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AGENCY

Distinctions
Lease
Agency
1. Basis
of is
Workrepresentation
2. Agent represents the principal
3. Agent exercises discretionary powers
4. 3 persons involved principal, agent, 3rd person w/ whom the agent contracted
5. Basis
1. Relatesistoemployment
commercial or business transactions
2. Lessor does not represent his employer
3. Lessor performs only ministerial functions
4. 2 persons involved
5. relates to matters of manual execution where the servant acts under the direc
tion and control of the master
Independent
Agency
1. A acts under
Contractor
the control of P
2. A of A may be may be controlled by P
3. A can bind P in case of tort or injury
4. Authorized
1. Negligence to
of work
A is according
imputable to his
P own method w/o being subject to P s control
except insofar as the result is concerned
2. EE s of contractor are not EE s of the P
3. Cannot bind P in case of tort or injury
4. Negligence of the contractor is not imputable to P
1. A acts for the P
Partnership
Agency
2. A is controlled by P
3. A assumes NO liability in contracts entered into w/in the scope of his author
ity
4. Partner
1. A does not
actsshare
for himself,
in the profits
the firm and for his partners
2. P is not controlled by other P s unless there is an agreement to the effect
3. P assumed liability for himself and the firm
4. P shares in the profits and losses
Agency
1.
Sale
A receives
to Sellthe goods as the goods of P (ownership is not transferred)
2. A delivers the proceeds/price of the sale
3. A can return the goods in case he is unable to sell the same
4. A is bound to act according to the instruction of P in dealing w/ the goods
5. Essence is the appointment of one to act for another
6. Buyer
1. A relationship
receives goods
w/c often
fromresults
seller as
in owner
sale
2. B pays the price
3. B, as a general rule, cannot return the goods sold
4. B can deal with the goods as he pleases, being the owner
5. Essence is the transfer of title from S to B
6. A subsequent step in the transaction
Agency
Implied
1. TherebyAgency
isEstoppel
no agency at all, but the one assuming to acts as agent has apparent
or ostensible, but NOT real authority to represent another
2. Can be invoked only by a 3rd person who, in good faith, relied on the conduct
of P in holding A out as being authorized
3. A is no agent at all, and, as against P, has none of the rights of an agent
4. There
1. Shouldisbeanrestricted
actual agency
to cases in w/c the authority is not real but apparent
2. Reliance by the 3rd person is not necessary because A is a real agent
3. A is a real agent w/ authority to act on behalf of the principal
4. A fact to be proved by deductions or inferences from other facts
Commission
1.
Broker
Is in possession
Agent of the goods of P
2. Has a relation w/ P and the goods
3. Only
1. Receives
actsaascommission
an intermediary,
upon thedoes
successful
not posses
conclusion
the goods
of the transaction
2. Has no relation with the goods
3. Earns his pay merely bringing the buyer and seller together, even if no sale
is eventually made
1. May be considered the source or cause
Power
Authority
2. An act is w/in the authority of A if it is not a violation of his duty to P
13.May
An be
A who
considered
has authority
the effect
also or
hasthe
thelimitation
power to bind
uponPA s ability to bind P
2 An act is w/in A s power if he has the legal ability to bind P to a 3rd person,
although the act constitutes a violation of his duty to P
3 Power cannot exist without authority
1. The sum total of the powers committed or permitted to A by P
Instructions
Authority

2. Relates to the subject w/ w/c A is empowered to deal or the kind of business


or transactions upon w/c he is empowered to act
3. Limitations of authority are operative against those who have or are charged
w/ the knowledge of them
4. Directs
1. Is contemplated
the manner
to of
be transacting
made known tothetheauthorized
3rd personbusiness
dealingand
withcontemplates
A on
ly a private rule of guidance to A and are independent and distinct in character
2. Refer to the manner or mode of A s action w/ respect to the matters w/c are w/i
n the scope of the permitted action
3. Without significance as against those dealing with A with neither knowledge n
or notice of them
4. Not expected to be made known to those w/ whom A deals
Agent
Bank
1. CanTeller
(Juridical
assert(Physical
evenPossession)
against
Possession)
P, an independent, autonomous right to retain the mon
ey or goods received in consequence of the agency, as when P fails to reimburse
him for advances he has made
2. When A misappropriates or fails to turn over P s proceeds of goods he was commi
ssioned
1. Payment
or by
authorized
3rd person
to to
sell,
a teller,
he is guilty
who isofa mere
estafakeeper of the funds, is paym
ent to the bank itself; T has no independent right or title to retain or posses
the funds as against the bank
2. If T misappropriates money receives by him for the bank, he is guilty of qual
ified theft

Trust is
Agent
Trustee
Agency usually
acts
may
may
usually
inact
behold
holds
the
terminated
onended
legal
name
his
no by
title
of
ownorthe
principal
name
revoked
ataccomplishment
to all at
the property
any time
of the purposes for which it was fo
Agencyhas
rmed
Trust
Agent
Trustee involves
may
does
authority
notnotcontrol
benecessarily
connected
to make
over contracts
atorall
property
evenwith
possesses
which
property
willsuch
be authority
binding ontoisbind
principal
the trusto
r trust
AAgency
or theismay
cestui
really
be the
que
a result
contractual
trust of therelation
contract or not; it may be created also by law
Definition:
ART 1868. By the contract of agency a person binds himself:
1. to render some service or
2. to do something in representation or on behalf of another,
with the consent or authority of the latter.
Agency
1. Definition - A relationship w/c implies a power in an agent to contract with
a 3rd person on behalf of a principal
2. Purpose - To extend the personality of the principal through the facility of
the agent
3. Nature of Relation Fiduciary in character since it is based on trust and conf
idence
Characteristics of Contract of Agency
1. Consensual perfected by mere consent
2. Principal it can stand on its own
3. Nominate it has its own name
4. Either:
a. Unilateral if it is gratuitous, because it creates obligations only for one o
f the parties
b. Bilateral if it is for compensation, because it gives rise to reciprocal righ
ts and obligations
5. Preparatory entered into as a means to an end; i.e., the creation of other tr
ansactions or contracts
6. Based on fiduciary relationship
Essential Elements of Agency
1. There is consent, express or implied, of the parties to establish the relatio
nship
2. The object is the execution of a juridical act in relation to 3rd persons
3. The agent acts as a representative and not for himself
4. The agent acts within the scope of his authority
Capacity of the Parties
1. Principal
a. any person who is capacitated may be a principal
b. may be a natural or juridical person
2. Agent since he assumes no personal liability, he does not have to possess ful
l capacity to act insofar as 3rd persons are concerned
a. The agent must be competent to bind himself to the principal
b. So far as 3rd persons are concerned, principal must be the one capacitated
Acts That May be Delegated to an Agent
1. General Rule What a man may do in person, he may do thru another
2. Exceptions
a. Personal Acts if personal performance is required
* right to vote
* making of a will
* contract of marriage
* statements required to be under oath
* member of BOD cannot act validly by proxy
* agent cannot delegate to a sub-agent performance of acts w/c he has been appoi
nted to perform in person
b. Criminal Acts
c. Acts not allowed by law
* alien cannot purchase land through a Filipino
Fiduciary Nature of Agency
1. A is estopped from asserting his interest adverse to P
2. A must not act as an adverse party
3. A must not act for an adverse party
4. A must not use or disclose secret information
5. A must give notice of material facts summons to A is summons to P
Qui facit per alium facit per se
He who acts though another, acts for himself

