable =unenforceableI at the instance of the parties who had been improperly represented, and only such parties can assert the nullity of said contracts as to them. Dayco v. Serra, ', )hil ,80 +1,!0-. Under Article 18,8 of the 8ew Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same e%pressly or impliedly. Rurthermore, when the third person . . . &nows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. 6f the said third person is aware of the limits of the authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertoo& to secure the principalGs ratification. Cervantes v. Co%rt o( *ppeals, # 9 SCRA 2< (!===+. Safic Alcan v. !mperial 8egeta(le, 300 #C/A 00, +!((1-. @ven when the agent, in this case the attorney$at$law who represented the client in forging a compromise agreement, has e%ceeded his authority in inserting penalty clause, the status of the said clause is not void but merely voidable, i.e.$ capable of being ratified. 6ndeed, the clientGs failure to <uestion the inclusion of the penalty in the 2udicial compromise despite several opportunities to do so and with the representation of new counsel, was tantamount to ratification. Bence, the client is stopped from assailing the validity thereof. Borja, Sr. v. S%lyap, Inc., #== SCRA * ! (2 #+. Contracts entered into in the name of another person by one who has been given no authority or legal representation or who has acted beyond his powers are classified as unauthori7ed contracts and are unenforceable, unless they are ratified. Go+%n v. -erca#o <!! SCRA # < (2 *+.

e. C'&seH?e&/es W2e& A.e&t A/ts i& His OB& N-me (Art. !))#+ (!+ rincipal 7as 6o Ri&ht *&ainst 1hir# erson I( *&ent *cts in 7is O.n 6a$e
Article 1*1* of the =oldI Civil Code provides that 4hen an agent acts in his own name, the principal shall have no action against the persons with whom the agent has contracted, nor the said persons against the principal. Article !'6 of the Code of Commerce provides that 4hen an agent transacts business in his own name, it shall not be necessary for him to state who is the principal, and he shall be directly liable as if the business were for his own account, to the persons with whom he transacts the same, said person not having any right of action against the principal, nor the latter against the former, the liabilities of the principal and the agent to each other always reserved. 6t being established by a preponderance of the evidence that the agent acted in his own name in selling the merchandise to the defendants, and that the defendants fully believed that they were dealing with the said agent, without any &nowledge of the fact that he was the agent of the plaintiffs, and having paid him in full for the merchandise purchased, they are not liable to the plaintiffs, for said merchandise. "his is true whether the transaction is covered by the provisions of the Civil Code or by the provisions of the Commercial Code. "im )iu v. Rui* & Rementeria, 10 )hil. 36*, 3*( +1,1(-. A")MNK 5utline Page 13 of 66

4hen an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted, or such persons against the principal. 6n such case, the agent is directly liable to the person with whom he has contracted, as if the transactions were his own. Smith 1ell v. Sotelo Matti, '' )hil. 8*' +1,!!-. @ven when the agent has a special power of attorney to mortgage the property of the principal, when such agent nevertheless e%ecuted the real estate mortgage in his own name, then it is not valid and binding on the principal pursuant to the provisions of Article 1883 of the Civil Code. Philippine Sugar &states ev. Corp. v. Poi*at , '8 )hil. 036 +1,!0-. Rural 1an- of 1om(on v. Court of Appeals, !1! #C/A !0 +1,,!-. Under Article 1883 of the Civil Code, if an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted. neither have such persons against the principal. 6n such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, e%cept when the contract involves things belonging to the principal. #ince the principals have caused their agent to enter into a charter party in his own name and without disclosing that he acts for any principal, then such principals have no standing to sue upon any issue or cause of action arising from said charter party. Marimperio Compania ;aviera$ S.A. v. Court of Appeals , 106 #C/A 368 +1,8*-.

(2+ *&ent Is 4irectly Bo%n# to 1hir# erson as I( the 1ransaction ;ere 7is O.n
4hen the agent e%ecutes a contract in his personal capacity, the fact that he is described in the contract as the agent of the principal and the properties mortgaged pertain to the principal, may not be ta&en to mean that he enters into the contract in the name of the principal. A mortgage on real property of the principal not made and signed in the name of the principal is not valid as to the principal. ;ational 1an- v. Palma :il, 00 )hil. 63, +1,31-. ;ational 1an- v. Agudelo, 08 )hil 600 +1,33-. A party who signs a bill of e%change as an agent +as the )resident of the company-, but failed to disclose his principal becomes personally liable for the drafts he accepted, even when he did so e%pressly as an agent. #ection !( of the 8egotiable 6nstruments Eaw says provides e%pressly that when an agent signs in an representative capacity, but does not indicate or disclose his principal would incur personal liability on the bill of e%change. Phil. 1an- of Commerce v. Aruego, 1(! #C/A 03( +1,81-.

EJCEPTION> W2e& C'&tr-/t I&7'17es T2i&.s $e1'&.i&. t' Pri&/i3-1

@ven when the agent has written authority to convey real property on behalf of the principal, nevertheless when the deed of sale was e%ecuted by the agent in her own name without showing the capacity in which she acted, although the act was doubtless irregular, the deed operated to bind the principal who had authori7ed the sale. %imene* v. Ra(ot, 38 )hil. 3*8 +1,18-. 4here the plaintiffs appointed the defendant to purchase a vessel and giving him money for that purpose, but the agent purchased the boat and placed it in his own name, he has breached his fiduciary obligation and is obliged to transfer the same to the plaintiffs, or the plaintiffs have a right to be subrogated. According to the e%ception under Art. 1*1* of the old Civil Code +when things belonging to the principal are dealt with- the agent is (ound to the principal although he does not assume the character of such agent and appears acting in his own name. "he money with which the launch was bought having come from the plaintiff, the e%ception established in Art. 1*1* is applicable to the instant case. #y =%uco v. Sy=%uco, '( )hil. 63' +1,!(-. 4here a co$owner transfers the entirety of the mining claim to the buyer, where the buyer &new that it included the one$half share pro=indiviso of the other co$owner, then the transaction may be considered as one where the disposing co$owner acted as agent of the other co$owner. Conse<uently, under Article 1883 of the Civil Code, such other co$owner may sue the person with whom the agent dealt with in his +agentGs- own name, when the transaction involves things belong to the principal. :oldstar v. "im, !0 #C/A 0,* +1,68-. 4hen a commission agent enters into a shipping contract in his own name to transport the grains of 8RA on a vessel owned by a shipping company, 8RA cannot claim it is not liable to the shipping company under Article 1883 when things belong to the principal are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. 6n other words, the agentG apparent representation yields to the principalGs true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising from the contract. ;ational 7ood Authority v. !AC, 18' #C/A 166 +1,,(-.

(#+ rovisions *re ;itho%t rej%#ice to *ctions Bet.een rincipal an# *&ent <See #isc%ssions belo. on breach by a&ent o( his #%ty o( loyalty; 9. S3e/i%i/ O51i.-ti'& R?1es %'r A.e&ts

A")MNK 5utline Page 14 of 66

-. N' O51i.-ti'& '% A.e&t t' A47-&/e F?&4s (Art. !))*+> It is rincipal9s obli&ation to a#vance the (%n#s, b%t rincipal to pay interest on a#vances $a#e by *&ent (ro$ #ay he a#vances the $oney (Art. !=!2+. (2+ W2ere 3ri&/i3-1 is i&s'17e&t (See Art. !=!=:#;> I&s'17e&/0 eFti&.?is2es -& -.e&/0+ 5. A.e&t S2'?14 C-rr0 O?t A.e&/0 i& A//'r4-&/e Bit2 Pri&/i3-1Ks I&str?/ti'&s (Art. !))8+ (!+ I% -.e&t %'11'Be4 i&str?/ti'&s, 3ri&/i3-1 /-&&'t set ?3 -.e&tKs i.&'r-&/e 'r /ir/?mst-&/e B2i/2 3ri&/i3-1 B-s, 'r '?.2t t' 2-7e 5ee&, -B-re '% +Art. !)==)ursuant to the instructions of the principals, the agent purchased a piece of land in their names and in the sums given to him by the principal, and that after the fact of purchase the principals had ratified the transaction and even received profits arising from the investment in the land, but that eventually a defect in the title to the land arose, the said principals cannot recover their lost investment from the agent. "here is nothing in the record which would indicate that the defendant failed to e%ercise reasonable care and diligence in the performance of his duty as such agent, or that he undertoo& to guarantee the vendorGs title to the land purchased by direction of the plaintiffs. ;epomuceno v. Heredia, * )hil 063, 066 +1,(*-. 4hen an agent in e%ecuting the orders and commissions of his principal carries out the instructions he has received from his principal, and does not appear to have e%ceeded his authority or to have acted with negligence, deceit or fraud, he cannot be held responsible for the failure of his principal to accomplish the ob2ect of the agency. Agents$ although they act in representation of the principal$ are not guarantors for the success of the (usiness enterprise they are as-ed to manage. :uiterre* Hermanos v. Oria Hermanos, 3( )hil. ',1 +1,10-.

EJCEPT> (!+ I% Sti3?1-te4 i& t2e A.e&/0 A.reeme&t

/. O51i.-ti'& N't C-rr0 O?t A.e&/0 I% EFe/?ti'& W'?14 M-&i%est10 Res?1t i& L'ss 'r D-m-.e t' Pri&/i3-1 (Art. !)))+
4hile it is true that an agent who acts for a revealed principal in the ma&ing of a contract does not become personally bound to the other party in the sense that an action can ordinarily be maintained upon such contract directly against the agent, yet that rule does not control when the agent cannot intercept and appropriate the thing which the principal is bound to deliver, and thereby ma&e the performance of the principal impossible. "he agent in any event must be precluded from doing any positive act that could prevent performance on the part of his principal, otherwise the agent becomes liable also on the contract. ;ational 1an- v. ,elsh 7airchild, '' )hil *8( +1,!3-.

4. DUTY OF LOYALTY> O51i.-ti'& i& - C'&%1i/t '% I&terest Sit?-ti'& (Art. !))=+ (!+ A.e&t s2-11 5e 1i-51e t' t2e 3ri&/i3-1 %'r 4-m-.es s?st-i&e4 50 t2e 1-tter B2ere i& /-se '% /'&%1i/t '% i&terest sit?-ti'&, -&4 -.e&t 3re%erre4 2is 'B& i&terest. (2+ A.e&t 3r'2i5ite4 %r'm 5?0i&. 3r'3ert0 e&tr?ste4 t' 2im %'r -4mi&istr-ti'& 'r s-1e Bit2'?t 3ri&/i3-1Ks /'&se&t (Art. !9=!:2;+.
An agent cannot represent both himself and his principal in a transaction involving the shifting to another person of the agentGs liability for a debt to the principal. A(oiti* v. e Silva, '0 )hil 883 +1,!'-. "he director and general manager of the stoc& corporation, who also was the ma2ority stoc&holder, and was designated to be the main negotiator for the company with the >overnment for the sale of its large tract of land, having special &nowledge of commercial information that would increase the value of the shares in relation to the sale of the parcels of land to the >overnment, can be treated legally as being an agent of the stoc&holders of the company, with a fiduciary obligation to reveal to the other stoc&holders such special information before proceeding to purchase from the other stoc&holders their shares of stoc&. 6f such director obtains the purchase of the shares of a stoc&holder without having disclosed important facts or to render the appropriate report on the e%pected increase in value of the company, there was fraud committed for which the director shall be liable for the earnings earned against the stoc&holder on the sale of shares. Strong v. :uiterre* Repide, '1 )hil. ,'* +1,(,-. A confidential employee who, &nowing that his principal was negotiating with the owner of some land for the purchase thereof, surreptitiously succeeds in buying it in the name of his wife, commits an act of disloyalty and infidelity to his principal, whereby he becomes liable, among other things, for the damages caused, which meant to transfer the property bac& to the principal under the terms and conditions offered to the original owner. Sing %uco and Sing 1engco v. Sunyantong and "lorente, '3 )hil 08, +1,!!-. 4here an uncle who was acting as agent or administrator of property belonging to a niece had procured a "orrens title in his own name to said property, he is deemed to be a trustee, and he must surrender the property to the niece and transfer title to her. "he relations of an agent to his principal are fiduciary and in regard to the property forming the sub2ect$matter of the agency, A")MNK 5utline Page 15 of 66

he is estopped from ac<uiring or asserting a title adverse to that of the principal. Conse<uently, an action in personam will lie against an agent to compel him to return or retransfer to his principal, or the latterGs estate, the real property committed to his custody as such agent and also to e%ecute the necessary documents of conveyance to effect such retransfer. Severino v. Severino, '' )hil. 3'3 +1,!3-.

e. R?1e I% A.e&t Is Em3'Bere4 t' $'rr'BCLe&4 M'&e0 (Art. !)= + (!+ I% em3'Bere4 t' 5'rr'B m'&e0, 2e m-0 5e t2e 1e&4er -t /?rre&t i&terest, (2+ I% em3'Bere4 t' 1e&4 m'&e0 -t i&terest, 2e /-&&'t 5'rr'B Bit2'?t 3ri&/i3-1Ks /'&se&t.
4hen power granted to agent was only to borrow money and mortgage principalGs property to secure the loan, it cannot be interpreted to include the authority to mortgage the properties to support the agentGs personal loans and use the proceeds thereof for his own benefit. "he lender who lends money to the agent &nowing that is was for personal purpose and not for the principalGs account, is a mortgagee in bad faith and cannot foreclose on the mortgage thus constituted for the account of the agent. Hodges v. Salas and Salas, 63 )hil. 06* +1,36-.

%. O51i.-ti'& '% A.e&t t' Re&4er A//'?&t (Art. !)=!+ (!+ A.e&t M?st Re&4er A//'?&t t' Pri&/i3-1
An administrator of an estate was made liable under Article 1*!( +now Art. 18,1- for failure to render an account of his administration to the heirs, unless the heirs consented thereto or are estopped by having accepted the correctness of his account previously rendered. O#inaga v. &state of Pere*, , )hil 180 +1,(*-. As a necessary conse<uence of such breach of trust, an agent must then forfeit his right to the commission and must return the part of the commission he received from his principal. 4o$in&o v. 4o$in&o, 92 SCRA !#! (!=8!+. )etitioner was the administrator of respondent;s properties for 18 years, and four letters within 18 years can hardly be considered as sufficient to &eep the principal informed and updated of the condition and status of the latter;s properties. Sa+on v. ,as:%e+8 -enancio, G.R. N'. !=2 )<, 22 Fe5r?-r0 2 !2.

(2+ De1i7er t' Pri&/i3-1 W2-te7er Is Re/ei7e4 50 Virt?e '% A.e&/0 ;hy incl%#e those not #%e the principal= Beca%se le&ally, it is the principal .ho receives the$ an# there(ore a&ent has to acco%nt (or the$
"he possession of an agent of the money or property of his principal is termed 2uridical possession which means a possession which gives the transferee a right over the thing which the transferee may set up even against the owner. Chua=1urce v. Court of Appeals, 331 #C/A 1 +!(((-. Conse<uently1 An insurance agent may be convicted of estafa for his failure to deliver sums of money paid to him as an insurance agent for the account of his employer. 4here nothing to the contrary appears, the provisions of article 1*!( of the Civil Code impose upon an agent the obligation to deliver to his principal all funds collected on his account. 0.S. v. Aiene, * )hil *36 +1,(* A travelling sales agent who misappropriated or failed to return to his principal the proceeds of the things or goods he was commissioned or authori7ed to sell, is liable for estafa. :u*man v. Court of Appeals, ,, )hil. *(3 +1,06-. 4hereas, a ban& teller or cash custodian, being merely an employee of the ban&, cannot be held liable for estafa, but rather for theft. Chua=1urce v. Court of Appeals, 331 #C/A 1 +!(((-. "he relation of an agent to his principal is fiduciary and it is elementary that in regard to property sub2ect matter of the agency, an agent is estopped from ac<uiring or asserting a title adverse to that of the principal. Bis position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui 9ue trust. 7ernan#e+ v. 7ernan#e+, *9< SCRA 29 (2 !!+.

(#+ Obli&ation *rises an# Beco$es 4e$an#able at *&ency9s 'n# (9+ Stip%lation 'xe$ptin& *&ent (ro$ Obli&ation to Ren#er an *cco%ntin& Is ,oi#
4hen accounts of the agent to the principal are once approved by the principal, the latter has no right to as& afterwards for a revision of the same or for a detailed account of the business, unless he can show that there was fraud, deceit, error or mista&e in the approval of the accounts Ofacts not proven in this case. :uiterre* Hermanos v. Oria Hermanos, 3( )hil. ',1, 0(0 +1,10-, 9uoting from Pastor v. ;icasio, 6 )hil. 10! +1,(6-.

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.. Li-5i1it0 '% A.e&t %'r I&terest (Art. !)=*+ (!+ A.e&t Is Li-51e %'r I&terest> (-+ On S%$s 7e *pplie# to 7is O.n Use 2(ro$ the 1i$e 7e Use# 1he$3 (5+ On S%$s O.in& the rincipal 2(ro$ the 1i$e *&ency Is 'xtin&%ishe#3
As to the interest imposed in the 2udgment on the amounts received by the agent which were not turned over to the principal, it is sufficient to cite aarticle 1*!' of the Civil Code, which provides that an agent shall be liable for interest upon any sums he may have applied to his own use, from the day on which he did so, and upon those which he still owes, after the e%piration of the agency, from the time of his default. Mende*onna v. 8da. e :oitia, 0' )hil 00*, 0*( +1,3(-. "he successor$in$interest of the principal is not entitled to collect interest from the agent of the father for sums loaned to and collected by the agent from various persons for the deceased principal. 6n all the aforementioned transactions, the defendant acted in his capacity as attorney$in$fact of the deceased father, and there being no evidence showing that he converted the money entrusted to him to his own use, he is not liable for interest thereon, in accordance with the provisions of Aart. icle 1*!' of the Civil Code. e 1or#a v. e 1or#a, 08 )hil 811 +1,33-.

2. DUTY OF DILIGENCE> A.e&t Li-51e %'r Fr-?4 -&4 Ne.1i.e&/e (Arts. !))9 -&4 != =+ (!+ W2-t S2-11 A..r-7-te 'r Miti.-te Li-5i1it0 Arisi&. O?t '% Ne.1i.e&/e L W2et2er A.e&/0 W-s %'r - C'm3e&s-ti'& 'r W-s Gr-t?it'?s
4here the agent by means of misrepresentation of the condition of the mar&et induces his principal to sell to him the property consigned to his custody at a price less than that for which he has already contracted to sell part of it, and who thereafter disposes of the whole at an advance, is liable to principal for the difference. #uch conduct on the part of the agent constituted fraud, entitling the principal to annul the contract of sale. Although commission earned by the agent on the fraudulent sale may be disallowed, nonetheless commission earned from other transactions which were not tainted with fraud should be allowed the agent. Cadwallader v. Smith 1ell, * )hil. '61 +1,(*-. 6n consignment of goods for sale, as a form of agency, the consignee$agent is relieved from his liability to return the goods received from the consignor$principal when it is shown by preponderance of evidence in the civil case brought that the goods were ta&en from the custody of the consignee by robbery, and no separate conviction of robbery is necessary to avail of the e%empting provisions under Article 11*' for force ma#eure. Austria v. CAourt of Appeals, 3, #C/A 0!* +1,*1-. "he Court brushed aside the contention that since it was merely acting as collecting ban&, it was the drawee$ban& that should be held liable for the loss of a depositor1 6n stressing that it was acting only as a collecting agent for >olden #avings, Jetroban& seems to be suggesting that as a mere agent it cannot be liable to the principal. "his is not e%actly true. 5n the contrary, Article !1,(, of the Civil Code clearly provides that the agent is responsible not only for fraud, but also for negligence. Metro(an- v. Court of Appeals, 1,' #C/A 16, +1,,1-. 4hen an agent is involved in the perpetration of fraud upon his principal for his e%trinsic benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency ? the basic tenets of agency rest on the highest consideration of 2ustice, e<uity and fairplay, and an agent will not be permitted to pervert his authority to his own personal advantage. Cos$ic "%$ber v. Co%rt o( *ppeals, 2*< SCRA !*) (!==*+. "he well$settled rule is that an agent is also responsible for any negligence in the performance of its function +Art. 1,(,- and is liable for the damages which the principal may suffer by reason of its negligent act. +Art. 188'-. British *ir.ays v. Co%rt o( *ppeals , 2)< SCRA 9< (!==)+.

<. W2e& A.e&t A33'i&ts - S?5stit?te (Art. !)=2+ -. Ge&er-1 R?1e> A.e&t M?st A/t i& Pers'&, $?t M-0 A33'i&t - S?5stit?te I% N't Pr'2i5ite4
Under the terms of Art. 18,!, when a special power of attorney to sell a piece of land does not contain a clear prohibition against the agent in appointing a substitute, the appointment by the agent of a substitute to e%ecute the contract is within the limits of the authority given by the principle, although the agent then would have to be responsible for the acts of the sub$agent. 'sc%eta v. "i$, <!2 SCRA 9!! (2 8+. R%le Opposite Un#er the Ol# Civil Co#e> An agent cannot delegate his powers under an power of attorney to a sub$agent in view of the legal principle delegata potestas delegare non potest3 +a delegated power cannot be delegated-, inasmuch as there is nothing in the records to show that he has been e%pressly authori7ed to do so. ;ational 1an- v. Agudelo, 08 )hil 600, 661 +1,33-.

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5. E%%e/ts W2e& A.e&t A33'i&ts - S?5stit?te> He Is Res3'&si51e %'r A/ts '% S?5stit?te (!+ 7e .as not &iven po.er to appoint one (2+ 7e .as &iven s%ch po.er .itho%t #esi&natin& the person an# s%bstit%te is notorio%sly inco$petent or insolvent.
A subagent cannot be held at greater liability that the main agent, and when the subagent has not received any special instructions from the agent to insure the ob2ect of the agency, the subagent cannot be held liable for the loss of the thing from fire, which is merely force ma2eure. !nternational 7ilms >China? v. "yric 7ilm, 63 )hil. **8 +1,36-.

/. A11 A/ts '% S?5stit?te A33'i&te4 A.-i&st Pri&/i3-1Ks Pr'2i5iti'& Are V'i4 (-s A.-i&st t2e Pri&/i3-1+
"he law on agency in our 2urisdiction allows the appointment by an agent of a substitute or sub$agent in the absence of an e%press agreement to the contrary between the agent and the principal. "herefore, an agent who receives 2ewelry for sale or return cannot be charged with estafa for there was no misappropriation when she delivered the 2ewelry to a sub$agent under the sale terms which the agent received it, but a client of the sub$agent absconded with them and could no longer be recovered. "he appointment of a sub$agent and delivery of the 2ewelry, in the absence of a prohibition, does not amount to conversion or misappropriation as to constitute estafa. but the agent remains civilly liable for the value of the 2ewelry to the principal. Serona v. Co%rt o( *ppeals, #=2 SCRA #< (2 2+.1( "he legal ma%im potestas delegate non delegare potestE a power once delegated cannot be re$delegated, while applied primarily in political law to the e%ercise of legislative power, is a principle of agency O for another, a re$delegation of the agency would be detrimental to the principal as the second agent has no privity of contract with the former. 1alta*ar v. Om(udsman 01( #C/A *' +!((6-. 6n a situation where the special power of attorney to sell a piece of land contains a prohibition to appoint a substitute, but nevertheless the agent appoints a substitute who e%ecutes the deed of sale in name of the principal, while it may be true that the agent may have acted outside the scope of his authority, that did not ma&e the sale void, but merely unenforceable under the second paragraph of Article 131* of the Civil Code. And only the principal denied the sale, his acceptance of the proceeds thereof are tantamount to ratification thereof. 'sc%eta v. "i$, <!2 SCRA 9!! (2 8+.

4. Ri.2ts '% Pri&/i3-1 A.-i&st S?5stit?te (Art. !)=#+

"he principal is liable upon a sub$agency contract entered into by its selling agent in the name of the principal, where it appears that the general agent was clothed with such broad powers as to 2ustify the interference that he was authori7ed to e%ecute contracts of this &ind, and it not appearing from the record what limitations, if any, were placed upon his powers to ace for his principal, and more so when the principal had previously ac&nowledged the transactions of the subagent. el Rosario v. "a 1adenia, 33 )hil. 316 +1,16-.

*. R?1e '& Li-5i1it0 W2e& TB' 'r M're A.e&ts A33'i&te4 50 t2e S-me Pri&/i3-1 -. Res3'&si5i1it0 '% TB' 'r M're A.e&ts N't S'1i4-r0 (Art. !)=9+ (!+ C'm3-re1 TB' 3ri&/i3-1s Bit2 /'mm'& -.e&t "L E-/2 3ri&/i3-1 s'1i4-ri10 1i-51e (Art. !=!<+
4hen two letters of attorney are issued simultaneously to two different attorneys$in$fact, but covering the same powers shows that it was not the principalGs intention that they should act 2ointly in order to ma&e their acts valid. the separate act of one of the attorney$in$fact, even when not consented to by the other attorney in fact, is valid and binding on the principal, especially the principal did not only repudiate the act done, but continued to retain the said attorney$in$fact. -%nicipal Co%ncil o( Iloilo v. 'van&elista, << P2i1. 2= (!=# +.

5. W2ere TB' 'r M're A.e&ts A.ree t' $e S'1i4-ri10 $'?&4 (Art. !)=<+ 8. R?1e '& Li-5i1it0 t' T2ir4 P-rties> A.e&t N't $'?&4 t' T2ir4 P-rt0 (Art. !)=8+
"he settlement and ad2ustment agent in the )hilippines of an insurance company in 8ew Hor& is no different from any other agent from the point of view of his responsibility1 whenever he ad2usts or settles a claim, he does it in behalf of his principal, and his action is binding not upon himself but upon his principal. 4hen the agent settles and ad2ust claims in behalf of the principal, the agent does not assume any personal liability, and he cannot be sued on his own right. the recourse of the insured is to press his claim against the principal. Salonga v. ,arner 1arnes, 88 )hil 1!0 +1,01-. "he appointment by a foreign insurance company of a local settling or claim agent, clothed with power to settle all the losses and claims that may arise under the policies that may be issued by or in
10 "his reiterates the ruling in People v. ;epomuceno, CA '6 5.>. 61!8 +1,',-. "im v. Court of Appeals, !*1 #C/A 1! +1,,*-. People v. )rinidad, CA 03 5.>. *3! +1,06-.

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behalf of the foreign company, does not amount to a contractual acceptance of personal liability on the part of the local settling or claim agent. An ad2ustment and settlement agent is no different from any other agent from the point of view of his responsibilities, for he also acts in a representative capacity. =9uoted from Salonga v. ,arner$ 1arnes &Co.$ "td., 88 )hil. 1!0 +1,01-I. 6n the same manner, a resident agent, as a representative of the foreign insurance company, is tas&ed only to receive legal processes on behalf of its principal and not to answer personally for the any insurance claims. S$ith Bell v. Co%rt o( *ppeals, 2*8 SCRA <# (!==8+.

-. Pri&/i3-1 Is t2e O&e $'?&4

An insurance agent who acts for fully disclosed foreign insurance companies cannot be made personally liable for the claims arising from the contracts of insurance made on behalf of the principals. & Macias & Co. v. ,arner$ 1arnes & Co., '3 )hil 100 +1,!!-. A promissory note and two mortgages e%ecuted by the agent for and on behalf of his principal, in accordance with a power of attorney e%ecuted by the principal in favor of the agent, are valid, and as provided by article 1*!* of the Civil Code, the principal must fulfill the obligations contracted by the agent. ;ational 1an- v. Palma :il, 00 )hil. 63, +1,31-. 4hen the buyer of shares of stoc&, pursuant to the terms of the deed of sale, effects payment of part of the purchase price to one of the sellerGs creditors, then there is no subrogation that ta&es place, as the buyer then merely acts as an agent of the seller effecting payment of money that was due to the seller in favor of a third$party creditor. Che$phil 'xport v. Co%rt o( *ppeals , 2<! SCRA 2!8 (!==<+. Agents who have been authori7ed to sell parcels of land cannot claim personal damages in the nature of unreali7ed commission by reason of the act of the buyer is refusing to proceed with the sale. "he rendering of such service did not ma&e them parties to the contracts of sale e%ecuted in behalf of the latter. #ince a contract may be violated only by the parties thereto as against each other, the real parties$in$interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. Uy v. Co%rt o( *ppeals, #!9 SCRA *= (!===+.11 A person acting as a mere representative of another ac<uires no rights whatsoever, nor does he incur any liabilities arising from the said contract between his principal and another party. *n&eles v. hilippine 6ational Rail.ays 2 6R3, < SCRA 999 (2 *+.1! Article 18,* reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. &urotech !ndustrial )echnologies$ !nc. v. Cui*on$ 0!1 #C/A 08' +!((*-. #ince, as a rule, the agency, as a contract, is binding only between the contradicting parties, then only the parties, as well as the third person who transacts with the parties themselves, may <uestion the validity of the agency or the violation of the terms and conditions found therein. 8illegas v. "ingan$ 0!6 #C/A 63 +!((*-. 6t is a basic rule in the law of agency that a principal is sub2ect to liability for loss caused to another by the latterGs reliance upon a deceitful representation by an agent in the course of his employment +1- if the representation is authori7ed. +!- if it is within the implied authority of the agent to ma&e for the principal. or +3- if it is apparently authori7ed, regardless of whether the agent was authori7ed by him or not to ma&e the representation. Pahud v. Court of Appeals, 0,* #C/A 13 +!((,-.

5. EF/e3t W2e& A.e&t> (!+ EF3ress10 $'?&4 Himse1%

4hen the attorney$in$fact of the owner of a parcel of land acted within the scope of his authority by mortgaging the property of the principal, the principal is bound by the mortgage, and cannot use the fact that the agent has also bound himself personally to the debt. "here is nothing in the law which prohibits an agent from binding himself personally for the debt incurred in behalf of the principal. 6n fact the law recogni7es such underta&ing as valid and binding on the agent. )uason v. Oro*co, 0 )hil 0,6 +1,(6-. Under Article 18,*, when the agent e%pressly binds himself to the contract entered into on behalf of the principal, then he become personally bound thereto to the same e%tent as the principle. Cut the doctrine is not applicable vice@versa, since everything agreed upon by the principal to be binding on himself is not legally binding personally on the agent. "hus when the previous agent of the union bound itself personally liable on the contracts of the union, the new agent is need deemed bound by the assumption underta&en by the original agent. 1enguet v. 1C! &mployees, !3 #C/A '60 +1,68-.

(2+ He EF/ee4s His A?t2'rit0 Wit2'?t Gi7i&. N'ti/e '% Limite4 P'Bers
"he rule under Article 18,* of the Civil Code is that when an agent acts in behalf of the principal, he cannot be held liable personally, e%cept when he acts outside the scope of his
11 Ormoc Sugarcane Planters< Association$ !nc. >OSPA? v. Court of Appeals, 0,6 #C/A 63( +!((,-. Ormoc Sugarcane Planters< Association$ !nc. >OSPA? v. Court of Appeals, 0,6 #C/A 63( +!((,-. 12 Chua v. )otal Office Products and Services >)opros?$ !nc.$ '*1 #C/A 0(( +!((0-. )an v. &ngineering Services$ ',8 #C/A ,3 +!((6-. Chong v. Court of Appeals$ 0!* #C/A 1'' +!((*-.

