Business Organization I Cases - Digest (3manresa - 12)

BUSINESS ORGANIZATION 1 Digested Cases 2012
Based on the Syllabus of Atty. Catherine Guerzo 1 of 172
A5 PEDRO MARTINEZ vs.ONG PONG CO and ONG

PARTNERSHIP: General Provisions ....................................4 LAY .................................................................................... 29
#1 PASCUAL vs. CIR and CTA ...........................................4 A6 FORTIS VS GUTIERREZ HERMANOS ..................... 30
#2 ELIGIO ESTANISLAO vs. CA, REMEDIOS A7 Tai Tong Chuache v. The Insurance Commission ..... 31
ESTANISLAO, EMILIO and LEOCADIO SANTIAGO .... 6
A8 Bachrach v. La Protectora ......................................... 32
#3 ANG PUE & COMPANY, ET ALvs.SECRETARY OF
COMMERCE AND INDUSTRY ......................................... 7 A9 JOSE MACHUCA vs. CHUIDIAN, BUENAVENTURA
& CO., May 13, 1903 .......................................................... 33
#4 JOSE P. OBILLOS vs. CIR ............................................ 8
A10 Pang Lim and Benito Galvez vs. Lo Seng ................. 34
#5 Lim Tong Lim v. Philippine Fishing Gear Industries .. 9
A11 Lim Tanhu v. Ramolete .............................................. 35
#6 Aguila v. CA ................................................................. 10
A12 DAN FUE LEUNG vs. IAC and LEUNG YIU ........... 36
#7 Oa and heirs of Julia Buales vs. CIR, G.R. No. L-
19342, May 25, 1972 ............................................................ 11 A13 EMILIO EMNACE vs. COURT OF APPEALS .......... 37
#8 SARDANE VS. CA AND ACOJEDO, G.R. NO. L-47045 A14 Sison v. McQuaid....................................................... 38
NOVEMBER 22, 1988.........................................................12
A15 ORNUM v. LASALA................................................... 39
#9 ADRIANO ARBES, ET AL. vs. VICENTE POLISTICO
............................................................................................13 PROPERTY RIGHTS OF PARTNERS ..................................41
#10 LILIBETH SUNGA-CHAN and CECILIA SUNGA vs. Case 1: Deluao v. Casteel, Aug. 29, 1969 ..........................41
LAMBERTO T. CHUA .......................................................15
Case 2: Lozana v. Depakakibo, April 27, 1960 ................ 42
#11 ANTONIA TORRES, assisted by her husband,
ANGELO TORRES; and EMETERIA BARING, Case 3: Navarro v. Escobido, Nov. 27, 2009 .................... 43
petitioners, vs. COURT OF APPEALS and MANUEL
Case 4: MENDIOLA vs. COURT OF APPEALS .............. 44
TORRES, respondents. ..................................................... 17
Case 5: REALUBIT vs. JASO ............................................ 45
#12 COMMISSIONER OF INTERNAL REVENUE,
petitioner vs. WILLIAM J. SUTER and THE COURT OF
OBLIGATION OF PARTNERS TO THIRD PERSONS ..... 46
TAX APPEALS, respondents. ........................................... 19
Case 1: PETITION FOR AUTHORITY TO CONTINUE
#13 WOLFGANG AURBACH, et.al. vs. SANITARY
USE OF THE FIRM NAME "SYCIP, SALAZAR,
WARES MANUFACTURING CORP, et.al. ......................21
FELICIANO, HERNANDEZ & CASTILLO." ................... 46
#14 HEIRS OF TAN ENG KEE vs. COURT OF APPEALS
Case 2: Teck Seing and Co. v. Pacific Commercial
and BENGUET LUMBER COMPANY ............................. 23
Company ........................................................................... 48
OBLIGATIONS OF THE PARTNERS ................................. 25 Case 3: PNB v. Eugenio .................................................... 49
A1 Ortega v. CA ................................................................. 25 Case 4: Co-Pitco v. Yulo ................................................... 50
A2 WILLIAM UY vs. BARTOLOME PUZON, substituted CASE 5: ISLAND SALES V. UNITED PIONEERS GEN.
by FRANCO PUZON ........................................................ 26 CONSRUCTION COMPANY, et.al.GR L-22493 July 31,
1975 ..................................................................................... 51
A3 Isabelo Moran Jr. vs. CA and Mariano Pecson (1984)
........................................................................................... 27 CASE 6: Elmo MUNASQUE V. COURT OF APPEALS,
........................................................................................... 52
A4 Evangelista v. Abad Santos ........................................ 28
CASE 7: J. TIOSEJO INVESTMENT CORP. V. SPOUSES Case 14: Woodchild Holdings v. Roxas Electric and
BENJAMIN AND ELEANOR ANG ................................... 54 Construction ..................................................................... 82
DISSOLUTION AND WINDING UP .................................56 Case 15: Litonjua v. Fernandez ........................................ 84
CASE 1: IDOS vs CA ..........................................................56 Case 16: Shoppers Paradise Realty v. Roque ..................86
CASE 2: TESTATE ESTATE OF MOTA vs SERRA .......... 57 Case 17: Bicol Savings v. CA ............................................. 87
CASE 3: TACAO vs CA and Nenita Anay ........................ 58 Case 18: Rural Bank of Bombon v. CA ............................. 88
Case 4: GOQUIOLAY vs SYCIP .......................................59 Case 19: NFA v. IAC ..........................................................89
CASE 5: NG CHO CIO vs NG DIONG ............................. 61 Case 20: Gold Star Mining v. Jimena ...............................90
CASE 6: PRIMELINK vs LAZATIN .................................. 62 Obligations of an Agent ...................................................... 91
Case 7: Magdusa v. Albaran 5 SCRA 511 .......................... 63 CASE 1: MACIAS VS WARNER ........................................91
Case 8: Benjamin Yu v. National Labor Relations CASE 2: PNB VS RITTRATO GROUP ............................. 92
Commission ..................................................................... 64
CASE 3: NATIONAL POWER CORPORATION v.
Nature, Form & Kinds of Agency .......................................67 NATIONAL MERCHANDISING CORPORATION ........ 93
Case 1: Loadmasters Customs Services v. Glodel CASE 4: PHILIPPINE PRODUCTS COMPANY V.

Brokerage ..........................................................................67 PRIMATERIA ZURICH, ................................................... 95
Case 2: Victorias Milling v. CA ...................................... 68 CASE 5: SAFIC ALCAN & CIE V. IMPERIAL VEGETABLE
OIL ....................................................................................96
Case 3: Naguiat v. CA ...................................................... 69
CASE 6: SIREDY ENTERPRISES V. CA and Conrado de
Case 4: AF Realty & Development v. Dieselman Freight Guzman.............................................................................98
Services ..............................................................................70
CASE 7: Green Valley Poultry v. IAC ............................. 100
Case 5: Dizon v. CA .......................................................... 71
Case 8: Intl Films v. Lyric Film Exchange ..................... 101
CASE 6: RAMOS vs. CA and CESARIO P. CALANOC ... 72
Case 9: PNB v. Bagamaspad .......................................... 103
CASE7: INLAND REALTY INVESTMENT SERVICE, INC.
vs. CA, ARANETA, EDUQUE, ......................................... 73 CASE 10: DOMINGO vs. DOMINGO, GR No. L-30573 |
Oct. 29, 1971 .................................................................... 104
CASE 8: SIASAT vs. INTERMEDIATE APPELLATE
COURT ..............................................................................74 Obligations of the Principal ............................................. 106
CASE 9: VELOSO vs. CA .................................................76 Case 1: Areola v. CA ........................................................ 106
CASE 10: LILY ELIZABETH BRAVO-GUERRERO et al vs. Case 2: Bedia v. White .................................................... 108
EDWARD P. BRAVO ........................................................ 77
Case 3: Prudential Bank v. CA ....................................... 109
Case 11: Rivero v. CA .........................................................79
Case 4: De Castro v. CA .................................................. 110
Case 12: Macapagal v. Remorin ...................................... 80
Case 5: Dominion Insurance Corp. v. CA .......................112
Case 13: Air Philippines v. Intl Business Aviation .......... 81
Extinguishment of Agency................................................. 114
Case 1: Estate of Juliana Gabriel v. CIR .......................... 114 CASE 4: MEYNARDO POLICARPIO vs. COURT OF
APPEALS and ROSITO PUECHI S. UY ......................... 149
Case 2: New Manila Lumber v. Republic ........................ 115
CASE 5: EMILIA O'LACO and HUCO LUNA vs.
Case 3: Catan v. NLRC .................................................... 116 VALENTIN CO CHO CHIT, O LAY KIA and COURT OF
APPEALS, ..........................................................................151
Case 4: Lustan v. CA ........................................................ 117
Case 6: Abellana v. Ponce ............................................... 154
Case 5: Ramnani v. CA .................................................... 118
Case 7: Cuaycong v. Cuaycong ....................................... 156
Case 6: Central Surety and Insurance v. C.N. Hodges . 120
Case 8: Roa v. CA ............................................................ 157
Case 7: Sanchez v. Medicard ........................................... 122
Case 9: Mindanao Development Authority v. CA ......... 159
Case 8: CMS LOGGING, INC. vs. CA ............................. 123
Case 10: Adille v. CA ....................................................... 161
CASE 9: LIM vs. SABAN ..................................................124
Case 11: Sumaoang v. Guimba ......................................... 163
Case 10: DEL ROSARIO et al vs. ABAD ......................... 125
Case 12: Marquez v. CA ................................................... 165
Case 11: BISAYA LAND TRANSPORTATION CO. vs.
SANCHEZ........................................................................ 126 Case 13: Armamiento v. Guerrero ..................................167
Case 12: RALLOS vs. FELIX GO CHAN & SONS REALTY Case 14: Municipality of Victorias v. CA ....................... 169
CORPORATION ............................................................. 128
Case 15: Salao v. Salao .....................................................171
Trusts: General Provisions ................................................ 129
Case 1: Trusteeship of minors Tuason v. Araneta ........ 129

.
Express Trust ...................................................................... 130
The first 29 Cases are part of the Digest Pool of | Barrera,
Case 1: Rizal Surety v. CA ............................................... 130 Bernal, Bote, Cezar, Diesto, Fabian, Flores, Ledesma,
Lozada, Morente, Sinsona, Solana, Tambor, Zozobrado,
Case 2: Heirs of Medina v. CA......................................... 133 Uy| 3Manresa 2013-14
Case 3: Sotto v. Teves ...................................................... 135
.
Case 4: Gutierrez v. CA ................................................. 139
Case 5: Gomez v. Duyan ................................................ 140
Case 6: Julio v. Dalandan ................................................143
IMPLIED TRUSTS .............................................................. 144
CASE 1: VDA. DE ESCONDE VS COURT OF APPEALS

and PEDRO ESCONDE .................................................. 144
CASE 2: VDA. DE RETUERTO VS. ANGELO and

Merlinda BARZ ............................................................... 146
CASE 3: SALTIGA DE ROMERO vs COURT OF

APPEALS ......................................................................... 147
profits among themselves. Respondent commissioner

and/ or his representative just assumed these conditions
PARTNERSHIP: General Provisions to be present on the basis of the fact that petitioners
purchased certain parcels of land and became co-owners
#1 PASCUAL vs. CIR and CTA thereof.
In the Evangelista case, there was a series of transactions

FACTS: On June 22, 1965, petitioners bought two (2)
where petitioners purchased twenty-four (24) lots
parcels of land from Santiago Bernardino, and on May 28,
showing that the purpose was not limited to the
1966, they bought another three (3) parcels of land from
conservation or preservation of the common fund or even
Juan Roque. The first two parcels of land were sold by
the properties acquired by them. The character of
petitioners in 1968 to Marenir Development Corporation,
habituality peculiar to business transactions engaged in
while the three parcels of land were sold by petitioners to
for the purpose of gain was present.
Erlinda Reyes and Maria Samson on March 19,1970.
Petitioners realized a net profit in the sale made in 1968 In the instant case, petitioners bought two (2) parcels of
in the amount of P165,224.70, while they realized a net land in 1965. They did not sell the same nor make any
profit of P60,000.00 in the sale made in 1970. The improvements thereon. In 1966, they bought another
corresponding capital gains taxes were paid by petitioners three (3) parcels of land from one seller. It was only 1968
in 1973 and 1974 by availing of the tax amnesties granted when they sold the two (2) parcels of land after which
in the said years. they did not make any additional or new purchase. The
remaining three (3) parcels were sold by them in 1970.
However, in a letter dated March 31, 1979 of then Acting
The transactions were isolated. The character of
BIR Commissioner Efren I. Plana, petitioners were
habituality peculiar to business transactions for the
assessed and required to pay a total amount of P107,101.70
purpose of gain was not present.
as alleged deficiency corporate income taxes for the years
1968 and 1970. Respondent Commissioner informed In Evangelista, the properties were leased out to tenants
petitioners that in the years 1968 and 1970, petitioners as for several years. The business was under the
co-owners in the real estate transactions formed an management of one of the partners. Such condition
unregistered partnership or joint venture taxable as a existed for over fifteen (15) years. None of the
corporation under Section 20(b) and its income was circumstances are present in the case at bar. The co-
subject to the taxes prescribed under Section 24, both of ownership started only in 1965 and ended in 1970.
the National Internal Revenue Code, that the
unregistered partnership was subject to corporate income By paragraphs 2 and 3 of Article 1769, it appears that the
tax as distinguished from profits derived from the fact that those who agree to form a co- ownership share
partnership by them which is subject to individual or do not share any profits made by the use of the
income tax; and that the availment of tax amnesty under property held in common does not convert their venture
P.D. No. 23, as amended, by petitioners relieved into a partnership. Or the sharing of the gross returns
petitioners of their individual income tax liabilities but does not of itself establish a partnership whether or not
did not relieve them from the tax liability of the the persons sharing therein have a joint or common right
unregistered partnership. Hence, the petitioners were or interest in the property. This only means that, aside
required to pay the deficiency income tax assessed. from the circumstance of profit, the presence of other
elements constituting partnership is necessary, such as
ISSUE: WON an unregistered partnership was in fact the clear intent to form a partnership, the existence of a
formed by petitioners which like a corporation was juridical personality, and the freedom to transfer or assign
subject to corporate income tax distinct from that any interest. In order to constitute a partnership inter se
imposed on the partners. there must be: (a) intent to form the same; (b) generally
participating in both profits and losses; (c) and such a
HELD: NO, only CO-OWNERSHIP. In the present case,
community of interest.
there is no evidence that petitioners entered into an
agreement to contribute money, property or industry to a It is evident that an isolated transaction whereby
common fund, and that they intended to divide the two or more persons contribute funds to buy certain
real estate for profit in the absence of other

circumstances showing a contrary intention cannot
be considered a partnership.
Persons who contribute property or funds for a common

enterprise and agree to share its gross returns in
proportion to their contribution, but who severally retain
the title to their respective contribution, are not thereby
rendered partners. They have no common stock or
capital, and no community of interest as principal
proprietors in the business.
In the present case, there is clear evidence of co-

ownership between the petitioners. There is no adequate
basis to support the proposition that they thereby formed
an unregistered partnership. The two isolated
transactions whereby they purchased properties and sold
the same a few years thereafter did not thereby make
them partners. They shared in the gross profits as co-
owners and paid their capital gains taxes on their net
profits and availed of the tax amnesty thereby. Under the
circumstances, they cannot be considered to have formed
an unregistered partnership which is thereby liable for
corporate income tax, as the respondent commissioner
proposes.
#2 ELIGIO ESTANISLAO vs. CA, REMEDIOS ISSUE: WON a partnership exists between members of
ESTANISLAO, EMILIO and LEOCADIO the same family arising from their joint ownership of
SANTIAGO certain properties.
HELD: YES. Said cancelling provision was necessary for