ART 1869. Agency may be:


1. express, or
2. implied:
a. from the acts of the principal,
b. from his silence or lack of action, or
c. his failure to repudiate the agency, knowing that another person is acting on
his behalf without authority.
Agency may be oral, unless the law requires a specific form.
Classification of Agency:
1. Manner of creation
a. Express
b. Implied
2. As to its character
a. Gratuitous
b. Compensated or onerous
3. Extent of business covered
a. General = comprises all the business of the principal
b. Special = comprises one or more special transaction
4. Authority conferred
a. Couched in general terms = deemed to comprise only acts of administration (18
77)
b. Couched in specific terms = authorizing only the performance of a specific ac
t or acts (1878)
5. Nature & effects
a. Ostensible or representative = agents act in the name and representation of t
he principal (1868)
b. Simple or commission = agents act in his own name but for the account of the
principal
ART 1870. Acceptance by the agent may also be:
1. express, or
2. implied:
a. from his acts which carry out the agency, or
b. from his silence or inaction according to the circumstances.
Implied Acceptance:
ART 1871. Between persons who are PRESENT, the acceptance of the agency may also
be implied if:
1. the principal delivers his power of attorney to the agent and
2. the agent receives it without any objection.
Power of Attorney
1. Definition An instrument in writing by which one person, as principal, appoin
ts another as his agent and confers upon him the authority to perform certain sp
ecified acts or kinds of acts on behalf of the principal
2. Purpose To evidence the authority of A to 3rd parties w/in whom A deals
Implied Acceptance:
ART 1872. Between persons who are ABSENT, the acceptance of the agency CANNOT be
implied from the silence of the agent, except:
1. When the principal transmits his power of attorney to the agent, who receives
it without any objection;
2. When the principal entrusts to him by letter or telegram a power of attorney
with respect to the business in which he is habitually engaged as an agent, and
he did not reply to the letter or telegram.
Between Persons Who are Absent
1. General Rule If both P and A are absent, acceptance of the agency by A is NOT
implied by silence or inaction
2. Exceptions When there is implied acceptance:
a. When P transmits (sends) his power of attorney to A, who receives it without
any objection; (must sent a reply, acknowledging receipt)
b. When P entrusts to A (by letter or telegram) a power of attorney with respect
to the business in which A is habitually engaged as an agent, and A did not rep
ly to the letter or telegram (no need to reply)

ART 1873. If a person specially informs another or states by public advertisemen


t that he has given a power of attorney to a third person, the latter thereby be
comes a duly authorized agent,
1. in the former case with respect to the person who received the special inform
ation, and
2. in the latter case with regard to any person.
The power shall continue to be in full force until the notice is rescind
ed in the same manner in which it was given.
2 Ways of Giving Notice of Agency
1. By SPECIAL INFORMATION the person appointed as agent is considered such w/ re
spect to the person to whom it was given
2. By PUBLIC ADVERTISMENT the agent is considered as such w/ regard to any perso
n
Note
The power of attorney must be revoked in the same manner in w/c it was g
iven.
If caused
Agency
Implied
No
There
agency
isbyAgency
anby
Estoppel
at actual
all(1881-1882)
principal,
(1911)he is liable to 3rd persons who relied on the misreprese
agency
Principal
ntation
If
Can
Reliance
An
Agent
caused
apparent
beisinvoked
never
aby
isreal
by 3rd
agent
always
agent,
personally
only
person
agent
isby
liable
then
nonot
ade
agent
Aliable
3rd
jure
isperson
necessary
the
atagent
all
only
whoone
in good
liablefaith, relied
ART 1874. When a sale of a piece of land or any interest therein is through an a
gent, the authority of the latter shall be in writing; otherwise, the sale shall
be void.
Q ACTUALLY this is voidable since principal can ratify under 1901, 1910(2)
Q Agency to Purchase Land = covered by 1878(5)
Q Real estate broker is not within Art 1874 where his authority is limited to fi
nding prospective buyer
ART 1875. Agency is presumed to be for a compensation, unless there is proof to
the contrary.
Double Agency
Agent acting at once for both contracting parties
This is disapproved by law unless:
1. the agent acted with full knowledge and free consent of both principal or
2. his employment was merely to bring parties together
ART 1876. An agency is either general or special.
The former comprises all the business of the principal.
The latter, one or more specific transactions.
Classification of an Agent:
1. Universal Agent = employed to do all acts that the principal may personally d
o and which he can lawfully delegate to another the power of doing
2. General Agent = employed to do all acts connected with a particular trade, bu
siness, or employment
3. Special or particular agent = authorized to act in one or more specific trans
action, or to do one or more specific acts, or to act upon a particular occasion
(atty-at-law; auctioneer; broker; factor)
General Agent
Special
Authorized to do only
all acts
one or
connected
more specific
with theacts
business
in pursuance of particular instr
uctions
Authorized to conduct a single
series transaction
of instructions
or ainvolving
series ofatransactions
continuity ofnotservice
invol
vingbind
May continuity
his principal
of service
by an act within the scope of his authority although it m
ay be contrary
Cannot bind thetoprincipal
his special
in ainstructions
manner beyond or outside the specific acts which
he is authorized
Continuing and unrestricted
to perform byon limitations
behalf of theother
principal
than those which confine the au
thority within
Temporary and naturally
the boundssuggests
of whatlimitations
is usual, proper,
of powerorofnecessary
which 3rd persons must
inform
Apparent
3rd
Statement
party
themselves
authority
musttheinquire
by principal
doesabout
notofterminate
the
thetermination
former
without
s authority
notice to
would
3rdordinarily
party be regarded
as advisory
Such statements will be regarded as words limiting the authority
ART 1877. An agency couched in general terms comprises only acts of administrati
on,
1. even if the principal should state:
a. that he withholds no power or
b. that the agent may execute such acts as he may consider appropriate, or
2. even though the agency should authorize a general and unlimited management.
(mem) ART 1878. Special powers of attorney are necessary in the following cases:
1. To make such payments as are not usually considered as acts of administration
;
2. To effect novations which put an end to obligations already in existence at t
he time the agency was constituted;
3. To:
a. compromise,
b. submit questions to arbitration,
c. renounce the right to appeal from a judgment,
d. waive objections to the venue of an action or
e. abandon a prescription already acquired;
4. To waive any obligation gratuitously;
5. To enter into any contract by which the ownership of an immovable is transmit
ted or acquired either gratuitously or for a valuable consideration;
6. To make gifts, except:
a. customary ones for charity or
b. those made to employees in the business managed by the agent;
7. To loan or borrow money, unless the latter act be urgent and indispensable fo
r the preservation of the things which are under administration;
8. To lease any real property to another person for more than one year;
9. To bind the principal to render some service without compensation;
10. To bind the principal in a contract of partnership;
11. To obligate the principal as a guarantor or surety;
12. To create or convey real rights over immovable property;
13. To accept or repudiate an inheritance;
14. To ratify or recognize obligations contracted before the agency;
15. Any other act of strict dominion.
Summary of Above Acts:
1. acts of strict dominion or ownership (as distinguished from acts of mere admi
nistration)
2. gratuitous contracts
3. contracts where personal trust or confidence is of the essence of the agreeme
nt
ART 1879. A special power to sell excludes the power to mortgage
A special power to mortgage does not include the power to sell.
Distinctions
1. Exclusive Agency to Sell
a. P is not prohibited from selling the goods himself
b. P is only prohibited from allowing other agents to sell the goods
2. Exclusive Power of Sale
a. Even P cannot compete with A in the selling of the goods
b. Includes the power to:
* look for prospective buyers
* execute the documents of sale
* accept the payment in cash only
* deliver the goods/property
ART 1880. A special power to compromise does not authorize submission to arbitra
tion.
REASON: arbitrator may not enjoy the trust and confidence of the principal
Special Power to Compromise:
Agent authorized to compromise can do anything which the principal himse
lf can do to effect a settlement
ART 1881. The agent must act within the scope of his authority.
He may do such acts as may be conducive to the accomplishment of the pur
pose of the agency.
Authority:
Power of the agent to affect the legal relations of the principal by act
s done in accordance with the principal s manifestation of consent to him
Authority may be considered as the source or cause while power is the ef
fect.
Authority by Necessity or Operation of Law
1. There must exist an emergency wherein A is required to act immediately
2. There must be inability on the part of A to communicate w/ P
3. The exercise by A of the authority is for the protection and the benefit of P
4. The means used by A must be legal
5. The authority ceases when the emergency ceases