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authority, or even when acting within the scope of his authority, he e%pressly binds himself personally liable to the contract entered into in the name of the principal. "herefore, a third party cannot generally sue on the contract see&ing both the principal and the agent to be liable thereon, for by suing the principal on the contract, the agent is deemed not to be personally liable. 5n the other hand, if the agent is being sued on the basis that he acted outside the scope of his authority, then it does not ma&e sense to be also suing the principal who cannot be held liable for the acts of the agent outside the scope of his authority. At any rate, =Article 18,*I does not hold that in cases of e%cess of authority, (oth the agent and the principal are liable to the other contracting party. Phil. Products Co. v. Primateria Society Anonyme, 10 #C/A 3(1, 3(0 +1,60-. 4here an agent defies the instructions of its principal in 8ew Hor& not to proceed with the sale due to non$availability of carriage, it has acted without authority or against its principalGs instructions and holds itself personally liable for the contract it entered into with the local company. 6ational o.er v. 6*-*RCO , !!8 SCRA 8)= (!=)2+. "he special power to approve loans does not carry with it the power to bind the principal to a contract of guaranty even to the e%tent of the amount for which a loan could have been granted by the agent. >uaranty is not presumed, it must be e%pressed and cannot be e%tended beyond its specified limits +Director v. #ing Nuco, 03 )hil. !(0. 6n one case, where it appears that a wife gave her husband power of attorney to loan money, this Court ruled that such fact did not authori7ed him to ma&e her liable as a surety for the payment of the debt of a third person. B* Finance v. Co%rt o( *ppeals, 2!! SCRA !!2 (!==2+. "o reiterate, the first part of Article 18,* declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is completely absolved of any liability. "he second part of the said provision presents the situations when the agent himself becomes liable to a third party when he e%pressly binds himself or he e%ceeds the limits of his authority without giving notice of his powers to the third person. Bowever, it must be pointed out that in case of e%cess of authority by the agent, li&e what petitioner claims e%ists here, the law does not say that a third person can recover from both the principal and the agent. 6t is well to state here that Article 18,* of the 8ew Civil Code upon which petitioner anchors its claim does not hold that in case of e%cess of authority, both the agent and the principal are liable to the other contracting party. &urotech !ndustrial )echnologies$ !nc. v. Cui*on$ 0!1 #C/A 08' +!((*-.

(#+ W2e& t2e A.e&t A/ts Bit2 Fr-?4 'r Ne.1i.e&/e

"he rule relied upon by the =agent to avoid the imposition of the li<uidated damages provided for in the contract of saleI that every person dealing with an agent is put upon in<uiry and must discover upon his peril the authority of the agent would apply in this case if the principal is sought to be held liable on the contract entered into by the agent. "hat is not so in this case. Bere, it is the agent that it sought to be held liable on a contract of sale which was e%pressly repudiated by the principal because the agent too& chances, it e%ceed its authority, and, in effect, it acted in its own name. DefendantsG contention that 8amercoGs liability should be based on tort or <uasi$delict, as held in some American case, . . ., is not well$ta&en. As correctly argued by the 8)C, it would be un2ust and ine<uitable for 8amerco to escape liability after it had deceived the 8)C. 6ational o.er v. 6*-*RCO, !!8 SCRA 8)=, ) (!=)2+. "he practice in group insurance business, which is consistent with the 2urisprudence thereon in the #tate of California from whose laws our 6nsurance Code has been mainly patterned, is that the employer$policyholder who ta&es out the insurance for its officers and employees, is the agent of the insurer who has authority to collect the proceeds from the insurer. "herefore, when the insurer, through the negligence of its agent, allows a purported attorney$in$fact who instrument does not clearly show such power to collect the proceeds, it was liable therefor under the doctrine that the principal is bound by the misconduct of its agent. "hird persons deal with agents at their peril and are bound to in<uire as to the e%tent of the power of the agent with whom they contract. ine#a v. Co%rt o( *ppeals, 22* SCRA 8<9 (!==#+. 4hen the ban& in e%tending a loan re<uired the principal borrower to obtain a mortgage$ redemption$insurance and deducted the premiums pertaining thereto from the loan proceeds, it was wearing two hats, as a lender and as insurance agent. And when it turned out that the ban& &new or ought to have &nown that the principal borrower was not <ualified at his age for J/6 coverage which prevented his insurance coverage from being made by the insurance company at the time of the borrowerGs death, the ban& was deemed to have been an agent who acted beyond the scope of its authority. Under Article 18,*, the agent who acts as such is not personally liable to the party with whom he contracts, unless he e%ceeds the limits of his authority without giving such party sufficient notice of his powers. 6f the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he +third person- has been deceived by the non$disclosure thereof by the agent, then the latter is liable for damages to him. "he rule that the agent is liable when he acts without authority is founded upon the supposition that there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the authority under which he assumes to act. 6nasmuch as the non$disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the unsuspecting client, the provisions of Articles 1,, !( and !1 of the Civil Code come into play. 4B v. Co%rt o( *ppeals, 2#! SCRA #8 (!==9+.

/. A.e&t Is Crimi&-110 Li-51e %'r Crime C'mmitte4 E7e& i& t2e P?rs?it '% t2e A.e&/0

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"he Eaw on Agency, as applied in civil cases, has no application in criminal cases, and no man can escape punishment when he participates in the commission of a crime upon the ground that he simply acted as an agent of any party. People v. Chowdury, 3!0 #C/A 0*! +!(((-.

4. A.e&tKs Writte& P'Ber '% Att'r&e0, I&s'%-r -s C'&/er&s T2ir4 Pers'&s, G'7er&s '& G?esti'&s W2et2er A.e&t A/te4 Wit2i& S/'3e '% A?t2'rit0 E7e& i% it EF/ee4s A?t2'rit0 A//'r4i&. t' U&4erst-&4i&. $etBee& Pri&/i3-1 -&4 A.e&t (Art. != +
4here the wife gave her husband a power of attorney to loan and borrow money, and for such purpose to mortgage her property, and where the husband signed his wifeGs name to a note and gave a mortgage on her property to secure the note and the amount of the loan was actually paid to her husband in money at the time the note and mortgage were e%ecuted, the transaction is binding upon the wife under her power of attorney, regardless of what the husband may ha e done with the money which he obtained on the loan. 1an- of P.!. v. e Coster, '* )hil 0,' +1,!0-. 6t is a settled rule that persons dealing with an assumed agent, whether the assumed agency be a general or special one are bound at their peril if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and e%tent of authority, and in case either is controverted, the burden of proof is upon them to establish it. Harry Aeeler v. Rodrigue*, ' )hil. 1,-. Bence, when the ban& accepted a letter of guarantee signed by a mere credit administrator on behalf of the finance company, the burden was on the ban& to satisfactorily prove that the credit administrator with whom they transacted acted within the authority given to him by his principal. B* Finance v. Co%rt o( *ppeals, 2!! SCRA !!2 (!==2+. As far as third persons are concerned, an act is deemed to have been performed within the scope of the agentGs authority, if such is within the terms of the power of attorney, as written, even if the agent has in fact e%ceeded the limits of his authority according to an understanding between the principal and his agent. '%&enio v. Co%rt o( *ppeals, 2#= SCRA 2 8 (!==9+. 4hen one &nowingly deals with the sales representative of a car dealership company, one must reali7e that one is dealing with a mere agent, and it is incumbent upon such person to act with ordinary prudence and reasonable diligence to &now the e%tent of the sales representativeGs authority as an agent in respect of contracts to sell the vehicles. A person dealing with an agent is put upon in<uiry and must discover upon his peril the authority of the agent. =8ormal business practice does not warrant a sales representative to have power to enter into a valid and binding contract of sale for the company.I 1oyota Sha., Inc. v. C*o%rt o( *ppeals, 299 SCRA #2 (!==<+. @very person dealing with an agent is put upon in<uiry and must discover upon his peril the authority of the agent. 6f he does not ma&e such in<uiry, he is chargeable with &nowledge of the agentGs authority, and his ignorance of that authority will not be any e%cuse. )ersons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and e%tent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. Bacaltos Coal -ines v. Co%rt o( *ppeals, 29< SCRA 9* (!==<+.13 "he fact that one is dealing with an agent, whether the agency be general or special, should be a danger signal. "he mere representation or declaration of one that he is authori7ed to act on behalf of another cannot of itself serve as proof of his authority to act as agent or of the e%tent of his authority as agent. 5% 'n& Cho v. *6*-, #2) SCRA 8!8 (2 +. "he settled rule is that persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and e%tent of authority, and in case either is controverted, the burden of proof is upon them to prove it. 6n this case, respondent Rernande7 specifically denied that she was authori7ed by the respondents$owners to sell the properties, both in her answer to the complaint and when she testified. "itonj%a v. Fernan#e+, 928 SCRA 98) (2 9+. "he ignorance of a person dealing with an agent as to the scope of the latterGs authority is no e%cuse to such person and the fault cannot be thrown upon the principal. A person dealing with an agent assumes the ris& of lac& of authority of the agent. Be cannot charge the principal by relying upon the agentGs assumption of authority that proves to be unfounded. "he principal, on the other hand, may act on the presumption that third persons dealing with his agent will not be negligent in failing to ascertain the e%tent of his authority as well as the e%istence of his agency. -anila -e$orial ark Ce$etery, Inc. v. "insan&an, 99# SCRA #88 (2 9+. A person dealing with a &nown agent is not authori7ed, under any circumstances, blindly to trust the agents. statements as to the e%tent of his powers. such person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. "he settled rule is that, persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and e%tent of authority, and in case either is controverted, the burden of proof is upon them to prove it. 6n this case, the petitioners failed to discharge their burden. hence, petitioners are not entitled to damages from respondent @C. "iton#ua$ %r. v. &ternit Corp.$ ',( #C/A !(' +!((6-.
Citing Pineda v. Court of Appeals, !!6 #C/A *0' +1,,3-. 8eloso v. "a 0r(ana, 08 )hil. 681 +1,33-. Harry &. Aeller &lectric Co. v. Rodrigue*, '' )hil. 1, +1,!!-. een v. Pacific Commercial Co., '! )hil. *38 +1,!!-. and Strong v. Repide, 6 )hil. 68( +1,(6-. Reiterated in Manila Memorial Par- Cemetery$ !nc. v. "insangan, ''3 #C/A 3** +!(('-.
13

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4hen dealing with an assumed agent, a third party should ascertain not only the fact of agency, but also the nature and e%tent of the agentGs authority. &scueta v. "im, 01! #C/A '11 +!((*-. "he Can& of Commerce clearly failed to observe the re<uired degree of caution in ascertaining the genuineness and e%tent of the authority of #antos to mortgage the sub2ect property. 6t should not have simply relied on the face of the documents submitted by #antos, as its underta&ing to lend a considerable amount of money re<uire of it a greater degree of diligence. "hat the person applying for the loan is other than the registered owner of the real property being mortgaged should have already raised a red flag and which should have induced Can& of commerce to ma&e in<uiries into and confirm #antosG authority to mortgage the #pouses #an )abloGs property. A person who deliberately ignores a significant fact that could create suspicion in an otherwise reasonable person is not an innocent purchaser for value. 1an- of Commerce v. San Pa(lo$ %r., 0!! #C/A *13 +!((*-. @"he Court has stressed time and again that every person dealing with an agent is put upon in<uiry, and must discover upon his peril the authority of the agent, and this is especially true where the ac of the agent is of unusual nature. 6f a person ma&es no in<uiry, he is chargeable with &nowledge of the agentGs authority, and his ignorance of that authority will not be any e%cuse. "hus, the undue haste in granting the loan without in<uiring into the ownership of the sub2ect properties being mortgage, as well as the authority of the supposed agent to constitute the mortgages on behalf of the owners, ban& accepting the mortgage cannot be deemed a mortgagee in good faith. San Pedro v. Ong, 06, #C/A *6* +!((8-. 6t is true that a person dealing with an agent is not authori7ed, under any circumstances, to trust blindly the agentGs statements as to the e%tent of his powers. #uch person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. "he settled rule is that persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, they must ascertain not only the fact of agency, but also the nature and e%tent of authority, and in case either is controverted, the burden of proof is upon them to prove it. Soriamont Steamship Agencies$ !nc. v. Sprint )ransport Services$ !nc., 0,! #C/A 6!! +!((,-. "he burden of proof to show that an agent acting in e%cess of authority to be able to invo&e the rule under Article 18,* of the Civil Code to ma&e the agent personally liable is on the person who alleges the same. Soriamont Steamship Agencies$ !nc. v. Sprint )ransport Services$ !nc. , 0,! #C/A 6!! +!((,-.

e. T2ir4 Pers'& C-&&'t Set"?3 F-/ts '% A.e&tKs EF/ee4i&. A?t2'rit0 W2ere Pri&/i3-1 R-ti%ie4 'r Si.&i%ie4 Wi11i&.&ess t' R-ti%0 A.e&tKs A/ts (Art. != !+ (!+ Pri&/i3-1 S2'?14 $e t2e O&e t' G?esti'& A.e&tKs L-/@ 'r EF/ess '% A?t2'rit0 (2+ Prese&t-ti'& '% P'Ber '% Att'r&e0 (M?st+ $e ReH?ire4 50 T2ir4 P-rt0 (Art. != 2+ (#+ Pri7-te 'r Se/ret Or4ers '% Pri&/i3-1 D' N't Pre6?4i/e T2ir4 Pers'&s W2' Re1ie4 U3'& A.e&tKs P'Ber '% Att'r&e0 'r Pri&/i3-1Ks I&str?/ti'& +Art. != 26n an e%propriation proceeding, the #tate cannot raise the alleged lac& of authority of the counsel of the owner to bind his client in a compromise agreement because such lac& of authority may be <uestioned only by the principal or client. =#ince it is within the right or prerogative of the principal to ratify even the unauthori7ed acts of the agentI. Commissioner of Pu(lic Highways v. San iego, 31 #C/A 61* +1,*(-.

). O51i.-ti'&s '% C'mmissi'& A.e&ts -. C'mmissi'& A.e&t Res3'&si51e %'r G''4s Re/ei7e4 A//'r4i&. t' Terms -&4 C'&4iti'&s -&4 -s Des/ri5e4 i& C'&si.&me&t (Art. != #+ EJCEPT> W2e& He M-@es - Writte& St-teme&t '% D-m-.e -&4 Deteri'r-ti'& +Art. != #5. O51i.-ti'& i& H-&41i&. V-ri'?s G''4s %'r Di%%ere&t OB&ers (Art. != 9+> (!+ Disti&.?is2 T2em 50 C'?&term-r@s I% G''4s '% S-me Ai&4 -&4 M-r@ UR OS'> T' Pre7e&t C'&%1i/t '% I&terest Am'&. OB&ers (2+ Disti&.?is2 %r'm Art. !=8* (C'&tr-/t '% De3'sit+ L De3'sit-r0 M-0 C'mmi&.1e Gr-i& 'r Ot2er Arti/1es '% Simi1-r N-t?re -&4 G?-1it0 L 'B&ers2i3 pro8rata /. He C-&&'t Se11 '& Cre4it Wit2'?t Pri&/i3-1Ks C'&se&t (Art. != <+ (!+ OTHERWISE> C'&si4ere4 -s C-s2 S-1es
4hether viewed as an agency to sell or as a contract of sale, the liability of >reen Kalley is indubitable. Adopting >reen KalleyGs theory that the contract is an agency to sell, it is liable because it sold on credit without authority from its principal. Under Article 1,(0, it is provided that the commission agent cannot, without the e%press or implied consent of the principal,

A")MNK 5utline Page 22 of 66

sell on credit, and should it do so the principal may demand from him payment in cash. Green ,alley v. I*C, !## SCRA *=8 (!=)9+.

4. W2e& Wit2 Pri&/i3-1Ks A?t2'rit0 t' Se11 '& Cre4it> (Art. != *+ (!+ I&%'rm t2e Pri&/i3-1 Bit2 St-teme&t '% $?0erKs N-mes, (2+ E%%e/t '% N'&"C'm31i-&/e L C'&si4ere4 S-s2 S-1e e. E%%e/t W2e& A.e&t Re/ei7es G?-r-&t0 'r 4el Cre#ere C'mmissi'&s (Art. != 8+ (!+ He S2-11 Se-r t2e Ris@ '% C'11e/ti'& (2+ He S2-11 P-0 Pri&/i3-1 t2e Pr'/ee4s '% S-1e '& S-me Terms A.ree4 Bit2 P?r/2-ser %. Li-5i1it0 %'r F-i1?re t' C'11e/t Pri&/i3-1Ks Cre4it W2e& D?e (Art. != )+ (!+ Li-5i1it0 %'r D-m-.es (2+ U&1ess D?e Di1i.e&/e Pr'7e&

IV. O$LIGATIONS OF THE PRINCIPAL

!. $i&4i&. E%%e/t '& Pri&/i3-1 '% C'&tr-/ts M-4e 50 t2e A.e&t -. W2e& D'&e Wit2i& A.e&tKs S/'3e '% A?t2'rit0> Pri&/i3-1 t2e O&10 O&e $'?&4 (Art. !)=8+
6n investment management account, where under the terms of the written instrument, the ban& shall purchase debt securities on behalf of the client and will handle the accounts in accordance with the instructions of the client, creates a principal$agent relationship, and not a trust relationship or an ordinary ban& deposit account. UConse<uently, under Article 1,1(, the client assumed all obligations or inherent ris&s entailed by transactions emanating from the arrangement, and the ban& may be held liable, as an agent, only when it e%ceeds its authority, or acts with fraud, negligence or bad faith. )rincipals in an agency relationship are solely obliged to observe the solemnity of the transaction entered into by the agent on their behalf, absent any proof that the latter acted beyond its authority, and concomitant to this obligation is that the principal also assumes the ris&s that may arise from the transaction. anlilio v. Citibank, 6.*., <#= SCRA *= (2 8+.

5. W2e& D'&e O?tsi4e '% A.e&tKs S/'3e '% A?t2'rit0> Pri&/i3-1 N't $'?&4 (Art. !=! +
4here the memorial par& company has authori7ed its agent to solicit and remit offers to purchase internment spaces obtained on forms provided by the company, then the terms of the offer to purchase, therefore, are contained in such forms and, when signed by the buyer and an authori7ed officer of the company, becomes binding on both the company and said buyer. And the fact that the buyer and the agent had an agreement different from that contained in the forms accepted does not bind the company, since the same were made obviously outside the agentGs authority. 4hen the power of the agent to sell are governed by the written form, it is beyond the authority of the agent as a fact that is deemed &nown and accepted by the third person, to offer terms and conditions outside of those provided in writing. -anila -e$orial ark Ce$etery, Inc. v. "insan&an, 99# SCRA #88 (2 9+.

/. EJCEPT> (!+ W2e& Pri&/i3-1 R-ti%ies, EF3ress10 'r Im31ie410 (Art. !=! +
#ince the general rule is that the principal is bound by the acts of his agent in the scope of the agency, therefore when the agent had full authority to ma&e the ta% returns and file them, together with the chec& payments, with the Collector of 6nternal /evenue on behalf of the principal, then the effects of dishonesty of the agent must be borne by the principal, not by an innocent third party who has dealt with the dishonest agent in good faith. "im Chai Seng v. )rinidad, '1 )hil. 0'' +1,!1-. A person with whom an agent has contracted in the name of his principal, has a right of action against the purported principal, even when the latter denies the commission or authority of the agent, in which case the party suing has the burden of proving the e%istence of the agency notwithstanding the purported principalGs denial thereof. 6f the agency relation is proved, then the principal shall be held liable, and the agent who is made a party to the suit cannot be held personally liable. 5n the other hand, if the agency relationship is not proven, it would be the agent who would become liable personally on the contract entered into. ;antes v. Madriguera, '! )hil. 38, +1,!1-.

A")MNK 5utline Page 23 of 66

4here a sale of land is effected through an agent who made misrepresentations to the buyer that the property can be delivered physically to the control of the buyer when in fact it was in adverse possession of third parties, the seller$principal is bound for such misrepresentations and cannot insist that the contract is valid and enforceable. the seller$principal cannot accept the benefits derived from such representations of the agent and at the same time deny the responsibility for them. :on*ales v. Ha(erer, '* )hil. 38( +1,!0-. 4hen an agent has been empowered to sell hemp in a foreign country, that e%press power carries with it the implied power to ma&e and enter into the usual and customary contract for its sale, which sale contract may provide for settlement of issues by arbitration. 4e are clearly of the opinion that the contract in <uestion is valid and binding upon the defendant =principalI, and that authority to ma&e and enter into it for and on behalf of the defendant =principalI, but as a matter of fact the contract was legally ratified and approved by the subse<uent acts and conducts of the defendant =principalI. Ro(inson$ 7leming and Co. v. Cru*, ', )hil. '! +1,!6-. "he authority to sell any &ind of realty that might belong to the principal was held to include also such as the principal might afterwards have during the time it was in force. Aatig(a- v. )ai Hing Co., 0! )hil. 6!! +1,!8-. "he registered owner who placed in the hands of another an e%ecuted document of transfer of the registered land, was held to have effectively represented to a third party that the holder of such document is authori7ed to deal with the property. 1londeau v. ;ano,. 61 )hil. 6!0 +1,30-. omingo v. Ro(les, '03 #C/A 81! +!((0-. 4hen the principal has duly empowered his agent to enter into a contract of mortgage over his property as well as a contract of surety, but the agent only entered into a contract of mortgage, no inference from the power of attorney can be made to ma&e the principal liable as a surety, because under the law, a surety must be e%press and cannot be presumed. ,ise and Co. v. )anglao, 63 )hil. 3*! +1,36-. 4hen ban& officers, acting as agent, had not only gone against the instructions, rules and regulations of the ban& in releasing loans to numerous borrowers who were <ualified, then such ban& officers are liable personally for the losses sustained by the ban&. "he fact that the ban& had also filed suits against the borrowers to recover the amounts given does not amount to ratification of the acts done by the ban& officers. P;1 v. 1agamaspad, 8, )hil. 360 +1,01-. As a general rule, the mismanagement of the business of a party by his agents does not relieve said party from the responsibility that he had contracted with third persons. Commercial 1an- & )rust Co. v. Repu(lic Armored Car Services Corp., 8 #C/A '!0 +1,63-. )ursuant to the terms of the 2udgment, petitioners had issued a chec& in payment of the 2udgment debt and made arrangements with the ban& for the latter to allow the encashment thereof. but the chec& was dishonored by the ban& which increased the amount of the 2udgment debt. 4hen the petitioner sought not to be made liable for the alleged oversight of the ban&, the Court denied such defense on the ground that "he principal is responsible for the acts of the agent, done within the scope of his authority, and should bear the damages caused upon third parties. 6f the fault or oversight lies on the agent ban&, the petitioners are free to sue said ban& for damages occasioned thereby. "ope* v. Alvendia, 1! #C/A 63' +1,6'-. 4here the principal issued the chec&s in full payment of the ta%es due, but his agents had misapplied the chec& proceeds, it was held that the principal would still be liable, because when a contract of agency e%ists, the agentGs acts bind his principal, without pre2udice to the latter see&ing recourse against the agent in an appropriate civil or criminal action. y Peh v. Collector of !nternal Revenue, !8 #C/A !16 +1,6,-. Under the principle that &nowledge of the agent is considered &nowledge by the principle, the Court ruled that the spouses cannot defend by contending lac& of &nowledge of the rules upon which they received their tic&ets from the airline company since the evidence bore out that their travel agent, who handled their travel arrangements, was duly informed by proper representatives of the airline company. *ir France v. Co%rt o( *ppeals, !2* SCRA 99) (!=)#+ 4hen a third party admitted in her written correspondence that she had contracted with the principal through an duly authori7ed agent, and then sues both the principal and the agent on an alleged breach of that contract, and in fact later on dismisses the suit insofar as the principal is concerned, there can be no cause of action against the agent. #ince it is the principal who should be answerable for the obligation arising from the agency, it is obvious that if a third person waives his claims against the principal, he cannot assert them against the agent. 1edia v. ,hite, !(' #C/A !*3 +1,,1-. "he fact that the agent defrauded the principal in not turning over the proceeds of the transactions to the latter cannot in any way relieve or e%onerate such principal from liability to the third persons who relied on his agentGs authority. 6t is an e<uitable ma%im that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss. C%ison v. Co%rt o( *ppeals, 228 SCRA #=! (!==#+. 5n the basis of the general principle that the principal is responsible for the acts of the agent, done within the scope of his authority, and should bear the damage caused to third persons, the principal cannot absolve itself from the damages sustained by its buyer on the premise that the fault was primarily caused by its agent in pointing to the wrong lot, since the agent was acting within its authority as the sole real estate representative =of the principal$sellerI when it made the delivery to A")MNK 5utline Page 24 of 66

the buyer, although =iIn acting within its scope of authority, =the agentI was, however, negligent, since it is negligence that is the basis of principalGs liability since under Arts. 1,(, and 1,1(, the liability of the principal for acts done by the agent within the scope of his authority do not e%clude those done negligently. leasantville 4ev. v. Co%rt o( *ppeals, 2<# SCRA ! (!==*+. 4hen a ban&, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an ac<uired asset +piece of land- in the normal course of business, it is legally obliged to confirm the transaction by issuing a board resolution to enable the buyers to register the property in their names. R%ral Bank o( -ilaor v. Oc(e$ia, #2< SCRA == (2 +. /atification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. "he substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. 5rdinarily, the principal must have full &nowledge at the time of ratification of all the material facts and circumstances relating to the unauthori7ed act of the person who assumed to act as agent. "hus, if material facts were suppressed or un&nown, there can be no valid ratification and this regardless of the purpose or lac& thereof in concealing such facts and regardless of the parties between whom the <uestion of ratification may arise. 8evertheless, this principle does not apply if the principalGs ignorance of the material facts and circumstances was willful, or that the principal chooses to act in ignorance of the facts. Bowever, in the absence of circumstances putting a reasonably prudent ma on in<uiry, ratification cannot be implied as against the principal who is ignorant of the facts. "hus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them, e%pressly or impliedly. 5nly the principal can ratify. the agent cannot ratify his own unauthori7ed acts. Joreover, the principal must have &nowledge of the acts he is to ratify. -anila -e$orial ark Ce$etery, Inc. v. "insan&an, 99# SCRA #88, #=9 (2 9+. #ince the basis of agency is representation, then the <uestion of whether an agency has been created is ordinarily a <uestion which may be established in the same way as any other fact, either by direct or circumstantial evidence. "hough that fact or e%tent of authority of the agents may not, as a general rules, be established from the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her agency both as against the asserted principal and the third persons interested in the transaction in which he or he is engaged. oles v. Angeles$ ',! #C/A 6(* +!((6-. "he general rule is that the principal is responsible for the acts of its agent done within the scope of its authority, and should bear the damage caused to third persons. 4hen the agent e%ceeds his authority, the agent becomes personally liable for the damage. Cut even when the agent e%ceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers. 6n other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, e%pressly or implied. /atification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. Filipinas "i(e *ss%rance Co. v. e#roso , <9# SCRA <92 (2 )+

(2+ W2ere A.e&t A/ts i& EF/ess '% A?t2'rit0, W2ere t2e Pri&/i3-1 A11'Be4 A.e&t t' A/t -s T2'?.2 A.e&t H-4 F?11 P'Bers (Art. !=!!+ (-+ EF/e3ti'& t' t2e R?1e t2-t O51i.-ti'&s Are Pres?me4 t' $e J'i&t (5+ D'/tri&e '% A33-re&t A?t2'rit0
"he doctrine of apparent authority focuses on two factors, first the principalGs manifestations of the e%istence of agency which need not be e%pressed, but may be general and implied, and second is the reliance of third persons upon the conduct of the principal or agent. Under the doctrine of apparent authority, the <uestion in every case is whether the principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is 2ustified in presuming that such agent has authority to perform the particular act in <uestion. ro(essional Services, Inc. v. Co%rt o( *ppeals, <99 SCRA !8 (2 )+, *!! SCRA 2)2 (2 ! +. @asily discernible from the foregoing is that apparent authority is determined only by the acts of the principal and not by the acts of the agent. "he principal is, therefore, not responsible where the agent;s own conduct and statements have created the apparent authority. Sar&asso Constr%ction & 4ev.elop$ent Corp. v. *hilippine orts *%thority, *2# SCRA 2* (2 ! +. "here can be no apparent authority of an agent without acts or conduct on the part of the principal, which must have been &nown and relied upon in good faith as a result of the e%ercise of reasonable prudence by a third party claimant, and which must have produced a change of position to the third partyGs detriment. 6n the present case, the trial courtGs decision was utterly silent on the manner by which the supposed principal, has clothed or held out its branch manager as having the power to enter into an agreement, as claimed by petitioners. 8o proof of the course of business, usages and practices of the ban& about, or &nowledge that the board had or is presumed to have of, its responsible officersG acts regarding ban& branch affairs, was ever adduced to establish the branch managerGs apparent authority to verbally alter the terms of mortgage contracts. Banate v. hilippine Co%ntrysi#e R%ral Bank, *2< SCRA 2! (2 ! +.

A")MNK 5utline Page 25 of 66

(/+ A.e&/0 50 Est'33e1

Cy the opening of branch office with the appointment of its branch manager and honoring several surety bonds issued in its behalf, the insurance company induced the public to believe that its branch manager had authority to issue such bonds. As a conse<uence, the insurance company was estopped from pleading, particularly against a regular customer thereof, that the branch manager had no authority. Central Surety & !nsurance Co. v. C.;. Hodges, 38 #C/A 10, +1,*1-. 4hen collision with another vessel has been caused by the negligence of the ship agent, both the ship owner and the ship agent can be sued together for the recovery of damages since their liability for the damage caused is solidary. 8erso*a v. "im, '0 )hil '16 +1,!3-. @ven when the agent of the real estate company acts unlawfully and outside the scope of authority, the principal can be held liable when by its own act it accepts without protest the proceeds of the sale of the agents which came from double sales of the same lots, as when learning of the misdeed, it failed to ta&e necessary steps to protect the buyers and failed to prevent further wrong from being committed when it did not advertise the revocation of the authority of the culprit agent. 6n such case the liabilities of both the principal and the agent is solidary. -anila Re$nants v. Co%rt o( *ppeals, !=! SCRA *22 (!== + Ror an agency by estoppel to e%ist, the following must be established1 +1- the principal manifested a representation of the agentGs authority or &nowingly allowed the agent to assume such authority. +!- the third person, in good faith, relied upon such representation. +3relying upon such representation, such third person has changed his position to his detriment. An agency by estoppel, which is similar to the doctrine of apparent authority, re<uires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action ta&en in reliance. "itonj%a, )r. v. 'ternit Corp., 9= SCRA 2 9 (2 *+. #ince the basis of agency is representation, the <uestion of whether an agency has been created is ordinarily a <uestion which may be established in the same way as any other fact, either by direct or circumstantial evidence. "hough that fact or e%tent of authority of the agents may not, as a general rules, be established from the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her agency both as against the asserted principal and the third persons interested in the transaction in which he or he is engaged. oles v. Angeles$ ',! #C/A 6(* +!((6-. 6nnocent third persons should not be pre2udiced if the principal failed to adopt the needed measures to prevent misrepresentation, much more so if the principal ratified his agentGs acts beyond the latterGs authority. Filipinas "i(e *ss%rance Co. v. e#roso , <9# SCRA <92 (2 )+. "he law ma&es no presumption of agency and proving its e%istence, nature and e%tent is incumbent upon the person alleging its e%istence, nature and e%tent is incumbent upon the person alleging it. An agency by estoppel, which is similar to the doctrine of apparent authority re<uires the proof of reliance upon the representation, and that, in turn, needs proof that the representations predated the action ta&en in reliance. 5%n ?.an By%n& v. *GCOR, * ) SCRA ! 8 (2 =+.