FACTS: Petitioner and private respondents are brothers
the Joint Affidavit speaks of P 15,000.00 advance rentals
and sisters who are co-owners of certain lots which were
starting May 25, 1966 while the latter agreement also
then being leased to the Shell Company. They agreed to
refers to advance rentals of the same amount starting May
open and operate a gas station thereat to be known as
24, 1966. There is, therefore, a duplication of reference to
Estanislao Shell Service Station with an initial investment
the P 15,000.00 hence the need to provide in the
of P15,000.00 to be taken from the advance rentals due to
subsequent document that it "cancels and supersedes" the
them from SHELL for the occupancy of the said lots
previous one. True it is that in the latter document, it is
owned in common by them. They agreed to help their
silent as to the statement in the Joint Affidavit that the P
brother, petitioner herein, by allowing him to operate and
15,000.00 represents the "capital investment" of the
manage the gasoline service station of the family. They
parties in the gasoline station business and it speaks of
negotiated with SHELL. For practical purposes and in
petitioner as the sole dealer, but this is as it should be for
order not to run counter to the company's policy of
in the latter document SHELL was a signatory and it
appointing only one dealer, it was agreed that petitioner
would be against its policy if in the agreement it should
would apply for the dealership. Respondent Remedios
be stated that the business is a partnership with private
helped in managing the business with petitioner from
respondents and not a sole proprietorship of petitioner.
May 3, 1966 up to February 16, 1967.
Moreover other evidence in the record shows that there
On May 26, 1966, the parties herein entered into an
was in fact such partnership agreement between the
Additional Cash Pledge Agreement with SHELL wherein
parties. This is attested by the testimonies of private
it was reiterated that the P 15,000.00 advance rental shall
respondent. Petitioner submitted to private respondents
be deposited with SHELL to cover advances of fuel to
periodic accounting of the business. Petitioner gave a
petitioner as dealer with a proviso that said agreement
written authority to private respondent Remedios, his
"cancels and supersedes the Joint Affidavit dated 11 April
sister, to examine and audit the books of their "common
1966 executed by the co-owners."
business (aming negosyo). Respondent Remedios
On August 25, 1970 private respondents filed a complaint assisted in the running of the business. There is no doubt
against petitioner praying among others that the latter be that the parties hereto formed a partnership when they
ordered: 1. to execute a public document embodying all bound themselves to contribute money to a common
the provisions of the partnership agreement entered into fund with the intention of dividing the profits among
between plaintiffs and defendant. A decision was themselves. The sole dealership by the petitioner and the
rendered in favor of said respondents. issuance of all government permits and licenses in the
name of petitioner was in compliance with the afore-
Petitioner appealed to the CA. CA affirmed in toto the stated policy of SHELL and the understanding of the
decision of the lower court. MR was denied. Not satisfied parties of having only one dealer of the SHELL products.
therewith, the petitioner filed a petition for certiorari
alleging that the respondent court erred in declaring that Further, the findings of facts of the respondent court are
a partnership was established by and among the conclusive in this proceeding, and its conclusion based on
petitioner and the private respondents as regards the the said facts are in accordance with the applicable law.
ownership and or operation of the gasoline service station
business.
Petitioner contends that because of the said stipulation

cancelling and superseding that previous Joint Affidavit,
whatever partnership agreement there was in said
previous agreement had thereby been abrogated.
BUSINESS ORGANIZATION 1 Cases
adversely affect appellants herein, is to erroneously

assume that the aforesaid provision constitute a property
#3 ANG PUE & COMPANY, ET ALvs.SECRETARY right of which the partners can not be deprived without
OF COMMERCE AND INDUSTRY due process or without their consent. The agreement
contain therein must be deemed subject to the law
FACTS: existing at the time when the partners came to agree
regarding the extension. In the present case, as already
It appears that on May 1, 1953, Ang Pue and Tan Siong, stated, when the partners amended the articles of
both Chinese citizens, organized the partnership Ang Pue partnership, the provisions of Republic Act 1180 were
& Company for a term of five years from May 1, 1953, already in force, and there can be not the slightest doubt
extendible by their mutual consent. The purpose of the that the right claimed by appellants to extend the original
partnership was "to maintain the business of general term of their partnership to another five years would be
merchandising, buying and selling at wholesale and retail, in violation of the clear intent and purpose of the law
particularly of lumber, hardware and other construction aforesaid.
materials for commerce, either native or foreign." The
corresponding articles of partnership (Exhibit B) were
registered in the Office of the Securities & Exchange
Commission on June 16, 1953.
On June 19, 1954 Republic Act No. 1180 was enacted to

regulate the retail business. It provided, among other
things, that, after its enactment, a partnership not wholly
formed by Filipinos could continue to engage in the retail
business until the expiration of its term.
On April 15, 1958 prior to the expiration of the five-year

term of the partnership Ang Pue & Company, but after
the enactment of the Republic Act 1180, the partners
already mentioned amended the original articles of part
ownership (Exhibit B) so as to extend the term of life of
the partnership to another five years. When the amended
articles were presented for registration in the Office of the
Securities & Exchange Commission on April 16, 1958,
registration was refused upon the ground that the
extension was in violation of the aforesaid Act.
ISSUE: Whether or not the extension is violative of the

RA 1180.
HELD: Yes!
The question before us is too clear to require an extended

discussion. To organize a corporation or a partnership
that could claim a juridical personality of its own and
transact business as such, is not a matter of absolute right
but a privilege which may be enjoyed only under such
terms as the State may deem necessary to impose. That
the State, through Congress, and in the manner provided
by law, had the right to enact Republic Act No. 1180 and
to provide therein that only Filipinos and concerns wholly
owned by Filipinos may engage in the retail business can
not be seriously disputed. That this provision was clearly
intended to apply to partnership already existing at the
time of the enactment of the law is clearly showing by its
provision giving them the right to continue engaging in
their retail business until the expiration of their term or
life.
To argue that because the original articles of partnership

provided that the partners could extend the term of the
partnership, the provisions of Republic Act 1180 cannot be
LLB3- Manresa 2013 | J. Cadiatan, P. Galagar, C. Nartatez, K. Quibod, R. Rizada, J. Santos, R. Tumanda
#4 JOSE P. OBILLOS vs. CIR consider them as partners would obliterate the
distinction between a co-ownership and a partnership.
The petitioners were not engaged in any joint venture by
FACTS:
reason of that isolated transaction.
On March 2, 1973 Jose Obillos, Sr. completed payment to Their original purpose was to divide the lots for
Ortigas & Co., Ltd. on two lots with areas of 1,124 and 963 residential purposes. If later on they found it not feasible
square meters located at Greenhills, San Juan, Rizal. The to build their residences on the lots because of the high
next day he transferred his rights to his four children, the cost of construction, then they had no choice but to resell
petitioners, to enable them to build their residences. The the same to dissolve the co-ownership. The division of the
company sold the two lots to petitioners for P178,708.12 profit was merely incidental to the dissolution of the co-
on March 13 (Exh. A and B, p. 44, Rollo). Presumably, the ownership which was in the nature of things a temporary
Torrens titles issued to them would show that they were state. It had to be terminated sooner or later.
co-owners of the two lots. Article 1769(3) of the Civil Code provides that "the sharing
In 1974, or after having held the two lots for more than a of gross returns does not of itself establish a partnership,
year, the petitioners resold them to the Walled City whether or not the persons sharing them have a joint or
Securities Corporation and Olga Cruz Canda for the total common right or interest in any property from which the
sum of P313,050 (Exh. C and D). They derived from the returns are derived". There must be an unmistakable
sale a total profit of P134,341.88 or P33,584 for each of intention to form a partnership or joint venture.*
them. They treated the profit as a capital gain and paid an
income tax on one-half thereof or of P16,792.
In April, 1980, or one day before the expiration of the five-
year prescriptive period, the Commissioner of Internal
Revenue required the four petitioners to pay corporate
income tax on the total profit of P134,336 in addition to
individual income tax on their shares thereof He assessed
P37,018 as corporate income tax, P18,509 as 50% fraud
surcharge and P15,547.56 as 42% accumulated interest, or
a total of P71,074.56.
Not only that. He considered the share of the profits of
each petitioner in the sum of P33,584 as a " taxable in full
(not a mere capital gain of which is taxable) and
required them to pay deficiency income taxes aggregating
P56,707.20 including the 50% fraud surcharge and the
accumulated interest.
Thus, the petitioners are being held liable for deficiency
income taxes and penalties totalling P127,781.76 on their
profit of P134,336, in addition to the tax on capital gains
already paid by them.
The Commissioner acted on the theory that the four
petitioners had formed an unregistered partnership or
joint venture within the meaning of sections 24(a) and
84(b) of the Tax Code (Collector of Internal Revenue vs.
Batangas Trans. Co., 102 Phil. 822).
ISSUE: Whether or not the petitioners had formed a
partnership.
HELD:
We hold that it is error to consider the petitioners as
having formed a partnership under article 1767 of the
Civil Code simply because they allegedly contributed
P178,708.12 to buy the two lots, resold the same and
divided the profit among themselves.
To regard the petitioners as having formed a taxable
unregistered partnership would result in oppressive
taxation and confirm the dictum that the power to tax
involves the power to destroy. That eventuality should be
obviated.
As testified by Jose Obillos, Jr., they had no such
intention. They were co-owners pure and simple. To
#5 Lim Tong Lim v. Philippine Fishing Gear fishing nets and the floats, both essential to fishing, were
Industries obviously acquired in furtherance of their business.
Facts: Lim Tong Lim's argument that he was merely the lessor of
Antonio Chua ang Peter Yao, on behalf of Ocean Quest the boats to Chua and Yao, not a partner in the fishing
Fishing Corporation entered into a contract with venture is erroneous. His consent to the sale proved that
Philippine Fishing Gear Industries(PFGI) for the purchase there was a preexisting partnership among all three.
of fishing nets. They claimed that they were engaged in a Lim Tong Lim entered into a business agreement with
business venture with Lim Tong Lim (petitioner), who Chua and Yao, in which debts were undertaken in order
was not a signatory to the agreement. The total price of to finance the acquisition and the upgrading of the
the nets was P532, 045. Floats worth P68, 000 were also vessels which would be used in their fishing business. The
sold. sale of the boats, as well as the division among the three
of the balance remaining after the payment of their loans,
The buyers of the fishing nets and floats were unable to proves that F/B Lourdes, though registered in his name,
pay. Philippine Fishing Gear Industries filed a collection was not his own property but an asset of the partnership.
suit against Chua, Yao and Lim as well as a prayer for writ It is not uncommon to register the properties acquired
of preliminary attachment. The writ was issued and from a loan in the name of the person the lender trusts,
enforced by attaching the fishing nets on the F/B Lourdes. who in this case is the petitioner himself. After all, he is
the brother of the creditor, Jesus Lim.
Chua admitted liability and requested a reasonable time It is unreasonable for petitioner to sell his property to pay
within which to pay. a debt he did not incur, if the relationship among the
Yao filed an answer but failed to appear in subsequent three of them was merely that of lessor-lessee, instead of
hearings. partners.
Lim Tong Lim filed an answer with Counterclaim and
Crossclaim and moved for the lifting of the writ(denied)
It is true that petitioner did not directly act on behalf of
and the nets were sold at public auction. He claimed that
the corporation. However, having reaped the benefits of
no partnership existed.
the contract entered into by persons with whom he
previously had an existing relationship, he is deemed to
Trial Court Philippine Fishing Gear Industries is entitled be part of said association and is covered by the scope of
to the Writ of Attachment and that Chua, Yao and Lim, as the doctrine of corporation by estoppel.
general partners, were jointly liable to pay PFGI.
CA - affirmed RTC
Issue: W/N a partnership exists between Chua, Yao and

Lim Tong Lim
Held: Yes. Art. 1767 By the contract of partnership, two

or more persons bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the profits among themselves.
Chua, Yao and Lim had decided to engage in a fishing

business, which they started by buying boats worth P3.35
million, financed by a loan secured from Jesus Lim who
was Lim Tong Lims brother.
In their Compromise Agreement, they subsequently
revealed their intention to pay the loan with the proceeds
of the sale of the boats, and to divide equally among them
the excess or loss. These boats, the purchase and the
repair of which were financed with borrowed money, fell
under the term "common fund" under Article 1767. The
contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry.
That the parties agreed that any loss or profit from the
sale and operation of the boats would be divided equally
among them also shows that they had indeed formed a
partnership.
The partnership extended not only to the purchase of the
boat, but also to that of the nets and the floats. The
each of the partners." The partners cannot be held liable

for the obligations of the partnership unless it is shown
#6 Aguila v. CA that the legal fiction of a different juridical personality is
being used for fraudulent, unfair, or illegal purposes.
Facts:
Abrogar has not shown that A.C. Aguila & Sons, Co., as a
Aguila is the manager of A.C. Aguila & Sons, Co., a separate juridical entity, is being used for fraudulent,
partnership engaged in lending activities. Abrogar and unfair, or illegal purposes. Moreover, the title to the
her husband are the registered owners of a particular subject property is in the name of A.C. Aguila & Sons, Co.
house and lot. Aguila and Abrogar entered into a and the Memorandum of Agreement was executed
Memorandum of Agreement. between Abrogar, with the consent of her late husband,
The MoA stated that A.C. Aguila shall buy the said house and A.C. Aguila & Sons, Co., represented by Aguila.
and lot from Abrogar for and in consideration of the sum
of P200, 000. Abrogar is given the option to repurchase Hence, it is the partnership, not its officers or agents,
the said property within a period of 90 days for the which should be impleaded in any litigation involving
amount of P230, 000. In the event that Abrogar fails to property registered in its name. A violation of this rule
exercise her option to repurchase, she is obliged to deliver will result in the dismissal of the complaint. We cannot
peacefully the possession of the property within 15 days understand why both the Regional Trial Court and the
after the expiration of the 90 day grace period. Court of Appeals sidestepped this issue when it was
squarely raised before them by petitioner.
The parties executed a deed of absolute sale on June 11,
1991. Abrogar failed to redeem the property within the 90 Our conclusion that petitioner is not the real party in
day period. Aguila then caused the cancellation of the interest against whom this action should be prosecuted
TCT of Abrogar and caused the issuance of a new makes it unnecessary to discuss the other issues raised by
certificate of title in the name of A.C. Aguila & Sons, Co. him in this appeal.
Abrogar received a letter demanding her to vacate the
premises within 15 days after receipt of the letter. Abrogar
refused to vacate so A.C. Aguila & Sons, Co. filed an
ejectment case against her.
MTC ruled in favor of A.C. Aguila & Sons, Co. that
Abrogar did not redeem the property within the 90 day
grace period
RTC - Abrogar filed a petition for declaration of nullity of
a deed of sale with the RTC alleging that the signature of
her husband on the deed of sale was a forgery because he
was already dead when the deed was supposed to have
been executed on June 11, 1991. (RTC ruling) Common
sense dictates that an established lending and realty firm
like the Aguila & Sons, Co. would not part with
P200,000.00 to the Abrogar spouses, who are virtual
strangers to it, without the simultaneous accomplishment
and signing of all the required documents, more
particularly the Deed of Absolute Sale, to protect its
interest.
CA reversed RTC the transaction was not a sale but an
equitable mortgage and was in the nature of pactum
commissorium and is therefore void.
Aguila contends that he is not the real party in interest

but A.C. Aguila & Co., against which this case should have
been brought
Issue: Whether or not the case should be dismissed

because the petitioner is not the real party in interest
Held: Yes, the case should be dismissed.
Under Art. 1768 of the Civil Code, a partnership "has a

juridical personality separate and distinct from that of
It is but logical that in cases of inheritance, there should

be a period when the heirs can be considered as co-
#7 Oa and heirs of Julia Buales vs. CIR, G.R. owners rather than unregistered co-partners within the
No. L-19342, May 25, 1972 contemplation of tax code. Before the partition and
distribution of the estate of the deceased, all the income
thereof does belong commonly to all the heirs, obviously,
Facts: without them becoming thereby unregistered co-
partners, but it does not necessarily follow that such
At the time of Julia Buales death, she left as heirs her status as co-owners continues until the inheritance is
surviving spouse Lorenzo Oa and her five children. A actually and physically distributed among the heirs, for it
civil case was instituted for the settlement of her estate is easily conceivable that after knowing their respective
and on 1949, a project of partition was approved by the shares in the partition, they might decide to continue
court. The project of partition shows that the heirs have holding said shares under the common management of
undivided half interest in the ten parcels of land and six the administrator or executor or of anyone chosen by
houses with the value of P87,860.00 and P17,590.00 them and engage in business on that basis. Withal, if this
respectively. After the partition though, there was no were to be allowed, it would be the easiest thing for heirs
attempt made to divide the properties. Instead, the in any inheritance to circumvent and render meaningless
properties remained under the mgt. of Lorenzo who used Sections 24 and 84(b) of the National Internal Revenue
the properties in business by leasing or selling them and Code. That being the case, the judgment of the Court of
investing the income and the proceeds from the sales Tax appeals is affirmed.
thereof in real properties and securities. As a result,
petitioners' properties and investments gradually
increased.
The incomes from the business ventures by Lorenzo are

then recorded in the books where the shares of the
petitioners in the Net income for the year are also known.
Every year, the petitioners paid income taxes which
correspond to their shares in the NI though they did not
actually receive their proportionate share in the NI, but
instead left it to Lorenzo, for him to use further in the
business.
So the CIR decided that the petitioners formed an

unregistered partnership and therefore, subject to the
corporate income tax, pursuant to Section 24, in relation
to Section 84(b), of the Tax Code.
Issue:
The issue raised by the petitioners in the present case is

that whether they should be considered as co-owners of
the properties inherited by them and of the profits
derived from the said properties or must they be deemed
to have formed an unregistered partnership subject to
corporate tax under the provisions of NIRC. They formed
an unregistered partnership and thus subject to corporate
tax.
Ruling:
Instead of distributing the estate among the heirs after

the approval of the project of partition, the properties
remained under the mgt of Lorenzo who used the same in
business. As a result of which, their investments and
properties steadily increased. From the moment the
petitioners allowed Lorenzo to use their inherited
properties and the incomes from their respective shares
as a common fund in undertaking several business
ventures, with the intention of deriving profit from it and
dividing the profit proportionally among themselves,
such act was tantamount to actually contributing such
incomes to a common fund and, in effect, they thereby
formed an unregistered partnership within the purview of
the provisions of the Tax Code.
#8 SARDANE VS. CA AND ACOJEDO, G.R. NO. Sardane. Furthermore, herein Acojedo had no voice in the
L-47045 NOVEMBER 22, 1988 management of the affairs of the basnig.
Facts: WHEREFORE, the present petition is denied.
Private Respondent Romeo Acojedo filed an action for

collection of sum of money against Nobio Sardane based
on several promissory notes and vales executed by
Sardane in favor of Acojedo. As a defense, Sardane now
intimates that the said promissory notes and vales
executed and signed by him were in fact receipts for
Acojedos contribution in the partnership. To bolster his
claim, he testified that he in fact Acojedo as a partner
received 50% of the net profits of Basnig Sarcado.
Issue:
Based on the contentions of Sardane, WON Acojedo is a

partner thus changing the nature of the promissory notes
issued by Sardane in favor of Acojedo. No. Acojedo is not
a partner.
Ruling:
First, the parole evidence rule under Rule 130 Section 7

provides that :
Sec. 7. Evidence of written agreements.