Requisites for P to be Bound by Acts of A:


1. A must act w/in the scope of his authority
2. A must act in representation or in behalf of P

(1883)within
Does
Acts
VALID;ingenerally,
not
principal
behalf
actthe
inofscope
behalf
isnot
thebound;
principal
of
binding
ofhis
Principal
agent
authority
on principal;
not personally
agentliable
and stranger
unless hearebound
the only
himself
part
ies, except
Outside
Unauthorized
VALID, w/n
thethe
regarding
scope
andsubject
Unenforceable
of his
things
matter
authority
belonging
belongs
but maytobe
tothe
theprincipal,
RATIFIED
principal
(1403,provided,
1407) at the time de
livery is to be made, the agent can transfer legally the ownership of the thing. O
therwise, he will be held liable for breach of warranty against eviction
When P is Bound by Acts of P
1. General Rule P is not bound by the acts of A beyond his limited powers
2. Exceptions:
a. Where P s acts have contributed to deceive a 3rd person in good faith
b. Where the limitations upon the power creates by P could not have been known b
y the 3rd person
c. Where P has placed in the hands of A, instruments signed by him in blank
d. Where P has ratified the acts of A
ART 1882. The limits of the agent's authority shall not be considered exceeded s
hould it have been performed in a manner more advantageous to the principal than
that specified by him.
ART 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such perso
ns against the principal.
In such case the agent is the one directly bound in favor of the person
with whom he has contracted, as if the transaction were his own, except when the
contract involves things belonging to the principal.
The provisions of this article shall be understood to be without prejudi
ce to the actions between the principal and agent.
Kinds of Principal
1. Disclosed if at the time of transaction contracted by A, the 3rd party knows
that A is acting for P and of P s identity
2. Partially Disclosed if the 3rd party knows that A is acting for P but is unaw
are of P s identity
3. Undisclosed if the 3rd party has no notice of the fact that A is acting as su
ch for P
Agency with Undisclosed Principal
1. General Rule A is directly liable to the 3rd person w/ whom he had contracted
as if the transaction were his own
a. Reason There is no representation of P when A acts in his own name
b. Therefore P cannot have a right of action against the 3rd person and vice ver
sa
2. Exception P is bound if the contract entered into by A involves things belong
ing to P
a. Reason For the protection of 3rd persons against possible collusion between A
and P
b. In such case, the contract is considered as entered into between P and the 3r
d person
3. Remedy of P P has the right to demand from A damages for his failure to compl
y with the agency
4. Remedy of 3rd Person He has a right of action not only against P but also aga
inst A
CHAPTER 2
Obligations of the Agent
ART 1884. The agent is bound by his acceptance to carry out the agency, and is l
iable for the damages which, through his non-performance, the principal may suff
er.
He must also finish the business already begun on the death of the princ
ipal, should delay entail any danger.
Obligations of an Agent under Art. 1884
1. To carry out the business of agency
2. To answer for damages w/c P may suffer through A s non-performance
3. To finish the business already began on the death of P
Exceptions to the General Rule That Death of P Extinguishes the Agency
1. If delay would entail damages
2. Agency coupled with interest
Specific Obligations of A to P
1. To carry out the agency w/c he has accepted
2. To answer for damages, which through his performance, P may suffer
3. To finish the business already begun on the death of P, should the delay enta
il any danger
4. To observe the diligence of a GFOF in the custody and preservation of the goo
ds forwarded to A by P in case he declines an agency, until an agent is appointe
d (1885)
5. To advance the necessary funds should there be a stipulation to do so (1886)
6. To act in accordance w/ the instructions of P, and in default thereof, to do
all that a GFOF would do (1887)
7. Not to carry out the agency if its execution would manifestly result in loss
or damage to the principal (1888)
8. To answer for damages if there being a conflict between A s interests and those
of P, he should prefer his own (1889)
9. Not to loan to himself if he has been authorized to lend money at interest (1
890)
10. To render an account of his transactions and to deliver to P whatever he may
have received by virtue of the agency (1891)
11. To distinguish goods by countermarks and designate the merchandise respectiv
ely belonging to each P, when the goods belong to different owners (1904)
12. To be responsible for the acts of the substitute appointed by A, in certain
cases (1892)
13. To pay interest on funds he has applied to his own use (1896)
14. To inform P, where an authorized sale of credit has been made, of such sale
(1906)
15. To bear the risk of collection, should he receive also on a sale, a guaranty
commission (1907)
16. To indemnify P for damages for his failure to collect the credits of P and t
he time that they became due (1908)
17. To be responsible for fraud or negligence (1909)
ART 1885. In case a person declines an agency, he is bound to observe the dilige
nce of a GFOF in the custody and preservation of the goods forwarded to him by t
he owner until the latter should
1. appoint an agent or
2. take charge of the goods.
ART 1886. Should there be a stipulation that the agent shall advance the necessa
ry funds, he shall be bound to do so EXCEPT when the principal is insolvent.
Q The exception is based on P s obligation to reimburse A. The insolvency of P is
a ground for extinguishment of the agency.
ART 1887. In the execution of the agency, the agent shall act in accordance with
the instructions of the principal.
In default thereof, he shall do all that a GFOF would do, as required by
the nature of the business.
Instructions
Private directions w/c P may give A in regard to the manner of performin
g his duties as an agent.
Effect of Violation of P s Instructions
1. If the act done by A is w/in the apparent scope of authority w/ w/c he has be
en clothed
a. It does not matter that it is directly contrary to the instructions of P
b. P will be liable UNLESS the 3rd person who dealt with A, knew that A exceeded
his authority or violated his instructions
2. 3rd persons dealing with A do so at their peril, they are:
a. bound to inquire as to the extent of A s authority, but
b. not required to investigate the instructions of P
ART 1888. An agent shall not carry out an agency if its execution would manifest
ly result in loss or damage to the principal.
ART 1889. The agent shall be liable for damages if, there being a conflict betwe
en his interests and those of the principal, he should prefer his own.
Q The agent s interests superior to that of P when A has a security interest in th
e goods of P in his possession
ART 1890. If the agent has been empowered to borrow money, he may himself be the
lender at the current rate of interest.
If he has been authorized to lend money at interest, he cannot borrow it
without the consent of the principal.
Reasons:
1. A can be the lender because there is no danger of P suffering any damages sin
ce the current rate of interest would have to be paid anyway
2. A cannot be the borrower the transaction may be prejudicial to P because A ma
y prove to be a bad debtor
ART 1891. Every agent is bound:
1. to render an account of his transactions and
2. to deliver to the principal whatever he may have received by virtue of the ag
ency, even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an a
ccount shall be void.