2. O51i.-ti'&s '% t2e Pri&/i3-1 -. O51i.-ti'& t' P-0 A.e&tKs C'm3e&s-ti'& (Art. !)8<+
Although the sale of the ob2ect of the agency to sell was perfected three days after the e%piration of the agency period, the agent would still be entitled to receive the commission stipulated based on the doctrine held in Prats v. Court of Appeals, 81 #C/A 36( +1,*8-, that when the agent was the efficient procuring cause in bringing about the sale that the agent was entitled to compensation. 6n the earlier case of Reyes v. Manaoat, 8 C.A. /ep. !d 368 +1,60-, this Court ruled that when there is a close, pro%imate and causal connection between the agent;s efforts and labor and the principal;s sale of his property, the agent is entitled to a commission. -anotok Bros. Inc. v. C, 22! SCRA 229 (!==#+. Although the ultimate buyer was introduced by the agent to the principal during the term of the agency, nevertheless, the lapse of the period of more than one +1- year and five +0- months between the e%piration of petitioners; authority to sell and the consummation of the sale, cannot authori7e compelling the principal to pay the stipulated bro&erGs fee, since the agent was no longer entitled thereto. "he Court ta&es into strong consideration that utter lac& of evidence of the agent showing any further involvement in the negotiations between principal and buyer during that period and in the subse<uent processing of the documents pertinent to said sale. "he bro&er was not the efficient procuring cause in bringing about the sale in <uestion, and are therefore not entitled to the stipulated bro&erGs commission. !nland Realty v. Court of Appeals, !*3 #C/A *( +1,,*-.

5. O51i.-ti'& t' A47-&/e S?ms ReH?este4 %'r EFe/?ti'& '% A.e&/0 (Art. !=!2+ (!+ A.e&t H-s Ri.2t t' Reim5?rseme&t %'r EF3e&ses A47-&/e4 I&/1?4i&. I&terest %r'm t2e D-0 It W-s A47-&/e4 (2+ C'm3-re> W2ere A.e&t C'&se&ts -&4 Is $'?&4 t' A47-&/e t2e S?ms -s Sti3?1-te4 (Art. !))*+ (#+ W2ere Pri&/i31e &'t Li-51e t' A.e&t %'r EF3e&ses I&/?rre4 (Art. !=!)+
According to Bahn, CJ4 periodically inspected the service centers to see to it that CJ4 A")MNK 5utline Page 26 of 66

standards were maintained. 6ndeed, it would seem from CJ4;s letter to Bahn that it was for Bahn;s alleged failure to maintain CJ4 standards that CJ4 was terminating Bahn;s dealership. "he fact that Bahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of CJ4. Ror as already noted, there are facts in the record which suggest that CJ4 e%ercised control over Bahn;s activities as a dealer and made regular inspections of Bahn;s premises to enforce compliance with CJ4 standards and specifications. 7ahn v. Co%rt o( *ppeals, 2** SCRA <#8 (!==8+. Bowever, while the law on agency prohibits the area manager from obtaining reimbursement, his right to recover may still be 2ustified under the general law on obligations and contracts, particularly Article 1!36 of the Civil Code on payment by a third party of the obligation of the debtor, allows recovery only insofar as the payment has been beneficial to the debtor. "hus, to the e%tent that the obligation of the insurance company has been e%tinguished, the area manager may demand for reimbursement from his principal. "o rule otherwise would result in un2ust enrichment of petitioner. 4here the area manager of the insurance company is only authori7ed to collect insurance premiums within his designated area of responsibility, but ma&es settlement and pays claims on insurance claims without any such authority from the principal insurance company, then the insurance company has no obligation to reimbursement the claims for e%penses incurred by the agent outside the scope of his authority. 4o$inion Ins%rance Corp. v. Co%rt o( *ppeals, #8* SCRA 2#= (2 2+.

/. O51i.-ti'& t' I&4em&i%0 A.e&t %'r D-m-.es (Art. !=!#+ (!+ C'm3-re> "iability o( *&ent (or 4a$a&es (or 6on8per(or$ance o( *&ency (Art. !))9+
4hen the purchase by one company of the copra of another company is by way of contract of purchase rather than an agency to purchase, the former is not liable to reimburse the latter for e%penses incurred by the latter in maintaining it purchasing organi7ation intact over a period during which the actual buying of copra was suspended. *lbala#ejo y Cia v. RC, 9< P2i1 <<* (!=2#+.

4. Ri.2t '% A.e&t t' Ret-i& O56e/t '% A.e&/0 i& P1e4.e %'r A47-&/es -&4 D-m-.es (Art. !=!9+ (!+ A.e&t $'?&4 t' 4e1i7er t' 3ri&/i3-1 e7er0t2i&. 2e re/ei7e4 even i( not #%e the principal (Art. !)=!+. (2+ T2i&. P1e4.e4 M-0 $e S'14 O&10 A%ter Dem-&4 '% Am'?&t D?e L P?51i/ A?/ti'& t' T-@e P1-/e Bit2i& O&e (!+ M'&t2 A%ter Dem-&4. De5t'r M-0 Dem-&4 Ret?r& '% N't S'14 Bit2i& T2is Peri'4 (Art. 2!22+. #. O51i.-ti'& '% TB' 'r M're Pri&/i3-1s t' A.e&t A33'i&te4 %'r C'mm'& Tr-&s-/ti'&s L S'1i4-r0 (Art. !=!<+ -. O51i.-ti'& '% t2e Pri&/i3-1s Is S'1i4-r0 $e/-?se '% T2eir C'mm'& I&terest
4hen the law e%pressly provides for solidarity of the obligation, as in the liability of co$ principals in a contract of agency, each obligor may be compelled to pay the entire obligation. "he agent may recover the whole compensation from any one of the co$principals, as in this case. 4e Castro v. Co%rt o( *ppeals, #)9 SCRA * 8 (2 2+.

5. C'm3-re> TB' 'r M're A.e&ts Bit2 O&e Pri&/i3-1 L A.e&tKs O51i.-ti'& Is S'1i4-r0 (Art !)=9+. /. Ri.2t '% E-/2 Pri&/i3-1 t' Re7'@e A?t2'rit0 '% C'mm'& A.e&t (Art. !=2<+. 9. Ri.2ts '% Pers'&s W2' C'&tr-/te4 %'r S-me T2i&., O&e Wit2 Pri&/i3-1 -&4 t2e Ot2er Wit2 A.e&t (Art. !=!*+ -. T2-t '% Pri'r D-te Is Pre%erre4 5. I% - D'?51e S-1e Sit?-ti'& L Art. !<99 G'7er&s <. Li-5i1it0 '% Pri&/i3-1 -&4 A.e&t t' T2ir4 Pers'&s W2'se C'&tr-/t M?st $e Re6e/te4 P?rs?-&t t' Art. !=!* (Art. !=!8+ -. I% A.e&t i& G''4 F-it2 ? Pri&/i3-1 Li-51e 5. I% A.e&t i& $-4 F-it2 ? A.e&t -1'&e Li-51e *. Li-5i1it0 '% Pri&/i3-1 t' T2ir4 Pers'&s %'r A/ts '% t2e A.e&tKs Em31'0ees
"he mere fact that the employee of the airline company;s agent has committed a tort is not sufficient to hold the airline company liable. "here is no vinculum #uris between the airline company and its agent;s employees and the contractual relationship between the airline company and its agent does not operate to create a 2uridical tie between the airline company and its agent;s employees. Article !18( of the Civil Code does not ma&e the principal vicariously liable for the tort A")MNK 5utline Page 27 of 66

committed by its agent;s employees and the principal$agency relationship per se does not ma&e the principal a party to such tort. hence, the need to prove the principal;s own fault or negligence. Spouses 8iloria v. Continental Airlines$ !nc., >./. 8o. 188!88, 16 Nanuary !(1!. Co$pare> "hus, with regard to the delivery of the petroleum, Killaru7 was acting as the agent of petitioner )etron. Ror a fee, he delivered the petroleum products on its behalf. 8otably, petitioner even imposed a penalty clause in instances when there was a violation of the hauling contract, wherein it may impose a penalty ranging from a written warning to the termination of the contract. "herefore, as far as the dealer was concerned with regard to the terms of the dealership contract, acts of Killaru7 and his employees are also acts of petitioner. etron Corp. v. Spo%ses Cesar )overo & 'r$a F. C%#illa, G.R. N'. !<! #), !) J-&?-r0 2 !2.

V. EJTINGUISHMENT OF AGENCY
!. H'B -&4 W2e& A.e&/0 EFti&.?is2e4 (Art. !=!=+ -. $0 Pri&/i3-1Ks Re7'/-ti'& '% A.e&/0 (EF3ress 'r Im31ie4+ 5. $0 A.e&tKs Wit24r-B-1 %r'm A.e&/0 /. $0 De-t2, Ci7i1 I&ter4i/ti'&, I&s-&it0 'r I&s'17e&/0 '% t2e Pri&/i3-1 'r t2e A.e&t 4. $0 t2e Diss'1?ti'& '% t2e J?ri4i/-1 E&tit0 W2i/2 E&tr?ste4 'r A//e3te4 t2e A.e&/0 e. $0 t2e A//'m31is2me&t '% t2e O56e/t 'r P?r3'se '% A.e&/0 %. $0 t2e EF3ir-ti'& '% t2e Peri'4 %'r W2i/2 A.e&/0 W-s C'&stit?te4 2. EF3ress Re7'/-ti'&> T2e Pri&/i3-1 M-0 Re7'@e -& D*&ency at ;illE -. I& W2i/2 C-se, Pri&/i3-1 M-0 C'm3e1 A.e&t t' Ret?r& t2e D'/?me&t E7i4e&/i&. t2e A.e&/0. (Art. !=2 +
4here no time for the continuance of the agency is fi%ed by the terms, the principal is at liberty to terminate it at will sub2ect only to the re<uirements of good faith. a/on v. 1rimo, '! )hil 133 +1,!1-.

5. Ri.2t '% Eit2er TB' 'r M're Pri&/i3-1s t' Re7'@e (!+ Obli&ation o( Several rincipals to a Co$$on *&ent Is Soli#ary. (Art. !=!<+ (2+ *ny o( the rincipals Can Revoke the *%thority o( 1heir Co$$on *&ent, ;itho%t the Consent o( the Other2s3. +Art. !=2<-

#. Im31ie4 Re7'/-ti'& -. A33'i&tme&t '% NeB A.e&t %'r S-me $?si&essCTr-&s-/ti'& +Art. !=2#(!+ I$plie#ly Revoke# as to *&ent Only (2+ *s to 1hir# ersons, 6otice to 1he$ Is 6ecessary +Art. !=226n litigation, the fact that a second attorney enters an appearance on behalf of a litigant does not authori7e a presumption that the authority of the first attorney has been withdrawn. A*nar v. Morris, 3 )hil. 636 +1,('-. 4here the father first gave a power of attorney over the business to his son, and subse<uently to the mother, the Court held that without evidence showing that the son was informed of the issuance of the power of attorney to the mother, the transaction effected by the son pursuant to his power of attorney, was valid and binding. Garcia v. 4e -an+ano, #= P2i1 <88 (!=!=+.

5. W2e& Pri&/i3-1 Dire/t10 M-&-.es $?si&ess E&tr?ste4 t' A.e&t (Art. !=29+
6f the purpose of the principal in dealing directly with the purchaser and himself effecting the sale of the principalGs property is to avoid payment of his agentGs commission, the implied revocation is deemed made in bad faith and cannot be sanctioned without according to the agent the commission which is due him. !nfante v. Cunanan, ,3 )hil 6,3 +1,03-. "he act of a contractor, who, after e%ecuting powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from the >overnment, and thereafter demanded and collected from the >overnment the money the collection of which he entrusted to his attorney$in$fact, constituted revocation of the agency. ;ew Manila Co. v. Repu(lic, 1(* )hil 8!' +1,6(-.

A")MNK 5utline Page 28 of 66

"he revocation of a special power of attorney, although embodied in a private writing is valid and binding between the parties. Philippine ;ational 1an- v. !ntermediate Appellate Court , 18, #C/A 68( +1,,(-. 4here the purported agent was orally given authority to follow up the purchase of the fire truc& with the municipal government, there is no authority to sell nor has the purported agent been empowered to ma&e a sale for and in behalf of the seller. Cut even if the purported agent is considered to have been constituted as an agent to sell the fire truc&, such agency would have been deemed revo&ed upon the resumption of direct negotiations between the seller and the municipality, the purported agent having in the meantime abandoned all efforts +if indeed any were e%erted- to secure the deal in the sellerGs behalf. :uarde' v. ;"RC, 1,1 #C/A '8* +1,,(-. )rincipal may revo&e, e%press or impliedly, a contract of agency at will, and may be availed of even if the period fi%ed in the contract of agency has not yet e%pired. As the principal has this absolute right to revo&e the agency, the agent can not ob2ect thereto. neither may he claim damages arising from such revocation, unless it is shown that such was done in order to evade the payment of agentGs commission. "he act of a contractor, who, after e%ecuting powers of attorney in favor another empowering the latter to collect whatever amounts may be due to him from the >overnment, and thereafter demanded and collected from the government the money the collection of which he entrusted to his attorney$in$fact, constituted revocation of the agency in favor of the attorney$in$fact. ;ew Manila "um(er Co.$ !nc. v. Repu(lic of the Philippines , 1(* )hil. 8!' +1,6(-. C-S "o&&in& v. Co%rt o( *ppeals, 2!! SCRA #89 (!==2+.1' Damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the e%ception mentioned, which is to evade the payment of the agentGs commission. C-S "o&&in& v. Co%rt o( *ppeals, 2!! SCRA #89 (!==2+.

/. Ge&er-1 P'Ber '% Att'r&e0 Is Re7'@e4 50 - S3e/i-1 O&e Gr-&te4 t' A&'t2er A.e&t, As Re.-r4s t2e S3e/i-1 M-tter I&7'17e4 i& t2e L-tter (Art. !=2*+
@ven though a period is stipulated during which the agent or employee is to hold his position in the service of the owner or head of a mercantile establishment, yet the latter may, for any of the special reasons specified in Art. 3(( of the Code of Commerce, dismiss such agent or employee even before the termination of the period. 1arretto v. Santa Marina, !6 )hil ''( +1,13-. A special power of attorney giving the son the authority to sell the principals properties is deemed revo&ed by a subse<uent general power of attorney that does not give such power to the son, and any sale effected thereafter by the son in the name of the father would be void. 4y B%ncio an# Co. v. On& G%an Ca, * P2i1 *=* (!=#9+. 6t is now well$settled that a principal may discharge or dismiss his agent for 2ust cause for malfeasance or misfeasance in the performance of his duties. "he provisions of article 3(( of the Code of Commerce e%pressly authori7es a merchant to discharge his employee or agent for fraud or breach of trust, or engaging in any commercial transaction for their own account without the e%press &nowledge and permission of the principal. Manila )rading v. Manila )rading "a(orers Assn., 83 )hil !,* +1,',-. 4hen the terms of the agency contract allowed the agent to dispose of, sell, cede, transfer and convey % % % until all the sub2ect property as subdivided is fully disposed of, the agency is one with a period and it is not e%tinguished until all the lots have been disposed of. Conse<uently, if the contract is terminated by the principal before all the lots in the subdivision has been disposed of, there is a breach of contract for which the principal would be liable for damages. ialosa v. Court of Appeals, 13( #C/A 30( +1,8'-. 4hen the revocation of the agency was effected by the principal primarily because of the refusal of the agent to share fifty percent of the commissions earned under the contract of agency, such revocation was done in bad faith, and for which the principal can be held liable for damages including the payment of full commissions earned by the agent at the time of the revocation of the agency. 8alen*uela v. Court of Appeals$ 1,1 #C/A 1 +1,,(-. Courts are without authority to reinstate an agency arrangement that has been revo&ed or terminated by the principal. 6n an agent$principal relationship, the personality of the principal is e%tended through the facility of the agent. 6n so doing, the agent, by legal fiction, becomes the principal, authori7ed to perform all acts which the latter would have him do. #uch a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. "he Agreement itself between the parties states that either party may terminate the Agreement without cause by giving the other 3( daysG notice by letter, telegram or cable. +emphasis supplied- 4e, therefore, set aside the portion of the ruling of the respondent appellate court reinstating 5rient Air as general sales agent of American Air. Orient Air Services v. Court of Appeals, 1,* #C/A 6'0, 606 +1,,1-.

9. C-ses '% Irre7'/-51e A.e&/ies (Art. !=28+> -. W2e& - $i1-ter-1 C'&tr-/t De3e&4s '& It
An e%ception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends upon the agency. "he reason for its irrevocability is because the agency becomes part of another obligation or agreement. 6t is not solely the rights of the principal
14

;ew Manila "um(er Co.$ !nc. v. Repu(lic of the Philippines, 1(* )hil. 8!' +1,6(-.

A")MNK 5utline Page 29 of 66

but also that of the agent and third persons which are affected. Bence, the law provides that in such cases, the agency cannot be revo&ed at the sole will of the principal. Rep%blic v. 'van&elista, 9** SCRA <99 (2 <+. Agency is e%tinguished by the death of the principal. "he only e%ception where the agency shall remain in full force and effect even after the death of the principal is when if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. Sasa(a v. 8da. e )e, 0,' #C/A '1( +!((,-.

5. W2e& It Is t2e Me-&s '% F?1%i11i&. -& O51i.-ti'& A1re-40 C'&tr-/te4

Unli&e simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of the parties cannot be revo&ed at will. "he reason is that it is one coupled with an interest, the agency having been created for the mutual interest of the agent and the principal. 6t appears that Eina #evilla is a bona fide travel agent herself, and as such, she had ac<uired an interest in the business entrusted to her. Joreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. #he continued the business, using her own name, after "ourist 4orld had stopped further operations. Ber interest, obviously, is not limited to the commissions she earned as a result of her business transactions, but one that e%tends to the very sub2ect matter of the power of management delegated to her. 6t is an agency that cannot be revo&ed at the pleasure of the principal. Accordingly, the revocation complained of should entitle the petitioner. Sevilla v. Co%rt o( *ppeals, !* SCRA !8! (!=))+. *&ency Co%ple# .ith Interest> 6n the insurance business in the )hilippines, the most difficult and frustrating period is the solicitation and persuasion of the prospective clients to buy insurance policies. 8ormally, agents would encounter much embarrassment, difficulties, and oftentimes frustrations in the solicitation and procurement of the insurance policies. "o sell policies, an agent e%erts great effort, patience, perseverance, ingenuity, tact, imagination, time and money. . . "herefore, the respondents cannot state that the agency relationship between Kalen7uela and )hilamgen is not coupled with interest. "here may be cases in which an agent has been induced to assume a responsibility or incur a liability, in reliance upon the continuance of the authority under such circumstances that, if the authority be withdrawn, the agent will be e%posed to personal loss or liability. . . . Rurthermore, there is an e%ception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of third persons or for the mutual interest of the principal and the agent. 6n these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal. ,alen+%ela v. Co%rt o( *ppeals, !=! SCRA ! (!== +. 8A#U"/A, in order to finance its underta&ing as the mar&eting agent of )B6E#UC5J +which was by law the sole buying and selling agent of sugar on the 9uedan permit level-, applied for and was grant a )'(8 Jillion /evolving Credit Eine by )8C, by which every time 8A#U"/A availed of the credit line, it e%ecuted a promissory note in favor of )8C. @ventually, in order to stabili7e sugar li<uidation prices at a targeted minimum price per picul . . . Also, the relationship between 8A#U"/AA#/A and )8C when the former constituted the latter as its attorney$in$fact is not a simp6e agency. 8A#U"/AA#/A has assigned and practically surrendered its rights in favor of )8C for a substantial consideration. "o reiterate, 8A#U"/AA#/A e%ecuted promissory notes in favor of )8C every time it availed of the credit line. "he agency established between the parties is one coupled with interest which cannot be revo&ed or cancelled at will by any of the parties. 6ational S%&ar 1ra#in& v. hilippine 6ational Bank, #=* SCRA <2) (2 #+. @ven an agency coupled with interest may indeed be revo&ed on the ground of fraud committed by the agent, which is really an act of rescission, the same must be clearly be proven. Bacalin& v. -%ya, #) SCRA 8!9 (2 2+.

/. U&6?sti%ie4 Rem'7-1 '% M-&-.i&. P-rt&er L Re7'/-ti'& Nee4s t2e V'te '% C'&tr'11i&. P-rt&ers (Art. !) +
. . . it must not be forgotten that a power of attorney although coupled with interest in a partnership can be revo&ed for a 2ust cause, such as when the attorney$in$fact betrays the interest of the principal, as happened in this case. 6t is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authori7es the agent to commit frauds against the principal. Coleon&co v. Claparols, ! SCRA <88, <)!"<)2 (!=*9+. 6n an agency coupled with interest, it is the -.e&/0 that cannot be revo&ed or withdrawn 50 t2e 3ri&/i3-1 due to an interest of a third party that depends upon it, or the mutual interest of both principal and agent. 6n this case, the non$revocation or non$withdrawal under paragraph 0+c- =of the )ower of Attorney I applies to the -47-&/es made by petitioner =agentI who is supposedly the -.e&t and not the principal under the contract. "hus, it cannot be inferred from the stipulation that the partiesG relation under the agreement is one of agency coupled with an interest and not a partnership. Phile' Mining Corp. v. Commissioner of !nternal Revenue , 001 #C/A '!8 +!((8-.

<. E%%e/ts '% Re7'/-ti'& '& T2ir4 P-rties -. W2e& It A%%e/ts De-1i&. Bit2 S3e/i%ie4 T2ir4 P-rties (Art. !=2!+ (!+ Re(ers to an *&ency Create# by rincipal to 4eal .ith Speci(ie# 1hir# ersons

A")MNK 5utline Page 30 of 66

(2+ For Revocation to rej%#ice 1he$, 6otice Is 6ee#e# (#+ C'm3-re> '((ect o( Special 6otice or %blic *#vertise$ent re> *ppoint$ent an# Revocation o( *&ent (Art. !)8#+.
4here the principal had e%pressly revo&ed the power of the agent to handle the affairs of the business, but such revocation was not conveyed to a long$standing client to whom the agent had been specifically endorsed in the past by the principal, the revocation was not deemed effective as to such client and the contracts entered into by the agent in the name of the principal after the revocation would still be valid and binding against the principal. Rallos v. 5an&co, 2 P2i1 2*= (!=!!+. 6n a case covering a power of attorney to deal with the general public, the fact that the revocation was advertised in a newspaper of general circulation would be sufficient warning to third persons. Rammani v. Court of Appeals, 1,6 #C/A *31 +1,,1-.

5. W2e& Re7'/-ti'& '% A.e&tKs Ge&er-1 P'Bers E%%e/ti7e A.-i&st T2ir4 Pers'&s (Art. !=22+ Re(ers to *&ency Create# to 4eal .ith the General %blic Revocation ;ill not rej%#ice 1hir# ersons ;ho 4eal .ith the *&ent in Goo# Faith an# ;itho%t ?no.le#&e o( Revocation 7o.ever 6otice o( Revocation in a 6e.spaper o( General Circ%lation Is S%((icient ;arnin&

4here a principal has been engaged, through his agent, in a series of purchase and sell transactions with a merchant, and purported suspended the agent without informing the merchant, the suspension of the agent could not wor& to the detriment of the merchant, thus1 "here is no convincing proof in the record that the orders given by the plaintiff to its agent +>utierre7- had ever been communicated to the defendant. "he defendant had a perfect right to believe, until otherwise informed, that the agent of the plaintiff, in his purchase of abaca and other effects, was still representing the plaintiff in said transactions. "he Court also found anomalous the position ta&en by the principal whereby he was willing to ratify the acts of the agent in selling goods to the merchant, but unwilling to ratify the agentGs acts in purchasing goods from the same merchant. Cia. :en. e )o(acos v. ia(a, !( )hil 3!1 +1,11-. 4hile Art. 1308 of Civil Code re<uires that the contracts involving real property must appear in a proper document, a revocation of a special power of attorney to mortgage a parcel of land, embodied in a private writing, is valid and binding between the parties, such re<uirement of Article 1308 being only for the convenience of the parties and to ma&e the contract effective as against third persons. P;1 v. !AC$ 18, #C/A 68( +1,,(-. 4hen the principal owner of land e%ecutes a special power of attorney giving her agent the power to mortgage the same, even when there has been a revocation thereof, but the same has not been made &nown to third parties, then those who receive a mortgage on the properties in good faith will be protected in their contract, for under Art. 1,!1 of the Civil Code, if an agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not pre2udice the latter if they were not given notice thereof. "%stan v. C*, 2** SCRA **# (!==8+.

*. Ri.2t '% A.e&t t' Wit24r-B (Resi.&+ %r'm A.e&/0 (Art. !=2)+ -. $0 Gi7i&. D?e N'ti/e t' Pri&/i3-1 5. A.e&t t' I&4em&i%0 Pri&/i3-1 S2'?14 $e S?%%er A&0 D-m-.e /. U&1ess Wit24r-B-1 Is D?e t' Im3'ssi5i1it0 '% C'&ti&?i&. A.e&/0 Wit2'?t Gr-7e Detrime&t t' A.e&t
4hen the agent and administrator of property informs his principal by letter that for reasons of health and medical treatment he is about to depart from the place where he is e%ecuting his trust and wherein the said property is situated, and abandons the property, turns it over to a third party, renders accounts of its revenues up to the date on which he ceases to hold his position and transmits to his principal a general statement which summari7es and embraces all the balances of his accounts since he began the administration to the date of the termination of his trust, and, without stating when he may return to ta&e charge of the administration of the said property, as&s his principal to e%ecute a power of attorney in due form in favor of and transmit the same to another person who too& charge of the administration of the said property, it is but reasonable and 2ust to conclude that the said agent had e%pressly and definitely renounced his agency and that such agency was duly terminated, in accordance with the provisions of article 1*3! +now Arts. 1,1, and 1,!8- of the Civil Code. ela Pena v. Hidalgo, 16 )hil '0( +1,1(-. "he fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the li<uidation of the accounts between them arising from the agency, and renders a final account of his operations, is e<uivalent to an e%press renunciation of the agency, and terminates the 2uridical relation between them. "he subse<uent purchase by the former agent of the principalGs usufruct rights in a public auction therefore was valid, since no fiduciary relationship e%isted between them at that point. 8alera v. 8elasco, 01 )hil 6,0 +1,!8-.

A")MNK 5utline Page 31 of 66

4. O51i.-ti'& '% A.e&t t' C'&ti&?e t' A/t E7e& A%ter Wit24r-Bi&. Fr'm A.e&/0 (Art. !=2=+ 'ven I( *&ent ;ith#ra.s (ro$ the *&ency (or a ,ali# Reason, 7e -%st Contin%e to *ct@ Until rincipal has ha# reasonable opport%nity to 1ake 6ecessary Steps to -eet Sit%ation@ (!+ C'm3-re> *&ent 4eclines the *&ency (Art. !))<+ 8. De-t2 '% t2e Pri&/i3-1 EFti&.?is2es t2e A.e&/0 (ArtS. !=!=:#;, !=#!+
"he time during which the agent may hold his position is indefinite or undertermined, when no period has been fi%ed in his commission and so long as the confidence reposed in him by the principal e%ist. but as soon as this confidence disappears the principal has a right to revo&e the power he conferred upon the agent, especially when the latter has resigned his position for good reasons. 1arretto v. Santa Marina, !6 )hil ''( +1,13-. @ven though a period is stipulated during which the agent is to hold his position in the service of the owner or head of a mercantile establishment, yet the latter may, for any of the special reason specified in article 3(( of the Code of commerce, dismiss such agent even before the termination of the period. 1arretto v. Santa Marina, !6 )hil. ''( +1,13-. Cy reason of the very nature of the relationship between principal and agent, agency is e%tinguished by the death of the principal or the agent. "his is the law in this 2urisdiction. Rallos v. Felix Go Chan & Sons Realty Corp., )! SCRA 2<! (!=8)+. "he death of a client divests his lawyer of authority to represent him as counsel, since a dead client has no personality and cannot be represented by an attorney. "avina v. Court of Appeals, 1*1 #C/A 6,1 +1,88-.10

-. W2e& t2e A.e&/0 C'&ti&?es Des3ite De-t2 '% Pri&/i3-1 (Art. !=# +> (!+ I( It ;as Constit%te# (or Co$$on Interest o( rincipal an# *&ent@ or (2+ In Favor o( 1hir# erson ;ho *ccepte# Stip%lation in 7is Favor.
An e%ample of an agency coupled with interest is when a power of attorney is constituted in a contract of real estate mortgage pursuant to the re<uirement of Act 8o. 3130, which would empower the mortgagee upon the default of the mortgagor to payment the principal obligation, to effect the sale of the mortgage property through e%tra2udicial foreclosure. "he argument that foreclosure by the Can& under its power of sale is barred upon death of the debtor, because agency is e%tinguished by the death of the principal, under . . . Article 1,1, of the Civil Code neglects to ta&e into account that the power to foreclose is not an ordinary agency that contemplates e%clusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latterGs own protection. 6t is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement. ere+ v. 6B, !8 SCRA )## (!=**+. Superseded the rule laid down in Pasno v. Ravina , 0' )hil. 38! +1,3(- and el Rosario v. A(ad, 1(' )hil. 6'8 +1,08-.

5. E%%e/t '% A/ts D'&e 50 A.e&t Wit2'?t A&'B1e4.e '% Pri&/i3-1Ks De-t2 (Art. !=#!+ (!+ *cts *re ,ali# rovi#e#> (i+ *&ent 4oes 6ot ?no. o( 4eath or Other Ca%se o( 'xtin&%ish$ent o( *&ency@ (ii+ 1hir# erson 4ealin& .ith *&ent -%st *lso Be in Goo# Faith 26ot *.are o( 4eath or Other Ca%se3
Under Article 1,31 of the Civil Code, we must uphold the validity of the sale of the land effected by the agent only after the death of the principal, when no evidence was adduced to show that at the time of sale both the agent and the buyers were unaware of the death of the principal. 1uason v. Panuyas, 1(0 )hil *,0 +1,0,-.. Reiterated in Herrera v. 0y Aim :uan, 1 #C/A '(6 +1,61-.

). De-t2 '% t2e A.e&t EFti&.?is2es t2e A.e&/0 -. O51i.-ti'& '% A.e&tKs Heirs i& C-se '% A.e&tKs De-t2 (Art. !=#2+> (!+ 6oti(y rincipal (2+ *#opt -eas%res as Circ%$stances 4e$an# in rincipal9s Interest NOTE> I% Pri&/i3-1 Dies, t2e L-B Is Si1e&t '& W2et2er His Heirs H-7e A&0 O51i.-ti'& t' N'ti%0 t2e A.e&t
15

Also 1arrameda v. 1ar(ara, ,( )hil. *18 +1,0!-. Caisip v. Hon. Ca(angon, 1(, )hil. 10( +1,0!-.

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"he contract of agency establishes a purely personal relationship between the principal and the agent, such that the agency is e%tinguished by the death of the agent, and his rights and obligations arising from the contract of agency are not transmittable to his heirs. 1erra#o v. Co%rt o( *ppeals , !#! SCRA #8# (!=)9+.

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B.