When the terms of an agreement have
been reduced to writing, it is to be
considered as containing all such terms,
and, therefore, there can be, between the
parties and their successors in interest,
no evidence of the terms of the
agreement other than the contents of the
writing except in the following cases:
(a) Where a mistake or imperfection of

the writing or its failure to express the
the true intent and agreement of the
parties, or the validity of the agreement
is put in issue by the pleadings;
(b) When there is an intrinsic ambiguity

in the writing.
In the present case, the promissory notes and vales are

clear and unambiguous and so they have to be
interpreted as what is written, without resorting to parole
evidence which suggests that the said documents do not
express the true intent and agreement of the parties.
Second, Article 1769(4) of the Civil Code is explicit that

while the receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in the
business, no such inference shall be drawn if such profits
were received in payment as wages of an employee. In the
present case, it was established that Acojedo is but an
employee, being the manager of Basnig Sarcado. The fact
that he had received 50% of the net profits does not
conclusively establish that he was a partner of the
#9 ADRIANO ARBES, ET AL. vs. VICENTE A partnership must have a lawful object, and must be
POLISTICO established for the common benefit of the partners.
When the dissolution of an unlawful partnership is

FACTS: This is an action to bring about liquidation of the
decreed, the profits shall be given to charitable institutions
funds and property of the association called "Turnuhan
of the domicile of the partnership, or, in default of such, to
Polistico & Co." The plaintiffs were members or
those of the province.
shareholders, and the defendants were designated as
president-treasurer, directors and secretary of said Appellant's contention on this point is untenable.
association. According to said article, no charitable institution is a
necessary party in the present case of determination of
It is well to remember that this case is now brought
the rights of the parties. The action which may arise from
before the consideration of this court for the second time.
said article, in the case of unlawful partnership, is that for
The first one was when the same plaintiffs appeared from
the recovery of the amounts paid by the member from
the order of the court below sustaining the defendant's
those in charge of the administration of said partnership,
demurrer, and requiring the former to amend their
and it is not necessary for the said parties to base their
complaint within a period, so as to include all the
action to the existence of the partnership, but on the fact
members of "Turnuhan Polistico & Co.," either as
that of having contributed some money to the
plaintiffs or as a defendants. This court held then that in
partnership capital.
an action against the officers of a voluntary association to
wind up its affairs and enforce an accounting for money Ricci holds that the partner who limits himself to
and property in their possessions, it is not necessary that demanding only the amount contributed by him need not
all members of the association be made parties to the resort to the partnership contract on which to base his
action. (Borlasa vs. Polistico, 47 Phil., 345.) The case action. And he adds in explanation that the partner
having been remanded to the court of origin, both parties makes his contribution, which passes to the managing
amend, respectively, their complaint and their answer, partner for the purpose of carrying on the business or
and by agreement of the parties, the court appointed industry which is the object of the partnership; or in
Amadeo R. Quintos, of the Insular Auditor's Office, other words, to breathe the breath of life into a
commissioner to examine all the books, documents, and partnership contract with an objection forbidden by law.
accounts of "Turnuhan Polistico & Co.," and to receive And as said contrast does not exist in the eyes of the law,
whatever evidence the parties might desire to present. the purpose from which the contribution was made has
not come into existence, and the administrator of the
The defendants objected to the commissioner's report,
partnership holding said contribution retains what
but the trial court, having examined the reasons for the
belongs to others, without any consideration; for which
objection, found the same sufficiently explained in the
reason he is not bound to return it and he who has paid
report and the evidence, and accepting it, rendered
in his share is entitled to recover it.
judgment, holding that the association "Turnuhan
Polistico & Co." is unlawful, and sentencing the But this is not the case with regard to profits earned in
defendants jointly and severally to return the amount of the course of the partnership, because they do not
P24,607.80, as well as the documents showing the constitute or represent the partner's contribution but are
uncollected credits of the association, to the plaintiffs in the result of the industry, business or speculation which
this case, and to the rest of the members of the said is the object of the partnership, and therefor, in order to
association represented by said plaintiffs, with costs demand the proportional part of the said profits, the
against the defendants. partner would have to base his action on the contract
which is null and void, since this partition or distribution
ISSUE: WON the court erred in ordering the return the
of the profits is one of the juridical effects thereof.
amount of P24,607.80 to the plaintiffs in this case and to
Wherefore considering this contract as non-existent, by
the rest of the members of the said association rather
reason of its illicit object, it cannot give rise to the
than to the charitable institution.
necessary action, which must be the basis of the judicial
RULING: NO. Because it pertains to their contribution complaint. Furthermore, it would be immoral and unjust
and not to profit derived from the unlawful partnership. for the law to permit a profit from an industry prohibited
by it.
There is no question that "Turnuhan Polistico & Co." is an
unlawful partnership (U.S. vs. Baguio, 39 Phil., 962), but Our Code does not state whether, upon the dissolution of
the appellants allege that because it is so, some charitable the unlawful partnership, the amounts contributed are to
institution to whom the partnership funds may be be returned by the partners, because it only deals with the
ordered to be turned over, should be included, as a party disposition of the profits; but the fact that said
defendant. The appellants refer to article 1666 of the Civil contributions are not included in the disposal prescribed
Code(now 1770 of NCC), which provides: profits, shows that in consequences of said exclusion, the
general law must be followed, and hence the partners
should reimburse the amount of their respective

contributions. Any other solution is immoral, and the law
will not consent to the latter remaining in the possession
of the manager or administrator who has refused to
return them, by denying to the partners the action to
demand them.
#10 LILIBETH SUNGA-CHAN and CECILIA partnership funds the amount of P200,000.00 and
SUNGA vs. LAMBERTO T. CHUA partially paid the same to respondent. Petitioner Lilibeth
allegedly informed respondent that the P200,000.00
FACTS: On June 22, 1992, Lamberto T. Chua (hereafter represented partial payment of the latter's share in the
respondent) filed a complaint against Lilibeth Sunga partnership, with a promise that the former would make
Chan (hereafter petitioner Lilibeth) and Cecilia Sunga the complete inventory and winding up of the properties
(hereafter petitioner Cecilia), daughter and wife, of the business establishment. Despite such commitment,
respectively of the deceased Jacinto L. Sunga (hereafter petitioners allegedly failed to comply with their duty to
Jacinto), for "Winding Up of Partnership Affairs, account, and continued to benefit from the assets and
Accounting, Appraisal and Recovery of Shares and income of Shellite to the damage and prejudice of
Damages . respondent.
Respondent alleged that in 1977, he verbally entered into ISSUE: 1.WON a partnership existed between Lamberto
Chua and Jacinto from 1977 until Jacinto's death in the
a partnership with Jacinto in the distribution of Shellane
absence of any written document. YES
Liquefied Petroleum Gas (LPG) in Manila. For business 2. WON CA erred in making the legal conclusion that
convenience, respondent and Jacinto allegedly agreed to laches and/or prescription did not apply in the instant
register the business name of their partnership, case. NO
SHELLITE GAS APPLIANCE CENTER (hereafter Shellite), 3. WON a partnership having an initial capital of
under the name of Jacinto as a sole proprietorship. P200,000 can exist even if it failed to register with the
SEC. YES
Respondent allegedly delivered his initial capital
contribution of P100,000.00 to Jacinto while the latter in
RULING: 1. petitioners argues, that in the absence of any
turn produced P100,000.00 as his counterpart
written document, these courts were proscribes from
contribution, with the intention that the profits would be
hearing the testimonies of respondent and his witness,
equally divided between them. The partnership allegedly
Josephine, to prove the alleged partnership three years
had Jacinto as manager, assisted by Josephine Sy
after Jacinto's death. To support this argument,
(hereafter Josephine), a sister of the wife respondent,
petitioners invoke the "Dead Man's Statute' or
Erlinda Sy. As compensation, Jacinto would receive a
"Survivorship Rule" under Section 23, Rule 130 of the
manager's fee or remuneration of 10% of the gross profit
Rules of Court.
and Josephine would receive 10% of the net profits, in
addition to her wages and other remuneration from the A partnership may be constituted in any form, except
business. where immovable property of real rights are contributed
thereto, in which case a public instrument shall
Allegedly, from the time that Shellite opened for business
necessary.6 Hence, based on the intention of the parties,
on July 8, 1977, its business operation went quite and was
as gathered from the facts and ascertained from their
profitable. Respondent claimed that he could attest to
language and conduct, a verbal contract of partnership
success of their business because of the volume of orders
may arise.7 The essential profits that must be proven to
and deliveries of filled Shellane cylinder tanks supplied by
that a partnership was agreed upon are (1) mutual
Pilipinas Shell Petroleum Corporation. While Jacinto
contribution to a common stock, and (2) a joint interest
furnished respondent with the merchandise inventories,
in the profits.8 Understandably so, in view of the absence
balance sheets and net worth of Shellite from 1977 to
of the written contract of partnership between
1989, respondent however suspected that the amount
respondent and Jacinto, respondent resorted to the
indicated in these documents were understated and
introduction of documentary and testimonial evidence to
undervalued by Jacinto and Josephine for their own
prove said partnership.
selfish reasons and for tax avoidance.
Two reasons forestall the application of the "Dead Man's
Upon Jacinto's death in the later part of 1989, his
Statute" to this case.
surviving wife, petitioner Cecilia and particularly his
daughter, petitioner Lilibeth, took over the operations, First, petitioners filed a compulsory counterclaim11
control, custody, disposition and management of Shellite against respondents in their answer before the trial court,
without respondent's consent. Despite respondent's and with the filing of their counterclaim, petitioners
repeated demands upon petitioners for accounting, themselves effectively removed this case from the ambit
inventory, appraisal, winding up and restitution of his net of the "Dead Man's Statute".12 Well entrenched is the rule
shares in the partnership, petitioners failed to comply. that when it is the executor or administrator or
Petitioner Lilibeth allegedly continued the operations of representatives of the estates that sets up the
Shellite, converting to her own use and advantage its counterclaim, the plaintiff, herein respondent, may testify
properties. to occurrences before the death of the deceased to defeat
the counterclaim.13 Moreover, as defendant in the
On March 31, 1991, respondent claimed that after
counterclaim, respondent is not disqualified from
petitioner Lilibeth ran out the alibis and reasons to evade
testifying as to matters of facts occurring before the death
respondent's demands, she disbursed out of the
of the deceased, said action not having been brought proves that respondent and Jacinto indeed forged the
against but by the estate or representatives of the partnership in question.
deceased.14
Second, the testimony of Josephine is not covered by the

"Dead Man's Statute" for the simple reason that she is not
"a party or assignor of a party to a case or persons in
whose behalf a case is prosecuted." Records show that
respondent offered the testimony of Josephine to
establish the existence of the partnership between
respondent and Jacinto. Petitioners' insistence that
Josephine is the alter ego of respondent does not make
her an assignor because the term "assignor" of a party
means "assignor of a cause of action which has arisen, and
not the assignor of a right assigned before any cause of
action has arisen."15 Plainly then, Josephine is merely a
witness of respondent, the latter being the party plaintiff.
2. With regard to petitioners' insistence that laches

and/or prescription should have extinguished
respondent's claim, we agree with the trial court and the
Court of Appeals that the action for accounting filed by
respondents three (3) years after Jacinto's death was well
within the prescribed period. The Civil Code provides
that an action to enforce an oral contract prescribes in six
(6) years while the right to demand an accounting for a
partner's interest as against the person continuing the
business accrues at the date of dissolution, in the absence
of any contrary agreement. Considering that the death of
a partner results in the dissolution of the partnership22,
in this case, it was Jacinto's death that respondent as the
surviving partner had the right to an account of his
interest as against petitioners. It bears stressing that while
Jacinto's death dissolved the partnership, the dissolution
did not immediately terminate the partnership. The Civil
Code23 expressly provides that upon dissolution, the
partnership continues and its legal personality is retained
until the complete winding up of its business,
culminating in its termination.
3. In a desperate bid to cast doubt on the validity of the

oral partnership between respondent and Jacinto,
petitioners maintain that said partnership that had initial
capital of P200,000.00 should have been registered with
the Securities and Exchange Commission (SEC) since
registration is mandated by the Civil Code, True, Article
1772 of the Civil Code requires that partnerships with a
capital of P3,000.00 or more must register with the SEC,
however, this registration requirement is not mandatory.
Article 1768 of the Civil Code25 explicitly provides that
the partnership retains its juridical personality even if it
fails to register. The failure to register the contract of
partnership does not invalidate the same as among the
partners, so long as the contract has the essential
requisites, because the main purpose of registration is to
give notice to third parties, and it can be assumed that
the members themselves knew of the contents of their
contract.26 In the case at bar, non-compliance with this
directory provision of the law will not invalidate the
partnership considering that the totality of the evidence
Article 1797 - The losses and profits shall be distributed

in conformity with the agreement. If only the share of
#11 ANTONIA TORRES, assisted by her husband, each partner in the profits has been agreed upon, the
ANGELO TORRES; and EMETERIA BARING, share of each in the losses shall be in the same
petitioners, vs. COURT OF APPEALS and proportion.
MANUEL TORRES, respondents.
The CA elucidated further:
Facts:
In the absence of stipulation, the share of each partner in
Sisters Antonia Torres and Emeteria Baring, herein the profits and losses shall be in proportion to what he
petitioners, entered into a "joint venture agreement" with may have contributed, but the industrial partner shall not
Respondent Manuel Torres for the development of a be liable for the losses. As for the profits, the industrial
parcel of land into a subdivision. Pursuant to the partner shall receive such share as may be just and
contract, they executed a Deed of Sale covering the said equitable under the circumstances. If besides his services
parcel of land in favor of respondent, who then had it he has contributed capital, he shall also receive a share in
registered in his name. By mortgaging the property, the profits in proportion to his capital.
respondent obtained from Equitable Bank a loan of
Issues:
P40,000 which, under the Joint Venture Agreement, was
to be used for the development of the subdivision. All 1.) WON the contract entered into by petitioners
three of them also agreed to share the proceeds from the and respondent is a contract of partnership. YES
sale of the subdivided lots. 2.) WON the Joint Venture Agreement/Partnership
and the earlier Deed of Sale were void for not
The project did not push through, and the land was
having complied with the requirements
subsequently foreclosed by the bank.
prescribed in Art. 1773 and for not having a valid
According to petitioners, the project failed because of consideration. NO
respondents lack of funds or means and skills. They add
Ruling:
that respondent used the loan not for the development of
the subdivision, but in furtherance of his own company, 1. Main Issue: Existence of a Partnership
Universal Umbrella Company.
A reading of the terms embodied in the Agreement
On the other hand, respondent alleged that he used the indubitably shows the existence of a partnership pursuant
loan to implement the Agreement. Respondent claimed to Article 1767 of the Civil Code, which provides:
that the subdivision project failed, however, because
petitioners and their relatives had separately caused the ART. 1767. By the contract of partnership two or more
annotations of adverse claims on the title to the land, persons bind themselves to contribute money, property,
which eventually scared away prospective buyers. or industry to a common fund, with the intention of
Despite his requests, petitioners refused to cause the dividing the profits among themselves.
clearing of the claims, thereby forcing him to give up on
Under the Agreement between petitioners and
the project.
respondent, petitioners would contribute property to the
Subsequently, petitioners filed a criminal case for estafa partnership in the form of land which was to be
against respondent and his wife, who were however developed into a subdivision; while respondent would
acquitted. Thereafter, they filed the present civil case give, in addition to his industry, the amount needed for
which, upon respondent's motion, was later dismissed by general expenses and other costs. Furthermore, the
the trial court. On appeal, however, the appellate court income from the said project would be divided according
remanded the case for further proceedings. Thereafter, to the stipulated percentage. Clearly, the contract
the RTC issued its assailed Decision, which, as earlier manifested the intention of the parties to form a
stated, was affirmed by the CA. partnership. [11]
Ruling of the Court of Appeals: It should be stressed that the parties implemented the
contract. Thus, petitioners transferred the title to the
In affirming the trial court, the Court of Appeals held that land to facilitate its use in the name of the respondent.
petitioners and respondent had formed a partnership for On the other hand, respondent caused the subject land to
the development of the subdivision. Thus, they must be mortgaged, the proceeds of which were used for the
bear the loss suffered by the partnership in the same survey and the subdivision of the land. As noted earlier,
proportion as their share in the profits stipulated in the he (Respondent) developed the roads, the curbs and the
contract. Disagreeing with the trial courts gutters of the subdivision and entered into a contract to
pronouncement that losses as well as profits in a joint construct low-cost housing units on the property.
venture should be distributed equally, [7] the CA invoked
Article 1797 of the Civil Code which provides:
Respondents actions clearly belie petitioners contention first stipulation states that petitioners did not actually
that he made no contribution to the partnership. Under receive payment for the parcel of land sold to respondent.
Article 1767 of the Civil Code, a partner may contribute Consideration, more properly denominated as cause, can
not only money or property, but also industry. take different forms, such as the prestation or promise of
a thing or service by another. [15]
2. Alleged Nullity of the Partnership Agreement:
In this case, the cause of the contract of sale consisted not
Petitioners argue that the Joint Venture Agreement is in the stated peso value of the land, but in the expectation
void under Article 1773 of the Civil Code, which provides: of profits from the subdivision project, for which the land
was intended to be used. As explained by the trial court,
ART. 1773. A contract of partnership is void, whenever
the land was in effect given to the partnership as
immovable property is contributed thereto, if an
[petitioners] participation therein. x x x There was
inventory of said property is not made, signed by the
therefore a consideration for the sale, the [petitioners]
parties, and attached to the public instrument.
acting in the expectation that, should the venture come
They contend that since the parties did not make, sign or into fruition, they [would] get sixty percent of the net
attach to the public instrument an inventory of the real profits.
property contributed, the partnership is void.
Addl. Info.
We clarify. First, Article 1773 was intended primarily to
Courts ruling as to the liability of the parties:
protect third persons. Thus, the eminent Arturo M.
Tolentino states that under the aforecited provision Claiming that respondent was solely responsible for the
which is a complement of Article 1771, the execution of a failure of the subdivision project, petitioners maintain
public instrument would be useless if there is no that he should be made to pay damages equivalent to 60
inventory of the property contributed, because without its percent of the value of the property, which was their
designation and description, they cannot be subject to share in the profits under the Joint Venture Agreement.
inscription in the Registry of Property, and their
contribution cannot prejudice third persons. This will We are not persuaded. True, the Court of Appeals held
result in fraud to those who contract with the partnership that petitioners acts were not the cause of the failure of
in the belief [in] the efficacy of the guaranty in which the the project. [16] But it also ruled that neither was
immovables may consist. Thus, the contract is declared respondent responsible therefor. [17] In imputing the
void by the law when no such inventory is made. The blame solely to him, petitioners failed to give any reason
case at bar does not involve third parties who may be why we should disregard the factual findings of the
prejudiced. appellate court relieving him of fault. Verily, factual
issues cannot be resolved in a petition for review under
Second, petitioners themselves invoke the allegedly void Rule 45, as in this case. Petitioners have not alleged, not
contract as basis for their claim that respondent should to say shown, that their Petition constitutes one of the
pay them 60 percent of the value of the property. [13] exceptions to this doctrine. [18] Accordingly, we find no
They cannot in one breath deny the contract and in reversible error in the CA's ruling that petitioners are not
another recognize it, depending on what momentarily entitled to damages.
suits their purpose. Parties cannot adopt inconsistent
positions in regard to a contract and courts will not
tolerate, much less approve, such practice.
In short, the alleged nullity of the partnership will not

prevent courts from considering the Joint Venture
Agreement an ordinary contract from which the parties
rights and obligations to each other may be inferred and
enforced.
Partnership Agreement Not the Result of an Earlier Illegal