ART 1892. The agent may appoint a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute:
1. When he was not given the power to appoint one;
2. When he was given such power,
a. but without designating the person, and
b. the person appointed was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the prin
cipal shall be void.
ART 1893. In the cases mentioned in 1 and 2 of Art. 1892, the principal may furt
hermore bring an action against the substitute with respect to the obligations w
hich the latter has contracted under the substitution.
Sub-Agent
A person to whom A delegates, as his agent, the performance of an act fo
r P which A has been empowered to perform
Rules
1. If SA was appointed by A w/o authority, SA is a stranger to P
2. If SA was appointed by A w/ authority, there is a relationship between SA and
P
3. When the authority of SA is w/ the authority of P, the death of A does not af
fect the relationship between P and SA
4. When SA is accountable only to A, the death of A terminates the authority of
SA
A is Responsible for Damages Caused by S in the Following Cases:
1. If SA was appointed by A against the prohibition of P
2. If A was not given the power to appoint SA
3. Even if A was given the power to appoint SA but SA is notoriously incompetent
or insolvent
A is NOT Responsible for Damages Caused by S in the Following Cases:
1. If A was given the power by P to appoint SA and SA is NOT notoriously incompe
tent or insolvent
2. If SA is the person designated by P to be the substitute
Substitution of SA is NOT Valid when
A was prohibited by P to appoint a substitute.
Substitution is Valid when:
1. A was given the power to appoint a substitute
2. Even if A was not given the power, there was no prohibition imposed by P
Acts of SA in the name of P are NOT Valid when:
1. SA was appointed by A against the prohibition of P
2. SA acted beyond the scope of his authority
ART 1894. The responsibility of 2 or more agents, even though they have been app
ointed simultaneously, is not solidary, if solidarity has not been expressly sti
pulated.
ART 1895. If solidarity has been agreed upon, each of the agents is responsible:
1. for the non-fulfillment of agency, and
2. for the fault or negligence of his fellows agents - except when the fellow ag
ents acted beyond the scope of their authority.
General Rule When There are 2 or More Agents
The liability is joint and personal, but only if each can act separately
.
ART 1896. The agent owes interest:
1. on the sums he has applied to his own use from the day on which he did so, an
d
2. on those which he still owes after the extinguishment of the agency.
Q #1: without prejudice to criminal action so agent can be sued for estafa
Q #2: demand not necessary
ART 1897. The agent who acts as such is NOT personally liable to the party with
whom he contracts, UNLESS he:
1. expressly binds himself or
2. exceeds the limits of his authority without giving such party sufficient noti
ce of his powers.
Agent may sue the 3rd party in his own name:
1. Agent contracts in his own name for an undisclosed principal (1883)
2. Agent possess beneficial interest in the subject matter of the agency like 19
07
3. Agent pays money of his principal to a 3rd party by mistake or under a contra
ct which subsequently become illegal
4. 3rd party commits a tort against the agent
ART 1898. If the agent contracts in the name of the principal, exceeding the sco
pe of his authority, and the principal does not ratify the contract, it shall be
void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal.
In this case, however, the agent is liable if he undertook to secure the
principal's ratification.
Liability of the Agent:
1. If A acted in the name of P and w/in the scope of his authority A assumes NO
liability
2. If A acts in excess of his authority, EVEN if he contracts in the name of P A
is personally liable UNLESS there is subsequent ratification by P
3. If the 3rd person w/ whom A has contracted is aware of the limits of the powe
r s granted by P
a. The contract is:
* Unenforceable against P
* Void between A and the 3rd person
b. However if A promised to secure P s ratification:
* A if personally liable if P does not ratify
* P is liable if P ratifies
ART 1899. If a duly authorized agent acts in accordance with the orders of the p
rincipal, the latter cannot set up the ignorance of the agent as to circumstance
s whereof he himself was, or ought to have been, aware.
Q If P appoints an agent who is ignorant, the fault is P s alone. Equity demands t
hat P should be bound by the acts of his agent.
ART 1900. So far as 3rd persons are concerned, an act is deemed to have been per
formed within the scope of the agent's authority, if such act is within the term
s of the power of attorney, as written, even if the agent has in fact exceeded t
he limits of his authority according to an understanding between the principal a
nd the agent.
Every person dealing with an assumed agent is put upon inquiry and must discover
upon his peril, if he would hold P liable:
1. not only the fact of the agency
2. but the nature and extent of authority of the agent
Q If he does not make such an inquiry, he is chargeable with knowledge of the ag
ent s authority, and his ignorance of that authority will not be an excuse.
Q However, if the authority of A is in writing, such person is not required to i
nquire further than the terms of the written power of attorney.
ART 1901. A third person cannot set up the fact that the agent has exceeded his
powers, if the principal:
1. has ratified, or
2. has signified his willingness to ratify the agent's acts.
Effect of Ratification by P
1. A is granted authority as if P originally authorized the act
2. The ratification has a retroactive effect
Q Implied ratification = receipt by the principal of benefits of the transaction
ART 1902. A 3rd person with whom the agent wishes to contract on behalf of the p
rincipal may require the presentation of the power of attorney, or the instructi
ons as regards the agency.
Private or secret orders and instructions of the principal do not prejud
ice third persons who have relied upon the power of attorney or instructions sho
wn them.
ART 1903. The COMMISSION AGENT shall be responsible for the goods received by hi
m in the terms and conditions and as described in the consignment, unless upon r
eceiving them he should make a written statement of the damage and deterioration
suffered by the same.
Broker
Factor
One whose
or business
CommissionisAgent
to receive and sell goods for a commission and who is entr
usted by P w/ the possession of goods to be sold, and usually selling in his own
Middleman
name. He or
mayintermediary
act in his ownwho,name
in behalf
OR in that
of others,
of P. and for a commission or fee,
JOB
negotiates
IS 3-WAY:contracts
The agentoristransactions
related notrelative
only to his
to real
principal
or personal
and toproperty
the buyer or
seller, but also to the property constituting the object of the transaction whi
ch should
JOB IS 2-WAY:
be placed
The broker
in hisispossession
pure intermediary,
and at hisa pure
disposal
go-between who does not ha
ve eitheronly
Engages theincustody
the business
or the ofpossession
buying orofselling
the property
personal
thatproperty
he disposes
for his
of prin
Engages in the buying or selling for his clients either personal or real propert
cipal
yShould
Not necessary;
have a place
more independent
of business than Commission Agent
Efficient and procuring cause:
Principle in the law on agency whereby the broker, to be entitled to com
pensation, must be the efficient agent or procuring cause of the sale
Ready-Willing-and-Able Rule:
Principle on the law on agency which states that for the broker to be en
titled to commission, he must produce a person who is ready, willing and able bo
th to accept and live up to the terms offered by his principal
Factorage = compensation of factor or commission agent
ART 1904. The commission agent who handles goods of the same kind and mark, whic
h belong to different owners, shall distinguish them by countermarks, and design
ate the merchandise respectively belonging to each principal.
Obligation of Commission Agent Handling Goods of the Same Kind and Mark
1. General Rule He may NOT commingle goods w/o authority
2. Exceptions:
a. Some agents, such as auctioneers, are normally permitted to mingle P s property
with their own
b. Collecting banks are permitted to mingle funds of their depositors with their
own property and that of other depositors
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 res
ult from such sale.
Authority of CA to Sell:
1. General Rule The CA is only authorized to sell in cash
2. Exception The CA can sell on credit ONLY with the express or implied consent
of P
3. Alternative Remedy of P if CA makes a sale on credit w/o his authority:
a. P may require payment in cash in w/c case, the interest or benefit from the s
ale will belong to A, OR
b. P may ratify the sale on credit -- in w/c case it will have all the risks and
advantages to him
ART 1906. Should the commission agent, with authority of the principal, sell on
credit, he shall so inform the principal, with a statement of the names of the b
uyers.
Should he fail to do so, the sale shall be deemed to have been made for
cash insofar as the principal is concerned.
Purpose
To prevent A from stating that the sale was on credit when in fact it wa
s made for cash.
ART 1907. Should the commission agent receive on a sale, in addition to the ordi
nary commission, another called a guarantee commission, he shall bear the risk o
f collection and shall pay the principal the proceeds of the sale on the same te
rms agreed upon with the purchaser.
Guarantee Commission or Del Credere Commission
1. Meaning One where, in consideration of an increased commission, the CA or fac
tor guarantees to P, the payment of debts arising through his agency; additional
commission to ensure collection of debt
2. Del Credere Agent agent who receives a guarantee commission
3. Purpose to compensate the CA for the risks he will have to bear in the collec
tion of the credit due P
4. A Del Credere Agent is liable to P if the buyer fails to pay BUT he is not pr
imarily the debtor; his is a contingent pecuniary liability (to make good in the
event the buyer fails to pay)
5. A Del Credere Agent may sue in his name in the event of non-performance of th
e buyer
ART 1908. The commission agent who does not collect the credits of his principal
at the time when they become due and demandable shall be liable for damages, un
less he proves that he exercised due diligence for that purpose.
Q This article does not apply when there is a guaranty commission.
ART 1909. The agent is responsible not only for fraud, but also for negligence,
which shall be judged with more or less rigor by the courts, according to whethe
r the agency was or was not for a compensation.