BUSINESS TRUSTS

I. NATURE AND CLASSIFICATION OF TRUSTS

!. De%i&iti'& -&4 Esse&ti-1 C2-r-/teristi/ '% Tr?st (Art. !99 +
A trust is the legal relationship between one person having an e<uitable ownership in property and another person owning the legal title to such property, the e<uitable ownership of the former entitling him to the performance of certain duties and the e%ercise of certain powers by the latter. "he characteristics of a trust are1 +a- it is a relationship. +b- it is a relationship of fiduciary character. +c- 6t is a relationship with respect to property, not one involving merely personal duties. +d- it involves the e%istence of e<uitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another. and +e- it arises as a result of a manifestation of intention to create the relationship. -orales v. Co%rt o( *ppeals, 289 SCRA 2)2 (!==8+. A trust is a fiduciary relationship with respect to property which involves the e%istence of e<uitable duties imposed upon the holder of the title to the property to deal with it for the benefit of another. 1P v. COA, '!! #C/A '0, +!(('-.!* 6n its technical legal sense, a trust is defined as the right, enforceable solely in e<uity, to the beneficial en2oyment of property, the legal title to which is vested in another. but the word trust is fre<uently employed to indicate duties, relations, responsibilities which are not strictly technical trusts. e!alber v. Ra$os, <88 SCRA < = (2 =+. "rust is the right to the beneficial en2oyment of property, the legal title to which is vested in another Oit is a fiduciary relationship that obliges the trustee to deal with the property for the benefit of the beneficiary. Heirs of )ran9uilino "a(iste v. Heirs of %ose "a(iste , 08* #C/A '1* +!((,-.1*

-. $-se4 '& EH?it0 (C'mm'&"1-B+ +Art. !992Article 1''! incorporates a large part of the American law on trusts, and thereby the )hilippine legal system will be amplified and will be rendered more suited to a 2ust and e<uitable solution of many <uestions. Report of the Code Commission$ at p. FG. As the law of trusts has been much more fre<uently applied in @ngland and in the United #tates than it has in #pain, we may draw freely upon American precedents in determining the effect of the testamentary trust here under consideration, especially so as the trusts &nown to American and @nglish e<uity 2urisprudence are derived from the fidei commissa of the /oman law and are based entirely upon Civil Eaw principles. :overnment v. A(adilla, '6 )hil. 6'! +1,!'-.18

5. Disti&.?is2e4 %r'm A.e&/0

+1- 4hile both trust and agency relationships are fiduciary in nature. agency is essentially revocable, while a trust contract is essentially obligatory in its terms and period, and can only be rescinded based on breach of trust. +!- "rustee ta&es legal or na&ed title to the sub2ect matter of trust, and acts on his own business discretion. agent possesses property under agency for and in the name of the owner and must act upon instructions of the owner. +3- "rustee enters into contracts pursuant to the trust in his own name as legal or na&ed title holder, while agent enters into contract in the name of the principal. +'- "rustee is liable directly and may be sued, albeit in his trust capacity. while agent cannot be sued since it is the principal that must be held liable on the suit.

2. Ai&4s '% Tr?st1 (-+ EF3ress Tr?sts, -&4 (5+ Im31ie4 Tr?sts +Art. !99!"rust is the legal relationship between one person having an e<uitable ownership in property and another person owning the legal title to such property, the e<uitable ownership of the former entitling him to the performance of certain duties and the e%ercise of certain powers by the latter. "rust relations between parties may either be e%press or implied. 8da. e &sconde v. CAourt of Appeals , !03 #C/A 66 +1,,6-.1,

II. EJPRESS TRUSTS

!. Esse&/e -&4 De%i&iti'& '% EF3ress Tr?sts
16 Also Huang v. Court of Appeals, !36 #C/A '!, +1,,'-. )ala Realty Services Corp. v. 1anco 7ilipino Savings and Mortgage 1an- , 3,! #C/A 0(6 +!((!-. 17 Advent Capital and 7inance Corporation v. Alcantara =>./. 8o. 183(0(. Nanuary !0, !(1! 18 Reiterated in Miguel v. Court of Appeals, !, #C/A *6( +1,6,-. Spouses Rosario v. Court of Appeals, 31( #C/A '6' +1,,,-. 19 Reiterated in Spouses Rosario v. Court of Appeals, 31( #C/A '6' +1,,,-. 1P v. COA, '!! #C/A '0, +!(('-.

A")MNK 5utline Page 34 of 66

5ur Civil Code defines an e%press trust as one created by the intention of the trustor or of the parties, and an implied trust as one that comes into being by operation of law. =Article 1''1I @%press trusts are those created by the direct and positive acts of the parties, by some writing or deed or will or by words evidencing an intention to create a trust. . . .4e find it clear that the plaintiffs alleged an e%press trust over an immovable, especially since it is alleged that the trustor e'pressly told the defendants of his intention to establish the trust. #uch a situation definitely falls under Article 1''3 of the Civil Code. Cuaycong v. Cuaycong, !1 #C/A 11,! +1,6*-. @%press trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either e%pressly or impliedly evincing an intention to create a trust. +8, C.N.#. *!!-. Ramos v. Ramos, 61 #C/A !8', !,8 +1,*'-.!( 6n )amayo v. Calle#o, the Court recogni7ed that a trust may have a constructive or implied nature in the beginning, but the registered owner;s subse<uent e%press ac&nowledgement in a public document of a previous sale of the property to another party, had the effect of imparting to the aforementioned trust the nature of an e%press trust. 1orbela v. Spo%ses Rosario, G.R. N'. !9 <2), 8 De/em5er 2 !!.

-. Esse&ti-110 C'&tr-/t?-1 i& N-t?re, Nee4 N' P-rti/?1-r W'r4i&.s +Art. !999Ror, technical or particular forms of words or phrases are not essential to the manifestation of intention to create a trust or to the establishment thereof. 8or would the use of some such words as trust or trustee essential to the constitution of a trust as we have held in "oren*o v. Posadas$ 6' )hil. '03, 368. Conversely, the mere fact that the word trust or trustee was employed would not necessarily prove an intention to create a trust. 4hat is important is whether the trustor manifested an intention to create the &ind of relationship which in law is &nown as a trust. 6t is important that the trustor should &now that the relationship which intents to create is called a trust, and whether or not he &nows the precise characteristics of the relationship which is called a trust. Bere, that trust is effective as against defendants and in favor of the beneficiary thereof, plaintiff Kictoria Nulio, who accepted it in the document itself. )%lio v. 4alan#an, 2! SCRA <9#, << "<<! (!=*8+. Although no particular words are re<uired for the creation of an e%press trust, a clear intention to create a trust must be shown, and the proof of fiduciary relationship must be clear and convincing. "he creation of an e%press trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. Ca!e+o v. Rojas, <#) SCRA 292 (2 8+. !1 6n other words, the creation of an e%press trust must be manifested with reasonable certainty and cannot be inferred from loose and vague declarations or from ambiguous circumstances susceptible of other interpretations. 8o such reasonable certitude in the creation of an e%press trust obtains in the case at bar. 6n fact, a careful scrutiny of the plain and ordinary meaning of the terms used in the Jinutes does not offer any indication that the parties thereto intended that A7nar, et al., become beneficiaries under an e%press trust and that /6#C5 serve as trustor. hilippine 6ational Bank v. *+nar , :G.R. N'. !8!) <. M-0 # , 2 !!.; *9= SCRA 2!9 (2 !!+ @%press trusts are created by direct and positive acts of the parties, by some writing or deed, or will, or by words either e%pressly or implied evincing an intention to create a trust. Under Article 1''' of the Civil Code, =nIo particular words are re<uired for the creation of an e%press trust, it being sufficient that a trust is clearly intended. "he Affidavit of @pifanio is in the nature of a trust agreement. @pifanio affirmed the lot brought in his name was co$owned by him, as one of the heirs of Nose, and his uncle "ran<uilino. And by agreement, each of them has been in possession of half of the property. "heir arrangement was corroborated by the subdivision plan prepared by @ngr. Cunagan and approved by Nose ). Dans, Acting Director of Eands. 7eirs o( 1ran:%ilino "abiste v. 7eirs o( )ose "abiste, <)8 SCRA 9!8 (2 =+.

5. $-se4 '& Pr'3ert0 Re1-ti'&s2i3, W2ere Le.-1 Tit1e Is He14 50 O&e, -&4 t2e EH?it-51e 'r $e&e%i/i-1 Tit1e Is He14 50 A&'t2er +60 C5/)U# NU/6# !1!A trust is a legal relationship between one person having an e<uitable ownership of the property and another person owning the legal title to such property, the e<uitable ownership of the former entitling him to the performance of certain duties and the e%ercise of certain powers by the latter. 4hat distinguishes a trust from other relations is the separation of legal title and e<uitable ownership of the property. 6n a trust relation, legal title is vested in the fiduciary while e<uitable ownership is vested in a cestui 9ue trust. "he petitioner alleged in her complaint that the ta% declaration of the land was transferred to the name of Crispulo without her consent. Bad it been her intention to create a trust and ma&e Crispulo her trustee, she would not have made an issue out of this because in a trust agreement, legal title is vested in the trustee. "he trustee would necessarily have the right to transfer the ta% declaration in his name and to pay the ta%es on the property. "hese acts would be treated as beneficial to the cestui 9ui trust and would not amount to an adverse possession. Ca!e+o v. Rojas, <#) SCRA 292, 2<< (2 8+. "rust, in its technical sense, is a right of property, real or personal, held by one party for the benefit of another ? it is a fiduciary relationship with respect to property, sub2ecting the person holding the same to the obligation of dealing with the property for the benefit of another person. :uy v. Court of Appeals$ 03, #C/A 08' +!((*-.
20 Reiterated in Spouses Rosario v. Court of Appeals , 31( #C/A '6' +1,,,-. Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-. Pe/al(er v. Ramos, 0** #C/A 0(, +!((,-. 1P v. COA, 1P v. COA, '!! #C/A '0, +!(('-. !1 Medina v. Court of Appeals, 1(, #C/A '3*, ''0 +1,81-. Advent Capital and 7inance Corporation v. Alcantara , >./. 8o. 183(0(, !0 Nanuary !(1!.

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/. U&i1-ter-1 -&4 Prim-ri10 O&er'?s (/-& 5e Gr-t?it'?s+ 4. Fi4?/i-r0

"he 2uridical concept of a trust, which in a broad sense involves, arises from, or is the result of, a fiduciary relation between the trustee and the cestui 9ue trust as regards certain propertyOreal, personal, funds or money, or choses in actionOmust not be confused with an action for specific performance. "hus, when claimants to several parcels of land withdraw their claims in court relying on the assurance and promise of Hulo made in open court that he would convey the lots claimed after the proceedings had terminated, then a trust or a fiduciary relation between them arose, or resulted therefrom, or was created thereby. A trustee cannot invo&e the statute of limitations to bar the action and defeat the rights of the cestuis 9ue trustent. acheco v. *rro, )< P2i1. < < (!=< +.!!

2. EF3ress Tr?st M?st $e Pr'7e&

A trust must be proven by clear, satisfactory, and convincing evidence. 6t cannot rest on vague and uncertain evidence or on loose, e<uivocal or indefinite declarations +De Eeon vs. )ec&son, 6! 5.>. ,,'-. As already noted, an e%press trust cannot be proven by parol evidence +)ascual vs. Jenses, !( #C/A !1, =1,6*I. Cuaycong vs. Cuaycong, !1 #C/A 11,!=1,6*I-. Ramos v. Ramos, 61 #C/A !8', 3(($3(1 +1,*'-. As a rule, however, the burden of proving the e%istence of a trust is on the party asserting its e%istence, and such proof must be clear and satisfactorily show the e%istence of the trust and its elements. Morales v. Court of Appeals, !*' #C/A !8! +1,,*-.!3 4hat is crucial is the intention to create a trust. 4hile oftentimes the intention is manifested by the trustor in e%press or e%plicit language, such intention may be manifested by inference from what the trust has said or done, from the nature of the transaction, or from the circumstances surrounding the creation of the purported trust. Bowever, an inference of the intention to create a trust, made from language, conduct or circumstances, must be made with reasonable certainty. 6t cannot rest on vague, uncertain or indefinite declarations. An inference of intention to create a trust, predicated only on circumstances, can be made only where they admit of no other interpretation. Ringor v. Ringor, '36 #C/A '8' +!(('-.

#. Ai&4s '% EF3ress Tr?st -. EF3ress Tr?st I&7'17i&. Imm'7-51e (Art. !99#+
A person who has held legal title to land, coupled with possession and beneficial use of the property for more than ten years, will not be declared to have been holding such title as trustee for himself and his brothers and sisters upon doubtful oral proof tending to show a recognition by such owner of the alleged rights of his brother and sisters to share in the produce of the land. =@rgo1 "he re<uirement that e%press trust over immovable must be in writing should be added as being governed by the #tatute of Rrauds.I Ga$boa v. Ga$boa, <2 P2i1. < # (!=2)+. 6n one case =Ringor v. Ringor, '36 #C/A '8' +!(('-I, the Court allowed oral testimony to prove the e%istence of a trust, which had been partially performed. 6t was stressed therein that what is important is that there should be an intention to create a trust. @ven when the purported trust res is unregistered land, "he e%istence of e%press trusts concerning real property may not be established by parol evidence. =Art. 1''3I. 6t must be proven by some writing or deed. 6n this case, the only evidence to support the claim that an e%press trust e%isted between the petitioner and her father was the self$serving testimony of the petitioner. Care allegations do not constitute evidence ade<uate to support a conclusion. "hey are not e<uivalent to proof under the /ules of Court. Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-. An e%press trust over real property cannot be constituted when nothing in writing was presented to prove it. but it may be proved as an implied trust. 1y v. 1y, <<# SCRA # * (2 )+. 6n accordance with Article 1''3, when an e%press trust concerns an immovable property or any interest therein, the same may not be proved by parol or oral evidence. Bowever, when the oppositors failed to timely ob2ect when the petitioner tried to prove by parol evidence the e%istence of an e%press trust over immovable, there is deemed to be a waiver since Article 1''3 is in the nature of a statute of frauds. "he term statute of frauds is descriptive of statutes which re<uire certain classes of contracts in writing. "he statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. "he effect of non$compliance is simply that no action can be proved unless the re<uirement is complied with. 5ral evidence of the contract will be e%cluded upon timely ob2ection. Cut if the parties to the action, during the trial, ma&e no ob2ection to the admissibility of the oral evidence to support the contract covered by the statute, and thereby permit such contract to be proved orally, it will be 2ust as binding upon the parties as if it had been reduced to writing. e!alber v. Ra$os, <88 SCRA < = (2 =+.

5. C'&tr-/t?-1CI&ter7i7's Tr?st /. Test-me&t-r0 Tr?st

22 23

Reiterated in Ramos v. Ramos, 61 #C/A !8' +1,*'-. Pe/al(er v. Ramos, 0** #C/A 0(, +!((,-. Reiterated Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-. 1ooc v. 7ive Star Mar-eting Co.$ !nc., 038 #C/A '! +!((8-.

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A testamentary trust was created by a provision in the will whereby the testator proposed to create trust for the benefit of a secondary school to be established in the town of "ayabas, naming as trustee the ayutamineto of the town or if there be no ayutamiento, then the civil governor of the )rovince of "ayabas. :overnment of P.!. v. A(adilla, '6 )hil. 6'! +1,!'-. Although the will e%ecuted by the testator did not use the words trust or trustee , but the intention to create one is clear since he ordered in his will that certain of his properties be &ept together undisposed during a fi%ed period, for a stated purpose. 8o particular or technical words are re<uired to create a testamentary trust. +6, C.N., p. *11.- Bence, the probate court certainly e%ercised sound 2udgment in appointing a trustee to carry into effect the provisions of the will. "oren*o v. Pasadas, 6' )hil. 303 +1,3*-.

4. Pe&si'& 'r Retireme&t Tr?sts e. C2-rit-51e Tr?sts 9. P-rties t' -& EF3ress Tr?st
As a rule, however, the burden of proving the e%istence of a trust is on the party asserting its e%istence, and such proof must be clear and satisfactorily show the e%istence of the trust and its elements. "he presence of the following elements must be proved1 +1- a trustor or settlor who e%ecutes the instrument creating the trust. +!- a trustee, who is the person e%pressly designated to carry out the trust. +3- the trust res, consisting of duly identified and definite real properties. and +'the cestui 9ue trust, or beneficiaries whose identity must be clear. 7ilipinas Port Services$ !nc. v. :o. , 018 #C/A '03 +!((*-.!'

-. T2e Tr?st'r
A person who establishes a trust is called the trustor. Pe/al(er v. Ramos, 0** #C/A 0(, +!((,-. 1P v. COA, '!! #C/A'0, +!(('-.

5. T2e Tr?stee
5ne in whom confidence is reposed is &nown as the trustee. +!(('-. Pe/al(er v. Ramos, 0** #C/A 0(, +!((,-. 1P v. COA, '!! #C/A'0,

(!+ 1r%stee -%st 7ave "e&al Capacity to *ccept the 1r%st@ (2+ Fail%re o( 1r%stee to *ss%$e the osition +Art. !99<-. (#+ Obli&ations o( the 1r%stee +R?1e =), R?1es '% C'?rt-. (9+ Generally, 1r%stee 4oes 6ot *ss%$e roperties O%tsi#e o( the 1r%st 'state. ersonal "iability on the 1r%st as to

"here is an implication by the #upreme Court that when a trustee enters into a contract that gives rise to liability, but there is no clear indication that he enters into the contract as trustee, then the trustee would be held individually liable on the liability arising from the contract1 Cut even if the contract had been authori7ed by the trust indenture, the )hilippine "rust Company in its individual capacity would still be responsible for the contract as there was no e%press stipulation that the trust estate and not the trustee should be held liable on the contract in <uestion. 6n other words, when the transaction at hand could have been entered into by a trustee either as such or in its individual capacity, then it must be clearly indicated that the liabilities arising therefrom shall be chargeable to the trust estate, otherwise they are due from the trustee in his personal capacity. 1an Sen&%an an# Co. v. hil. 1r%st Co., <) P2i1. 8 (!=##+.

(<+ 1r%stee Generally 'ntitle# to Receive a Fair Co$pensation (or 7is Services . "oren*o v. Pasadas, 6' )hil. 303 +1,3*-, citing 1arney v. Saunders, 16 Bow., 030. 1' Eaw. @d., 1('*. /. $e&e%i/i-r0 +Arts. !99 -&4 !99*6n order that a trust may become effective there must, of course be a trustee and a cestui 9ue trust. "he e%istence of an e<uivalent designated position in the testamentary trust to act as trustee +i.e., the Civil >overnor of "ayabas- complies with the re<uirement of a trustee. 6n regard to private trusts it is not always necessary the the cestui 9ue trust should be named, or even be in esse at the time the trust is created in his favor. "hus a devise a father in trust for accumulation for his children lawfully begotten at the time of his death has been held to be good although the father had no children at the time of the vesting of the funds in him as trustee. 6n charitable trusts such as the one here under discussion, the rule is still further rela%ed. Govern$ent v. *ba#illa, 9* P2i1. *92, *98 (!=29+. Acceptance by beneficiary of gratuitous trust is not sub2ect to the rules for the formalities of donations. Cristobal v. Go$e+, < P2i1. )! (!=28+ "he person for whose benefit the trust has been created is referred to as the beneficiary. 1P v. COA, '!! #C/A'0, +!(('-. Pe/al(er v. Ramos, 0** #C/A 0(, +!((,-.
24

Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-.

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4. 1he Corp%s or the Res

4here DC) establishes a pension trust for its officers and employees and appoints trustees for the fund whereby the trust agreement transferred legal title over the income and properties of the fund, then the principal and the income of the fund together constitute the res or sub2ect matter of the trust. #ince the trust agreement established the fund precisely so that it would eventually be sufficient to pay for the retirement benefits of DC) officers and employees, then the income and profits thereof cannot be boo&ed by DC) as its own, and DC) cannot be directed by C5A to treat such income as it own. 4B v. CO*, 922 SCRA9<= (2 9+.

<. H'B EF3ress Tr?st Termi&-te4 -. W2ere t2e Tr?st F-i1s

Under an ordinary devise of land in trust, the trustee holds the legal title and the cestui 9ue trust the beneficial title and the natural heirs of the testator who are neither trustees nor cestuis 9ue trustent have no remaining interest in the land devised e%cept the right to the reversion in the event the devise should fail, or the trust for other reasons terminate. :overnment v. A(adilla, '6 )hil. 6'! +1,!'-.

5. U3'& t2e De-t2 '% Tr?stee

Assuming that such a =trustI relation e%isted, it terminated upon CrispuloGs death in 1,*8. A trust terminates upon the death of the trustee where the trust is personal to the trustee in the sense that the trustor intended no other person to administer it. 6f Crispulo was indeed appointed as trustee of the property, it cannot be said that such appointment was intended to be conveyed to the respondent or any of CrispuloGs other heirs. Bence, after CrispuloGs death, the respondent had no right to retain possession of the property. At such point, a constructive trust would be created over the property by operation of law. 4here one mista&enly retains property which rightfully belongs to another, a constructive trust is the proper remedial devise to correct the situation. Ca!e+o v. Rojas, <#) SCRA 292 (2 8+.

/. Ge&er-110 EF3ress Tr?sts N't S?s/e3ti51e t' Pres/ri3ti'&

. . . ?&re3?4i-te4 Britte& eF3ress tr?sts -re im3res/ri3ti51e . : "o apply the 1($year prescriptive period, which would bar a beneficiary;s action to recover in an e%press trust, the repudiation of the trust must be proven by clear and convincing evidence and made &nown to the beneficiary. "he e%press trust disables the trustee from ac<uiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and ma&es such repudiation &nown to the beneficiary or cestui <ue trust. Ror this reason, the old Code of Civil )rocedure +Act 1,(- declared that the rules on adverse possession do not apply to Pcontinuing and subsistingP +i.e., unrepudiated- trusts. 6n an e%press trust, the delay of the beneficiary is directly attributable to the trustee who underta&es to hold the property for the former, or who is lin&ed to the beneficiary by confidential or fiduciary relations. "he trustee;s possession is, therefore, not adverse to the beneficiary, until and unless the latter is made aware that the trust has been repudiated. 1orbela v. Spo%ses Rosario, G.R. N'. !9 <2), 8 De/em5er 2 !!.; 4hen there e%ists an e%press trust, prescription and laches will run only from the time the e%press trust is repudiated. "he Court has held that for ac<uisitive prescription to bar the action of the beneficiary against the trustee in an e%press trust for the recovery of the property held in trust it must be shown that1 +a- the trustee has performed une<uivocal acts of repudiation amounting to an ouster of the cestui 9ue trustE +b- such positive acts of repudiation have been made &nown to the cestui 9ue trustE and +c- the evidence thereon is clear and conclusive. 7eirs o( 1ran:%ilino "abiste v. 7eirs o( )ose "abiste, <)8 SCRA 9!8 (2 =+.!0 A trustee who obtains a "orrens title over the property held in trust by him for another cannot repudiate the trust by relying on the registration. "he rule re<uires a clear repudiation of the trust duly communicated to the beneficiary. "he only act that can be construed as repudiation was when respondents filed the petition for reconstitution see&ing registration only in his name. 7eirs o( 1ran:%ilino "abiste v. 7eirs o( )ose "abiste, <)8 SCRA 9!8 (2 =+. O"4 RU"'> "here is a rule that a trustee cannot ac<uire by prescription the ownership of property entrusted to him +)alma vs. Cristobal, ** )hil. *1!-, or that an action to compel a trustee to convey property registered in his name in trust for the benefit of the cestui 9ui trust does not prescribe +Janalang vs. Canlas, ,' )hil. **6. Cristobal vs. >ome7, 0( )hil. 81(-, or that the defense of prescription cannot be set up in an action to recover property held by a person in trust for the benefit of another +#evilla vs. De los Angeles, ,* )hil. 8*0-, or that property held in trust can be recovered by the beneficiary regardless of the lapse of time +Jarabilles vs. Uuito, 1(( )hil. 6'. Cancairen vs. Diones, ,8 )hil. 1!!, 1!6 Nuan vs. VuWiga, 6! 5.>. 1301. ' #C/A 1!!1. Nacinto vs. Nacinto, E$ 1*,0*, Jay !1, 1,6!. #ee "amayo vs. Call2o, 1'* )hil. 31, 31*-. Q "he =foregoingI rule applies s<uarely to e%press trusts. "he basis of the rule is that the possession of a trustee is not adverse. 8ot being adverse, he does not ac<uire by prescription the property held in trust. "hus, #sec.tion 38 of Act 1,( provides that the law of prescription does not apply in the case of a continuing and subsisting trust +Dia7 vs. >orricho and Aguado, 1(3 )hil. !61, !66 +1,08-. Eaguna v. Eevantino, *1 )hil. 066. #umira vs. Kistan, *' )hil. 138. >olfeo vs. Court of Appeals, 63 5.>. '8,0, 1! #C/A
25

Pilapil v. Heirs of Ma'imino R. 1riones, 01' #C/A 1,* +!((*-. Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-.

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1,,. Caladiao vs. #antos, 63 5.>. 1,06, 1( #C/A 6,1-. Ramos v. Ramos, 61 #C/A !8', !,, +1,*'-.

III. IMPLIED TRUSTS

!. Listi&. '% Im31ie4 Tr?sts N't EF/1?si7e> F'?&4e4 '& EH?it0 (Art. !998+.
"he concept of implied trusts is that from the facts and circumstances of a given case the e%istence of a trust relationship is inferred in order to effect the presumed +in this case it is even e%pressed- intention of the parties or to satisfy the demands of 2ustice or to protect against fraud. Padilla v. Court of Appeals, 03 #C/A 168 +1,*3-. 6mplied trusts are those which, without being e%pressed, are deducible from the nature of the transactions as matters of intent$ or which are superinduced on the transaction by operation of law as matters of e9uity$ independently of the particular intention of the parties. "hey are ordinarily subdivided into resulting and constructive trusts +8, C.N.#. *!!-. Ra$os v. Ra$os, *! SCRA 2)9, 2=) (!=89+.!6

-. Res?1ti&. Tr?sts
"he rule of imprescriptibility of an action to recover property held in trust may possible apply to a resulting trust as long as the trustee has not repudiated the trust. A resulting trust is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed always to have (een contemplated (y the parties$ the intention as to which is to be found in the nature of their transaction, but not e%pressed in the deed or instrument of conveyance +8, C.N.#. *!0-. @%amples of resulting trusts are found in article=sI 1''8 to 1''0 of the Civil Code. Ra$os v. Ra$os, *! SCRA 2)9 (!=89+.!* /esulting trusts are based on the e<uitable doctrine that valuable consideration and not legal title determines the e<uitable title or interest and are presumed always to have been contemplated by the parties. "hey arise from the nature or circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obligated in e<uity to hold his title for the benefit of another. Spouses Rosario v. CAourt of Appeals, 31( #C/A '6' +1,,,-. A resulting trust is a species of implied trust that is presumed always to have been contemplated by the parties, the intention as to which can be found in the nature of their transaction although not e%pressed in a deed or instrument of conveyance. A resulting trust is based on the e<uitable doctrine that it is the more valuable consideration than the legal title that determines the e<uitable interests in property. Ca!e+o v. Rojas, <#) SCRA 292 (2 8+.

5. C'&str?/ti7e Tr?sts
5n the other hand, a constructive trust is a trust raised by construction of law, or arising by operation of law . 6n a more restricted sense and as contradistinguished from a resulting trust, a constructive trust is a trust not created by any words, either e%pressly or implied evincing a direct intention to create a trust, but by the construction of e9uity in order to satisfy the demands of #ustice. 6t does not arise by agreement or intention but by operation of law. 6f a person obtains legal title to property by fraud or concealment, courts of e<uity will impress upon the title a so$ called constructive trust in favor of the defrauded party. A constructive trust is not a trust in the technical sense. Ra$os v. Ra$os, *! SCRA 2)9 (!=89+.!8 6n constructive trusts there is neither promise nor fiduciary relations. the so$called trustee does not recogni7e any trust and has no intent to hold the property for the beneficiary. 4ia+ v. Gorricho an# *&%a#o, ! # P2i1. 2*! (!=<)+.!, A constructive trust, otherwise &nown as a trust e% maleficio, a trust e% delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fruad, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconcscionable conduct, artifice, concealment, or <uestionable means, or who in any way against e<uity and good conscience, either has obtained or holds the legal right to property which he ought not, in e<uity and good conscience, hold and en2oy. 6t is raised by e<uity to satisfy the demands of 2ustice. Sumaoang v. %udge$ R)C$ 1r. HHH!$ 1uim(a$ ;ueva &ci#a, !10 #C/A 136 +1,,!-.3( A constructive trust is one created not by any word or phrase, either e%pressly or impliedly, evincing a direct intention to create a trust, but one which arises in order to satisfy the demands of 2ustice. 6t does not come about by agreement or intention but in the main by operation of law, construed as against one who, by fraud, duress or abuse of confidence, obtains or holds the legal
26 Reiterated in Salao v. Salao, *( #C/A 60, 8( +1,*6-. )igno v. Court of Appeals, !8( #C/A !*1 +1,,*-. Policarpio v. Court of Appeals, !6, #C/A 3'' +1,,*-. Spouses Rosario v. Court of Appeals , 31( #C/A '6' +1,,,-. Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-. Pe/al(er v. Ramos, 0** #C/A 0(, +!((,-. !* Reiterated in Salao v. Salao, *( #C/A 60 +1,*6-. Constructive trusts are created by the construction of e<uity in 'r4er to satisfy the demands of 2ustice and prevent un2ust enrichment. "hey arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or hold the legal right to property which he ought not, in e<uity and good conscience, to hold. Spouses Rosario v. Court of Appeals, 31( #C/A '6' +1,,,-. 28 Reiterated in :uy v. Court of Appeals, 03, #C/A 08' +!((*-. !, Reiterated in Carantes v. Court of Appeals, *6 #C/A 01' +1,**-. 30 Also Roa$ %r. v. Court of Appeals, 1!3 #C/A 3 +1,83-.

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right to property which he ought not, in e<uity and good conscience, to hold. Ca!e+o v. Rojas, <#) SCRA 292 (2 8+. Under the principle of constructive trust, registration of property by one person in his name, whether by mista&e or fraud, the real owner being another person, impresses upon the title so ac<uired the character of constructive trust for the real owner, which would 2ustify an action for reconveyance. Pasi/o v. Monterroyo, 06( #C/A *3, +!((8-. Constructive trusts are fictions of e<uity that courts use as devices to remedy any situation in which the holder of the legal title, JC6AA in this case, may not, in good conscience, retain the beneficial interest. ,#a. #e O%ano v. Rep%blic o( the hilippines, *92 SCRA #)9 (2 !!+.