Contract:
Petitioners also contend that the Joint Venture

Agreement is void under Article 1422 [14] of the Civil
Code, because it is the direct result of an earlier illegal
contract, which was for the sale of the land without valid
consideration.
This argument is puerile. The Joint Venture Agreement

clearly states that the consideration for the sale was the
expectation of profits from the subdivision project. Its
#12 COMMISSIONER OF INTERNAL REVENUE, ground for dissolution of the partnership, either in the
petitioner vs. WILLIAM J. SUTER and THE Code of Commerce or in the New Civil Code, and that
COURT OF TAX APPEALS, respondents. since its juridical personality had not been affected and
since, as a limited partnership, as contra distinguished
Facts: from a duly registered general partnership, it is taxable on
its income similarly with corporations, Suter was not
A limited partnership, named "William J. Suter bound to include in his individual return the income of
'Morcoin' Co., Ltd.," was formed on 30 September 1947 by the limited partnership.
herein respondent William J. Suter as the general partner,
and Julia Spirig and Gustav Carlson, as the limited issues:
partners. The partners contributed, respectively,
(1) Whether or not the corporate personality of the
P20,000.00, P18,000.00 and P2,000.00 to the partnership.
William J. Suter "Morcoin" Co., Ltd. should be
On 1 October 1947, the limited partnership was registered
disregarded for income tax purposes, considering that
with the Securities and Exchange Commission. In 1948,
respondent William J. Suter and his wife, Julia Spirig
however, general partner Suter and limited partner Spirig
Suter actually formed a single taxable unit; and
got married and, thereafter, on 18 December 1948, limited
partner Carlson sold his share in the partnership to Suter (2) Whether or not the partnership was dissolved
and his wife. The limited partnership had been filing its after the marriage of the partners, respondent William J.
income tax returns as a corporation, without objection by Suter and Julia Spirig Suter and the subsequent sale to
the herein petitioner, Commissioner of Internal Revenue, them by the remaining partner, Gustav Carlson, of his
until in 1959 when the latter, in an assessment, participation of P2,000.00 in the partnership for a
consolidated the income of the firm and the individual nominal amount of P1.00.
incomes of the partners-spouses Suter and Spirig
resulting in a determination of a deficiency income tax Ruling:
against respondent Suter in the amount of P2,678.06 for
(1) The thesis that the limited partnership, William
1954 and P4,567.00 for 1955.
J. Suter "Morcoin" Co., Ltd., has been dissolved by
Respondent Suter protested the assessment, and operation of law because of the marriage of the only
requested its cancellation and withdrawal, as not in general partner, William J. Suter to the originally limited
accordance with law, but his request was denied. Unable partner, Julia Spirig one year after the partnership was
to secure a reconsideration, he appealed to the Court of organized is rested by the appellant upon the opinion of
Tax Appeals, which court, after trial, rendered a decision, now Senator Tolentino in Commentaries and
on 11 November 1965, reversing that of the Commissioner Jurisprudence on Commercial Laws of the Philippines,
of Internal Revenue. Vol. 1, 4th Ed., page 58, that reads as follows:
The theory of the petitioner, Commissioner of A husband and a wife may not enter into a contract
Internal Revenue, is that the marriage of Suter and Spirig of general copartnership, because under the Civil Code,
and their subsequent acquisition of the interests of which applies in the absence of express provision in the
remaining partner Carlson in the partnership dissolved Code of Commerce, persons prohibited from making
the limited partnership, and if they did not, the fiction of donations to each other are prohibited from entering into
juridical personality of the partnership should be universal partnerships. (2 Echaverri 196) It follows that
disregarded for income tax purposes because the spouses the marriage of partners necessarily brings about the
have exclusive ownership and control of the business; dissolution of a pre-existing partnership. (1 Guy de
consequently the income tax return of respondent Suter Montella 58)
for the years in question should have included his and his
The petitioner-appellant has evidently failed to
wife's individual incomes and that of the limited
observe the fact that William J. Suter "Morcoin" Co., Ltd.
partnership, in accordance with Section 45 (d) of the
was not a universal partnership, but a particular one.
National Internal Revenue Code, which provides as
As appears from Articles 1674 and 1675 of the Spanish
follows:
Civil Code, of 1889 (which was the law in force when the
(d) Husband and wife. In the case of married subject firm was organized in 1947), a universal
persons, whether citizens, residents or non-residents, partnership requires either that the object of the
only one consolidated return for the taxable year shall be association be all the present property of the partners, as
filed by either spouse to cover the income of both contributed by them to the common fund, or else "all that
spouses; .... the partners may acquire by their industry or work during
the existence of the partnership". William J. Suter
In refutation of the foregoing, respondent Suter "Morcoin" Co., Ltd. was not such a universal partnership,
maintains, as the Court of Tax Appeals held, that his since the contributions of the partners were fixed sums of
marriage with limited partner Spirig and their acquisition money. It follows that William J. Suter "Morcoin" Co., Ltd.
of Carlson's interests in the partnership in 1948 is not a
was not a partnership that spouses were forbidden to mere business conduit of the partner-spouses; it was
enter by Article 1677 of the Civil Code of 1889. organized for legitimate business purposes; it conducted
its own dealings with its customers prior to appellee's
(2) Nor could the subsequent marriage of the marriage, and had been filing its own income tax returns
partners operate to dissolve it, such marriage not being as such independent entity. The change in its
one of the causes provided for that purpose either by the membership, brought about by the marriage of the
Spanish Civil Code or the Code of Commerce. partners and their subsequent acquisition of all interest
therein, is no ground for withdrawing the partnership
The appellant's view, that by the marriage of both
from the coverage of Section 24 of the tax code, requiring
partners the company became a single proprietorship, is
it to pay income tax. As far as the records show, the
equally erroneous. The capital contributions of partners
partners did not enter into matrimony and thereafter buy
William J. Suter and Julia Spirig were separately owned
the interests of the remaining partner with the
and contributed by them before their marriage; and
premeditated scheme or design to use the partnership as
after they were joined in wedlock, such contributions
a business conduit to dodge the tax laws. Regularity, not
remained their respective separate property under the
otherwise, is presumed.
Spanish Civil Code (Article 1396):
As the limited partnership under consideration is
The following shall be the exclusive property of
taxable on its income, to require that income to be
each spouse:
included in the individual tax return of respondent Suter
(a) That which is brought to the marriage as his or is to overstretch the letter and intent of the law. In fact, it
her own; .... would even conflict with what it specifically provides in
its Section 24: for the appellant Commissioner's stand
Thus, the individual interest of each consort in results in equal treatment, tax wise, of a general
William J. Suter "Morcoin" Co., Ltd. did not become copartnership (compaia colectiva) and a limited
common property of both after their marriage in 1948. partnership, when the code plainly differentiates the two.
Thus, the code taxes the latter on its income, but not the
It being a basic tenet of the Spanish and Philippine
former, because it is in the case of compaias colectivas
law that the partnership has a juridical personality of its
that the members, and not the firm, are taxable in their
own, distinct and separate from that of its partners
individual capacities for any dividend or share of the
(unlike American and English law that does not recognize
profit derived from the duly registered general
such separate juridical personality), the bypassing of the
partnership (Section 26, N.I.R.C.; Araas, Anno. & Juris.
existence of the limited partnership as a taxpayer can only
on the N.I.R.C., As Amended, Vol. 1, pp. 88-89).
be done by ignoring or disregarding clear statutory
mandates and basic principles of our law. The limited
partnership's separate individuality makes it impossible
to equate its income with that of the component
members. True, section 24 of the Internal Revenue Code
merges registered general co-partnerships (compaias
colectivas) with the personality of the individual partners
for income tax purposes. But this rule is exceptional in its
disregard of a cardinal tenet of our partnership laws, and
can not be extended by mere implication to limited
partnerships.
The rulings cited by the petitioner (Collector of

Internal Revenue vs. University of the Visayas, L-13554,
Resolution of 30 October 1964, and Koppel [Phil.], Inc. vs.
Yatco, 77 Phil. 504) as authority for disregarding the
fiction of legal personality of the corporations involved
therein are not applicable to the present case. In the cited
cases, the corporations were already subject to tax when
the fiction of their corporate personality was pierced; in
the present case, to do so would exempt the limited
partnership from income taxation but would throw the
tax burden upon the partners-spouses in their individual
capacities. The corporations, in the cases cited, merely
served as business conduits or alter egos of the
stockholders, a factor that justified a disregard of their
corporate personalities for tax purposes. This is not true
in the present case. Here, the limited partnership is not a
#13 WOLFGANG AURBACH, et.al. vs. SANITARY These incidents triggered off the filing of separate
WARES MANUFACTURING CORP, et.al. petitions by the parties with the Securities and Exchange
Commission (SEC). The SEC decision led to the filing of
[G.R. No. 75875. 75951. 75975-76. 15 Dec 1989] two separate appeals with the Intermediate Appellate
Court by Wolfgang Aurbach, John Griffin, David
Ponente: GUTIERREZ, JR., J. Whittingham and Charles Chamsay and by Luciano E.
Salazar. The petitions were consolidated and the
Facts : In 1961, Saniwares, a domestic corporation was appellate court in its decision ordered the remand of the
incorporated for the primary purpose of manufacturing case to the SEC with the directive that a new
and marketing sanitary wares. One of the incorporators, stockholders' meeting of Saniwares be ordered convoked
Mr. Baldwin Young went abroad to look for foreign as soon as possible, under the supervision of the
partners, European or American who could help in its Commission.
expansion plans. On August 15, 1962, ASI, a foreign
corporation domiciled in Delaware, United States entered
into an Agreement with Saniwares and some Filipino Issue(s): The main issue hinges on who were the duly
investors whereby ASI and the Filipino investors agreed elected directors of Saniwares for the year 1983 during its
to participate in the ownership of an enterprise which annual stockholders' meeting held on March 8, 1983. To
would engage primarily in the business of manufacturing answer this question the following factors should be
in the Philippines and selling here and abroad vitreous determined: (1) the nature of the business established by
china and sanitary wares. The parties agreed that the the parties whether it was a joint venture or a corporation
business operations in the Philippines shall be carried on and (2) whether or not the ASI Group may vote their
by an incorporated enterprise and that the name of the additional 10% equity during elections of Saniwares'
corporation shall initially be "Sanitary Wares board of directors.
Manufacturing Corporation."
Ruling : The rule is that whether the parties to a
At the request of ASI, the agreement contained provisions particular contract have thereby established among
themselves a joint venture or some other relation
designed to protect it as a minority group, including the
depends upon their actual intention which is determined
grant of veto powers over a number of corporate acts and in accordance with the rules governing the interpretation
the right to designate certain officers, such as a member and construction of contracts.
of the Executive Committee whose vote was required for In the instant cases, our examination of important
important corporate transactions. provisions of the Agreement as well as the testimonial
evidence presented by the Lagdameo and Young Group
The joint enterprise thus entered into by the Filipino shows that the parties agreed to establish a joint venture
investors and the American corporation prospered. and not a corporation. The history of the organization of
Unfortunately, with the business successes, there came a Saniwares and the unusual arrangements which govern
deterioration of the initially harmonious relations its policy making body are all consistent with a joint
between the two groups. According to the Filipino group, venture and not with an ordinary corporation. Section 5
a basic disagreement was due to their desire to expand (a) of the agreement uses the word "designated" and not
the export operations of the company to which ASI "nominated" or "elected" in the selection of the nine
objected as it apparently had other subsidiaries of joint directors on a six to three ratio. Each group is assured of a
venture groups in the countries where Philippine exports fixed number of directors in the board.
were contemplated. On March 8, 1983, the annual
stockholders' meeting was held. The meeting was The legal concept of a joint venture is of common law
presided by Baldwin Young. The minutes were taken by origin. It has no precise legal definition but it has been
the Secretary, Avelino Cruz. After disposing of the generally understood to mean an organization formed for
preliminary items in the agenda, the stockholders then some temporary purpose. It is in fact hardly
proceeded to the election of the members of the board of distinguishable from the partnership, since their elements
directors. The ASI group nominated three persons are similar community of interest in the business, sharing
namely; Wolfgang Aurbach, John Griffin and David P. of profits and losses, and a mutual right of control. The
Whittingham. The Philippine investors nominated six, main distinction cited by most opinions in common law
namely; Ernesto Lagdameo, Sr., Raul A. Boncan, Ernesto jurisdictions is that the partnership contemplates a
R. Lagdameo, Jr., George F. Lee, and Baldwin Young. Mr. general business with some degree of continuity, while
Eduardo R, Ceniza then nominated Mr. Luciano E. the joint venture is formed for the execution of a single
Salazar, who in turn nominated Mr. Charles Chamsay. transaction, and is thus of a temporary nature. This
The chairman, Baldwin Young ruled the last two observation is not entirely accurate in this jurisdiction,
nominations out of order on the basis of section 5 (a) of since under the Civil Code, a partnership may be
the Agreement, the consistent practice of the parties particular or universal, and a particular partnership may
during the past annual stockholders' meetings to have for its object a specific undertaking. (Art. 1783, Civil
nominate only nine persons as nominees for the nine- Code). It would seem therefore that under Philippine law,
member board of directors, and the legal advice of a joint venture is a form of partnership and should thus
Saniwares' legal counsel. be governed by the law of partnerships. The Supreme
Court has however recognized a distinction between

these two business forms, and has held that although a
corporation cannot enter into a partnership contract, it
may however engage in a joint venture with others.
Necessarily, the appellate court was correct in upholding

the agreement of the parties as regards the allocation of
director seats under Section 5 (a) of the "Agreement," and
the right of each group of stockholders to cumulative
voting in the process of determining who the group's
nominees would be under Section 3 (a) (1) of the
"Agreement." Section 5 (a) relates to the manner of
nominating the members of the board of directors while
Section 3 (a) (1) relates to the manner of voting.
This is the proper interpretation of the Agreement of the

parties as regards the election of members of the board of
directors. Equally important as the consideration of the
contractual intent of the parties is the consideration as
regards the possible domination by the foreign investors
of the enterprise in violation of the nationalization
requirements enshrined in the Constitution and
circumvention of the Anti-Dummy Act. In the instant
case, the foreign Group ASI was limited to designate three
directors. This is the allowable participation of the ASI
Group. Hence, in future dealings, this limitation of six to
three board seats should always be maintained as long as
the joint venture agreement exists considering that in
limiting 3 board seats in the 9-man board of directors
there are provisions already agreed upon and embodied
in the parties' Agreement to protect the interests arising
from the minority status of the foreign investors.
WHEREFORE, the petitions in G.R. Nos. 75975-76 and

G.R. No. 75875 are DISMISSED and the petition in G.R.
No. 75951 is partly GRANTED. The amended decision of
the Court of Appeals is MODIFIED in that Messrs.
Wolfgang Aurbach John Griffin, David Whittingham
Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan,
Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and George
F. Lee are declared as the duly elected directors of
Saniwares at the March 8, 1983 annual stockholders'
meeting. In all other respects, the questioned decision is
AFFIRMED.
Case Digest by: Bayani JM A. Solana
#14 HEIRS OF TAN ENG KEE vs. COURT OF real rights are contributed, and (2) when the partnership
APPEALS and BENGUET LUMBER COMPANY has a capital of three thousand pesos or more. In both
cases, a public instrument is required. An inventory to be
signed by the parties and attached to the public
[G.R. No. 126881. 03 October 2000] instrument is also indispensable to the validity of the
partnership whenever immovable property is contributed
Facts : Following the death of Tan Eng Kee on to the partnership.
September 13, 1984, Matilde Abubo, the common-law Undoubtedly, the best evidence would have been the
spouse of the decedent, joined by their children Teresita, contract of partnership itself, or the articles of
Nena, Clarita, Carlos, Corazon and Elpidio, collectively partnership but there is none. The alleged partnership,
known as herein petitioners HEIRS OF TAN ENG KEE,
though, was never formally organized. In addition,
filed suit against the decedent's brother TAN ENG LAY on
February 19, 1990. The complaint was for accounting, petitioners point out that the New Civil Code was not yet
liquidation and winding up of the alleged partnership in effect when the partnership was allegedly formed
formed after World War II between Tan Eng Kee and Tan sometime in 1945, although the contrary may well be
Eng Lay. On March 18, 1991, the petitioners filed an argued that nothing prevented the parties from
amended complaint impleading private respondent complying with the provisions of the New Civil Code
herein BENGUET LUMBER COMPANY, as represented by when it took effect on August 30, 1950. But all that is in
Tan Eng Lay. The amended complaint was admitted by
the past. The net effect, however, is that we are asked to
the trial court in its Order dated May 3, 1991.
determine whether a partnership existed based purely on
The amended complaint principally alleged that after the circumstantial evidence. A review of the record persuades
Second World War, Tan Eng Kee and Tan Eng Lay, us that the Court of Appeals correctly reversed the
pooling their resources and industry together, entered decision of the trial court. The evidence presented by
into a partnership engaged in the business of selling petitioners falls short of the quantum of proof required to
lumber and hardware and construction supplies. They establish a partnership.
named their enterprise "Benguet Lumber" which they
A demand for periodic accounting is evidence of a
jointly managed until Tan Eng Kee's death. Petitioners
partnership. During his lifetime, Tan Eng Kee appeared
herein averred that the business prospered due to the
never to have made any such demand for accounting
hard work and thrift of the alleged partners. However,
from his brother, Tang Eng Lay.
they claimed that in 1981, Tan Eng Lay and his children
caused the conversion of the partnership "Benguet In determining whether a partnership exists, these rules
Lumber" into a corporation called "Benguet Lumber shall apply:
Company." The incorporation was purportedly a ruse to
deprive Tan Eng Kee and his heirs of their rightful (1) Except as provided by Article 1825, persons who are
participation in the profits of the business. Petitioners not partners as to each other are not partners as to third
prayed for accounting of the partnership assets, and the persons;
dissolution, winding up and liquidation thereof, and the
(2) Co-ownership or co-possession does not of itself
equal division of the net assets of Benguet Lumber.
establish a partnership, whether such co-owners or co-
After trial, Regional Trial Court of Baguio City, Branch 7 possessors do or do not share any profits made by the use
rendered judgment on April 12, 1995. Private respondent of the property;
sought relief before the Court of Appeals which, on March
(3) The sharing of gross returns does not of itself establish
13, 1996, rendered the assailed decision reversing the
a partnership, whether or not the persons sharing them
judgment of the trial court. Petitioners' motion for
have a joint or common right or interest in any property
reconsideration was denied by the Court of Appeals in a
which the returns are derived;
Resolution dated October 11, 1996.
(4) The receipt by a person of a share of the profits of a
Issue(s): Whether Tan Eng Kee and Tan Eng Lay were business is a prima facie evidence that he is a partner in
partners in Benguet Lumber.
the business, but no such inference shall be drawn if such
profits were received in payment:
Ruling : A contract of partnership is defined by law as
one where: ...two or more persons bind themselves to
(a) As a debt by installment or otherwise;
contribute money, property, or industry to a common
fund, with the intention of dividing the profits among
(b) As wages of an employee or rent to a landlord;
themselves. Two or more persons may also form a
partnership for the exercise of a profession. Thus, in order (c) As an annuity to a widow or representative of a
to constitute a partnership, it must be established that (1)
deceased partner;
two or more persons bound themselves to contribute
money, property, or industry to a common fund, and (2)
(d) As interest on a loan, though the amount of
they intend to divide the profits among themselves. The
agreement need not be formally reduced into writing, payment vary with the profits of the business;
since statute allows the oral constitution of a partnership,
save in two instances: (1) when immovable property or
(e) As the consideration for the sale of a goodwill of a

