II.

AGENCY
WEEK 7
B. Nature, Concept and Purpose
Gr. no 167552 April 23, 2007 (Eurotech vs. CA)
Eurotech Industrial Technologies, Inc. vs. Edwin Cuizon and Erwin
FACTS: Petitioner is engaged in the business of importation and distribution of various European
industrial equipment for customers here in the Philippines. It has as one of its customers Impact
Systems Sales (Impact Systems) which is a sole proprietorship owned by respondent ERWIN Cuizon
(ERWIN). Respondent EDWIN is the sales manager of Impact Systems and was impleaded in the court
a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to
P91, 338.00 pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump
valued at P250, 000.00 with respondents making a down payment of P50, 000.00. When the sludge
pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents without
their having fully settled their indebtedness to petitioner. Later, on 28 June 1995, respondent EDWIN
and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in
favor of petitioner. Following the execution of the Deed of Assignment, petitioner delivered to
respondents the sludge pump as dated 30 June 1995.
Respondents, despite the existence of the Deed of Assignment, proceeded to collect from Toledo Power
Company the amount ofP365,135.29 as evidenced by Check Voucher prepared by said power company
and an official receipt dated 15 August 1995 issued by Impact Systems. Alarmed by this development,
petitioner made several demands upon respondents to pay their obligations. As a result, respondents
were able to make partial payments to petitioner.
Petitioner's counsel sent respondents a final demand letter wherein it was stated that respondents total
obligations stood at P295, 000.00 excluding interests and attorneys fees. Because of respondents
failure to abide by said final demand letter, petitioner instituted a complaint for sum of money,
damages, with application for preliminary attachment against herein respondents before the Regional
Trial Court of Cebu City.
Trial Court: granted Petitioner's prayer for the issuance of writ of preliminary attachment.
Edwins Answer: he admitted petitioners allegations with respect to the sale transactions entered into
by Impact Systems and petitioner between January and April 1995. He, however, disputed the total
amount of Impact Systems indebtedness to petitioner which, according to him, amounted to only P220,
000.00. By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real
party in interest in this case. According to him, he was acting as mere agent of his principal, which was
the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact. In
support of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioners Complaint.

Eurotech: filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary
Judgment.
Trial Court:
Granted petitioners motion to declare respondent ERWIN in default but denied
petitioners motion for summary judgment.
Rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a
party defendant in this case
Court of Appeals: Affirmed the Order of the Court a quo.
ISSUE: WON EDWIN exceeded his authority when he signed the Deed of Assignment thereby
binding himself personally to pay the obligations to petitioner?
HELD: No. Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however, presents two
instances when an agent becomes personally liable to a third person. The first is when he expressly
binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the
agent can be held liable if he does not give the third party sufficient notice of his powers. The Court
held that respondent EDWIN does not fall within any of the exceptions contained in this provision.
In this case, the parties do not dispute the existence of the agency relationship between respondents
ERWIN as principal and EDWIN as agent. The only cause of the present dispute is whether respondent
EDWIN exceeded his authority when he signed the Deed of Assignment thereby binding himself
personally to pay the obligations to petitioner. The Deed of Assignment clearly states that respondent
EDWIN signed thereon as the sales manager of Impact Systems. As discussed elsewhere, the position
of manager is unique in that it presupposes the grant of broad powers with which to conduct the
business of the principal.
Applying the foregoing to the present case, the Court held that Edwin Cuizon acted well-within his
authority when he signed the Deed of Assignment. There is, therefore, no doubt in our mind that
respondent EDWINs participation in the Deed of Assignment was reasonably necessary or was
required in order for him to protect the business of his principal.
In a contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another with the latters consent. The underlying principle of the
contract of agency is to accomplish results by using the services of others to do a great variety of
things like selling, buying, manufacturing, and transporting. Its purpose is to extend the
personality of the principal or the party for whom another acts and from whom he or she derives
the authority to act.
It 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 executed by the principal.
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish
the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.
2

b) Essential requisites/elements (Art. 1318)

Rallos vs Felix Go Chan & Sons Realty Corp.
FACTS: Concepcion and Gerundia Rallos were sisters and registered coowners of theparcel of landin
issue. They executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing
him to sell such land for and in their behalf. After Concepcion died, Simeon Rallos sold the undivided
shares of his sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for the
sum of P10,686.90. New TCTs were issued to the latter. Petitioner Ramon Rallos, administrator of the
Intestate Estate of Concepcion filed acomplaint praying (1)that the sale of the undivided share of the
deceased Concepcion Rallos in lot 5983 be unenforceable, and said share be reconveyed to her estate;
(2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be
cancelledandanother title be issued in the names of the corporation and the "Intestate estate of
Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of attorney's fees
and payment of costs of suit. Trial court ruled that the sale is null and void, Respondent filed petition
CA reversed the decision.
ISSUE: WON the the sale of undivided share is null and void
RULING: No. Relationship of agency whereby one party, called the principal (mandante), authorizes
another, called the agent (mandatario), to act for himinhis behalf intransactions withthirdpersons.The
essential elements of agency are: (1) there is consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents
acts as arepresentativeandnot for himself; and(4) theagent acts within the scope of his authority. There
are various ways of extinguishing agency, but here We are concerned only with one causedeath of
the principal: Paragraph3of Art. 1919of theCivil Code which was taken from
Art. 1709 of the Spanish Civil Code provides:
"ART. 1919.Agency is extinguished by the death, civil interdiction, insanity or insolvency Of the
principal or of the agent; . . . ."
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule aforementioned.
ART. 1930.The agency shall remain in full force andeffectevenafter thedeathof theprincipal, if it has
been constituted in the common interest of the latter andof theagent, or intheinterest
of a third person who has accepted the stipulation in his favor. ART. 1931.Anything done by the agent,
without knowledge the death of the principal or of any other cause which extinguishes the agency, is
valid
and
shall
be
fully
effective
with
respect
to
third persons who may have contracted with him in good faith. On the basis of the established
knowledge of Simeon Rallos concerning the death of his principal, Concepcion Rallos, Article 1931 of
the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the
part
of
the
agent
of
the
death
of
his
principal; it is not enough that the third person acted in good faith. On review the Supreme Court held
that the salewas null andvoidbecause, althoughthebuyer may have beenapurchaser ingoodfaith,
saidsalewas madewiththeagent's knowledgeof his principal's death. The general rule is that death of the
principal
or
the
agent
extinguishes
the
agency and this case does not fall under any of the exceptions to the general rule.
Appealed decision set aside and judgment of the lower court affirmed on toto.

G.R. No. 179446 January 10, 2011

LOADMASTERS vs. GLODEL
PETITION for review on certiorari of a decision of the Court of Appeals which held Loadmasters liable
to Glodel in the amount of P1,896,789.62 representing the insurance indemnity which R&B Insurance
paid to the insured-consignee, Columbia Wire and Cable
FACTS: R&B Insurance issued Marine Policy in favor of Columbia to insure the shipment of electric
copper cathodes from Leyte to North Harbor, Manila.
Columbia engaged the services of Glodel for the release and withdrawal of the cargoes from the pier
and the subsequent delivery to its warehouses/plants. Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery trucks to transport the cargoes to Columbias warehouses/plants.
The goods were loaded on board 12 trucks, 6 of which were to be delivered to Bulacan, while the
others were destined for Valenzuela City. The cargoes for Valenzuela City were duly delivered. Of the 6
trucks en route to Bulacan, only 5 reached the destination. 1 truck failed to deliver. Said truck was
recovered but without the copper cathodes. Columbia filed with R&B Insurance a claim for insurance
indemnity. R&B Insurance paid Columbia the amount of P1,896,789.62. R&B Insurance, thereafter,
filed a complaint for damages against both Loadmasters and Glodel seeking reimbursement of the
amount it had paid to Columbia claiming that it had been subrogated "to the right of the consignee to
recover from the party/parties who may be held legally liable for the loss."
The RTC rendered a decision holding Glodel liable. Both R&B Insurance and Glodel appealed the RTC
decision to the CA.
The CA rendered a decision holding that Loadmasters as agent of Glodel is likewise held liable to the
latter in the amount representing the insurance indemnity.
Hence, Loadmasters filed the present petition for review on certiorari before the SC. Loadmasters
argues that it cannot be considered an agent of Glodel because it never represented the latter in its
dealings with the consignee. Glodel counters that Loadmasters is liable to it because the latter was
grossly negligent in the transportation of the subject cargo. Glodel argues that its relationship with
Loadmasters is that of Charter wherein the transporter (Loadmasters) is only hired for the specific job
of delivering the merchandise. Thus, the diligence required in this case is merely ordinary diligence or
that of a good father of the family, not the extraordinary diligence required of common carriers.
ISSUE: WON a contract of agency exists between Loadmasters and Glodel
HELD: The Court clarifies that there exists no principal-agent relationship between Glodel and
Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code provides: "By the
contract of agency 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." The elements of a contract of
agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is
the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not
for himself; (4) the agent acts within the scope of his authority. Accordingly, there can be no contract of
agency between the parties. Loadmasters never represented Glodel. Neither was it ever authorized to
make such representation. It is a settled rule that the basis for 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 has the
4

same legal effect as if they were personally executed by the principal. On the part of the principal, there
must be an actual intention to appoint or an intention naturally inferable from his words or actions,
while on the part of the agent, there must be an intention to accept the appointment and act on it. Such
mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of Loadmasters and Glodel? Each wrongdoer is
liable for the total damage suffered by R&B Insurance. Where several causes producing an injury are
concurrent and each is an efficient cause without which the injury would not have happened, the injury
may be attributed to all or any of the causes and recovery may be had against any or all of the
responsible persons although under the circumstances of the case, it may appear that one of them was
more culpable, and that the duty owed by them to the injured person was not the same. No actors
negligence ceases to be a proximate cause merely because it does not exceed the negligence of other
actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole
cause of the injury. There is no contribution between joint tortfeasors whose liability is solidary since
both of them are liable for the total damage. Where the concurrent or successive negligent acts or
omissions of two or more persons, although acting independently, are in combination the direct and
proximate cause of a single injury to a third person, it is impossible to determine in what proportion
each contributed to the injury and either of them is responsible for the whole injury. Where their
concurring negligence resulted in injury or damage to a third party, they become joint tortfeasors and
are solidarily liable for the resulting damage under Article 2194 of the Civil Code.
WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to consignee Columbia Wire & Cable Corporation
Manila Memorial vs. Linsangan (GR. 151319)
FACTS:Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner of a memorial lot
under Contract No. 25012 was no longer interested in acquiring the lot and had opted to sell his rights
subject to reimbursement of the amounts he already paid. The contract was for P95,000.00. Baluyot
reassured Atty. Linsangan that once reimbursement is made to the former buyer, the contract would be
transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be reimbursed to the
original buyer and to complete the down payment to MMPCI. Baluyot issued handwritten and
typewritten receipts for these payments. Contract No. 28660 has a listed price of P132,250.00. Atty.
Linsangan objected to the new contract price, as the same was not the amount previously agreed upon.
To convince Atty. Linsangan, Baluyot executed a document confirming that while the contract price is
P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00.
Later on, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled for reasons
the latter could not explain. For the alleged failure of MMPCI and Baluyot to conform to their
agreement, Atty. Linsangan filed a Complaint for Breach of Contract and Damages against the former.
MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the contract
because of non-payment of arrearages. MMPCI stated that Baluyot was not an agent but an
independent contractor, and as such was not authorized to represent MMPCI or to use its name except
as to the extent expressly stated in the Agency Manager Agreement. Moreover, MMPCI was not aware
5

of the arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment
and monthly installments as indicated in the contract.
The trial court held MMPCI and Baluyot jointly and severally liable. The Court of Appeals affirmed the
decision of the trial court.
ISSUES:
1. Whether or not there was a contract of agency between Baluyot and MMPCI?
2. Whether or not MMPCI should be liable for Baluyots act?
HELD:
1. Yes. By the contract of agency, 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.
As properly found both by the trial court and the Court of Appeals, Baluyot was authorized to
solicit and remit to MMPCI offers to purchase interment spaces obtained on forms provided by
MMPCI. The terms of the offer to purchase, therefore, are contained in such forms and, when
signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties.
2. No. While there is no more question as to the agency relationship between Baluyot and
MMPCI, there is no indication that MMPCI let the public, or specifically, Atty. Linsangan to
believe that Baluyot had the authority to alter the standard contracts of the company. Neither is
there any showing that prior to signing Contract No. 28660, MMPCI had any knowledge of
Baluyot's commitment to Atty. Linsangan. Even assuming that Atty. Linsangan was misled by
MMPCI's actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent
in his dealings with Baluyot, and could have easily determined, had he only been cautious and
prudent, whether said agent was clothed with the authority to change the terms of the principal's
written contract.
To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless the
latter ratifies the same. It also bears emphasis that when the third person knows that the agent was
acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the
said third person was aware of such limits of authority, he is to blame and is not entitled to recover
damages from the agent, unless the latter undertook to secure the principal's ratification.
Eurotech vs. Cuison (GR. 167552)
FACTS:Petitioner is engaged in the business of importation and distribution of various European
industrial equipment for customers here in the Philippines. It has as one of its customers Impact
Systems Sales (Impact Systems) which is a sole proprietorship owned by respondent ERWIN Cuizon.
Respondent EDWIN as the sales manager of Impact Systems.
Respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with
respondents making a down payment of fifty thousand pesos (P50,000.00). When the sludge pump
arrived from the United Kingdom, petitioner refused to deliver the same to respondents without their
having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and
Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor
of petitioner.
6

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment,
proceeded to collect from Toledo Power Company the amount ofP365,135.29 as evidenced by Check
Voucher No. 0933 prepared by said power company and an official receipt dated 15 August 1995 issued
by Impact Systems.
On 7 October 1996, petitioners counsel sent respondents a final demand letter wherein it was stated that
as of 11 June 1996, respondents total obligations stood at P295,000.00 excluding interests and attorneys
fees. Because of respondents failure to abide by said final demand letter, petitioner instituted a
complaint for sum of money, damages, with application for preliminary attachment against herein
respondents before the Regional Trial Court of Cebu City.
On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary
attachment.
Respondent EDWIN alleged that he is not a real party in interest in this case. According to him, he was
acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner
and the latter was very much aware of this fact.
After the filing of respondent EDWINs Memorandum in support of his special and affirmative defenses
and petitioners opposition thereto, the trial court rendered its assailed Order dated 29 January 2002
dropping respondent EDWIN as a party defendant in this case. According to the trial court
A study of Annex G to the complaint shows that in the Deed of Assignment, defendant Edwin B.
Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a single
proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is the proprietor; that
plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is
dated June 28, 1995. A study of Annex H to the complaint reveals that [Impact] Systems Sales which is
owned solely by defendant Erwin H. Cuizon, made a down payment of P50,000.00 that Annex H is
dated June 30, 1995 or two days after the execution of Annex G, thereby showing that [Impact]
Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew that
[Impact] Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted
the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant
Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff
knew about said ratification. Plaintiff could not say that the subject contract was entered into by Edwin
B. Cuizon in excess of his powers since [Impact] Systems Sales made a down payment of P50,000.00
two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party
defendant.
ISSUE:Whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to petitioner?
HELD:In a contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another with the latters consent. The underlying principle of the contract
of agency is to accomplish results by using the services of others to do a great variety of things like
selling, buying, manufacturing, and transporting. Its purpose is to extend the personality of the
principal or the party for whom another acts and from whom he or she derives the authority to act. It is
7

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 executed by the principal. By this legal fiction, the actual or real absence of the principal is
converted into his legal or juridical presence qui facit per alium facit per se.
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish
the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to
the party with whom he contracts. The same provision, however, presents two instances when an agent
becomes personally liable to a third person. The first is when he expressly binds himself to the
obligation and the second is when he exceeds his authority. In the last instance, the agent can be held
liable if he does not give the third party sufficient notice of his powers. We hold that respondent
EDWIN does not fall within any of the exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of
Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the
grant of broad powers with which to conduct the business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or manager;
such a position presupposes a degree of confidence reposed and investiture with liberal powers for the
exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to
the business entrusted to his care and management. In the absence of an agreement to the contrary, a
managing agent may enter into any contracts that he deems reasonably necessary or requisite for the
protection of the interests of his principal entrusted to his management. x x x.
There is, therefore, no doubt in our mind that respondent EDWINs participation in the Deed of
Assignment was reasonably necessary or was required in order for him to protect the business of his
principal. Had he not acted in the way he did, the business of his principal would have been adversely
affected and he would have violated his fiduciary relation with his principal.
To reiterate, the first part of Article 1897 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.
The second part of the said provision presents the situations when the agent himself becomes liable to a
third party when he expressly binds himself or he exceeds the limits of his authority without giving
notice of his powers to the third person. However, it must be pointed out that in case of excess of
authority by the agent, like what petitioner claims exists here, the law does not say that a third person
can recover from both the principal and the agent.
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any
right nor incur any liability arising from the Deed of Assignment, it follows that he is not a real party in
interest who should be impleaded in this case. A real party in interest is one who stands to be benefited
or injured by the judgment in the suit, or the party entitled to the avails of the suit.[41] In this respect,
we sustain his exclusion as a defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August
2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397,
8

affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City, is
AFFIRMED.
G.R. No. 156262 (July 14, 2005)
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO
and Present: MARY T. BUENAVENTURA, petitioners,
vs.
HEIRS OF BARTOLOME RAMOS, respondents
FACTS:Spouses Tuazon (Leonilo and Maria) paid deceased Bartolome Ramos with Traders Royal
Bank checks for 4, 437 cavans of rice out of 8, 326 cavans which they bought from the later. But when
the checks were encashed, all of it bounced due to insufficiency of funds. Respondents contended that
petitioner already knew that they would be sued so they conspired with other defendants to defraud
them as creditors by executing multiple fictitious sales of their properties. As result of the sale, there
were no more properties left in the names of spouses Tuazon answerable to creditors, to damage and
prejudice to respondents.
For the petitioners, they deny the purchased of rice from Bartolome Ramos and instead claimed that it
was from Magdalena Ramos, wife of Bartolome, who owned and traded the merchandise and Maria
Tuazon was merely an agent of hers. They alleged that Evangeline Santos was the buyer and the issuer
of the checks to Maria as payment for the rice. In good faith, the checks were received from Evangeline
Santos and relayed to Ramos without knowing that they were not funded and it is for this reason that
petitioner insist in the inclusion of Evangeline as an indespensable party. Maria also claims that that
alleged fictitious sales were merely due to financial difficulty. To dispute the contention that they were
the buyers of the rice, they argued that there were no sales invoices, receipt or like evidence to prove it.
ISSUE: W/N the CA erred in ruling that the petitioners are not agents of the respondents.
Held:NO.In a contract of agency, one binds oneself to render some service or to do something in
representation or on behalf of another, with the latters consent or authority. The following are the
elements of agency:
the parties consent, express or implied, to establish the relationship;
the object, which is the execution of a juridical act in relation to a third person
the representation, by which the one who acts as an agent does so, not for oneself, but as a
representative
the limitation that the agent acts within the scope of his or her authority.

As the basis of agency is representation, there must be, on the part of the principal, an actual intention
to appoint, an intention naturally inferable from the principals words or actions. In the same manner,
there must be an intention on the part of the agent to accept the appointment and act upon it. Absent
such mutual intent, there is generally no agency.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the
amounts represented by the bounced checks, in a separate civil case that they sought to be consolidated
with the current one. If, as they claim, they were mere agents of respondents, petitioners should have
brought the suit against Santos for and on behalf of their alleged principal, in accordance with Section 2
of Rule 3 of the Rules on Civil Procedure. Their filing a suit against her in their own names negates
their claim that they acted as mere agents in selling the rice obtained from Bartolome Ramos.
9

Yu Eng Cho vs Pan American World Airways

FACTS: Yu Eng Cho is a businessman who travels abroad from time to time. In 1976, he bought tworound trip plane tickets from Tagunicar who represented herself to be an agent of Tourist World
Services, Inc. (TWSI). The destinations are Hongkong, Tokyo, San Francisco, U.S.A. The purpose of
this trip is to go to Fairfield, New Jersey, U.S.A. to buy to 2 lines of infrared heating system processing
textured plastic article.
During that time however, only the passage from Manila to Hongkong, then to Tokyo, were confirmed.
The flight from Tokyo to San Francisco was on RQ status, meaning on request. Per instruction of
Tagunicar, petitioners returned after a few days for the
confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of TWSI,
Tagunicar told petitioners that their flight is now confirmed all the way. Thereafter, she attached the
confirmation stickers on the plane tickets.
On July 23, 1978, plaintiffs left for Hongkong and stayed there for 5 days. Upon their arrival in Tokyo,
they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said office, however,
informed them that their names are not in the manifest.
Since petitioners were supposed to leave on within 72hours in Japan, they were constrained to accept
airline tickets for Taipei as recommended by Japan Air Lines officials.
This is the only option left to them because Northwest Airlines was then on strike, hence, there was no
chance for the petitioners to obtain airline seats to the United States within 72 hours. Petitioners paid
for these tickets.
Upon reaching Taipei, there were no flights available for petitioners, thus, they were forced to return
back to Manila on August 3, 1978, instead of proceeding to the United States. Japan Air Lines refunded
the petitioners the difference of the price for Tokyo-Taipei and Tokyo-San Francisco.
In view of their failure to reach Fairfield, New Jersey, Yu Eng Chos option to buy the two lines of
infrared heating system was cancelled and failed to realize a profit of
P300,000.00 to P400,000.00.
Hence, plaintiffs filed a complaint for damages against Tagunicar, Canilao, TWSI and Pan Am.
The RTC held the defendants jointly and severally liable, except defendant Canilao.
Only respondents Pan Am and Tagunicar appealed to the Court of Appeals which held that Tagunicar is
not a duly authorized agent or representative of either Pan Am or TWSI. It held that their business
transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent
and sub-agent,respectively.
ISSUE:Whether or not there is a contract of agency between Tagunicar, and TWSI?
HELD:No. There is no contract of agency.
By the contract of agency, 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. The elements of
10

agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is
the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not
for himself; (4) the agent acts within the scope of his authority.
It is a settled rule that persons dealing with an assumed agent 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 extent of
authority, and in case either is controverted, the burden of proof is upon them to establish it.
In the case at bar, however, petitioners merely rely on the affidavit of respondent Tagunicar where she
stated that she is an authorized agent of TWSI. This affidavit, however, has weak probative value in
light of respondent Tagunicar's testimony in court to the contrary.
ORIENT AIR SERVCES AND HOTEL REPRESENTATIVES V CA
FACTS: American Airlines, inc, an air carrier offering passenger and air cargo transportation in the
Phils, and Orient Air Services and Hotel Representatives entered into a General Sales Agency
Agreement whereby the former authorized the latter to act as its exclusive general sales agent within
the Phils for the sale of air passenger transportation
Alleging that Orient Air had reneged on its obligations under the Agreement by failing to remit the net
proceeds of sale in the amount of US $ 254,400, American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement
American Air instituted suit against Orient Air for Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and Restraining Order averring the basis for the termination of the
Agreement as well as Orient Airs previous record of failures to promptly settle past outstanding
refunds of which there were available funds in the possession of the Orient Air to the damage and
prejudice of American Air
TC ruled in favor of Orient Air to which the Intermediate Appelalate Court (now CA) affirmed TCs
decision with modifications with respect to monetary awards granted.
ISSUE: W/N Orient Air is entitled to the 3% overriding commission
RULING: Yes. It is a well settled principle that in the interpretation of a contract, the entirety thereof
must be taken into consideration to ascertain the meaning of its provisions. The various stipulations in
the contract must be read together to give effect to all
The Agreement, when interpreted in accordance with the foregoing principles, entitles
Orient Air to
the 3% overriding commission based on total revenue or as referred to by the parties, total flown
revenues.
As the designated General Sales Agent of American Air, Orient Air was responsible for the promotion
and marketing of American Airs services for air passenger transportation and the solicitation of sales
therefor. In return for such efforts and services, Orient Air was to be paid commissions of 2 kinds: first,
a sales agency commission, ranging from 7 to 8% of tariff fares and charges from sales by Orient Air
when made on American Air ticket stock; and second, an overriding commission of 3% of tariff fares
and charges for all sales of passenger transportation over American Air services.
11

The second type of commissions would accrue for sales of American Air services made not on its ticket
stocket but on the ticket stock of other air carriers sold by such carriers or other authorized ticketing
facilities or travel agents.
In addition, it is clear from the records that American Air was the party responsible for the preparation
of the Agreement. Consequently, any ambiguity in this contract of adhesion is to be taken contra
proferentem construed against the party who cause the ambiguity and could have avoided it by the
exercise of a little more care.
Bordador vs Luz GR No. 130148
FACTS: Petitioners(Bordadors) were engaged in the business of purchase and sale of jewelry and respondentBrigida
D. Luz, also known as Aida D. Luz), was their regular customer.On several occasions, respondent
Narciso Deganos, the brother of Brigida D. Luz, received severalpieces of gold and jewelry
from petitioners amounting to P382,816.00 These items and their prices were indicated in seventeen
receipts covering the same. Eleven of thereceipts stated that they were received for a certain Evelyn
Aquino, a niece of Deganos, and the remainingsix indicated that they were received for Brigida D. Luz.
Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return
theunsold items to petitioners.Deganos remitted only the sum of P53,207.00. He neither paid the
balance of the sales proceeds, nordid he return any unsold item to petitioners.The total of his unpaid
account to petitioners, including interest, reached the sum ofP725,463.98.
ISSUE:Whether or not herein respondent spouses are liable topetitioners for the latters claim for money and damages in
the sum of P725,463.98, plus interests andattorneys fees, despite the fact that the evidence does not show that they signed
any of the subjectreceipts or authorized Deganos to receive the items of jewelry on their behalf.
HELD:No evidence support the theory of petitioners that Deganos was an agent of Brigida D. Luz and
that thelatter should consequently be held solidarily liable with Deganos in his obligation to
petitioners. While thequoted statement I n the findings of fact of the assailed appellate decision
mentioned that Deganosostensibly acted as an agent of Brigida, the actual conclusion and ruling of the
Court of Appeals
categorically stated that, (Brigida Luz) never authorized her brother (Deganos) to act for and in her
behalfin any transaction with Petitioners.
It is clear, therefore, that even assumingarguendothatDeganos acted as an agent of Brigida, the latter
never authorized him to act on her behalfwith regard tothe transactions subject of this case. The Civil
Code provides: Art. 1868. By the contract of agency a person binds himself to render some service or
to dosomething in representation or on behalf of another, with the consent or authority of thelatter.The
basis for agency is representation. Here, there is no showing that Brigida consented to the acts
ofDeganos or authorized him to act on her behalf, much less with respect to the particular
transactionsinvolved.
Petitioners attempt to foist liability on respondent spouses through the supposed agency relation
with Deganos is groundless and ill-advised.Besides, it was grossly and inexcusably negligent of
petitioners to entrust to Deganos, not once ortwice but on at least six occasions as evidenced by six
receipts, several pieces of jewelry of substantialvalue without requiring a written authorization from his
12

alleged principal. A person dealing with an agent isput upon inquiry and must discover upon his peril
the authority of the agent.
The records show that neither an express nor an implied agency was proven to have existed
betweenDeganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions
with Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency
relation between thetwo respondents where no evidence supports such claim.What was finally proven
as a matter of fact is that there was no such contract between Brigida D. Luzand Narciso Deganos,
executed or partially executed, and no delivery of any of the items subject of thiscase was ever made to
the former.
Apex Mining vs Southest Mindanao Gold
Facts: The case involves the Diwalwal Gold Rush Area (Diwalwal), a rich tract of mineral
landlocated inside the Agusan-Davao-Surigao Forest Reserve in Davao del Norte and Davao Oriental.
Sincethe early 1980s, Diwalwal has been stormed by conflicts brought about by numerous mining
claims over it.
On March 10, 1986, Marcopper Mining Corporation (MMC) was granted an Exploration Permit(EP
133) by the Bureau of Mines and Geo-Sciences (BMG). A long battle ensued between Apex and MMC
with the latter seeking the cancellation of the mining claims of Apex on the ground that such mining
claims were within a forest reservation (Agusan-Davao-Surigao Forest Reserve) and thus the
acquisition on mining rights should have been through an application for a permit to prospect with the
BFD and not through registration of a DOL with the BMG. When it reached the SC in 1991, the
Courtruled against Apex holding that the area is a forest reserve and thus it should have applied for a
permit to prospect with the BFD.
On February 16 1994, MMC assigned all its rights to EP 133 to Southeast Mindanao GoldMining
Corporation (SEM), a domestic corporation which is alleged to be a 100%-owned subsidiary of MMC.
Subsequently, BMG registered SEMs Mineral Production Sharing Agreement (MPSA)application and
the Deed of Assignment. Several oppositions were filed. The Panel of Arbitrators created by the DENR
upheld the validity of EP 133.
During the pendency of the case, DENR AO No. 2002-18 was issued declaring an emergency situation
in the Diwalwal Gold Rush Area and ordering the stoppage of all mining operations therein.
Issues: W/N EP 133 and its subsequent transfer to SEM is valid.
Held: INVALID. One of the terms and conditions of EP 133 is: That this permit shall be for the
exclusive use and benefit of the permittee or his duly authorized agents and shall be used for mineral
exploration purposes only and for no other purpose. While it may be true that SEM is a100%
subsidiary corporation of MMC, there is no showing that the former is the duly authorized agent of the
latter. As such, the assignment is null and void as it directly contravenes the terms and conditions of the
grant of EP 133.
a. The Deed of Assignment was a total abdication of MMCs rights over the permit. It is not a
mere grant of authority to SEM as agent.
b. Reason for the stipulation. Exploration permits are strictly granted to entities or individuals
possessing the resources and capability to undertake mining operations. Without such a
13

c.

d.

e.

f.

condition, non-qualified entities or individuals could circumvent the strict requirements under
the law by the simple expediency of acquiring the permit from the original permittee.
Separate personality. The fact that SEM is a 100% subsidiary of MMC does not
automatically make it an agent of MMC. A corporation is an artificial being invested by
law with a personality separate and distinct from persons composing it as well as from
that of any other legal entity to which it may be related. Absent any clear proof to the
contrary, SEM is a separate and distinct entity from MMC. (related to agency topic)
Doctrine of piercing the corporate veil inapplicable. Only in cases where the corporate fiction
was used as a shield for fraud, illegality or inequity may the veil be pierced and removed. The
doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit
prohibited acts. The assignment of the permit in favor of SEM is utilized to circumvent the
condition of non transferability of the exploration permit. To allow SEM to avail itself of this
doctrine and to approve the validity of the assignment is tantamount tosanctioning an illegal act
which is what the doctrine precisely seeks to forestall.
PD 463 requires approval of Secretary of DENR. Also, PD 463 (Mineral Resources
Development Decree), which is the governing law when the assignment was executed,
explicitly requires that the transfer or assignment of mining rights, including the right to
explore a mining area, must be with the prior approval of the Secretary of DENR. Such is not
present in this case.
EP 133 expired by non-renewal. Although EP 133 was extended for 12 months until July
6,1994, MMC never renewed its permit prior and after its expiration.With the expiration of EP
133 on July 6, 1994, MMC lost any right to the Diwalwal Gold RushArea. SEM, on the other
hand, has not acquired any right to the said area because the transfer of EP 133 in its favor is
invalid. Hence, both MMC and SEM have not acquired any vested rightover the area covered
by EP 133.2.

VICTORIAS MILLING CO., INC., petitioner, vs.

CONSOLIDATED SUGAR CORPORATION, respondents.
G.R. No. 117356 | 2000-06-19

COURT

OF

APPEALS

and

FACTS: St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias
Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No. 1214M,
which gave rise to the instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000 bags of
sugar. On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC)
its rights in SLDR No. 1214M for P 14,750,000.00. CSC wrote petitioner that it had been authorized by
STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR
No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf
the refined sugar covered by SDR No. 1214 dated October 16, 1989 in the total quantity of 25,000
bags." On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with
petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27, 1989
acknowledging receipt of the said checks in payment of 50,000 bags. Aside from SLDR No. 1214M,
said checks also covered SLDR No. 1213. Private respondent CSC surrendered SLDR No. 1214M to
the petitioner's NAWACO warehouse and was allowed to withdraw sugar. However, after 2,000 bags
had been released, petitioner refused to allow further withdrawals of sugar against SLDR No. 1214M.
CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR No. 1214M had been
"sold and endorsed" to it but that it had been refused further withdrawals of sugar from petitioner's
warehouse despite the fact that only 2,000 bags had been withdrawn. On January 31, 1990, petitioner
14

replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because
STM had already withdrawn all the sugar covered by the cleared checks. Trial court and the Court of
Appeals ordered the release of 25,000 bags in favor of the defendant CSC, hence the present case.
ISSUE:Whether CSC is an agent of STM hence estopped to sue as an assignee on SDLR 1214M.
HELD: No.It appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not
an agent of STM. Private respondent CSC was not subject to STM's control. The question of whether a
contract is one of sale or agency depends on the intention of the parties as gathered from the whole
scope and effect of the language employed. That the authorization given to CSC contained the phrase
"for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention
of the parties. That no agency was meant to be established by the CSC and STM is clearly shown by
CSC's communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. The use
of the words "sold and endorsed" means that STM and CSC intended a contract of sale, and not an
agency. Hence, on this score, no error was committed by the respondent appellate court when it held
that CSC was not STM's agent and could independently sue petitioner. A conclusion that there was a
valid sale and transfer to plaintiff-appellee may, therefore, be made thus capacitating plaintiff-appellee
to sue in its own name, without need of joining its imputed principal STM as co-plaintiff.
G.R. No. 129919 (February 6, 2002)
DOMINION INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.
FACTS: On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted a civil case for sum of money
against defendant Dominion Insurance Corporation. Plaintiff sought to recover thereunder the sum of
P156,473.90 which he claimed to have advanced in his capacity as manager of defendant to satisfy
certain claims filed by defendants clients.
Defendant denied any liability to plaintiff and asserted a counterclaim for P249,672.53, representing
premiums that plaintiff allegedly failed to remit.He also filed a third-party complaint against Fernando
Austria, who, at the time relevant to the case, was its Regional Manager for Central Luzon area.
On May 22, 1992 the case was again called for pre-trial conference. Only plaintiff and counsel were
present. Despite due notice, defendant and counsel did not appear, although a messenger, Roy Gamboa,
submitted to the trial court a handwritten note sent to him by defendants counsel which instructed him
to request for postponement. Plaintiffs counsel objected to the desired postponement and moved to
have defendant declared as in default. This was granted by the trial court
On August 7, 1992 defendant corporation filed a MOTION TO LIFT ORDER OF DEFAULT. The trial
court denied defendants motion. The defendant moved for reconsideration of the aforesaid order. For
the first time counsel revealed to the trial court that the reason for his nonappearance at the pre-trial
conference was his illness. Just the same, the trial court denied said Motion.
The court a quo rendered judgment ordering the defendant Dominion Insurance Corporation to pay
plaintiff the sum of P156,473.90 representing the total amount advanced by plaintiff in the payment of
the claims of defendants clients;
The Court of Appeals promulgated a decision affirming that of the trial court.
15

ISSUES:1.) W/N Guevarra acted within his authority as agent of petitioner. NO

2.) W/N Guevarra must be reimbursed for the amount advanced. YES
HELD:
1. NO. By the contract of agency, 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. The basis for
agency is representation. On the part of the principal, there must be an actual intention to appointor
an intention naturally inferrable 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.
Even though the contact entered into by Guevarra and Dominion was with the word special the
contents of the document was actually a general agency. A general power permits the agent to do all
acts for which the law does not require a special power and the contents in the document did not
require a special power of attorney.
Art 1878 of the civil code provides instances when a special power of attorney is required.:
1) To make such payment as are not usually considered as acts of administration.
15) any other act of dominion
The payment of claims is not an act of administration which requires a special power of attorney
before Guevarra could settle the insurance claims of the insured.
Also Guevarra was instructed that the payment for the insured must come from the revolving fund or
collection in his possession, Gueverra should not have paid the insured through his own capacity.
Under 1918 of civil code an agent who acted in contravention of the principals instruction the principal
will not be liable for the expenses incurred by the agent.
2. YES. Even if the law on agency prohibits Gueverra from obtaining reimbursement his right to
recover may be justified under the article 1236 of the civil code. Thus Guevarra must be reimbursed but
only to the extent that Dominion has benefited without interest or demand for damages.