/. Disti&/ti'& $etBee& Res?1ti&. Tr?st -&4 C'&str?/ti7e Tr?st

/esulting trusts are based on the e<uitable doctrine that valuable consideration and not legal title determines the e<uitable title or interest and are presumed always to have been contemplated by the parties. "hey arise from the nature of circumstances of the consideration involved in a transaction whereby one person thereby becomes invested with legal title but is obliged in e<uity to hold his legal title for the benefit of another. 5n the other hand, constructive trusts are created by the construction of e<uity in order to satisfy the demands of 2ustice and prevent un2ust enrichment. "hey arise contrary to intention against one who, by fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought not, in e<uity and good conscience, to hold. "ope+ v. Co%rt o( *ppeals, <89 SCRA 2* (2 )3.31

4. H'B t' Pr'7e Im31ie4 Tr?st (Art. !9<8+

An implied trust in order to be recogni7ed must measure up to the yardstic& that a trust must be proven by clear, satisfactory and convincing evidence, and cannot rest on vague and uncertain evidence or on loose, e<uivocal or indefinite declarations. Salao v. Salao, 8 SCRA *< (!=8*+. "he e%istence of public records other than the "orrens title indicating a proper description of the land, and not the technical description thereof, and clearly indicating the intention to create a trust, was considered sufficient proof to support the claim of the cestui 9ue trust. -%nicipality o( ,ictorias v. Co%rt o( *ppeals, !9= SCRA #2 (!=)8+. As a rule, the burden of proving the e%istence of a trust is on the party asserting its e%istence and such proof must be clear and satisfactorily show the e%istence of the trust and its elements. =An affidavit of the fact of resulting trust against contrary affidavits, as well as the transfer certificates of title and ta% declarations to the contrary, do not support clearly the e%istence of trustI 1ooc v. 7ive Start Mar-eting Co.$ !nc., 038 #C/A '! +!((*-.3! 4hile implied trust may be proved by oral evidence, the evidence must be trustworthy and received by the courts with e%treme caution, and should not be made to rest on loose, e<uivocal or indefinite declarations. "rustworthy evidence is re<uired because oral evidence can easily be fabricated. 6n order to establish an implied trust in real property by parol evidence, the proof should be as fully convincing as if the acts giving rise to the trust obligation are proven by an authentic document. An implied trust, in fine, cannot be established upon vague and inconclusive proof. 6n the present case, there was no evidence of any transaction between the petitioner and her father form which it can be inferred that a resulting trust was intended. +at p. !06- Ca!e+o v. Rojas, <#) SCRA 292 (2 8+.

e. Disti&.?is2e4 %r'm A%asi"C'&tr-/ts

5ur present Civil Code incorporated implied trust, which includes constructive trusts, on top of <uasi$contracts, both of which embody the principle of e<uity above strict legalism. hilippine 6ational Bank v. Co%rt o( *ppeals, 2!8 SCRA #98 (!==#+.

2. P?r/2-se '% Pr'3ert0 W2ere $e&e%i/i-1 Tit1e i& O&e Pers'&, $?t Pri/e P-i4 50 A&'t2er Pers'& (Art. !99)+ R-ti'&-1e> 5ne who pays for something usually does so for his own benefit. 0y Aloc v. Cho %an %ing,
1, )hil. !(! +1,11-. Although it may have been proven that the father was the source of the funds in the purchase of a parcel of land which was titled in the name of his son, no implied trust is deemed to have been established since under Article 1''8 of the Civil Code, if the person to whom the title is conveyed is the child of the one paying the price of the sale, no trust is implied by law, and instead a donation is disputably presumed in favor of the child. "he successors of the deceased father had not shown that no such donation was intended. 1y v. 1y, <<# SCRA # * (2 )+.

#. P?r/2-se '% Pr'3ert0 W2ere Tit1e Is P1-/e4 i& t2e N-me '% Pers'& W2' L'-&e4 t2e P?r/2-se Pri/e (Art. !9< + L ':%itable -ort&a&e
6mplied trust under Article 1'0( presupposes a situation where a person, using his own funds, buys property on behalf of another, who in the meantime may not have the funds to purchase it. "itle to the property is for the time being placed in the name of the trustee, the person who pays for it, until he is reimbursed by the beneficiary, the person for whom the trustee bought the land. 6t is only after
31 Also A*nar 1rothers Realty Company v. Aying , '08 #C/A ',6 +!((0-. Spouses Rosario v. Court of Appeals, 31( #C/A '6' +1,,,-. &state of Margarita . Ca(acungan$ v. "aigo$ >./. 8o. 1*0(*3, 10 August !(11-. 32 Also )igno v. Court of Appeals, !8( #C/A !6! +1,,*-. Morales v. Court of Appeals, !*' #C/A !8! +1,,*-.

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the beneficiary reimburses the trustee of the purchase price that the former can compel conveyance of the property from the latter. arin&it v. Bajit, *#! SCRA <)9 (2 ! +.

9. W2e& A5s'1?te C'&7e0-&/e '% Pr'3ert0 E%%e/te4 O&10 -s - Me-&s t' Se/?re Per%'rm-&/e '% O51i.-ti'& '% t2e Gr-&t'r (Art. !9<9+ L ':%itable -ort&a&e
4hen a deed of sale with right of repurchase was really intended to cover a loan made by the purported seller from the purported buyer, then the doctrines upheld in the cases of Uy Aloc vs. Cho Nan Eing +1, )hil., !(!-. Camacho vs. Junicipality of Caliaug +!8 )hil., '6-. and #everino vs. #everino +'' )hil., 3'3-, are applicable in the instant case in the sense that the defendants only hold the certificate of transfer in trust for the plaintiffs as to the portion of the lot containing 1,3(( coconut trees, and therefore, said defendants are bound to e%ecute a deed in favor of the plaintiffs transferring said portion to them. e Ocampo v. Daporte*a, 03 )hil. ''!, ''0 +1,!,-.

<. TB' 'r M're Pers'&s P?r/2-se Pr'3ert0 J'i&t10, $?t P1-/es Tit1e I& O&e '% T2em (Art. !9<2+ *. Pr'3ert0 C'&7e0e4 t' Pers'& Mere10 -s H'14er T2ere'% (Art. !9<#+
4here real property is ta&en by a person under an agreement to hold it for, or convey it to another or the grantor, a resulting or implied trust arises in favor of the person for whose benefit the property was intended. #uch implied trust is enforceable even when the agreement is not in writing, and is not an e%press trust which re<uires that it be in writing to be enforceable. "his rule, which has been incorporated in the new Civil Code in Art. 1'03 thereof, is founded upon e<uity. Martine* v. :ra/o, '! )hil. 30 +1,!1-. 4here the original purchaser of the immovable property had sold all his interest thereto to his brother who reimbursed him all amounts previously, but continued to pay the balance of the installments in the name of the original buyer with understanding that upon full payment the title would be transferred to the buyer, am implied trust had been constituted. 7eirs o( '$ilio Can#elaria v. Ro$ero, ! = P2i1. < (!=* +. "he Court denied the application of the provisions of Article 1'03 to establish an implied trust . . . #aid arguments are untenable, even considering the whole complaint. "he intention of the trustor to establish the alleged trust may be seen in paragraphs 0 and 6. Article 1'03 would apply if the person conveying the property did not e%pressly state that he was establishing the trust, unli&e the case at bar where he was alleged to have e%pressed such intent. Conse<uently, the lower court did not err in dismissing the complaint, +at p. 11,8- on the ground that since the complaint sought to recover an e%press trust over immovables, then under Article 1''3 of the Civil Code, the same may not be proved by parol evidence. Cuaycong v. Cuaycong, !1 #C/A 11,! +1,6*-. 4here a lot was ta&en by a person under an agreement to hold it for, or convey it to another or to the grantor, a resulting or implied trust arises in favor of the person for whose benefit the property was intended. Spouses Rosario v. Court of Appeals, 31( #C/A '6' +1,,,-.

8. D'&-ti'& '% Pr'3ert0 t' - D'&ee W2' S2-11 H-7e N' $e&e%i/i-1 Tit1e (Art. !99=+
4here the father donates a piece of land in the name of the daughter but with verbal notice that the other half would be held by her for the benefit of a younger brother, coupled with a deed of waiver later on e%ecuted by the daughter that she held the land for the common benefit of her brother, created an implied trust in favor of the brother under Article 1'', of the Civil Code. *#a+a v. C*o%rt o( *ppeals, !8! SCRA #*= (!=)=+.

). L-&4 P-sses $0 S?//essi'& $?t Heir P1-/es Tit1e i& - Tr?stee (Art. !9<!+.
4hen the eldest sibling in the family had registered land inherited from the parents in his name, he was acting in a trust capacity and as representative of all his brothers and sisters. As a conse<uence he is now holding the registered title thereto in a trust capacity, and it is proper for the court to declare that the plaintiffs are entitled to their several pro rata shares, notwithstanding the fact that the certificate of registration is in the name of the defendant alone, in accordance with the doctrine held in Severino v. Severino, '' )hil. 3'3 +1,!3-.33 Castro v. Castro, 0* )hil. 6*0 +1,3!-. 6n a situation where a Chinese resident had caused land to be placed in the name of the trustee who was bound to hold the same for the benefit of the trustor and his family in the event of death, the application of the doctrine of implied trust under Article 1'01 by the heirs of the trustor cannot be upheld. "his contention must fail because the prohibition against an alien from owning lands of the public domain is absolute and not even an implied trust can be permitted to arise on e<uity consideration. )ing Ho$ %r. v. )eng :ui$ 008 #C/A '!1 +!((8-.

=. W2e& Tr?st F?&4 Use4 t' P?r/2-se Pr'3ert0 W2i/2 Is Re.istere4 i& Tr?steeKs N-me (Art. !9<<+
A confidential employee who, &nowing that his principal was negotiating with the owner of some land for the purchase thereof, surreptitiously succeeds in buying it in the name of his wife, commits an act of disloyalty and infidelity to his principal, and is liable for damage. "he reparation of the damage must consist in respecting the contract which was about to be concluded, and transferring the said
33

Castro v. Castro, 0* )hil. 6*0 +1,3!-.

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land for the same price and upon the same terms as those on which the purchase was made for the land sold to the wife of said employee passed to them as what might be regarded as e<uitable trust, by virtue of which the thing thus ac<uired by an employee is deemed to have been ac<uired not for his own benefit or that of any other person but for his principal and held in trust for the latter. Sin& )%co an# Sin& Ben&co v. S%nyanton& an# "lorente, 9# P2i1. <)= (!=22+.

! . W2e& Pr'3ert0 is A/H?ire4 T2r'?.2 Mist-@e 'r Fr-?4 (Art. !9<*+

Cy fraudulently causing the transfer of the registration of title over the disputed property in his name, the petitioner holds the title to this disputed property in trust for the benefit of the respondent as the true owner. registration does not vest title but merely confirms or records title already e%isting and vested. "eoveras v. ,al#e+, G.R. N'. !*==)<, < J?&e 2 !!. "he decedent during his lifetime had married legitimately three successive times, but without li<uidation of the con2ugal partnerships formed during the first and second marriages. "he only male issue managed to convince his co$heirs that he should act as administrator of the properties left by the decedent, but instead obtained a certificate of title in his own name to the valuable piece of property of the estate. Held. 4here the son, through fraud was able to secure a title in his own name to the e%clusion of his co$heirs who e<ually have the right to a share of the land covered by the title, an implied trust was created in favor of said co$heirs, and that said son was deemed to merely hold the property for their and his benefit. +:on*ales v. %imene*$ Sr., 13 #C/A *3, 8!-. "he rules are well$settled that when a person through fraud succeeds in registering the property in his name, the law creates what is called a constructive or implied trust in favor of the defrauded party and grants the latter the right to recover the property fraudulently registered within a period of ten years. +#ee /ui7 v. Court of Appeals, *, #C/A 0!0, 03*-. Heirs of )ana- Pangaaran Patiwayon v. Martine*, 1'! #C/A !0!, !61 +1,86-.3' 4here the land is decreed in the name of a person through fraud or mista&e, such person is by operation of law =Article 1'06I considered a trustee of an implied trust for the benefit of the persons from whom the property comes. "he beneficiary shall have the right to enforce the trust, notwithstanding the irrevocability of the "orrens title and the trustee and his successors$in$interest are bound to e%ecute the deed of reconveyance. +)acheco vs. Arro, 80 )hil. 0(0. @scobar vs. Eocsin, *' )hil. 86-. Municipality of 8ictorias v. Court of Appeals, 1', #C/A 3!, '0 +1,8*-. 4hen property is registered in one person, but who e%pressly ac&nowledged that the right of his siblings thereto, it is a situation of an implied trust covered under Article 1'06 of the Civil Code, which states that if property is ac<uired through mista&e or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. 6t is well settled that an action for reconveyance of real property to enforce an implied trust prescribes in ten year, the period rec&oned from the issuance of the adverse title to the property which operates as a constructive notice. :on*ales v. !ntermediate Appellate Court, !(' #C/A1(6 +1,,1-. 6f property is ac<uired through mista&e or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Pedrano v. Heirs of 1enedicto Pedrano$ 03, #C/A '(1 +!((*-. 4here the shares of stoc& in an operating family company are placed by the parents$controlling stoc&holders in the name of a holding company e%pressly for the benefit of their three daughters, an e%press trust is duly constituted pursuant to the terms of Article 1''( of the Civil Code. :uy v. Court of Appeals, 03, #C/A 08' +!((*-. An action for reconveyance respects the decree of registration as incontrovertible but see&s the transfer of property, which has been wrongfully or erroneously registered in other personGs names, to its rightful and legal owners, or to those who claim to have a better right. "here is no special ground for an action for reconveyance. 6t is enough that the aggrieved party has a legal claim on the property superior to that of the registered owner and that the property has not yet passed to the hands of an innocent purchaser for value. "hese cases may also be considered as actions to remove cloud on oneGs title as they are intended to procure the cancellation of an instrument constituting a claim on petitionersG alleged title which was used to in2ure or ve% them in the en2oyment of their alleged title. Heirs of 8aleriano S. Concha$ Sr. v. "umocso, 0'( #C/A 1 +!((*-. Under the principle of constructive trust, registration of property by one person in his name, whether by mista&e or fraud, the real owner being another person, impresses upon the title so ac<uired the character of a constructive trust for the real owner, which would 2ustify an action for reconveyance. +Citing Heirs of )a(ia v. Court of Appeals, 016 #C/A '31 =!((*I- 6n the action for reconveyance, the decree of registration is respected as incontrovertible but what is sought instead is the transfer of the property wrongfully or erroneously registered in anotherGs name to its rightful owner or to one with a better right. + !(id- 6f the registration of the land is fraudulent, the person in whose name the land is registered holds it as a mere trustee, and the real owner is entitled to file an action for reconveyance of the property. + citing Mendi*a(el v. Apao, '8! #C/A 08* =!((6I- +at p. *01- asi!o v. -onterroyo, <* SCRA 8#= (2 )+. 4hen the respondents are able to establish that they have a better right to the parcel of land since they had long been in possession of the property in the concept of owners, by themselves and through their predecessors$in$interest, then despite the irrevocability of the "orrens titles issued in the names of the petitioners and even if they are already the registered owners under the "orrens system, the

34

Rui* v. Court of Appeals, *, #C/A 0!0 +1,**-.

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petitioners may still be compelled under the law to reconvey the property to respondents. asi!o v. -onterroyo, <* SCRA 8#= (2 )+. 4here in her notarial will the testator e%pressed that she wished to constitute a trust fund for her paraphernal properties, denominated as 7ideicomiso de %uliana "ope* Man*ano >7ideicomiso?, to be administered by her husband. . . "wo$thirds +!A3- of the income from rentals over theses properties were to answer for the education of deserving but needy honor students, while one$third +1A3- was to shoulder the e%penses and fees of the administrator, but that eventually in the probate of the will the properties were ad2udicated to the husband as sole heir, the Court ruled that 5n the premise that the disputed properties are the paraphernal properties of Nuliana which should have been included in the 7ideiocomiso, their registration in the name of Nose would be erroneous and NoseGs possession would be that of a trustee in an implied trust . . . =which fromI the factual milieu of this case is provided in Article 1'06 of the Civil Code. . . . "he apparent mista&e in the ad2udication of the disputed properties to Nose created mere implied trust of the constructive variety in favor of the beneficiaries of the 7ideicomiso. "ope* v. Court of Appeals, 0*' #C/A !6 +!((8-. I6 CO61R*S1> 4here a mother and her minor daughter inherited a large tract of land, and had it applied for cadastral survey, but title was issued only in the name of the mother, courts of e<uity will impress upon the title, a condition which is generally in a broad sense termed constructive trust in favor of the defrauded party, but the use of the word trust in this sense is not technically accurate and is not the &ind of trust. Gayon#ato v. 1reas%rer, 9= P2i1. 299 (!=2*+. 4hen a designated agent, ta&ing advantage of the illiteracy of the principal, claims for himself the property which he was designated to claim for the principal and manages to have it registered in his own name and became part of his estate when the agent died, the estate is in e<uity bound to e%ecute the deed of conveyance of the lot to the cestui 9ue trust. . Q A trustOsuch as that which was created between the plaintiff and Domingo #umangilOis sacred and inviolable. "he Courts have therefore shielded fiduciary relations against every manner of chicanery or detestable designed cloa&ed by legal technicalities. "he "orrens system was never calculated to foment betrayal in the performance of a trust. 'scobar v. "ocsin, 89 P2i1. )* (!=9#+.30 @ven in the absence of fraud in obtaining registration or even after the lease of one year after the issuance of a decree of registration, a co$owner of land who applied for and secured its ad2udication and registration in his name &nowing that it had not been allotted to him in the partition, may be compelled to convey the same to whoever received it in the apportionment, so long as no innocent third party had ac<uired rights therein, in the meantime for a valuable consideration. 6ndeed, any rule to the contrary would sanction oneGs enrichment at the e%pense of another. )ublic policy demands that a person guilty of fraud or, at least, of breach of trust, should not be allowed to use a "orrens title as a shield against the conse<uences of his wrongdoing. +Cabanos vs. /egister of Deeds, etc., '( )hil. 6!(. #everino vs. #everino, '1 )hil. 3'3-. 8da. de %acinto v. 8da. de %acinto , 0 #C/A 3*(, 3*6 +1,6!-.36 Eastly, the claim of the heirs of )edro Nacinto that the latter had ac<uired ownership of the property in litigation by prescription, is li&ewise untenable. As we had recently held in Nuan, et a. vs. VuWiga, >./. 8o. E$1*('', April !8, 1,6!, an action to enforce a trust is imprescriptible. Conse<uently, a coheir who, through fraud, succeeds in obtaining a certificate of title in his name to the pre2udice of his coheirs, is deemed to hold the land in trust for the latter, and the action by them to recover the property does not prescribe. 8da. de %acinto v. 8da. de %acinto, 0 #C/A 3*(, 3*6$3** +1,6!-. 4here the children of the decedent by his second marriage have ta&en over properties of the estate, e%cluding therefrom grandchildren of the decedent by his first marriage, the situation is one that is governed by the rules of co$ownership under Article ',' of the Civil Code which provides that no prescription shall run in favor of a co$owner or co$heir against his co$owners or co$heirs so long as he e%pressly or impliedly recogni7es the co$ownership. 6n view of a clear repudiation of the co$ownership duly communicated to the co$heirs, no prescription occurred and the filing of the action for partition and delivery of possession covering their corresponding shares !8 years after the death of the decedent was not filed out of time. Mariano v. %udge e 8ega, 1'8 #C/A 3'! +1,8*-.

!!. D'es Im31ie4 Tr?st Pres/ri5e 'r M-0 It $e De%e-te4 50 L-/2esM

6t is settled that an action for reconveyance based on a constructive implied trust prescribes in 1( years. Het not li&e in the case of a resulting implied trust and an e%press trust, prescription supervenes in a constructive implied trust even if the trustee does not repudiate the relationship. 6n other words, repudiation of said trust is not a condition precedent to the running of the prescriptive period. 'state o( -ar&arita 4. Cabac%n&an, v. "ai&o G.R. N'. !8< 8#, !< A?.?st 2 !!. 4hen the registered owner, be he the patentee or his successor$in$interest to whom the free patent was transferred, &new that the parcel of land described in the patent and in the "orrens title belonged to another, who together with his predecessors$in$interest had been in possession thereof, and if the patentee and his successor$in$interest were never in possession thereof, the true owner may bring an action to have the ownership of or title to the land 2udicially settled. #uch aggrieved party may still file an action for reconveyance based on implied or constructive trust, which prescribes in 1( year from the date of the issuance of the certificate of title over the property, provided that the property has not been ac<uired by an innocent purchaser for value. Cavile v. "itania87on&, <)! SCRA 9 ) (2 =+.
35 36

Reiterated in Municipality of 8ictorias v. Court of Appeals, 1', #C/A 3! +1,8*-. Ca(anos v. Register of eeds, '( )hil. 6!(. #everino vs. #everino, '1 )hil. 3'3.

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"he Court has held that for ac<uisitive prescription to bar the action of the beneficiary against the trustee in an e%press trust for the recovery of the property held in trust it must be shown that1 +a- the trustee has performed une<uivocal acts of repudiation amounting to an ouster of the cestui 9ue trust. +b- such positive acts of repudiation have been made &nown to the cestui 9ue trust, and +c- the evidence thereon is clear and conclusive. "he rule re<uires a clear repudiation of the trust duly communicated to the beneficiary. Heirs of )ran9uilino "a(iste v. Heirs of %ose "a(iste , 08* #C/A '1* +!((,-. ": there is but one instance when prescription cannot be invo&ed in an action for reconveyance1, that is, when the plaintiff is in possession of the land to be reconveyed. "6n Beirs of )omposa #aludares, this Court e%plained that the Court in a series of cases, has permitted the filing of an action for reconveyance despite the lapse of more than ten +1(- years from the issuance of title to the land and declared that said action, when based on fraud, is imprescriptible as long as the land has not passed to an innocent buyer for value. Cut in all those cases, the common factual bac&drop was that the registered owners were never in possession of the disputed property. "he e%ception was based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the e%pense of another. 6n Alfredo v. Corras, the Court ruled that prescription does not run against the plaintiff in actual possession of the disputed land because such plaintiff has a right to wait until his possession is disturbed or his title is <uestioned before initiating an action to vindicate his right. Bis undisturbed possession gives him the continuing right to see& the aid of a court of e<uity to determine the nature of the adverse claim of a third party and its effect on his title. 'strella 1ion&co 5are# v. )ose 1ion&co, G.R. N'. !*!#* , != O/t'5er 2 !!. P6f property is ac<uired through mista&e or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.P An action for reconveyance based on implied trust prescribes in 1( years as it is an obligation created by law, to be counted from the date of issuance of the "orrens title over the property. "his rule, however, applies only when the plaintiff or the person enforcing the trust is not in possession of the property. : there is no prescription when in an action for reconveyance, the claimant is in actual possession of the property because this in effect is an action for <uieting of title. 6B hilippine 6ational Bank v. )%$a$oy, G.R. N'. !*== !, # A?.?st 2 !!.; Joreover, the prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession thereof. 5therwise, if the plaintiff is in possession of the property, prescription does not commence to run against him. "hus, when an action for reconveyance is nonetheless filed, it would be in the nature of a suit for <uieting of title, an action that is imprescriptible. Brito v. 4ianala, *#) SCRA <2= (2 ! +. 4hen the plaintiff in such action is &'t i& 3'ssessi'& of the sub2ect property, the action prescribes in ten years from the date of registration of the deed or the date of the issuance of the certificate of title over the property. 4hen the plaintiff is i& 3'ssessi'& of the sub2ect property, the action, being in effect that of <uieting of title to the property, does not prescribe. 6n the case at bar, petitioners +who are the plaintiffs in Civil Case 8o. ,8$(!1- are not in possession of the sub2ect property. Civil Case 8o. ,8$(!1, if it were to be considered as that of enforcing an implied trust, should have therefore been filed within ten years from the issuance of "C" 8o. "$0,'!* on December !!, 1,6,. Civil Case 8o. ,8$(!1 was, however, filed on August !(, 1,,8, which was way beyond the prescriptive period. 7eirs o( 4o$in&o ,alientes v. Ra$as, *#) SCRA 999 (2 ! +. rescription Cannot *pply ;hen 1itle o( 1r%stee ,oi# 4%e to For&ery ? 6t is well settled that an action for reconveyance of real property to enforce an implied trust prescribes in ten year, the period rec&oned from the issuance of the adverse title to the property which operates as a constructive notice. :on*ales v. !ntermediate Appellate Court, !(' #C/A 1(6 +1,,1-. As previously stated, the rule that a trustee cannot, by prescription, ac<uire ownership over property entrusted to him until and unless he repudiates the trust, applies to e%press trust and resulting implied trusts, However$ in constructive trusts$ prescription may supervene even if the trustee does not repudiate the relationship. 8ecessarily, repudiation of the said trust is not a condition precedent to the running of the prescriptive period. A constructive trust, unli&e an e%press trust, does not emanate from, or generate a fiduciary relation. 4hile in an e%press trust, a beneficiary and a trustee are lin&ed by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor any fiduciary relation to spea& of and the so$called trustee neither accepts any trust nor intends holding the property for the beneficiary. "he relation of trustee and cestui 9ue trust does not in fact e%ist, and the holding of a constructive trust is for the trustee himself, and therefore, at all times adverse. Ca/e*o v. Ro#as, 038 #C/A !'! +!((*-. An action for the reconveyance of a parcel of land based on implied or constructive trust prescribes in 1( years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title of the property. 4ithout an 5riginal Certificate of "itle +5C"-, the date from whence the prescriptive period could be rec&oned is un&nown and it could not be determined if indeed the period had already lapsed or not. Pedrano v. Heirs of 1enedicto Pedrano$ 03, #C/A '(1 +!((*-. An aggrieved party may file an action for reconveyance based on implied or constructive trust, which prescribes in ten years from the date of issuance of the certificate of title over the property provided that the property has not been ac<uired by an innocent purchaser for value. Ahemani v. Heirs of Anastacio )rinidad$ 0'( #C/A 83 +!((*-. 4here the facts deemed admitted showed that the signature of the petitioners, being forced heirs, in the e%tra2udicial settlement with sale has been forged, and although title to the land had been A")MNK 5utline Page 44 of 66

registered in the name of the buyer, the contract is void, and the action to see& the declaration of nullity is imprescriptible under Article 1'1( of the Civil Code, and is not to be governed by the principles of implied trust. Maca(a((ad v. Masirag$ 0*6 #C/A *( +!((,-. Close Relationship an# Contin%e# Reco&nition o( 1r%st Relationship ? 5n the other hand, laches, being rooted in e<uity, is not always to be applied strictly in a way that would obliterate an otherwise valid claim especially between blood relatives. "he e%istence of a confidential relationship based upon consanguinity is an important circumstance for consideration. hence, the doctrine is not to be applied mechanically as between near relatives. 'state o( -ar&arita 4. Cabac%n&an, v. "ai&o G.R. N'. !8< 8#, !< A?.?st 2 !!. "he doctrine of laches +here, 1, years from the time the Deed of Donation was e%ecuted by the father in the name of the sister, but for the e<ual benefit of the brother- is not to be applied mechanically as between near relatives, in this case between brother and sister, which would tend to e%cuse what otherwise may be considered a long delay in ta&ing action. Joreover, continued recognition of the e%istence of the trust, in this case by letters written by the sister to the brother, recogni7ing the trust relationship, precludes the defense of laches. Ada*a v. CA, 1*1 #C/A 36, +1,8,-. HISTORICAL JURISPRUDENCE> )hough the Statute of "imitations does not run (etween the trustee and cestui 9ue trust as long as the trust relations su(sist, it does run between the trust and third persons, and a third person who holds actual, open, public, and continuous possession of land for over ten years, adversely to the trust, ac<uires title to the land by prescription as against such trust. :overnment v. A(adilla, '6 )hil. 6'! +1,!'-. rescription Cannot *pply *&ainst a -inor Bene(iciary in I$plie# 1r%st @ 6n an implied trust, when the act of repudiation of the trustee was effected at the time the cestui 9ue trust was still a minor, then such act does not pre2udice the latter1 4e note, however, that this supposed repudiation of the trust first too& place before Januel Castro had reached his ma2ority, and we are unable to see how a minor with whom another is in trust relation can be pre2udiced by repudiation of the trustee addressed to him by the person who is sub2ect to the trust obligation. "he defendant in our opinion is not entitled to the benefit of prescription from his supposed repudiation of the trust. Castro v. Castro, 0* )hil. 6*0 +1,3!-. "he e%press trusts disable the trustee from ac<uiring for his own benefit the property committed to his management or custody, at least while he does not openly repudiate the trust, and ma&es such repudiation &nown to the beneficiary or cestui 9ue trust. Ror this reason, the old Code of Civil )rocedure +Act 1,(- declared that the rules on adverse possession do not apply to continuing and subsisting +i.e., unrepudiated- trusts. Cut in /'&str?/ti7e tr?sts, the rule is that laches constitutes a bar to actions to enforce the trust, and repudiation is not re<uired, unless there is concealment of the facts giving rise to the trust. "he reason for the difference in treatment is obvious. I& eF3ress tr?sts, t2e 4e1-0 '% t2e 5e&e%i/i-r0 is 4ire/t10 -ttri5?t-51e t' t2e tr?stee B2' ?&4ert-@es t' 2'14 t2e 3r'3ert0 %'r t2e %'rmer, 'r B2' is 1i&@e4 t' t2e 5e&e%i/i-r0 50 /'&%i4e&ti-1 'r %i4?/i-r0 re1-ti'&s. "he trustee;s possession is, therefore, not adverse to the beneficiary, until and unless the latter is made aware that the trust has been repudiated. Cut in /'&str?/ti7e tr?sts +that are imposed by law-, there is neither promise nor fiduciary relation. the so$called trustee does not recogni7e any trust and has no intent to hold for the beneficiary. therefore, the latter is not 2ustified in delaying action to recover his property. It is 2is %-?1t i% 2e 4e1-0s, 2e&/e, 2e m-0 5e est'33e4 50 2is 'B& 1-/2es. 5f course, the e<uitable doctrine of estoppel by laches re<uires that the one invo&ing it must show, not only the un2ustified inaction, but that some unfair in2ury would result to him unless the action is held barred. ia* v. :orricho and Aguado, 1(3 )hil. !61 +1,08-. Con2ugal partnership property could not be sold by the surviving spouse without the formalities established for the sale of property of the deceased persons, and such sale by the surviving spouse is void as to the share of the deceased spouse and the vendee becomes a trustee of the share of the deceased spouse for the benefit of her heirs, the cestuis 9ue trustent. )rescription cannot be set up as a defense in an action that see&s to recover the property held in trust for the benefit of another and neither could laches be set up as a defense, it being similar to prescription. Cuison v. 7ernande* and 1eng*on, 1(0 )hil. 130 +1,0,-. 4hen the trial court declared in a decision that had become final and e%ecutory that appellees had the right to redeem the property in <uestion and ordered appellants to ma&e the resale of the property in favor of appellees, there was created a constructive trust, in the sense that although appellants had the na&ed title issued in their names, and which they retained, nevertheless, they were to hold said property in trust for appellees to redeem, sub2ect to the payment of the redemption price. !n the latter instance of constructive trust$ prescription may apply only where the trustee asserts a right adverse to that of the cestui 9ue trust$ such as$ asserting acts of ownership over the property (eing held in trust. Cut the facts showed that no e%ercise of adverse rights could be claimed by the appellants, since after the decision aforementioned had become final and e%ecutory, appellants began to recogni7e the right of the appellees to collect rentals from the tenant of the property, and when the tenant left the house, appellees too& possession of, and e%ercised acts of ownership over, the house and appellants, all along, showed conformity thereto. :eronimo and !sidro v. ;ava and A9uino, 1(0 )hil. 1'0 +1,0,-. Constructive or implied trusts may, of course, be barred by lapse of time. )he rule in such trusts is that laches constitutes a (ar to actions to enforce the trust$ and repudiation is not re9uired$ unless A")MNK 5utline Page 45 of 66