business or other property by installments or
otherwise.
In the light of the aforequoted legal provision, we

conclude that Tan Eng Kee was only an employee, not a
partner. Even if the payrolls as evidence were discarded,
petitioners would still be back to square one, so to speak,
since they did not present and offer evidence that would
show that Tan Eng Kee received amounts of money
allegedly representing his share in the profits of the
enterprise. Petitioners failed to show how much their
father, received as his share in the profits of Benguet
Lumber Company for any particular period. Hence, they
failed to prove that Tan Eng Kee and Tan Eng Lay
intended to divide the profits of the business between
themselves, which is one of the essential features of a
partnership.
In the instant case, we find private respondent's

arguments to be well-taken. Where circumstances taken
singly may be inadequate to prove the intent to form a
partnership, nevertheless, the collective effect of these
circumstances may be such as to support a finding of the
existence of the parties' intent. Yet, in the case at bench,
even the aforesaid circumstances when taken together are
not persuasive indicia of a partnership. They only tend to
show that Tan Eng Kee was involved in the operations of
Benguet Lumber, but in what capacity is unclear. We
cannot discount the likelihood that as a member of the
family, he occupied a niche above the rank-and-file
employees. He would have enjoyed liberties otherwise
unavailable were he not kin, such as his residence in the
Benguet Lumber Company compound. He would have
moral, if not actual, superiority over his fellow employees,
thereby entitling him to exercise powers of supervision. It
may even be that among his duties is to place orders with
suppliers. Again, the circumstances proffered by
petitioners do not provide a logical nexus to the
conclusion desired; these are not inconsistent with the
powers and duties of a manager, even in a business
organized and run as informally as Benguet Lumber
Company.
There being no partnership, it follows that there is no

dissolution, winding up or liquidation to speak of.
Case Digest by: Bayani JM A. Solana
OBLIGATIONS OF THE PARTNERS (2) The birth and life of a partnership at will is predicated
on the mutual desire and consent of the partners. The
A1 Ortega v. CA right to choose with whom a person wishes to associate
himself is the very foundation and essence of that
partnership. Its continued existence is, in turn, dependent
on the constancy of that mutual resolve, along with each
G.R. No. 109248 July 3, 1995
partner's capability to give it, and the absence of a cause
GREGORIO F. ORTEGA, TOMAS O. DEL CASTILLO,
for dissolution provided by the law itself. Verily, any one
JR., and BENJAMIN T. BACORRO, petitioners, vs.
of the partners may, at his sole pleasure, dictate a
HON. COURT OF APPEALS, SECURITIES AND
dissolution of the partnership at will. He must, however,
EXCHANGE COMMISSION and JOAQUIN L.
act in good faith, not that the attendance of bad faith can
MISA,respondents. 4
prevent the dissolution of the partnership but that it can
5
result in a liability for damages.
The law firm of ROSS, LAWRENCE, SELPH and
CARRASCOSO, its name, was changed to BITO, MISA & In passing, neither would the presence of a period for its
LOZADA on June 7, 1977. On 19 December 1980, [Joaquin specific duration or the statement of a particular purpose
L. Misa] appellees Jesus B. Bito and Mariano M. Lozada for its creation prevent the dissolution of any partnership
associated themselves together, as senior partners with 6 7
by an act or will of a partner. Among partners, mutual
respondents-appellees Gregorio F. Ortega, Tomas O. del agency arises and the doctrine of delectus personae allows
Castillo, Jr., and Benjamin Bacorro, as junior partners. them to have the power, although not necessarily the
On 30 June 1988, petitioner filed with this Commission's right, to dissolve the partnership. An unjustified
Securities Investigation and Clearing Department (SICD) dissolution by the partner can subject him to a possible
a petition for dissolution and liquidation of partnership. action for damages.
On 31 March 1989, the hearing officer rendered a decision
against their favor. On appeal, the SEC en banc reversed The dissolution of a partnership is the change in the
the decision of the Hearing Officer. The Court of Appeals, relation of the parties caused by any partner ceasing to be
finding no reversible error on the part of respondent associated in the carrying on, as might be distinguished
8
Commission, AFFIRMED in toto the SEC decision. from the winding up of, the business. Upon its
dissolution, the partnership continues and its legal
1. Whether or not the Court of Appeals has erred in personality is retained until the complete winding up of
holding that the partnership of Bito, Misa & Lozada (now its business culminating in its termination.
Bito, Lozada, Ortega & Castillo) is a partnership at will.
No.
2. Whether or not the Court of Appeals has erred in

holding that the withdrawal of private respondent
dissolved the partnership regardless of his good or bad
faith. No.
Ruling: (1) A partnership that does not fix its term is a

partnership at will. That the law firm "Bito, Misa &
Lozada," and now "Bito, Lozada, Ortega and Castillo," is
indeed such a partnership need not be unduly belabored.
The partnership agreement does not provide for a
specified period or undertaking. The "DURATION" clause
simply states, "The partnership shall continue so long as
mutually satisfactory and upon the death or legal
incapacity of one of the partners, shall be continued by
the surviving partners."
The "purpose" of the partnership is not the specific

undertaking referred to in the law. Otherwise, all
partnerships, which necessarily must have a purpose,
would all be considered as partnerships for a definite
undertaking. There would therefore be no need to
provide for articles on partnership at will as none would
so exist. Apparently what the law contemplates, is a
specific undertaking or "project" which has a definite or
definable period of completion.
A2 WILLIAM UY vs. BARTOLOME PUZON, the capital of the partnership. Thereafter, the appellant
substituted by FRANCO PUZON failed to make any further contributions the partnership
funds as shown in his letters to the appellee wherein he
(Note: During this time when this case was decided, confessed his inability to put in additional capital to
nauuna ang name ng appellee kesa appellant sa title ng continue with the projects.
case.)
The findings of the trial court that the appellant
FACTS: misapplied partnership funds is, likewise, sustained by
competent evidence. It is of record that the appellant
Bartolome Puzon has a construction contract with the assigned to the Philippine National Bank all the payments
Bureau of Public Highways (BPH). In order to finish his to be received on account of the contracts with the
construction projects, he sought the financial assistance Bureau of Public Highways for the construction of the
of William Uy and proposed the creation of the aforementioned projects to guarantee the repayment of
partnership (UP Construction Company) between them the bank. By virtue of the said appeflant's personal loan
which would be the sub-contractor of the projects and with the said bank assignment, the Bureau of Public
the profits to be divided equally between them. The Highways paid the money due on the partial
partners agreed that the capital of the partnership would accomplishments on the construction projects in
be P100,000.00 of which each partner shall contribute the question to the Philippine National Bank who, in turn,
amount of P50,000.00 in cash. Puzon was short of cash applied portions of it in payment of the appellant's loan.
and he promised to contribute his share in the That the assignment to the Philippine National Bank
partnership capital as soon as his application for a loan prejudicial to the partnership cannot be denied. For sure,
with the Philippine National Bank (PNB) shall have been if the appellant gave to the partnership all that were
approved. However, in order to obtain the loan, Puzon earned and due it under the subcontract agreements, the
has to clear his collaterals of encumbrances first. In order money would have been used as a safe reserve for the
to do this, William Uy advanced to the partnership his discharge of all obligations of the firm and the
contribution and the management of the partnership was partnership would have been able to successfully and
entrusted to him. Puzon promised William Uy that the profitably prosecute the projects it subcontracted. Since
amount of P150,000.00 would be given to the partnership the defendant-appellant was at fault, the trial court
to be applied as reimbursement of the capital properly ordered him to reimburse the plaintiff-appellee
contribution of William Uy which Uy had advanced to whatever amount latter had invested in or spent for the
clear the title of Puzon's property; and as Puzon's partnership on account of construction projects.
contribution to the partnership; and as Puzon's personal
loan to the partnership.
To guarantee the repayment of the above-

mentioned loan, Bartolome Puzon, without the
knowledge and consent of William Uy, assigned to the
PNB all the payments to be received on account of the
contracts with the BPH for the construction of the afore-
mentioned projects. As a result, BPH made payments to
PNB in consideration for the construction works of the
partnership. As time passed and the financial demands of
the projects increased, William Uy, who supervised the
said projects, found difficulty in obtaining the necessary
funds with which to pursue the construction projects.
William Uy correspondingly called on Bartolome Puzon
to comply with his obligations under the terms of their
partnership agreement and to place, at lest, his capital
contribution at the disposal of the partnership. Failing to
reach an agreement with William Uy, Bartolome Puzon,
as prime contractor of the construction projects,
terminated the subcontract agreement with UP
Construction Company and stripped William Uy of
authority to deal with BPH.
ISSUE: Whether or not Puzon violated the terms of the

partnership.
HELD: Yes. The findings of the trial court clearly

showed that the appellant failed to contribute his share in
Art 1797 provides that the shares and losses shall be

A3 Isabelo Moran Jr. vs. CA and Mariano Pecson governed by the agreement, in the absence of an
(1984) agreement regarding the losses, it shall be borne
proportionately. Being a contract of partnership, each
partner must bear the losses and profits of the venture
that is the essence of partnership. Even under the
Doctrine: assurance of the other party that the venture would
The essence of partnership is the sharing of profits and become successful, in the absence of fraud, the other
losses. party has no right to claim highly speculative profits.
Hidden risks such as the failure of the COMELEC to
Facts: Pecson and Moran entered into an agreement proclaim the candidates in the ConCon on time, etc.
whereby both would contribute P15,000 each for the should be considered.
purpose of printing 95,000 posters featuring the delegates
of the 1971 Constitutional Convention. Moran would act (As to the P 7000) The fact that respondent presented in
as a managing partner. According to the agreement, Court as evidence the book Voice of the Veterans is
Pecson would receive a commission of P1000 a month sufficient proof that the project took off and therefore,
from April to December (8 months). Pecson gave Moran the assertion of the CA in awarding the P7000 in favor of
P10,000 as part of his share. Only 2,000 posters were Pecson is baseless.
printed. The printing cost P4,000. Pecson gave another
P7000 for the printing of The Voice of the Veteran 2. NO. Because of the circumstances mentioned above,
Magazine which they also agreed upon. Moran gave Moran should only pay Pecson 6K representing the
Pecson a promissory note amounting to P20,000 in unused balance of his 10K share (4k was for the printing),
consideration of Pecsons contributions and commission and another 3K representing 12 of the profits earned from
for three months. Pecson filed a case for an action of the sale of the printed posters. (NOTE THAT THE 20K
recovery of sum of money based on the alleged WAS FOR: P10,000 CONTRIBUTION OF PECSON FOR
partnership agreement, whereby he seeks the return of THE POSTERS, P7000 CONTRIBUTION FOR THE
his 10K contribution, and based on the promissory note. VETERANS MAGAZINE, P3000 FOR 3 MONTHS
WORTH OF COMMISSION)
The CFI held that, there is indeed a partnership
agreement, and that based on this Pecson gave 10K, and
gave another 7K for the Voice of the Veteran Magazine.
The CFI ruled that because Pecson also failed to give the
full amount of 15 thousand for the posters, both Moran
and Pecson is entitled to rescind the contract. Moran was
asked to return to Pecson the 17K received by him. Both
parties appealed to the CA. The CA ruled against Moran.
He was ordered to pay:
P 47,500 the amount which, according to the

CA, would have accrued in favor of Pecson if the
agreement was honored; P 8000 , as commission
from April to December; P 7000, as return of
Pecsons investment for the Voice of the Veterans
because the project never took off.
From this judgment, Moran appealed to the Supreme

Court.
Issue:
1. W/N the CA erred in ordering Moran to pay the
abovementioned amounts.
2. W/N Moran is liable to pay the promissory note
executed by him
Held:
1. YES. (As to the P47,500 and the P8000) - When partner
who has undertaken to contribute a sum of money fails to
do so, he becomes a debtor of the partnership for
whatever he may have promised to contribute and for
interests and damages from the time he should have
complied with his obligation. In the case at bar, there was
no evidence that the partnership would have been a
profitable venture, in fact it was a failure doomed from
the start. Therefore there is no basis for the award of
speculative damages. Moreover, both parties were in
breach of their duties as Pecson also failed to pay in full
his obligation to the partnership.
A4 Evangelista v. Abad Santos in their Supplemental Answer dated June 29, 1964 or
after around nine (9) years from June 7, 1955
subsequent to the filing of defendants' answer to the
complaint, defendants reached an agreement whereby the
G.R. No. L-31684 June 28, 1973
herein plaintiff been excluded from, and deprived of, her
EVANGELISTA & CO., DOMINGO C. EVANGELISTA,
alleged share, interests or participation, as an alleged
JR., CONCHITA B. NAVARRO and LEONARDA
industrial partner, in the defendant partnership and/or in
ATIENZA ABAD SABTOS, petitioners, vs.
its net profits or income, on the ground plaintiff has never
ESTRELLA ABAD SANTOS, respondent.
contributed her industry to the partnership, instead she
On December 17, 1963 respondent filed a suit against the
has been and still is a judge of the City Court (formerly
three other partners alleging that the partnership had
Municipal Court) of the City of Manila, devoting her time
been paying dividends to the partners except to her; and
to performance of her duties as such judge and enjoying
the defendants had refused and continued to refuse to let
the privilege and emoluments appertaining to the said
her examine the partnership books or to give her
office, aside from teaching in law school in Manila,
information regarding the partnership. She therefore
without the express consent of the herein defendants'.
prayed that the defendants be ordered to render
accounting of the partnership business and to pay her
corresponding share in the partnership profits after such
accounting.
The defendants claimed among others that Estrella was

not an industrial partner; that she has been, and up to the
present time still is, one of the judges of the City Court of
Manila, devoting all her time to the performance of the
duties of her public office, thus it was never contemplated
between the parties, for she could not lawfully contribute
her full time and industry which is the obligation of an
industrial partner pursuant to Art. 1789 of the Civil Code.
Whether the Estrella is an industrial partner.
Ruling: Yes. Even as she was and still is a Judge of the

City Court of Manila, she has rendered services for
appellants without which they would not have had the
wherewithal to operate the business for which appellant
company was organized.
ART. 1789. An industrial partner cannot engage in

business for himself, unless the partnership expressly
permits him to do so; and if he should do so, the capitalist
partners may either exclude him from the firm or avail
themselves of the benefits which he may have obtained in
violation of this provision, with a right to damages in
either case.'
It is not disputed that the provision against the industrial

partner engaging in business for himself seeks to prevent
any conflict of interest between the industrial partner and
the partnership, and to insure faithful compliance by said
partner with this prestation.
There is no pretense, however, even on the part of the

appellee is engaged in any business antagonistic to that of
appellant company, since being a Judge of one of the
branches of the City Court of Manila can hardly be
characterized as a business.
That appellee has faithfully complied with her prestation

with respect to appellants is clearly shown by the fact that
it was only after filing of the complaint in this case and
the answer thereto appellants exercised their right of
exclusion under the codal art just mentioned by alleging
A5 PEDRO MARTINEZ vs.ONG PONG CO and establishing the said store the object of the association.
ONG LAY This was the principal pronouncement of the judgment.
With regard to the second and third assignments of error,