WEEK 8
3. Agency distinguished from/compared with other relations
b) Lease of Work or Service (Art. 1644)
G.R. No. L-21601 (December 28, 1968)
NIELSON & COMPANY, INC., plaintiff-appellant,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.
FACTS:Sometime in 1937, Nielson & Company, Inc. and Lepanto Consolidated Mining Company
entered into a management contract.

16

Nielson had agreed, for a period of five years, with the right to renew for a like period, to explore,
develop and operate the mining claims of Lepanto, and to mine, or mine and mill, such pay ore as may
be found and to market the metallic products recovered therefrom which may prove to be marketable,
as well as to render for Lepanto other services specified in the contract.
Nielson was to take complete charge, subject at all times to the general control of the Board of
Directors of Lepanto, of the exploration and development of the mining claims, of the hiring of a
sufficient and competent staff and of sufficient and capable laborers, of the prospecting and
development of the mine, of the erection and operation of the mill, and of the benefication and
marketing of the minerals found on the mining properties.
Nielson was also to act as purchasing agent of supplies, equipment and other necessary purchases by
Lepanto, but no purchase shall be made without the prior approval of Lepanto and no commission shall
be claimed or retained by Nielson on such purchase.
The principal and paramount undertaking of Nielson under the management contract was the operation
and development of the mine and the operation of the mill. All the other undertakings mentioned in the
contract are necessary or incidental to the principal.
In the performance of this principal undertaking, Nielson was not in any way executing juridical acts
for Lepanto.
Lepanto terminated the contract in 1945, 2 years before its expiration, when it took over and assumed
exclusive management of the work previously entrusted to Nielson under the contract.
Thus, on February 6, 1958, Nielson brought an action before the Court of First Instance of Manila to
recover certain sums of money representing damages allegedly suffered by the plaintiff.
Lepanto finally maintains that Nielson as an agent is not entitled to damages since the law gives to the
principal the right to terminate the agency at will.
ISSUE:Was the management contract entered into by and between Nielson and Lepanto a contract of
agency such that it has the right to revoke and terminate the contract at will, or a contract of lease of
services?
HELD: Contract of Lease of Services
The management contract was one of contract of lease of services and not a contract of agency.
In both agency and lease of services, one of the parties binds himself to render some service to the
other party. Agency, however is distinguished from lease of work or services in that:
The basis of agency is representation, while in the lease of work or services, the basis is employment.
Article 1544, defining contract of lease of service, provides:
In a lease of work or services, one of the parties binds himself to make or construct something or to
render a service to the other for a price certain.
17

(Note: Article 1644 of the new Civil Code states that: In the contract of lease of work or
service, one of the parties binds himself to execute a piece of work or to render to the other some
service for a price certain, but the relation of the principal and agent does not exist between them.)
Article 1709 of the old Civil Code, Article 1868 of the new Civil Code has defined the contract of
agency in more explicit terms, as follows:
By the contract of agency 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.
There is another obvious distinction between agency and lease of services. Agency is a preparatory
contract, as agency "does not stop with the agency because the purpose is to enter into other contracts."
The most characteristic feature of an agency relationship is the agent's power to bring about business
relations between his principal and third persons. "The agent is destined to execute juridical acts
(creation, modification or extinction of relations with third parties). Lease of services contemplate only
material (non-juridical) acts." (Reyes and Puno, "An Outline of Philippine Civil Law," Vol. V, p. 277).
Consequently, from the provision of paragraph XI of the Management contract, that the employment by
Lepanto of Nielson to operate and manage its mines was principally in consideration of the know-how
and technical services that Nielson offered Lepanto. The contract thus entered into pursuant to the offer
made by Nielson and accepted by Lepanto was a "detailed operating contract". It was not a contract of
agency. Nowhere in the record is it shown that Lepanto considered Nielson as its agent and that
Lepanto terminated the management contract because it had lost its trust and confidence in Nielson.
The contention of Lepanto that it had terminated the management contract in 1945, following the
liberation of the mines from Japanese control, because the relation between it and Nielson was one of
agency and as such it could terminate the agency at will, is, therefore, untenable
It is Our considered view that by express stipulation of the parties, the management contract in question
is not revocable at the will of Lepanto. We rule that this management contract is not a contract of
agency as defined in Article 1709 of the old Civil Code, but a contract of lease of services as defined in
Article 1544 of the same Code. This contract can not be unilaterally revoked by Lepanto.

De la Cruz vs. Northern Theatrical Enterprises c/o Mark B.

c) Independent Contractor (Art. 1713)
G.R. No. L-10918 (March 4, 1916)
WILLIAM FRESSEL, ET AL., plaintiffs-appellants,
vs.
MARIANO UY CHACO SONS & COMPANY, defendant-appellee.
FACTS: During the latter part of the year 1913, the defendant entered into a contract with one E.
Merritt

18

Merritt undertook and agreed with the defendant to build for the defendant a costly edifice in the city of
Manila at the corner of Calle Rosario and Plaza del Padre Moraga.
In the contract it was agreed between the parties thereto, that the defendant at any time, upon certain
contingencies, before the completion of said edifice could take possession of said edifice in the course
of construction and of all the materials in and about said premises acquired by Merritt for the
construction
of
said
edifice.
During the month of August, the plaintiffs delivered to Merritt certain materials of the value of
P1,381.21, which price Merritt had agreed to pay on the 1st day of September, 1914.
That on the 28th day of August, 1914, the defendant under and by virtue of its contract with Merritt
took possession of the incomplete edifice in course of construction together with all the materials on
said premises including the materials delivered by plaintiffs.
That neither Merritt nor the defendant has paid for the materials mentioned although payment has been
demanded, and that on the 2d day of September, 1914, the plaintiffs demanded of the defendant the
return or permission to enter upon said premises and retake said materials at the time still unused which
was refused by defendant.
The appellants insist that Merritt acted as the agent of the defendant in purchasing the materials in
question and that the defendant, by taking over and using such materials, accepted and ratified the
purchase, thereby obligating itself to pay for the same.
ISSUE: Whether Merritt acted as the agent of the defendant for the acquisition of the materials from
plaintiffs.
HELD: The fact that "the defendant entered into a contract with one E. Merritt, where by the said
Merritt undertook and agreed with the defendant to build for the defendant a costly edifice" shows that
Merritt was authorized to do the work according to his own method and without being subject to the
defendant's control, except as to the result of the work
The mere fact that Merritt and the defendant had stipulated in their building contract that the latter
could, "upon certain contingencies," take possession of the incompleted building and all materials on
the ground, did not change Merritt from an independent contractor to an agent.
In the absence of a statute creating what is known as mechanics' liens, the owner of a building is not
liable for the value of materials purchased by an independent contractor either as such owner or as the
assignee of the contractor.
The allegations in the complaint not being sufficient to constitute a cause of action against the
defendant, the judgment appealed from is affirmed, with costs againsthe appellants. So ordered.
G.R. No. L-8169 (January 29, 1957)
THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY
COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON, PORFIRIO
DE LA FUENTE and THE COURT OF APPEALS (First Division), respondents.
19

FACTS:A car owned by Salvador Sison was brought to the gasoline and service station owned by The
Shell Company of the Philippine Islands at the City of Manila, but operated by Porfirio dela Fuente, for
washing and greasing for a consideration of Php 8.00. The car was placed into a lifter for washing and
greasing.
The job was undertaken by Porfirio dela Fuente though his two employees. When the job was to be
completed there was an ungreased portion underneath the vehicle which could not be reached by the
greaseman. So, the lifter was lowered a little by one of the greasemen and by doing so, for unknown
reasons, the car accidentally fell and sustained damages to the value of Php 1,651.88.
The car was covered with an insurance by Firemens Insurance Company of Newark, New Jersey and
Commercial Casualty Insurance Company Jointly for the sum of Php 10,000.00.
The damages sustained by the car was paid by the insurance company upon charging the owner, Sison
Php 100.00 in accordance with the terms and conditions of the insurance contracts. Both have filed an
action to recover from Porfirio dela Fuente and Shell Company of the Philippine Islands the amount of
the damages on the ground of negligence.
The Court of First Instance dismissed the complaint for the recovery for the amount of damages.
Firemens Insurance appealed the decision of the Court of First Instance to the Court of Appeals, where
the decision of the CFI was reversed, ruling that dela Fuente was an agent of Shell, hence, the principal
is liable with his agents breach of undertaking.
ISSUE:Whether or not dela Fuente is really an agent of Shell Company of the Philippine Islands
instead of Shells claim that deal Fuente is and independent contractor?
HELD:
The decision of the Court of Appeals is affirmed. dela Fuente is an agent of Shell Company of the
Philippine Islands with the reasons as follows:
DE LA FUENTE owed his position to SHELL which could remove him or terminate his
services at any time. He merely undertook to exclusively sell SHELLs products at the station
he operates. For this purpose, he was placed in possession of all the equipment needed to
operate it, including the hydraulic lifter from which SISONs automobile fell.
But it must be noted that these equipment were delivered to DE LA FUENTE merely on loan
basis. SHELL still took charge of its care and maintenance. It supervised DE LA FUENTE and
conducted period inspection of the gasoline and service station
Moreover, SHELL did not leave the fixing of price for gasoline to DELA FUENTE; on the
other hand, SHELL had complete control thereof and it had supervision over DE LA FUENTE
in the operation of the station and in the sale of its products therein.
In fine, the gasoline and service station really belonged to SHELL. It bore its trade name and
the operator DE LA FUENTE merely sold theproducts of SHELL there.
Considering the above listed, in no wise can it be said that DE LAFUENTE is an independent
contractor of SHELL. The extensive control and supervision that SHELL exercises over DE LA
FUENTE militate heavily against this contention. On the contrary, such circumstances show the
existence of agency between them.
The existence of agency between SHELL and DE LA FUENTE is also evidenced by a receipt issued by
SHELL and signed by DE LAFUENTE, acknowledging the delivery of equipment for the gas station in
question and an official from of the inventory of said equipment containing DE LA FUENTEs
signature above the words: "Agent's signature
G.R. No. L-12986 (March 31, 1966)
20

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF
DOMINGA ONG,petitioners-appellants,
vs.
CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondentsappellees.
The action is for damages under Articles 1902 and 1903 of the old Civil Code.
It appears that in the afternoon of March 18, 1948 a fire broke out at the Caltex service station at the
corner of Antipolostreet and Rizal Avenue, Manila. It started while gasoline was being hosed from a
tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of
the hose was inserted. The fire spread to and burned several neighboring houses, including the personal
properties and effects inside them. Their owners, among them petitioners here, sued respondents Caltex
(Phil.), Inc. and Mateo Boquiren, the first as alleged owner of the station and the second as its agent in
charge of operation. Negligence on the part of both of them was attributed as the cause of the fire.
The trial court and the Court of Appeals found that petitioners failed to prove negligence and that
respondents had exercised due care in the premises and with respect to the supervision of their
employees.
ISSUE: Whether Caltex should be held liable for the damages caused to appellants.
HELD: This issue depends on whether Boquiren was an independent contractor, as held by the Court
of Appeals, or an agent of Caltex. This question, in the light of the facts not controverted, is one of law
and hence may be passed upon by this Court. These facts are: (1) Boquiren made an admission that he
was an agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the
equipment therein; (3) Caltex exercised control over Boquiren in the management of the state; (4) the
delivery truck used in delivering gasoline to the station had the name of CALTEX painted on it; and (5)
the license to store gasoline at the station was in the name of Caltex, which paid the license fees.
In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his
drivers to remove gasoline from the truck into the tank and alleged that the "alleged driver, if one there
was, was not in his employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the owners of
the gasoline station." It is true that Boquiren later on amended his answer, and that among the changes
was one to the effect that he was not acting as agent of Caltex. But then again, in his motion to dismiss
appellants' second amended complaint the ground alleged was that it stated no cause of action since
under the allegations thereof he was merely acting as agent of Caltex, such that he could not have
incurred personal liability. A motion to dismiss on this ground is deemed to be an admission of the facts
alleged in the complaint.
Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the
business conducted at the service station in question was owned and operated by Boquiren. But Caltex
did not present any contract with Boquiren that would reveal the nature of their relationship at the time
of the fire. There must have been one in existence at that time. Instead, what was presented was a
license agreement manifestly tailored for purposes of this case, since it was entered into shortly before
the expiration of the one-year period it was intended to operate. This so-called license agreement was
executed on November 29, 1948, but made effective as of January 1, 1948 so as to cover the date of the
fire, namely, March 18, 1948. This retroactivity provision is quite significant, and gives rise to the
conclusion that it was designed precisely to free Caltex from any responsibility with respect to the fire,
21

as shown by the clause that Caltex "shall not be liable for any injury to person or property while in the
property herein licensed, it being understood and agreed that LICENSEE (Boquiren) is not an
employee, representative or agent of LICENSOR (Caltex)."
But even if the license agreement were to govern, Boquiren can hardly be considered an
independent contractor. Under that agreement Boquiren would pay Caltex the purely nominal sum of
P1.00 for the use of the premises and all the equipment therein. He could sell only Caltex Products.
Maintenance of the station and its equipment was subject to the approval, in other words control, of
Caltex. Boquiren could not assign or transfer his rights as licensee without the consent of Caltex. The
license agreement was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until
terminated by Caltex upon two days prior written notice. Caltex could at any time cancel and terminate
the agreement in case Boquiren ceased to sell Caltex products, or did not conduct the business with due
diligence, in the judgment of Caltex. Termination of the contract was therefore a right granted only to
Caltex but not to Boquiren. These provisions of the contract show the extent of the control of
Caltex over Boquiren. The control was such that the latter was virtually an employee of the
former not an independent contractor. Hence, Caltex should be liable for damages caused to
appellants.
Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily
to appellants.
d) Negotiorum Gestio (Art. 2144-2145)
G.R. No. L-5486 August 17, 1910
JOSE DE LA PENA Y DE RAMON vs. FEDERICO HIDALGO,
FACTS:This decision concern the appeals entered under respective bills of exception by counsel for
Jose de la Pea y de Ramon, the administrator of the estate of the deceased Jose de la Pea y Gomiz,
from the order directing that the amount deposited as bond, by counsel for the intervening attorneys,
Chicote and Miranda, Frederick G. Waite and C.W. OBrien, from the said order of Oct. 18, in so far as
it declares that the counterclaim by the said Hidalgo against de la Pea was presented in his capacity as
administrator of the aforementioned estate and that the interveners lien could not avail to prevent the
off-set decreed in the said first order appealed from.
After a regular trial in the CFI of the case of Jose de la Pea y de Ramon, as administrator of the estate
of his deceased father, Jose de la Pea y Gomiz vs. Federico Hidalgo, for the payment of a sum of
money, the record of the proceedings was forwarded to this court on appeal. By the decision rendered
Hidalgo to pay to Jose (son), as administrator, the sum of 6,774.50 with the legal interest and
likewise, sentenced the said Jose (son) to pay Federico, as a counterclaim, the sum of 9,000 with legal
interest and affirmed the judgement appealed from in so far as it was in agreement with the said
decision, and reversed it in so far as it was not in accordance therewith. That decision became final.
The record of proceedings having been remanded for execution to the CFI where it was originated, the
judge by the order decreed that both amounts for which the defendant Hidalgo and the administrator
Pea were mutually liable in concurrent sums should off-set each other and that, consequently,
Jose(son) in conformity with the final decision of this court, which was liable for the payment of
difference between such amounts together with the interests at 6% from the date.

22

At this stage of the proceedings for the execution of the judgment that had become final, the attorneys
for the said plaintiff, Messrs. Chicote and Miranda, Frederick Garfield Waite and C.W. OBrien
represented by C.A DeWitt, asked that they be permitted to intervene in the proceedings, as they held a
lien upon the amount awarded in the said decision of this court, rendered in favor of the plaintiff and
alleged that the lien which they held was upon the judgment entered in favor of the plaintiff in his
capacity as administrator, against the defendant that was entitled to the judgment awarded him by
virtue of his counterclaim, yet, in consideration of the fact that their lien affected the judgment of the
lower court, which was in no wise reversed, the said lien was valid with respect to any judgment that
the plaintiff had obtained against the defendant, notwithstanding such counterclaim. In spite of the
defendant's opposition, the court, ruling on this incidental question raised, issued the aforecited order of
October 18, 1910.
ISSUE:WON the counterclaim by Hidalgo against de la Pea was presented in his capacity as
administrator of the aforementioned estate and that the intervener's lien could not avail to prevent the
set-off decreed in the said first order appealed from?
HELD:It is evident, by a simple perusal of the finding of facts of the grounds of law of the final
decision rendered in that action, that the same was instituted by Jose de la Pea y de Ramon, not by
himself and in his own representation, but in his capacity as administrator of the estate of his deceased
father, Jose de la Pea y Gomiz, demanding payment of certain amounts which, according to his third
amended complaint, the defendant Federico Hidalgo owed the latter; and it is none the less evident that
the counterclaim presented by the defendant Federico Hidalgo had for its sole object the collection of a
certain sum which was owing to him by the deceased testator, Jose de la Pea y Gomiz, and that the
plaintiff, Jose de la Pea y de Ramon, per se and personally, had nothing to do with this debt of the
estate,
which
concerned
him
only
as
such
administrator.
If in any place or in any line of said decision mention was made of the name of the plaintiff Pea y de
Ramon without the title of his office as administrator of the estate, it probably was because the
complaint was filed and the action was brought by him in his capacity of administrator, and the
counterclaim, also, was directed him as such administrator; and if in any paragraph the said title of his
office was omitted in designating him, such omission can not serve as a ground for concluding that the
counterclaim allowed and the sentence imposed in the said decision were against Jose de la Pea y de
Ramon as a private individual and not as the administrator of the aforementioned estate; and the
sentence contained in the decision referred to can in no wise be understood to have been made against
Jose de la Pea y de Ramon personally, but in his capacity of administrator of the estate, which alone
was liable for the debt owing to the defendant; if mention was therein made of the plaintiff by name, it
is
because
he
was
the
representative
of
the
debtor
estate.
In the aforementioned decision of this court, by which the complaint and the counterclaim presented by
the parties to the said suit were disposed of, the amount which the defendant Hidalgo should pay to the
administrator of the estate of the deceased Pea y Gomiz and the sum which the said administrator,
designated by his name of Jose de la Pea y de Ramon, should, by virtue of the counterclaim, pay to
the defendant, Federico Hidalgo, alone were specified; the resultant difference, after the set-off should
have been made, was not stated, as it was considered that this merely arithmetical operation would
necessarily be performed in the course of the execution proceedings by the judge of the Court of First
Instance charged with carrying out the final decision rendered in the case. This, in fact, he did do in his
order of October 14, by directing that the plaintiff should pay the said sum, that it, the difference which
was found to exist, after making the set-off between the respective amounts the litigating parties were
sentenced to pay. The failure to state in the said decision that both debts were set-off against each other
23

up to a concurrent sum, can not avail?as a ground for alleging that the attorneys of the administrator
Pea y de Ramon have acquired a lien on the amount which Hidalgo should pay to the administrator
Pea y de Ramon in preference to the creditor of the amount that is the subject of the counterclaim.
If it just be that the estate of the deceased Pea y Gomiz should collect the amount owing it by Hidalgo,
as determined by final decision, it is equally just that Hidalgo should have the same right to collect the
sum which the said estate owes him, according to the same decision; therefore, in order to comply with
such decision, determining the two liabilities directly opposed to each other, it consequently and
logically follows that a set-off of both credits, up to a concurrent amount, must be affected; and if the
lien or the right to collect professional fees on the part of the attorneys were superior to the right of the
creditor of the estate, the result would be that the executory decision would not be complied with; there
would then be no set-off and the defendant would be compelled to pay to the said administrator his debt
to the estate, through the aforementioned lien of the intervening attorneys, but could not collect, nor
apply to the payment of the credit owing him by the same estate, the amount of his debt to the latter;
this would be illegal and opposed to the most rudimentary principles of justice and, furthermore, would
be
an
absurdity
and
contrary
to
common
sense
The judgment appealed from having been reversed with respect to that portion thereof relative to the
liability asked by the administrator of the estate to be laid against Federico Hidalgo, the sole judgment
to be executed is that contained in the decision rendered in second instance and in this decision, as has
been shown; and the result, in short, has been in no wise favorable to the plaintiff because, instead of
being able to collect the amount of his credit owing by Hidalgo to the estate, he still finds himself
obliged to pay the defendant the difference resulting from the set-off to which the counterclaim, made
by the latter for a greater sum, gave rise; and therefore, the right claimed by the appellant attorneys to
collect their fees out of the amount awarded to the said administrator, is in all respects unsustainable,
inasmuch as, in consequence of the counterclaim, there was a set-off against that amount and the
plaintiff has nothing to collect, but, on the contrary, is still liable for the difference which was found to
exist after the reciprocal debts of both parties had been set off against each other.
The right of attorneys for the administrator Pea y de Ramon, to collect fees for professional service,
under section 37 of the Code of Civil Procedure, is restricted to the personal founds of their client, to
amounts awarded to the latter by final decision, but does not comprise sums of money which, according
to the same decision, must be applied to be made in such decision by virtue of a prior counterclaim.
We know of no legal provision which grants to the attorneys for the losing party in a suit, or who has
not obtained a judgment authorizing him to collect money from the adverse party, the privilege of
collecting their professional fees with preference over, and better right then, the said adverse party, the
legitimate
creditor
of
the
said
attorneys'
client.
The suit was prosecuted for the collection of amounts which both parties reciprocally were owing each
other, and a decision was rendered deciding the complaint and the counterclaim and determining the
sums which the litigating parties must mutually pay; therefore, the final judgment must be executed, as
provided by the trial judge, pursuant to its terms, and no impediment to such execution can be had in
the improper contention made by the appellant attorneys, who can invoke no law or just reason which
authorizes them to collect their professional fees out of the bond given by Hidalgo, once the same was
not
deposited
as
security
for
the
payment
of
the
said
fees.
For the foregoing reasons, whereby the errors attributed by the appellant attorneys to the trial judge
have been duly refuted, it is our opinion and we hold that we should and hereby do affirm the order of
24

October 14, 1910, and also the order of the 18th of the same month, with the exception of the final
provision of this last order, of October 18, which we reversed and direct at the return be made to
Federico Hidalgo of the sum of P8,500 retained by the clerk of the court below as a result of the motion
of intervention herein concerned. No special finding is made as to the costs.
So ordered.
e) Loan (Art. 1933)
Jai Alai Corp. v BPI
Facts: Petitioner deposited checks to its current account with the BPI. These checks were from a
certain Ramirez, a consistent better in its games, who was a sales agent from InterIsland Gas. InterIsland later found out that of the forgeries committed in the checks and thus, it informed all the parties
concerned. Upon the demands on the bank as the collecting bank, it debited the account of petitioner.
Thereafter, petitioner tried to issue a check for payment of shares of stock but such was dishonored for
insufficient funds. Petitioner filed a complaint with CFI which was however dismissed and as well by
the CA , on appeal.
Issue: WON there is creditordebtor exist between Petitioner and Respondent
Ruling: No. Respondent bank acted within legal bounds when it debited the account of petitioner.
When the petitioner deposited the checks to its account, the relationship created was one of agency still
and not of creditordebtor. The bank was to collect from the drawees of the checks
with the corresponding proceeds. The Bank may have the proceeds already when it debited the
account of petitioner. Nonetheless, there is still no creditordebtor relationship. Following Section 23, a
forged signature is wholly inoperative and no right to discharge it or enforce its payment can be
acquired through or under the forged signature except against a party who cannot invoke its forgery or
want of authority. It stands to reason that as a collecting bank which indorsed the checks to the
draweebanks for clearing, should be liable to the latter for reimbursement for the indorsements on the
checks had been forged prior to their delivery to the petitioner. The payments made by the drawee
banks to respondent were ineffectivethe creditordebtor relationship hadnt been validly effected.
f) Sale (Art. 1458)
GR No. 11491 (August 23, 1918)
Quiroga v Parsons Hardware
APPEAL from a judgment of the Court of First Instance of Manila.
FACTS: A contract was entered into by and between Andres Quiroga and J. Parsons for the exclusive
sale of Quiroga beds in Visayan Islands, where plaintiff was to furnish the defendant with the beds
which the latter might order and that the defendant was to pay the price. The price agreed upon was the
one determined by the plaintiff for the sale of the beds in Manila, with a discount of from 20 to 25 per
cent, according to their class. Payment was to be made at the end of sixty days, or before, at the
plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional
discount was to be allowed for prompt payment.

25

After sometime, plaintiff filed a complaint against the defendant alleging violations of obligations some
of which were not expressly set forth in the contract: not to sell the beds at higher prices than those of
the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on
public exhibition, and to pay for the advertisement expenses for the same. The plaintiff alleged that the
defendant was his agent and that said obligations are implied in a contract of commercial agency. The
plaintiff calls attention to the testimony of Ernesto Vidal, former vice-president of the defendant
corporation, who testified that it was he who drafted the contract and that the contract was for an
agency and collection of commission on sales. However, according to the defendant's evidence, it was
Mariano Lopez Santos, a director of the corporation, who prepared the contract.
ISSUE: WON the defendant was a purchaser or an agent of the plaintiff
HELD: For the classification of contracts, due regard must be paid to their essential clauses. In the
contract in the instant case, what was essential, constituting its cause and subject matter, was that the
plaintiff was to furnish the defendant with the beds which the latter might order, at the stipulated price,
and that the defendant was to pay this price in the manner agreed upon. These are precisely the
essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff
to supply the beds, and, on that of the defendant, to pay their price. These features exclude the legal
conception of an agency or order to sell whereby the mandatory or agent receives the thing to sell it,
and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to
a third person, and if he does not succeed in selling it, he returns it.
The testimony of the person who drafted the contract, to the effect that his purpose was to be an agent
for the beds and to collect a commission on the sales, is of no importance to prove that the contract was
one of agency, inasmuch as the agreements contained in the contract constitute, according to law,
covenants of purchase and sale, and not of commercial agency. It must be understood that a contract is
what the law defines it to be, and not what it is called by the contracting parties.
Gonzalo Puyat and Sons vs. Arco Amusement Co., (72 Phil, 402)
FACTS:In the year 1929, the "Teatro Arco", a corporation duly organized under the laws of the
Philippine Islands, with its office in Manila, was engaged in the business of operating cinematographs.
In 1930, its name was changed to Arco Amusement Company. C. S. Salmon was the president, while A.
B. Coulette was the business manager. About the same time, Gonzalo Puyat & Sons, Inc., another
corporation doing business in the Philippine Islands, with office in Manila, in addition to its other
business, was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond,
Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and
machinery, and the Arco Amusement Company desiring to equipt its cinematograph with sound
reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then president and acting
manager, Gil Puyat, and an employee named Santos. After some negotiations, it was agreed between
the parties, that is to say, Salmon and Coulette on one side, representing the plaintiff, and Gil Puyat on
the other, representing the defendant, that the latter would, on behalf of the plaintiff, order sound
reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant,
in addition to the price of the equipment, a 10 per cent commission, plus all expenses, such as, freight,
insurance, banking charges, cables, etc.
Three years later, Arco discovered that the prices quoted to them by GPS with regard to their first
2orders mentioned were not the net prices, but rather the list price, and that it had obtained a discount
from Starr Piano. Moreover, Arco alleged that the equipments were overpriced. Thus, being its agent,
GPS had to reimburse the excess amount it received from Arco.
26

ISSUE: Whether or not there was a contract of agency?

HELD: No. The contract is the law between the parties and should include all the things they are
supposed to have been agreed upon. What does not appear on the face of the contract should be
regarded merely as "dealer's" or "trader's talk", which can not bind either party. The letters, Exhibits 1
and 2, by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound
reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no
other interpretation that the respondent in question at the prices indicated which are fixed and
determinate. The respondent admitted in its complaint filed with the Court of First Instance of Manila
that the petitioner agreed to sell to it the first sound reproducing equipment and machinery.
This is incompatible with the pretended relation of agency between the petitioner and the respondent,
because in agency, the agent is exempted from all liability in the discharge of his commission provided
he acts in accordance with the instructions received from his principal (section 254, Code of
Commerce), and the principal must indemnify the agent for all damages which the latter may incur in
carrying out the agency without fault or imprudence on his part (article 1729, Civil Code).
In the second place, to hold the petitioner an agent of the respondent in the purchase of equipment and
machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact
that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the
ordinary for one to be the agent of both the vendor and the purchaser. The facts and circumstances
indicated do not point to anything but plain ordinary transaction where the respondent enters into a
contract of purchase and sale with the petitioner, the latter as exclusive agent of the Starr Piano
Company in the United States.
It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any
difference between the cost price and the sales price which represents the profit realized by the vendor
out of the transaction. This is the very essence of commerce without which merchants or middleman
would not exist.
Velasco

vs.

Universal

Trading

Co.

vs Teck

Suan

(97

Phil

171)

FACTS: Sometime in November, 1948, Ignacio Delizalde, an agent of the Far Eastern Export &
Import Company, went to the store of Lim Teck Suan situated at 267 San Vicente Street, Manila, and
offered to sell textile, showing samples thereof, and having arrived at an agreement with Bernardo Lim,
the General Manager of Lim Teck Suan, Delizalde returned on November 17 with the buyer's order
Plaintiff established a letter of credit No. 6390 (Exhibit B) in favor of Frenkel International Corporation
through the Hongkong and Shanghai Banking Corporation, attached to the agreed statement of facts.
On February 11, 1949, the textile arrived at Manila on board the vessel M.S. Arnold Maersk, covered
by bill of lading No. 125 (Exhibit C), Invoice No. 1684-M (Exhibit D) issued by Frenkel International
Corporation direct to the plaintiff. The plaintiff complained to the defendant of the inferior quality of
the textile received by him and had them examined by Marine Surveyor Del Pan & Company. Said
surveyor took swatches of the textile and had the same analyzed by the Institute of Science (Exhibit E
1) and submitted a report of survey under date of April 9, 1949 (Exhibit E). Upon instructions of the
defendants plaintiff deposited the goods with the United Warehouse Corporation (Exhibits H, H-1 to H6. As per suggestion of the Far Eastern Export and Import Company contained in its letter dated June
16, 1949, plaintiff withdrew from the United Bonded Warehouse, Port Area, Manila, the fifteen cases of
Ashtone Acetate and Rayon Suiting for the purpose of offering them for sale which netted P11,907.30.
27

Deducting this amount from the sum of P23,686.96 which included the amount paid by plaintiff for
said textile and the warehouse expenses, a difference of P11,476.66 is left, representing the net direct
loss.
The defense set up is that the Far Eastern Export and Import Company only acted as a broker in this
transaction; that after placing the order the defendants took no further action and the cargo was taken
directly by the buyer Lim Teck Suan, the shipment having been made to him and all the documents
were also handled by him directly without any intervention on the part of the defendants; that upon
receipt of Lim Teck Suan's complaint the defendants passed it to its principal, Frenkel International
Corporation, for comment, and the latter maintained that the merchandise was up to standard called for.
"The lower court acquitted the defendants from the complaint asking for damages in the sum of
P19,500.00 representing the difference in price between the textile ordered and those received, plus
profits unrealized and the cost of this suit, and dismissed the counterclaim filed by the defendants
without pronouncement as to costs."
ISSUE: Whether where the transaction therein involved was found to be one of purchase and sale and
not of brokerage or agency?
HELD: In the present case, the export company acted as agent for Frenkel International Corporation,
presumably the supplier of the textile sold. Suan according to the first part of the agreement is said
merely to be commissioning the Export Company to procure for him the merchandise, the price of the
merchandise bought was paid for by Suan by means of an irrevocable letter of credit opened in favor of
the supplier, Frenkel International Corporation. Although Suan received the merchandise he
immediately protested its poor quality and it was deposited in the warehouse and later withdrawn and
sold for the best price possible, all at the suggestion of the Export company. The present case is in our
opinion a stronger one than that of Velasco for holding the transaction as one of purchase and sale
because as may be noticed from the agreement (Exhibit "A"), the same speaks of the items
(merchandise) therein involved as sold, and the sale was even confirmed by the Export company. No
commission or monetary consideration was paid or agreed to be paid by the buyers to the Export
company, proof that there was no agency or brokerage, and that the profit of the latter was undoutedly
the difference between the price listed to the buyers and the net or special price quoted to the sellers, by
the suppliers. We agree with the Court of Appeals that the transaction entered into here is one of
purchase and sale. Where a foreign company has an agent here selling its goods and merchandise, that
same agent could not very well act as agent for local buyers, because the interests of his foreign
principal and those of the buyer would be in direct conflict. He could not serve two masters at the same
time. The Export company being an agent of Frenkel International Corporation could Premiere
Productions, Inc. vs. Phil. Movie Pictures Worker's Assn. not, as it claims, have acted as an agent or
broker for Suan. Finding no reversible error in the decision appealed from, the same is hereby affirmed,
with costs. Decision affirmed.
1.PURCHASE AND SALE; WHEN TRANSACTION NOT AN AGENCY OR BROKERAGE.
Where the agreement speaks of the items (merchandise) therein involved as sold and the sale was even
confirmed by the export company, the agents U. T. Co. and the export company dealt directly with local
merchants V. and S. without expressly indicating or revealing their principals, there was no privity of
contract between the buyers S. and V. and the suppliers F. I. C. and A. J. W. C., respectively, no
commission or monetary consideration was paid or agreed to be paid by the buyers to the export
company and the U. T. Co., proof that there was no agency or brokerage and that the profit of the latter
28

undoubtedly the difference between the price listed to the buyers and the net special price quoted to the
sellers, by the suppliers. Held; that the transaction entered into is one of purchase and sale.
2.PRINCIPAL AND AGENT; AGENT OF FOREIGN COMPANY MAY NOT ACT AS AGENT OF
LOCAL BUYERS.Where a foreign company has an agent here selling its goods and merchandise,
that same agent could not very well act as agent for local buyers, because the interests of his foreign
principal and those of the buyers would be in direct conflict. He could not serve two masters at the
same time.
G.R. No. L-10517 (June 28, 1957)
PEARL ISLAND COMMERCIAL CORPORATION, plaintiff-appellee,
vs.
LIM TAN TONG and MANILA SURETY & FIDELITY CO., INC., defendants-appellants
FACTS: Plaintiff Pearl Island Commercial Corporation entered in a contract with defendant Lim Tan
Tong to be the sole distributor of floor wax in different provinces of Visayas and all provinces in
Mindanao. On the day that the contract was finalized, defendant Manila Safety & Fidelity Co. with
Tong as principal filed the surety bond binding itself unto the plaintiff in the sum of P 5, 000, by reason
of the appointment of Tong as exclusive agent for plaintiff for the Visayas-Mindanao provinces. The
surety company had Ko Su Kuan and Marciano Du execute in its favor and indemnity agreement that
they would indemnify the surety company in whatever amount it may pay to the plaintiff by reason of
the bond filed by it.
When the plaintiff was able to ship the wax cases, Lim Tan Tong only paid P 770 leaving behind P 6,
337 unpaid. Tong refuses to remit the unpaid because of he claims that the plaintiff owes him a bigger
amount. To recover the amount, plaintiff files an action to recover the amount.
ISSUE: WON the trial court erred in holding that the contract between the Pearl Island Commercial
Corporation and Lim Tan Tong was one of agency so that breach thereof would come within the terms
of the surety bond posted by appellant therein. NO
HELD:NO.It is appellant's contention that it cannot be held liable on its bond for the reason
that the latter was filed on the theory that the contract between the plaintiff and Tong was one of
agency as a result of which, said surety Company guaranteed the faithful performance of tong as agent,
but that it turned out that said contract was one of purchase and sale, shown by the very title of said
contract, namely, "Contract of Purchase and Sale", and appellant never undertook to guaranty the
faithful performance of Tong as a purchaser. However, a careful examination of the said contract
shows that appellant is only partly right, for the reason that the terms of the said contract,
while providing for sale of Bee Wax from the plaintiff to Tong and purchase of the same by Tong from
the plaintiff, also designates Tong as the sole distributor of the article within a certain territory. Besides,
paragraph 4 of the contract entitled "Security", provides that Tong was to furnish surety bond to cover
all shipments made by the plaintiff to him. Furthermore, appellant must have understood the contract to
one, at least partly, of agency because the bond itself says the following:
WHEREAS, the above bounden principal has been appointed as exclusive agent for Pearl
Islands Commercial Corporation of Manila, Philippines, for the VisayasMindanao Provinces.