there is concealment of the facts giving rise to the trust. +Dia7, et al. vs. >orricho, 1(3 )hil. !61Continuous recognition of a resulting trust, however, precludes any defense of laches in a suit to declare and enforce the trust. . . . "he beneficiary of a resulting trust may, therefore, without pre2udice to his right to enforce the trust, prefer the trust to persist and demand no conveyance from the trustee. Heirs of &milio Candelaria v. "ucia Romero, 1(, )hil. 0(( +1,6(-. "he case at bar involves an implied or constructive trust upon the defendant$appellees. "he Court of Appeals declared that 6ldefonsa held in trust the X legally belonging to the plaintiffs. of which condition, the defendants had full &nowledge. "he sale made by 6ldefonsa in favor of the defendants, was not void or ine%istent contract, action on which is imprescriptible +Art. 1'0(, 8.C.C.-. 6t is voidable, at most, and as such in valid until revo&ed within the time prescribed by law for it revocation, and that is undoubtedly the reason why the Court of Appeals pronounced that the Appellees had the right to as& for a reconveyance of their share, unless the action is barred by prescription. )he prescripti(ility of an action for reconveyance (ased on implied or constructive trust$ is now a settled 9uestion in this #urisdiction. !t prescri(es in ten >IG? years +CoWaga v. #oler, >./. 8o. E$10*1*, 3( Nune 1,61. N. J. "uason M Co., 6nc. v. Jagdangal, >./. 8o. E$1003,, 3( Nan. 1,6!-. Al*ona v. Capunitan and Reyes, ' #C/A '0( +1,6!-. 4eci#e# j%st $onths later> 6f a person obtains legal title to property by fraud or concealment, a constructive trust is created in favor of the defrauded party and the latter has the right to vindicate the property regardless of the lapse of time. "he rule that registration of real property under the "orrens system had the effect of a constructive notice to the whole world cannot be availed of when the purpose of the action is to compel a trustee to convey the property registered in his name for the benefit of the cestui 9ue trust. !n other words$ the defense of prescription cannot (e set up in an action to enforce a trust. 2,e need not reiterate those cases holding imprescripti(le the action to enforce a trust. =Castro vs. Castro, 0* )hil. 6*0. Cristobal vs. >ome7, 0( )hil. 81I. A different view could encourage fraud and permit one person un2ustly to enrich himself at the e%pense of another. %uan v. Du/iga, ' #C/A 1!!1 +1,6!-. 4here the administrator of the estate of the decedent had been duly instituted as the sole heir in the will of the decedent which was duly probated, even assuming that the administrator had acted as trustee for the other heirs, the obtaining of the transfer certificates of titles in the administratorGs name of all registered land of the estate would constitute an open and clear repudiation of any trust, and the lapse of more than twenty yearsG open and adverse possession as owner would certainly suffice to vest title by prescription in said administrator. "ope* v. :on*aga, 1( #C/A 16* +1,*'-. 6n constructive trusts among co$heirs or co$owners, the prescriptive period begins on the date when the trustee registers the deed that see&s to e%clude the cestuis 9ue trustant from title to the property and see&ing to have new title issued only in trusteeGs name. Castrillo v. Court of Appeals , 1( #C/A 0', +1,6'-. 4here the owner of an unregistered land had sold the property to another under a sale with a right of repurchase but was never able to e%ercise the right of repurchase, the registration by the seller of the property in his name under the "orrens system was done in bad faith, and he is deemed to have constituted himself as trustee for the buyer of the property to whom ownership was consolidated and who had been in possession thereof for many years. "he action of the buyer or his successors$in$interest to have a reconveyance of the title even when filed more than twenty years after the seller had obtained title thereto was imprescriptible. Under Act 1,( +the old Code of Civil )rocedure-, section 38, which is the governing statute, prescription does not apply to continuing and subsisting trusts . so that actions against a trustee to recover trust property held by him are imprescriptible. Actions for the reconveyance of property wrongfully registered are of this category. Caladiao v. 8da de 1las, 1( #C/A 6,1 +1,6'-. "he petitioners and private respondents were co$heirs, and the petitionerGs action for partition and reconveyance was based upon a constructive trust resulting from fraud, the Court held that the discovery of the fraud is deemed to have ta&en place, in the case at bar, on Nune !3, 1,'8, when said instrument was filed with the /egister of Deeds and new certificates of title were issued in the name of respondents e%clusively, for the registration of the deed of e%tra$2udicial settlement constituted constructive notice to the whole word. :erona v. e :u*man, 11 #C/A 103 +1,6'-. Although as a general rule, an action for partition among co$heirs does not prescribe, this is true only as long as the defendants do not hold the property in <uestion under an adverse title +Cordova v. Cordova, E$,,36, 1' Nanuary 1,'8-. "he statute of limitations operates as in other cases, from the moment such adverse title is asserted by the possessor of the property +/amos v. /amos, '0 )hil. 36!. Cargayo v. Camumot, '( )hil. 80* =1,!(I. Castro v. @charri, !( )hil. !3-. Q Although, there are some decisions to the contrary +Nacinto v. Jendo7a, E$1!0'(, !8 Rebruary 1,0(. Cuison v. Rernande7, E$11*6', 31 Nanuary 1,0,. Jaribiles v. Uuinto, E$1('(8, 18 5ctober 1,06. and #evilla v. De los Angeles, E$**'0, 18 8ovember 1,00-, it is already settled in this 2urisdiction that an action for reconveyance of real property based upon a constructive or implied trust, resulting from fraud, may be barred by the statute of limitations +Candelaria v. /omero, E$1!1',, 3( #eptember 1,6(. Al7ona v. Capunita, E$1(!!(, !8 Rebruary 1,6!-. Q 6nasmuch as petitioner see& to annul the aforementioned deed of e%tra$2udicial settlement upon the ground of fraud in the e%ecution thereof, the action therefor may be filed within four +'- years from the discovery of the fraud +Jauricio v. Killanueva, E$ 11(*!, !' #eptember 1,0,-. #uch discovery is deemed to have ta&en place, when said instrument was filed with the /egister of Deeds and new certificates of title were issued in the name of respondents e%clusively, for the registration of the deed of e%tra$2udicial settlement constitute constructive notice to the whole world +Dia7 v. >orricho, E$11!!,, !, Jarch 1,08. Avecilla v. Hatco,

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E$110*8, 1' Jay 1,08. N.J. "ua7on M Co., 6nc. v. Jagdangal, E$1003,, 3( Nanuary 1,6!. Eope7 v. >on7aga, E$18*88, 31 Nanuary 1,6'-. :erona v. Carmen de :u*man, 11 #C/A 103 +1,6'-. Cesides, even assuming the alleged trust to be an implied one, the right alleged by plaintiffs would have already prescribed since starting in 1,36 when the trustor died, plaintiffs had already been allegedly refused by the aforesaid defendants in their demands over the land, and the complaint was filed only in 1,61Omore than the 1($year period of prescription for the enforcement of such rights under the trust. 6t is settled that the right to enforce an implied trust in oneGs favor prescribes in ten +1(- years. =>on7ales v. Nimene7, E$1,(*3, 3( Nan. 1,60.I Cuaycong v. Cuaycong, !1 #C/A 11,!, 11,8 +1,6*-. 4hile there are some decisions which hold that an action upon a trust is imprescriptible, without distinguishing between e%press and implied trust, the better rule, as laid down by the #upreme Court in other decisions, is that prescription does supervene where the trust is merely an implied one. 1ueno v. Reyes, !* #C/A 11*, +1,6,-. Actions on implied and constructive trusts +as distinguished from e%press ones- are e%tinguished by laches or prescription of ten years. 8arsity Hills v. 8avarro, '3 #C/A 0(3 +1,!!-. "he rule of imprescriptibility of the action to recover property held in trust may possibly apply to resulting trusts as long as the trustee has not repudiated the trust +Beirs of Candelaria vs. /omero, 1(, )hil. 0((, 0(!$3. Jaritne7 vs. >raWo, '! )hil. 30. Cuencamino vs. Jatias, 63 5.>. 11(33, 16 #C/A 8',-. Ramos v. Ramos, 61 #C/A !8' +1,*'-. "he rule of imprescriptibility does not apply to constructive trusts, and was therefore misapplied to constructive trusts in >eronimo and 6sidoro vs. 8ava and A<uino, 1(0 )hil. 1'0,103 =1,0,I. Compare with Cuison vs. Rernande7 and Ceng7on, 1(0 )hil. 130, 13, =1,0,I. De )asion vs. De )asion, 11! )hil. '(3, '(*-. Ramos v. Ramos, 61 #C/A !8', !,,$3(( +1,*'-. 4ith respect to constructive trusts, the rule is different =as compared to e%press trustI. )he prescripti(ility of an action for reconveyance (ased on constructive trust is now settled +Al7ona v. Capunitan, ' #C/A '0( +1,6!-. >erona v. De >u7man, supra. Claridad v. Benares, ,* )hil. ,*3. >on7ales v. Nimene7, 13 #C/A 8( +1,60-. CoWaga v. #oler, 11 )hil. 601. N.J. "ua7on M Co. v. Jandanagal, ' #C/A 8' +1,6!-. Prescription may supervene in an implied trust +Cueno vs. /eyes, !* #C/A 11*, +1,6,-. Rabian v. Rabian, E$!(('',, !, Nanuary 1,68. Nacinto v. Nacinto, 0 #C/A 3*1 +1,6!-. And whether the trust is resulting or constructive$ its enforcement may (e (arred (y laches +Dia7 v. >orricho and Aguado, supra. Compare with Je2ia v. >ampona, 1(( )hil. !**-. Ramos v. Ramos, 61 #C/A !8', 3(( +1,*'-. "he prescriptibility of an action for reconveyance based on implied or constructive trust, is now a settled <uestion in this 2urisdiction. 6t prescribes in ten years. 5n the other hand e%press trusts prescribe 1( years from the repudiation of the trust &scay v. Court of Appeals, 61 #C/A 36, +1,*'-. Constructive notice is applicable in cases of constructive trusts, as borne out by the decisions in "ope* and :erona, 6n any event, it is now settled that an action for reconveyance based on implied or constructive trust is prescriptible. it prescribes in ten years. "here is a clear repudiation of a trust where on who is an apparent administrator of property causes the cancellation of the title thereto in the name of the apparent beneficiaries and gets a new certificate of title in his own name. Carantes v. Court of Appeals, *6 #C/A 01' +1,**-. 4here a possessor of registered land see&s a reconveyance of title to him from the registered owner on the ground of implied trust under Article 1'06 of the Civil Code, then the trial court committed serious error in dismissing the case on the ground that the petitioner had no standing to sue. Ei&ewise to satisfy the demands of 2ustice, the doctrine of implied trust may be made to operate in plaintiffGs favor, assuming that he can prove his allegation that defendant had ac<uired legal title by fraud. +at p. 183-. )laintiffGs action for reconveyance may not be said to have prescribed, for, basing the present action on implied trust, the prescriptive period is ten years. Armamento v. :uererro, ,6 #C/A 1*8, 18' +1,8(-.

N'O'N

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C.
I. HISTORICAL $ACAGROUND

PARTNERSHIPS

!. O14 $r-&/2es '% P-rt&ers2i3 L-B Ci7i1 P-rt&ers2i3s +not pursued in mercantile manner. non$habitual or not in the regular pursuit of (usiness C'mmer/i-1 P-rt&ers2i3s +in pursuit of industry or commerce. characteri7ed by ha(ituality or in the regular pursuit of (usiness Distinction between civil and commercial partnerships was critical under the old set$up because it determined the applicable rules for registration, personal liability of members, and the rights and manner of dissolution. Compa/ia Agricola de 0ltramar v. Reyes, ' )hil. !, 11 +1,('-.

(-+ C'mmer/i-1 3-rt&ers2i3s Bere 4eeme4 t' 5e, -&4 s?56e/t t' C'4e '% C'mmer/e 3r'7isi'&s %'r, mer/2-&ts>
A commercial or mercantile partnership has for its ob2ect the pursuit of industry or commerce, and is then a merchant that must necessarily be governed by the Code of Commerce and must comply with the registration re<uirements thereof to lawfully come into e%istence. it cannot choose to be organi7ed under the Civil Code to ma&e it a civil partnership. A commercial partnership is distinguished from a civil one by the ob2ect to which it is devoted and not by the manner with which it is organi7ed. Prautch v. Hernande*, 1 )hil. *(0 +1,(3-. Contra> 4e are inclined to the belief that the respective codes, Civil and Commercial, have adopted a complete system for the organi7ation, control, continuance, liabilities, dissolutions, and 2uristic personalities of associations organi7ed under each. . . . 6t is our opinion that associations organi7ed under the different codes are governed by the provisions of the respective codes. Compa/ia Agricola de 0ltramar v. Reyes, ' )hil. ! +1,('-. A commercial partnership that fails to register its articles of partnership in the mercantile registry in accordance with Art. 11, of the Code of Commerce, does not become a 2uridical person with a personality distinct from those of the individuals who composed it. Ang Seng 6uen v. )e Chico, * )hil. 0'1 +1,(*-. 1ourns v. Carman, * )hil. 11* +1,(6-. Hung=Man=+oc v.Aieng=Chiong=Seng, 6 )hil. ',8 +1,(6-.3* Conse:%ently> +1,(3-. 8either in the name of one or more of the members on behalf of his associates. nevertheless the individual members may sue 2ointly as individuals, and persons dealing with them in their 2oint capacity will not be permitted to deny their right to do so. Prautch$ etc. v. %ones, 8 )hil. 1, ! +1,(*-. Ang Seng 6uen v. )e Chico , 1! )hil. 0'* +1,(,-. 4ithout a separate 2uridical personality, what was applicable was Art. 1!( which made persons in charge of the management of the association liable for the debts incurred by such partnership de facto . Awong=,o=Sing v. Aieng=Chiong=Seng, 6 )hil. ',8 +1,(6-. 6t cannot maintain an action in its name Prautch v. Hernande*, 1 )hil. *(0

(5+ F'r /'mi&. i&t' eFiste&/eC5e/'mi&. - 6?ri4i/-1 3ers'&, re.istr-ti'& B-s t2e @e0 e1eme&t %'r /'mmer/i-1 3-rt&ers2i3s (Arts. !!)"!!=, C'4e '% C'mmer/e+, B2i1e it B-s mere 3er%e/ti'& '% t2e /'&tr-/t %'r /i7i1 3-rt&ers2i3s>
4hen the partnership business is in laundry, it is essentially a civil partnership and governed by the provisions of the Civil Code, and it e%isted validly even when no formal partnership agreement was entered into and registered, and thereby the obligations of the partners for partnership debts would be pro=rata. ietrich v. 7reeman, 18 )hil. 3'1 +1,11-.

(/+ F'r 3-rt&ers2i3 4e5ts, /'mmer/i-1 3-rt&ers Bere s'1i4-ri10 1i-51e, albeit s?5si4i-ri10, B2i1e /i7i1 3-rt&ers Bere 3rim-ri10 5?t '&10 6'i&t10 1i-51e>
6n a civil partnership, each member is not bound to pay all the debts of the concern, but simply his pro rata share, Co=Pitco v. +ulo, 8 )hil. 0'' +1,(*-. 6n a commercial partnership, although the partners are only subsidiarily liable + i.e.$ they en2oy the benefit of e%cussion- they are liable solidarily, 8iuda de Chan iaco v. Peng, 03 )hil. ,(6 +1,!8-. both the partnership and the separate partners may be 2oined in one action, but the private property of the partners cannot be ta&en in payment of the partnership debts until the common property of the firm has been e%hausted. "a Compa/ia Maritima v. Mu/o*, , )hil. 3!6 +1,(*-. and their right of e%cussion is deemed already satisfied where at the time the 2udgment is e%ecuted against the partnership they are unable to show that there are still
37

Ang Seng 6uen v. )e Chico, * )hil. 0'1 +1,(*-. 1ourns v. Carman, * )hil. 11* +1,(6-.

A")MNK 5utline Page 48 of 66

partnership assets, or when a writ of e%ecution against the partnership has been returned not fully satisfied, e los Reyes v. "u-(an, 30 )hil. *0* +1,16-. P;1 v. "o, 0( )hil. 8(! +1,!*-.

II. NATURE AND ATTRI$UTES OF THE PARTNERSHIP

!. De%i&iti'& '% P-rt&ers2i3 (Art. !8*8+ 2. TRI"LEVEL EJISTENCECLEGAL RELATIONSHIPS IN A PARTNERSHIP SETTING -. RI-*RI"5 * CO61R*C1U*" R'"*1IO6S7I (Arts. !8*8, !88! -&4 !8)9+

5. S' *R*1' )URI4IC*" 'RSO6*"I15 *S 17' -'4IU- 1O URSU' BUSI6'SS (Art. !8*)+ /. U64'R"5I6G BUSI6'SS '61'R RIS' *S 17' RI-*R5 OB)'C1I,'
4hen the original partners sell their e<uity interest in the company, the original 2uridical person was e%tinguished and the new set of partners constituted a new partnership arrangement with a new 2uridical personality. Het the underlying business enterprise remained the same between the two sets of investors and liability rules pertaining to the underlying business enterprise must be respected. 5% v. 6"RC, 229 SCRA 8< (!==#+.

#. Esse&ti-1 E1eme&ts -&4 P?r3'se '% t2e P-rt&ers2i3 -. CONSENT> artnership $%st necessarily arise (ro$ a contract%al relationship. Pers'&s B2' -re &'t 3-rt&ers t' '&e -&'t2er -re &'t 3-rt&ers -s t' t2ir4 3ers'&s (Art. !8*=:!;+. EJCEPT> P-rt&ers2i3 50 est'33e1 (Art. !)2<+ 5. SU$JECT MATTER> D artners Seek the )oint %rs%it o( a B%siness ,ent%re or B%siness 'nterpriseE -s /1e-r10 i&4i/-te4 50> *&ree$ent to Contrib%te to a Co$$on F%n#. and *&ree$ent or Intention to 4ivi#e the ro(its an# "osses. EJCEPT> J'i&t 3?rs?it '% - 3r'%essi'& 4'&e t2r'?.2 - 3r'%essi'&-1 3-rt&ers2i3. (i+ * partnership $%st be establishe# (or the co$$on bene(it or interest o( the parties (Art. !88 +. (ii+ * stip%lation excl%#in& a partner (ro$ participation in the pro(its an# losses is voi# (Art. !8==+.
2)he o(taining of profit or gain from the (usiness to (e carried on3 is the very reason for the e%istence of a partnership. it is the element that distinguishes the contract of partnership from voluntary religious or social organi7ations. 7ernande* v. e la Rosa, 1 )hil. 6*1 +1,(3-. An agreement between two persons to operate a coc&pit, by which one is to contribute his services and the other to provide the capital, the profits to be divided between them, constitutes a partnership. 6n this case, that he performed services in connection with the business and that defendant not only rendered an accounting of the business and paid him his share of the profits, were competent proof to establish the partnership. uterte v. Rallos, ! )hil. 0(, +1,(3-. . . . where the society is not constituted for the purpose of gain, it does not fall within this article of the Civil Code =on partnershipsI. #uch an organi7ation is fully covered by the Eaw of Associations of 188*, but that law was never e%tended to the )hilippine 6slands. Council of Red Men v. 8eterans Army, * )hil. 680 +1,(*-.

/. CONSIDERATION> Un#ertakin& to Contrib%te -oney, Co$$on F%n#

roperty or In#%stry to a

4. P-rti/?1-r R?1es '& Testi&. Per%e/te4 P-rt&ers2i3 (Art. !8*=Although the e%istence of a partnership cannot be established by general reputation, rumor, or hearsay, nonetheless, a verbal partnership is valid and may be proven by competent evidence, and the intention of the parties, to form a partnership may be gathered from the facts and ascertained from their language and conduct, and once so established should be given effect. Aiel v. &state of P.S. Sa(ert, '6 )hil. 1,3 +1,!'-. "he issue as to whether there is a partnership between the parties is a factual matter. Alic(usan v. Court of Appeals, !6, #C/A 336 +1,,*-. 4hen members of the same family lease out to #B@EE a family commercial lot for the establishment of a gasoline station, and invested the advanced rentals and deposits to allow one A")MNK 5utline Page 49 of 66

of their members to use the amounts as the registered dealer of #B@EE under the latterGs policy of one station, one dealer, and that the registered dealer had accounted for the operations to the other members of the family, there was indeed a partnership formed among themselves, for which the registered dealer can be compelled to e%ecute the covering articles of partnership, for accounting and distribution of the shares in profits of the other partners. 'stanislao, )r. v. Co%rt o( *ppeals, !* SCRA )# (!=))+. 4hen facts proven show that purported partner never furnished the supposed )!(,((( capital, nor rendered any help or intervention in the management of the purported partnership business, much less demanded an accounting of its affairs and its earnings, there was never intended a real partnership despite the articles of partnership e%ecuted. All that the purported partner did was to receive her share of )3,((( a month, which can not be interpreted in any manner than a payment for the use of the premises which she had leased from the owners, and was in accordance with the original letter of defendant +@%h. A -, which shows that both parties considered themselves as lessor$lessee under a contract of lease. 5%lo v. 5an& Chiao Sen&, ! * P2i1. !!! (!=<=+.

(i+ C'"OB&ers2i3 'r C'"P'ssessi'& D'es N't Itse1% Est-51is2 - P-rt&ers2i3, E7e& W2e& Pr'%its Are S2-re4.
4hen land is purchased with the funds contributed by the parties and thereafter divided e<ually among them, there could not have been formed a partnership. :allemet v. )a(ilaran, !( )hil. !'1 +1,11-. 4hen fifteen people contributed money to buy a sweepsta&es tic&et with the intention to divide the pri7e which they may win, and in fact the tic&et won third pri7e, they formed a partnership, which was sub2ect to ta% as a corporate ta%payer. :atchalian v. Collector of !nternal Revenue, 6* )hil. 666 +1,3,-. "he first element of an agreement to contribute money, property or industry to a common fund, is undoubtedly present in the case at bar, for, admittedly, petitioners have agreed to, and did, contribute money and property to a common fund. "he issue remains as to the second element of intent to divide the profits among themselves. Upon consideration of all the facts and circumstances surrounding the case, we are fully satisfied that their purpose was to engage in real estate transactions for monetary gain and then divide the same among themselves. 6n other words one cannot but perceive a character of habituality peculiar to business transactions engaged in for purposes of gain. 'van&elista v. Collector o( Internal Reven%e, ! 2 P2i1. !9 (!=<8+. 4here father and son purchased lot and building and had it administered with the original purpose of dividing the net income from the property, then a partnership was constituted. Reyes v. Commissioner of !nternal Revenue, !' #C/A 1,8 +1,68-. 4hen the heirs agreed after partition of the estate, to use common properties and income as a common fund with the intention of ma&ing profit for them in proportion to their shares in the inheritance, the co$ownership was converted into a partnership. O!a v. Co$$issioner o( Internal Reven%e, 9< SCRA 89 (!=82+. 4hen four brothers and sisters ac<uired lots from their purpose with the original purpose to divide the lots for residential purposes, and later they found it not feasible to build their residences on the lots because of the high cost of construction, then they had no choice but to resell the same to dissolve the co$ownership. "he division of the profit was merely incidental to the dissolution of the co$ownership which was in the nature of things a temporary state. 6t had to be terminated sooner or later. O(illos$ %r. v. Commissioner of !nternal Revenue, 13, #C/A '36 +1,80-. 6n contrast with &vangelista$ when the only facts proven was the e%istence of co$ ownership between the parties covering two isolated purchase of parcels of land and the sharing of profits on the subse<uent sales thereof, there can be no deduction that an unregistered partnership has been constituted to ma&e it separately liable for corporate income ta%1 the transactions were isolated, the parcels purchased were not managed or even leased out. "he sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have 2oint or common right of interest in the property. "here must be clear intent to form a partnership, the e%istence of a 2uridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property. asc%al v. Co$$issioner o( Internal Reven%e, !** SCRA <* (!=))+. Jere co$ownership or co$possession of property does not necessarily constitute the co$ owners or co$possessors are partners in the absence of an agreement to enter into a partnership. ;avarro v. Court of Appeals, !!! #C/A 6*0 +1,,3-.

S2-ri&. '% Gr'ss Ret?r& D'es N't Cre-te P-rt&ers2i3.

An e%clusive agent to develop a parcel of land who is entitled to receive a !(9 commission on the gross sales, cannot claim to be a partner to the venture simply on the basis that he had made personal advances for the e%penses incurred in the development and administration of the property, since the amounts were never considered contributions into the business. 1iglangawa and &spiritu v. Constantino, 1(, )hil. 168 +1,6(-.

Re/ei3t 50 - Pers'& '% - S2-re '% t2e Pr'%its '% - $?si&ess>

A")MNK 5utline Page 50 of 66

Despite the agreement that Castida was to receive 309 of the profit from the business of mi%ing and distributing fertili7er registered in the name of Jen7i M Co., there was never any contract of partnership constituted between them based on the following &ey elements1 +a- there was never any common fund created between the parties, since the entire business as well as the e%penses and disbursements for operating it were entirely for the account of Jen7i M Co.. +b- there was no provision in the agreement for reimbursing Jen7i M Co. in case there should be no profits at the end of the year. and +c- the fertili7er business was 2ust one of the many lines of business of Jen7i M Co., and there were no separate boo&s and no separate ban& accounts &ept for that particular line of business. "he arrangement was deemed to be one of employment, with Castida contributing his services to manage the particular line of business of Jen7i M Co. Basti#a v. -en+i an# Co., <) P2i1. !)) (!=##+. 4here there is no written agreement of the partnership, nor proof that the claimant received a share in the profits, nor was there anything to show he had any participating with respect to the running of the business, then no partnership claim can be sustained. Sy v. Court of Appeals, 3,8 #C/A 3(1 +!((3-. Heirs of %ose "im v. "im, 61' #C/A 1'1 +!(1(-. Although the 5livas were mere creditors, not partners, the Antons agreed to compensate them for the ris&s they had ta&en. "he 5livas gave the loans with no security and they were to be paid such loans only if the stores made profits. Bad the business suffered loses and could not pay what it owed, the 5livas would have ultimately assumed those loses 2ust by themselves. #till there was nothing illegal or immoral about this compensation scheme. *nton v. Oliva, *98 SCRA < * (2 !!+.

W2e& Re/ei3t '% Pr'%its D'es N't Cre-te Pres?m3ti'& '% P-rt&ers2i31 o *s Install$ent ay$ents o( 4ebt or Interest 1hereo(
"here is no partnership formed when a loan was obtained to purchase a venture under the condition that the lender would receive part of the profits of the business in lieu of interest. Pastor v. :aspar, ! )hil. 0,! +1,(3-. A creditor of a business enterprise cannot recover his claim against a person who gave personal guarantees to some other obligations of the business enterprise and who is without any right to participate in the profits and cannot be deemed a partner in the business enterprise, since the essence of partnership is that the partners share in the profits and losses. 1ocao v. Co%rt o( *ppeals, #*< SCRA 9*# (2 !+.

o *s ;a&es o( an '$ployee
A manager of the partnership business would naturally have some degree of control over the operations and maintenance thereof. Cut the fact that he had received 0(9 of the net profits does not conclusively establish that he was a partner of the private respondent herein. Art. 1*6,+'- of the Civil Code is e%plicit that while the receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, no such inference shall be drawn if such profits were received in payment as wages of an employee. Rurthermore, herein petitioner had no voice in the management of the affairs of the partnership. Sardane v. Court of Appeals, 16* #C/A 0!' +1,88-. Also 7ortis v :utierre* Hermanos, 6 )hil. 1(( +1,(6-. "he submission of the payroll of the company indicating that the brother was listed as an employee and receiving only wages from the company militates against his claim of being a partner in the business. Heirs of )ang &ng Aee v. Court of Appeals, 3'1 #C/A *'( +!(((-. "he fact that in their articles of agreement, the parties agreed to divide the profits of a lending business in a stipulated proportion shows a partnership e%ists, even when the other parties to the agreement were given separate compensations as boo&&eeper and credit investigator. Santos v. Reyes, 368 #C/A !61 +!((1-.

o *s Rent ay$ents to a "an#lor# o *s *nn%ity to a ;i#o. or Representative o( 4ecease# artner o Consi#eration o( Sale o( Goo#.ill or Other roperty 9. ESSENTIAL CHARACTERISTICS OF THE PARTNERSHIP -. RI-*RI"5 * CO61R*C1U*" R'"*1IO6S7I (Arts. !8*8, !88!, !8)9+ 5. I6FOR-*"BCO6S'6SU*" *64 ;'*? )URI4IC*" 'RSO6*"I15 (Arts. 99:#;, !8*), !889+ /. 4'"'C1US 'RSO6*' (i+ *ssi&n$ent o( a partner o( his share #oes not $ake assi&nee a partner (Arts. !) 9, !)!#+
"he birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. "he right to choose with whom a person wishes to associate himself is the very A")MNK 5utline Page 51 of 66

foundation and essence of that partnership. 6ts continued e%istence is, in turn, dependent on the constancy of that mutual resolve, along with each partnerGs capability to give, it, and the absence of a cause for dissolution provided by the law itself. Orte&a v. Co%rt o( *ppeals, 29< SCRA <2= (!==<+. An un2ustified dissolution by a partner can sub2ect him to action for damages because by the mutual agency that arises in a partnership, the doctrine of delectus personae allows the partners to have the power, although not necessarily the right, to dissolve the partnership. )ocao v. Court of Appeals$ 3'! #C/A !( +!(((-.

4. -U1U*" *G'6C5 (Arts. !) #:!;, !)!), !)!=, !)2! t' !)2#+ e. U6"I-I1'4 "I*BI"I15 FOR *R16'RS (Arts. !)!*, !)!8, !)29, !)#=:9; -&4 :8;+

III. AINDS OF PARTNERSHIPS

!. As t' O56e/t (Art. !88*, !st 3-r.+ -. U&i7ers-1 P-rt&ers2i3 (Arts. !888 t' !8)2+ " Deeme4 - D?&i7ers-1 3-rt&ers2i3 '% 3r'%itsE B2e& -rti/1es 4' &'t s3e/i%0 t2e 3-rt&ers2i3Ks &-t?re. (Art. !8)!+ " Pers'&s B2' -re 3r'2i5ite4 %r'm .i7i&. e-/2 't2er -&0 4'&-ti'& 'r -47-&t-.e /-&&'t e&ter i&t' - ?&i7ers-1 3-rt&ers2i3. (Art. !8)2+ 5. P-rti/?1-r P-rt&ers2i3 (Art. !8)#+ = Use(%lness o( the #istin&%ishin& bet.een %niversal an# partic%lar partnerships. "yons v. Rosenstock, 9) P2i1. = = (!=#2+.#) 2. As t' D?r-ti'& (Art. !8)<+ -. P-rt&ers2i3 Bit2 FiFe4 Term 5. P-rt&ers2i3 %'r - P-rti/?1-r U&4ert-@i&. /. P-rt&ers2i3 -t Wi11
4hen there has been duly registered articles of partnership, and subse<uently the original partners accept an industrial partner but do not register a new partnership, and thereafter the industrial partner retires from the business, and the original partners continue under the same set$ up as the original partnership, then although the second partnership was dissolved with the withdrawal of the industrial partner, there resulted a reversion bac& into the original partnership under the terms of the registered articles of partnership. "here is not constituted a new partnership at will. Ro#as v. Maglana, 1,! #C/A 11( +1,,(-.

#. As t' t2e N-t?re '% t2e Li-5i1ities '% P-rt&ers -. Ge&er-1 P-rt&ers2i3 (Art. !88*, 2&4 3-r.+ 5. Limite4 P-rt&ers2i3 (Socie#a# en Co$an#ita+ (Arts. !)9# t' !)*8+ 9. C'm3-re4 Bit2 Ot2er Me4i- '% D'i&. $?si&ess -. C'"OB&ers2i3 (Arts. 9)9 t' 9)*+ 5. S'1e Pr'3riet'rs2i3
A sole proprietorship does not possess a 2uridical personality separate and distinct from the personality of the owner of the enterprise. "he law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court. 5nly natural or 2uridical persons or entities authori7ed by law may be parties to a civil action and every action must be prosecuted and defended in the name of the real parties$in$interest. &#ercito v. M.R. 8argas Construction, 001 #C/A ,* +!((8-.