CHAPTER 3
Obligations of the Principal

ART 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the prin
cipal is not bound except when he ratifies it expressly or tacitly.
Specific Obligations of P to A
1. To comply with all the obligations which the A may have contracted w/in the s
cope of his authority and in the name of the P
2. To advance to the A, should the A so request, the sums necessary for the exec
ution of the agency (1911)
3. To reimburse the A for all advances made by him, provided the A is free from
fault (1912)
4. To indemnify the A for all the damages w/c the execution of the agency may ha
ve caused the A w/o fault or negligence on his part. (1913)
5. To pay the A the compensation agreed upon, or if no compensation was specifie
d, the reasonable value of the A s services (1875, 1306)
Liability of P to 3rd Persons
1. General Rule P is liable to 3rd persons for all acts committed by A in P s beha
lf w/in the scope of his authority
2. Reason because the act of A is the act of P
Liability of P for Tort of A
1. General Rule P is solidarily liable to 3rd persons for torts of A committed a
t P s direction and w/in the scope of his authority; 3rd person may sue both P and
A or choose whom he will hold
2. Reason he who does an act through another, does it himself
Conditions for Ratification to be Effective
1. P must have the intent to ratify
2. The ratification must be done voluntarily
3. P must have the capacity and power to ratify
4. P must have knowledge of material facts
5. P must ratify the acts in its entirety
6. The act must be capable of ratification
7. The act must be done in behalf of P
Effects of Ratification by P
1. With respect to A ratification relieves A from liability to:
a. the 3rd party to the unauthorized transaction
b. P for acting w/o authority
2. With respect to P himself
a. P assumes responsibility for the unauthorized act, as fully as if A had acted
under original authority
b. P is not liable for acts outside the authority approved by his ratification
3. With respect to 3rd persons
a. bound by the ratification
b. but before ratification, the 3rd person is free to revoke the unauthorized co
ntract
GR: Ratification have retroactive effect equivalent to initial approval
EXCEPTION:
1. to do so would defeat the right of 3rd parties
2. would render wrongful an otherwise rightful act or omission
3. allow circumvention of a rule of law formulated in the interest of public pol
icy
4. if the 3rd party has withdrawn from the contract
ART 1911. Even when the agent has exceeded his authority, the principal is solid
arily liable with the agent if the former allowed the latter to act as though he
had full powers.
2 Instances When P is Solidarily Liable With A
1. For torts of A committed at P s direction or w/in the scope of A s authority
2. Even when A has exceeded his authority, if P allowed A to act as though he ha
d full powers Estoppel
Estoppel
A bar which precludes a person from denying or asserting anything contra
ry to that which has been established as the truth by his own deed or representa
tion, either express or implied
He isparty
Estoppel
Ratification
Rests
The on prejudice
bound
intention,
isnotwithstanding
bound because
rather
expressthan
hethe
orintended
implied,
intention
absencetoof
regardless
besuch intention
of prejudice
becausetothe
another
other part
y will be prejudiced and defrauded by his conduct, unless the law treats him as
Affects
legally only
Retroactive
boundthe
affects
relevant
the entire
parts otransaction
the transaction
and from
and the
frombeginning
that time only when e
stoppel
The substance
may beofsaid
ratification
to be spelled
is confirmation
out of the unauthorized act or contrac
t after
The substance
it hasofbeen
estoppel
done orismade
the principal s inducement to another to act to his p
rejudice
ART 1912. The principal must advance to the agent, should the latter so request,
the sums necessary for the execution of the agency. (applies when there is no s
tipulation that A advance the funds)
Should the agent have advanced them, the principal must reimburse him th
erefor, even if the business or undertaking was not successful, provided the age
nt is free from all fault. (w/n advanced by A on his own initiative or by stipul
ation because A is not the insurer of the business of P)
The reimbursement shall include interest on the sums advanced, from the
day on which the advance was made. (demand is not necessary in order that delay
on the part of P shall exist)
ART 1913. The principal must also indemnify the agent for all the damages which
the execution of the agency may have caused the latter, without fault or neglige
nce on his part.
Q But if A is negligent, he can be held liable.
P is NOT Liable:
1. For any wrongful act committed by 3rd persons such as muggers, hit and run dr
ivers, etc
2. When A acts in his own account and not as an agent
ART 1914. The agent may retain in pledge the things which are the object of the
agency until the principal effects the reimbursement and pays the indemnity set
forth in the 2 preceding articles.
Right of Lien
1. If P fails to reimburse or indemnify A
2. An instance of pledge w/c is created by operation of law
Nature of A s Right of Lien
1. Right is limited to the subject matter of agency not a general lien w/c gives
A the right to retain P s goods for claims disconnected w/ the business of agency
2. Right requires possession by A of subject matter actual or constructive; must
have acquired that possession lawfully in his capacity as an agent
3. Right generally only in favor of agent not of sub-agent or one who A delegate
s his authority where no privity exists between SA and P
ART 1915. If two or more persons have appointed an agent for a common transactio
n or undertaking, they shall be solidarily liable to the agent for all the conse
quences of the agency.
Requisites for Solidary Liability
1. There are 2 or more principals