29

Lim vs People
FACTS:The appellant is a businesswoman. On January 10, 1966, the appellant went to the house of
Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of the appellant
to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overprice for
which she could sell the tobacco.
This agreement was made in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew
the document. This was signed by the appellant and witnessed by the complainant's sister, Salud
Bantug, and the latter's maid. The appellant at that time was bringing a jeep, and the tobacco was
loaded in the jeep and brought by the appellant.
The appellant failed to pay the whole amount agreed upon by her and Ayroso despite the latter several
demands for payment. Appelant denied that demands for payment were made upon her. She also denied
that there is no contract of agency between her and Ayroso.
ISSUE:Whether or not a contract of agency exist between appellant Lim and Ayroso.
HELD:Yes, Ayroso is an agent of appellant Lim.
The agreement embodied in their contract is one of agency manifested by the act that Ayroso has the
obligation to return the tobacco if the same was not sold. The fact that appellant received the tobacco to
be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was sold, strongly
negates transfer of ownership of the goods to the petitioner.
Green Valley Poultry and Alllied Products vs IAC
FACTS:
In an agency to sell, the agent is liable to pay the principal for goods sold by the agent without the
principals consent. The commission agent cannot without the express or implied consent of the
principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the
commission agent shall be entitled to any interest or benefit, which may result from such sale.
In 1969, GREEN VALEY POULTRY AND ALLIED PRODUCTS entered into a letter agreement with
SQUIBB & SONS PHILIPPINE CORPORATION. The details of the agreement state that Green Valley
will be the nonexclusive distributor of the products of Squibb Veterinary Products. As its distributor
Green Valley is entitled to 10% discount on Squibbs whole sale price and catalogue price. Green
Valley is also limited to selling Squibbs products to central and northern Luzon. Payment for purchases
from Squibb will be due 60 days from date of invoice, etc. For goods delivered to Green Valley but
unpaid, Squibb filed a suit to collect. Squibb argues that their relationship with Green Valley is a mere
contract of sale as evidenced by the stipulation that Green Valley was obligated to pay for the goods
received upon the expiration of the 60-day credit period. Green Valley counters that the relationship
between itself and Squibb is that of an agency to sell.
ISSUE:
W/N Green Valley is an agent of Squibb.

30

RULING:
Whether viewed as an agency to sell or as a contract of sale GREEN VALLEY is liable to Squibb for
the unpaid products. If it is a contract of sale then the Green Valley is liable by just merely enforcing
the clear words of the contract. If it is an agency then Green Valley is liable because it sold on credit
without authority from its principal.
The Civil Code says:
Art. 1905 The commission agent cannot without the express or implied consent of the principal, sell
on credit. Should he do so, the principal may demand from him payment in cash, but the commission
agent shall be entitled to any interest or benefit, which may result from such sale.
BERT OSMENA & ASSOCIATES VS. CA.
FACTS:
Petitioner Company, developer of the subdivision, and Carmen and Helena Siguenza, owners of the
property, represented by petitioner. Antonio V. Osmea signed the contract on behalf of the company as
seller of lot 1 & 2 in cebu city for P15,200.00 and executed a contract of sale to Quimbo spouses.
spouses had intended to construct a house thereon inasmuch as their rented abode, for which they were
paying P170.00 monthly, had become inconvenient for their family. Plans for the house were drawn. It
turned out that on December 15, 1969, or approximately a year and a half prior to the sale in the
spouses' favor, Lots Nos. 1 and 2 had already been sold to Dr. Francisco Maningo and that TCTs were
already issued in favor of Irenea Maningo. Discovering this fact espondent spouses instituted this suit
for Damages against petitioner company and the Siguenzas.
Issue:
whether the contract between Osmena and the owner of the property is one of agency or there was a
contract of sale that took effect?
Held:
The contract is clear that appellant is one of the Seller-of the lots in question. the terms of the written
contract by parole evidence, for there is never an allegation in the appellant's answer that Osmea does
not express the true intent of the parties or that it is suffering from a vice or mistake or imperfection.
Further, appellant never asserted in its answer that it is a mere agent of its co-defendant Helena. Indeed,
the tenor of its Answer is one which shows its admission that it is a co-seller of all lots in subdivision
which it is developing. Petitioner's contention that in as much as respondent spouses had agreed to
exchange Lot 409 for Lots 1 and 2, the contract of sale had been novated and its liability extinguished,
is untenable. No new contract was ever executed between. Petitioner and respondent spouses,
notwithstanding Helena Siguenza's assurances to that effect. Novation is a contract containing two
stipulations: one to extinguish an existing obligation, the other to substitute a new one in its place. It
requires the creation of a new contractual relation as well as the extinguishment of the old. There must
be consent of all the parties to the substitution, resulting in the extinction of the old obligation and the
creation of a new valid one

31

h) Broker
I.

PACIFIC COMMERCIAL COMPANY V. ALFRED YATCO Week 8

Facts:
Pacific sold for the account of Victoria Milling Co. refined sugar up to the total amount of 1M. Pacific
received by way of commission 29K. Victoria Milling paid merchant sales tax in its capacity as
manufacturer and owner of the sugar sold. Likewise, Pacific paid tax also. There were two ways in
which Pacific made the sales of sugar after looking for purchasers and sending the purchase order to
Victoria Milling:
1) the purchase is made for the delivery of the sugar EX-WAREHOUSE sugar is first deposited in the
warehouse of Pacific before delivery to the purchaser.
2) the purchase is made for the delivery EX-SHIP Pacific would simply hand over the bill of lading to
the purchaser and collect the price
CFI of Manila: in the first case, Pacific acted as a commission merchant; in the second case as a broker
ordered Yatco to return to Pacific the amount collected from it by way of tax on the sale of sugar to
be delivered EX-SHIP and denied prayer for return of amount paid for the sales of sugar to be delivered
EX-WAREHOUSE.
Issue:
WON Pacific acted as a mere commercial broker as to the sugar delivered ex-ship.
Held:
The broker has no relation with the thing he sells or buys. He is merely an intermediary between the
purchaser and the vendor. He acquired neither the possession nor the custody of the things sold. His
only office is to bring together the parties to the transaction. The sugar was shipped by Pacific at its
expense and risk until it reached its destination, where it was later taken ex-ship by the purchaser.
Pacific never had possession of the sugar at any time. The bill of lading sent to the broker was sent only
for the purpose of turning it over to the purchaser for the collection of the price. The sugar did not
come to its possession in any sense.
i) Guardianship
B. F. FESSENDEN V. E. W. JONES, GUARDIAN, 52 N.C. 15 (N.C. 1859)
FACTS:
The action was commenced by a warrant, returnable before a justice of the peace,
and brought to the Superior Court by appeal. The plaintiff, who was a physician,
declared for medicines and medical services rendered to a slave, the property of a
ward of the defendant. The proof was that the plaintiff was called to attend the
slave in question by persons having authority from the defendant, and that the
plaintiff looked to the defendant for payment when the medicines were furnished
32

and the services rendered. The defendant contended that, as it was known to the
plaintiff to whom the slave belonged, the charge should have been made against
the ward, and the action brought against him. But the court thought otherwise,
and charged the jury upon the facts proved that the plaintiff was entitled to
recover. Defendant's counsel excepted. Verdict and judgment for plaintiff. Appeal
by the defendant.
ISSUE:
Whether the guardian can be made to answer for services rendered to a ward.
HELD: Yes
The guardian is charged with the duty of controlling and managing the person and
property of the ward, and judging of (15) the expenditures which may be needful
for either, and he alone is informed of the condition of the ward's resources.
Hence, the contract should be made with the guardian, and hence the guardian
ought to be looked to for payment. To allow a departure from the above rule
would, in the first place, have the effect to encourage in the youth of the country
appeals from the judgments of their guardians, and, in the next, make the right to
compensation on the part of the creditor depend upon a condition of things of
which he had no means to judge, and, therefore, uncertain and precarious.
Where there is a parent or guardian, the infant cannot contract, even for
necessaries. Persons must take care (save in certain excepted cases) to contract
with the guardian, and, contracting with him, it seems to be a principle of
common justice they should be permitted to resort to him, primarily, for the
fulfillment of the contract. To turn persons dealing with the guardian in relation to
the ward's estate over to the ward would render it necessary in every case for
such persons, in order to guard themselves against loss, to enter into an account
with the guardian as to the amount of the ward's estate the income and
expenditures, and the necessity for the expenditure then contemplated. Such
requirements, applied to the ordinary transactions of life, and especially to such a
one as is the subject of this suit, are manifestly absurd.
It will be seen from the foregoing considerations a guardian (16) is not in the
condition of an ordinary agent or factor, and therefore the same legal relations, in
all respects, do not subsist between them and those whom they respectively
represent. The former represents one who has no legal capacity to contract for
himself; the latter, one fully able to contract and bind were he present. The former
is substituted by the law, and stands in loco parentis. The latter is the appointee
of his principal, and that principal can, at any moment, abrogate or modify his
powers.
MARGARET McDONALD, Appellant,vs. THE CITY OF SPRING VALLEY, Appellee.
No. 12174. Supreme Court of Illinois. October 21, 1918.
FACTS: The seven-year-old minor Margaret McDonald was injured in June of 1916 in a building
constructed by the city as a place of amusement. The minor lost her third finger in her left hand. In
33

March 1917, with the assistance of her next friend Patrick McDonald , she filed a statement in the city
offices stating the time, place, and other details of her injury. The minor filed a suit in trespass alleging
that the city's negligence led to the loss of the third finger of her left hand.
The city demurred to the minor's suit on the grounds that the minor did not comply with required notice
of her injury within six months.
The jury in the trial court entered judgment for the minor, but the appellate court reversed.
ISSUE:Whether or not appellant, a minor by her next friend, may sought review of the order of the
Appellate Court for the Second District (Illinois), which entered judgment in favor of appellee city.
HELD: YES. On review, the court reversed the appellate court's judgment and affirmed the judgment
of the trial court. The court held that the statute in question was a general statute, which was to be read
in conjunction with rules of law that had become well established. One such rule of law was the rule
that the status of a minor was recognized at law as being different than that of an adult. Extrapolating
from that reasoning, the court ruled that the notice statute was intended to apply only to those who were
mentally and physically able to comprehend and comply with its terms.
It cannot be controverted that a minor is incapable of appointing an agent or an attorney, and it cannot
be successfully contended that the statute can be complied with by the filing of the required notice by
the father, mother or some friend of the child as next friend. While the parent of a minor is its natural
guardian he cannot be said to be the agent or attorney for the child. A child with a meritorious cause of
action but incapable of initiating any proceeding for its enforcement will not be left to the whim or
mercy of some self-constituted next friend to enforce its rights.
The declaration disclosed that appellant was mentally and physically incapable of giving the notice
required by the statute, and she therefore did not come within the provisions of this statute as properly
construed.
The judgment of the Appellate Court is reversed and the judgment of the circuit court affirmed.
k) Ship Agent
(G.R. No. L-48264 February 21, 1980)
SWITZERLAND GENERAL INSURANCE COMPANY, LTD., petitioner,
vs.
HON. PEDRO A. RAMIREZ, Presiding Judge of the Court of First Instance of Manila, Branch
XXX, OYAMA LINES, CITADEL LINES and MABUHAY BROKERAGE CO., INC.,
respondents.
FACTS:On December 24, 1975, petitioner, a foreign insurance company authorized to do business in
the Philippines thru its agent, F. E. Zuellig Inc., filed an admiralty case (Civil Case No. 100704) against
private respondents Oyama Shipping Co., Ltd. (referred to as Oyama Lines), a foreign firm doing
business in the Philippines, and Citadel Lines, Inc. which is the local agent of private, respondent
Oyama Shipping Co., Inc. and/or Mabuhay Brokerage Co., Inc.s
The complaint alleged that on December 21, 1974, 60,000 bags of Urea Nitrogen were shipped from
Niihama Japan, on board the S/S St. Lourdes", claimed to be owned and operated by defendant Citadel
34

Lines, Inc. The goods were consigned to Borden International Phils., Inc., and insured by petitioner for
the sum of P9,319,105.00 against all risks.
The shipment was discharged from the vessel S/S "St. Lourdes" shipside into lighters owned by
Mabuhay Brokerage Company, Inc., but when the same was subsequently delivered to and received by
the consignee, it was found to have sustained losses and/or damage amounting to P38.698.94. This
amount was paid by petitioner insurance company to the consignee/assured, by virtue of which
payment it became subrogated to the rights of the latter.
Petitioner made repeated demands against herein private respondents for payment of the aforesaid
losses or damaged but no payment was made and, uncertain in whose custody the goods were damaged,
impleaded the private respondents as alternative defendants to determine their respective liability.
Defendant Citadel Lines, Inc. filed an Answer with Compulsory Counterclaim and Cross-claim,
interposing special and affirmative defenses and alleging that defendant Citadel Lines was merely the
civil agent in the Philippines for the Japanese firm Oyama Shipping Co., Ltd. It was further alleged that
the principal agency relationship between the said Oyama Shipping Co., Ltd. and defendant Citadel
Lines, Inc. was terminated on August 21, 1975 when the Tokyo District Court declared and decreed the
insolvency of the said Oyama Shipping Co., Ltd.
Defendant Oyama Shipping Co. Ltd. likewise filed its Answer, denying the material averments of the
complaint, alleging that it ceased to be represented in the Philippines upon the declaration of its
insolvency by the Tokyo Court likewise, that due to the insolvency of Oyama Shipping Co. Ltd., the
case as against it should be dismissed, the remedy for the plaintiff being to file its claim before the
insolvency court in Tokyo, Japan.
After trial on the merits, respondent court rendered a decision, dated February 23, 1978, in favor of
petitioner as against therein defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines, Inc. and
Mabuhay Brokerage Co., Inc. from liability. Such that as a mere agent in the Philippines of the
defendant Oyama Line, the defendant Citadel Line cannot be held liable for the damages recoverable
from its principal.
Petitioner filed a Motion for Reconsideration of the aforesaid decision insofar as it absolves
respondents Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability, but said Motion for
Reconsideration was denied on April 21, 1979; hence, the instant petition for review.
ISSUE:Whether or not Citadel Lines, Inc. is mere agent or a ship agent
HELD: Ship Agent.
A ship agent, according to Article 586 of the Code of Commerce, is the person entrusted with the
provisioning of a vessel or who represents her in the port in which she happens to be.
It is not disputed by the Citadel lines that it is the local representative in the Philippines of the Oyama
Shipping Co., Ltd. and, as alleged by petitioner, upon arrival of the vessel S/S "St. Lourdes" in Manila,
it took charge of the unloading of the cargo and issued cargo receipts (or tally sheets) in its own name,
for the purpose of evidencing discharge of cargoes and the conditions thereof from the vessel to the
arrastre operators and/or unto barges/lighters, and that claims against the vessel S/S "St. Lourdes" for
losses/damages sustained by shipments were in fact filed and processed by respondent Citadel Lines,
35

Inc. These facts point to the inevitable conclusion that private respondent is the entity that represents
the vessel in the port of Manila and hence is a ship agent within the meaning and context of Article 586
of the Code of Commerce.
Considering the relationship of the parties, respondent Citadel Lines, Inc. cannot be considered as a
"mere agent" under the civil law on agency as distinguished from a ship agent, within the context of the
Code of Commerce.
The Code of Commerce provides, among others, that the ship agent shall also be liable for the
indemnities in favor of third persons which arise from the conduct of the captain in the care of the
goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all
her equipments and the freightage he may have earned during the voyage. (Article 587).
It appearing that the Citadel Lines is the ship agent for the vessel S/S "St. Lourdes" at the port of
Manila, it is, therefore, liable to the petitioner, solidarily with its principal, Oyama Shipping Co., Ltd.,
in an amount representing the value of the goods lost and or damaged, amounting to P38,698.94.

WEEK 9
C. Kinds, Creation and Existence
1. General Classification
b) Apparent or Ostensible Agency (Art. 1873)
Rallos vs. Yangco
FACTS:A Letter was sent to Florentino Rallos, et al., signed by Teodor Yangco and Florentino
Collantes, the contents of the letter were to give information to the public about Yangcos opening of a
shipping and commission department for buying ang selling tobacco and other native products and
introducing Florentino Collantes, whom he has conferred public power of attorney to perform all acts
necessary for carrying out the business.
Rallos accepted the invitation and proceeded to do a considerable business with Yangco through
Collantes.
On February 1909, Rallos sent Collantes 218 bundles of tobacco to which Collantes received the said
products and sold it for a sum amount of Php 1,744.00. The amount of Php 1,537.08 belongs to Rallos
as proceeds from the tobacco which he had sent to Collantes, however the said amount was used by
Collantes.
It appears, however, that prior to sending of said tobacco Yangco has already severed ties with
Collantes and that Collantes is no longer the factor of Yangco.
ISSUE:Whether or not Rallos can recover from Yangco, even if Collantes was no longer Yangcos
agent prior to the transaction?
HELD:Yes.Having advertised the fact that Collantes was his agent and having given special notice to
the plaintiffs of that fact, and having given them a special invitation to deal with such agent. It was the
duty of Yangco on the termination of the relationship of principal and agent to give due and timely
notice thereof to Rallos.
36

Failing 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 knowledge, actual or constructive, of the termination of such
relationship.
G.R. No. L-6530
October 6, 1911
LA COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellant,
vs.
DIABA, defendant-appellee.
FACTS:On the 19th of July, 1909, the plaintiff commenced an action against the defendant in the
Court of First Instance of the Province of Leyte, for the purpose of recovering the sum of P442, for
goods sold and delivered by the plaintiff, through its agent (Gutierrez) to the defendant, between the
11th of January, 1909, and the 1st of April, 1909.
Defendant admitted that he had purchased from the agent of the plaintiff (Gutierrez) goods, wares, and
merchandise, between the 12th of January, 1909, and the 15th of March, 1909, amounting to the sum of
P692, and that he had sold to the agent of the plaintiff (Gutierrez) abaca and other effects, between the
25th of January, 1909, and the 6th of February, 1909, amounting to P1,308.80, leaving a balance due
him (the defendant) of P616.80.
Hon. Charles A. Low found that the plaintiff was indebted to the defendant in the sum of P616.80, and
rendered a judgment against the plaintiff for said sum. From that judgment the plaintiff appealed for
said sum. From that judgment the plaintiff appealed and made several assignments of error in this
court.
The plaintiff attempted to show that it had suspended its agent (Gutierrez), as its agent, and that he
(Gutierrez) had no further authority to represent it (the plaintiff).
ISSUE: Whether the plaintiff correctly terminated the agency.
HELD: There is no convincing proof in the record that the orders given by the plaintiff to its agent
(Gutierrez) had ever been communicated to the defendant. The 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.
c) Agency by Estoppel
G.R. No. 2962, Macket et al. v. Camps, 7 Phil. 553
FACTS: The plaintiffs in this action are partners doing business under the firm name of Macke,
Chandler & Company. Plaintiff sold to the defendant and delivered at his place of business, known as
the "Washington Cafe," various bills of goods amounting to P351.50; that the defendant has only paid
on account of said accounts the sum of P174; that there is still due them on account of said goods the
sum of P177.50;
B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented
himself to be agent of the defendant, he shipped the said goods to the defendants at the Washington
Cafe; that Flores later acknowledged the receipt of said goods and made various payments thereon
amounting in all to P174; that on demand for payment of balance of the account Flores informed him
37

that he did not have the necessary funds on hand, and that he would have to wait the return of his
principal, the defendant, who was at that time visiting in the provinces;
A written contract was introduced in evidence from which it appears that one Galmes, the former
owner of the business now known as the "Washington Cafe," subrented the building wherein the
business was conducted, to the defendant for a period of one year, the defendant obligating himself not
to sublet or subrent the building or the business without the consent of the said Galmes. This contract
was signed by the defendant and the name of Ricardo Flores appears thereon as a witness, and attached
thereto is an inventory of the furniture and fittings which also is signed by the defendant with the word
"sublessee" below the name, and at the foot of this inventory the word "received" followed by the name
"Ricardo Flores," with the words "managing agent" immediately following his name.
ISSUE:Whether or not, Flores is an agent of the defendant.
HELD:Yes. One 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 prejudice of
innocent third parties dealing with such person in good faith and in the following preassumptions or
deductions, which the law expressly directs to be made from particular facts, are deemed conclusive.
"Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such belief, he can not, in any litigation
arising out such declaration, act, or omission, be permitted to falsify it"; and unless the contrary
appears, the authority of an agent must be presumed to include all the necessary and usual means of
carrying his agency into effect.
3. Creation and Elements of Actual Agency
a) Consent/Mandate
i. Manifestation of Mandate
- Express (Art. 1869, 1874)
- Implied (Art. 1870-1872)
G.R. No. L-40242 December 15, 1982
DOMINGA CONDE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with
his wife, NICETAS ALTERA, RAMON CONDE, together with his wife, CATALINA T.
CONDE, respondents.
FACTS:On 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner DomingaConde, as
heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of
agricultural land located in MaghubasBurauen Leyte, to CasimiraPasagui, married to Pio Altera
(hereinafter referred to as the Alteras), for P165.00.
On 17 April 1941, the Cadastral Court of Leyte adjudicated the Lot to the Alteras "subject to the right
of redemption by DomingaConde, within ten (10) years counting from April 7, 1983, after returning the
amount of P165.00 and the amounts paid by the spouses in concept of land tax ... "

38

On 14 November 1956,Original Certificate of Title No. N-534 in the name of the spouses Pio Altera
and CasimiraPasagui, subject to said right of repurchase, was transcribed in the "Registration Book" of
the Registry of Deeds of Leyte.
On 28 November 1945, private respondent Paciente Cordero, son-in-law of the Alteras, signed a
Memorandum of Repurchase. Neither of the vendees-a-retro, Pio Altera nor CasimiraPasagui, was a
signatory to the deed.
Petitioner maintains that because Pio Altera was very ill at the time, Paciente Cordero executed the
deed of resale for and on behalf of his father-in-law. Petitioner further states that she redeemed the
property with her own money as her co-heirs were bereft of funds for the purpose.
On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde,
who are also private respondents herein. Their relationship to petitioner does not appear from the
records. Nor has the document of sale been exhibited.
Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January
1969, in the Court of First Instance of Leyte, Branch IX, Tacloban City, a Complaint, against Paciente
Cordero and his wife Nicetas Altera, Ramon Conde and his wife Catalina T. Conde, and
CasimiraPasaguiPio Altera having died in 1966, for quieting of title to real property and declaration of
ownership.
Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation
of his father-in-law Pio Altera, who was seriously sick on that occasion, and of his mother-in-law who
was in Manila at the time, and that Cordero received the repurchase price of P65.00.
Private respondents, for their part, adduced evidence that Paciente Cordero signed the document of
repurchase merely to show that he had no objection to the repurchase; and that he did not receive the
amount of P165.00 from petitioner inasmuch as he had no authority from his parents-in-law who were
the vendees-a-retro.
RTC rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to
vacate the property in dispute and deliver its peaceful possession to the defendants Ramon Conde and
Catalina T. Conde".
CA upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of
repurchase in view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero
and not by Pio Altera, the vendee-a-retro, and that there is nothing in said document to show that
Cordero was specifically authorized to act for and on behalf of the vendee a retro, Pio Altera.
ISSUE: Whether the Memorandum of Repurchase is valid on the ground that neither of the vendeesa-retro signed it
HELD: Yes. Of significance, however, is the fact that from the execution of the repurchase document
in 1945, possession, which heretofore had been with the Alteras, has been in the hands of petitioner as
stipulated therein. Land taxes have also been paid for by petitioner yearly from 1947 to 1969 inclusive.
If, as opined by both the Court a quo and the Appellate Court, petitioner had done nothing to formalize
her repurchase, by the same token, neither have the vendees-a-retro done anything to clear their title of
the encumbrance therein regarding petitioner's right to repurchase. No new agreement was entered into
by the parties as stipulated in the deed of pacto de retro, if the vendors a retro failed to exercise their
39

right of redemption after ten years. If, as alleged, petitioner exerted no effort to procure the signature of
Pio Altera after he had recovered from his illness, neither did the Alteras repudiate the deed that their
son-in-law had signed. Thus, an implied agency must be held to have been created from their
silence or lack of action, or their failure to repudiate the agency.
Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he
had signed wherein he acknowledged the receipt of P165.00 and assumed the obligation to maintain the
repurchasers in peaceful possession should they be "disturbed by other persons". If the contract is plain
and unequivocal in its terms he is ordinarily bound thereby. It is the duty of every contracting party to
learn and know its contents before he signs and delivers it."
In sum, although the contending parties were legally wanting in their respective actuations, the
repurchase by petitioner is supported by the admissions at the pre-trial that petitioner has been in
possession since the year 1945, the date of the deed of repurchase, and has been paying land taxes
thereon since then. The imperatives of substantial justice, and the equitable principle of laches brought
about by private respondents' inaction and neglect for 24 years, loom in petitioner's favor.
WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE,
and petitioner is hereby declared the owner of the disputed property.
ii. Manifestation of Acceptance
- Express (Art. 1869, 1870)
- Implied (Art. 1870-1872)
G.R. No. L-12579 July 27, 1918
GREGORIO JIMENEZ vs. PEDRO RABOT, NICOLASA JIMENEZ and her husband EMILIO
RODRIGUEZ, defendants. PEDRO RABOT, appellant.
FACTS:This action was instituted by the plaintiff, Gregorio Jimenez, to recover from the defendant,
Pedro Rabot, a parcel of land situated in the municipality of Alaminos, in the Province of Pangasinan.
The parcel of land in question, together with two other parcels in the same locality originally belonged
of the heirs in the division of the estate of his father. While Gregorio was staying at Vigan his property
in Alaminos was confided by him to the care of his elder sister Nicolasa Jimenez.
Gregorio Jimenez wrote this sister a letter from Vigan in which he informed her that he was pressed for
money and requested her to sell one of his parcels of land and send him the money in order that he
might pay his debts. This letter contains no description of the land to be sold other than is indicated in
the words one of my parcels of land (uno de mis terrenos).
Acting upon this letter Nicolasa approached the defendant Pedro Rabot, and the latter agreed to buy the
parcel in question for the sum of P500. P250 were paid at once, with the understanding that a deed of
conveyance would be executed when the balance should be paid. Nicolasa admits having received this
payment of P250 at the time stated; but there is no evidence that she sent any of it to her brother.
About one year later Gregorio came down to Alaminos and demanded that his sister should surrender
this piece of land to him, it being then in her possession. She refused upon some pretext or other to do
so. Gregorio instituted an action in the Court of First Instance for the purpose of recovering their land
from her control.
40

CFI: decided favorably to the plaintiffs.

Upon May 31, 1912, Nicolasa Jimenez executed and delivered to Pedro Rabot a deed purporting to
convey to him the parcel of land which is the subject of this controversy. The deed recites that the sale
was made in consideration of the sum of P500, the payment of which is acknowledged. Pedro Rabot
went into possession, and the property was found in his hands at the time when final
judgment was entered in favor of the plaintiffs in the action above mentioned.
ISSUE: WON the authority conferred on Nicolasa by the letter was sufficient to enable her to bind her
brother Gregorio?
HELD:Yes. The letter conferred is sufficient to enable her to bind her brother. As a matter of formality,
a power of attorney to convey real property ought to appear in a public document, just as any other
instrument intended to transmit or convey an interest in such property ought to appear in a public
document. (Art. 1280, Civil Code.) But inasmuch as it is an established doctrine that a private
document is competent to create, transmit, modify, or extinguish a right in real property, it follows that
a power of attorney to convey such property, even though in the form of a private document, will
operate with effect.
The only provisions of law bearing on this point are contained in article 1713 of the Civil Code and in
section 335 of the Code of Civil Procedure.
Article 1713 of the Civil Code requires that the authority to alienate land shall be contained in an
express mandate; while
Subsection 5 of section 335 of the Code of Civil Procedure says that the authority of the agent must be
in writing and subscribed by the party to be charged.
The Court is of the opinion that the authority expressed in the letter is a sufficient compliance with both
requirements The purpose in giving a power of attorney is to substitute the mind and hand of the agent
for the mind and hand of the principal; and if the character and extent of the power is so far defined as
to leave no doubt as to the limits within which the agent is authorized to act, and he acts within those
limits, the principal cannot question the validity of his act. It is not necessary that the particular act to
be accomplished should be predestinated by the language of the power.
The general rule here applicable is that the description must be sufficiently definite to identify the land
either from the recitals of the contract or deed or from external facts referred to in the document,
thereby enabling one to determine the identity of the land and if the description is uncertain on its face
or is shown to be applicable with equal plausibility to more than one tract, it is insufficient.
In the present case the agent was given the power to sell either of the parcels of land belonging to the
plaintiff. We can see no reason why the performance of an act within the scope of this authority should
not bind the plaintiff to the same extent as if he had given the agent authority to sell "any or all" and
she had conveyed only one.