FACTS: On the 12th of December, 1900, the plaintiff
this court, like the court below, finds no evidence that the
herein delivered P1,500 to the defendants who, in a
entire capital or any part thereof was lost. It is no
private document, acknowledged that they had received
evidence of such loss to aver, without proof, that the
the same with the agreement, as stated by them, "that we
effects of the store were ejected. Even though this were
are to invest the amount in a store, the profits or losses of
proven, it could not be inferred therefrom that the
which we are to divide with the former, in equal shares."
ejectment was due to the fact that no rents were paid, and
The plaintiff filed a complaint on April 25, 1907, in order that the rent was not paid on account of the loss of the
to compel the defendants to render him an accounting of capital belonging to the enterprise.
the partnership as agreed to, or else to refund him the
With regard to the possible profits, the finding of the
P1,500 that he had given them for the said purpose. Ong
court below are based on the statements of the defendant
Pong Co alone appeared to answer the complaint; he
Ong Pong Co, to the effect that "there were some profits,
admitted the fact of the agreement and the delivery to
but not large ones." This court, however, does not find
him and to Ong Lay of the P1,500 for the purpose
that the amount thereof has been proven, nor deem it
aforesaid, but he alleged that Ong Lay, who was then
possible to estimate them to be a certain sum, and for a
deceased, was the one who had managed the business,
given period of time; hence, it can not admit the estimate,
and that nothing had resulted therefrom save the loss of
made in the judgment, of 12 per cent per annum for the
the capital of P1,500, to which loss the plaintiff agreed.
period of six months.
The judge of the Court of First Instance of the city of
Inasmuch as in this case nothing appears other than the
Manila who tried the case ordered Ong Pong Co to return
failure to fulfill an obligation on the part of a partner who
to the plaintiff one-half of the said capital of P1,500
acted as agent in receiving money for a given purpose, for
which, together with Ong Lay, he had received from the
which he has rendered no accounting, such agent is
plaintiff, to wit, P750, plus P90 as one-half of the profits,
responsible only for the losses which, by a violation of the
calculated at the rate of 12 per cent per annum for the six
provisions of the law, he incurred. This being an
months that the store was supposed to have been open,
obligation to pay in cash, there are no other losses than
both sums in Philippine currency, making a total of P840,
the legal interest, which interest is not due except from
with legal interest thereon at the rate of 6 per cent per
the time of the judicial demand, or, in the present case,
annum, from the 12th of June, 1901, when the business
from the filing of the complaint. (Arts. 1108 and 1100, Civil
terminated and on which date he ought to have returned
Code.) We do not consider that article 1688 is applicable
the said amount to the plaintiff, until the full payment
in this case, in so far as it provides "that the partnership is
thereof with costs.
liable to every partner for the amounts he may have
ISSUE: WON Ong Pong Co is liable to return the of disbursed on account of the same and for the proper
capital received from Martinez and of profit. interest," for the reason that no other money than that
contributed as is involved.
RULING: YES as to the capital but NOT with profit.
As in the partnership there were two administrators or
As to the first assignment of error, the fact that the store agents liable for the above-named amount, article 1138 of
was closed by virtue of ejectment proceedings is of no the Civil Code has been invoked; this latter deals with
importance for the effects of the suit. The whole action is debts of a partnership where the obligation is not a joint
based upon the fact that the defendants received certain one, as is likewise provided by article 1723 of said code
capital from the plaintiff for the purpose of organizing a with respect to the liability of two or more agents with
company; they, according to the agreement, were to respect to the return of the money that they received
handle the said money and invest it in a store which was from their principal. Therefore, the other errors assigned
the object of the association; they, in the absence of a have not been committed.
special agreement vesting in one sole person the
management of the business, were the actual
administrators thereof; as such administrators they were
the agent of the company and incurred the liabilities
peculiar to every agent, among which is that of rendering
account to the principal of their transactions, and paying
him everything they may have received by virtue of
the mandatum. (Arts. 1695 and 1720, Civil Code.) Neither
of them has rendered such account nor proven the losses
referred to by Ong Pong Co; they are therefore obliged to
refund the money that they received for the purpose of
A6 FORTIS VS GUTIERREZ HERMANOS
FACTS: Plaintiff worked for the defendants during the

year 1902 under a contract by which he was to receive as
compensation 5 per cent of the net profits of the business.
The contract was made on the part of the defendants by
Miguel Alonzo Gutierrez but was not in writing. By the
provisions of the articles of partnership he (Miguel
Alonzo Gutierrez) was made one of the managers of the
company, with full power to transact all of the business
thereof. As such manager he had authority to make a
contract of employment with the plaintiff.
It is claimed by the appellants that the contract alleged in

the complaint made the plaintiff a copartner of the
defendants in the business which they were carrying on.
ISSUE: WON Fortis is an employee or a manager.
HELD: This contention cannot be sustained. It was a

mere contract of employment. The plaintiff had no voice
nor vote in the management of the affairs of the
company. The fact that the compensation received by
him was to be determined with reference to the profits
made by the defendants in their business did not in any
sense make by a partner therein. The articles of
partnership between the defendants provided that the
profits should be divided among the partners named in a
certain proportion. The contract made between the
plaintiff and the then manager of the defendant
partnership did not in any way vary or modify this
provision of the articles of partnership. The profits of the
business could not be determined until all of the expenses
had been paid. A part of the expenses to be paid for the
year 1902 was the salary of the plaintiff. That salary had to
be deducted before the net profits of the business, which
were to be divided among the partners, could be
ascertained.
ISSUE (issue related to obligation of the partners):

WON Gutierrez had the right to employ Fortis although
the contract was not in writing.
HELD: YES. Scope of a managing partner: a managing

partner has the authority to employ a bookkeeper
although the contract was not in writing. It was no
necessary that the contract between the plaintiff and the
defendants should be made in writing.
have no right of action against herein respondent. It

likewise dismissed petitioner's complaint in intervention
A7 Tai Tong Chuache v. The Insurance based on the inference that the credit secured by the
Commission mortgaged property was already paid by the Palomos
before the said property was gutted down by fire. The
A7 - TAI TONG CHUACHE & CO., petitioner, vs. THE foregoing conclusion was arrived at on the basis of the
INSURANCE COMMISSION and TRAVELLERS certification issued by the then Court of First Instance of
MULTI-INDEMNITY CORPORATION, respondents. Davao, Branch II that in a certain civil action against the
Palomos, Antonio Lopez Chua stands as the complainant
FACTS:
and not petitioner Tai Tong Chuache & Company.
Azucena Palomo bought a parcel of land and building
ISSUE: W/N the civil case flied by Arsenio Chua was in
from Rolando Gonzales and assumed a mortgage of the
his capacity as personal creditor of spouses Palomo. NO
building in favor of S.S.S. which was insured with S.S.S.
Accredited Group of Insurers. April 19, 1975: Azucena W/N Tai Tong Chuache & Co. can claim the proceeds of
Palomo obtained a loan from Tai Tong Chuache Inc. in the fire Insurance Policy issued by Travellers. YES
the amount of P100,000 and to secure it, the land
and building was mortgaged.
HELD: As adverted to earlier, respondent Insurance
On April 25, 1975, Arsenio Chua, representative of Thai Commission absolved respondent insurance company
Tong Chuache & Co. insured the latter's interest with from liability on the basis of the certification issued by
Travellers Multi-Indemnity Corporation for P100,000.00 the then Court of First Instance of Davao, Branch II, that
(P70,000.00 for the building and P30,000.00 for the in a certain civil action against the Palomos, Arsenio
contents thereof). June 11, 1975: Pedro Palomo secured Lopez Chua stands as the complainant and not Tai Tong
a Fire InsurancePolicy covering the building for P50,000 Chuache. From said evidence respondent commission
with Zenith Insurance Corporation. July 16, inferred that the credit extended by herein petitioner to
1975: another Fire Insurance policy was procured the Palomos secured by the insured property must have
from Philippine British Assurance Company, covering the been paid. Such is a glaring error which this Court cannot
same building for P50,000 and the contents thereof for sanction. Respondent Commission's findings are based
P70,000. upon a mere inference.
July 31, 1975: building and the contents were totally razed Citing Rule 3, Sec. 2 respondent pointed out that the
by fire. action must be brought in the name of the real party in
interest. We agree. However, it should be borne in mind
Spouses Palomo were able to claim P41,546.79 from
that petitioner being a partnership may sue and be sued
Philippine British Assurance Co., P11,877.14 from Zenith
in its name or by its duly authorized representative. The
Insurance Corporation and P5,936.57 from S.S.S. Group of
fact that Arsenio Lopez Chua is the representative of
Accredited Insurers but Travellers Multi-Indemnity
petitioner is not questioned. Petitioner's declaration that
refused.
Arsenio Lopez Chua acts as the managing partner of the
Travellers Insurance, on its part, admitted the issuance of partnership was corroborated by respondent insurance
the Policy No. 599 DV and alleged that Fire Policy No. 599 company.
DV, covering the furniture and building of complainants
Thus Chua as the managing partner of the partnership
was secured by a certain Arsenio Chua, mortgage creditor,
may execute all acts of administration including the right
for the purpose of protecting his mortgage credit against
to sue debtors of the partnership in case of their failure to
the complainants, Spouses Palomo; that the said policy
pay their obligations when it became due and
was issued in the name of Azucena Palomo, only to
demandable. Or at the very least, Chua being a partner of
indicate that she owns the insured premises; that the
petitioner Tai Tong Chuache & Company is an agent of
policy contains an endorsement in favor of Arsenio Chua
the partnership. Being an agent, it is understood that he
as his mortgage interest may appear to indicate that
acted for and in behalf of the firm.
insured was Arsenio Chua and the complainants, that the
premium due on said fire policy was paid by Arsenio The respondent insurance company having issued a
Chua; that respondent Travellers is not liable to pay policy in favor of herein petitioner which policy was of
complainants, Spouses Palomo. Tai Tong Chuache & Co. legal force and effect at the time of the fire, it is bound by
filed a complaint in intervention claiming the proceeds of its terms and conditions. Upon its failure to prove the
the fire Insurance Policy issued by Travellers. allegation of lack of insurable interest on the part of the
petitioner, respondent insurance company is and must be
Respondent Insurance Commission dismissed spouses
held liable.
Palomos' complaint on the ground that the insurance
policy subject of the complaint was taken out by Tai Tong
Chuache & Company, petitioner herein, for its own
interest only as mortgagee of the insured property and
thus complainant as mortgagors of the insured property
fellows for the entire indebtedness but is liable with them

or his aliquot part. It is obvious that the contract which
A8 Bachrach v. La Protectora Barba in fact executed in pursuance of that authority did
not by its terms profess to bind the appellants personally
at all, but only the partnership and himself. It follows that
the four appellants cannot be held to have been
Facts: Nicolas Segundo, Antonio Adiarte, Ignacio Flores personally obligated by that instrument; but, as we have
and Modesto Serrano (defendants) formed a civil already seen, their liability rests upon the general
partnership called La Protectora for the purpose of principles underlying partnership liability.
engaging in the business of transporting passengers and
freight at Laoag, Ilocos Norte. Marcelo Barba, acting as
manager, negotiated for the purchase of 2 automobile
trucks from E. M. Bachrach for P16,500. Barba paid P3,000
in cash and for the balance executed promissory notes. b. Yes. There is no proof in the record showing what the
agreement, if any, was made with regard to the form of
management. Under these circumstances it is declared in
One of these promissory notes was signed in the article 1695 of the Civil Code that all the partners are
following manner: considered agents of the partnership. Barba therefore
must be held to have had authority to incur these
P.P La Protectora, By Marcelo Barba Marcelo Barba expenses. But in addition to this he is shown to have
been in fact the president or manager, and there can be
no doubt that he had actual authority to incur this
The other 2 notes were signed in the same way but the obligation.
word by was omitted. It was obvious that in signing the
notes, Barba intended to bind both the partnership and
himself. The defendants executed a document in which
they declared that they were members of La Protectora
and that they had granted to its president full authority to
contract for the purchase of the 2 automobiles. The
document was delivered by Barba to Bachrach at the time
the vehicles were purchased.
Barba incurred a debt amounting to P2,617.57 and

Bachrach foreclosed a chattel mortgage on the trucks but
there was still balance. To recover the balance, action was
instituted against the defendants. Judgment was rendered
against all of the defendants.
Issue:
a.Whether or not the defendants are liable for the firm

debts.
b.Whether or not Barba had authority to incur expenses

for the partnership
Held:
a.Yes. Promissory notes constitute the obligation

exclusively of La Protectora and Barba. They do not
constitute an obligation directly binding the defendants.
Their liability is based on the principles of partnership
liability. A member is not liable in solidum with his
A9 JOSE MACHUCA vs. CHUIDIAN, effected the operations necessary in order to

BUENAVENTURA & CO., May 13, 1903 satisfy" the claims of D. Vicente Buenaventura.
Decision: CFI decision (w/c favoured Garcia) REVERSED
and SET ASIDE. Case is REMANDED to the court a quo.
The plaintiff will be entitled to receive from the
Facts: assets of the partnership, if any remain, at the
In 1882, defendants are organized as a regular termination of the liquidation.
general partnership in Manila; it was a Court did not discuss how would the partners
continuation of a prior partnership of the same share in the remaining assets, if there is any, in
name. It was stipulated that the partners liability proportion to their contributions.
should be "limited to the amounts brought in by
them. Thereafter, partners contributed
additional amounts.
In 1888, the partnership went into liquidation,
and it does not appear that the liquidation had
been terminated.
During liquidation, the accounts-current of
Telesforo Chuidian and Candelaria Chuidian had
diminished while Mariano Buenaventuras acct
had increased.
In 1894, Mariano Buenaventura died and his
estate passed to his children (among whom was
Vicente Buenaventura).
In 1898, Vicente Buenaventura executed a public
instrument wherein he "assigns to Jose Garcia
25% share in all that may be obtained by
whatever right in whatever form from the
liquidation of the partnership of Chuidian,
Buenaventura & Co. xxx
Garcia now asks to have the credit assigned to
him to be recorded in the books of the
partnership. Likewise, to receive immediately
25% of the amount representing Vicente
Buenaventuras share in the account-current.
Issue: Whether Garcia is entitled to 25% of D. Vicente

Buenaventura's share in the partnership's assets.
Held/Ratio: NO. Garcia is NOT entitled.
Under clause 19 of the partnership agreement of the

parties, the partnership would be liquidated:
liabilities to non partners are to be discharged first;
claims of the Chuidian minors are to be next satisfied
(does not appear how they acquired such);
advances made by a partner;
leaving the ultimate residue (if any) to be distributed,
among the partners in the proportions they may be
entitled.
Hence, Vicente Buenaventura (rights are
those of his decesead father, Mariano) is NOT
entitled to receive any part of the assets until
the creditors who are nonpartners and the
Chuidian minors are paid. Whatever rights
Vicente had either as creditor or partner, he
could only transfer subject to this condition.
Vicente cannot transfer the partnership's assets to 3rd

person but may transfer/assign a partner's interest (share
in profits & losses) on the partnership
By that instrument he undertakes to assign to
Garcia not a present interest in the assets of the
partnership but an interest in whatever "may be
obtained from the liquidation of the partnership,"
which Garcia is to receive "in the same form in
which it may be obtained from said partnership,"
and "on the date when Messrs. Chuidian,
Buenaventura & Co., in liquidation, shall have
estate, to destroy an interest derived from himself, and

for which he has received full value.
A10 Pang Lim and Benito Galvez vs. Lo Seng
The bad faith of the plaintiffs in seeking to deprive the
defendant of this lease is strikingly revealed in the
Facts: circumstance that prior to the acquisition of this property
Pang Lim had been partner with Lo Seng and Benito
Lo Seng and Pang Lim were partners in the business of Galvez an employee. Both therefore had been in relations
running a distillery, known as "El Progreso. The land on of confidence with Lo Seng and in that position had
which said distillery is located were, at the time, the acquired knowledge of the possibilities of the property
property of another Chinaman, who resides in Hongkong, and possibly an experience which would have enabled
named Lo Yao, who, in September, 1911 leased the same to them, in case they had acquired possession, to exploit the
the firm of Lo Seng and Co. for the term of three years. distillery with profit.
Upon the expiration of this lease a new written contract,
in the making of which Lo Yao was represented by one Lo
Shui as attorney in fact, became effective whereby the It would be shocking to the moral sense if the condition
lease was extended for fifteen years. of the law were found to be such that Pang Lim, after
profiting by the sale of his interest in a business,
Pang Lim sold all his interest in the distillery to his worthless without the lease, could intervene as purchaser
partner Lo Seng, thus placing the latter in the position of of the property and confiscate for his own benefit the
sole owner. Lo Shui, again acting as attorney in fact of Lo property which he had sold for a valuable consideration
Yao, executed and acknowledged before a notary public a to Lo Seng.
deed purporting to convey to Pang Lim and another
Chinaman named Benito Galvez, the entire distillery Above all other persons in business relations, partners are
plant. But this document was never recorded in the required to exhibit towards each other the highest degree
registry of property. of good faith. In fact the relation between partners is
essentially fiduciary, each being considered in law, as he
Thereafter, Pang Lim and Benito Galvez demanded is in fact, the confidential agent of the other. If one
possession from Lo Seng, but the latter refused to yield; partner obtains in his own name and for his own benefit
and the present action of unlawful detainer was the renewal of a lease on property used by the firm, to
thereupon initiated by Pang Lim and Benito Galvez in the commence at a date subsequent to the expiration of the
court of justice of the peace of Paombong to recover firm's lease, the partner obtaining the renewal is held to
possession of the premises. be a constructive trustee of the firm as to such lease. As
Lo Seng is vested with the possessory right as against
Issue: Pang Lim, he cannot be ousted either by Pang Lim or
WON the plaintiffs (Pang Lim and Galvez), as purchasers Benito Galvez. Having lawful possession as against one
of the estate, are at liberty to terminate the lease, cotenant, he is entitled to retain it against both.
assuming that it was originally binding upon all parties
participating in it.
Ruling: NO!
Plaintiff Pang Lim has occupied a double role in the

transactions which gave rise to this litigation, namely,
first, as one of the lessees; and secondly, as one of the
purchasers now seeking to terminate the lease. These two
positions are essentially antagonistic and incompatible.
Every competent person is by law bond to maintain in all
good faith the integrity of his own obligations; and no less
certainly is he bound to respect the rights of any person
whom he has placed in his own shoes as regards any
contract previously entered into by himself.
While yet a partner in the firm of Lo Seng and Co., Pang