/. $?si&ess Tr?st 4. A.e&/0

An agent cannot escape the criminal liabilities of estafa for conversion of the funds given to him by his principal by claiming that he had become a partner when the boo&s of accounts &ept for the business showed that the amount was charged to him since the same was merely a method of &eeping an account of the business, so that the parties would &now how much money had been invested and what the condition thereof was at any particular time. 0nited States v. Muhn, 6 )hil. 16' +1,(6-. Nust because a duly appointed agent has made personal advances for the e%penses of the business venture that he had been designated to administer, does not ma&e him a partner of his principal. 1inglangawa v. Constantino, 1(, )hil. 168 +1,6(-.
38

8illareal v. Ramire*, '(6 #C/A 1'0 +!((3-.

A")MNK 5utline Page 52 of 66

e. )ob Contractin& or S%bcontractin&

Nob contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out with a contractor or subcontractor the performance of a specific 2ob, wor& or service within a definite or predetermined period, regardless of whether such 2ob, wor& or service is to be performed or completed within or outside the premises of the principal. "he rules on 2ob contracting are inapposite where the contract, far from being a 2ob contracting arrangement, is in essence a business partnership that parta&es of the nature of a 2oint venture. )rave/o v. 1o(ongon 1anana :rowers Multi=Purpose Cooperative, 0,8 #C/A !* +!((,-.

%. Corporations .. Cooperatives

IV. PARTNERSHIP AS PRIMARILY A CONTRACTUAL RELATIONSHIP

!. Esse&ti-1 C2-r-/teristi/s '% t2e C'&tr-/t '% P-rt&ers2i3 (Art. !8*8+ -. 6o$inate an# rincipal
6f the contract contains the elements of common fund and 2oint interest in the profits, the partnership relation results, and the law fi%es the incidents of this relation if the parties fail to do so. 6t is of no importance that the parties have failed to reach an agreement with respect to the minor details of contract. "hese details pertain to the accidental and not to the essential part of the contract of partnership. Fernan#e+ v. 4ela Rosa, ! P2i1. *8! (!= 2+.

(i+ * artnership -%st 7ave a "a.(%l Object or %rpose (Art. !88 +.

"he contract of partnership to divide the fishpond between the parties after the administrative agency shall have approved the arrangement became illegal under the Risheries Act. As such, it cannot be made sub2ect to any suspensive condition the fulfillment of which could allegedly ma&e the ultimate underta&ing therein a demandable obligation. 6t is an elementary rule in law that a partnership cannot be formed for an illegal purpose or one contrary to public policy and that where the ob2ect of a partnership is the prosecution of an illegal business or one which is contrary to public policy, the partnership is void. eluao v. Casteel, !, #C/A 30( +1,6,-. Under Art. 1666 of the old Civil Code, an action to declare a partnership as an unlawful partnership does not re<uire that the charitable institution to which the partnership funds shall be turned over should be included as a party in the suit, because no charitable institution is necessary for the determination of the rights of the parties, who are partners in the unlawful partnership1 "he action which may arise from said article, in the case of an unlawful partnership, is that for the recovery of the amounts paid in by the members from those in charge of the administration of said partnership, and it is not necessary for the said partners to based their action on the e%istence of the partnership, but on the fact of having contributed some money to the partnership capital. Ar(es v. Polistico, 03 )hil. '8, +1,!,-.

5. Consens%al
An action to compel a party to e%ecute the contract of partnership to enforce the terms by which an enterprise had been constituted constitute an enforcement of an obligation to do, which is contrary to public policy against involuntary servitude. ;oo#ho%se v. 7alili, =# P2i1. <2* (!=<#+. S''> "here was indeed a partnership formed among themselves, for which the registered dealer can be compelled to e%ecute the covering articles of partnership, for accounting and distribution of the shares in profits of the other partners. 'stanislao, )r. v. Co%rt o( *ppeals , !* SCRA )# (!=))+.

/. Onero%s an# Co$$%tative

A partnership may be deemed to e%ist among parties who agree to borrow money to pursue a business and to divide the profits and losses that may arise therefrom, even if it is shown that they have not contributed to any capital of their own to a common fund. "heir contribution may be in the form of credit or industry, not necessarily cash or fi%ed assets. Ceing partners, they are liable for debts incurred by or on behalf of the partnership. "he liability for a contract entered into on behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted on its behalf, but reaped benefits from that contract. "im )ong "im v. Phil. 7ishing :ear !ndustries$ !nc., 31* #C/A *!8, *31 +1,,,-.

4. Bilateral an# Reciprocal e. reparatory an# ro&ressive

V. FORMALITIES REGUIRED FOR THE CONTRACT OF PARTNERSHIP

!. C'mme&/eme&t -&4 F'rm ReH?ire4 (Arts. !88! -&4 !8)9+ 2. Re.istr-ti'& ReH?ireme&ts

A")MNK 5utline Page 53 of 66

Ol# Civil Co#e an# Co#e o( Co$$erce> "hird parties without &nowledge of the e%istence of the partnership who deal with the property still registered in the name of one of the partners have a right to e%pect full effectivity of such transaction on the property, in spite of the protestation of the other partners and perhaps even the partnership creditors. 1or#a v. Addison, '' )hil. 8,0 +1,!!-.

-. ;hen Capital is C,DDD or -ore (Art. !882+

"he agreement to the contribution to a common fund and the division of profits and losses would bring about the e%istence of a partnership. Jere failure to register the contract of partnership with the #@C does not invalidate a contract that has the essential re<uisites of partnership ? a partnership may e%ist even if the partners do not use the words partner or partnership . *n&eles v. Secretary o( )%stice, 9*< SCRA ! * (2 <+. An unregistered contract of partnership is valid as among the partners, so long as it has the essential re<uisites, because the main purpose of registration is to give notice to third parties. "he failure to register the contract does not affect the liability of the partnership and of the partners to third persons, and that neither does such failure affect the partnership;s 2uridical personality. and it can be assumed that the members themselves &new of the contents of their contract. -a v. Fernan#e+, )r., *2< SCRA <** (2 ! +.

5. ;hen I$$ovable roperty Contrib%te# (Arts. !88! -&4 !88#+

"he e%ecution of a written agreement was not necessary in order to give efficacy to the verbal contract of partnership as a civil contract, the contributions of the partners not having been in the form of immovables or rights therein. +Civil Code, art. 166*.- "he special provision cited, re<uiring the e%ecution of a public writing in the single case mentioned and dispensing with all formal re<uirements in other cases, renders inapplicable to this species of contract the general provisions of Art. 1!8( of the old Civil Code. Fernan#e+ v. 4ela Rosa, ! P2i1. *8! (!= 2+. 4hen the articles of partnership provide that the venture is established to operate a fishpond, it does not necessarily mean that immovable properties or real rights have been contributed into the partnership which would trigger the operation of Article 1**3. Agad v. Ma(ato, !3 #C/A 1!!3 +1,68-. Railure to prepare an inventory of the immovable property is contributed, in spite of Art. 1**3 declaring the partnership void, would not render the partnership void when1 +a- 8o third$party is involved since Art. 1**3 was intended for the protection of third$parties. and +bthe partners have made a claim on the partnership agreement which is deemed binding between them as any other contract. 1orres v. Co%rt o( *ppeals, #2 SCRA 92) (!===+. 4hile the sale of land appearing in a private deed is binding between the parties, it cannot be considered binding on third persons if it is not embodied in a public instrument and recorded in the /egistry of Deeds. 4hen it comes to contributions of real estate to a partnership, especially when it covers registered land, then the peremptory provisions of the )roperty /egistration Decree +).D. 1'0,- will prevail as to who has a better claim, right or lien on the property, since registration in good faith and for value, is the operative rule under the "orrens system. Sec%ya v. ,#a. #e Sel$a, #2* SCRA 299 (2 +. An instrument purporting to be the contract of partnershipA2oint venture, which is unsigned and undated, and does not meet the public instrumentation re<uirements e%acted under Article 1**1 of the Civil Code, and not even registrable with the #@C as called for under Article 1**!, and which also does not meet the inventory re<uirement under Article 1**3 since the claims involve contributions of immovable properties, does not warrant a finding that a contract of partnership or 2oint venture e%ist. "itonj%a, )r. v. "itonj%a, Sr., 988 SCRA <8* (2 <+.

/. "e&al ,al%e o( the For$al Re:%ire$ents (or artnerships

An oral contract of partnership is valid and binding between the parties, even if the amount of capital contributed is in e%cess of the sum of 1,0(( pesetas. "he provisions of law re<uiring a contract to be is a particular form should be understood to grant to the parties the remedy to compel that the form mandated by law be complied with, but does not prevent them from claiming under an oral contract which is otherwise valid without first see&ing compliance with such form. )hunga Chui v. 6ue 1entec, ! )hil. 061 +1,(3-. Magalona v. Pesayco, 0, )hil. '03 +1,3'-. /egistration of the partnership is the best evidence to prove the e%istence of the partnership among the partners. Heirs of )an &ng Aee v. Court of Appeals , 3'1 #C/A *'( +!(((-. Heirs of %ose "im v. "im, 61' #C/A 1'1 +!(1(-. 4hen there has been duly registered articles of partnership, and subse<uently the original partners accept an industrial partner but do not register a new partnership, and thereafter the industrial partner retires from the business, and the original partners continue under the same set$up as the original partnership, then although the second partnership was dissolved with the withdrawal of the industrial partner, there resulted a reversion bac& into the original partnership under the terms of the registered articles of partnership. "here is not constituted a new partnership at will. Rojas v. -a&lana, !=2 SCRA !! (!== +.

#. W2e& C'r3'r-te Ve&t?re F-i1s t' F'rm-110 I&/'r3'r-te, D' t2e I&/'r3'r-t'rs $e/'me P-rt&ers=
A")MNK 5utline Page 54 of 66

C-ses> ioneer Ins%rance v. Co%rt o( *ppeals, !8< SCRA **) (!=)=+. "i$ 1on& "i$ v. hilippine Fishin& Gear In#%stries, Inc. , #!8 SCRA 82) (!===+.

9. Ot2er R?1es '& C'&stit?ti'& '% - P-rt&ers2i3 -. ;hen *rticles ?ept Secret *$on& -e$bers (Art. !88<+ 5. R%les on artnership 6a$e (Art. !)!<, SEC Mem' Cir/?1-r N'. <, s. 2 )+
"he re<uirement under the Code of Commerce that the partnership name must contain the names of all the partners, is meant to protect from fraud the public that deals with the partnership business, and cannot be invo&ed by the partners to allege the non$e%istence of the partnership. %o Chung Cang v. Pacific Commercial Co., '0 )hil. 1'! +1,!3-. P;1 v. "o, 0( )hil. 8(! +1,!*-. "he contention that the last paragraph of Art. 18'( of Civil Code regulating the continuation of the business of the partnership name, or the name of a deceased part as part thereof, allows a partnership from continuing its business under a firm name which includes the name of a deceased partner has been denied when it comes to a law partnership on the following grounds1 +a- it contravenes the provision of Arts. 1810 and 18!0, which impose liability on a person whose name is included in the firm name, which cannot cover a deceased person who can no longer be sub2ect to any liability. +b- public relations value of the use of an old firm name can tend to create undue advantages and disadvantages in the practice of the profession. +c- Art. 18'( covers dissolution and winding up scenarios and cannot be ta&en to mean to cover firms that are intended as going concerns, and cover more commercial partnerships. and +d- when it comes to other professions, there is legislative authority for them to use in their firm names those of deceased partners. !n the Matter of the Petition for Authority to Continue 0sing 7irm ;ames , etc., ,! #C/A 1 +1,*,-. RULE #. 2, C'4e '% Pr'%essi'&-1 Res3'&si5i1it0> "he continued use of the name of a deceased partner is permissible provided that the firm indicates in all its communications that said partner is deceased.

VI. PARTNERSHIP AS A JURIDICAL PERSON

!. C'&seH?e&/es -s - J?ri4i/-1 Pers'&>

(Arti/1es 99(#+, 9<, !8*) -&4 !8)9+

-. "e&al Capacity to 'nter into Contracts an# Inc%r Obli&ations (Art. 9*+ 5. -ay *c:%ire roperties in Its O.n 6a$e (Arts. 9* -&4 !889+ /. -ay S%e an# Be S%e# in Its Fir$ 6a$e (Art. 9*+
6n a ban&ruptcy proceeding against a general partner, since the partnership is a separate 2uridical person one partner is not entitled to be made a party as an individual separate from the firm. and, yet precisely because a partnership is a 2uridical person, there can be proper service to the firm of court notices upon service to any partner of the partnership found within the 2urisdiction of the court. Hong-ong 1an- v. %urado & Co., ! )hil. 6*1 +1,(3-. "he death of a partner would not constitute a ground for the dismissal of the suit pending against the partnership, since the partnership has a separate 2uridical personality. ;go )ian )e- v. Phil. &ducation Co., *8 )hil. !*0 +1,'*-. ,ahl v. onaldson Sim & Co.$ 0 )hil. 11 +1,(0-. =6It has been the universal practice in the )hilippine 6slands since American occupation, and was the practice prior to that time, to treat companies of the class to which the plaintiff belongs as legal or 2uridical entities and to permit them to sue and be sued in the name of the company, the summons being served solely on the managing agent or other official of the company by the section of the Code of Civil )rocedure. 8argas & Co. v. Chan, !, )hil. ''6 +1,10-. A partnership may sue and be sued in its name or by its duly authori7ed representative, and when it has a designated managing partner, he may e%ecute all acts of administration including the right to sue debtors of the partnership. )ai )ong Chuache & Co. v. !nsurance Commission , 108 #C/A 366 +1,88-.

4. 7as 4o$icile> P1-/e B2ere t2eir 1e.-1 re3rese&t-ti'& is est-51is2e4 'r B2ere t2e0 eFer/ise t2eir 3ri&/i3-1 %?&/ti'&s (Art. <!+ e. 1axable as a Corporate 1axpayer. )an v. el Rosario, !3* #C/A !3' +1,,'-. %. -ay Be 4eclare# Insolvent 'ven I( Its artners *re 6ot
A limited partnership that commits acts of insolvency may be the sub2ect of an involuntary petition for insolvency, even when its general partners are very much still solvent. "his is on the basis that a limited partnership has a separate 2uridical personality from its partners. Campos Rueda & Co. v. Pacific Commercial & Co., '' )hil. ,16 +1,!3-. @%cept when partnership assets have been e%hausted to ma&e partners personally liable for partnership debts as provided in Article 1816, then in view of the separate 2uridical personality possessed by the partnership, the partners cannot be sued personally under a contract entered into in the name of the partnership, unless it is shown that the legal fiction is being used for a fraudulent, unfair or illegal purpose. Aguila$ %r. v. Court of Appeals, 316 #C/A !'6 +1,,,-. A")MNK 5utline Page 55 of 66

.. Is a erson 'ntitle# to Constit%tional Ri&hts

A partnership being a person before the law is entitled to constitutional right to due process and e<ual protection. Cf Smith$ 1ell & Co. v. ;atividad, '( )hil. 136 +1,1,-. 1ache & Co. >Phil.?$ !nc. v. Rui*, 3* #C/A 8!3 +1,*1-. A partnership being a person before the law is entitled to be accorded the constitutional right against unreasonable searches and sei7ures. Cf Stonehill v. io-no, !( #C/A 383 +1,6*-. A partnership having obtained its personality from state grant is not entitled to the constitutional right against self$incrimination. Cf 1ataan Shipyard & &ngineering Co.$ !nc. v. PC::, 10( #C/A 181 +1,8*-.

2. Pr'7isi'&s C'&tr-7e&i&. Pri&/i31e '% Se3-r-te J?ri4i/-1 Pers'&-1it0 -. artners *re Co8o.ners o( artnership roperties (Arts. !)!!+. 5. /. artners -ay In#ivi#%ally 4ispose o( Real in artnership 6a$e (Art. !)!=+. roperty o( the artnership 'ven ;hen

artners *re ersonally "iable (or artnership 4ebts *(ter 'xha%stion o( artnership *ssets ((Arts. !)!*, !)!8, !)29, !)#=:9; -&4 :8;+.

VII. THE PARTNERS

!. Ai&4s '% P-rt&ers -. General an# "i$ite# artners 5. In#%strial an# Capitalist artners /. Ostensible, 6o$inal an# 4or$ant artners 4. Ori&inal an# Inco$in& artners e. -ana&in& an# "i:%i#atin& artners %. Retirin&, S%rvivin& an# Contin%in& artners 2. PROPERTY RIGHTS OF PARTNERS -. Ri&hts to Speci(ic artnership roperty (Arts. !)! -&4 !)!!+
':%al Ri&ht to ossess B%t (or artnership %rpose Only . 0.S. v. Clarin, 1* )hil. 8' +1,1(-. People v. Alegre, '8 5.>. 03'1 +1,0!-. Celino v. CAourt of Appeals, 163 #C/A ,* +1,88-.

6on8*ssi&nable (Art. !)!!:2;+ 6ot S%bject to *ttach$ent or 'xec%tion or to "e&al S%pport (Art. !)!!:#;+ Re$e#y o( artner9s Separate Cre#itors (Art. !)!9+ 5. -U1U*" *G'6C5> Ri&ht to articipate in -ana&e$ent o( the artnership (i+ General R%le on *&ency (Arts. !) #:!; -&4 !)!)+
6n the ordinary course of business, a partner has authority to purchase goods + Smith$ 1ell & Co. v. A*nar, '( 5.>. 188! =1,'1I-, to hire employees of the partnership. + :arcia Ron v. "a Compania de Minas de 1atau , 1! )hil. 13( =1,(8I. as well as dismiss them + Martine* v. Cordo(a & Conde, 0 )hil. 0'0 =1,(6I-. 4hen partnership real property had been mortgaged and foreclosed, the redemption by any of the partners, even when using his separate funds, does not allow such redemption to be in his sole favor. Under the general principle of law, a partner is an agent of the partnership +Art. 1818, new Civil Code-. Rurthermore, every partner becomes a trustee for his copartner with regard to any benefits or profits derived from his act as a partner +Article 18(*, new Civil Code-. Conse<uently, when Catalan redeemed the properties in <uestion he became a trustee and held the same in trust for his copartner >atchalian, sub2ect of course to his right to demand from the latter his contribution to the amount of redemption. Catalan v. :atchalian, 1(0 )hil. 1!*( +1,0,-. "he stipulation in the articles of partnership that the two managing partners may contract and sign in the name of the partnership with the consent of the other, undoubtedly creates an obligation between the two partners, which consists in as&ing the otherGs consent before contracting for the partnership. "his obligation of course is not imposed upon a third person who contracts with the partnership. 8either is it necessary for the third person to ascertaining if the managing partner with whom he contracts has previously obtained the consent of the other. A third person may and has a right to presume that the partner with whom he contracts has, in the ordinary and natural course of business, the consent of his copartner. for A")MNK 5utline Page 56 of 66

otherwise he would not enter into the contract. "he third person would naturally not presume that the partner with whom he enters into the transaction is violating the articles of partnership, but on the contrary, is acting in accordance therewith. And this finds support in the legal presumption that the ordinary course of business has been followed. "itton v. 7il & Ceron, *8 P2i1. < = (!=#<+. 6f we are to interpret the articles of partnership in <uestion by holding that it is the obligation of the third person to in<uire whether the managing copartner of the one with whom he contracts has given his consent to said contract, which is practically casting upon him the obligation to get such consent, this interpretation would, in similar cases, operate to hinder effectively the transactions, a thing not desirable and contrary to the nature of business which re<uires promptness and dispatch on the basis of good faith and honesty which are always presumed. "itton v. 7il & Ceron, *8 P2i1. < = (!=#<+. 6n spite of the provision of Article 1!, of the Code of Commerce to the effect that P6f the management of the general partnership has not been limited by special agreement to any of the members, all shall have the power to ta&e part in the direction and management of the common business, and the members present shall come to an agreement for all contracts or obligations which may concern the association,P such obligation is one imposed by law on the partners among themselves, that does not necessarily affect the validity of the acts of a partner, while acting within the scope of the ordinary course of business of the partnership, as regards third persons without notice. "he latter may rightfully assume that the contracting partner was duly authori7ed to contract for and in behalf of the firm and that, furthermore, he would not ordinarily act to the pre2udice of his co$partners. "he regular course of business procedure does not re<uire that each time a third person contracts with one of the managing partners, he should in<uire as to the latter;s authority to do so, or that he should first ascertain whether or not the other partners had given their consent thereto.P Go:%iolay v. Sycip, ! ) P2i1. =98 (!=* +. 6n a transaction within the ordinary course of the partnership business effected by the industrial partner without the consent of the capitalist partner, the provisions in the articles of partnership that the industrial partner shall manage, operate and direct the affairs, businesses and activities of the partnership, constitute sufficient authority to ma&e such transaction binding against the partnership, as against another provision of the articles by which the industrial partner is authori7ed "o ma&e, sign, seal, e%ecute and deliver contracts . . upon terms and conditions acceptable to him duly approved in writing by the capitalist partner, which must cover only the e%ecution of formal contracts in writing and not necessarily to routine transactions such as ordinary purchases and sale of merchandise. Smith$ 1ell & Co. v. A*nar, '( 5.>. 1881 +1,'1-. @ven when the articles of partnership e%pressly provide that in the case of death of a partner during the 1($year term of the partnership the deceased partner shall be represented by his heirs or assigns in said co$partnership, and that the sole managing partner was upon his death substituted by his widow, the widow although now a partner cannot be deemed to have assumed sole management of the partnership, since the article provision on succession can only cover proprietary rights, but not managerial right which is based on personal trust and confidence. Go:%iolay v. Sycip, ! ) P2i1. =98 (!=* +. A presumption e%ists that each partner is an authori7ed agent for the firm and that he has authority to bind it in carrying on the partnership transaction. Mu/as9ue v. Court of Appeals, 13, #C/A 033 +1,80-. 8one of the partners and the partnership itself cannot be held liable for estafa when they fail or refuse to return the contributions or share in profits of the partner. U.S. v. Clarin, !8 P2i1. )9 (!=! +. BU1> 4hen partner receives funds from another partner for a particular purpose and he misappropriate it, then the receiving partner is liable for estafa. "iwanag v. Court of Appeals, !81 #C/A !!0 +1,,*-.

(ii+ *cts Re:%irin& Unani$o%s Consent (Art. !)!)+ (iii+ Re:%ire# Consent in -akin& *lterations on I$$ovable roperty (Art. !) #:2;+ (i7+ ;hen 1here Is 4esi&nation o( -ana&er or -ana&e$ent !) t' !) 2+ (7+ Speci(ie# o.ers o( artners> (!+ C-& 4is3'se '% 3-rt&ers2i3 3r'3ert0 e7e& B2e& i& 3-rt&ers2i3 &-me (Art. !)!=, Go:%iolay v. Sycip, = SCRA **# :!=*=;+. (2+ A4missi'& 'r re3rese&t-ti'& m-4e 50 -&0 3-rt&er /'&/er&i&. 3-rt&ers2i3 -%%-irs is e7i4e&/e -.-i&st t2e 3-rt&ers2i3 (Art. !)2 +. (#+ N'ti/e t' -&0 3-rt&er '% -&0 m-tter re1-ti&. t' 3-rt&ers2i3 -%%-irs is &'ti/e t' t2e 3-rt&ers2i3 (Art. !)2!+. (9+ Wr'&.%?1 -/t 'r 'missi'& '% -&0 3-rt&er -/ti&. %'r 3-rt&ers2i3 -%%-irs m-@es t2e 3-rt&ers2i3 1i-51e (Art. !)22+.
A")MNK 5utline Page 57 of 66

rero&atives (Arts.

(<+ P-rt&ers2i3 5'?&4 t' m-@e .''4 1'sses %'r -/ts 'r mis-331i/-ti'&s '% 3-rt&ers (Art. !)2#+. (7+ F?11 I&%'rm-ti'& -&4 A//'?&ti&. t' Ot2er P-rt&ers (Art. !) *+ /. 'AUI15 I61'R'S1 I6 17' *R16'RS7I ,'61UR' (Arts. !)! -&4 !)!2+ (i+ articipation in ro(its an# "osses (!+ * Stip%lation 'xcl%#in& a Is ,oi# (Art. !8==+. artner (ro$ *ny Share in the ro(its or "osses

(2+ 4istrib%tion o( ro(its an# "osses (Art. !8=8+.

6n a partnership arrangement, when the agreement to pay a high commission to one of the partners was in anticipation of large profits being made from the venture, but that eventually the venture sustained losses, then there is no legal basis to demand for the payment of the commissions since the essence of the partnership is the sharing of profits and losses. -oran, )r. v. Co%rt o( *ppeals, !## SCRA )) (!=)9+. Art. 1*,* covers the distribution of losses among the partners in the settlement of partnership affairs and does not cover the obligations of partners to third persons which is covered by Article 1816. Ramnani v. Court of Appeals, 1,6 #C/A *31 +1,,1-.

(#+ ;hen 1hir#8 arty 4esi&nate# to Share (Art. !8=)+ (ii+ Ri&ht to 4ispose o( S%ch Interest (Art. !)!#+
Any partner may transfer his interest and his assignee may demand an accounting from the remaining partners and a third person into whose hands the partnership property has passed in satisfaction of the firmGs debt. %ac-son v. 1lum, 1 )hil. ' +1,(1-.

(iii+ Ri&ht o( artner9s Cre#itors to 'xec%te Upon It (Art. !)!9+ 4. Ot2er Pr'3riet-r0 Ri.2ts '% P-rt&ers (i+ Ri&ht to Rei$b%rse$ent (or *#vances an# In#e$ni(ication (or Risks (Arts. !8=< -&4 !8=*+
"he rule is inapplicable where no money other than that contributed as capital is involved. Martine* v. Ong Pong Co., 1' )hil. *!6 +1,1(-.

(ii+ *ccess to artnership Books an# Recor#s (Art. !) <+ (iii+ Ri&ht to For$al *cco%ntin& (Art. !) =+
A partnerGs right to accounting for properties of the partnership that are within the custody or control of the other partners shall apply only when there is proof that such properties, registered in the individual names of the other partners, have been ac<uired from the use of partnership funds, thus1 Accordingly, the defendants have no obligation to account to anyone for such ac<uisitions in the absence of clear proof that they had violated the trust of =one of the partnersI during the e%istence of the partnership. "im )anhu v. Ramolete, 66 #C/A '!0 +1,*0-.

(i7+ Ri&ht to 4issolve the artnership (Art. !)# :2;+

@ven in a partnership not at will, a partner can unilaterally dissolve the partnership by a notice of dissolution, which in effect is a notice of withdrawal. Under Article 183(+!- of the Civil Code, even if there is a specified term, one partner can cause its dissolution by e%pressly withdrawing even before the e%piration of the period, with or without 2ustifiable cause. 5f course, if the cause is not 2ustified or no cause was given, the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm. 4ith his withdrawal, the number of members is decreased, hence, the dissolution. Rojas v. -a&lana, !=2 SCRA !! (!== +.

#. O$LIGATIONS OF PARTNERS TO THE PARTNERSHIP -. O51i.-ti'& t' C'&tri5?te t' t2e C'mm'& F?&4 (Arts. !8)*+ (i+ ;hen S%$ o( -oney (Arts. !8)* -&4 !8))+ (ii+ ;hen roperty E In General (Art. !8=<+

A")MNK 5utline Page 58 of 66

 ;ho Bears Risk o( "oss (or 4eter$inate 1hin& (Art.!)# :9;+ (iii+ ;hen Contrib%tion in Goo#s (Arts. !8)8 -&4 !8=<+ (i7+ ;hen Real roperty (Arts. !882 -&4 !88#+, (7+ ;hen in Service (Arts. !8)=+ (7+ res%$ption as to ercenta&e o( Capital (Art. !8= + (7i+ *##itional Contrib%tion, in Case o( I$$inent "oss (Art. !8=!+
Credit , such as a promissory note or other evidence of obligation, or even a mere goodwill, may be validly contributed into the partnership. City of Manila v. Cum(e, 13 )hil. 6** +1,(,-. 4hen a partner fails to pay to the partnership the whole amount of his promised contribution, he becomes indebted to it for the remainder of what is due, with interest and any damages occasioned thereby, but it does not authori7e the other partners to see& rescission of the partnership contract under Article 11,1 of Civil Code, since the remedies are provided for in particular under now Arts. 1*86 to 1*88 of Civil Code. Sancho v. "i*arraga, 00 )hil. 6(1 +1,31-. A partner who promises to contribute to a partnership becomes a promissory debtor of the partnership, including liability for interests and damages caused for failure to pay, and which amounts may be deducted upon dissolution of the partnership from his share in the profits and net assets. Ro#as v. Maglana, 1,! #C/A 11( +1,,(-.3,

5. O& Re/'7er0 '% Dem-&4-51e S?m (Art. !8=2+. /. O& Re/ei7i&. P-rt&ers2i3 Cre4its (Art. !8=#+. 4. As t' T2ir4 Pers'&s De-1i&. Bit2 t2e P-rt&ers2i3. 9. FIDUCIARY DUTIES OF PARTNERS -. D?t0 '% Di1i.e&/e (Art. !8=9+ 5. D?t0 t' A//'?&t (Art. !) 8+ /. D?t0 '% L'0-1t0> Capitalist artners Cannot 'n&a&e (or 1heir O.n *cco%nt in Si$ilar artnership B%siness (Art. !) )+ In#%strial artner Cannot 'n&a&e in *ny For$ o( B%siness (Art. !8)=+ artners in General Cannot 'n&a&e in Co$petitive B%siness

4hen the partnership arrangement has been terminated, the former partners are no longer prohibited in pursuing the same business as that for which the partnership was constituted. Halon v. Haussermann, '( )hil. *,6 +1,!(-. 4hen partnership real property had been mortgage and foreclosed, the redemption by any of the partners, even when using his separate funds, does not allow such redemption to be in his sole favor. Catalan v. :atchalian, 1(0 )hil. 1!*( +1,0,-. irector of "ands v. "ope Al(a , E$116'8, !! April 1,0,, 1(0 )hil. !1*1. An industrial partner is not deemed to have violated to the other partners by having delivered on the particular service re<uired of her and devoting her time serving in the 2udiciary which is not considered to be engaged in an activity for profit. 'van&elista & Co. v. *ba# Santos , <! SCRA 9!* (!=8#+. Rormer partners have no obligation to account on how they ac<uired properties in their names, when such ac<uisition were effected long after the partnership had been automatically dissolved as a result of the death of )o Chuan =the primary managing partnerI. Accordingly, defendants have no obligation to account to anyone for such ac<uisitions in the absence of clear proof that they had violated the trust of )o Chuan during the e%istence of the partnership. "im )anhu v. Remolete, 66 #C/A '!0 +1,*0-. 4hen a partner engages in a separate business enterprise that is competitive with that of the partnership, the other partnerGs withdrawal from the partnership becomes thereby 2ustified and for which the latter cannot be held liable for damages. Ro#as v. Maglana, 1,! #C/A 11( +1,,(-.

<. PARTNERSK UNLIMITED LIA$ILITY -. P-rt&ers Li-51e ro8Rata Bit2 T2eir Se3-r-te Pr'3erties A%ter P-rt&ers2i3 Assets H-7e $ee& EF2-?ste4, F'r A11 P-rt&ers2i3 De5ts. (Art. !)!*, Islan# Sales, Inc. v. Unite# ioneers General Constr%ction Co., *< SCRA <<9 (!=8<+. *ny Stip%lation *&ainst ersonal "iability o( artners (or artnership 4ebts Is ,oi#, 'xcept as *$on& 1he$selves (Art. !)!8+.
39

Reiterated in Moran$ %r. v. Court of Appeals, 133 #C/A 88 +1,8'-.