41

Linan vs. Puno c/o Mica

Facts: Diego Linan (Plaintiff) owned a parcel of land and executed a document which conferred upon
the defendant Marcos P. Puno the power, duties and obligations therein contained: "I, Diego Lian, of
age, married, a resident of Daet, Province of Ambos Camarines, Philippine Islands, and at the present
timetemporarily residinginthis city of Tarlac,capital of theProvince of Tarlac, P. I.,setforththat I hereby
confer sufficient power,suchas thelawrequires,uponMr Marcos P. Puno, likewise a resident of this city
of Tarlac, capital of the Province of Tarlac, in order that in my name and representation he may
administer the interest I possess within this municipality of Tarlac, purchase, sell, collect and pay, as
well as sue and be sued before any authority, appear before the courts of justice and administrative
officers in any proceeding or business concerning the good administration and advancement of my said
interests, and may, in necessary cases, appoint attorneys at law or attorneys in fact to represent him."
That in June 1911, the defendant Puno, for the sum of P800, sold said parcel of land to the other
defendants. The plaintiff alleges that thesaiddocument didnot confer uponthedefendant Puno the power
to sell the land and prayed that the sale be set aside; that thelandbereturned
to him, together with damages. RTC ruled That the document did not give Puno authority to sell the
land;That the sale wa illegal and void; That defendants should return the land to the plaintiff; and That
the defendants should pay to the plaintiff the sum of P1,000 as damages, P400 of which the defendant
Puno should alone be responsible for, and to pay the costs. From that decision the defendants
appealed.
Issue: WON that the sale of Puno acting as an agent of Linan is valid
Ruling: Yes. According to SC, the power conferred upon the defendant Puno and as certain, if
possible, what was the real intent of the plaintiff. The lower court held that the "only power conferred
was the power to administer." Reading the contract we find it says that the plaintiff "I confer . . .
power . that . . . he may administer . . . purchase, sell, collect and pay . . . in any proceeding or business
concerning the good administration and advancement of my said interests." The words "administer,
purchase, sell," etc., seem to be used coordinately. Each has equal force with the other. There seems to
be no good reason for saying that Puno had authority to administer and not to sell when "to sell" was as
advantageous to the plaintiff in the administration of his affairs as "to administer." To hold that the
power was "to administer" only when the power "to sell" was equally conferred would be to give effect
to a portion of the contract only. That would give to special words of the contract a special and limited
meaning to the exclusion of other general words of equal import.
The record contains no allegation or proof that Puno acted in bad faith or fraudulently in selling the
land. It will be presumed that he acted in good faith and in accordance with his power as he understood
it. That his interpretation of his power, as gathered from the contract is tenable cannot, we believe, be
successfully denied. In view of that fact and in view of the fact that, so far as the record shows, the
other defendants
acted in good faith, we are of the opinion that the
contract, liberally construed, as we think it should be, justifies the interpretation given it by Puno.
In
reaching this conclusion, we have taken into account the fact that the plaintiff delayed his action to
annul said sale from the month of June, 1911, until the15thof February,1913. Neither have we
overlooked the fact charged in the brief of the appellants that the plaintiff has not returned, nor offered
to return, nor indicated a willingness to return, the purchase price. (Art.
1308 of the Civil Code; Manikis vs. Blas, No. 7585. 1 )

42

GR No. 29917
December 29, 1928
JOSE M. KATIGBAK vs. TAI HING CO
APPEAL from a judgment of the Court of First Instance of Manila.
FACTS: Po Tecsi executed a general power of attorney in favor of his brother Gabino Barreto Po Ejap,
empowering and authorizing him to to sell any kind of realty "belonging" (pertenezcan) to the Po Tecsi.
Afterwards, Po Ejap sold his land to Po Tecsi which was subject to a mortgage lien in favor of the PNB
and another mortgage in favor of Antonio M. H. Limjenco. Then, Po Ejap, making use of the power
conferred on him by Po Tecsi, sold to Jose M. Katigbak, the aforesaid land, mentioning in the
instrument executed to that end only the mortgage lien in favor of the PNB, and without recording
either his power of attorney or the sale in the proper certificate of title. After said sale, Po Tecsi leased
the property sold, from Po Ejap, who administered it in the name of Katigbak. Po Tecsi leased a part of
said land to Uy Chia, the contract of which was recorded in the proper certificate of title. Po Tecsi had
rented it until his death leaving unpaid rents. Upon the death of Po Tecsi, his son Po Sun Suy succeeded
him in the possession of the land and was appointed administrator of his father's estate. He wrote to his
uncle Po Ejap promising to send the rents later on saying that the price of hemp had suddenly dropped,
his motor boat had been grounded, and his abaca plantations had suffered damages.
Thereafter, Katigbak sold the property in question to Po Sun Boo, son of Po Ejap, who notified Po Sun
Suy and Po Ching that he had purchased the land they occupied and that from that date they were to
deal with him concerning the payment of the rents thereof. As the accrued rent had not been paid, an
action was brought in the CFI of Manila for the recovery of said rent, first against the commercial firm
Tai Hing Co., and later against the members of said firm, Po Sun Suy and Po Ching, by an amendment
to the original complaint.Po Sun Suy filed an intervention praying that judgment be rendered against
Katigbak declaring him not to be the owner of the property and, therefore, not entitled to the rents of
the property in question. It is contended that Po Ejap was not authorized under the power executed by
Po Tecsi in his favor to sell said land, for the reason that said power had been executed before Po Ejap
sold said land to his brother Po Tecsi. The appellants also contended that said power of attorney not
having been registered in the registry of deeds, the authority granted therein to sell realty registered in
accordance with the Torrens system is ineffective, and the sale of the property in question made by Po
Ejap in favor of Katigbak by virtue of said power has no more effect than that of a contract to transfer
or sell.
The CFI rendered a decision in favor of the plaintiff.
ISSUE: WON a power of attorney not recorded in the Registry of Deeds is ineffective to compel Po
Tecsi to acknowledge the sale.
HELD: The power is general and authorizes Po Ejap to sell any kind of realty "belonging"
(pertenezcan) to the principal. The use of the subjunctive "pertenezcan" (might belong) and not the
indicative "pertenecen" (belong), means that Po Tecsi meant not only the property he had at the time of
the execution of the power, but also such as the might afterwards have during the time it was in force.
While it is true that a power of attorney not recorded in the registry of deeds is ineffective in order than
an agent or attorney-in-fact may validly perform acts in the name of his principal, and that any act
performed by the agent by virtue of said with respect to the land is ineffective against a third person
who, in good faith, may have acquired a right thereto, it does, however, bind the principal to
acknowledge the acts performed by his attorney-in-fact regarding said property (sec. 50, Act No. 496).
43

In the present case, while it is true that the non-registration of the power of attorney executed by Po
Tecsi in favor of his brother Po Ejap prevents the sale made by the latter of the litigated land in favor of
Katigbak from being recorded in the registry of deeds, it is not ineffective to compel Po Tecsi to
acknowledge said sale.
Judgment appealed from is affirmed.
Amigo vs. Teves (96 Phil 252)
FACTS:On August 11, 1937, Macario Amigo and Anacleto Cagalitan executed in favor of their son,
Marcelino Amigo, a power of attorney granting to the latter, among others, the power "to lease, let,
bargain, transfer, convey and sell, remise, release, mortgage and hypothecate, part or any of the
properties upon such terms and conditions, and under such covenants as he shall think fit."
On October 30, 1938, Marcelino Amigo, in his capacity as attorney-in-fact, executed a deed of sale of a
parcel of land for a price of P3,000 in favor of Serafin Teves stipulating therein that the vendors could
repurchase the land within a period of 18 months from the date of the sale. In the same document, it
was also stipulated that vendors would remain in possession of the land as lessees for a period of 18
months subject to the following terms and conditions: (a) the lessees shall pay P180 as rent every six
months from the date of the agreement; (b) the period of the lease shall terminate on April 30, 1940; (c)
in case of litigation, the lessees shall pay P100 as attorney's fees; and (d) in case of failure to pay any
rental as agreed upon, the lease shall automatically terminate and the right of ownership of vendee shall
become absolute.
On July 20, 1939, the spouses Macario Amigo and Anacleta Cagalitan donated to their sons Justino
Amigo and Pastor Amigo several parcels of land including their right to repurchase the land in
litigation. The deed of donation was made in a public instrument, was duly accepted by the donees, and
was registered in the Office of the Register of Deeds.
The vendors-lessees paid the rental corresponding to the first six months, but not the rental for the
subsequent semester, and so on January 8, 1940, Serafin Teves, the vendee-lessor, executed an
"Affidavit of Consolidation of Title" in view of the failure of the lessees to pay the rentals as agreed
upon, and registered said affidavit in the Office of the Register of Deeds of Negros Oriental, who, on
January 28, 1940, issued to Serafin Teves the corresponding transfer of title over the land in question.
On March 9, 1940, Justino Amigo and Pastor Amigo, as donees of the right to repurchase the land in
question, offered to repurchase the land from Serafin Teves by tendering to him the payment of the
redemption price but the latter refused on the ground that the ownership had already been consolidated
in him as purchaser a retro.
ISSUE:Whether or not the lease covenant contained in the deed of sale with pacto de retroexecuted by
Marcelino Amigo as attorney-in-fact in favor of Serafin Teves is not germane to, nor within the
purview of, the powers granted to said attorney-in-fact and, therefore, is ultra vires and null and void
HELD:No. The lease covenant contained in the deed of sale with pacto de retro executed by Marcelino
Amigo as attorney-in-fact in favor of Serafin Teves is not germane to, nor within the purview of, the
powers granted to said attorney-in-fact and,therefore,is not ultra vires and is valid.
44

The power granted to the agent is so broad that it practically covers the celebration of any contract and
the conclusion of any covenant or stipulation. Among the powers granted are: to bargain, contract
,agree for, purchase, receive, and keep lands, tenements, here ditaments, and accept the seizing and
possessing of all lands, "or" to lease, let, bargain, transfer, convey and sell, remise, release, mortgage
and hypothecate upon such terms and conditions, and under such covenants as he shall think fit."When
the power of attorney says that the agent can enter into any contract concerning the land, or can sell the
land under any term or condition and covenant he may think fit, means that he can act in the same
manner and with the same breath and latitude as the principal could concerning the property.
The fact that the agent has acted in accordance with the wish of his principals can be inferred from their
attitude in donating to the herein petitioners the right to redeem the land under the terms and conditions
appearing in the deed of sale executed by their agent. The lease covenant embodied in the deed of sale
is common in contracts involving sales of land with pact ode retro. The lease that a vendor executes on
the property may be considered as a means of delivery or tradition by constitutum possessorium. Where
the vendor a retro continues to occupy the land as lessee, by fiction of law, the possession is deemed to
be constituted in the vendee by virtue of this mode of tradition. It can be said that the covenant
regarding the lease of the land sold is germane to the contract of sale with pacto de retro.
Villa vs. Garcia Bosque (49 Phil 126)
FACTS:September 17, 1919, the plaintiff, Rosa Villa y Monna, viuda de E. Bota, was the owner of a
printing establishment and bookstore located at 89 Escolta, Manila, and known as La Flor de Catalua,
Viuda de E. Bota, with the machinery, motors, bindery, type material, furniture, and stock appurtenant
thereto. Upon the date stated, the plaintiff, then and now a resident of Barcelona, Spain, acting through
Manuel Pirretas, as attorney in fact, sold the establishment above-mentioned to the defendants
Guillermo Garcia Bosque and Jose Pomar Ruiz, residents of the City of Manila, for the stipulated sum
of P55,000, payable as follows: Fifteen thousand pesos (P15,000) on November 1, next ensuing upon
the execution of the contract, being the date when the purchasers were to take possession; .ten thousand
pesos (P10,000) at one year from the same date; fifteen thousand pesos (P15,000) at two years; and the
remaining fifteen thousand pesos (P15,000) at the end of three years. By the contract of sale the
deferred instalments bear interest at the rate of 7 per centum per annum. In the same document the
defendants France and Goulette obligated themselves as solidary sureties with the principals Bosque
and Ruiz, to answer for any balance, including interest, which should remain due and unpaid after the
dates stipulated for payment of said instalments, expressly renouncing the benefit of exhaustion of the
property of the principals. The first instalment of P15,000 was paid conformably to agreement.
In the year 1920, Manuel Pirretas y Monros, the attorney in fact of the plaintiff, absented himself from
the Philippine Islands on a prolonged visit to Spain; and in contemplation of his departure he executed
a document, dated January 22, 1920, purporting to be a partial substitution of agency, whereby he
transferred to "the mercantile entity Figueras Hermanos, or the person, or persons, having legal
representation of the same," the powers that had been previously conferred on Pirretas by the plaintiff
"in order that," so the document runs, "they may be able to effect the collection of such sums of money
as may be due to the plaintiff by reason of the sale of the bookstore and printing establishment already
mentioned, issuing for such purpose the receipts, vouchers, letters of payment, and other necessary
documents for whatever they shall have received and collected of the character indicated."
About this time the owners of the business La Flor de Catalua, appear to have converted it into a
limited partnership under the style of "Guillermo Garcia Bosque, S. en C.;" and presently a corporation
was formed to take over the business under the name "Bota Printing Company, Inc."
45

Induced by this dilatoriness on the part of the debtor and supposedly animated by a desire to get the
matter into better shape, M. T. Figueras entered into the agreement attached as Exhibit 1 to the answer
of Bosque. In this document it is recited that Guillermo Garcia Bosque, S. en C., is indebted to Rosa
Villa, viuda de E. Bota, in the amount of P32,000, for which R. G. France and F. H. Goulette are bound
as joint and several sureties, and that the partnership mentioned had transferred all its assets to the Bota
Printing Company, Inc., of which one George Andrews was a principal stockholder. It is then stipulated
that France and Goulette shall be relieved from all liability on their contract as sureties and that in lieu
thereof the creditor, Doa Rosa Villa y Monna, accepts the Bota Printing Company, Inc., as debtor to
the extent of P20,000, which indebtedness was expressly assumed by it, and George Andrews as debtor
to the extent of P12,000, which he undertook to pay at the rate of P200 per month thereafter.
ISSUE:Whether Manuel Pirretas y Monros, as an attorney in fact of Rosa Villa y Monna has the right
of authority to release sureties?
HELD:The partial substitution of agency (Exhibit B to amended complaint) purports to confer on
Figueras Hermanos or the person or persons exercising legal representation of the same all of the
powers that had been conferred on Pirretas by the plaintiff in the original power of attorney. This
original po
wer of attorney is not before us, but assuming, as is stated in Exhibit B, that this document contained a
general power to Pirretas to sell the business known as La Flor de Catalua upon conditions to be fixed
by him and power to collect money due to the plaintiff upon any account, with a further power of
substitution, yet it is obvious upon the face of the act of substitution (Exhibit B) that the sole purpose
was to authorize Figueras Hermanos to collectthe balance due to the plaintiff upon the price of La Flor
de Catalua, the sale of which had already been effected by Pirretas. The words of Exhibit B on this
point are quite explicit ("to the end that the said lady may be able to collect the balance of the selling
price of the Printing Establishment and Bookstore abovementioned, which has been sold to Messrs.
Bosque and Pomar"). There is nothing here that can be construed to authorize Figueras Hermanos to
discharge any of the debtors without payment or to novate the contract by which their obligation was
created. On the contrary the terms of the substitution shows the limited extent of the power. A further
noteworthy feature of the contract Exhibit 1 has reference to the personality of the purported attorney in
fact and the manner in which the contract was signed. Under the Exhibit B the substituted authority
should be exercised by the mercantile entity Figueras Hermanosor the person duly authorized to
represent the same.
In the actual execution of Exhibit 1, M. T. Figueras intervenes as purported attorney in fact without
anything whatever to show that he is in fact the legal representative of Figueras Hermanos or that he is
there acting in such capacity. The act of substitution conferred no authority whatever on M. T. Figueras
as an individual. In view of these defects in the granting and exercise of the substituted power, we
agree with the trial judge that the Exhibit 1 is not binding on the plaintiff. Figueras had no authority to
execute the contract of release and novation in the manner attempted; and apart from this it is shown
that in releasing the sureties Figueras acted contrary to instructions. For instance, in a letter from
Figueras in Manila, dated March 4, 1922, to Pirretas, then in Barcelona, the former stated that he was
attempting to settle the affair to the best advantage and expected to put through an arrangement
whereby Doa Rosa would receive P20,000 in cash, the balance to be paid in instalments, "with the
guaranty of France and Goulette." In his reply of April 29 to this letter, Pirretas expresses the
conformity of Doa Rosa in any adjustment of the claim that Figueras should see fit to make, based
upon payment of P20,000 in cash, the balance in instalments payable in the shortest practicable periods,
it being understood, however, that the guaranty of Messrs. France and Goulette should remain intact.
46

Again, on May 9, Pirretas repeats his assurance that the plaintiff would be willing to accept P20,000
down with the balance in interest-bearing instalments "with the guaranty of France and Goulette."
From this it is obvious that Figueras had no actual authority whatever to release the sureties or to make
a novation of the contract without their additional guaranty.
1.PRINCIPAL AND AGENT; ATTORNEY IN FACT UNDER SUBSTITUTED POWER; LACK OF
AUTHORITY TO RELEASE SURETIES.A sale of property was made by the attorney in fact for a
stated consideration, part of which was paid in cash and the balance made payable in deferred
instalments. The attorney in fact then executed a substituted power of attorney in favor of a third person
to enable the latter to collect the deferred instalments. Held, That under this power the substituted
attorney in fact had no authority to enter into a new contract with a transferee of the original purchasers
modifying the terms of the sale and releasing two individuals who had joined as solidary sureties in the
original contract.
2.PRINCIPAL AND SURETY ; EXTENSION OF TIME BY CREDITOR TO PRINCIPAL DEBTOR;
EFFECT ON LIABILITY OF SURETIES.Where the purchase price of property is payable in various
instalments, an extension of time granted by the creditor to the debtor with respect to one instalment
will discharge the sureties, whether simple or solidary, from all liability as to such instalment but it
does not affect their liability for other instalments unconnected with the extension of time.
G.R. No. L-30181
July 12, 1929
THE DIRECTOR OF PUBLIC WORKS, plaintiff-appellee,
vs.
SING JUCO, ET AL., defendants.
SING JUCO, SING BENGCO and PHILIPPINE NATIONAL BANK, appellants
FACTS: A Torrens certificate of title No. 1359, relates to a parcel of land in Iloilo which is owned in
undivided share by Mariano de la Rama, Gonzalo Mariano Tanboontien, Sing Juco and Sing Bengo.
The land was mortgaged to Philippine National Bank for the purpose of securing a credit in an amount
of not excess than P 170K. The land is located at a low level near the Iloilo river, the it was subject to
flooding. In 1921, the Government of the Philippines was planning extensive harbor improvements in
the vicinity, requiring extensive dredging by the Bureau of Public Works. It required the Bureau of
Public works to find a place to deposit the dirt and mud taken from the place or places, dredged. The
land of defendants was the obvious choice since it was near the place of activity of the bureau. A
contract was made between the Director of Public Works, representing the Government of the
Philippines and the four owners, M. de la Rama, Sing Juco, G. M. Tanboontien and Seng Bengco.
In the contract, they agreed that 250K cubic meters of dredged material will be deposited to the fours
land and that the compensation will be determined by the Director of Public works, under certain
conditions mentioned in the contract, of an amount of not less than 20 nor more than 75 centavos per
cubic meter. The owners will pay in 5 annual installments and failure to pay the installment, the whole
amount will be once due.
In relation to the contract above, the Director of Public works required a bond to be supplied by the
owners in the penal amount of P 150K, estimated twice the cost of the filling. The bond was
concurrently with the main contract. It should be noted that one of the names appearing in the contract
is that of Casa Viuda de Tan Toco purportedly signed by M. de la Rama.
47

The dredging was done in compliance with the contract and the payment demanded from the owners,
but no payment was done thus an action was instituted by the Director of Public works to recover the
amount due the Government in the said contract.
ISSUE:WON Tan Ong Sze, Viuda de Tan Toco, is liable to the contract of suretyship
HELD: NO. The contention of Tan Ong Sze, widow of Tan Toco, to the effect that she was not, and is
not, bound by the contract of suretyship, is our opinion, well-founded. It will be remembered that said
contract purports to have been signed by Mariano de la Rama, acting for this defendant under the
power of attorney. But the Government has exhibited no power of attorney which would authorize the
creation, by the attorney-in-fact, of an obligation in the nature of suretyship binding upon this principal.
It is true that the Government introduced in evidence 2 documents exhibiting powers of attorney,
conferred by these documents (Exhibit K, identical with Exhibit 5) Mariano de la Rama was given the
power which reads as follows:
. . . and also for me and in my name to sign, seal and execute, and as my act and deed deliver, any lease
or any other deed for the conveying any real or personal property or the other matter or thing wherein I
am or may be personally interested or concerned. And I do hereby further authorize and empower my
said attorney to substitute and point any other attorney or attorneys under him for the purposes
aforesaid, and the same again and pleasure to revoke; and generally for me and in my name to do,
perform, and execute all and any other lawful and reasonable acts and things whatsoever as fully and
effectually as I, the said Tan Ong Sze might or could do if personally present.
In another document, (Exhibits L and M), executed in favor of the same Mariano de la Rama by his
uncle Tan Lien Co, attorney-in-fact of Tan Ong Sze, with power of substitution, there appears the
following:
. . . and also for her and for her name to sign, seal and execute, and as her act and deed deliver, any
lease, release, bargain, sale, assignment, conveyance or assurance, any other deed for the conveying
any real or personal property or other matter or thing wherein she or may be personally interested or
concerned.
Neither of these powers officially confers upon Mariano de la Rama the power to bind a principal by a
contract of suretyship. The clauses noted relate more specifically to the execution of contracts relating
to property; and the more general words at the close of the quoted clauses should be interpreted, under
the general rule ejusdem generis, as referring to the contracts of like character. Power to execute a
contract so exceptional a nature as a contract of suretyship or guaranty cannot be inferred from the
general words contained in these powers.
BPI vs de Coster
FACTS:Defendant Gabriela Andrea de Coster y Roxas executed a Special Power of Attorney in favor
of her husband. This authority gave Jean M. Poizat (agent husband) the power to loan and borrow
money in her behalf. The agent was able to obtain a loan from BPI, secured by a chattel mortgage on
the steamers of his company, Poizat Vegetable Oil Mills and a real mortgage over a property, which is
also subject to another mortgage in favor of La Orden de Dominicos. Defendants defaulted on their
obligations to BPI and La Orden de Dominicos. Thus, both creditors prayed for the foreclosure of the
mortgaged properties. RTC declared the defendants in default for their failure to appear and ruled in
48

favor of the plaintiffs. De Coster alleges that she never had any knowledge of the actual facts until she
read about her default in the newspapers, since she was not in the Philippines when the summons was
served; that her husband fled the country; that the mortgages executed by her agent husband was
without marital consent; and that he did not have any authority to make her liable as surety on the debt
of a third personit being a personal debt of her husband and his company.
ISSUE:Whether or not the principal-wife, Gabriela De Coster y Roxas, is liable for the mortgage
executed by her agent husband, Jean Poizat
HELD:NO. The note and mortgage show upon their face that at the time they were executed, the
agent-husband was attorney-in-fact for the defendant wife, and the bank knew or should have known
the nature and extent of his authority and the limitations upon his power.
Par. 5 of the Power of Attorney authorizes the agent husband for and in the name of his wife to loan or
borrow any sums of money or fungible things, etc. This is taken to mean that he only had the power to
loan his wifes money and to borrow money for or on account of his wife as her agent and attorney-infact. It does not carry with it or imply that he had the legal right to make his wife liable as a surety for
the preexisting debt of a third person.
It is fundamental rule of construction that where in an instrument powers and duties are specified and
defined, that all of such powers and duties are limited and confined to those which are specified and
defined, and that all other powers and duties are excluded. The fact that the agent-husband failed and
neglected to perform his duties and to represent the interests of his principal is NOT a bar to the
principal obtaining legal relief for the negligence of her agent.
It is apparent from the face of the instrument that the whole purpose and intent of the power of attorney
was to empower and authorize the agent-husband to look after and protect the interests of the wife and
for her and in her name to transact any and all of her business. But nowhere does it provide or authorize
him to make her liable as a surety for the payment of the preexisting debt of a third person.
Thus, the agent-husband does not have the authority to sign the note and to execute the mortgage for
and on behalf of the wife as her act and deed, and that as to her the note is void for want of power of
her husband to execute it.
GERMANN & CO. VS DONALDSON, SIM & CO.
FACTS:
Max Leonard Tornow, a German national was the owner of Germann & Co. which operated in Berlin
and Manila. On February 5, 1900 he executed in Berlin an instrument constituting Fernando
Kammerzell as his true and lawful attorney with power to enter the firm name of Germann & Co. in the
Commercial Registry of Manila as a branch of the house of the company in Berlin, it being the
purpose of this power to invest said attorney with full legal powers and authorization to direct and
administer in the City of Manila for us and in our name a branch of our general commercial business of
import and export for which purpose he may make contracts of lease and employ suitable assistants, as
49

well as sign every kind of documents, accounts, and obligations connected with the business which
may be necessary, take charge in general of the receipt and delivery of merchandise connected with the
business sign all receipts for sums of money and collect them and exact their payment by legal means
On October 27, 1900 Kammerzell executed a general power for suits in Manila and purporting to
be a substitution in favor of several attorneys of powers conferred upon Kammerzell in an instrument
executed by Tornow. Kammerzells instrument was authenticated will formalities of domestic laws
while Tornows was not.
ISSUE:
Whether or not Kammerzell has the authority to institute suits for the recovery of sums of money?
HELD:
YES. The Court ruled that the clause conferring the power to exact the payment of sums of money by
legal means, provides that the power to exact the payment of debts due the concern by means of the
institution of suits for the recovery. The main object of the instrument is clearly to make him the
manager of the Manila branch with the same general authority. In absence of a clear language, it was
the intention of the principal to withhold from his agent a power essential to the efficient management
of the business.
Mack et et al. v. Camps, 7 Phil. 553
Facts:
The plaintiffs in this action are partners doing business under the firm name of Macke, Chandler & Company.
Plaintiff sold to the defendant and delivered at his place of business, known as the "Washington Cafe," various
bills of goods amounting to P351.50; that the defendant has only paid on account of said accounts the sum of
P174; that there is still due them on account of said goods the sum of P177.50;
B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented himself to
be agent of the defendant, he shipped the said goods to the defendants at the Washington Cafe; that Flores later
acknowledged the receipt of said goods and made various payments thereon amounting in all to P174; that on
demand for payment of balance of the account Flores informed him that he did not have the necessary funds on
hand, and that he would have to wait the return of his principal, the defendant, who was at that time visiting in
the provinces;
A written contract was introduced in evidence from which it appears that one Galmes, the former owner of the
business now known as the "Washington Cafe," subrented the building wherein the business was conducted, to
the defendant for a period of one year, the defendant obligating himself not to sublet or subrent the building or
the business without the consent of the said Galmes. This contract was signed by the defendant and the name of
Ricardo Flores appears thereon as a witness, and attached thereto is an inventory of the furniture and fittings
which also is signed by the defendant with the word "sublessee" below the name, and at the foot of this
inventory the word "received" followed by the name "Ricardo Flores," with the words "managing agent"
immediately following his name.
Issue:

50

Whether or not, Flores is an agent of the defendant.

Held:
Yes. One who clothes another apparent authority as his agent, and holds him out to the public as such, cannot be
permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties
dealing with such person in good faith and in the following assumptions or deductions, which the law expressly
directs to be made from particular facts, are deemed conclusive. "Whenever a party has, by his own declaration,
act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out such declaration, act, or omission, be permitted to falsify it"; and
unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual
means of carrying his agency into effect.

MUNICIPAL COUNCIL OF ILOILO V. EVANGELISTA

FACTS:
On March 20, 1924, the Court of First Instance of Iloilo rendered judgment in Civil Case No. 514
thereof, wherein the appellant, herein Tan Ong Sze Vda. de Tan Toco was the plaintiff and the
Municipality of Iloilo the defendant and the former sought to recover of the plaintiff value of a strip of
land belonging to said plaintiff taken by the defendant to widen a public street; the judgment entitled
the plaintiff to recover Php 42,966.40 representing the value of said strip of land from the defendant.
On appeal to the judgment was affirmed on November 28, 1924. After the case was remanded to the
court of origin and the judgment rendered therein had become final and executory. Attorney Jose
Evangelista in is own behalf and as counsel for the administratix of Jose Ma. Arroyos intestate estate
filed a claim in the said case for professional services rendered by him, which the court acting with the
consent of the appellant widow, fixed at 15% of the amount of the judgment. At the hearing on said
claim, the claimants appeared as did also for the Philippine National Bank which prayed that the
amount of the judgment be turned over to it because the land taken over had been mortgaged to it.
Antero Soriano also appeared claiming the amount of the judgment as it had been assigned to him and
by him in turn, assigned to Mauricio Cruz & Co., Inc. After hearing, all the adverse claims on the
amount of the judgment, the court ordered that the attorneys lien in the amount of 15% of the
judgment be recorded in favor of Attorney Evangelista in his own behalf and counsel for the
administratix of the deceased Jose Ma. Arroyo and directed the Municipality of Iloilo to file an action
of interpleading against the adverse claimants: the PNB, Antero Soriano, Mauricio Cruz & Co., Jose
Evangelista and Jose Arroyo, as was done the case being filed in the CFI of Iloilo as civil case no.
7702. On March 29, 1928 with the approval of the auditor of the provincial treasurer of Iloilo and with
the Executive Bureau paid the late Antero Soriano the amount of Php 6,000.00 in part payment of the
judgment mentioned above assigned to him by Tan Boon Tiong acting as attorney-in-fact of the
appellant herein, Tan Ong Sze Vda. de Tan Toco. On December 18, 1928, the municipal treasurer of
Iloilo deposited with the clerk of the Court of First Instance of Iloilo the amount of Php 6,000.00 on
account of the judgment rendered in said civil case no. 3514. In pursuance of the resolution of the court
below ordering that the attorneys lien in the amount of 15% of the judgment be recorded in favor of
Attorney Jose Evangelista.In his own behalf and as a counsel for the late Jose Ma. Arroyo, the said
clerk of court delivered on the same date to said Attorney Evangelista the said amount of Php 6,000.00.
At the hearing of the instant case, the co-defendants of Evangelista agreed not to discuss the payment
made to the latter by the clerk of CFI of Iloilo of the amount Php 6,000.00 mentioned above in
consideration of said lawyers waiver of the remainder of the 15% of said judgment amounting to Php
44.69. With these 2 payments of Php 6,000.00 each making a total of Php 12,000.00 , the judgment for
Php 42,966.44 against the Municipality of Iloilo was reduced to Php 30,966.40 which was adjudicated
by said court to Maurice Cruz & Co. This appeal, then, is confined to the claim of Mauricio Cruz & Co.
51

as alleged assignee of the rights of the late Soriano by virtue of the said judgment in payment of
professional services rendered by him to the said widow and her co-heirs.
ISSUE:
Whether or not the assignment made by Tan Boon Tiong as attorney-in-fact of the appellant Tan Ong
Sze Vda. de Tan Toco to Attorney Antero Soriano, of all the credits, rights and interests belonging to
said appellant entitled Vda. de Tan Toco vs. the Municipal of Iloilo adjudicating to said widow the
amount of Php 42,966.40 plus the costs of court against said municipal council in consideration of the
professional services rendered by said attorney to said widow and her co-heirs valid?
RULING:
YES. Tan Boon Tiong as attorney-in-fact of the appellant was empowered by his principal to make as
assignment of credits, rights and interests, in payment of debts for professional services rendered by
lawyers. Tan Boon Tiong is authorized to employ and contract for the services of lawyers upon such
conditions as he may deem convenient. This power necessarily implies the authority to pay the
professional services they engaged. In the present case, for the appellant in favor of Atty. Soriano for
professional services rendered in other cases in the interests of the appellant and her co-heirs was that
credit which had against the Municipality and such assignment was equivalent to the payment of
amount of said credit to Antero Soriano for professional services. Meaning of acts of administration --An attorney-in-fact empowered to pay the debts of the principal and to employ attorneys to defend the
latters interests is impliedly empowered to pay attorneys fees for services rendered in the interests of
the principal.
YU CHUCK, MACK YUENG, and DING MOON, plaintiffs-appellees, vs. "KONG LI PO",
defendant-appellant.
G.R. No. L-22450 | 1924-12-03
FACTS:The defendant is a domestic corporation engaged in the publication of a Chinese newspaper
styled Kong Li Po. Its articles of incorporation and by-laws are in the usual form and provide for a
board of directors and for other officers, among them a president whose duty it is to "sign all contracts
and other instruments of writing." No special provision is made for a business or general manager.
Some time during the year 1919 one C.C. Chen or T.C. Chen was appointed general business manager
of the newspaper. During the month of December of that year he entered into an agreement with the
plaintiffs by which the latter bound themselves to do the necessary printing for the newspaper. Under
this agreement the plaintiffs worked for the defendant from January 1, 1920, until January 31, 1921,
when they were discharged by the new manager, Tan Tian Hong, who had been appointed in the
meantime, C.C. Chen having left for China. The letter of dismissal stated no special reasons for the
discharge of the plaintiffs. The plaintiffs thereupon brought the present action alleging, among other
things, in the complaint that their contract of employment was for a term of three years from the first
day of January, 1920; that in the case of their discharge by the defendant without just cause before the
expiration of the term of the contract, they were to receive full pay for the remaining portion of the
term; that they had been so discharged without just cause and therefore asked judgment for damages in
the sum of P20,880.
ISSUE:
1. Whether C.C. Chen authorized or acted within its authority in the execution of the contract of
employment of the plaintiffs
52

2. Whether the contract was subsequently ratified by the corporation.

HELD 1: No.
The general rule is that the power to bind a corporation by contract lies with its board of directors or
trustees, but this power may either expressly or impliedly be delegated to other officers or agents of the
corporation, and it is well settled that except where the authority of employing servants and agents is
expressly vested in the board of directors or trustees, an officer or agent who has general control and
management of the corporation's business, or a specific part thereof, may bind the corporation by
the employment of such agents and employees as are usual and necessary in the conduct of such
business. But the contracts of employment must be reasonable. In regard to the length of the term of
employment, Corpus Juris says: "In the absence of express limitations, a manager has authority to hire
an employee for such a period as is customary or proper under the circumstances, such as for the year,
for the season, or for two seasons. But unless he is either expressly authorized, or held out as having
such authority, he cannot make a contract of employment for a long future period, such as for three
years, although the contract is not rendered invalid by the mere fact that the employment extends
beyond the term of the manager's own employment. . . ." From what has been said, there can be no
doubt that Chen, as general manager of the Kong Li Po, had implied authority to bind the defendant
corporation by a reasonable and usual contract of employment with the plaintiffs, but we do not think
that the contract here in question can be so considered. Not only is the term of employment unusually
long, but the conditions are otherwise so onerous to the defendant that the possibility of the
corporation being thrown into insolvency thereby is expressly contemplated in the same contract.
This fact in itself was, in our opinion, sufficient to put the plaintiffs upon inquiry as to the extent of the
business manager's authority; they had not the right to presume that he or any other single officer or
employee of the corporation had implied authority to enter into a contract of employment which might
bring about its ruin.
HELD 2: No.
Neither do we think that the contention that the corporation impliedly ratified the contract is supported
by the evidence. The contention is based principally in the fact that Te Kim Hua, the president of the
corporation for the year 1920, admitted on the witness stand that he saw the plaintiffs work as printers
in the office of the newspaper. he denied however, any knowledge of the existence of the contract and
asserted that it was never presented neither to him nor to the board of directors. Before a contract ca
be ratified knowledge of its existence must, of course, be brought home to the parties who have
authority to ratify it or circumstances must be shown from which such knowledge may be presumed.
No such knowledge or circumstances have been shown here. That the president of the corporation saw
the plaintiffs working in its office is of little significance; there were other printers working there at that
time and as the president had nothing to do with their employment, it was hardly to be expected that he
would inquire into the terms of their contracts. Moreover, a ratification by him would have been of no
avail; in order to validate a contract, a ratification by the board of directors was necessary. The fact that
the president was required by the by-laws to sign the documents evidencing contracts of the
corporation, does not mean that he had power to make the contracts.
CONCURRING OPINION: Street, J.
On the principal point in the case, namely, whether one C.C. Chen or T.C. Chen, who was running the
Kong Li Po, and authority to bind the corporation to the plaintiffs by a contract for the term of three
years, I find that the authorities fully support the proposition quoted in the opinion from Corpus Juris to
the effect that a manager cannot make a contract of employment for a long period, such as for three
53

years, unless expressly authorized or held our by the corporation as having such authority. The
distinction here, as I see it, in not so much a distinction between the reasonable and the unreasonable as
it is between the usual and unusual, or the ordinary and extraordinary. There must be a limit somewhere
upon the authority of a manager with respect to the duration of contracts which he makes for the
corporation, and my eye has fallen upon no decision in which a contract was made by a manager,
though there are the contact was made by a manager, though there are cases in which contracts for the
period of only one year have been sustained.
DISSENTING: Malcolm, J.
The failure by the defendant to deny under oath the execution of the instrument sued on, a copy of
which is attached to the complaint, when such instrument purports to be signed by an agent of the
defendant corporation, is an admission, not only of the genuiness of the signature, but also of the
authority of the agent to sign it for the defendant and the power of the defendant to enter into such a
contract, citing section 103 of the Code of Civil Procedure, Bausman vs. Credit Guarantee Co. ([1891],
47 Minn., 377), and Knight vs. Whitmore ([1899], 125 Cal., 198). The case for the plaintiffs is thus
premised on a written instrument which the defendant admits to be genuine, and as to which the
defendant admits the authority of the agent to accomplish and the power of the defendant to make. the
defendant corporation held T.C. Chen out to the public as the business manager of the newspaper Kong
Li Po and clothed him with apparent authority to bind the corporation. The president of the corporation
admitted as much on the witness stand, while public announcement was made as follows: "To Whom
It May Concern: Announcement is hereby given that hereafter all contracts, agreements and receipts are
considered null and void unless duly signed by T.C. Chen, General Manager of this paper. The action
of the business manager was thus ratified by his superior officers and they are now in estoppel to deny
such ratification. As held in the case of Macke vs. Camps ([1907], 7 Phil., 553), one of who clothes
another with apparent authority as his agent and holds him out to the public as such, cannot be
permitted to deny the authority of such person to act as his agent in good faith and in the honest belief
that he is what he appears to be. Unless the contrary appears, the authority of an agent must be
presumed to include all the necessary and usual means of carrying his agency into effect, citing section
333, subsection 1, of the Code of Civil Procedure, and various cases. See also articles 1259, 1311 and
1313 of the Civil Code.
G.R. No. L-38816
November 3, 1933
INSULAR DRUG CO., INC., plaintiff-appellee,
vs.
THE PHILIPPINE NATIONAL BANK, ET AL., defendants.
THE PHILIPPINE NATIONAL BANK, appellant.
FACTS: This is an appeal taken by Philippine National Bank from a judgment of the Court of First
Instance of Manila requiring bank to pay to the Insular Drug Co., Inc., the sum of P18,285.92 with
legal interest and costs.
U.E. Foerster acted as the salesman and collector of Insular Drug Co. for the Islands of Panay and
Negros. He was instructed to take the checks which came to his hands for the drug company to the
Iloilo branch of the Chartered Bank of India, Australia and China and deposit the amounts to the credit
of the drug company.
Instead, Foerster deposited checks, with the Iloilo branch of the Philippine National Bank. The checks
were in that bank placed in the personal account of Foerster. Some of the checks were drawn against
the Bank of Philippine National Bank. After the indorsement on the checks was written "Received
54

payment prior indorsement guaranteed by Philippine National bank, Iloilo Branch, Angel Padilla,
Manager."
As a consequence of the indorsements on checks the amounts therein stated were subsequently
withdrawn by U. E., Foerster and Carmen E. de Foerster.
Eventually the Manila office of the drug company investigated the transactions of Foerster. Upon the
discovery of anomalies, Foerster committed suicide. But there is no evidence showing that the bank
knew that Foerster was misappropriating the funds of his principal. The Insular Drug Company claims
that it never received the face value of 132 checks here in the question.
ISSUE: Whether or not PNB can be held liable YES
HELD: YES. The next point relied upon by the bank, to the effect that Foerster had implied authority
to indorse all checks made out in the name of the Insular Drug Co., Inc., has even less force. Not only
did the bank permit Foerster to indorse checks and then place them to his personal account, but it went
farther and permitted Foerster's wife and clerk to indorse the checks. The right of an agent to indorse
commercial paper 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
checks received in payment. Any person taking checks made payable to a corporation, which can act
only by agent does so at his peril, and must same by the consequences if the agent who indorses the
same is without authority.
Further speaking to the errors specified by the bank, it is sufficient to state that no trust fund was
involved; that the fact that bank acted in good faith does not relieve it from responsibility; that no proof
was adduced, admitting that Foerster had right to indorse the checks, indicative of right of his wife and
clerk to do the same , and that the checks drawn on the Bank of the Philippine Islands can not be
differentiated from those drawn on the Philippine National Bank because of the indorsement by the
latter.
The bank could tell by the checks themselves that the money belonged to the Insular Drug Co., Inc.,
and not to Foerster or his wife or his clerk. When the bank credited those checks to the personal
account of Foerster and permitted Foerster and his wife to make withdrawals without there being made
authority from the drug company to do so, the bank made itself responsible to the drug company for the
amounts represented by the checks. The bank could relieve itself from responsibility by pleading and
proving that after the money was withdrawn from the bank it passed to the drug company which thus
suffered no loss, but the bank has not done so. Much more could be said about this case, but it suffices
to state in conclusion