2. The principals have all concurred in the appointment of the same agent
3. The agent is appointed for a common transaction or undertaking
Double Sale:
ART 1916. When 2 persons contract with regard to the same thing,
1. one of them with the agent and
2. the other with the principal,
and the 2 contracts are incompatible with each other, that of prior date shall b
e preferred, without prejudice to the provisions of Art. 1544.
ART 1544. If the same thing should have been sold to different vendees, the owne
rship shall be transferred to the person who may have first taken possession the
reof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the perso
n acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the perso
n:
1. who in good faith was first in the possession; and,
2. in the absence thereof, to the person who presents the oldest title, provided
there is good faith.
Example When 2 Persons Contract Separately with A and P
1. P authorized A to contract for the construction of his house for a price not
more than P100,000. Without the knowledge of A, P contracted w/ B for P95,000. L
ater A contracted with C for P90,000
a. Under Art. 1916, the contract between P and B shall prevail as it is of prior
date
2. P gave A authority to sell a car. Without the knowledge of A, P sold the car
to B to be delivered the next day. Before delivery, A sold the car to C, who bou
ght it in good faith and immediately took possession of the car
a. Under Art, 1544[1], C is considered the owner because he took possession of t
he car first
3. P gave A an SPA to sell his land. A sold the land to B who did not register t
he sale. Later, P sold the same land to C, who in good faith, registered the sal
e
a. Under Art. 1544[2], C is considered the owner because he registered the sale
first
4. If neither sale was registered and C took possession of the land in good fait
h
a. Under Art. 1544[3], the land should belong to C because he first took possess
ion in good faith
5. If neither took possession of the land
a. Under Art. 1544[3], the land should belong to B because his title is older th
an C

ART 1917. In the case referred to in Art. 1916,


1. If the agent has acted in good faith, the principal shall be liable in damage
s to the 3rd person whose contract must be rejected.
2. If the agent acted in bad faith, he alone shall be responsible.
ART 1918. The principal is not liable for the expenses incurred by the agent in
the following cases:
1. If the agent acted in contravention of the principal's instructions, unless t
he latter should wish to avail himself of the benefits derived from the contract
; (this is to punish A unless A s acts were impliedly ratified by P)
2. When the expenses were due to the fault of the agent;
3. When the agent incurred them with knowledge that an unfavorable result would
ensue, if the principal was not aware thereof; (here A is guilty of bad faith an
d lack of diligence)
4. When it was stipulated that the expenses would be borne by the agent, or that
the latter would be allowed only a certain sum. (when a limit was imposed by P
for the amount of expenses)
CHAPTER 4
Modes of Extinguishment of Agency
Agency is extinguished (1919): [EDWARD]
1. By the expiration of the period for which the agency was constituted.
2. By the death, civil interdiction, insanity or insolvency of the principal or
of the agent;
3. By the withdrawal of the agent;
4. By the accomplishment of the object or purpose of the agency;
5. By its revocation by the principal;
6. By the dissolution of the firm or corporation which entrusted or accepted the
agency;
Presumption of Continuance of Agency
1. When shown to have existed an agency relation will be presumed to have contin
ued
2. In the absence of anything to show its termination the burden of proving its
extinguishment is on the party asserting it
Death of the P or A
1. General Rule Agency is extinguished ipso jure upon the death of either P or A
2. Exceptions:
a. When the agency is coupled with interest
b. When the act of A was executed w/o the knowledge of the death of P and the 3r
d person who contracted with A acted in good faith
c. Act 3135 [REM Law] The power of sale in a deed of mortgage is not revoked by
the death of P (mortgagor) as it is not an ordinary agency but an authority conf
erred upon the mortgagee for his own protection
Other Modes of Extinguishment of Agency
1. Loss of the thing
2. Novation of the contract
3. War if the A or P is the enemy alien
4. Legal impossibility
5. Termination of P s authority as when P is merely an agent or trustee
ART 1920. The principal may revoke the agency at will, and compel the agent to r
eturn the document evidencing the agency.
Such revocation may be express or implied.
Revocation of Agency by P
1. General Rule P may revoke the agency at will even if the agency is said to be
irrevocable
2. Exceptions:
a. Art. 1927 partially executed contracts
b. Art. 1930 agency coupled with interest
3. Reasons:
a. Since the authority of A emanates from P, it is enough that P should wish to
terminate the agency
b. Confidence being the cardinal basis of the relation, it stands to reason that
it should cease when such confidence disappears
c. The P-A relationship is consensual and personal in nature
Liability of P for Damages Caused by Revocation
1. When the agency constituted for a fixed period P shall be liable for damages
occasioned by the wrongful discharge of A before the expiration of the period
2. When no time fixed for continuance of agency P is at liberty to terminate it
wt will subject only to the requirements of good faith
Kinds of Revocation
1. Express either by personal notice or by publication
2. Implied examples:
a. when P appoints a new agent for the same business transaction
b. when P completely takes over the management of the business entrusted to A
c. when P, after granting a GPA to A, grants an SPA to another