Lim participated in the creation of this lease, and when
he sold out his interest in that firm to Lo Seng this
operated as a transfer to Lo Seng of Pang Lim's interest in
the firm assets, including the lease; and Pang Lim cannot
now be permitted, in the guise of a purchaser of the
partnership in liquidation and the only right Tan could

have would be to what might result after such liquidation
A11 Lim Tanhu v. Ramolete to belong to the deceased partner; before this is finished,
it is impossible to determine what rights or interests the
Facts: deceased had.
Tan filed an action for accounting of real and personal -No specific amounts or properties may be
properties as well as recovery of the same with damages adjudicated to the heir or legal representative of
the deceased partner without the liquidation
Tan alleged that she is the widow of Tee Hoon Lim Po being first terminated
Chuan, who was a partner in the commercial partnership
Glory Commercial Company along with Lim Tanhu and
Ng Sua
- she alleged that Lim Tanhu and Ng Sua,

through fraud and machination, took actual and active
management of the partnership, and although Lim Po
Chuan was the manager of the company, Lim Tanhu and
Ng Sua managed to use the funds of the partnership to
purchase lands and buildings
Lim Tanhu and Ng Sua denied the allegations and

according to them, Tan is not the legitimate wife, and
with regard to the allegations of fraud, proper liquidation
had been regularly made of the business of the
partnership and that Lim Po Chuan used to receive his
share until his death, as a result of which the partnership
was dissolved and what corresponded to him were all
given to his wife and children.
Issue: W/N Tan, allegedly being the wife of Lim Po

Chuan, can claim from the company the share of her
husband
Held: NO.
Since Lim Po Chuan was in control of the affairs of the

partnership, the logical inference is that if Lim Tanhu and
Ng Sua obtained any portion of the funds of the
partnership for themselves, it must have been with the
knowledge and consent of Lim Po Chuan
-for this reason, no accounting could be

demanded from them therefore; Article 1807 of
the Civil Code refers only to what is taken by a
partner without the consent of the other partner
of partners
It is also significant that the tax declarations and land

titles, the properties which were allegedly acquired by
Lim Tanhu and Ng Sue with the funds of the partnership
appear to have been transferred to their names only in
1969 or later long after the partnership had been
dissolved after the death of Lim Po Chuan
-Lim Tanhu and Ng Sua then had no obligation

to account for such acquisitions in the absence of
clear proof that they had violated the trust of Lim
Po Chuan during the partnership
Assuming that there has not yet been any liquidation,

Glory Commercial Corporation would have the status of a
that the same continues until fully paid. The question

now arises as to whether or not the payment of a share of
A12 DAN FUE LEUNG vs. IAC and LEUNG YIU profits shall continue into the future with no fixed ending
date. Considering the facts of this case, the Court may
decree dissolution of the partnership under Article 1831 of
[G.R. No. 70926. 31 Jan 1989] the Civil Code. There shall be a liquidation and winding
up of partnership affairs, return of capital, and other
Facts : The Sun Wah Panciteria, a restaurant, located at incidents of dissolution because the continuation of the
Florentino Torres Street, Sta. Cruz, Manila, was partnership has become inequitable.
established sometime in October, 1955. It was registered
as a single proprietorship and its licenses and permits WHEREFORE, the petition for review is hereby
were issued to and in favor of petitioner Dan Fue Leung DISMISSED for lack of merit. The decision of the
as the sole proprietor. Respondent Leung Yiu adduced respondent court is AFFIRMED with a MODIFICATION
evidence during the trial of the case to show that Sun that as indicated above, the partnership of the parties is
Wah Panciteria was actually a partnership and that he ordered dissolved.
was one of the partners having contributed P4, 000.00 to
its initial establishment.
In essence, the private respondent alleged that when Sun

Wah Panciteria was established, he gave P4, 000.00 to the
petitioner with the understanding that he would be
entitled to twenty-two percent (22%) of the annual profit
derived from the operation of the said panciteria.
Issue(s): Whether or not Leung Yiu is a partner in the

establishment of Sun Wah Panciteria.
Ruling : The private respondent and the petitioner are

partners in the establishment of Sun Wah Panciteria
because Article 1767 of the Civil Code provides that "By
the contract of partnership two or more persons bind
themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profits
among themselves".
The private respondent is a partner of the petitioner in

Sun Wah Panciteria. The requisites of a partnership
which are 1) two or more persons bind themselves to
contribute money, property, or industry to a common
fund; and 2) intention on the part of the partners to
divide the profits among themselves - have been
established. As stated by the respondent, a partner shares
not only in profits but also in the losses of the firm. If
excellent relations exist among the partners at the start of
business and all the partners are more interested in
seeing the firm grow rather than get immediate returns, a
deferment of sharing in the profits is perfectly plausible.
It would be incorrect to state that if a partner does not
assert his rights anytime within ten years from the start of
operations, such rights are irretrievably lost. The private
respondent's cause of action is premised upon the failure
of the petitioner to give him the agreed profits in the
operation of Sun Wah Panciteria. In effect the private
respondent was asking for an accounting of his interests
in the partnership.
It is Article 1842 of the Civil Code in conjunction with

Articles 1144 and 1155 which is applicable. Regarding the
prescriptive period within which the private respondent
may demand an accounting, Articles 1806, 1807, and 1809
show that the right to demand an accounting exists as
long as the partnership exists. Prescription begins to run
only upon the dissolution of the partnership when the
final accounting is done.
The resolution of the Intermediate Appellate Court

ordering the payment of the petitioner's obligation shows
on his part. Hence, respondents' complaint seeking the

liquidation and partition of the assets of the partnership
with damages is a personal action which may be filed in
A13 EMILIO EMNACE vs. COURT OF APPEALS the proper court where any of the parties reside.
II. The Supreme Court held that the action has not yet
prescribed.
G.R. No. 126334; November 23, 2001
The three (3) final stages of a partnership are: (1)
Facts: dissolution; (2) winding-up; and (3) termination.36 The
Petitioner Emilio Emnace, Vicente Tabanao and Jacinto partnership, although dissolved, continues to exist and its
Divinagracia were partners in a business concern known legal personality is retained, at which time it completes
as Ma. Nelma Fishing Industry. Sometime in January of the winding up of its affairs, including the partitioning
1986, they decided to dissolve their partnership and and distribution of the net partnership assets to the
executed an agreement of partition and distribution of partners. For as long as the partnership exists, any of the
the partnership properties among them, consequent to partners may demand an accounting of the partnership's
Jacinto Divinagracia's withdrawal from the partnership. business. Prescription of the said right starts to run only
Included in the assets to be distributed were two (2) upon the dissolution of the partnership when the final
parcels of land located at Sto. Nio and Talisay, Negros accounting is done.
Occidental. Contrary to petitioner's protestations that respondents'
Throughout the existence of the partnership, and even right to inquire into the business affairs of the
after Vicente Tabanao's untimely demise in 1994, partnership accrued in 1986, prescribing four (4) years
petitioner Emnace failed to submit to herein respondents thereafter, prescription had not even begun to run in the
Tabanao's heirs any statement of assets and liabilities of absence of a final accounting.
the partnership, and to render an accounting of the Articles 1807 and 1809, which deal with the duty to
partnership's finances. Petitioner also reneged on his account, the right to demand an accounting accrues at
promise to turn over to Tabanao's heirs the deceased's the date of dissolution in the absence of any agreement to
one-third (1/3) share in the total assets of the partnership the contrary. When a final accounting is made, it is only
despite formal demand for payment thereof. then that prescription begins to run.
Tabanao' s heirs filed against petitioner an action for In the case at bar, no final accounting has been made, and
accounting, payment of shares, division of assets and
that is precisely what respondents are seeking in their
damages.
Petitioner filed a motion to dismiss the complaint on the action before the trial court, since petitioner has failed or
grounds of improper venue since the action is a real refused to render an accounting of the partnership's
action involving a parcel of land that is located outside business and assets. Hence, the said action is not barred
the territorial jurisdiction of the court a quo. He further by prescription.
contended that the complaint should be dismissed on the
ground of prescription, arguing that respondents' action
prescribed four (4) years after it accrued in 1986.
Issues:
I. Whether or not the venue was properly laid.
II. Whether or not the action filed by herein respondent-
heirs has already prescribed.
Ruling:
I. The Supreme Court held that the venue was properly
laid.
The herein respondents are asking that the assets of the

partnership be accounted for, sold and distributed
according to the agreement of the partners. The fact that
two of the assets of the partnership are parcels of land
does not materially change the nature of the action. It is
an action in personam because it is an action against a
person, namely, petitioner, on the basis of his personal
liability. It is not an action in rem where the action is
against the thing itself instead of against the person.
Furthermore, there is no showing that the parcels of land
involved in this case are being disputed. In fact, it is only
incidental that part of the assets of the partnership under
liquidation happen to be parcels of land.
Moreover, the action filed by respondents not only seeks
redress against petitioner. It also seeks the enforcement
of, and petitioner's compliance with, the contract that the
partners executed to formalize the partnership's
dissolution, as well as to implement the liquidation and
partition of the partnership's assets. Clearly, it is a
personal action that, in effect, claims a debt from
petitioner and seeks the performance of a personal duty
A14 Sison v. McQuaid
SERGIO SISON vs. HELEN MCQUAID
Facts: Sison and McQuaid are partners in a lumber

business. The partnership sold lumber to the US army for
P13,800. Sison alleged that McQuaid has persistently
refused to deliver one-half of the price, or P6,900, to him
notwithstanding repeated demands, investing the whole
sum for her own benefit. He filed an action to recover
from McQuaid one-half of the purchase price of the
lumber sold.
Issue: Should the proceeds from the sale of lumber be

considered profits as to entitle Sison thereof?
Ruling: NO. The complaint does not allege that there has
been a liquidation of the partnership business and the
said sum has been found to be due him as his share of the
profits. The proceeds from the sale of a certain amount of
lumber cannot be considered profits until costs and
expenses have been deducted. Moreover, the profits of
the business cannot be determined by taking into account
the result of one particular transaction instead of all the
transactions thats been had. Hence, the need for a
general liquidation before a member of a partnership may
claim a specific sum as his share of the profits.
A15 ORNUM v. LASALA a further accounting from the moment they received and
accepted their shares as itemized in said statement.
21. This judgment was reversed by the Court of Appealsprincipally on
.In 1908 Pedro Lasala, father of the respondents, andEmerenciano the ground that as the final statement of accounts remains
Ornum formed a partnership unsigned by the respondents, the same stands
2. Lasala as capitalist while Ornum will be the industrial partner disapproved.
22. The decision appealed by the petitioners
3. Lasala delivered the sum of P1,000 to Ornum who will
conducta business at his place of residence in Romblon. ISSUES:(1) WoN the accounting stated in the letter
4. In 1912, when the assets of the partnership consisted including the last and final statement of account was
ofoutstanding accounts and old stock of tacitly accepted by the petitioners as the final liquidation
merchandise,Emerenciano Ornum, following the wishes and accounting of the assets of the partnership?
of his wife, asked forthe dissolution of the Lasala, Emerenciano (2) Are there really mistakes and misrepresentations
made in the statement of accounts made?
5. Ornum looked for someone who could take his place Petitioners contention:
and he suggested the names of the petitioners who To support a plea of a stated account so as to conclude
accordingly became the new partners. the parties in relation to all dealings between them, the
6. Upon joining the business, the petitioners, contributed accounting must be shown to have been final. All the first
P505.54as their capital nine statements which the defendants sent the plaintiffs were partial
settlements, while the last, although intended to be final,
7. the new partnership Pedro Lasala had a capital of
P1,000,appraised value of the assets of the former partnership, has not been signed.
plusthe said P505.54 invested by the petitioners who, as
industrial partners, were to run the business in Romblon.
8. After the death of Pedro Lasala, his children (the HELD FOR ISSUE NO. 1: YES. SC stated that the last and
respondents) succeeded to all his rights and interest in the final statement of accounts hereinabove quoted, had been approved
partnership. by the respondents.
9. The partners never knew each other personally.
10. No formal partnership agreement was ever executed. This approval resulted, by virtue of the letter of Father
11. The petitioners, as managing partners, were received one-half of Mariano Lasala of July 19, 1932, quoted in part in
the net gains, and the other half was to be divided between the appealed decision from the failure of the respondents
them and the Lasala group in proportion to the capital put in by each to object to the statement and from their promise to sign
group. the same as soon as they received their shares as shown in said
statement.
12. During the course divided, but the partners were given
theelection, as evidenced by the statements of accounts referred to After such shares had been paid by the petitioners and
in the decision of the Court of Appeals, to invest their accepted by the respondents without any reservation, the
respective shares in such profits as additional capital. approval of the statement of accounts was virtually confirmed and its
signing thereby became a mere formality to be complied with by the
13. The petitioners accordingly let a greater part of their
respondents exclusively. Their refusal to sign, after receiving their
profits as additional investment in the partnership.
shares, amounted to a waiver to that formality in favor of
14. After twenty years the business had grown to such ane the petitioners who has already performed their
xtent that is total value, including profits, amounted obligation.
toP44,618.67.
This approval precludes any right on the part of the respondents to
15. Statements of accounts were periodically prepared by thepetitioner
a further liquidation, unless the latter can show that there
s and sent to the respondents who invariably did not make any
was fraud, deceit, error or mistake in said approval.
objection thereto.
The Court of Appeals did not make any findings that
there was fraud, and on the matter of error or mistake it merely
16. Before the last statement of accounts was made, therespondents said:
had received P5,387.29 by way of profits.
HELD FOR ISSUE NO. 2: the pronouncement that the
17. The last and final statement of accounts, dated May 27, evidence tends to prove that there were mistakes in the
1932, and prepared by the petitioners after the respondents had petitioners' statements of accounts, without specifying
announced their desire to dissolve the partnership, the mistakes, merely intimates as suspicion and is not
18. Pursuant to the request contained in this letter, thepetitioners such a positive and unmistakable finding of fact as to
remitted and paid to the respondents the total amount justify a revision, especially because the Court of Appeals
corresponding to them under the above-quoted statement of has relied on the bare allegations of the parties,
accounts which, however, was not signed by the latter. Moreover, as the petitioners did not appeal from the
19. Thereafter the complaint in this case was filed by there decision of the Court abandoned such allegation in the
spondents, praying for an accounting and final Court of Appeals.
liquidation of the assets of the partnership.
20. The Court of First Instance of Manila held that the last and final no justifiable reason (fraud, deceit, error or mistake) has
statement of accounts prepared by the petitioners was beenpositively and unmistakably found by the Court of
tacitly approved and accepted by the respondents who, by virtue of Appeals so
the above-quoted letter of Father Mariano Lasala, lost their right to
as to warrant the liquidations sought by the respondents.

In justice to the petitioners
It should be borne in mind that this case has been

pending fornearly nine years and that, if another
accounting is ordered, acostly action or proceeding may arise
which may not bedisposed of within a similar period, it is
not improbable that theintended relief may in fact be the
respondents' funeral.
execute a formal transfer of one-half of the fishpond and

to secure official approval of the same.
PROPERTY RIGHTS OF PARTNERS The appellees advocate a dangerous theory which invites
promiscuous violation of the said administrative order.
For all that a would-be permittee or lessee would do in
Case 1: Deluao v. Casteel, Aug. 29, 1969 order to escape the consequences of an unauthorized
sublease or transfer, is to effect such sublease or transfer
before the issuance of the lease or permit, and then argue
G.R. No. L-21906 August 29, 1969 that there is no violation because such sublease or
INOCENCIA DELUAO and FELIPE DELUAO, plaintiffs- transfer was effected before a permit or lease was issued.
appellees, To be sure, this theory espoused by the appellees would
vs. violate the intent of the legislature to grant the privilege
NICANOR CASTEEL and JUAN DEPRA, defendants, of occupying, possessing, developing and enjoying
NICANOR CASTEEL, defendant-appellant. fishponds of the public domain only to bona fide holders
of permits or lease agreements properly issued or
executed by the DANR Secretary.
FACTS:
Apellees argue that the Fisheries Administrative Order 2. ISSUE: Whether or not the issuance of permit to
14, Sec.7 should be declared a nullity because the Casteel resulted in a trut by operaion of law.
prohibition against the transfer or sub-letting of
fishponds covered by permits or lease agreements it HELD: trust is the right, enforceable in equity, to the
provided is not covered by the Fisheries Act. beneficial enjoyment of property the legal title to which is
in another (Ulmer v. Fulton, 97 ALR 1170, 120 Ohio St. 323,
The provision provides that ony holders of permits or 195 NE 557). However, since we held as illegal the second
leases issued or executed by the Secretary of DANR can part of the contract of partnership between the parties to
enter upon definite tracts of public forest land to be divide the fishpond between them after the award, a
devoted exclusivey for fishpond purposes. fortiori, no rights or obligations could have arisen
therefrom. Inescapably, no trust could have resulted
The Deluaos herein entered into an agreement with because trust is founded on equity and can never result
Casteel to divide the fishpond and allege that they are not from an act violative of the law.
covered with the prohibition because what is alleged to
be referred to fishponds covered by permits or leases, and
since no permit or lease had as yet been granted to
Casteel, they are not covered. 3. ISSUE: Whether or not the fishpond is specific
partnership property.
They even allege that the decision of the Secretary of HELD: Parenthetically, the appellees' statement that the
DANR favorable to Castel did not only recognize the beneficial right over the fishpond in question is the
occupancy rights of the Casteel, but approved his "specific partnership property" contemplated by art. 1811
application, as well. Thus, the suspensive condition that of the Civil Code is incorrect. A reading of the said
the forest land to be devoted to a fishpod must only be provision will show that what is meant is tangible
used by the ones who holds permits already have taken property, such as a car, truck or a piece of land, but not
place making he ultimate undertaking of dividing the an intangible thing such as the beneficial right to a
land has become a demandable obligation. fishpond. If what the appellees have in mind is the
fishpond itself, they are grossly in error. A fishpond of the
public domain can never be considered a specific
1. ISSUE: Whether or not the Deluaos are correct in partnership property because only its use and enjoyment
saying that after the promulgation of the DANR never its title or ownership is granted to specific
Secretarys decision in favor of Casteel, the division private persons.
of the fishpond are already valid in accordance
with the Fisheries Administrative Order.
HELD:
The contract of partnership to divide the fishpond