WEEK 10
D. Obligations of the Agent
INTERNATIONAL FILMS (CHINA), LTD., plaintiff-appellant,
vs.
55

THE LYRIC FILM EXCHANGE, INC., defendant-appellee

FACTS: Bernard Gabelman was the Philippine agent of the plaintiff company International films
(China), Ltd. On June 2, 1933, the International Films (China), Ltd., through its said agent, leased the
film entitled Monte Carlo Madness to the defendant company, the Lyric Film Exchange, Inc. to be
shown in different theatres.
One of the conditions of the contract was that the defendant company would answer for the loss of the
film whatever cause. On June 23, 1933, following the last showing of the film in question in the Paz
Theatre, Vicente Albo, then chief of the film department of the Lyric Film Exchange, Inc., telephoned
said Gabelman, informing him that the showing of said film had already finished and asked, at the
same time, where he wished to have the film returned to him.
In answer, Bernard Gabelman asked whether he could deposit the film in question in the vault of the
Lyric Film Exchange, Inc., as the plaintiff did not yet have a safety vault, as required by the regulations
of the fire department.
In response, OMalley, Vicente Albos chief, answered that the deposit could not be made inasmuch as
the film in question would not be covered by the insurance carried by the defendant. Bernard Gabelman
then requested Vicente Albo to permit him to deposit said film in the vault of Lyric Film Exchange,
Inc., under Gabelmans own responsibility. As there was a verbal contract between Gabelman and the
defendant, whereby the film Monte Carlo Madness would be shown elsewhere, OMalley agreed and
the film was deposited in the vault of the defendant company under Bernard Gabelmans responsibility.
On July 27, 1933, Gabelman was succeeded by Lazarus Joseph, whereupon turning over the agency to
the latter, the former informed Lazarus Joseph of the deposit of the film Monte Carlo Madness, as
well as of the verbal contract entered into between him and the Lyric Film Exchange, Inc., whereby the
latter would act as a subagent of the plaintiff company, International Films (China) Ltd., with authority
to show this film "Monte Carlo Madness" in any theater where said defendant company, the Lyric Film
Exchange, Inc., might wish to show it after the expiration of the contract.
As soon as Lazarus Joseph had taken possession of the Philippine agency of the International Films
(China) Ltd., he went to the office of the Lyric Film Exchange, Inc., to ask for the return not only of the
film "Monte Carlo Madness" but also of the films "White Devils" and "Congress Dances".
On August 13 and 19, 1933, the Lyric Film Exchange, Inc., returned the films entitled "Congress
Dances" and "White Devils" to Lazarus Joseph, but not the film "Monte Carlo Madness" because it was
to be shown in Cebu on August 29 and 30, 1933. Inasmuch as the plaintiff would profit by the showing
of the film "Monte Carlo Madness", Lazarus Joseph agreed to said exhibition. It happened, however,
that the bodega of the Lyric Film Exchange, Inc., was burned on August 19, 1933, together with the
film "Monte Carlo Madness" which was not insured.
International Films (China), Ltd. then filed a complaint against the Lyric Film Exchange, Inc. which
was later dismissed by the trial court, hence this petition.
ISSUE: Whether or not Lyric Film Exchange, Inc. as a sub-agent could be held liable for the
destruction by fire of the film Monte Carlo Madness

56

RULING: NO.The verbal contract had between Bernard Gabelman, the former agent of the plaintiff
company, and Vicente Albo, chief of the film department of the defendant company, was a sub-agency
or a submandate, the defendant company is not civilly liable for the destruction by fire of the film in
question because as a mere submandatary or subagent, it was not obliged to fulfill more than the
contents of the mandate and to answer for the damages caused to the principal by his failure to do so
(art. 1718, Civil Code). The fact that the film was not insured against fire does not constitute fraud or
negligence on the part of the defendant company, the Lyric Film Exchange, Inc., because as a subagent,
it received no instruction to that effect from its principal and the insurance of the film does not form a
part of the obligation imposed upon it by law.
Lyric Film Exchange, Inc., as subagent of the plaintiff in the exhibition of the film "Monte Carlo
Madness", was not obliged to insure it against fire, not having received any express mandate to that
effect, and it is not liable for the accidental destruction thereof by fire.
Nepomuceno, et. al vs. Heredia
FACTS: Heredia was the business adviser of Canon, and in Heredias possession given by Canon was
the amount of 1,500.
Nepomuceno was to receive 500 pesos from Leano. Leano proposed to sell a land to Nepomuceno for
2,000 pesos; 1,500 was to be given to Leano and the 500.00 shall be credited as payment for Leanos
debt.
Nepomuceno, knowing that Canon had the 1,500.00, proposed that they enter into a joint investment to
buy the lot. This was discussed with Heredia, thereafter, Heredia was instructed by Nepomuceno and
Canon to draw the necessary documents for the sale.
A Deed of Conditional Sale was executed for the land on September 24. 1904 with a reservation on the
part of Leano the privilege of repurchasing the land at the end of one year and obligating himself to
make monthly payments in considerations of the right to retain the land in possession in sufficient
amount to bring the Nepomuceno and Canons interest on their money at the rate of 17 per centum per
annum. Nepomuceno and Canon paid to Leano the sum of 1,500.00 pesos, cash, and discharging the
above mentioned credit of 500.00 pesos due to Nepomuceno.
More than a year after the transactions, during which time Leano continued to pay, and that
Nepomuceno and Canon receive the stipulated payments in consideration of the right to retain
possession, a cloud was cast on the title to the land by the institution of proceedings for the recovery of
possession by third parties.
Nepomuceno and Canon thereupon brought a judicial action in which they are seeking to recover from
the defendant the whole of the amount of money invested, with interest from the date of the investment,
alleging with that purchase of the land was not made in accordance with their instructions, or on their
account.
ISSUE:Whether or not Heredia was an agent of Nepomuceno and Canon?
HELD:Yes.It was clearly established at the trial that the Heredia was acting merely as the agent for the
Nepomuceno and Canon throughout the entire transaction.
57

That the purchase of the land was made not only with their full knowledge and consent, but at their
suggestion
That after the purchase had been effected, Nepomuceno and Canon, with full knowledge of the facts,
approved and ratified the actions of their agent in the premises.
There is nothing in the record which would indicate that the Canon failed to exercise reasonable care
and diligence in the performance of his duty as such agent, or that he undertook to guarantee Leanos
title to the land purchased by direction of the Nepomuceno and Canon.
G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE
DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and
JOSELITO, all surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenorrespondent.
FACTS: Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive agency to
sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per
square meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by
Vicente or by anyone else during the 30-day duration of the agency or if the property is sold by Vicente
within three months from the termination of the agency to a purchaser to whom it was submitted by
Gregorio during the continuance of the agency with notice to Vicente.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising
him one-half of the 5% commission.Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio
as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square
meter. Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences
between Gregorio and Oscar de Leon, the latter raised his offer to P109,000.00 on June 20, 1956.
Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of P1,000.00 as earnest
money, after which Vicente advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his
former offer to pay for the property at P1.20 per square meter. Subsequently, Vicente asked for an
additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him.
Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of One Thousand
Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per square meter.
In the deed of sale was not executed on August 1, 1956 nor on August 15, 1956 as extended by Vicente,
Oscar told Gregorio that he did not receive his money from his brother in the United States, for which
reason he was giving up the negotiation including the amount of One Thousand Pesos (P1,000.00)
given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio
as propina or gift.
When Oscar did not see him after several weeks, Gregorio sensed something fishy.So, he went to
Vicente to effect that Vicente was still committed to pay him 5% commission
58

Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he discovered deed of
sale executed on September 17, 1956 by Amparo Diaz, wife of Oscar de Leon, over their house and lot
No. 40 Denver Street, Cubao, Quezon City, in favor Vicente as down payment by Oscar de Leon on the
purchase price of Vicente's lot No. 883 of Piedad Estate.
Upon thus learning that Vicente sold his property to the same buyer, Oscar de Leon and his wife, he
demanded in writing payment of his commission on the sale price of One Hundred Nine Thousand
Pesos (P109,000.00)
Vicente stated that Gregorio is not entitled to the 5% commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.
ISSUE: Whether failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de
Leon constitutes fraud, as to cause a forfeiture of his commission on the sale price
HELD: Gregorio is not enttilled to receive the commission.
An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the
vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to
the principal and forfeits his right to collect the commission from his principal, even if the principal
does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that
the agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the
possibility of any wrong, not to remedy or repair an actual damage.
By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position
wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as
his commission is concerned, as if no agency had existed. The fact that the principal may have been
benefited by the valuable services of the said agent does not exculpate the agent who has only himself
to blame for such a result by reason of his treachery or perfidy.
His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his
principal and undermined his loyalty to his principal.
G.R. No. 3188
THE UNITED STATES, plaintiff-appellee,
vs.
ALEC KIENE, defendant-appellant.
FACTS:The defendant was an insurance agent. As such agent there was paid over to him for the
account of his employers, the China Mutual Life Insurance Company, the sum of 1,539.20 pesos,
Philippine currency, which he failed and refused to turn over to them. For his failure and refusal so to
do, he was convicted of the crime of estafa in the Court of First Instance of the city Manila in
sentenced to be imprisoned for one year and six months in Bilibid, and to pay the costs of the trial.
The facts as stated above were fully established at the trial of the case; the accused offered no evidence
on his own behalf and rest his appeal substantially upon the alleged failure of the prosecution to
establish the existence of a duty or obligation imposed on the defendant to turn over his principal the
funds which he is charged with appropriating to his own use.
Counsel for the defendant contends that the trial court erroneously admitted in evidence a certain
document purporting to be a contract of agency signed by the defendant. The name of the accused is
attached to this document, and one of the witnesses, the district agent of the China Mutual Life
59

Insurance Company, stated that it was the contract of agency it purported to be, but failed to state
specifically that the signature attached thereto was the signature of the defendant, though he declared
that he knew his signature and had seen him write it on various occasions.
ISSUE:Whether Kiene is liable to deliver the amount collected to the insurance company?
HELD:Yes. We are of opinion that the obligation of the defendant to deliver the funds in question to
his employers is determined by the provision of article 1720 of the Civil Code, which is as follows:
Every agent is bound to give an account of his transactions and to pay to the principal all that he may
have received by virtue of the agency, even though what has been received is not owed to the principal.
Nothing to the contrary appearing in the record, and the existence of the agency and the collection of
the funds on account of the principal having been established, the obligation to deliver these funds to
the principal must be held to have been imposed upon the agent by virtue of the contract of agency.
199 scra 245
THE UNITED STATES, plaintiff and appellee, vs. DOMINGO REYES, defendant and appellant.
FACTS: R. B. Blackman is a surveyor in the Province of Pangasinan. Domingo Reyes, the accused,
also lives in that province. Blackman employed Reyes to collect certain amounts due from twelve
individuals for Blackman's work in connection with the survey of their lands. The total amount to be
collected by Reyes was P860. He only succeeded in collecting P540. He delivered to Blackman P368.
He retained the balance, or P172. The difficult point concerns the exact terms of the contract. It was
merely an oral agreement between Blackman and Reyes. Blackman claims that he agreed to pay Reyes
a commission of 10 per cent. Reyes claims that he was to receive a commission of 20 per cent. The trial
court, in its decision, states that"R. B. Blackman, the surveyor, ordered the said accused to collect
certain debts due for surveying and offered a 10 per cent commission on all accounts collected.
To return to the figures again, it will be noticed that if we accept the statements of Blackman, Reyes
was entitled to 10 per cent of P540 (or P530), or P54, making P172 misappropriated, or, if we deduct
his commission, P118. On the other hand, if we accept the statements of Reyes, then 20 per cent of the
total amount to be collected, P860, is exactly P172, the amount claimed to have been misappropriated.
ISSUE: Whether Reyes is guilty of the crime estafa on the ground that he retained more than his
commission
HELD: Yes. The right to a commission does not make one a joint owner with a right to money
collected, but establishes the relation of principal and agent. The agent is under obligation to turn over
to the principal the amount collected minus his commission. But the agent, having unlawfully retained
more than his commission, is guilty of estafa.
* There are a number of reasons which impel us to the conclusion that the defendant and appellant is
guilty as charged. In the first place, in view of the discrepancy in the evidence we are not disposed to
set up our judgment as superior to that of the trial court. In the second place, conceding that Reyes was
to receive 20 per cent, this, unless some contrary and express stipulation was included, would not
entitle him in advance to 20 per cent of the total to be collected, but only to 20 per cent of the amount
actually collected. In the third place, the right to receive a commission of either 10 or 20 per cent
did not make Reyes a joint owner with Blackman so as to entitle him to hold out any sum he
chose. (Campbell vs. The State [1878], 35 Ohio St., 70.) In the fourth place, under the oral contract
60

Reyes was an agent who was bound to pay to the principal all that he had received by virtue of
the agency. (Civil Code, article 1720; U. S. vs. Kiene [1907], 7 Phil. Rep., 736.) And, lastly, since for
all practical purposes, the agency was terminated, the agent was under the obligation to turn over
to the principal the amount collected, minus his commission on that amount. (U. S. vs. Schneer
[1907], 7 Phil. Rep., 523.)
All the requisites of estafa as punished by article 535, paragraph 5, of the Penal Code, and as construed
by the commentators, are here present.
The judgment of the trial court being in accord with the facts and the law is hereby affirmed with the
costs. So ordered.
G.R. No. L-3754 November 15, 1907
ANGELA OJINAGA vs. THE ESTATE OF TOMAS R. PEREZ,
FACTS:Domingo Perez died and leaving as surviving heir ten children, six by one marriage and four
by another. The administration was assumed by Tomas R. Perez, one of the heirs.
In 1890, a partition of such estate was had among the heirs of Domingo Perez.
By this partition the six children of the first marriage received 31,608.90 pesos each, and the four
children of the second marriage 17,241.24 pesos each.
Two of the children of the first marriage, Adela and Aurora, withdrew their participation. The
remaining children of the first marriage (Tomas, Patricio, Juan and Isabel) and four of the second
(Filomena, Jose, Rodolf and Margarita). Tomas R. Perez being included among the former and he
continued in the administration of their respective portions for 3 years.
In such administration he acted as guardian for all the persons interested except Eladio Ojinaga (the
surviving husband and successor in interest of Isabel Perez) and as to him Tomas acted as agent.
In 1893 Juan and Patricio Perez became of age, Tomas filed an account of his administration in the
CFI. In this accounting he showed the net profits of the business for the period stated as P8,084. Juan
and Patricio refused to accept this statement as correct, claiming that the profits actually derived by
Tomas from such business during the period named were greater than shown by him. Eladio Ojinaga
accepted the account as rendered and permitted Tomas to continue in the administration of his interest.
Patricio and Juan persisted in their charge that the account was not correct and continued to demand a
new accounting from Tomas.
The arbitrators were appointed to examine the accounts of Tomas. While this examination was going
on, and before it had been completed, Patricio offered to accept P32,000 as a final settlement and
determination of the whole question. Tomas was willing to pay this amount as a settlement of the
transaction, but Patricio and his associates insisted that in the division of this P32,000 among the heirs
Eladio be excluded, and that it be divided among seven heirs instead of being divided among eight
heirs.
Patricio Perez knew at this time that Eladio Ojinaga was satisfied with the accounting rendered in 1893,
and, testifying at the trial, he said that the reason why they excluded Ojinaga from participation in this
amount was because they suspected that there was an agreement between him and Tomas and that the
61

idea of Tomas was to take his own share out so as to reduce the share of each for his own benefit.
Therefore this settlement was never carried out.
Litigation was begun by Patricio and Juan against their brother Tomas for an accounting. Other judicial
proceedings were commenced by Tomas against the heirs, or some of them.
By that agreement: Don Tomas R. Perez binds himself to pay Don Patricio Perez the sum of
P12,053.54 as profits together with the interests agreed upon during the period of his administration.
He agreed to pay to the other heirs who joined in the agreement, and who were all of the heirs except
Eladio Ojinaga, a proportionate amount.
It is claimed by the appellant that this document proves conclusively that the amount of the profits to
which Eladio was entitled for the period in question was this sum of P12,053.54 and that he is entitled
to that sum with interest thereon from the period of its administration.
The appellant sought to prove at the trial the actual amount of the profits during the period in question
by the books kept at the time, but it appears that these had been lost and destroyed.
With the exception of these compromise settlements, the only evidence as to the actual profits was that
furnished by Patricio.
Eladio testified that the reason why he would not accept 8,084 pesos as the amount of the profits was
because the first year he (Tomas R. Perez) rendered the account to the court there was P17,000 profit,
and the second year not more than 8,000 pesos profit, and the third year not more than P4,000 profit,
but my brother stated to me that on account of some mistakes in the account the profits became reduced
by reason of paying off some expenses.
It appears from testimony that Tomas filed yearly statements in regard to the profits and that from these
yearly statements they would appear to amount to P29,000, but when he presented his final account for
the whole time he showed profits of only P8,084 claiming that expenses had been paid which had not
been included in the yearly accounts.
Tomas having died in 1903, his explanation of this difference could not be given.
On the 29th of October, 1894, Ojinaga stated in writing his consent to this account and left to the
administration of Tomas all the property which belonged to him coming from the estate.
The rendition of this account and the agreement of Ojinaga to the correctness constituted a contract
between these parties, a contract which can be set aside only upon the grounds upon which any other
contract can be annulled.
It is claimed by the appellant that it can be annulled on the ground of fraud committed by Tomas in
concealing from Ojinaga the truth in regard to the amount of profits for the period in question.
The appellant admitted at the trial that when litigation was commenced against Tomas R. Perez, about
1897, Ojinaga complained bitterly of the conduct of Juan and Patricio and accused them of being
unkind to their brother.

62

Evidence was introduced at the trial as to the contents of two letters said to be lost, written by Tomas to
Ojinaga at the time the settlement of P32,000 was under discussion, in which Tomas advised Ojinaga to
claim his part of that sum. Even then Ojinaga took no action in the matter. Until he died in 1898.
His will, made in that month, stated that the last time when he settled accounts with Tomas was in
1894, but that this settlement was not made effective because there were discovered certain
irregularities in the account, irregularities.
The appellant, Doa Angela Ojinaga, as judicial administratrix of Eladio Ojinaga, deceased, presented
to the commissioners appointed to hear claims against the estate of Tomas, deceased, a demand for
12,053.54 pesos with interest from the period of its administration.
This claim was disallowed by the commissioners and from that disallowance the appellant appealed to
the CFI That court entered judgment against the appellant and from that judgment she has appealed to
this court
ISSUE:WON Eladio Ojinaga so conducted himself with regard to the transaction that his
administratrix has now lost the right to claim a proportionate share?
HELD:NO, the receipt so given to the agent was a bar to her right to recover the amount of her share
growing out of the administration of her estate by the administrator or agent.
Eladio Ojinaga not only agreed to the correctness of this account in 1894, but after he was thoroughly
informed in the same year as to all the facts in the case he agreed to other accounts, which necessarily,
as he then knew, involved in a repetition of his agreement to the account of 1894. And knowing all the
facts in the case, he not only did not join in litigation commenced for the purpose of securing a true
statement of the profits but expressly refused to do so and censured the persons who promoted such
litigation.
It matters now how fair the conduct of the agent may have been in a particular case, nor that the
principal would have been no better of if the agent had strictly pursued his power, nor that the principal
was not, in fact, injured by the intervention of the agent for his own profit.
Separate Opinions
JOHNSON, J., dissenting:
I can not agree with the conclusion in this case. The following facts were admitted:
(1)
That the defendant was the administrator or agent in charge of the property of the plaintiff.
(2)
That the actual profits accruing to the plaintiff by virtue of such administration amounted to
about 12,000 pesos.
(3)
That the defendant paid to the plaintiff of such profits the sum of 1,761.72 pesos.
(4)
That the plaintiff believed that this amount so received was her share of the accrued profits and
gave a receipt for the same.
Under these facts the majority of the court held that the receipt so given to the agent was a bar to her
right to recover the amount of her share growing out of the administration of her estate by the
administrator or agent. Under the view we take of the case it is unimportant whether the defendant was
administrator or agent. The rule of law, as we understand it, is exactly the same.
63

No rule of law is better settled than that an agent can not retain for his own use profits made in the
course of the agency. Such profits belong to the principal. The well-settled and salutary principle that a
person who undertakes to act for another shall not, in the same matter, act for himself, results also in
the order rule that all profits made and advantage gained by the agent in the execution of the agency
belong to the principal. It matters not whether such profit or advantage be the result of the performance
or the violation of the duty of the agent, if his duty be strictly performed, the resulting profit accrues to
the principal as the legitimate consequence of the relation; even if the profit accrues from his violation
of duty, that likewise belongs to the principal, not only because the principal has to assume the
responsibility of the transaction but also because the agent can not be permitted to derive advantage
from his own default. The mere fact that the agent, by some means or other, by stating facts or refusing
to state all of the facts, induces the principal to accept a certain amount as the profits made in the
course of the agency, this fact can not be used for the purpose of preventing the principal from
recovering the true amount when the true amount is actually discovered.
It is only by rigid adherence to this rule of law that all temptation can be removed from one acting in a
fiduciary capacity to abuse his trust or seek his own advantage in the position which it affords him.
It matters not how fair the conduct of the agent may have been in a particular case, nor that the
principal would have been no better off if the agent had strictly pursued his power, nor that the
principal was not, in fact, injured by the intervention of the agent for his own profit. The result in both
cases must be the same.
If an agent dealing legitimately with the subject-matter of his agency acquires a profit, or if by
departing from his instructions he obtains better results than would have been obtained by following
them, the principal may yet claim the advantage thus obtained, even though the agent may have
contributed his own funds or responsibility in producing the result. All profits and every advantage,
beyond lawful compensation, made by the agent in a business or by dealing or speculating with the
effects of his principal, though in violation of his duty as agent, and though the loss, if one had
occurred, would have fallen on the agent, are for the benefit of the principal. (Dutton vs. Willner, 52 N.
Y., 312; Gardner vs. Ogden, 22 N. Y., 327; 78 American Decisions, 192.)
The principal may, at his own option, in such cases, compel the agent to account for or convey to him
the profits thus acquired. (Gardner vs. Ogden, supra.)
In no instance and under no condition will the courts allow an agent or trustee to make a profit for his
own benefit in the course of his agency or trust relation. The law holds out no such inducement to
agents or trustees so to misapply their services to the funds intrusted to their care. An agent by
concealing facts from his principal can under no condition be permitted, by sound jurisprudence, to
profit thereby. The principal, once such facts are discovered, has the right to recover whatever may be
due to him from the agent as the result of the agency. (Merryman vs.David, 31 Ill., 404; Kerfoot vs.
Hyman, 52 Ill., 512; Bunker vs. Miles, 30 Maine, 431; 50 American Decisions, 632; Montgomery
County vs. Robinson, 85 Ill., 174; In re rose, 80 Cal., 166; Estate of Knight, 12 Cal., 200; 73 American
Decisions, 531; Ward vs. Tinkham, 65 Mich., 695.)
It is found also that the rule under the Spanish law is no different from the above quoted. Article 1720
of the Civil Code provides:
Every agent is bound to give an account of his transactions and to pay to the principal all that he may
have received by virtue of the agency, even though what has been received is not owed to the principal.
64

Not only is he liable to the principal for any sum or sums resulting from such agency, but if he has
applied the same to his own use he is liable for interest upon the same. (Art. 1724, Civil Code.)
The judgment of the lower court should be reversed and the plaintiff should be permitted to recover,
with interest, whatever sum or sums the defendant received as a result of the agency or administration,
with costs.
De Borja vs. De Borja (digest)
The facts are stated in the opinion of the court.
M. H. de Joya and Quintin Paredes for plaintiffappellant. Jose de Borja for defendantappellant. IMPERIAL, J.:
Facts: The plaintiff herein, in his capacity as judicial administrator of the estate of the deceased
Marcelo de Borja, instituted this action in the Court of First Instance of Rizal, to recover from the
defendant the sum of P61,376.56 which, according to the amended complaint, the said defendant owed
the aforesaid deceased, for certain sums of money loaned to andcollectedby
him from other persons with the obligation to render an accounting thereof to the said deceased.
Issue: WON the Plaintiff acted on his capacity as an agent
Ruling: Yes In all the aforementioned transactions, the defendant acted in his capacity as attorneyinfact of his 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 article 1724 of the Civil Code. The defendantappellant's claim to the effect that he is
entitled to collect therents for the use of the earthen jar factory and the buildings thereof, is, likewise,
unfounded. The trial court held that all there existed between the parties was a mere gratuitous
commodatum and that the most that the deceased bound himself to do was to pay the taxes on the
properties
in
question.
There
is
nothing in the records of the case to justify reversing the judgment rendered therein. The judgment
appealed from being, in our opinion, in accordance with the law and sufficiently supported by a
preponderance of the evidence presented therein, it is hereby affirmed, without
special pronouncement as to the costs of this instance. So ordered.
Avancea, C. J., Malcolm, VillaReal, and Hull, JJ., concur. Judgment affirmed.
GR No. 19689. April 4, 1923
PHILIPPINE NATIONAL BANK vs. WELCH, FAIRCHILD & Co.
APPEAL from a judgment of the Court of First Instance of Manila.
FACTS: La Compaa Naviera, Inc, was organized in Manila under the laws of the Philippine Islands,
for the purpose of engaging in the business of marine shipping. Among its shareholders was Welch,
Fairchild & Co.
As an entirely new enterprise in the shipping world, it was necessary for it to acquire a proper
complement of vessels and adequate equipment and as shipping values in those days were high, the
company did not have sufficient ready capital to meet all the requirements. And so, it applied to the
plaintiff for a loan of $125,000, with which to purchase a boat called Benito Juarez, which had been
found on the market in the United States.

65

The defendant was kept advised as to certain needs of La Compaa Naviera, and acted for it in
important matters. In particular it was through the efforts of the defendant that the consent of the proper
authorities in the United States was obtained for the transfer of the Benito Juarez to Philippine registry.
In addition to this, the defendant advanced in San Francisco several thousands of pesos necessary for
the repair and equipment of the vessel prior to its departure for the Philippine Islands. However, it
became impracticable to deliver the bill of sale and insurance policy to the bank in San Francisco at the
time the money was needed to effect the transfer. Being advised of this circumstance, he defendant
addressed a letter on August 8, 1918, to the plaintiff, requesting it to cable its correspondent in San
Francisco to release the money and make payment for the vessel without requiring the delivery of the
bill of sale or policy of insurance with the promise that the Compaa Naviera will deliver said
documents to the plaintiff. La Compaa Naviera, Inc. confirmed such request through a letter dated
August 10, 1918. In response to these communications the plaintiff, sent a cablegram to its
correspondent in San Francisco authorizing payment of the purchase price of the Benito Juarez, without
the production of either bill of sale or insurance policy. Under these circumstances the vessel was
delivered and money paid over without the production or delivery of the documents mentioned. The
Benito Juarez was then dispatched, to the Philippine Islands. However, it encountered a storm off one
of the the islands of Hawaii and became a total loss. The proceeds of the insurance came to the hands of
the defendant having been applied by it in part satisfaction of indebtedness incurred by La Compaa
Naviera to it. This disposition of the insurance money was made by the defendant with the tacit
approval of La Compaa Naviera.
The plaintiff filed a complaint seeking to recover from the defendant the sum of $125,000, with
interest, being part of the proceeds of said insurance. The trial judge absolved the defendant from the
complaint and the plaintiff appealed.
Issue:WON PNB could collect from Welch, Fairchild & Co.
HELD: The plaintiff bank has a clear right of action against the defendant.
While it is true that an agent who acts for a revealed principal in the making 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 (art. 1725, Civ. Code), yet that rule clearly does not
control this case; for even conceding that the obligation created by the letter of August 8, 1918, was
directly binding only on the principal, and that in law the agent may stand apart therefrom, yet it is
manifest upon the simplest principles of jurisprudence that one who has intervened in the making of a
contract in the character of agent cannot be permitted to intercept and appropriate the thing which the
principal is bound to deliver, and thereby make performance by the principal impossible. The agent in
any event must be precluded from doing any positive act that could prevent performance on the part of
his principal. This much, ordinary good faith towards the other contracting party requires. The situation
before us in effect is one where, notwithstanding the promise held out jointly by principal and agent in
the letters of August 8 and 10, 1918, the two have conspired to make an application of the proceeds of
the insurance entirely contrary to the tenor of said letters. This cannot be permitted.
By virtue of the promise contained in the letter of August 8, 1918, the bank became the equitable owner
of the insurance effected on the Benito Juarez to the extent necessary to indemnify the bank for the
money advanced by it, in reliance upon that promise, for the purchase of said vessel; and this right of
the bank must be respected by all persons having due notice thereof, and most of all by the defendant
which took out the insurance itself in the interest of the parties then concerned, including of course the
66

bank. The defendant therefore cannot now be permitted to ignore the right of the bank and appropriate
the insurance to the prejudice of the bank, even though the act be done with the consent of its principal.
Harry Keeler Electric Co. vs. Rodriguez (44 Phil 19)
FACTS:Plaintiff is Harry E. Keeler Electric Co., a domestic corporation based in Manila engaged in
the electrical business, and among other things in the sale of what is known as the "Matthews" electric
plant.
Defendant is Domingo Rodriguez a resident of Talisay, Occidental Negros. Montelibano, a resident of
Iloilo, went to Keeler Electric and made arrangement with the latter wherein: He claimed that he could
find purchaser for the "Matthews" plant
Keeler Electric told Montelibano that for any plant that he could sell or any customer that he could
find he would be paid a commission of 10% for his services, if the sale was consummated.
Through Montelibanos efforts, Keeler was able to sell to Rodriguez one of the "Matthews" plants.
Rodriguez paid Montelibano (the purchase price of P2,513.55), after the installation of the plant and
without the knowledge of Keeler Electric. Keeler Electric filed an action against Rodriguez for
the payment of the purchase price.
Rodriguez: Claimed that he already paid the price of the plant. In addition, he alleged that Montelibano
sold and delivered the plant to him, and "was the one who ordered the installation of that electrical
plant. There were evidences: a statement and receipt which Montelibano signed to whom he paid the
money.
He paid Montelibano because the latter was the one who sold, delivered, and installed the electrical
plant, and he presented to him the account, and assured him that he was duly authorized to collect the
value of the electrical plant. As a matter of proof thereon, a receipt was made witnessed by Juan Cenar.
Cenar was sent by Keeler Electric to install the plant in Rodriguezs premises in Iloilo. He brought with
him a statement of account for Rodriguez but the latter said that he would pay in Manila.
The Lower Court In favoring Rodriguez held that Keeler Electric had held out Montelibano to
Rodriguez as an agent authorized to collect Payment to Montelibano would discharge the debt of
Rodriguez. The bill was given to Montelibano for collection purposes.
ISSUE:WON Rodriguez had a right to assume by any act or deed of Keeler Electric that Montelibano
was authorized to receive the money.
HELD:NO, Montelibano was not authorized.Article 1162 of the Civil Code provides:
Payment must be made to the persons in whose favor the obligation is constituted, or to another
authorized to receive it in his name.
There is no evidence that the plaintiff ever delivered any statements to Montelibano, or that he was
authorized to receive or receipt for the money, and defendant's own telegram shows that the plaintiff
"did not present bill" to defendant. He now claims that at the very time this telegram was sent, he had
the receipt of Montelibano for the money upon the identical statement of account which it is admitted
the plaintiff did render to the defendant.
67

The plant was sold by Keeler Electric to Rodriguez and was consigned to Iloilo where it was installed
by Cenar, acting for, and representing, Keeler Electric, whose expense for the trip is included in, and
made
a
part
of,
the
bill
which
was
receipted
by Montelibano.
Montelibano was not an agent of Keeler Electric.
There is nothing on the face of this receipt to show that Montelibano was the agent of, or that he was
acting for,Keeler Electric. It is his own personal receipt and his own personal signature. Outside of the
fact that Montelibano received the money and signed this receipt, there is no evidence that he had
anyauthority, real or apparent, to receive or receipt for the money. Neither is there any evidence that
Keeler Electric ever delivered the statement to Montelibano.
AUSTRIA V CA 39 SCRA 527
FACTS: In a receipt dated 30 January 1961, Maria G. Abad acknowledged having received from
Guillermo Austria one (1) pendant with diamonds valued at P4,500.00, to be sold on commission basis
or to be returned on demand. On 1 February 1961, however, while walking home to her residence in
Mandaluyong, Rizal, Abad was said to have been accosted by two men, one of whom hit her on the
face, while the other snatched her purse containing jewelry and cash, and ran away. Among the pieces
of jewelry allegedly taken by the robbers was the consigned pendant. The incident became the subject
of a criminal case filed in the Court of First Instance of Rizal against certain persons.
As Abad failed to return the jewelry or pay for its value notwithstanding demands, Austria brought in
the Court of First Instance of Manila an action against her and her husband f or recovery of the pendant
or of its value, and damages. Answering the allegations of the complaint, defendants spouses set up the
defense that the alleged robbery had extinguished their obligation.
After due hearing, the trial court rendered judgment for the plaintiff, and ordered defendants spouses,
jointly and severally, to pay to the former the sum of P4,500.00, with legal interest thereon, plus the
amount of P450.00 as reasonable attorneys' fees, and the costs. It was held that defendants failed to
prove the fact of robbery, or, if indeed it was committed, that defendant Maria Abad was guilty of
negligence when she went home without any companion, although it was already getting dark and she
was carrying a large amount of cash and valuables on the day in! question, and such negligence did not
free her from liability for damages for the loss of the jewelry.
ISSUE: Whether in a contract of agency (consignment of goods for sale) it is necessary that there be
prior conviction for robbery before the loss of the article shall exempt the consignee from liability for
such loss?
HELD: The Court of Appeals erred in finding that there was robbery in the case, although nobody has
been found guilty of the supposed crime. It is petitioner's theory that for robbery to fall under the
category of a fortuitous event and relieve the obligor from his obligation under a contract.
In short, that the occurrence of the robbery should be proved by a final judgment of conviction in the
criminal case.
It is recognized in this jurisdiction that to constitute a caso fortuito that would exempt a person from
responsibility, it is necessary that (1) the event must be independent of the human will (or rather, of the
debtor's or obligor's); (2) the occurrence must render it impossible for the debtor to fulfill the obligation
in a normal manner; and that (3) the obligor must be free of participation in, or aggravation of, the
68

injury to the creditor.1 A fortuitous event, therefore, can be produced by nature, e.g., earthquakes,
storms, floods, etc., or by the act of man, such as war, attack by bandits, robbery,2 etc.,
To avail of the exemption granted in the law, it is not necessary that the persons responsible for the
occurrence should be found or punished; it would only be sufficient to establish that the unforeseeable
event, the robbery in this case, did take place without any concurrent fault on the debtor's part, and this
can be done by preponderant evidence. To require in the present action for recovery the prior
conviction of the culprits in the criminal case, in order to establish the robbery as a fact, would be to
demand proof beyond reasonable doubt to prove a f act in a civil case.
The conduct of respondent Maria G. Abad, in returning alone to her house in the evening, carrying
jewelry of considerable value, would be negligent per se, and would not exempt her from responsibility
in the case of a robbery.
There is likewise no merit in petitioner's argument that to allow the fact of robbery to be recognized in
the civil case before conviction is secured in the criminal action, would prejudice the latter case, or
would result in inconsistency should the accused obtain an acquittal or should the criminal case be
dismissed. It must be realized that a court finding that a robbery has happened would not necessarily
mean that those accused in- the criminal action should be found guilty of the crime; nor would a ruling
that those actually accused did not commit the robbery be inconsistent with a finding that a robbery did
take place. The evidence to establish these facts would not necessarily be the same.
WHEREFORE, finding no error in the decision of the Court of Appeals under review, the petition in
this case is hereby dismissed, with costs against the petitioner.
Petition dismissed.