Notice of Revocation
1. To Agent express or implied
2. To 3rd Persons:
a. former customers actual notice
b. other persons publication
Renunciation by Agent
1. A has the power to renounce the agency, subject only to the contractual oblig
ations owing to P
2. Form express or implied
ART 1921. If the agency has been entrusted for the purpose of contracting with s
pecified persons, its revocation shall not prejudice the latter if they were not
given notice thereof.
ART 1922. If the agent had general powers, revocation of the agency does not pre
judice third persons:
1. who acted in good faith and
2. without knowledge of the revocation.
Notice of the revocation in a newspaper of general circulation is a suff
icient warning to third persons.
Effect of Revocation in Relation to 3rd Persons
1. When A is authorized to contract with SPECIFIED persons actual or personal no
tice should be given to them
2. When A is authorized to contract with the public in GENERAL mere publication
is sufficient warning
ART 1923. (Implied Revocation)
The appointment of a new agent for the same business or transaction revo
kes the previous agency from the day on which notice thereof was given to the fo
rmer agent, without prejudice to the provisions of the 2 preceding articles.
ART 1924. (Implied Revocation)
The agency is revoked if the principal directly manages the business ent
rusted to the agent, dealing directly with third persons.
Q Art. 1924 should be distinguished from Art. 1916.
ART 1925. When 2 or more principals have granted a power of attorney for a commo
n transaction, any one of them may revoke the same without the consent of the ot
hers.
ART 1926. (Partial Implied Revocation)
A general power of attorney is revoked by a SPA granted to another agent
, as regards the special matter involved in SPA.
ART 1927. (VIP)
An agency cannot be revoked:
1. if a bilateral contract depends upon it, or
2. if it is the means of fulfilling an obligation already contracted, or
3. if a partner is appointed manager of a partnership in the contract of partner
ship and his removal from the management is unjustifiable.
When Agency Irrevocable (Exception to Art. 1920)
1. General Rule P may revoke an agency at will
2. Exceptions:
a. When the agency is created:
* not only for the interest of P but also for the interest of 3rd persons
* for the mutual interest of both P and A
b. When it is a means of fulfilling an obligation already contracted
* Example P borrowed money from A (contract of loan). P then authorizes A to col
lect rents from P s property to pay for the loan P contracted from A
c. When A, who is a partner, is appointed as manager, he cannot be removed:
* unless for justifiable or lawful causes
* upon the vote of the partners representing controlling interest
ART 1928. The agent may withdraw from the agency by giving due notice to the pri
ncipal.
If P should suffer any damage by reason of the withdrawal, the agent mus
t indemnify him therefor, unless the agent should base his withdrawal upon the i
mpossibility of continuing the performance of the agency without grave detriment
to himself.
Right of A to Withdraw
1. Without Just Cause
a. A should give notice to P
b. A must indemnify P should P suffer any damage by reason of such withdrawal
2. With Just Cause A cannot be held liable, such as when:
a. the withdrawal is based on the impossibility of continuing w/ the agency w/o
grave detriment to A
b. it is due to a fortuitous event
ART 1929. The agent, even if he should withdraw from the agency for a valid reas
on, must continue to act until the principal has had reasonable opportunity to t
ake the necessary steps to meet the situation.
ART 1930. (Agency Coupled with Interest)
The agency shall remain in full force and effect even after the death of
the principal, if it has been constituted:
1. in the common interest of the latter and of the agent, or
2. in the interest of a third person who has accepted the stipulation in his fav
or.
Agency coupled with an Interest:
The agent has acquired some interest of his own in the execution of the
authority granted to him, in addition to his mere interest in the contract of em
ployment with the resulting gains
ART 1931. Anything done by the agent, without knowledge of the death of the prin
cipal 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.
Q Applies to all other modes of extinguishment of agency
Act Done by A after Death of P Valid ONLY under 2 Conditions:
1. A acted w/o knowledge of the death of P
2. 3rd person who contracted with A acted in good faith
ART 1932. If the agent dies, his heirs must:
1. notify the principal thereof, and
2. in the meantime adopt such measures as the circumstances may demand in the in
terest of P.
Q Art. 1932 does NOT impose a duty on the heirs of P to notify A of the death of
P.
GR: Agent s duties cannot be performed by his personal representations
EXCEPTIONS:
1. Heir s duty to continue the agency after the death of the agent (agency by oper
ation of law; presumed or tacit agency)
2. Where the agency is one coupled with an interest in the subject matter of the
agency, his heirs may subsequently exercise the power conferred at least insofa
r as may be necessary to protect the interests of the estate of the agent

Trusts
CHAPTER 1
General Provisions

1. Created
Express
Implied Trust
by the intention of the trustor or parties
2. Created by direct and positive acts of the parties by some writing or deed or
will or by words evidencing an intention to create a trust
3. If it concerns an immovable, it cannot be proven by parole evidence
4. In order that prescription may bar an action to enforce an express trust, an
express
1. Comesrepudiation
into being by
madeoperation
known toofB law
is required
2. Those w/o being expressed, are deducible from the nature of the transaction b
y operation of law as matters of equity
3. May be proven by parole evidence
4. No express repudiation is required for laches or prescription to lie

ART 1440. A person who establishes a trust is called the trustor.


One in whom confidence is reposed as regards property for the benefit of
another person is known as the trustee.
The person for whose benefit the trust has been created is referred to a
s the beneficiary.
Concept of Trust
It is a fiduciary relationship created by law or agreement where legal t
itle is held by one and beneficial title is held by another
Characteristics of Trust:
1. It is a fiduciary relationship
2. Created by law or by agreement
3. Where the legal title is held by one and the equitable title or beneficial ti
tle is held by another

Persons Involved in the Creation of Trust


1. Trustor or Setter one who intentionally creates or establishes the trust
2. Trustee one who takes and holds the legal title:
a. for the benefit of another
b. with certain powers and subject to certain duties
3. Beneficiary or Cestui Que Trust one who has an equitable interest in the
property and enjoys the benefit of administration of the trust by the trustee