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5. A11 P-rt&ers Li-51e S'1i4-ri10 Bit2 P-rt&ers2i3 %'r E7er0t2i&. C2-r.e-51e t' t2e P-rt&ers2i3 W2e& C-?se4 50> ;ron&(%l *ct or O$ission o( *ny artner *ctin& o in the Or#inary Co%rse o( B%siness o( the artnership@ or o .ith *%thority (ro$ the Other artners an# artner9s *ct or -isapplication o( roperties. (Art. !)29+
)artnerGs liability for employees claims. "iwanag and Reyes v. ,or-men<s Compensation Commission, 1(0 )hil. *'1 +1,0,-.

/. NeB10 A4mitte4 P-rt&er i&t' -& EFisti&. P-rt&ers2i3 Is Li-51e O&10 '?t '% P-rt&ers2i3 Pr'3ert0 S2-res -&4 C'&tri5?ti'&s, %'r A11 t2e O51i.-ti'&s '% t2e P-rt&ers2i3 Arisi&. $e%'re His A4missi'& (Art. !)2*+. 4. P-rt&ers2i3 Cre4it'rs Are Pre%erre4 t' T2'se '% E-/2 '% t2e P-rt&ers -s Re.-r4s t2e P-rt&ers2i3 Pr'3ert0. (Art. !)28+. *. Re1-ti'&s -&4 De-1i&.s Bit2 T2ir4 Pers'&s -. Re3rese&t-ti'& -s - P-rt&er t' T2ir4 P-rties (Art. !)2<+.

IJ. DISSOLUTION, WINDING"UP, AND TERMINATION OF PARTNERSHIP

!. N-t?re -&4 E%%e/ts '% Diss'1?ti'&
)ermination of a partnership is the point in time after all the partnership affairs have been wound up. I#os v. Co%rt o( *ppeals, 2=* SCRA !=9 (!==)+.'(

-. As t' t2e Re1-ti'&s2i3 '% t2e P-rt&ers (Arts. !)2) -&4 !)#2+
#ince a partnership has a separate 2uridical personality, then upon its dissolution, the withdrawing partners have no cause of action to demand the return of their e<uity from the other partners. it is the partnership that must refund the e<uity of the retiring partners. 6n other words, it can only pay out of what it has in its coffers, which consists of all its assets. Bowever, before the partners can be paid their shares, the creditors of the partnership must first be compensated. whatever is left thereafter becomes available for the payment of the partnersG shares. ,illareal v. Ra$ire+, 9 * SCRA !9< (2 #+.

5. O& t2e P-rt&ers2i3 Itse1% (Art. !)2=+

An action to dissolve the partnership and for the appointment of a receiver for the purpose must include the partnership since it is entitled to be heard in matters affecting its e%istence as well as the appointment of a receiver. Cla%#io v. Fan#%eta, *9 P2i1. )!2 (!=#8+.

/. O& t2e A?t2'rit0 '% t2e P-rt&ers (Arts. !)#2, !)## -&4 !)#9+ 4. O& t2e Li-5i1ities '% t2e P-rt&ers (Art. !)#<+ (i+ Upon 4issol%tion o( the artnership, artners Shall Contrib%te the *$o%nts 6ecessary to Satis(y the artnership "iabilities. (Art. !)#=:9; -&4 :8;+
A partnership guilty of an act of insolvency may be proceeded against and declared ban&rupt in insolvency proceedings despite the solvency of each of the partners composing it. Campos Rueda & Co. v. Pacific Commercial Co., '' )hil. ,16 +1,!!-.

2. T03es (C-?ses+ '% Diss'1?ti'& (Arts. !)# -&4 !)9 + -. N'&"J?4i/i-1 Diss'1?ti'& (Arts. !)# , !)##, -&4 !)9 :!;+ (i+ Wit2'?t Vi'1-ti'& '% t2e P-rt&ers2i3 A.reeme&t> 'xpiration o( 1er$ or Un#ertakin& By the 'xpress ;ill o( a artner in a artnership at ;ill -%t%al *ssent o( the artners 'xp%lsion o( a artner %rs%ant to an *&ree$ent Grantin& S%ch Ri&ht
"he legal effect of the changes in the membership of the partnership would be the dissolution of the old partnership. +u v. ;"RC, !!' #C/A *0 +1,,3-.

40

citing )aras, Civil Code of the )hilippines, Kol. K, *th ed., p. 016.

A")MNK 5utline Page 60 of 66

4hen a new member is accepted into an e%isting partnership, legally there has been a dissolution of the old and a formation of a new partnership. &llingson v. ,als$ O<Connor & 1arneson, 1(' ). !d 0(* +1,'(-.

(ii+ I& C'&tr-7e&ti'& '% A.reeme&t (Arts. !)2* -&4 !)# :2;+
A mere falling out or misunderstanding among the partners does not convert the partnership into a sham organi7ation, since the partnership e%ists and is dissolved under the law. -%!a:%e v. Co%rt o( *ppeals, !#= SCRA <##, <9 (!=)<+, 1ocao v. Co%rt o( *ppeals, #92 SCRA 2 , #8 (2 +. )artners who effect a dissolution by his withdrawal in contravention of an agreement renders himself liable for damages which may be deducted from his partnership account, and he loses his right to wind$up. Ro#as v. Maglana, 1,! #C/A 11( +1,,(-.

(iii+ $0 O3er-ti'& '% L-B (Art. !)# + S%pervenin& Ille&ality "oss o( Speci(ic 1hin& Contrib%te# 4eath, Insolvency or Civil Inter#iction o( a artner
Absence of any clear stipulation, the acceptance bac& of part of the contribution by the partner does not necessarily mean his withdrawal from, or dissolution of, the partnership. 7ernande* v. ela Rosa, 1 )hil. 6*1 +1,(!-. "he death of one of the partners dissolves the partnership, but that the li<uidation of its affairs is by law entrusted not to the e%ecutors of the deceased partner, but to the surviving partners or to the li<uidators appointed by them. ,ahl v. onaldson Sim & Co.$ 0 )hil. 11 +1,(0-. :uidote v. 1or#a, 03 )hil. ,(( +1,!8-. A particular partnership is dissolved by the death of one of its partners there being no stipulation in the contract of partnership of its subsistence after the death of a partner, and it thereby attains the status of a partnership in li<uidation, and only the rights inherited by the heirs of the deceased partner were those resulting from the said li<uidation and nothing more. 6f there would be a continuation of the partnership a clear agreement on meeting of the minds must be made, otherwise, a new partnership arrangement cannot be presumed to have arisen among the heirs and the remaining partners. 1earne*a v. e9uilla, '3 )hil. !3* +1,!!-. 6n e<uity, surviving partners are treated as trustees of the representatives of the deceased partner, in regard to the interest of the deceased partner in the firm. As a conse<uence of this trusteeship, surviving partners are held in their dealings with the firm assets and the representatives of the deceased to that nicety of dealing and that strictness of accountability re<uired of and incident to the position of one occupying a confidential relation. 6t is the duty of surviving partners to render an account of the performance of their trust to the personal representatives of the deceased partner, and to pay over to them the share of such deceased member in the surplus of firm property, whether it consists of real or personal assets. :uidote v. 1or#a, 03 )hil. ,(( +1,!8-.

5. J?4i/i-1 Diss'1?ti'& (Arts. !88 -&4 !)#!+

"he courts have dissolved a partnership without formal application when the continuation of the partnership has become ine<uitable. 7ue "eung v. !AC, 16, #C/A *'6 +1,8,-. #ustaining of losses is valid basis to dissolve the partnership. Moran$ %r. v. Court of Appeals , 133 #C/A 88 +1,8'-. Rrom the foregoing provision, it is evident that P+t-he transfer by a partner of his partnership interest does not ma&e 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 e%cept the assignee;s profits. "he assignment does not 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.P #ince a partner;s interest in the partnership includes his share in the profits, we find that the CA committed no reversible error in ruling that the #pouses Naso are entitled to Ciondo;s share in the profits, despite Nuanita;s lac& of consent to the assignment of said Rrenchman;s interest in the 2oint venture. Although @den did not, moreover, become a partner as a conse<uence of the assignment andAor ac<uire the right to re<uire an accounting of the partnership business, the CA correctly granted her prayer for dissolution of the 2oint venture conformably with the right granted to the purchaser of a partner;s interest under Article 1831 of the Civil Code. Real%bit v. )aso, G.R. N'. !8)8)2, 2! Se3tem5er 2 !!.

#. Wi&4i&."?3 '% t2e P-rt&ers2i3 $?si&ess E&ter3rise

,inding=up as the process of settling business affairs after dissolution, '1 and it cites as e%amples of winding$up process, the following1 @%amples of winding up1 the paying of previous obligations. the collecting of assets previously demandable. even new business if needed to wind up,
41

!dos v. Court of Appeals, !,6 #C/A 1,' +1,,8-.

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as the contracting with a demolition company for the demolition of the garage used in a Tused carG partnership. !dos v. Court of Appeals, !,6 #C/A 1,' +1,,8-. Although the dissolution of a partnership is caused by any partner withdrawing from the partnership, nonetheless the partnership is not terminated but continuous until the winding up of the business. Singson v. !sa(ela Sawmill, 88 #C/A 6!3 +1,*,-. "he legal personality of an e%piring partnership persists for the limited purpose of winding$up and closing its affairs. +u v. ;"RC, !!' #C/A *0 +1,,3-.

-. $i&4i&. A?t2'rit0 '% P-rt&ers -%ter Diss'1?ti'& (Art. !)#9+ 5. W2' H-s A?t2'rit0 t' Wi&4"U3 (Art. !)#*+ 5. Dis/2-r.e '% Li-5i1ities (Arts. !)#< -&4 !)#8+ /. W2e& T2ere is Fr-?4 'r Misre3rese&t-ti'& (Art. !)#)+ 4. M-&&er '% Sett1i&. A//'?&ts Am'&. t2e P-rt&ers (Art. !)#=+
As a general rule, when a partner retires or withdraws from the partnership, he is entitled to the payment of what may be due him after a li<uidation. Cut no li<uidation is necessary where there was already a settlement or an agreement as to what the retiring partner shall receive, and the latter was in fact reimbursed pursuant to the agreement. 1onnevie v. Hernande*, ,0 )hil. 1*0 +1,0'-. "he managing partner cannot be held personally liable for the payment of partnersG shares, for he does not hold them e%cept as a manager, of, or trustee for, the partnership. 6t is the partnership that must refund their shares to the retiring partners. Magdusa v. Al(aran, 0 #C/A 011 +1,6!-. A partnerGs share cannot be returned without first dissolving and li<uidating the partnership, for the return is dependent on the discharge of the creditors, whose claims en2oy preference over those of the partners. and it is self$evident that all members of the partnership are interested in his assets and business, and are entitled to be heard in the matter of the firmGs li<uidation and the distribution of its property. Magdusa v. Al(aran, 0 #C/A 011 +1,6!-. "he right to accounting does not prescribe during the life of the partnership, and that prescription begins to run only upon the dissolution of the partnership and final accounting is done. 7ue "eung v. !AC, 16, #C/A *'6 +1,8,-.

6t is wrong to presume that the total capital contribution in a partnership is e<uivalent to the gross assets to be distributed to the partners at the time of dissolution of the partnership. 4e cannot sustain the underlying idea that the capital contribution at the beginning of the partnership remains intact, unimpaired and available for distribution or return to the partners. #uch idea is speculative, con2ectural and totally without factual or legal support. >enerally, in the pursuit of a partnership business, its capital is either increased by profits earned or decreased by losses sustained. it does not remain static and unaffected by the changing fortunes of the business. 4hen partners venture into business together, they should have prepared for the fact that their investment would either grow or shrin&. 6t is a long established doctrine that the law does not relieve parties from the effects of unwise, foolish or disastrous contracts they have entered into with all the re<uired formalities and with full awareness of what they were doing. Courts have no power to relieve them from obligations they have voluntarily assumed, simply because their contracts turn out to be disastrous deals or unwise investments. ,illareal v. Ra$ire+, 9 * SCRA !9< (2 #+.

e. C1-ims '% Cre4it'rs (Art. !)9 +

"he failure of a partner to have published her withdrawal from the partnership, and her agreeing to have the remaining partners proceed with running the partnership business instead of insisting on the li<uidation of the partnership, will not relieve such withdrawing partner from her liability to the partnership creditors. @ven if the withdrawing partner acted in good faith, this cannot overcome the position of partnership creditors who also acted in good faith, without &nowledge of her withdrawal from the partnership. Sin&son v. Isabela Sa.$ill, )) SCRA *2# (!=8=+. 4hen the partnership e%ecutes a chattel mortgage over its properties in favor of a withdrawing partner, and the withdrawal was not published to bind the partnership creditors, and in fact the partnership itself was not dissolved but allowed to be operated as a going concern by the remaining partners, the partnership creditors have standing to see& the annulment of the chattel mortgage for having been entered into adverse to their interests. Sin&son v. Isabela Sa.$ill, )) SCRA *2# (!=8=+. 4hen the new partners continue the same business of the old partnership which has been dissolved by the withdrawal of its original partners, the new partnership is liable to answer for the e%isting liabilities of the business enterprise even when they were incurred under the old partnership arrangement, as clearly governed under the provisions of Article 18'( of the Civil Code. Bowever, the new partnership is not compelled to retain the services of the managers and employees of the old partnership and may choose their personnel. 5% v. 6"RC, 229 SCRA 8< (!==#+.

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%. E%%e/t '& De/e-se4 'r Retiri&. P-rt&er W2e& P-rt&ers2i3 $?si&ess C'&ti&?e4 A%ter Diss'1?ti'& (Art. !)9!+. (i+ Ri&ht o( 'xpelle# artner (Art. !)#<+ .. Ri.2t t' Re/ei7i&. Pr'3er A//'?&t %'r P-rt&ers2i3 I&terest (Art. !)92+
"he right to accounting does not prescribe during the life of the partnership, and that prescription begins to run only upon the dissolution of the partnership and final accounting is done. 7ue "eung v. !AC, 16, #C/A *'6 +1,8,-.

2. Ri.2t t' C'&ti&?e $?si&ess W2e& P-rt&ers2i3 Wr'&.%?110 Diss'17e4 (Art. !)#8:2;+

J. LIMITED PARTNERSHIPS
!. Ori.i&, C'&/e3t -&4 P?r3'se (Art. !)9#+
See e'cerpts from *$es v. 4o.nin&, N.Y. S?rr. Cit. reproduced in CAU"6#"A, "/@A"6#@ 58 )B6E6))68@ )A/"8@/#B6) EA4, 1,,0 ed., at pp. 336$!!*-. "he provisions of the Civil Code on limited partnership were ta&en from the Uniform Eimited )artnership Act. See annotations in "5E@8"685, C6K6E C5D@ 5R "B@ )B6E6))68@#, Kol K. at pp. 38!$3,0 +1,,! ed.-

2. F'rm-ti'& -&4 St-t?t'r0 ReH?ireme&ts -. ReH?ireme&ts %'r F'rm-ti'& (Arts. !)99 -&4 !)*8+
)rohibition does not apply when the partners entered into a limited partnership, the man being the general partner and the woman being the limited partner, and a year later the two get married. Co$$issioner o( Internal Reven%e v. S%ter, 28 SCRA !<2 (!=*=+.

5. SB'r& Certi%i/-te '% Limite4 P-rt&ers2i3 Fi1e4 Bit2 SEC (Art. !)9<+ artnership 6a$e *##e# the .or# /"i$ite#0
o T2e &-me '% t2e 1imite4 3-rt&er /-&&'t -33e-r i& t2e 3-rt&ers2i3 &-me (Art. !)9*+

Character an# "ocation o( B%siness On the artners>

o N-me -&4 resi4e&/e '% e-/2 .e&er-1 -&4 1imite4 3-rt&ers 5ei&. res3e/ti7e10 4esi.&-te4 o Am'?&tC4es/ri3ti'& '% /'&tri5?ti'&s, -&4 4et-i1s '% %?t?re /'&tri5?ti'&s i% -&0 t' 5e m-4e 50 1imite4 3-rt&ers, -&4 B2e& /'&tri5?ti'&s ret?r&e4 o S2-res '% 3r'%its, -&4 /'m3e&s-ti'& 50 B-0 '% i&/'me '% 1imite4 3-rt&ers o Ri.2t '% s?5stit?ti'& 'r -ssi.&me&t 50 1imite4 3-rt&ers o A4missi'& '% -44iti'&-1 1imite4 3-rt&ers o Pri'rit0 ri.2ts '7er 't2er 1imite4 3-rt&ers o Ri.2t '% rem-i&i&. .e&er-1 3-rt&ers t' /'&ti&?e 5?si&ess ?3'& 4e-t2, retireme&t, /i7i1 i&ter4i/ti'&, i&s-&it0 'r i&s'17e&/0 '% - .e&er-1 3-rt&er o Ri.2t '% 1imite4 3-rt&ers t' 4em-&4Cre/ei7e 3r'3ert0 't2er t2-& /-s2 i& ret?r& %'r 2is /'&tri5?ti'&

/. D'/tri&e '% S?5st-&ti-1 C'm31i-&/e (Art. !)99, 1-st 3-r.+

#ubstantial, rather than strict, compliance in good faith with the legal re<uirements is all that is necessary for the formation of a limited partnership. otherwise, when there is not even substantial compliance, the partnership becomes a general partnership as far as third persons are concerned. )o Ch%n& Can& v. aci(ic Co$$ercial Co., 9< P2i1. !92 (!=2#+.

4. E%%e/ts '% F-i1?re t' C'm310 Bit2 Re.istr-ti'& ReH?ireme&ts

A limited partnership that does not comply with the registration re<uirements shall be treated as a general partnership in which all the members are liable for partnership debts. )o Ch%n& Can& v. aci(ic Co$$ercial Co., 9< P2i1. !92 (!=2#+.

e. E%%e/ts '% F-1se St-teme&t i& Certi%i/-te (Art. !)98+ %. Ame&4me&t '% Certi%i/-te (Arts. !)*9 -&4 !)*<+

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#. Ri.2ts, P'Bers, Restri/ti'&s -&4 Li-5i1ities '& P-rt&ers -. Ge&er-1 P-rt&er (Art. !)< + Allen v. Stein(erg, !!3 A. d !'( +1,66-. Mist Properties$ !nc. v. 7it*simmons Realty Co., !!8 8.H.#. d '(6 +1,6!-. 5. Limite4 P-rt&ers -t F'rm-ti'& (Arts. !)9), !)<!, !)<9+ Contrib%tions -ay Be CashB roperty B%t 6ot Services (Art. !)9<+ riority *&ree$ents *$on& "i$ite# artners (Art. !)<<+ Stip%lation on ro(its an# Co$pensation (Art. !)<*+. Horn v. 1uilder Supply Company of "ongview, '(1 #.4. d. +1,66-. Stip%lation on ;hen Contrib%tion Receive# (Art. !)<8+ "iabilities to the artnership (Art. !)<)+ *##itional "i$ite# artners (Art. !)9=+ /*ssi&nability0 o( Ri&hts (Art. !)<=+ 6o Stan#in& to S%e (or artnership (Art. !)**+
Eimited partners have a right to be informed and to formal accounting. Riviera Con(ress Associates v. +ass-y, !0 A.D. d !1, !68 8.H.#. d. 80' +1,66-. Eimited partner may loan money to the partnership. Hughes v. Dash, 3(, R.d +1,6!-. A.).&. 7inancial Services$ !nc. v. Corson$ !68 A. d *3 +1,*(-.

/. Li-5i1it0 '% O&e $e1ie7i&. Himse1% t' $e Limite4 P-rt&er (Art. !)<2+ . 8idric-sen v. :rover, 363 R. d 3*! +1,66-. :iles v. 8ette, !63 U.#. 003, 68 E..@d. ''1 +1,!'-. :ilman Paint & 8arnish Co. v. "egum, 8( A.d ,(6 +1,61-. 4. Ge&er-1 P-rt&er -1s' -s Limite4 P-rt&er (Art. !)<#+ 9. Diss'1?ti'& -&4 Wi&4i&. U3 -. C-?ses A%%e/ti&. t2e Ge&er-1 P-rt&er (Art. !)* + 5. C-?ses Pert-i&i&. t' t2e Limite4 P-rt&er (Arts. !)*! -&4 !)*9+ Hol*man v. &scamilla, 1,0 ). d 833 +1,'8-. e

/. De-1i&.s '% Limite4 P-rt&ers Bit2 P-rt&ers2i3 A%%-irs. Plasteel Products Corp v. Helman, !*1 R. d 30' +1,0,-. ,eil v. iversified Properties, 31, R.#upp. **8 +1,*(-. Silvola v. /owlett, !*! ).d. !8* +1,0'-. 4. A331i/-ti'& '% - Cre4it'r '% Limite4 P-rt&er (Art. !)*2+ e. Sett1eme&t '% A//'?&ts (Art. !)*#+
Creditors preferred over limited partners . ;e'sen v. ;ew +or- Stoc- &'change , !61 8.H.#. *8( +1,60-. Chalmers v. ,eed, !0 8.H.#. d. 1,0 +1,'1-

JI. JURISDICTION ON PARTNERSHIP MATTERS

!. Se/s. < -&4 *, Pres. De/ree N'. = 2"A 2. Se/ti'& <.! '% t2e Se/?rities Re.?1-ti'& C'4e (R.A. N'. )8==+ #. I&terim R?1es '% Pr'/e4?re %'r I&tr-"C'r3'r-te Dis3?tes

D.

JOINT VENTURE ARRANGEMENTS

I. JOINT VENTURES ARE SPECIES OF PARTNERSHIP

4hen a Contract of Eease mandates contribution into the venture on the part of the purported lessee, and ma&es the lessee participate not only in the revenues generated from the venture, and in fact absorb most of the ris&s involved therein, then a 2oint venture arrangement has really been constituted between the purported lessor and lessee, since under the Eaw on )artnership, whenever there is an agreement to contribute money, property or industry to a common fund, with an agreement to share the profits and losses therein, then a partnership arises. ?ilosbayan, Inc. v. G%in&ona, )r., 2#2 SCRA !! (!==9+. A")MNK 5utline Page 64 of 66

6n the )hilippines, the prevailing school of though is that a 2oint venture is a species of partnership. Heirs of )an &ng Aee v. Court of Appeals, 3'1 #C/A *'( +!(((-.'! 4hen the purported primary venturer in a consortium +which is an association of corporation bound in a 2oint venture arrangement- declares unilaterally that the other four members are part of a consortium, but there is no affirmation from any of the other members, nor is there a showing of a community of interest, a sharing of ris&s, profits and losses in the pro2ect bidded for, then there is really no 2oint venture constituted among them, lac&ing the essential elements of what ma&es a partnership. In(or$ation 1echnolo&y Fo%n#ation o( the hilippines v. CO-'"'C, 9!= SCRA !9! (2 9+. >enerally understood to mean an organi7ation formed for some temporary purpose, a 2oint venture is li&ened to a particular partnership or one which Phas for its ob2ect determinate things, their use or fruits, or a specific underta&ing, or the e%ercise of a profession or vocation.P "he rule is settled that 2oint ventures are governed by the law on partnerships which are, in turn, based on mutual agency or delectus personae. Real%bit v. )aso, G.R. N'. !8)8)2, 2! Se3tem5er 2 !!.

II. JOINT VENTURE AGREEMENT (JVA+ MUST $E CONSTRUED AND

ENFORCED VENTURERS

AS

CONTRACT $ETWEEN

AND

AMONG CO"

4hen a Noint Kenture Agreement has been e%ecuted among the co$venturers covering the terms for the development of a subdivision pro2ect, the contributions of the co$venturers and the manner of distribution of the profits, a partnership has been duly constituted under Art. 1*6* of Civil Code, and although no inventory was prepared covering the parcels of land contributed to the venture, much less was a certificate of registrations filed with the #@C, the partnership was not void because +a- Art. 1**3 is intended for the protection of the partnership creditors and cannot be invo&ed when the issue is between and among the partners. and +b- the alleged nullity of the partnership will not prevent courts from considering the NKA as an ordinary contract form which the parties rights and obligations to each other may be inferred and enforced. 1orres v. Co%rt o( *ppeals, #2 SCRA 92) (!===+.

III. TYPES OF JOINT VENTURE ARRANGEMENTS

!. I&%'rm-1 'r C'&tr-/t?-1 JV Arr-&.eme&t Wit2'?t - Se3-r-te Firm +#@C 5pinion, !! December 1,66, #@C R5E65 1,6($1,*6. #@C 5pinion, !, Rebruary 1,8(. #@C 5pinion, (3 #ept. 1,8'-.
4hen the principal and the agent have entered into a power of attorney covering a construction pro2ect, with the principal contributing thereto his contractorGs license and e%pertise, while the agent would provide and secure the needed funds for labor, materials and services, deal with the suppliers and sub$contractors. and in general and together with the principal, oversee the effective implementation of the pro2ect, for which the principal would receive as his share 39 of the pro2ect cost while the rest of the profits shall go to the agent, the parties have in effect entered into a partnership, and the revocation of the powers of management of the agent is deemed a breach of the contract. -en#o+a v. a%le, <8= SCRA #9= (2 =+. Although the parties e%ecuted the instrument as a )ower of Attorney and referred to themselves as )rincipal and Janager , the contractual relationship created was not that of Agency or Janagement Contract. A e%amination of the T)ower of AttorneyG reveals that a partnership or 2oint venture was indeed intended by the parties. Under a contract of partnership, two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. 4hile a corporation, li&e petitioner, cannot generally enter into a contract of partnership unless authori7ed by law or its charter, it has been held that it may enter into a 2oint venture which is a&in to a particular partnership relationship1 % % % )erusal of the agreement denominated as the T)ower of AttorneyG indicates that the parties had intended to create a partnership and establish a common fund for the purpose. "hey also had a 2oint interest in the profits of the business as shown by a 0($0( sharing in the income of the mine. hilex -inin& Corp. v. Co$$issioner o( Internal Reven%e, <<! SCRA 92) (2 )+.

2. As - F'rm '% P-rt&ers2i3 t' P?rs?e t2e E&ter3rise -s - Firm

@ven when the wording of the instrument does not clearly provide for an option, and not a obligation, on the part of one of the co$venturers to ma&e contributions into the business enterprise, will not detract from the legal fact that they constituted a partnership between themselves. "he wording of the partiesG agreement as to petitionerGs contribution to the common fund does not detract from the fact that petitioner transferred its funds and property to the pro2ect as specified in paragraph 0, thus rendering effective the other stipulations of the contract, particularly paragraph 0+c- which prohibits petitioner from withdrawing the advances until termination of the partiesG business relations. As can be seen, petitioner became bound by its contributions once the transfers were made. "he contributions ac<uired an obligatory nature as soon as petitioner had chosen to e%ercise the option. hilex -inin& Corp. v. Co$$issioner o( Internal Reven%e , <<! SCRA 92) (2 )+.
42 Reiterated in Primelin- Properties and ev. Corp. v. "a*atin=Magat , ',3 #C/A ''' +!((6-. !nformation )echnology 7oundation of the Philippines v. COM&"&C, '1, #C/A 1'1 +!(('-.

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A 2oint venture being a form of partnership, it is to be governed by the Eaw on )artnerships. 6n the NKA, the parties agreed on a 0($0( ratio on the proceeds of the pro2ect, although they did not provide for the splitting of losses, which therefore puts into application Art. 1*,*1 the same ratio applies in splitting the obligation$loss of the 2oint venture. "he appellate court;s decision must be modified, however, there being a 2oint venture, there is no need for >otesco to reimburse Jarsman Drysdale for 0(9 of the aggregate sum due to )>6 since not allowing Jarsman Drysdale to recover from >otesco what it paid to )>6 would not only be contrary to the law on partnership on division of losses but would parta&e of a clear case of un2ust enrichment at >otesco;s e%pense. -ars$an 4rys#ale "an#$ Inc. v. hilippine Geoanalytics$ Inc., *22 SCRA 2)! (2 ! +. A 2oint venture is considered in this 2urisdiction as a form of partnership and is, accordingly, governed by the law of partnerships. Under Art. 18!' of Civil Code, all partners are solidarily liable with the partnership for everything chargeable to the partnership, including loss or in2ury caused to a third person or penalties incurred due to any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co$partners. 4hether innocent or guilty, all the partners are solidarily liable with the partnership itself. ). 1iosejo Invest$ent Corp. v. *n&, *# SCRA ##9 (2 ! +.

#. T2r'?.2 - J'i&t Ve&t?re C'r3'r-ti'&

"he manner of nomination of the members of the Coard of Directors provided in the Noint Kenture Agreement must be made effective and reconciled with the statutory provision on cumulative voting made applicable by the Corporation Code to stoc& corporations. *%rbach v. Sanitary ;ares -n(&. Corp., !) SCRA !# (!=)=+. A right of first refusal agreed to by the >overnment in the Noint Kenture Agreement entered into with its co$venturer must be made to apply and be binding to the >overnment and the bidder at a public bidding held on the shares of the 2oint venture corporation constituted pursuant to the agreement. )G S%$$it 7ol#in&s, Inc. v. Co%rt o( *ppeals, 9!2 SCRA ! (2 #+.

9. NEDA !==) GUIDELINES AND PROCEDURES FOR ENTERING INTO JOINT VENTURE (JV+ ARRANGEMENTS $ETWEEN GOVERNMENT AND PRIVATE ENTITIES -. De%i&iti'& '% /)oint ,ent%re0 L A contractual arrangement whereby a private sector entity or a
group of private sector entities on one hand, and a >overnment @ntity or a group of >overnment @ntities on the other hand, contribute money$capital, services, assets +including e<uipment, land or intellectual property-, or a combination of any or all of the foregoing. )arties to a NK share ris&s to 2ointly underta&e an investment activity in order to accomplish a specific, limited or special goal or purpose with the end view of facilitating private sector initiative in a particular industry or sector, and eventually transferring ownership of the investment activity to the private sector under competitive mar&et conditions. 6t involves a community or pooling of interest in the performance of the service, function, business or activity, with each party having a right to direct and govern the policy in connection therewith, and with a view of sharing both profits and losses, sub2ect to agreement by the parties. A NK may be a contractual NK, or a corporate NK.

5. De%i&iti'& '% /Contract%al ),0 L A legal and binding agreement under which the NK partners
shall perform the primary functions and obligations under the NK Agreement without forming a NK Company.

/. De%i&iti'& '% /), Co$pany0 L An entity registered with the #ecurities and @%change
Commission +#@C- by the NK partners that shall perform the primary functions and obligations of the NK as stipulated under the NK Agreement. "he NK Company shall possess the characteristics stipulated under these >uidelines.

IV. TAJ RECOGNITION AND TREATMENT OF JOINT VENTURES

!. Ge&er-110, - J'i&t Ve&t?re, Li@e - P-rt&ers2i3 Is Tre-te4 -s C'r3'r-te T-F3-0er. 2. A JV C'&s'rti?m U&4ert-@i&. C'&str?/ti'& Pr'6e/ts 'r E&.-.i&. i& Petr'1e?m, C'-1, Ge't2erm-1 -&4 Ot2er E&er.0 O3er-ti'&s P?rs?-&t t' -& O3er-ti&. 'r C'&s'rti?m A.reeme&t ?&4er - Ser7i/e C'&tr-/t Bit2 t2e G'7er&me&t, S2-11 N't $e T-Fe4 Se3-r-te10 -s - C'r3'r-te T-F3-0er. (Se/. 22($+, NIRC '% !==8+

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