WEEK 11
E. Obligations of the Principal
G.R. No. L-22604

February 3, 1925

GUADALUPE GONZALEZ and LUIS GOMEZ, plaintiffs-appellants,

vs.
E.J. HABERER, defendant-appellee
FACTS:A tract of land was sold to defendant by the plaintiffs. This case is an action to recover P 34,
260 due the plaintiff and P 10, 000 for damage due to failure of defendant to comply with the
agreement.
Defendant admits that P 31, 000 remains unpaid by as his defense; it was due to the false representation
of the plaintiffs to make him believe that they were in possession of the property. He found that there
are claimants to the land and the plaintiffs havent done anything to resolve it. He therefore asks that
the plaintiffs be ordered to return to him P 30, 000 and pay P 25, 000 for breach of contract.
ISSUE:WON, the plaintiffs were under no obligation to place the land in possession of the defendant.
HELD: NO. It is conceded by the plaintiffs that the defendant never obtained actual or physical
possession of the land, but it is argued that under the contract quoted the plaintiffs were under no
69

obligation to place him in possession. This contention cannot be sustained. Cause 3 of paragraph 3 of
the contract
"3. That said Mr. E.J. Haberer shall have the right to take possession of the aforesaid land immediately
after the execution of this document together with all the improvements now existing on the same land,
such as palay plantation and others.
gave the defendant the right to take possession of the land immediately upon the execution of the
contract and necessarily created the obligation on the part of the plaintiffs to make good the right thus
granted; it was one of the essential conditions of the agreement and the failure of the plaintiffs to
comply with this condition, without fault on the part of the defendant, is in itself sufficient ground for
the rescission, even in the absence of any misrepresentation on their part.
Albaladejo y Cia vs Phil Refining Company
FACTS: Albaladejo y Cia had a contract with The Visayan Refining Co. whereby the former shall sell
copra to the latter for a period of a years. Later, the plaintiff advised the Visayan of the stocks that the
former had for shipment, and, from time to time, requested the Visayan to send vessels to take up said
stocks; but allegedly the Visayan culpably and negligently allowed a great number of days to elapse
before sending the boats for the transportation of the copra to Opon, Cebu, and that due to the fault and
negligence of the Visayan, the stocks of copra prepared for shipment by the plaintiff had to remain an
unnecessary length of time in warehouses and could not be delivered to the Visayan, nor could they be
transmitted to this latter because of the lack of boats, and that for this reason the copra gathered by the
plaintiff and prepared for delivery to the Visayan suffered the diminishment of weight herein below
specified, through shrinkage or excessive drying, and, in consequence thereof, an important
diminishment in its value.
ISSUE: Whether or not an AGENCY exists between the plaintiff and the defendant making the latter
liable with the copra.
HELD: In the appellant's brief the contention is advanced that the contract between the plaintiff and
the Visayan Refining Co. created the relation of principal and agent between the parties, and the
reliance is placed upon article 1729 of the Civil Code which requires the principal to indemnify the
agent for damages incurred in carrying out the agency. Attentive perusal of the contract is, however,
convincing to the effect that the relation between the parties was not that of principal and agent in so far
as relates to the purchase of copra by the plaintiff. It is true that the Visayan Refining Co. made the
plaintiff one of its instruments for the collection of copra; but it is clear that in making its purchases
from the producers the plaintiff was buying upon its own account and that when it turned over the
copra to the Visayan Refining Co., pursuant to that agreement, a second sale was effected. In paragraph
three of the contract it is declared that during the continuance of this contract the Visayan Refining Co.
would not appoint any other agent for the purchase of copra in Legaspi; and this gives rise indirectly to
the inference that the plaintiff was considered its buying agent. But the use of this term in one clause of
the contract cannot dominate the real nature of the agreement as revealed in other clauses, no less than
in the caption of the agreement itself. In some of the trade letters also the various instrumentalities used
by the Visayan Refining Co. for the collection of copra are spoken of as agents. But this designation
was evidently used for convenience; and it is very clear that in its activities as a buyer the plaintiff was
acting upon its own account and not as agents, in the legal sense, of the Visayan Refining Co. The title
to all of the copra purchased by the plaintiff undoubtedly remained in it until it was delivered by way of
subsequent sale to said company.

WEEK 12
70

F. Modes of Extinguishment of Agency

ANTONIO M. A. BARRETTO, plaintiff-appellant,
vs.
JOSE SANTA MARINA, defendant-appellee.
TORRES, J.:
FACTS:
The plaintiff, Antonio M.A. Barretto, was an agent and manager of Jose Santa Marina, the defendant, a
resident of Spain and the owner and proprietor of the business known as the La Insular Cigar and
Cigarette Factory. The petitioner alleged that the defendant, without reason, justification, or pretext and
in violation of the contract of agency, summarily and arbitrarily dispensed with the plaintiff's services
and removed him from the management of the business.
The evidence showed that the plaintiff Barretto's renunciation or registration of the position he held as
agent and manager of the said factory was freely and voluntarily made by him on the occasion of the
insolvency and disappearance of a Chinese man who had bought from the factory products and, without
paying this large debt, disappeared and has not been seen since. Barretto sent a letter of resignation to
Santa Marina and Santa Marina did not immediately reply and tell him of his decision on the matter.
After several months, Barretto was informed that the power conferred upon him by the defendant has
been revoked and the latter had already appointed J. McGavin to substitute him.
ISSUE:
Whether the contract of agency was validly revoked.
RULING:
Yes, the contract of agency between the plaintiff and the defendant is validy revoked. Barretto was not
really dismissed or removed by Santa Marina. Rather, Barretto resigned as the defendants agent and
manager as evidenced by the letter he sent to the defendant.
Article 1733 of the civil Code, applicable to the case at bar, according to the provisions of article 2 of
the Code of Commerce, prescribes: "The principal may, at his will, revoke the power and compel the
agent to return the instrument containing the same in which the authority was given."
Article 279 of the Code of Commerce provides: "The principal may revoke the commission intrusted to
an agent at any stage of the transaction, advising him thereof, but always being liable for the result of
the transactions which took place before the latter was informed of the revocation."1awphi1.net
The contract of agency can subsist only so long as the principal has confidence in his agent, because,
from the moment such confidence disappears and although there be a fixed period for the exercise of
the office of agent, the principal has a perfect right to revoke the power that he had conferred upon the
agent owing to the confidence he had in him and which for sound reasons had ceased to exist.

71

The fixing of the period by the Courts in their contracts cannot be invoked since the rights and
obligations existing between Barretto and Santa Marina are absolutely different from those to which it
refers, for, according to article 1732 of the Civil Code, agency is terminated:
1. By revocation.
2. By withdrawal of the agent.
3. By death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
It is not incumbent upon the courts to fix the period during which contracts for services shall last. Their
duration is understood to be implicity fixed, in default of express stipulation, by the period for the
payment of the salary of the employee.
Article 302 of the Code of Commerce reads thus:
In cases in which no special time is fixed in the contracts of service, any one of the parties
thereto may dissolve it, advising the other party thereof one month in advance.
The factor or shop clerk shall be entitled, in such case, to the salary due for one month.
From the mere fact that the principal no longer had confidence in the agent, he is entitled to withdraw it
and to revoke the power he conferred upon the latter, even before the expiration of the period of the
engagement or of the agreement made between them; but, in the present case, once it has been shown
that, between the deceased Joaquin Santa Marina and the latter's heir, now the defendant, on the one
hand, and the plaintiff Barretto, on the other, no period whatever was stipulated during which the lastnamed should hold the office and manager of the said factory, it is unquestionable that the defendant,
even without good reasons, could lawfully revoke the power conferred upon the plaintiff and appoint in
his place Mr. McGavin, and thereby contracted no liability whatever other than the obligation to pay
the plaintiff the salary pertaining to one month and some odd days.
G.R. No. L-18616 March 31, 1964
VICENTE M. COLEONGCO, plaintiff-appellant, vs. EDUARDO L. CLAPAROLS, defendant-appellee.
REYES, J.B.L., J.:
FACTS:
Defendant-appellee, Eduardo L. Claparols, operated a factory for the manufacture of nails in Talisay, Occidental
Negros, under the style of "Claparols Steel & Nail Plant". The marketing of the nails was handled by the "ABCD
Commercial" of Bacolod, which was owned by a Chinaman named Kho To
Losses compelled Claparols to look for someone to finance his imports of nail wires and on April 1953 he was
introduced by Kho To to Vicente Coleongco, the appellee, recommending said appellant to be the financier in the
stead of Kho To. Claparols agreed and a contract was perfected between them making Coleongco the financier
and a special power of attorney was given to Coleongco authorizing him to open and negotiate letters of credit,
to sign contracts, bills of lading, invoices, and papers covering transactions; to represent appellee and the nail
factory; and to accept payments and cash advances from dealers and distributors. Coleongco also became the
assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his
time to the nail manufacture processes.

72

On November 1956, Claparols was disagreeably surprised by service of an alias writ of execution to enforce a
judgment obtained against him by the Philippine National Bank because of derogatory information against
Claparols made by appellant Coleongco. Claparols was able to arrange matters with the bank and thereafter
revoked the SPA and informed Coleongco through registered mail. Coleongco was also dismissed as assistant
manager and Claparols hired auditors to go over the books and records of the business. It was also revealed to
Claparols by the machine superintendent, Agsam, that he was asked by Coleongco to pour acid on the machine
to paralyze the factory. It was found out by the auditors that Coleongco owes Claparols and certain
correspondences were found by Claparols stating Coleongcos proposal to Kho To to take over Claparols
business and to reduce the drawings granted to Claparol.
it is contended by the appellant Coleongco that the power of attorney was made to protect his interest under the
financing agreement and was one coupled with an interest that the appellee Claparols had no legal power to
revoke.
ISSUE:
Whether the revocation of the SPA of Coleongco was valid.
RULING:
Yes, the revocation of the SPA of Coleongco by his principal Claparols is valid. A power of attorney can be made
irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with
interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact betrays
the interest of the principal, as happened in this case. It 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 authorizes
the agent to commit frauds against the principal.
Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that responsibility arising
from fraud is demandable in all obligations, and that any waiver of action for future fraud is void. It is also on
this principle that the Civil Code, in its Article 1800, declares that the powers of a partner, appointed as manager,
in the articles of co-partnership are irrevocable without just or lawful cause; and an agent with power coupled
with an interest can not stand on better ground than such a partner in so far as irrevocability of the power is
concerned.
I.

Dy Buncio vs Ong Guan Gan Week 12

Facts:
Plaintiff claims that the property belongs to its judgment debtor, Ong Guan Can, while defendants Juan Tong and Pua Giok
Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by Ong Guan Can, Jr.
Ong Guan Can, Jr., as agent of Ong Guan Can, the proprietor of the commercial firm of Ong Guan Can & Sons, sells the
rice-mill and camarin for P13,000 and gives as his authority the power of attorney dated the 23d of May, 1928, a copy of
this public instrument being attached to the deed and recorded with the deed in the office of the register of deeds of Capiz.
The receipt of the money acknowledged in the deed was to the agent, and the deed was signed by the agent in his own name
and without any words indicating that he was signing it for the principal.
The trial court held that the deed was invalid and that the property was subject to the execution which has been levied on the
properties by the judgment creditor. Furthermore, leaving aside the irregularities of the deed, the power of attorney referred
to in the deed and registered therewith is not a general power of attorney but a limited one and does not give the express
power to alienate the properties in question. Appellants claim that this defect is cured by a general power of attorney given
to the same agent in 1920.
ISSUE:
Whether the general power of attorney first issued cures the defect on the limited power of attorney subsequently issued.
RULING:

73

No, the general power of attorney issued in 1920 does not cure the defect on the limited power of attorney. Article 1732 of
the Civil Code is silent over the partial termination of an agency. The making and accepting of a new power of attorney,
whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke
the latter when the two are inconsistent. If the new appointment with limited powers does not revoke the general power of
attorney, the execution of the second power of attorney would be a mere futile gesture. Thus, the power of attorney used by
Ong Guan Can, Jr. does not give the power to alienate the property making the sale in 1928 invalid.

Ecsay v. CA 61 SCRA 369

FACTS: Emilio Ecsay mortgaged his property now in question to the PNB. He was
not able to pay his loan before he died in 1924, thus the bank filed a foreclosure
suit against the estate of the former. Pending the said suit, on 1933 an original
contract was entered between the bank, the administrator, and Jose Ecsay,
brother of Emilio where the latter assumed the mortgage indebtedness of his
deceased brother. This was agreed to by Magdalena widow of Emilio, in her own
behalf and as guardian of their children. When it was discovered that the original
contract failed to state the transfer of ownership of the properties in question, in
consideration of Joses assumption of the mortgaged, a supplementary
contract was entered by the parties which was approved by the probate court
taking cognizance of the estate of the deceased Emilio in 1934. In 1941,
Magdalena and the other children filed a complaint against the petitioner and the
administrator for the recovery of the ownership and possession of the properties
in question. Petitioners contend that since the titles over the properties in
question were transferred by fraudulent means, an implied trust was created
between the testate estate of Emilio and Jose Sr. under which, by operation of law,
the latter became a trustee of the properties in question in favor of the heirs of
Emilio; consequently, the respondents are duty bound to reconvey the properties
in question to the petitioners whose right to recover the properties does not
prescribe.
ISSUE:
Whether or not an implied trust was created during the reconveyance of property
in question to Jose Ecsay.
HELD : No
The court held that as the Court of Appeals held, no fraud was proved. The
evidence is clear that the original and supplementary contracts were the result of
a series of negotiations by the testate estate of Emilio Escay through its Judicial
Administrator and legal representative; its creditor, the Philippine National Bank;
the heirs represented by their guardian ad litem, Magdalena Vda. de Escay; and
Jose Escay. Since there was no fraud, there was no trust relation that arose.
Assuming that there was fraud in the transfer of the properties, the lapse of time
since the discovery of the alleged fraud in 1941 has extinguished any right on the
part of the petitioners to seek the reconveyance of the properties. The
prescriptibility of an action for reconveyance based on implied or constructive
trust, is now a settled question in this jurisdiction. It prescribes in ten years.
G.R. No. L-5180

August 31, 1953

74

CONSEJO INFANTE, petitioner,

vs.
JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS, SECOND
DIVISION, respondents.
FACTS: Consejo Infante, defendant herein, was the owner of two parcels of land, together with a
house built thereon, situated in the City of Manila.
She contracted the services of Jose Cunanan and Juan Mijares, plaintiff herein, to sell the abovementioned property for a price of P30,000 subject to the condition that the purchaser would assume the
mortgage existing thereon in the favor of the Rehabilitation Finance Corporation.
She agreed to pay them a commission of 5 per cent on the purchase price plus whatever overprice they
may obtain for the property. Plaintiffs found one Pio S. Noche who was willing to buy the property
under the terms agreed upon with defendant, but when they introduced him to defendant, the latter
informed them that she was no longer interested in selling the property and succeeded in making them
sign a document stating therein that the written authority she had given them was already can-celled.
However, the defendant dealt directly with Pio S. Noche selling to him the property for P31,000. Upon
learning this transaction, plaintiffs demanded from defendant the payment of their commission, but she
refused and so they brought the present action.
Defendant admitted having contracted the services of the plaintiffs to sell her property as set forth in
the complaint, but stated that she agreed to pay them a commission of P1,200 only on condition that
they buy her a property somewhere in Taft Avenue to where she might transfer after selling her
property. Defendant avers that while plaintiffs took steps to sell her property as agreed upon, they sold
the property at Taft Avenue to another party and because of this failure it was agreed that the authority
she had given them be cancelled.
ISSUE: W/N Jose Cunanan and Juan Mijares are entitled to the commission originally agreed upon
HELD: YES. Petitioner, contends that authority has already been withdrawn on November 30, 1948
when, by the voluntary act of respondents, they executed a document stating that said authority shall be
considered cancelled and without any effect, so that when petitioner sold the property to Pio S. Noche
on December 20, 1948, she was already free from her commitment with respondents and, therefore,
was not in duty bound to pay them any commission for the transaction..
If the facts were as claimed by petitioner, there is in-deed no doubt that she would have no obligation to
pay respondents the commission which was promised them under the original authority because, under
the old Civil Code, her right to withdraw such authority is recognized. A principal may withdraw the
authority given to an agent at will. (Article 1733.) But this fact is disputed. Thus, respondents claim
that while they agreed to cancel the written authority given to them, they did so merely upon the verbal
assurance given by petitioner that, should the property be sold to their own buyer, Pio S. Noche, they
would be given the commission agreed upon. True, this verbal assurance does not appear in the written
cancellation, Exhibit 1, and, on the other hand, it is disputed by petitioner, but respondents were
allowed to present oral evidence to prove it, and this is now assigned as error in this petition for review.
But even disregarding the oral evidence adduced by respondents in contravention of the parole
evidence rule, we are, however, of the opinion that there is enough justification for the conclusion
75

reached by the lower court as well as by the Court of Appeals to the effect that respondents are entitled
to the commission originally agreed upon. It is a fact found by the Court of Appeals that after petitioner
had given the written authority to respondents to sell her land for the sum of P30,000, respondents
found a buyer in the person of one Pio S. Noche who was willing to buy the property under the terms
agreed upon, and this matter was immediately brought to the knowledge of petitioner. But the latter,
perhaps by way of strategem, advised respondents that she was no longer interested in the deal and was
able to prevail upon them to sign a document agreeing to the cancellation of the written authority.
That petitioner had changed her mind even if respondents had found a buyer who was willing to close
the deal, is a matter that would not give rise to a legal consequence if respondents agree to call off the
transaction in deference to the request of the petitioner. But the situation varies if one of the parties
takes advantage of the benevolence of the other and acts in a manner that would promote his own
selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned without
ac-cording to the party prejudiced the reward which is due him. This is the situation in which
respondents were placed by petitioner. Petitioner took advantage of the services rendered by
respondents, but believing that she could evade payment of their commission, she made use of a
ruse by inducing them to sign the deed of cancellation Exhibit 1. This act of subversion cannot be
sanctioned and cannot serve as basis for petitioner to escape payment of the commission agreed upon.
Separate Opinions
LABRADOR, J., concurring and dissenting:
I concur in the result. I can not agree, however, to the ruling made in the majority decision that the
petitioners can not introduce evidence of the circumstances under which the document was signed, i.e.
upon promise by respondent that should the property be sold to petitioner's buyer they would
nevertheless be entitled to the commission agreed upon. Such evidence is not excluded by the parole
evidence rule, because it does not tend to alter or vary the terms of the document. This document was
merely a withdrawal of the authority granted the petitioner to sell the property, not an agreement that
they shall not be paid their commission.
G.R. No. L-28050
March 13, 1928
FEDERICO VALERA, plaintiff-appellant,
vs.
MIGUEL VELASCO, defendant-appellee
FACTS: By virtue of the powers of attorney, the Miguel Velasco was appointed attorney-in-fact of
Federico Valera with authority to manage his property in the Philippines, consisting of the usufruct of a
real property located of Echague Street, City of Manila.
Velasco accepted both powers of attorney, managed Valera's property, reported his operations, and
rendered accounts of his administration; and on March 31,1923 presented exhibit F to plaintiff, which
is the final account of his administration for said month, wherein it appears that there is a balance of
P3,058.33 in favor of Valera.
The liquidation of accounts revealed that the Valera owed the Velasco P1,100, and as misunderstanding
arose between them, the Velasco brought suit against the Valera, civil case No. 23447 of this court.
Judgment was rendered in his (Velasco) favor on March 28, 1923, and after the writ of execution was
issued, the sheriff levied upon the plaintiff's (Valera) right of usufruct, sold it at public auction and
adjudicated it to the defendant in payment of all of his claim.
76

Subsequently, on May 11, 1923, the plaintiff sold his right of redemption to one Eduardo Hernandez,
for the sum of P200 (Exhibit A). On September 4, 1923, this purchaser conveyed the same right of
redemption, for the sum of P200,to the plaintiff himself, Federico Valera (Exhibit C).
After the plaintiff had recovered his right of redemption, one Salvador Vallejo, who had an execution
upon a judgment against the plaintiff rendered in a civil case against the latter, levied upon said right of
redemption, which was sold by the sheriff at public auction to Salvador Vallejo for P250 and was
definitely adjudicated to him. Later ,he transferred said right of redemption to the defendant Velasco.
This is how the title to the right of usufruct to the aforementioned property later came to vest the said
defendant.
Thereafter, Federico Valera filed a complaint against Miguel Velasco, wherein the Court of First
Instance of Manila dismissed the complaint on the ground that he has not satisfactorily proven his right
of action. Hence, this appeal.
ISSUE: Whether the filing of the complaint against the principal is an act of termination of the contract
of agency.
HELD: YES.The misunderstanding between the plaintiff and the defendant over the payment of the
balance of P1,000 due the latter, as a result of the liquidation of the accounts between them arising
from the collections by virtue of the former's usufructuary right, who was the principal, made by the
latter as his agent, and the fact that the said defendant brought suit against the said principal on March
28, 1928 for the payment of said balance, more than prove the breach of the juridical relation between
them; for, although the agent has not expressly told his principal that he renounced the agency, yet
neither dignity nor decorum permits the latter to continue representing a person who has adopted such
an antagonistic attitude towards him. When the agent filed a complaint against his principal for
recovery of a sum of money arising from the liquidation of the accounts between them in connection
with the agency, Federico Valera could not have understood otherwise than that Miguel Velasco
renounced the agency; because his act was more expressive than words and could not have caused any
doubt. (2 C. J., 543.) In order to terminate their relations by virtue of the agency the defendant, as
agent, rendered his final account on March 31, 1923 to the plaintiff, as principal.
Briefly, then, the fact that an agent institutes an action against his principal for the recovery of the
balance in his favor resulting from the liquidation of the accounts between them arising from the
agency, and renders and final account of his operations, is equivalent to an express renunciation of the
agency, and terminates the juridical relation between them.
If, as we have found, the defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his
principal, suing him for the collection of the balance in his favor, resulting from the liquidation of the
agency accounts, ceased ipso facto to be the agent of the plaintiff-appellant, said agent's purchase of the
aforesaid principal's right of usufruct at public auction held by virtue of an execution issued upon the
judgment rendered in favor of the former and against the latter, is valid and legal
The filing of a complaint by an agent against his principal for the collection of a balance in his favor
resulting from a liquidation of the agency accounts between them, and his rendering of a final account
of his operations, are equivalent to an express renunciation of the agency and terminate the juridical
relation between them.
77

(Note: Please see article 1732 and article 1736 of the Civil Code)

c/o Mark B
G.R. No. L-17043
January 31, 1961
NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR, plaintiffs-appellants,
vs.
LUY KIM GUAN and LINO BANGAYAN, defendants-appellees.
FACTS:The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and
who died in China sometime after he went to that country in the last part of 1931 or early part of 1932.
The said Luis Herrera in his lifetime was the owner of three (3) parcels of land .
Before leaving for China, however, Luis Herrera executed on December 1, 1931, a deed of General
Power of Attorney which authorized and empowered the defendant Kim Guan, among others to
administer and sell the properties of said Luis Herrera.
Lot 1740 was originally covered by Original Certificate Title 8601 registered in the name of Luis
Herrera, married to GO Bang. This lot was sold by the defendant Luy Kim in his capacity as attorneyin-fact of the deceased Luis Her to Luy Chay on September 11, 1939.
Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go Bang. On
December 1, 1931, Luis Herrera sold one-half () undivided share and to Herrera and Go Bang, the
other half
On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the defendants, sold to
Nicomedes Salazar his one half () participation in these two (2) lots.
As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but as to the
specific and precise date of his death the evidence of both parties failed to show.
It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding quoted
portion of the decision were fraudulent and were executed after the death of Luis Herrera and,
consequently, when the power of attorney was no longer operative
ISSUE: Whether the transactions are null and void because they were executed after the death of the
principal.
HELD:The date of death of Luis Herrera has not been satisfactorily proven. The only evidence
presented by the Plaintiff-appellant in this respect is a supposed letter received from a certain "Candi",
dated at Amoy in November, 1936, purporting to give information that Luis Herrera (without
mentioning his name) had died in August of that year. This piece of evidence was properly rejected by
the lower court for lack of identification.
On the other hand, we have the testimony of the witness Chung Lian to the effect that when he was in
Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that the latter
was still alive at the time.

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Since the documents had been executed the attorney-in-fact one in 1937 and the other in 1939, it is
evident, if we are to believe this testimony, that the documents were executed during the lifetime of the
principal.
Even granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no
indication in the record, that the age Luy Kim Guan was aware of the death of his prince at the time he
sold the property.
The death of the principal does not render the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment the agency.
G.R. No. L-10881
September 30, 1958
EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO,
BERNARDO DEL ROSARIO, ISIDRA DEL ROSARIO, DOMINGA DEL ROSARIO and
CONCEPCION
BORROMEO, plaintiff-appellees,
vs.
PRIMITIVO ABAD and TEODORICO ABAD, defendants-appellants.
FACTS:The plaintiffs are the children and heirs of the late Tiburcio del Rosario. On 12 December
1936, the Secretary of Agriculture and Commerce, by authority of the President of the Commonwealth
of the Philippines, issued under the provisions of the Public Land Act (Act No. 2874) homestead patent
No. 40596 to Tiburcio del Rosario. The homestead with an area of 9 hectares, 43 ares and 14 centares is
situated in barrio San Mauricio, municipality of San Jose, province of Nueva Ecija. On 11 February
1937, the Registrar of Deeds in and for the province of Nueva Ecija issued original certificate of title
No. 4820 in the name of the homesteader (Annex A, stipulation of facts, pp. 25-30, Rec. on App.). On
24 February 1937, Tiburcio del Rosario obtained a loan from Primitivo Abad in the sum of P2,000 with
interest at the rate of 12% per annum, payable on 31 December 1941. As security for the payment
thereof he mortgaged the improvements of the parcel of land in favor of the creditor (Annex B,
complaint, pp. 10-13, Rec. on App.). On the same day, 24 February, the mortgagor executed an
"irrevocable special power of attorney coupled with interest" in favor of the mortgagee, authorizing
him, among others, to sell and convey the parcel of land (Annex A, complaint, pp. 7-9, Rec. on App.).
Thereafter the mortgagor and his family moved to Santiago, Isabela, and there established a new
residence. Sometime in December 1945 the mortgagor died leaving the mortgage debt unpaid. On 9
June 1947, Primitivo Abad, acting as attorney-in-fact of Tiburcio del Rosario, sold the parcel of land to
his son Teodorico Abad for and in consideration of the token sum of P1.00 and the payment by the
vendee of the mortgage debt of Tiburcio del Rosario to Primitivo Abad (Annex C, complaint, pp. 1316, Rec. on App.). The vendee took possession of the parcel of land. Upon the filing and registration of
the last deed of sale, the Registrar of Deeds in and for the province of Nueva Ecija cancelled original
certificate of title No. 4820 in the name of Tiburcio del Rosario and in lieu thereof issued transfer
certificate of title No. 1882 in favor of the vendee Teodorico Abad.
On 29 December 1952 the plaintiffs brought suit against the defendants to recover possession and
ownership of the parcel of land, damages, attorney's fees and costs. The defendants answered the
complaint and prayed for the dismissal thereof, damages, attorney's fees and costs.
ISSUE:Whether the agency is created and therefore the sale is valid?

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HELD:No. The power of attorney executed by Tiburcio del Rosario in favor of Primitivo Abad (Annex
A, complaint, pp. 7-9, Rec. on App.) providing, among others, that is coupled with an interest in the
subject matter thereof in favor of the said attorney and are therefore irrevocable, and . . . conferring
upon my said attorney full and ample power and authority to do and perform all things reasonably
necessary and proper for the due carrying out of the said powers according to the true tenor and purport
of the same, . . ." does not create an agency coupled with an interest nor does it clothe the agency with
an irrevocable character. A mere statement in the power of attorney that it is coupled with an interest is
not enough. In what does such interest consist must be stated in the power of attorney.
The fact that Tiburcio del Rosario, the principal, had mortgaged the improvements of the parcel of land
to Primitivo Abad, the agent, (Annex B, complaint, pp. 10-13, Rec. on App.) is not such an interest as
could render irrevocable the power of attorney executed by the principal in favor of the agent. In fact
no mention of it is made in the power of attorney. The mortgage on the improvements of the parcel of
land has nothing to do with the power of attorney and may be foreclosed by the mortgagee upon failure
of the mortgagor to comply with his obligation. As the agency was not coupled with an interest, it was
terminated upon the death of Tiburcio del Rosario, the principal, sometime in December 1945, and
Primitivo Abad, the agent, could no longer validly convey the parcel of land to Teodorico Abad on 9
June 1947. The sale, therefore, to the later was null and void. But granting that the irrevocable power of
attorney was lawful and valid it would subject the parcel of land to an encumbrance. As the homestead
patent was issued on 12 December 1936 and the power of attorney was executed on 24 February 1937,
it was in violation of the law that prohibits the alienation or encumbrance of land acquired by
homestead from the date of the approval of the application and for a term of five years from and after
the issuance of the patent or grant. Appellants contend that the power of attorney was to be availed of
by the agent after the lapse of the prohibition period of five years, and that in fact Primitivo Abad sold
the parcel of land on 9 June 1947, after the lapse of such period. Nothing to that effect is found in the
power of attorney.