Trust property or trust res


Q property actually existing in which the trustor has transferable interest or t
itle
Q it may be a real or personal property (undivided, future or contingent interes
t)
Q cannot be
o mere expectancy without right or interest; or
o mere interest in the performance of a contract although such interest is in th
e nature of a property right
Nature of Ownership of Trustee or Beneficiary: Duplicate Ownership
1. Ownership by 2 persons at the same time = one of them is under an obligation
to use his ownership for the benefit of the other
2. Ownership of trustee, a mere matter of form and nominal
a. Agent = because duty of administering the property
b. In legal theory, not a mere agent but an owner = acts for himself and transac
ts in his name
ART 1441. Trusts are either express or implied.
Express trusts are created by the intention of the trustor or of the par
ties.
Implied trusts come into being by operation of law.
Kinds of Trusts
1. Express can come into existence only by the execution of an intention to crea
te it by the trustor or parties; there is an agreement in writing
2. Implied which come into being by operation of law; either:
a. Resulting (Bare or Passive) - one in w/c the intention to create a trust is
implied or presumed in law
b. Constructive one imposed by law irrespective of, and even contrary to, any su
ch intention for the purpose of:
* promoting justice
* frustrating fraud
* preventing unjust enrichment
ART 1442. The principles of the general law of trusts, insofar as they are not i
n conflict with this Code, the Code of Commerce, the Rules of Court and special
laws are hereby adopted.
CHAPTER 2
Express Trusts
ART 1443. No express trusts concerning an immovable or any interest therein may
be proved by parol evidence.
Evidence to Prove Trust
1. Express Trust Concerning Immovable property must be in writing (to bind 3rd p
ersons, must be in public instrument and registered)
2. Express Trust Concerning Personal property oral evidence is sufficient
3. Implied Trust, whether concerning immovable or personal oral evidence is suff
icient (1457)
ART 1444. No particular words are required for the creation of an express trust,
it being sufficient that a trust is clearly intended.
ART 1445. No trust shall fail because the trustee appointed declines the designa
tion, unless the contrary should appear in the instrument constituting the trust
.
Q If he declines, the courts will appoint a trustee to fill the office that he d
eclines.
ART 1446. Acceptance by the beneficiary is necessary. Nevertheless, if the trust
imposes no onerous condition upon the beneficiary, his acceptance shall be pres
umed, if there is no proof to the contrary.
Q Acceptance by B is presumed if the trust is gratuitous. It is only necessary w
hen the trust imposes an onerous condition.
How Express Trusts are Ended
1. By mutual agreement of all the parties
2. By expiration of terms agreed upon
3. By fulfillment of the resolutory condition
4. By loss of the subject matter of the trust
5. By merger
6. By accomplishment of the purpose of the trust

CHAPTER 3
Implied Trusts
ART 1447. The enumeration of the following cases of implied trust does not exclu
de others established by the general law of trust, but the limitation laid down
in article 1442 shall be applicable.
Implied Trusts
Those, w/o being express, are deducible from the nature of the transacti
on as matters of intent, or which are superinduced on the transaction by operati
on of law, as matters of equity, independently of the particular intention of th
e parties.
Consequences of an Implied Trust
The implied trustee shall deliver the possession and reconvey title to t
he property to B and pay B the fruits and other net profits received from such p
roperty during the period of wrongful holding
Trustee May Claim Title by Prescription Founded on Adverse Possession When:
1. His repudiation is open and unequivocal
2. The positive acts of repudiation have been made known to B
3. The evidence thereon should be clear and conclusive or convincing
4. The period fixed by law has prescribed
Prescription
1. Prescriptive Periods
a. Express trust none, as long as not repudiated; no laches
b. Resulting none, as long as not repudiated; laches apply
c. Constructive 10 years; laches apply
2. An action for reconveyance of land based on constructive trust prescribes in
10 years from the time the right of action accrues
a. but this only applies when the person enforcing the trust is not in possessio
n of the land
b. if he is in possession of the land, he may wait until his possession is distu
rbed or his title attacked before taking steps to vindicate his right
3. The only limitation upon the right of B to recover title held in trust is tha
t the property must not have been transferred to an Innocent Purchaser for Value
, in which event, his remedy is to ask for damages
Ground is Fraudulent Representation
Period
4Annulment
No
10
Declaration
Action
Imprescriptible
yrs
annulment
yrs from
forquiet
of
from
to Prescription
of
Reconveyance
discovery
discovery
of
a the
Voidable
(1410
title
rule
nullity
ofand
ofon
NCC)
offraud
Contract
fraud
legitimate
constructive
Reala(1391[4]
of (1144
Prop owner
void based
NCC)
contract
NCC)
notice
on in
is Implied
does
possession
notTrust
apply
ART 1448. (Resulting Trust)
There is an implied trust when property is sold, and
1. the legal estate is granted to one party
2. but the price is paid by another for the purpose of having the beneficial int
erest of the property.
The former is the trustee, while the latter is the beneficiary. However,
if the person to whom the title is conveyed is a child, legitimate or illegitim
ate, of the one paying the price of the sale, no trust is implied by law, it bei
ng disputably presumed that there is a gift in favor of the child.
REASON: one who pays for something usually does so for his own benefit
Requisites of Purchase Money Resulting Trust:
1. an actual payment of money, property or services or an equivalent, consisting
of valuable consideration
2. such consideration must be furnished by the alleged beneficiary of the result
ing trust
Exceptions to Purchase Money Resulting Trust:
1. (last par of 1448): parents pay the purchase money and the title is conveyed
to the child
2. actual contrary intention is proved
3. purchase is made in violation of an existing statute and in evasion of its ex
press provision
ART 1449. (Resulting Trust)
There is also an implied trust when a donation is made to a person but i
t appears that although the legal estate is transmitted to the donee, he neverth
eless is either to have no beneficial interest or only a part thereof.
ART 1451. (Resulting Trust)
When land passes by succession to any person and he causes the legal tit
le to be put in the name of another, a trust is established by implication of la
w for the benefit of the true owner.
ART 1452. (Resulting Trust)
If two or more persons agree to purchase property and by common consent
the legal title is taken in the name of one of them for the benefit of all, a tr
ust is created by force of law in favor of the others in proportion to the inter
est of each.
ART 1453. (Resulting Trust)
When property is conveyed to a person in reliance upon his declared inte
ntion to hold it for, or transfer it to another or the grantor, there is an impl
ied trust in favor of the person whose benefit is contemplated.
ART 1450. (Constructive Trust)
If the price of a sale of property is loaned or paid by one person for t
he benefit of another and the conveyance is made to the lender or payor to secur
e the payment of the debt, a trust arises by operation of law in favor of the pe
rson to whom the money is loaned or for whom it is paid.
The latter may redeem the property and compel a conveyance thereof to hi
m.
Q Contrary rule will result to pactum commisorium which is expressly prohibited
by 2088 NCC
Q Upon payment of loan, may ask for reconveyance
ART 1454. (Constructive Trust)
If an absolute conveyance of property is made in order to secure the per
formance of an obligation of the grantor toward the grantee, a trust by virtue o
f law is established.
If the fulfillment of the obligation is offered by the grantor when it b
ecomes due, he may demand the reconveyance of the property to him.
ART 1455. (Constructive Trust)
When any trustee, guardian or other person holding a fiduciary relations
hip uses trust funds for the purchase of property and causes the conveyance to b
e made to him or to a third person, a trust is established by operation of law i
n favor of the person to whom the funds belong.
ART 1456. (Constructive Trust)
If property is acquired through mistake or fraud, the person obtaining i
t is, by force of law, considered a trustee of an implied trust for the benefit
of the person from whom the property comes.
Q The mistake referred to here is made by a 3rd person, not that made by a party
to the contract. For if made by the party, no trust is created
ART 1457. An implied trust may be proved by oral evidence.
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1
Agency and Trust
emily zen chua