G.R. No. L-31581

February 3, 1930
Estate of the deceased GabinaLabitoria.
ENRIQUE M. PASNO, petitioner-appellee,
vs.
FORTUNATA RAVINA and PONCIANA RAVINA, oppositors-appellants.
PHILIPPINE NATIONAL BANK, appellant.
There are two appeals in this case. One appeal has been taken by the oppositors to the legalization of
the will of GabinaLabitoria, and concerns the validity of that will. The other appeal has been taken by
the Philippine National Bank and concerns the survivability of the right of sale of the mortgaged
property under special power while the mortgaged property is in custodia legis. We will deal with these
appeals separately.
I. ENRIQUE M. PASNO, petitioner and appellee, vs. FORTUNATA RAVINA and PONCIANO
RAVINA, oppositors and appellants. Validity of GabinaLabitoria's will.
As the stenographic notes have not been written up and elevated to this court, any discussion of the
evidence is rendered impossible. The single question to be decided is whether the admitted fact that the
will was executed on July 27, 1928, although stating that it was executed on February 6, 1926,
80

invalidates the will. As said by the trial judge, the reason for the error was on account of the will being
in great part a reproduction of another will of February 6, 1926, and inadvertently retaining this date.
Section 618, as amended, of the Code of Civil Procedure prescribes the requisites necessary to the
execution of a valid will. The law does not require that the will shall be dated. Accordingly, a will
without a date is valid. So likewise an erroneous date will not defeat a will. (Wright vs. Wright [1854],
5 Ind., 389; Peace vs. Edwards [1915], 170 N. C., 64; Ann. Cas. 1918-A, 778; L. R. A. 1916-E, 501
note.)
It results that the trial judge was right in admitting the will of GabinaLabitoria to probate.
II. ENRIQUE M. PASNO, petitioner and appellee, vs. PHILIPPINE NATIONAL BANK,
appellant. Right of the mortgagee, the Philippine National Bank, to foreclose the mortgage in its
favor executed by GabinaLabitoria during her lifetime now that the mortgaged property is in the
hands of an administrator.
FACTS:GabinaLabitoria during her lifetime mortgaged three parcels of land to the Philippine National
Bank to secure an indebtedness of P1,600. It was stipulated in the mortgage, among other things, that
the mortgagee "may remove, sell or dispose of the mortgaged property or any buildings, improvements
or other property in, on or attached to it and belonging to the mortgagor in accordance with the
provisions of Act No. 3135 or take other legal action that it may deem necessary."
The mortgagor died, and a petition was presented in court for the probate of her last will and testament.
During the pendency of these proceedings, a special administrator was appointed by the lower court
who took possession of the estate of the deceased, including the three parcels of land mortgaged to the
Philippine National Bank.
The estate having failed to comply with the conditions of the mortgage, the Philippine National Bank,
asked the sheriff of Tayabas to proceed with the sale of the parcels of land.
When the attorney for the special administrator received notice of the proposed action, he filed a
motion in court in which an order was asked requiring the sheriff to vacate the attachment over the
mortgaged properties and to abstain from selling the same.
RTC granted the petition, and later denied a motion for reconsideration presented on behalf of the
Philippine National Bank.
ISSUE: Whether the right of sale survives the death of the grantor.
HELD: Yes. The appellant practically concedes that the law applicable to the case is section 708 of the
Code of Civil Procedure. The cited section reads: "A creditor holding a claim against the deceased,
secured by mortgage or other collateral security, may abandon the security and prosecute his claim
before the committee, and share in the general distribution of the assets of the estate; or he may
foreclose his mortgage or realize upon his security, by ordinary action in court, making the executor or
administrator a party defendant; and if there is a judgment for a deficiency, after the sale of the
mortgaged premises, or the property pledged, in the foreclosure or other proceeding to realize upon the
security, he may prove his deficiency judgment before the committee against the estate of the deceased;
or he may rely upon his mortgage or other security alone, and foreclose the same at any time, within
the period of the statute of limitations, and in that even he shall not be admitted as a creditor, and shall
receive no share in the distribution of the other assets of the estate; but nothing herein contained shall
prohibit the executor or administrator from redeeming the property mortgaged or pledged, by paying
the debt for which it is held as security, under the direction of the court, if the court shall adjudge it to
be for the best interest of the estate that such redemption shall be made." In this connection, it is to be
81

noted that the law provides two remedies (Osorio vs. San Agustin [1913], 25 Phil., 404). The creditor
here is not taking advantage of the first remedy for the mortgage security has not been abandoned.
Rather is the second remedy invoked but until now unsuccessfully since the mortgagee has not begun
an ordinary action in court to foreclose the mortgage making the special administrator a party
defendant.
The power of sale given in a real estate mortgage is a power coupled with an interest which
survives the death of the grantor. The mortgagee with a power of sale should, on the death of the
mortgagor, foreclose the mortgage in accordance with the procedure pointed out in section 708 of
the Code of Civil Procedure.That would safeguard the interests of the estate by putting the estate on
notice while it would not jeopardize any rights of the mortgagee. The only result is to suspend
temporarily the power to sell so as not to interfere with the orderly administration of the estate of a
decedent.
It results that the trial judge committed no error in sustaining the petition of the administrator of the
estate of the deceased GabinaLabitoria and in denying the motion of the Philippine National Bank.
G.R. No. L-21813 July 30, 1966
AMPARO G. PEREZ, ET AL. vs. PHILIPPINE NATIONAL BANK, Binalbagan Branch, ET AL.
FACTS:On 1939, Vicente Perez mortgaged Lot No. 286-E of the Kabankalan Cadastre, with Transfer
certificate of Title to the PNB Bacolod Branch, in order to secure payment of a loan of P2,500, plus
interest, payable in yearly installments.
On 1942, Vicente Perez, mortgagor, died intestate, survived by his widow and children (appellees). At
that time, there was an outstanding balance of P1,917.00, and corresponding interest, on the mortgage
debtedness.
On 1956, Amparo (widow of V. Perez) instituted Special Proceedings at the CFI for the settlement of
the estate of Vicente Perez. In which Amparo was appointed as Administratrix and notice to creditors
and duly published. The project of partition was submitted and it was approved and the properties
distributed accordingly Special Proceedings was then closed.
As 1947, Amparo inquired by letter from the Bank the status of her husbands account; and she was
informed that there was an outstanding balance P2,758.84 earning a daily interest of P0.4488. She was
furnished a copy of the mortgage and a copy of the Tax Declaration.
The PNB granted the mortgage deed, caused the mortgaged properties to be extrajudicially foreclosed.
The Provincial Sheriff accordingly sold the said land in auction, and it was purchased by the Bank.
After the lapse of the year of redemption, Certificate of Title was issued in the name of the Bank.
Amparo and heirs were not notified.
So Amparo and the heirs instituted this case against the PNB seeking to annul the extra-judicial
foreclosure sale and the transfer of the Certificate of Title as well as to recover damages, claiming that
the Bank had acted illegally and in bad faith. Bank denied all of its allegations.
CFI: Annulled the extra-judicial foreclosure sale of the said lot of Kabankalan Cadastre, standing in the
name of Vicente Perez, in favor of the PNB, as well as the cancellation of the mortgagors Original
82

Certificate of Title and the issuance of a new Certificate in the Banks name; and ordering the said
Bank to pay the heirs of Vicente Perez for damages and attorneys fees, and costs.
The Bank appealed to this Supreme Court
ISSUE: WON Foreclosure Proceedings is barred upon death of the debtor, because agency is
extinguished by the death of the principal?
HELD:No, The argument that foreclosure by the PNB under its power of sale is barred upon death of
the debtor, because agency is extinguished by the death of the principal, under Article 1732 of the Civil
Code of 1889 and Article 1919 of the Civil Code of the Philippines, neglects to take into account that
the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the
principal by the agent but is primarily an authority conferred upon the mortgagee for the latters own
protection. It 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. As can be seen in the
preceding quotations from Pasno vs. Ravina, 54 Phil. 382, both the majority and the dissenting
opinions conceded that the power to foreclose extrajudicially survived the death of the mortgagor, even
under the law prior to the Civil Code of the Philippines now in force.
It has been held that the power of sale in the deed of real estate mortgage is not revoked by the death of
the principal-mortgagor, on the ground that it is an ancillary stipulation supported by the same cause or
consideration that supports the mortgage and forms an essential inseparable part of that bilateral
agreement. The power of attorney therefore survives the death of the mortgagor, and allows the
mortgagee to effect the foreclosure of the real estate mortgage even after the death of the principalmortgagor.
Nevertheless, while upholding the validity of the appellant Bank's foreclosure, We can not close our
eyes to the fact that the Bank was apprised since 1947 of the death of its debtor, Vicente Perez, yet it
failed and neglected to give notice of the foreclosure to the latter's widow and heirs as expressly found
by the court a quo. Such failure, in effect, prevented them from blocking the foreclosure through
seasonable payment, as well as impeded their effectuating a seasonable redemption. In view of these
circumstances, it is our view that both justice and equity would be served by permitting herein
appellees to redeem the foreclosed property within a reasonable time, by paying the capital and interest
of the indebtedness up to the time of redemption, plus foreclosure and useful expenses, less any rents
and profits obtained by the Bank from and after the same entered into its possession.
CITED CASE:
The ruling in Pasno vs. Ravina not having been reiterated in any other case, We have carefully
reexamined the same after mature deliberation have reached the conclusion that the dissenting opinion
is more in conformity with reason and law.Of the three alternative courses that section 7, Rule 87 (now
Rule 86), offers the mortgage creditor, to wit, (1) to waive the mortgage and claim the entire debt from
the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at
any time before it is barred by prescription, without right to file a claim for any deficiency, the majority
opinion in Pasno vs. Ravina, in requiring a judicial foreclosure, virtually wipes out the third alternative
conceded by the Rules to the mortgage creditor, and which would precisely include extra-judicial
foreclosures by contrast with the second alternative. This result we do not consider warranted by the
text of the Rules; and, in addition, the recognition of creditors right to foreclose extra-judicially
83

presents undoubted advantages for the estate of the mortgagor, as pointed out by the dissenting opinion
in Pasno vs. Ravina.In the light of these considerations, we have decided to overrule the majority
decision in said case, and uphold the right of the mortgage creditor to foreclose extra-judicially in
accordance with section 7, Rule 86,of the Revised Rules (old Rule 87).

III. TRUST
WEEK 13
C. Different Kinds of Trust
1. Express Trust (Art. 1443-1446)
RAMOS VS. RAMOS case digest 61 SCRA 284
FACTS: Spouses Martin Ramos and Candida Tanate died on October 4, 1906 and October 26, 1880,
respectively. They were survived by their 3 children. Moreover, Martin was survived by his 7 natural
children. In December 1906, a special proceeding for the settlement of the intestate estate of said
spouses was conducted. Rafael Ramos, a brother of Martin, administered the estate for more than 6
years. Eventually, a partition project was submitted which was signed by the 3 legitimate children and
2 of the 7 natural children. A certain Timoteo Zayco signed in representation of the other 5 natural
children who were minors. The partition was sworn to before a justice of peace.
The conjugal
hereditary estate was appraised at P74,984.93, consisting of 18 parcels of land, some head of cattle and
the advances to the legitimate children. thereof represented the estate of Martin. 1/3 thereof was the
free portion or P12,497.98. The shares of the 7 natural children were to be taken from that 1/3 free
portion. Indeed, the partition was made in accordance with the Old Civil code. Thereafter, Judge
Richard Campbell approved the partition project. The court declared that the proceeding will be
considered closed and there cord should be archived as soon as proof was submitted that each he3ir
had received the portion adjudicated to him. On February 3, 1914, Judge Nepumoceno asked the
administrator to submit a report showing that the shares of the heirs had been delivered to them as
required by the previous decision. Nevertheless, the manifestation was not in strict conformity with the
terms of the judges order and with the partition project itself. 8 lots of the Himamaylan Cadastre were
registered in equal shares in the names of Gregoria (widow of Jose Ramos) and her daughter, when in
fact the administrator was supposed to pay the cash adjudications to each of them as enshrined in the
partition project. Plaintiffs were then constrained to bring the suit before the court seeking for the
reconveyance in their favor their corresponding participations in said parcels of land in accordance with
Article840of the old Civil Code. Note that 1/6 of the subject lots represents the 1/3 free portion of
martins shares which will eventually redound to the shares of his 7 legally acknowledged natural
children. The petitioners action was predicated on the theory that their shares were merely held in
trust by defendants. Nonetheless, no Deed of Trust was alleged and proven. Ultimately, the lower court
dismissed the complaint on the grounds of res judicata, prescription and laches.
Issue: 1.WON the plaintiffs action was barred by prescription, laches and res judicata
2.WON there is an express or implied trust
Ruling: 1.Yes 2. No The crucial issue is prescription. With it the question of res judicata and the
existence of a trust are inextricably interwoven. Inasmuch as trust is the main thrust of plaintiffs' action,
84

it will be useful to make a brief disgression of the nature of trusts (fideicomisos) and on the availability
of prescription and laches to bar the action for reconveyance of property allegedly held in trust. "In its
technical legal sense, a trust is defined as the right, enforceable solely in equity, to the beneficial
enjoyment of property, the legal title to which is vested in another, but the words 'trust' is frequently
employed to indicate duties, relations, and responsibilities which are not strictly
technical trusts." (89 C.J.S. 712). The plaintiffs did not prove any express trust in this case. The
expediente of the intestate proceeding, Civil Case No. 217, particularly the project of partition, the
decision and the manifestation as to the receipt of shares (Exh. 3, 4and6)negatives the existence of an
express trust. Those public documents prove that the estate of Martin Ramos was settled in that
proceeding and that adjudications were made to his seven natural children. A trust must be proven by
clear, satisfactory, and convincing evidence. It cannot rest on vague and uncertain evidence or on loose,
equivocal or indefinite declarations (DeLeonvs.Peckson, 62O. G. 994). As already noted, an express
trust cannot be proven by parol evidence (Pascual vs. Meneses, L18838, May 25, 1967, 20 SCRA 219,
228; Cuaycong vs. Cuaycong, L21616, December 11, 1967, 21 SCRA 1192).
Neither have the
plaintiffs specified the kind of implied trust contemplated in their action. We have stated that whether
it is a resulting or constructive trust, its enforcement may be barred by laches. In the cadastral
proceedings, which supervened after the closure of the intestate proceeding, the eight lots involved
herein were claimed by the spouses Jose Ramos and Gregoria T. Ramos to the exclusion of the
plaintiffs (Exh. 8to19).After the death of Jose Ramos, the said lots were adjudicated to his widow and
daughter (Exh. 8). In 1932 Gregoria T. Ramos and Candida Ramos leased the said lots to Felix Yulo
(Exh. 20).Yuloin1934transferredhis lease rights over Hacienda Calazato Juan S. Bonin and Nestor
Olmedo, the husband of plaintiff Atanacia Ramos (Exh. 22). Bonin and Olmedo in 1935 sold their
lease rights over Hacienda Calaza to Jesus S. Consing (Exh. 23). Those transactions prove that the
heirs
of
Jose
Ramos
had
repudiated
any
trust
which
was
supposedly constituted over Hacienda Calaza in favor of the plaintiffs. Under Act 190, whose statute
of limitations applies to this case (Art. 116, Civil Code), the longest period of extinctive prescription
was only ten years Diaz vs. Gorricho and Aguado, supra.). Atanacia, Modesto and Manuel, all
surnamed Ramos, were already of age in 1914 (Exh. A to D). From that year, they could have brought
the action to annul thepartition. MariaRamos and Emiliano Ramos were both born in 1896. They
reached the age of twentyone years in 1917. They could have brought the action from that year. The
instant action was filed only in 1957. As to Atanacia, Modesto and Manuel, the action was filed fortythree years after it accrued and, as to Maria and Emiliano, the action was filed forty years after it
accrued. The delay was inexcusable. The instant action is unquestionably barre
by prescription and res judicata.
2. Implied Trust (Art. 1447-1457)
No. L-21616. December 11, 1967.
GERTRUDES F. CUAYCONG, ET AL. vs. Luis D. CUAYCONG, ET AL.
APPEAL from a decision of the Court of First Instance of Negros Occidental.
FACTS: On June 21, 1936, Eduardo Cuaycong, an owner of two haciendas in Victorias, Negros
Occidental, died without issue with his wife (Clotilde de Leon), 3 brothers (Lino, Justo, Meliton) and a
sister (Basilisa) surviving him. Upon his death, his properties were distributed to his heirs as he willed
except the haciendas, the titles of which are in the name of Luis D. Cuaycong, son of Justo.
On October 3, 1961, the heirs of Lino filed a suit against Justo, Luis and Benjamin Cuaycong (one of
the sons of Lino) for conveyance of inheritance and accounting alleging that Eduardo had on several
85

occasions made known his desire to divide the haciendas among his siblings and his wife. That
Eduardo told Justo and Luis, and the two agreed to hold in trust what might belong to his brothers and
sister and deliver to them their share when the proper time comes. That the haciendas were later
acquired by Luis thru clever strategy, fraud, misrepresentation and in disregard of Eduardo's wishes by
causing the issuance in his name of certificates of title covering said properties. That as far back as
1936 Lino demanded from Justo and Luis his share but such had been refused.
On October 20, 1961, Luis moved to dismiss the complaint on the grounds of unenforceability of the
claim under the statute of frauds, no cause of action (Rule 8, Sec. 1 [f] of the Rules of Court), and bar
of causes of action by the statute of limitations (Rule 8, Sec. 1[e]). Subsequently, opposition thereto, an
answer and reply were filed.
On December 16, 1961, the CFI ruled that the trust alleged refers to an immovable which under Article
1443 of the Civil Code may not be proved by parole evidence. Plaintiffs were given 10 days to file an
amended complaint mentioning or alleging therein the written evidence of the alleged trust, otherwise
the case would be dismissed. Later, the court dismissed the case for failure to amend the complaint.
Failing in their efforts to have the dismissal reconsidered, plaintiffs appealed to SC. The plaintiffs claim
that an implied trust is referred to in the complaint which, under Article 1457 of the Civil Code, may be
proved by parole evidence.
ISSUE: WON there was an implied trust
HELD: Our Civil Code defines an express 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. Express 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. On the other hand, implied trusts are those which, without
being expressed, are deducible from the nature of the transaction by operation of law as matters of
equity, independently of the particular intention of the parties. Thus, if the intention to establish a trust
is clear, the trust is express; if the intent to establish a trust is to be taken from circumstances or other
matters indicative of such intent, then the trust is implied. From these and from the provisions of the
complaint itself, we find it clear that the plaintiffs alleged an express trust over an immovable,
especially since it is alleged that the trustor expressly told the defendants of his intention to establish
the trust. Such a situation definitely falls under Article 1443 of the Civil Code.
Appellants argue that an implied trust should be construed to exist. Said arguments are untenable,
Article 1453 would apply if the person conveying the property did not expressly state that he was
establishing the trust, unlike the case at bar where he was alleged to have expressed such intent.
Consequently, the lower court did not err in dismissing the complaint.
Besides, even assuming the alleged trust to be an implied one, the right alleged by plaintiffs would
have already prescribed since starting in 1936 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 1961 more than the 10-year period of prescription for the enforcement of such rights
under the trust. It is settled that the right to enforce an implied trust in one's favor prescribes in ten (10)
years. And even under the Code of Civil Procedure, action to recover real property such as lands
prescribes in ten years (Sec. 40, Act 190).

Week 14
86

E. Enforcement of Trust
1. In relation to laches
FABIAN vs. FABIAN
FACTS: Pablo Fabian bought from the Philippine Government lot 164 of the Friar Lands Estate in
Muntinlupa, Rizal. By virtue of this purchase, he was issued sale certificate 547. He died on August 2,
1928, survived by four children, namely, Esperanza, Benita I, Benita II, and Silbina.
On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the deceased, executed an affidavit.
On the strength of this affidavit, sale certificate 547 was assigned to them.
The acting Director of Lands, on behalf of the Government, sold lot 164 to Silbina Fabian Teodora
Fabian. The vendees spouses forthwith took physical possession thereof, cultivated it, and appropriated
the produce. In that same year, they declared the lot in their names for taxation purposes. In 1937 the
RD of Rizal issued a TCT over lot 164 in their names. They later subdivided the lot into 2 equal parts.
The plaintiffs filed the present action for reconveyance against the defendants spouses, averring that
Silbina and Teodora, through fraud perpetrated in their affidavit aforesaid. That by virtue of this
affidavit, the said defendants succeeded in having the sale certificate assigned to them and thereafter in
having lot 164 covered by said certificate transferred in their names; and that by virtue also of these
assignment and transfer, the defendants succeeded fraudulently in having lot 164 registered in their
names. They further allege that the land has not been transferred to an innocent purchaser for value. A
reconveyance thereof is prayed for.
In their answer, the defendants spouses claim that Pablo Fabian was not the owner of lot 164 at the time
of his death on August 2, 1928 because he had not paid in full the amortizations on the lot; that they are
the absolute owners thereof, having purchased it from the Government, and from that year having
exercised all the attributes of ownership thereof up to the present; and that the present action for
reconveyance has already prescribed. The dismissal of the complaint is prayed for.
The lower court rendered judgment declaring that the defendants spouses had acquired a valid and
complete title to the property by acquisitive prescription, and accordingly dismissed the complaint. The
latters motion for reconsideration was thereafter denied. Hence, the present recourse.
ISSUE:Whether or not laches constitute a bar to an action to enforce a constructive trust?
HELD:Yes. The assignment and sale of the lot to the defendants Silbina and Teodora were therefore
null and void. To the extent of the participation of the appellants, application must be made of the
principle that if property is acquired through fraud, the person obtaining it is considered a trustee of an
implied trust for the benefit of the person from whom the property comes.
Laches may bar an action brought to enforce a constructive trust such as the one in the case at bar.
Illuminating are the following excerpts from a decision penned by Mr. Justice Reyes. But in
constructive trusts, the rule is that laches constitutes a bar to actions to enforce the trust, and
repudiation is not required, unless there is a concealment of the facts giving rise to the trust.

87

The assignment of sale certificate was effected in October 1928; and the actual transfer of lot 164 was
made on the following November 14. It was only on July 8, 1960, 32 big years later, that the appellants
for the first time came forward with their claim to the land. The record does not reveal, and it is not
seriously asserted, that the Appelles concealed the facts giving rise to the trust. Upon the contrary,
paragraph 13 of the stipulation of facts of the parties states with striking clarity those defendants
herein have been in possession of the land in question since 1928 up to the present publicly and
continuously under claim of ownership; they have cultivated it, harvested and appropriated the fruits
for themselves.
SOTTO V TEVES 86 SCRA 154
FACTS: Don Filemon Sotto became a co-trustee by virtue of his subsequent marriage to Carmen
Rallos. The truth of the matter is that, according to the Court, Atty. Sotto became a constructive trustee
not only by reason of his marriage to Carmen Rallos but also on account of his prestige and tremendous
social and political influence, also because Atty. Sotto enjoyed and exercised a personal domestic,
social, political and moral ascendancy and superiority over his wife, over Maria Fadullon. Concepcion
Rallos and the latters children, besides being the protector of the rights and interest of the Rallos
family acting like a pater familias attending to their financial and medical needs, as well as the family
lawyer.
In life, Atty. Filemon Sotto was a very prestigious man. He wielded tremendous social and political
influence. Successively, he was municipal councilor, vice-president of Cebu City, Assemblyman,
Senator and Delegate to the Constitutional Convention of 1934. He was editor and publisher of many
newspapers among which was the famous La Revolucion which featured quite prominently in the
celebrated Wood-Sotto libel case. When his life, however, was almost at an end, he was declared
incompetent. In 1962, while Atty. Sotto was under guardianship, Cesar Sotto, his nephew and protegee
and one of the guardians judicially appointed to take care of his estate, delivered to Filar Teves, one of
the herein plaintiffs, certain documents which had lain in secrecy in the private files of Atty. Sotto. All
along, the direct descendants and blood relatives of Florentino Rallos had rested on the belief that the
properties in question, which are the fruits of the sweat and toil of their grandfather, would one day be
delivered unto them. The revelation of Cesar Sotto, however, led the plaintiffs to the discovery that all
the properties in question were now titled in the name of Atty. Sotto, and were in danger of failing into
the hands of his children out of wedlock, who are total strangers to the spouses Rallos and Fadullon.
Upon such discovery, the plaintiffs initiated the present lawsuit forthwith.
On June 13, 1967, the herein private respondents filed suit in the Court of First Instance of Cebu
against petitioner Marcelo Sotto, as administrator of the intestate estate of Filemon Sotto, for the
recovery of possession and ownership of the 5 parcels of land described in the complaint, with
damages. The complaint was based mainly upon the theory that a trust relation was established and
created with respect to the said properties, with Atty. Filemon Sotto as trustee and as cestuis que trust,
his mother-in-law, Maria Fadullon Vda. de Rallos; his wife, Carmen Rallos; and his sister-in-law,
Concepcion Rallos (predecessor in interest of herein private respondents); and that in gross violation of
the trust reposed upon him by Concepcion Rallos and after her death, by her heirs, the said Atty.
Filemon Sotto, through sheer manipulation, fraudulent acts and means, non-existent and void decrees,
fictitious sales and transfers, succeeded in causing the transfer of the ownership of the properties to the
name of his wife Carmen Rallos, and finally to his name alone.
Atty. Filemon Sotto (then known as Don Filemon Sotto) was still single, but he already enjoyed
considerable prestige and influence and was well-known for his sagacity, he having become a
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municipal councilor, municipal vice-mayor, fiscal and assemblyman; that he married Carmen J. Rallos
on Sept. 27, 1913 and he later became senator, delegate to the Constitutional Convention and editor,
besides being a practicing lawyer.
Atty. Filemon Sotto, having married Carmen Rallos, thereby virtually making him a member of the
Rallos family, was looked upon as the head of the Rallos family to look after the properties inherited
from the deceased Florentino Rallos including the 5 parcels of land hereinbefore mentioned, thereby
establishing a trust relation with Don Filemon Sotto as trustee of the said properties for the benefit of
his mother-in-law Maria Fadullon Vda. de Rallos, his wife Carmen Rallos de Sotto and sister-in-law
Concepcion Rallos and the heirs of the latter, as cestuis que trust
Under the law on Trusts, it is not necessary, as petitioner insists, that the document expressly state and
provide for the express trust, for no particular words are required for the creation of an express trust, it
being sufficient that a trust is clearly intended. (Art. 1444. N.C.C.). An express trust is 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.
The relation between parties, in order to be a fiduciary relation need not be legal, but may be moral,
social, domestic or merely personal; and where by reason of kinship, business association, disparity in
age or physical or mental condition or other reason, the grantee is in an especially intimate position
with regard to another and the latter reposes a degree of trust and confidence in the former, confidential
relationship exists which prohibits the one entrusted from seeking a selfish benefit for himself during
the course of relationship, and affords a basis for imposing a constructive trust.
A fiduciary relationship may exist even if the title to the property subject to the trust appears in the
name of the trustee alone, because in cases of trusteeship, the legal title usually appears in the name of
the trustee, while the equitable title remains with the cestui que trust.
ISSUE: Whether there was an express trust relation existed between Atty. Filemon Sotto on one hand
and Maria Fadullon Vda. de Rallos, Carmen Rallos and Concepcion Rallos on the other with respect to
the lots in question; that there was no implied trust subsisting between Atty. Sotto and the said heirs
HELD: The express trusts disable the trustee from acquiring for his own benefit the property
committed to his management or custody, at least while he does not openly repudiate the trust, and
makes such repudiation known to the beneficiary or cestui que trust.
And from the standpoint of acquisitive prescription, or prescription of ownership, this Court has held
in numerous decisions involving fiduciary relations such as those occupied by a trustee with respect to
the cestui que trust that as a general rule the formers possession is not adverse and therefore cannot
ripen into a title by prescription. Adverse possession in such a case requires the concurrence of the
following circumstances: (a) that the trustee has performed unequivocal acts of repudiation amounting
to an ouster of the cestui que trust; (b) that such positive acts of repudiation have been made known to
the cestui que trust; and (c) that the evidence thereon should be clear and conclusive.
We rule that the registration of the lots in the names of Carmen Rallos and her mother Maria Fadullon
Vda. de Rallos and their subsequent transfers and consolidation to Carmen Rallos name alone in a
manner shown to be fictitious, fraudulent and secretive, thereby keeping the cestuis que trust in the
dark did not constitute acts of repudiation of the express trust. Such registrations were ineffective and
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not binding upon the cestui que trust. We are persuaded and convinced that the circumstances required
by said decisions are not present in the case at bar.
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time,
to do that which by exercising due diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it.
The defense of laches is an equitable one and does not concern itself with the character of the
defendants title, but only with whether or not by reason of the plaintiffs long inaction or inexcusable
neglect he should be barred from asserting his claim at all.
Under the facts established and showing the complete dominance of Atty. Sotto over the heirs and
descendants of the Rallos family, the confidential relationship between the parties connected by ties of
marriage and the reliance of the heirs with complete and absolute confidence in their uncle-in-law, Atty.
Sotto, who, however, kept the heirs in total ignorance and suppressed from them the real truth
regarding said properties that they were already registered in Atty. Sottos name as finally revealed to
them by Cesar Sotto, the nephew and protegee of Atty. Sotto and were in danger of being lost to total
strangers, the doctrine of laches is not strictly applicable. Furthermore, Atty. Sotto received from his
wife, Carmen Rallos, the properties under her will fully impressed with their fiduciary character and in
the full knowledge that said properties were trust properties as far back in 1913 when he drafted and
prepared the Mocion Sobre la Disposition de los Bienes and filed the same in the probate proceedings.
This knowledge he carried into his marriage with Carmen Rallos and throughout his lifetime so that the
will executed by Carmen Rallos bequeathing the properties to her husband, Atty. Sotto, was merely a
vehicle of an existing trust. He thereby became a trustee of the trust properties, not as an innocent third
party and neither for a valuable consideration. Notwithstanding the fact that the titles to the properties
were ultimately transferred to the name of Atty. Filemon Sotto, widower, through administrative
proceedings, the titling thereof must be regarded as for the benefit and interest of the cestui que trust,
the private respondents herein.
We are satisfied that respondents, upon discovery of the fraudulent transfers, fictitious sales and
concealed deeds relating to the trust properties which were revealed to them by Cesar Sotto, the very
nephew and protegee of Atty. Filemon Sotto and guardian appointed over the latters estate, promptly
and seasonably filed the present action for reconveyance. There is no absolute rule as to what
constitutes laches or staleness of demand; each case is to be determined according to its particular
circumstances. The question of laches is addressed to the sound discretion of the court and since laches
is an equitable doctrine, its application is controlled by equitable considerations. It cannot be invoked
to defeat justice or to perpetrate fraud and injustice. It would be rank injustice and patently iniquitous to
deprive the lawful heirs of their rightful inheritance.
Private respondents are entitled to the relief prayed for, which is for the reconveyance of the properties
to them. Since their grandmother, Maria Fadullon Vda. de Rallos die in 1938, her pro-indiviso share in
the properties then owned in co-ownership descended by intestacy to her daughters, Concepcion and
Carmen. Upon Carmens death in 1945 without issue, the properties devolved to Concepcion pursuant
to their agreement in 1925 as testified to by Pilar Teves. When Concepcion Rallos died, her heirs, who
are now the private respondents, are entitled to these properties and should be declared owners thereof.
They are also entitled to the fruits thereof, the rentals of the properties, including damages and
attorneys fees as assessed by the appellate court which We find just and reasonable.
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WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby affirmed,
with costs against the petitioner.
SO ORDERED.
2. In relation to Statute of Limitations
G.R. No. L-19060
May 29, 1964
IGNACIO GERONA, MARIA CONCEPCION GERONA, FRANCISCO GERONA and
DELFIN GERONA, petitioners,
vs.
CARMEN DE GUZMAN, JOSE DE GUZMAN, CLEMENTE DE GUZMAN,
FRANCISCO DE GUZMAN, RUSTICA DE GUZMAN, PACITA DE GUZMAN and VICTORIA
DE GUZMAN respondents
FACTS:Petitioners allege that they are the legitimate children of Domingo Gerona and Placida de
Guzman; that the latter who died was a legitimate daughter of Marcelo de Guzman and his first wife,
Teodora de la Cruz; that after the death of the first wife, Marcelo de Guzman married Camila Ramos
begotting the respondents. Sometime after Marcelo de Guzman died, respondents executed a deed of
extra-judicial settlement of the estate of the deceased Marcelo de Guzman fraudulently representing
that they are the only surviving heirs of the deceased although they know that the petitioners were also
his forced heirs; that they respondents has successfully transferred the certificates of title to seven
parcels of land, issued in the name of the deceased, to be cancelled and new transfer of title to be issued
in their own name, in the proportion of 1/7th individual interest for each. The fraud was discovered by
petitioners only the year before the institution of the case. The petitioners demanded that the
respondents share the properties to 1/8th interest thereon.
The respondents answered that the petitioners mother was not entitle to the share in the estate of
Marcelo de Guzman she being merely a spurious child of the latter and that the petitioners action are
barred by the statute of limitation.
ISSUE:WON the action of the petitioners is not subject to the statute of limitation.
HELD: NO. Petitioners' contention is untenable. 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 question under an adverse title. The statute of limitations operates as in other cases, from the moment
such adverse title is asserted by the possessor of the property.
Inasmuch as petitioners seek to annul the aforementioned deed of "extra-judicial settlement" upon the
ground of fraud in the execution thereof, the action therefor may be filed within four (4) years from the
discovery of the fraud. Such discovery is deemed to have taken place, in the case at bar, on June 25,
1948, when said instrument was filed with the Register of Deeds and new certificates of title were
issued in the name of respondents exclusively, for the registration of the deed of extra-judicial
settlement constitute constructive notice to the whole world.
F. Period of Prescription for Reconveyance of Real Property Based on Implied Trust
Carantes vs CA
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FACTS:Mateo Carantes was the original owner of Lot 44 situated at Loakan, Baguio City by virtue of
Free Patent. Mateo died and he was survived by his widow Ogasia and six children. In 1930
construction of the Loakan Airport was commenced by the Government. Because a portion of Lot No.
44 was needed for the landing field, it was expropriated. Special Proceedings were filed with the court
for the settlement of the estate of the late Mateo Carantes. One of his sons, herein petitioner Maximino
Carantes, was appointed and qualified as judicial administrator of the estate. A deed denominated
"Assignment of Right to Inheritance" was executed by four of Mateo Carantes children. The stated
monetary consideration for the assignment was P1.00. However, the document contains a recital to the
effect that the said lots, "by agreement of all the direct heirs and heirs by representation of the deceased
Mateo Carantes as expressed and conveyed verbally by him during his lifetime, rightly and exclusively
belong to the particular heir, Maximino Carantes, now and in the past in the exclusive, continuous,
peaceful and notorious possession of the same for more than ten years." The siblings of Maximiano
filed a complaint alleging that they and/or their predecessors-in-interest executed the deed of
"Assignment of Right to Inheritance" only because they were made to believe by the defendant
Maximino Carantes that the said instrument embodied the understanding among the parties that it
merely authorized the defendant Maximino to convey portions of Lot No. 44 to the Government in
their behalf to minimize expenses and facilitate the transaction.
ISSUE:Whether or not a constructive trust was created in favor of the private respondents giving them
a right for reconveyance of their property.
HELD:Definitely, no express trust was created in favor of the private respondents. If trust there was, it
could only be as held by respondent court a constructive trust, which is imposed by law. In
constructive trusts there is neither promise nor fiduciary relations; the so-called trustee does not
recognize any trust and has no intent to hold the property for the beneficiary. In at least two cases, the
rule of constructive notice was applied by this Court although a constructive trust had been created.
Thus, in Lopez, et al. vs. Gonzaga, et al., where the plaintiffs and the defendants were co-heirs and the
decedent owner of the lands had merely allowed the principal defendant to use the products and rentals
of the lands for purposes of coconut oil experimentation, but said defendant later caused the transfer of
the certificates of title in his own name through the registration of certain judicial orders, this Court
held that the recording of the judicial orders sufficed as notice to the other heirs, for the rule is that
knowledge of what might have been revealed by proper inquiry is imputable to the inquirer. In Gerona,
et al. vs. De Guzman, et a., supra, the petitioners and the private respondents were co-heirs, and the
petitioners' action for partition and reconveyance was based upon a constructive trust resulting from
fraud. This Court held that the discovery of the fraud "is deemed to have taken place, in the case at bar,
on June 25, 1948, when said instrument was filed with the Register of Deeds and new certificates of
title were issued in the name of respondents exclusively, for the registration of the deed of extrajudicial settlement constituted constructive notice to the whole world."
The decision under review found that a constructive trust was created in favor of the private
respondents, and, holding that an action for reconveyance based on constructive trust is imprescriptible,
recognized the right of the private respondents to file an action for reconveyance regardless of the lapse
of time, citing Gayandato vs. Treasurer of the Philippine Islands, et al.
We have examined Gayandato, and have failed to find support therein for the holding of the respondent
court. In any event, it is now settled that an action for reconveyance based on implied or constructive
trust is prescriptible it prescribes in ten years. In this case the ten-year prescriptive period began on
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March 16, 1940, when the petitioner registered the deed of "Assignment of Right to Inheritance" and
secured the cancellation of the certificate of title in the joint names of the heirs of Mateo Carantes, and,
in lieu thereof, the issuance of a new title exclusively in his name. Since the present action was
commenced only on September 4, 1958, it is clear that the same is barred by extinctive prescription.

PURIFICACION ALARCON and ROSAURO ALARCON vs. HONORABLE ABDULWAHID BIDIN

Facts:

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In 1923, Roberto Alarcon leased Lot 3178 of the Zamboangas cadastre to Esteban Sergas. On January
5, 1926, Roberto sold a portion of his undivided share to Esteban. The date of the instrument of sale
was entered on the title as January 5, 1926, and the date of inscription as May 3, 1963. The name of the
vendor in the text of the "Escritura de Venta" was "Roberto Alarcon", but the typewritten name at the
bottom of the document, above which appears a thumbmark, reads "Alberto Alarcon". On July 9, 1928,
Roberto Alarcon sold another portion of his share of the land to Adela Alvarez, who, in turn, sold it, on
November 29, 1954, to Domingo Rojas Francisco, one of the private respondents. Petitioners filed suit
for recovery of what they allege is their portion of cadastral lot 3178 on October 23, 1978 denying the
genuineness of the Escritura de Venta as the thunmbmark is not Roberto Alarcon's nor is he "Alberto"
Alarcon. Private respondents, defendants below, moved to dismiss the complaint on the ground that the
action is barred by the statute of limitations and that petitioners are guilty of laches. Petitioners opposed
on the ground that no prescription can lie against their father's recorded title. The respondent Judge
dismissed the complaint "for the reason that it is barred by laches"
Issue:
Whether or not the complaint was dismissed for the reason that it is barred by laches.
Whether or not the land registered under the Torrens System may not be acquired by prescription.
Held:
Yes. As far as petitioners are concerned, more than 50 years had elapsed since the execution of the
deeds of sale in 1926 and 1928 and the date they instituted suit for recovery of possession in 1978.
Clearly, their passivity and inaction and, before them, that of their father, constituted laches. As held by
respondent Judge, their cause of action must be considered barred for it has been converted into a stale
demand
True, land registered under the Torrens System may not be acquired by prescription or adverse
possession, as petitioners correctly contend. The protection given by law is in favor of registered
owners. As it is, although title to the disputed property is still in the name of Roberto Alarcon, it has
been subjected to the registration in 1963 of the sale made by him to Esteban Sergas. Technically,
therefore, the latter became the owner in 1963 of the portion of the land sold to him. It may also be
stated that if petitioners' cause of action in seeking the nullification of the sales is predicated on fraud,
the same has prescribed for not having been brought within four years from the inscription of the deed
of sale in favor of Esteban Sergas in 1963.

BUENO vs REYES G.R. No. L-22587 April 28, 1969

FACTS
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Francisco Reyes filed an answer in a Cadastral Case claiming lot No. 2857 as property belonging to
himself and to his two brothers, Juan and Mateo. The case was heard without opposition, and the lot
was adjudicated in favor of the claimants in whose names an OCT was issued to.

Twenty-three years thereafter, the plaintiffs filed the action below for reconveyance of the subject land.
They allege in their complaint that the said lot originally belonged to Jorge Bueno, who died leaving
three children, namely, Brigida, Eugenia and Rufino to whom the property descended by intestate
succession; that subsequently Brigida and Eugenia died, leaving their respective children, who are now
the plaintiffs-appellants together with Rufino; that Francisco Reyes was Eugenias husband and the
father of the plaintiffs surnamed Reyes, who [by] agreement among the heirs of Jorge Bueno was
entrusted in filing the answer in the cadastral proceedings and in obtaining the title thereto for and
in behalf of all the heirs of Jorge Bueno, including his wife Eugenia Bueno. (Par. V of the
complaint.)

That as agreed upon with said Francisco Reyes, said Francisco Reyesdeclared the said parcel of land
above-described in his name, and either in bad faith or by mistake filed an answer in the cadastral
proceedings andobtained title thereto in his name and those of brothers, Mateo and Juan, who
connived and consented to the malicious or erroneous acts of the late Francisco Reyes, knowing fully
well that said parcel of land was never owned by them and has never been in their possession, and
knowing further that said parcel of land belonged to, and possessed by the wife of Francisco Reyes in
conjunction with her sister and brother, Brigida and Rufino, respectively;

That the fact that Francisco Reyes, Mateo Reyes and Juan Reyes are declared owners of the has only
been discovered during this year when Mateo Reyes and Juan Reyes, the defendants herein, including
Francisco Reyes who was dead long ago, filed with this Court a petition for the issuance of a writ of
possession against a wrong person by the name of Mateo R. Reyes, who now admittedly (sic) not the
possessor of the lot but plaintiffs herein, and the plaintiffs have demanded from the defendants the
reconveyance and/or the quitclaiming of their undivided shares as appearing in said Certificate of Title
No. but then, they refused, and continue to refuge to do so.
The plaintiffs complaint was dismissed, upon motion of the defendants, alleging that there is already
prescription of action. Hence, this petition.
ISSUE: Whether by mistake or fraud the real owner being another person, impresses upon the title so
acquired the character of a constructive trust for the real owner which would justify an action for
reconveyance.

HELD:

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If any trust can be deduced at all from the foregoing facts it was animplied one, arising by operation of
law not from any presumed intention of the parties but to satisfy the demands of justice and equity and
as a protection against unfair dealing or downright fraud. Indeed, in this kind of implied trust,
commonly denominated constructive, as distinguished from resulting, trust, there exists a certain
antagonism between the cestui quetrust and the trustee. Thus, for instance, under Article 1456 of the
Civil Code:

if property is acquired through mistake 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. In a number
of cases this Court has held that registration of property by one person in his name, whether by mistake
or fraud, the real owner being another person, impresses upon the title so acquired the character of a
constructive trust for the real owner, which would justify an action for reconveyance.
While there are some decisions which hold that an action upon a trust is imprescriptible, without
distinguishing between express and implied trusts, the better rule, as laid down by this Court in other
decisions, is that prescription does supervene where the trust is merely an implied one. The reason has
been expressed by Justice J.B.L. Reyes as follows:

Under Section 40 of the old Code of Civil Procedure, all actions for recovery of real property
prescribed in 10 years, excepting only actions based oncontinuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held in the case of Diaz v. Gorricho, L-11229, March
29, 1958, however, the continuing or subsisting trusts contemplated in section 38 of the Code of Civil
Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are
imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all.
The foregoing, of course, are not facts already established by evidence. But they are alleged in the
complaint and therefore deemed hypothetically admitted for purposes of the motion to dismiss filed by
the defendants. To be sure, there are contradictory allegations of fact in the answer, but these are
matters of defense that must be unsubstantiated at the trial. At the very least the grounds upon which
the order of dismissal is based do not appear to us to be indubitable; and it would be more in keeping
with justice to afford the plaintiffs as well as the defendants the opportunity to lay their respective
claims and defenses before the Court in a full-blown litigation.
Varsity Hills vs Navarro
A petition was filed by the respondents Mejia as heirs of Quintin Mejia and by Elpidio Tiburcio as
assignee of a portion of the estate left by the latter as plaintiff against petitioners Tuason et. al. The
complaint alleged that Quintin Mejia had obtained a Spanish title to the land and that he and his
successors in interest had occupied the land without interruption until they were forcibly rejected
therefrom and their houses demolished in1934 through a writ of execution. In 1914, the defendants
Tuason had obtained a decree of registration covering 35,403 hectares and that they had fraudulently
and insidiously included plaintiffs land in the area covered by the Certificate of Transfer by inserting
fake and false technical descriptions. UP et al. as subsequent acquirers whose titles are derived from the
original fraudulent certificates should likewise be annulled. Herein Petitioners contend that the decision
in a civil case wherein the Respondents were declared as without title to the land and ejected by a writ
96

of execution was affirmed by the Supreme Court. The Petitioners contend in the present case that the
causes of action averred by the Respondents were barred by the LRA and the statute of limitations
over51 years having elapsed since the decree of registration was issued, barred by laches as 32 years
have elapsed since the ejectment and that the court had no jurisdiction to review and revise the decree
of registration. They also maintain as affirmative defenses that they had in possession for over 30years
of the land thus acquiring title by acquisitive prescription and that claims for ownership were
extinguished by the decree and that they are purchasers for value and in good faith of the lands standing
in their names. A motion to dismiss was filed yet was denied by the lower court. The Petitioners
resorted to the SC for a special proceeding for writs of certiorari and prohibition thus the trial court was
enjoined from proceeding with the trial until further orders. Mejia and Tiburcio claim that appeal in due
time was the proper remedy.
Issue:
Whether or not the present action prospers based on claims of implied/constructive trust?
Held:
The court below gravely abused its discretion in denying petitioners motion to dismiss based on their
affirmative defenses. The action by Tiburcio and Mejias was already barred by res judicata
andextinctive prescription. A previous case was decided wherein Quintin Mejia had been found without
title and thus ejected. The action in the court below was definitely barred as while the present
respondents were not parties to the cause which Quintin Mejia was such a party, the final judgment
against him concludes and bars his predecessors and privies as well. Since the respondents failed to file
a petition for review of the decree within one year after the entry thereof despite claims that there was
fraud in the inclusion of their land in the title, they are barred by the LRA. However if the fraud had
been committed after the issuance of the decree, they should have pleaded when Quintin was made a
defendant in Civil Case 4420. Nevertheless, their cause of action is barred by res judicata. With or
without judgment against Quintin, their action had been extinguished by the lapse of 30 years from the
time he was ejected from the land in question. An action to recover is also foreclosed by the statute of
limitations. Actions on implied trusts are extinguished by laches or prescription of 10 years.
G.R. No. L-14248 April 28, 1960 NEW MANILA LUMBER COMPANY, INC.,
plaintiff-appellant,
vs. REPUBLIC OF THE PHILIPPINES, defendant-appellee.
FACTS:
On May 8, 1958, the plaintiff lumber company filed in the court below a complaint
against the defendant Republic of the Philippines for the recovery of a sum of
money. The complaint alleges, among other things, that defendant, thru the
Director of Schools, entered into a contract with one Alfonso Mendoza to build two
school houses; that plaintiff furnished the lumber materials in the construction of
the said buildings; that prior to the payment by defendant of any amount due the
contractor, the latter executed powers of attorney in favor of the plaintiff
"constituting it as his sole, true and lawful attorney-in-fact with specific and
exclusive authority to collect and receive from the defendant any and all amounts
due or may be due to said contractor from the defendant in connection with the
construction of the aforesaid school buildings, as may be necessary to pay
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materials supplied by the plaintiff"; and that originals of the powers of attorney
were received by defendant (thru the Director of Public Schools) who promised to
pay plaintiff, but that it, nevertheless, paid the contractor several amounts on
different occasions without first making payment to plaintiff. The complaint,
therefore, prays that defendant be ordered to pay plaintiff the sum of P18,327.15,
the unpaid balance of the cost of lumber supplied and used in the construction of
the school buildings, with interest at the legal rate from the date same was due,
plus attorney's fees and costs.
ISSUE:
Whether the payment of the Republic of the Philippines directly to the contractor
revokes the power of attorney to the plaintiff to collect, preventing the latter from
demanding from the former the amount due to the contractor.
HELD: Yes
Plaintiff argues that an implied contract between it and the defendant Republic
arose, when the latter, thru the Director of Public Schools, on being furnished
copies of the powers of attorney executed by the contractor, promised to make
payment to plaintiff for the materials supplied for the construction of the school
buildings. It will be observed, however, that defendant was not a party to the
execution of the powers of attorney.
At any rate, under the facts alleged in the complaint, the powers of attorney in
question made plaintiff the contractor's agent in the collection of whatever
amounts may be due the contractor from the defendant. And since it is also
alleged that, after the execution of the powers of attorney, the contractor
(principal) demanded and collected from defendant the money the collection of
which he entrusted to plaintiff, the agency apparently has already been revoked.
(Articles 1920 and 1924, new Civil Code.)
The point is made by plaintiff that the powers of attorney executed by the
contractor in its favor are irrevocable and are coupled with interest. But even
supposing that they are, still their alleged irrevocability cannot affect defendant
who is not a party thereto. They are obligatory only on the principal who executed
the agency.
G.R. No. L-31858 August 31, 1977
FAUSTINO JARAMIL AND FILOMENA CABINAR, petitioner,
vs.
COURT OF APPEALS, and SOTERA MEDRANA, REGINA DE LA CRUZ, VALERIANA C.
PRUDENCIO ET AL.,respondents.
FACTS:Sotera Medrana, widow of the late Isidro dela Cruz, instituted an action to recover possession
of a parcel land, Lot 1422, and for damages against the spouses Faustino Jaramil and Filomena
Cabinar.
The complaint alleged the Isidro dela Cruz was in life the owner of Lot 1422 located in Umingan,
Pangasinan. That sometime in 1935 the spouses Faustino Jaramil and Filomena Cabinar were permitted
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by the registered owners to established residence on the land with the understanding that said spouses
would vacate the premises upon demand; and that despite a demand to vacate made on or about August
23, 1958, the defendants refused to leave the land in question.
The defendants averred that they are the true owners of the disputed lot and that if Isidro dela Cruz and
Sotera Medrana were able to register the property in their names, the registration must have been done
through fraud and bad faith. That when the cadastral survey of Umingan was being undertaken, Isidro
dela Cruz went to him and said that inasmuch as their lots adjoin each other, Isidro dela Cruz would
take care of the survey and represent Faustino Jaramil in the cadastral proceedings, promising to deliver
Faustino's title as soon as Isidro's title was obtained; that upon the request of Isidro dela Cruz, Faustino
Jaramil gave the former P50.00 to defray the expenses; that in 1958 when the heirs of Isidro dela Cruz
caused a relocation survey of the land to be made and claimed it as their own, Faustino Jaramil
discovered for the first time that the property had been registered in the names of Isidro dela Cruz and
Sotera Medrana.1
The defendants interposed a counterclaim wherein they asked for the reconveyance to them of the land
question.
ISSUE: W/N the Jaramil and Cabinars (petitioner-appellant) action for reconveyance of title is barred
by statute of limitations.
Held: YES. The majority opinion in CA found the testimony of Faustino Jaramil on the alleged fraud
to be incredible because it is indeed odd that Faustino Jaramil had not taken Steps to verify whether or
not the title to the land in question had been registered in his name. The evidence shows that the
cadastral court had adjudicated the land in question to Isidro dela Cruz and Sotera Medrana on April
17, 1926 and on March 15, 1932. Original Certificate of Title No. 49228 of the Registry of Deeds of
Pangasinan was issued in their names.
Despite the issuance of Original Certificate of Title No. 49228 to Isidro dela Cruz and Sotera Medrana
on March 15, 1912, the petitioners-appellants did not take any steps to cause the transfer of the title to
the land to them. It was only when the private respondents instituted in 1958 Civil Case No. T-535 in
the Court of First Instance of Pangasinan to recover the possession of the land in question that the
petitioners-appellants interposed a counter-claim in heir answer for the reconveyance of said land to
them .
The preponderance of the evidence is that Isidro dela Cruz and Sotera Medrana did not perpetrate fraud
in having the title to the land in question registered in their names. Granting, arguendo that fraud was
committed and an implied trust was created, the counterclaim of the petitioners-appellants for the
reconveyance of the title to the land in question to them has prescribed. It is now settled that an action
for the reconveyance of land based on implied or constructive trust prescribes within ten (10) years.
The Supreme Court has held that:
It is Idle to bother as to whether the action here is one founded exclusively on fraud which prescribes in
four (4) years or one based on constructive trust which is barred after ten years, there being no question
that the appellees secured their title more than twenty years before the filing of the complaint, and it is
from the date of the issuance of such title that the effective assertion of adverse title for purposes of the
statute of limitations is counted. (Gerona vs. De - Guzman, 11 SCRA 153). 14

99

The cause of action of the petitioners-appellants for the reconveyance to them of the title to the land in
question arose on March 15, 1932 when Original Certificate of Title No. 49228 was issued by the
Office of the Register of Deeds of Pangasinan. 15 The issuance of said original certificate of title
constituted constructive notice to the public including the petitioners-appellants.
WHEREFORE, the decision of the Court of Appeals is hereby affirmed, without pronouncement as to
costs.

G.R. No. L-39478

November 29, 1977
FAUSTINA CABABARROS VDA. DE NACALABAN, ANDRONICA, TEODITA,
GODOFREDO, PROPULO, CALVIN, TARCIANO, OROTON, and NEVIL, all surnamed'
NACALABAN. petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and CATALINA CABABARROS, ROSITA,
PRUTO, AMADEO, LILA, NATIVIDAD, ADORACION, ALEJANDRIA, ARQUIPO, ARLITA,
JOSEFA, VERONA, JOSEFINA, LOURDES, PUSINA MAGNA and JOSEFINO, all surnamed
CABABARROS; VIVINA, ROGELIO, FRANCISCO, GLORIA, CALINICO all surnamed
ABEJO; LEO, CLEMENTE, VICTOR, EDITHA, ANNE, ALEJANDER, FELIX, and AMPARO,
all surnamed ABEJO; minors and are represented by their natural mother and guardian,
NATIVIDAD NANGCAS VDA. DE ABEJO, respondents.
FACTS: On February 11, 1964 Rosita, Pruto Amadeo, Natividad, Adoracion, Alejandria, Lila, and
Josefina, all surnamed Cababarros and Vivina, Rogelio, Francisco, Gloria, Calinico and Ciriaco, all
surnamed Abejo, claiming to be heirs of the spouses Narciso Cababarros and Narcisa Edmilao,
instituted against Faustina Vda. de Nacalaban and Godofredo, Propulo Calvin, Tarciano, Oroton and
Nivel all surnamed Nacalaban, and Gerardo Cababarros and Catalina Cababarros Civil Case No. 2317
for partition of a parcel of land and reconveyance of shares therein.
The complaint stated that the spouses Narciso Cababaros and Narcisa Edmilao, during their lifetime,
acquired a certain parcel of land known as Lot No. 1162, surveyed in the name of Heirs of Narciso
Cababarros situated at Corrales Extension, Telegrapo Cagayan de Oro City containing an area of 4,082
square meters and declared in the name of Diociciano Naralaban under Tax Declaration No. 16358; that
upon the death of Narciso Cababarros and Narcisa Edmilao the said land was transmitted by operation
of law to the defendants and the parents of the plaintiffs; that the property in question being owned in
common, was placed in trust and in the physical possession of defendant Faustina Vda. de Nacalaban
and her late husband, Dioniciano Nacalaban, on the understanding that they should deliver the shares of
the herein plaintiffs in case the latter demanded the same; that which the property in question was in the
ion of the defendant Faustina Vda. de Nacalaban and her husband Dioniciano Nacalaban, the said
spouses were able to secure fraudulently a certificate of title in their names, without the consent and
knowledge of the plaintiffs; and that upon knowing of the fraudulent acquisition, the plaintiffs had
exerted on several occasions efforts to demand for their respective shares but the defendants arrogantly
refused and ignored the plaintiffs' demands.

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In their answer the defendants alleged that the late spouses Narciso Cababarros and Narcisa Edmilao
were not owners anymore of the land subject of this action long before their deaths and hence could not
have transmitted non-existent rights over the said land which was no longer theirs; that no trust, express
or implied, had ever existed between plaintiffs and defendants; and that the plaintiffs were fully aware
that the spouses Dioniciano Nacalaban and Faustina Cababarros were issued a torrens title as proof of
their exclusive ownership over the land in question long before World War II. They averred as
affirmative defenses that the complaint states no cause of action; that even assuming that a cause of
action exists, the same has already been barred by prior judgment; and that the same has already been
barred by the statute of limitations or prescription, The defendants asked for damages and attorney's
fees.
Accordingly, the Court of Appeals, ruled affirming in toto the judgment of the Court of First Instance of
Misamis, Oriental which favors the plaintiffs (the herein respondents). Hence, this appeal by petition
for certiorari to review.
ISSUE: Whether the plaintiff-respondents are barred by prior judgment and/or by prescription
RULING: YES.From the facts of record it is clear that when the spouses Narciso Cababarros and
Narcisa Edmilao died, they were no longer owners of the land in question which had been previously
acquired by Casimiro Tamparong. Hence the plaintiffs, private respondents herein did not inherit any
right on the land in question.
The record also shows that a deed of sale conveying the land in question was executed by Casimiro
Tamparong in favor of the spouses Dioniciano Nacalaban and Faustina Cababaros On the basis of the
deed of sale in their favor, said spouses claimed the land in the cadastral proceedings and as a
consequence Original Certificate of Title No. 6929 of the Registry of Misamis Oriental was issued to
them on January 8, 1938.
There is no showing that the petitioners ever recognized the private respondents as their co-owners of
the land in question. Since 1952 the land in question had been declared for taxation purposes only in
the name of Dioniciano Nacalaban.
The contention of the private respondents that an implied trust over the land in question existed
between them and the petitioners has no factual and legal basis. Granting, arguendo, that such an
implied trust existed, the cause of action of the private respondents has prescribed. Their cause of
action arose on January 8, 1938 when Original Certificate of Title No. 6929 was issued by the Register
of Deeds of Misamis Oriental to the spouses Dioniciano Nacalaban and Faustina Cababarros The
issuance of the title was constructive notice to the private respondents. Moreover, there is evidence
that in 1945 the private respondents had demanded partition of the land in question and the petitioners
refused to comply with the demand.
The present action for partition and reconveyance was commenced only on February 11, 1964, more
than ten (10) years from the date the cause of action arose in 1938.
It is now settled that actions on implied and constructive trusts are extinguished by laches or
prescription of ten years.

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WHEREFORE, the 'decision appealed from is hereby set aside and the complaint in Civil Case No.
2317 of the Court of First Instance of Misamis Oriental is dismissed., without pronouncement as to
costs.

c/o Mark B.

G.R. No. L-45645 June 28, 1983

FRANCISCO A. TONGOY, for himself and as Judicial Administrator of the Estate of the Late
Luis
D.
Tongoy
and
Ma.
Rosario
Araneta
Vda.
de
Tongoy, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA, JUAN T. SONORA,
JESUS T. SONORA, TRINIDAD T. SONORA, RICARDO P. TONGOY, CRESENCIANO P.
TONGOY, AMADO P. TONGOY, and NORBERTO P. TONGOY, respondents
FACTS: The case is basically an action for reconveyance respecting two (2) parcels of land in Bacolod
City.
The first is Lot No. 1397 of the Cadastral Survey of Bacolod, otherwise known as Hacienda Pulo,
containing an area of 727,650 square meters and originally registered under Original Certificate of Title
No. 2947 in the names of Francisco Tongoy, Jose Tongoy, Ana Tongoy, Teresa Tongoy and Jovita
Tongoy in pro-indiviso equal shares. Said co-owners were all children of the late Juan Aniceto Tongoy.
The second is Lot No. 1395 of the Cadastral Survey of Bacolod, briefly referred to as Cuaycong
property, containing an area of 163,754 square meters, and formerly covered by Original Certificate of
Title No. 2674 in the name of Basilisa Cuaycong.
Of the original registered co-owners of Hacienda Pulo, three died without issue, namely: Jose Tongoy,
who died a widower on March 11, 1961; Ama Tongoy, who also died single on February 6, 1957, and
Teresa Tongoy who also died single on November 3, 1949. The other two registered co-owners,
namely, Francisco Tongoy and Jovita Tongoy, were survived by children. Francisco Tongoy, who died
on September 15, 1926, had six children; Patricio D. Tongoy and Luis D. Tongoy by the first marriage;
Amado P. Tongoy, Ricardo P. Tongoy; Cresenciano P. Tongoy and Norberto P. Tongoy by his second
wife Antonina Pabello whom he subsequently married sometime after the birth of their children. For
her part, Jovita Tongoy (Jovita Tongoy de Sonora), who died on May 14, 1915, had four children:
Mercedes T. Sonora, Juan T. Sonora, Jesus T. Sonora and Trinidad T. Sonora.
By the time this case was commenced, the late Francisco Tongoy's aforesaid two children by his first
marriage, Patricio D. Tongoy and Luis D. Tongoy, have themselves died. It is claimed that Patricio D.
Tongoy left three acknowledged natural children named Fernando, Estrella and Salvacion, all surnamed
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Tongoy. On the other hand, there is no question that Luis D. Tongoy left behind a son, Francisco A.
Tongoy, and a surviving spouse, Ma. Rosario Araneta Vda. de Tongoy.
On April 17, 1918, Hacienda Pulo was mortgaged by its registered co-owners to the Philippine
National Bank (PNB), Bacolod Branch, as security for a loan of P11,000.00 payable in ten (10) years at
8% interest per annum.
The mortgagors however were unable to keep up with the yearly amortizations, as a result of which the
PNB instituted judicial foreclosure proceedings over Hacienda Pulo on June 18, 1931.
To avoid foreclosure, one of the co-owners and mortgagors, Jose Tongoy, proposed to the PNB an
amortization plan that would enable them to liquidate their account.
But, on December 23, 1932, the PNB Branch Manager in Bacolod advised Jose Tongoy by letter that
the latter's proposal was rejected and that the foreclosure suit had to continue. As a matter of fact, the
suit was pursued to finality up to the Supreme Court which affirmed on July 31, 1935 the decision of
the CFI giving the PNB the right to foreclose the mortgage on Hacienda Pulo.
Patricio D. Tongoy and Luis Tongoy executed on April 29, 1933 a Declaration of Inheritance wherein
they declared themselves as the only heirs of the late Francisco Tongoy and thereby entitled to the
latter's share in Hacienda Pulo.
On March 13, 1934, Ana Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Sonora, Juan Sonora and
Patricio Tongoy executed an "Escritura de Venta", which by its terms transferred for consideration their
rights and interests over Hacienda Pulo in favor of Luis D. Tongoy.
On October 23, 1935 and November 5, 1935, respectively, Jesus Sonora and Jose Tongoy followed suit
by each executing a similar "Escritura de Venta" pertaining to their corresponding rights and interests
over Hacienda Pulo in favor also of Luis D. Tongoy.
In the case of Jose Tongoy, the execution of the "Escritura de Venta" was preceded by the execution on
October 14, 1935 of an Assignment of Rights in favor of Luis D. Tongoy by the Pacific Commercial
Company as judgment lien-holder (subordinate to the PNB mortgage) of Jose Tongoy's share in
Hacienda Pulo.
On the basis of the foregoing documents, Hacienda Pulo was placed on November 8, 1935 in the name
of Luis D. Tongoy, married to Maria Rosario Araneta, under Transfer Certificate of "Title No. 20154.
In the following year, the title of the adjacent Cuaycong property also came under the name of Luis D.
Tongoy, married to Maria Rosario Araneta, per Transfer Certificate of Title No. 21522, by virtue of an
"Escritura de Venta" executed in his favor by the owner Basilisa Cuaycong on June 22, 1936
purportedly for P4,000.00.
On June 26, 1936, Luis D. Tongoy executed a real estate mortgage over the Cuaycong property in favor
of the PNB, Bacolod Branch, as security for loan of P4,500.00.
Three days thereafter, on June 29, 1936, he also executed a real estate mortgage over Hacienda Pulo in
favor of the same bank to secure an indebtedness of P21,000.00, payable for a period of fifteen (15)
years at 8% per annum. After two decades, on April 17, 1956, Luis D. Tongoy paid off all his
103

obligations with the PNB, amounting to a balance of P34,410.00, including the mortgage obligations on
the Cuaycong property and Hacienda Pulo.
However, it was only on April 22, 1958 that a release of real estate mortgage was executed by the bank
in favor of Luis D. Tongoy.
On February 5, 1966, Luis D. Tongoy died, leaving as heirs his wife Maria Rosario Araneta and his son
Francisco A. Tongoy.
Just before his death, however, Luis D. Tongoy received a letter from Jesus T. Sonora, dated January
26, 1966, demanding the return of the shares in the properties to the co-owners.
Not long after the death of Luis D. Tongoy, the case now before Us was instituted in the court below on
complaint filed on June 2, 1966 by Mercedes T. Sonora, Juan T. Sonora ** , Jesus T. Sonora, Trinidad
T. Sonora, Ricardo P. Tongoy and Cresenciano P. Tongoy. Named principally as defendants were
Francisco A. Tongoy, for himself and as judicial administrator of the estate of the late Luis D. Tongoy,
and Maria Rosario Araneta Vda. de Tongoy. Also impleaded as defendants, because of their
unwillingness to join as plaintiffs were Amado P. Tongoy, Norberto P. Tongoy ** and Fernando P.
Tongoy. Alleging in sum that plaintiffs and/or their predecessors transferred their interests on the two
lots in question to Luis D. Tongoy by means of simulated sales, pursuant to a trust arrangement
whereby the latter would return such interests after the mortgage obligations thereon had been settled,
the complaint prayed that 'judgment be rendered in favor of the plaintiffs and against the defendants
Defendants Francisco A. Tongoy and Ma. Rosario Vda. de Tongoy filed separate answers, denying in
effect plaintiffs' causes of action, and maintaining, among others, that the sale to Luis D. Tongoy of the
two lots in question was genuine and for a valuable consideration, and that no trust agreement of
whatever nature existed between him and the plaintiffs.
Defendants also raised laches, prescription, estoppel, and the statute of frauds against plaintiffs.
Answering defendants counter claimed for damages against plaintiffs for allegedly bringing an
unfounded and malicious complaint.
The lower court rendered its decision on October 15, 1968 finding the existence of an implied trust in
favor of plaintiffs, but at the same time holding their action for reconveyance barred by prescription,
except in the case of Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy, and Norberto P.
Tongoy, who were adjudged entitled to reconveyance of their corresponding shares in the property left
by their father Francisco Tongoy having been excluded therefrom in the partition had during their
minority, and not having otherwise signed any deed of transfer over such shares.
Both parties appealed the decision of the lower court to respondent appellate court.
Plaintiffs-appellants Mercedes T. Sonora, Jesus T. Sonora, Trinidad T. Sonora and the heirs of Juan T.
Sonora questioned the lower court's decision dismissing their complaint on ground of prescription, and
assailed it insofar as it held that the agreement created among the Tongoy-Sonora family in 1931 was
an implied, and not an express, trust; that their action had prescribed; that the defendants-appellants
were not ordered to render an accounting of the fruits and income of the properties in trust; and that
defendants were not ordered to pay the attorney's fees of plaintiffs- appellants.

104

Defendants-appellants Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy assailed the
findings that there was preponderance of evidence in support of the existence of an implied trust; that
Ricardo P. Tongoy, Amado P. Tongoy and Norberto P. Tongoy are the legitimate half-brothers of the late
Luis D. Tongoy; that their shares in Hacienda Pulo and Cuaycong property should be reconveyed to
them by defendants-appellants; and that an execution was ordered pending appeal.
On December 3, 1975, respondent court rendered the questioned decision, the dispositive portion of
which is as follows:
WHEREFORE, judgment is hereby rendered modifying the judgment and Orders appealed from by
ordering Maria Rosario Araneta Vda. de Tongoy and Francisco A. Tongoy.
1) To reconvey to Mercedes T. Sonora, Juan T. Sonora (as substituted and represented by his heirs),
Jesus T. Sonora and Trinidad T. Sonora each a 7/60th portion of both Hacienda Pulo and the Cuaycong
property, based on their original shares;
2) To reconvey to Ricardo P. Tongoy, Cresenciano P. Tongoy, Amado P. Tongoy and Norberto P.
Tongoy as substituted and represented by his heirs each a 14/135th portion of both Hacienda Pulo and
the Cuaycong property, also based on their original shares; provided that the 12 hectares already
reconveyed to them by virtue of the Order for execution pending appeal of the judgment shall be duly
deducted;
3) To render an accounting to the parties named in pars. 1 and 2 above with respect to the income of
Hacienda Pulo and the Cuaycong property from May 5, 1958 up to the time the reconveyances as
herein directed are made; and to deliver or pay to each of said parties their proportionate shares of the
income, if any, with legal interest thereon from the date of filing of the complaint in this case, January
26, 1966, until the same is paid;
Petitioners Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy (defendants-appellants) have
come before Us on petition for review on certiorari.
ISSUE: Whether the Court of Appeals erred in finding that there was a trust constituted on Hacienda
Pulo.
HELD: The deeds of transfer executed in favor of Luis Tongoy were from the very beginning
absolutely simulated or fictitious, since the same were made merely for the purpose of restructuring the
mortgage over the subject properties and thus preventing the foreclosure by the PNB.
Considering the law and jurisprudence on simulated or fictitious contracts as aforestated, the within
action for reconveyance instituted by herein respondents which is anchored on the said simulated deeds
of transfer cannot and should not be barred by prescription. No amount of time could accord validity or
efficacy to such fictitious transactions, the defect of which is permanent.
There is no implied trust that was generated by the simulated transfers; because being fictitious or
simulated, the transfers were null and void ab initio-from the very beginning and thus vested no rights
whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give life to anything at
all.
Considering that the implied trust resulted from the simulated sales which were made for the purpose of
enabling the transferee, Luis D. Tongoy, to save the properties from foreclosure for the benefit of the
co-owners, it would not do to apply the theory of constructive notice resulting from the registration in
the trustee's name. Hence, the ten-year prescriptive period should not be counted from the date of
105

registration in the name of the trustee, as contemplated in the earlier case of Juan vs. Zuiga (4 SCRA
1221). Rather, it should be counted from the date of recording of the release of mortgage in the
Registry of Deeds, on which date May 5, 1958 the cestui que trust were charged with the knowledge
of the settlement of the mortgage obligation, the attainment of the purpose for which the trust was
constituted.
G.R. No. L-52064 December 26, 1984
JULIANA CARAGAY-LAYNO, Assisted by Her Husband, BENITO LAYNO, petitioner, vs.
HONORABLE COURT OF APPEALS and SALVADOR ESTRADA as Administrator of the
Estate of the Deceased, MARIANO DE VERA, respondents.
FACTS: It was established by a relocation survey that the Disputed Portion is a 3,732 square-meterarea of a bigger parcel of sugar and coconut land (Lot No. 1, Psu-24206 [Case No. 44, GLRO Rec. No.
117]), with a total area of 8,752 square meters, situated at Calasiao, Pangasinan. The entire parcel is
covered by Original Certificate of Title No. 63, and includes the adjoining Lots 2 and 3, issued on 11
September 1947 in the name of Mariano M. DE VERA, who died in 1951 without issue. His intestate
estate was administered first by his widow and later by her nephew, respondent Salvador Estrada.
Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first cousins, "both
orphans, who lived together under one roof in the care of a common aunt."
As Administratrix, DE VERA's widow filed in Special Proceedings No. 4058 of the former Court of
First Instance of Pangasinan, Branch III, an Inventory of all properties of the deceased, which included
"a parcel of land in the poblacion of Calasiao, Pangasinan, containing an area of 5,417 square meters,
more or less, and covered by Tax Declaration No. 12664."
Because of the discrepancy in area mentioned in the Inventory as 5,147 square meters (as filed by the
widow), and that in the title as 8,752 square meters, ESTRADA repaired to the Disputed Property and
found that the northwestern portion, subsequently surveyed to be 3,732 square meters, was occupied by
petitioner-spouses Juliana Caragay Layno and Benito Layno. ESTRADA demanded that they vacate the
Disputed Portion since it was titled in the name of the deceased DE VERA, but petitioners refused
claiming that the land belonged to them and, before them, to JULIANA's father Juan Caragay.
ESTRADA then instituted suit against JULIANA for the recovery of the Disputed Portion (Civil Case
No. D-2007), which she resisted, mainly on the ground that the Disputed Portion had been fraudulently
or mistakenly included in OCT No. 63, so that an implied or constructive trust existed in her favor. She
then counterclaimed for reconveyance of property in the sense that title be issued in her favor.
After hearing, the Trial Court rendered judgment ordering JULIANA to vacate the Disputed Portion.
On appeal respondent Appellate Court affirmed the Decision in toto.
ISSUE:Whether Juliana can reconvey the land based on implied trust?
HELD:Yes. Prescription cannot be invoked against JULIANA for the reason that as lawful possessor
and owner of the Disputed Portion, her cause of action for reconveyance which, in effect, seeks to quiet
title to the property, falls within settled jurisprudence that an action to quiet title to property in one's
possession is imprescriptible. Her undisturbed possession over a period of fifty two (52) years gave her
a continuing right to seek the aid of a Court of equity to determine the nature of the adverse claim of a
third party and the effect on her own title.
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Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance, and to annul
OCT. No. 63 accrued only in 1966 when she was made aware of a claim adverse to her own. It was
only then that the statutory period of prescription may be said to have commenced to run against her,
following the pronouncement in Faja vs. Court of Appeals, supra, a case almost Identical to this one.
The evidence discloses that the Disputed Portion was originally possessed openly, continuously and
uninterruptedly in the concept of an owner by Juan Caragay, the deceased father of JULIANA, and had
been declared in his name under Tax Declaration No. 28694 beginning with the year 1921, later revised
by Tax Declaration No. 2298 in 1951. Upon the demise of her father in 1914, JULIANA adjudicated
the property to herself as his sole heir in 1958, and declared it in her name under Tax Declaration No.
22522 beginning with the year 1959, later cancelled by TD No. 3539 in 1966. Tacking the previous
possession of her father to her own, they had been in actual open, continuous and uninterrupted
possession in the concept of owner for about forty five (45) years, until said possession was disturbed
in 1966 when ESTRADA informed JULIANA that the Disputed Portion was registered in Mariano DE
VERA's name.
Of significance is the fact, as disclosed by the evidence, that for twenty (20) years from the date of
registration of title in 1947 up to 1967 when this suit for recovery of possession was instituted, neither
the deceased DE VERA up to the time of his death in 1951, nor his successors-in-interest, had taken
steps to possess or lay adverse claim to the Disputed Portion. They may, therefore be said to be guilty
of laches as would effectively derail their cause of action. Administrator ESTRADA took interest in
recovering the said portion only when he noticed the discrepancy in areas in the Inventory of Property
and in the title.

107