between them after such award became illegal because it
is at war with several prohibitory laws. As such, it cannot
be made subject to any suspensive condition the
fulfillment of which could allegedly make the ultimate
undertaking therein a demandable obligation. It is an
elementary rule in law that a partnership cannot be
formed for an illegal purpose or one contrary to public
policy and that where the object of a partnership is the
prosecution of an illegal business or one which is contrary
to public policy, the partnership is void. And since the
contract is null and void, the appellant is not bound to
Case 2: Lozana v. Depakakibo, April 27, 1960 been a liquidation of the partnership assets at the time
plaintiff sold the Buda Diesel Engine on October 15, 1955,
and since the court below had found that the plaintiff had
actually contributed one engine and 70 posts to the
partnership, it necessarily follows that the Buda diesel
CASE 2: G.R. No. L-13680 April 27, 1960
engine contributed by the plaintiff had become the
MAURO LOZANA, plaintiff-appellee, property of the partnership. As properties of the
vs. partnership, the same could not be disposed of by the
SERAFIN DEPAKAKIBO, defendant-appellant. party contributing the same without the consent or
approval of the partnership or of the other partner.
(Clemente vs. Galvan, 67 Phil., 565).
FACTS: ISSUE: W/N the partnership was void ab initio - no
- Plaintiff Mauro Lozana entered into a contract RULING: Upon examining the contract of partnership,
with defendant Serafin Depakakibo wherein they especially the provision thereon wherein the parties
established a partnership capitalized at the sum agreed to maintain, operate and distribute electric light
of P30,000, plaintiff furnishing 60% thereof and and power under the franchise belonging to Mrs.
the defendant, 40%, for the purpose of Buenaflor, we do not find the agreement to be illegal, or
maintaining, operating and distributing electric contrary to law and public policy such as to make the
light and power in the Municipality of contract of partnership, null and void ab initio. The
Dumangas, Province of Iloilo, under a franchise agreement could have been submitted to the Public
issued to Mrs. Piadosa Buenaflor. Service Commission if the rules of the latter require them
- However, the franchise or certificate of public to be so presented. But the fact of furnishing the current
necessity and convenience in favor of the said to the holder of the franchise alone, without the previous
Mrs. Piadosa Buenaflor was cancelled and approval of the Public Service Commission, does not per
revoked by the Public Service Commission on se make the contract of partnership null and void from
May 15, 1955. the beginning and render the partnership entered into by
- Evidently because of the cancellation of the the parties for the purpose also void and non-existent.
franchise in the name of Mrs. Piadosa Buenaflor, Under the circumstances, therefore, the court erred in
plaintiff herein Mauro Lozana sold a generator, declaring that the contract was illegal from the beginning
Buda (diesel), to the new grantee Olimpia D. and that parties to the partnership are not bound
Decolongon, by a deed dated October 30, 1955. therefor, such that the contribution of the plaintiff to the
- Defendant Serafin Depakakibo, on the other partnership did not pass to it as its property. It also
hand, sold one Crossly Diesel Engine, 25 h. p., follows that the claim of the defendant in his
Serial No. 141758, to the spouses Felix Jimenea counterclaim that the partnership be dissolved and its
and Felina Harder, by a deed dated July 10, 1956. assets liquidated is the proper remedy, not for each
- On November 15, 1955, plaintiff Mauro Lozana contributing partner to claim back what he had
brought an action against the defendant, alleging contributed.
that he is the owner of the Generator Buda
(Diesel) and that he is entitled to the possession
thereof.
- On December 5, 1955, defendant filed an answer,
denying that the generator and the equipment
mentioned in the complaint belong to the
plaintiff and alleging that the same had been
contributed by the plaintiff to the partnership
entered into between them in the same manner
that defendant had contributed equipments also,
and therefore that he is not unlawfully detaining
them. By way of counterclaim, defendant alleged
that under the partnership agreement the parties
were to contribute equipments, plaintiff
contributing the generator and the defendant,
the wires for the purpose of installing the main
and delivery lines; that the plaintiff sold his
contribution to the partnership, in violation of
the terms of their agreement.
- Trial court entered a decision declaring plaintiff
owner of the equipment and entitled to the
possession thereof, with costs against defendant.
ISSUE: W/N Plaintiff owns the generator in question
RULING: As it appears from the above stipulation of facts

that the plaintiff and the defendant entered into the
contract of partnership, plaintiff contributing the amount
of P18,000, and as it is not stated therein that there bas
Case 3: Navarro v. Escobido, Nov. 27, 2009 presumed to be conjugal unless the contrary is
proved. Our examination of the records of the case does
not show any proof that Kargo Enterprises and the
properties or contracts in its name are conjugal.
G.R. No. 153788 November 27, 2009
Article 124 of the Family Code, on the administration of
ROGER V. NAVARRO, Petitioner, the conjugal property, provides:
vs.
Art. 124. The administration and enjoyment of the
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC
Branch 37, Cagayan de Oro City, and KAREN T. GO, conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husbands
doing business under the name KARGO
decision shall prevail, subject to recourse to the court by
ENTERPRISES, Respondents.
the wife for proper remedy, which must be availed of
within five years from the date of the contract
implementing such decision.
FACTS:
xxx
KARGO Enterprise, a business enterprise engaged in the
This provision, by its terms, allows either Karen or Glenn
buying and selling of motor vehicles, entered into an lease
Go to speak and act with authority in managing their
agreement with option to purchase, represented by its
conjugal property, i.e., Kargo Enterprises. No need exists,
manager, Glenn Co with Roger Navarro. The latter gave a
therefore, for one to obtain the consent of the other
check as payment for the motor vehicles, however, when
before performing an act of administration or any act that
it was presented to the bank, the same was dishonored
does not dispose of or encumber their conjugal property.
due to insufficiency of funds. Despite demands, Navarro
failed to satisfy the same. Under Article 108 of the Family Code, the conjugal
partnership is governed by the rules on the contract of
Karen Go filed a case for replevin and/or sum of money partnership in all that is not in conflict with what is
against Navarro, as the owner of Kargo Enterprises, expressly determined in this Chapter or by the spouses in
further stating that she is married to Glenn Co. their marriage settlements. In other words, the property
relations of the husband and wife shall be governed
Navarro contended that the case must be dismissed primarily by Chapter 4 on Conjugal Partnership of Gains
because Kargo has no juridical personality, and that of the Family Code and, suppletorily, by the spouses
Karen is not the real party-in-interest because the actual marriage settlement and by the rules on partnership
parties in the agreement was him and Glenn. under the Civil Code. In the absence of any evidence of a
marriage settlement between the spouses Go, we look at
He also assailed the capacity of Glenn Co to sign the lease
the Civil Code provision on partnership for guidance.
agreement as manager alleging that Karen is the sole
proprietor of the business. A rule on partnership applicable to the spouses
circumstances is Article 1811 of the Civil Code, which
1. ISSUE: Whether or not Karen was not a real states:
party-in-interest.
Art. 1811. A partner is a co-owner with the other partners
HELD: of specific partnership property.
The incidents of this co-ownership are such that:
As the registered owner of Kargo Enterprises, Karen Go is
the party who will directly benefit from or be injured by a (1) A partner, subject to the provisions of this Title and to
judgment in this case. Thus, contrary to Navarros any agreement between the partners, has an equal right
contention, Karen Go is the real party-in-interest, and it is with his partners to possess specific partnership
legally incorrect to say that her Complaint does not state property for partnership purposes; xxx
a cause of action because her name did not appear in the
Under this provision, Glenn and Karen Go are effectively
Lease Agreement that her husband signed in behalf of
co-owners of Kargo Enterprises and the properties
Kargo Enterprises.
registered under this name; hence, both have an equal
right to seek possession of these properties.
2. ISSUE: Whether Glenn Go can legally sign the Under this ruling, either of the spouses Go may bring an
Lease Agreement in his capacity as a manager of action against Navarro to recover possession of the Kargo
Kargo Enterprises, alleged to be under sole Enterprises-leased vehicles which they co-own. This
proprietorship. conclusion is consistent with Article 124 of the Family
Code, supporting as it does the position that either
spouse may act on behalf of the conjugal partnership, so
long as they do not dispose of or encumber the property
HELD: in question without the other spouses consent.
The registration of the trade name in the name of one

person a woman does not necessarily lead to the
conclusion that the trade name as a property is hers
alone, particularly when the woman is married. By law, all
property acquired during the marriage, whether the
acquisition appears to have been made, contracted or
registered in the name of one or both spouses, is
Case 4: MENDIOLA vs. COURT OF APPEALS Petitioner is not a part-owner of Pacfor Phils. William
Gleason, private respondent Pacfor's President
established this fact when he said that Pacfor Phils. is
simply a "theoretical company" for the purpose of
dividing the income 50-50. He stressed that petitioner
FACTS: Private respondent Pacfor entered into a "Side
knew of this arrangement from the very start, having
Agreement on Representative Office known as Pacific
been the one to propose to private respondent Pacfor the
Forest Resources (Phils.), Inc." with petitioner Arsenio T.
setting up of a representative office, and "not a branch
Mendiola. Private respondent will establish a Pacfor
office" in the Philippines to save on taxes. Thus, the
representative office in the Philippines, to be known as
parties in this case, merely shared profits. This alone does
Pacfor Phils, and petitioner ATM will be its President.
not make a partnership.
Petitioner's base salary and the overhead expenditures of
the company shall be borne by the representative office Besides, a corporation cannot become a member of a
and funded by Pacfor/ATM, since Pacfor Phils. is equally partnership in the absence of express authorization by
owned on a 50-50 equity by ATM and Pacfor-usa. statute or charter.41 This doctrine is based on the
following considerations: (1) that the mutual agency
In July 2000, petitioner wrote Kevin Daley, Vice President
between the partners, whereby the corporation would be
for Asia of Pacfor, seeking confirmation of his 50% equity
bound by the acts of persons who are not its duly
of Pacfor Phils. Private respondent Pacfor, through
appointed and authorized agents and officers, would be
William Gleason, its President, replied that petitioner is
inconsistent with the policy of the law that the
not a part-owner of Pacfor Phils. because the latter is
corporation shall manage its own affairs separately and
merely Pacfor-USA's representative office and not an
exclusively; and, (2) that such an arrangement would
entity separate and distinct from Pacfor-USA. "It's simply
improperly allow corporate property to become subject to
a 'theoretical company' with the purpose of dividing the
risks not contemplated by the stockholders when they
income 50-50."11 Petitioner presumably knew of this
originally invested in the corporation.42 No such
arrangement from the start.
authorization has been proved in the case at bar.
Petitioner claimed that he was all along made to believe
Be that as it may, we hold that on the basis of the
that he was in a joint venture with them. Had he known
evidence, an employer-employee relationship is present
that no joint venture existed, he would not have allowed
in the case at bar. Private respondent Pacfor has the
Pacfor to take the profitable business of his own
power of control over the means and method of
company, ATM Marketing Corp. Petitioner raised other
petitioner in accomplishing his work. Petitioner, as
issues, such as the rentals of office furniture, salary of the
private respondent Pacfor's resident agent in the
employees, company car, as well as commissions allegedly
Philippines, is, exactly so, only an agent of the
due him.
corporation, a representative of Pacfor, who transacts
On the basis of the "Side Agreement," petitioner insisted business, and accepts service on its behalf.
that he and Pacfor equally own Pacfor Phils. Thus, it
This right of control was exercised by private respondent
follows that he and Pacfor likewise own, on a 50/50 basis,
Pacfor during the period of November to December 2000,
Pacfor Phils.' office furniture and equipment and the
when it directed petitioner to turn over to it all records of
service car. He also reiterated his demand for unpaid
Pacfor Phils.. This is one unmistakable proof that private
commissions, and proposed to offset these with the
respondent Pacfor exercises control over the petitioner.
remaining Christmas giveaway fund in his possession.
On February 15, 2001, petitioner filed his complaint for

illegal dismissal, recovery of separation pay, and payment
of attorney's fees with the NLRC. Labor Arbiter Felipe Pati
ruled in favor of petitioner, finding there was constructive
dismissal
ISSUE: whether an employer-employee relationship

exists between petitioner and private respondent Pacfor?
HELD: We hold that petitioner is an employee of private

respondent Pacfor and that no partnership or co-
ownership exists between the parties.
In a partnership, the members become co-owners of what

is contributed to the firm capital and of all property that
may be acquired thereby and through the efforts of the
members.36 The property or stock of the partnership
forms a community of goods, a common fund, in which
each party has a proprietary interest. Each partner
possesses a joint interest in the whole of partnership
property. This essential element, the community of
interest, or co-ownership of, or joint interest in
partnership property is absent in the relations between
petitioner and private respondent Pacfor.
Case 5: REALUBIT vs. JASO confirming the transfer of his interest in the business in
favor of Eden.26
Second issue: NO. Generally understood to mean an

organization formed for some temporary purpose, a joint
FACTS: On 17 March 1994, petitioner Josefina Realubit venture is likened to a particular partnership or one
entered into a Joint Venture Agreement with Francis Eric which "has for its object determinate things, their use or
Amaury Biondo, a French national, for the operation of an fruits, or a specific undertaking, or the exercise of a
ice manufacturing business. For and in consideration of profession or vocation." The rule is settled that joint
the sum of P500,000.00, however, Biondo subsequently ventures are governed by the law on partnerships which
executed a Deed of Assignment dated 27 June 1997, are, in turn, based on mutual agency or delectus
transferring all his rights and interests in the business in personae. Insofar as a partners conveyance of the entirety
favor of respondent Eden Jaso, the wife of respondent of his interest in the partnership is concerned.
Prosencio Jaso. With Biondos eventual departure from
the country, the Spouses Jaso caused their lawyer to send Under Article 1813, it is evident that "(t)he transfer by a
Josefina a letter dated 19 February 1998, apprising her of partner of his partnership interest does not make the
their acquisition of said Frenchmans share in the assignee of such interest a partner of the firm, nor entitle
business and formally demanding an accounting and the assignee to interfere in the management of the
inventory thereof as well as the remittance of their partnership business or to receive anything except the
portion of its profits. assignees profits. The assignment does not purport to
transfer an interest in the partnership, but only a future
The Spouses Jaso commenced the instant suit with the contingent right to a portion of the ultimate residue as
filing of their 3 August 1998 Complaint against Josefina, the assignor may become entitled to receive by virtue of
her husband, Ike Realubit, and their alleged dummies, for his proportionate interest in the capital.
specific performance, accounting, examination, audit and
inventory of assets and properties, dissolution of the joint Since a partners interest in the partnership includes his
venture, appointment of a receiver and damages. The share in the profits, we find that the CA committed no
complaint alleged, among other matters that aside from reversible error in ruling that the Spouses Jaso are
appropriating for themselves the income of the business, entitled to Biondos share in the profits, despite Juanitas
the Spouses Realubit have fraudulently concealed the lack of consent to the assignment of said Frenchmans
funds and assets thereof thru their relatives, associates or interest in the joint venture. Although Eden did not,
dummies.8 moreover, become a partner as a consequence of the
assignment and/or acquire the right to require an
Spouses Realubit averred that their said business partner accounting of the partnership business.
had left the country in May 1997 and could not have
executed the Deed of Assignment which bears a signature Based on the evidence on record, moreover, both the
markedly different from that which he affixed on their RTC36 and the CA37 ruled out the dissolution of the joint
Joint Venture Agreement; that they refused the Spouses venture and concluded that the ice manufacturing
Jasos demand in view of the dubious circumstances business at the aforesaid address was the same one
surrounding their acquisition of Biondos share in the established by Juanita and Biondo.
business which was established at Don Antonio Heights,
Commonwealth Avenue, Quezon City; that said business
had already stopped operations on 13 January 1996 when
its plant shut down after its power supply was
disconnected by MERALCO for non-payment of utility
bills.
ISSUES: -WHETHER OR NOT THERE WAS A VALID

ASSIGNMENT OF RIGHTS TO THE JOINT VENTURE.
-WHETHER THE COURT MAY ORDER PETITIONER

[JOSEFINA REALUBIT] AS PARTNER IN THE JOINT
VENTURE TO RENDER [A]N ACCOUNTING TO ONE
WHO IS NOT A PARTNER IN SAID JOINT VENTURE.
HELD:
First Issue: YES. It cannot be gainsaid that, as a public

document, the Deed of Assignment Biondo executed in
favor of Eden not only enjoys a presumption of regularity
but is also considered prima facie evidence of the facts
therein stated. As for the Spouses Realubits bare
assertion that Biondos signature on the same document
appears to be forged, suffice it to say that, like fraud,
forgery is never presumed and must likewise be proved by
clear and convincing evidence by the party alleging the
same. Said forgery is, moreover debunked by Biondos
duly authenticated certification dated 17 November 1998,
OBLIGATION OF PARTNERS TO THIRD PERSONS A. Inasmuch as "Sycip, Salazar, Feliciano, Hernandez and
Castillo" and "Ozaeta, Romulo, De Leon, Mabanta and
Reyes" are partnerships, the use in their partnership
names of the names of deceased partners will run counter
Case 1: PETITION FOR AUTHORITY TO to Article 1815 of the Civil Code which provides:
CONTINUE USE OF THE FIRM NAME "SYCIP, Art. 1815. Every partnership shall operate under a firm
SALAZAR, FELICIANO, HERNANDEZ & name, which may or may not include the name of one or
CASTILLO." more of the partners.
Those who, not being members of the partnership,

include their names in the firm name, shall be subject to
the liability, of a partner.
FACTS: Two separate Petitions were filed before this
Court 1) by the surviving partners of Atty. Alexander It is clearly tacit in the above provision that names in a
Sycip, who died on May 5, 1975, and 2) by the surviving firm name of a partnership must either be those of living
partners of Atty. Herminio Ozaeta, who died on February partners and. in the case of non-partners, should be living
14, 1976, praying that they be allowed to continue using, persons who can be subjected to liability. In fact, Article
in the names of their firms, the names of partners who 1825 of the Civil Code prohibits a third person from
had passed away. including his name in the firm name under pain of
assuming the liability of a partner. The heirs of a deceased
Petitioners base their petitions on the following
partner in a law firm cannot be held liable as the old
arguments:
members to the creditors of a firm particularly where they
1. Under the law, a partnership is not prohibited from are non-lawyers.
continuing its business under a firm name which includes
The public relations value of the use of an old firm name
the name of a deceased partner; in fact, Article 1840 of the
can tend to create undue advantages and disadvantages in
Civil Code explicitly sanctions the practice
the practice of the profession. An able lawyer without
3. The Canons of Professional Ethics are not transgressed connections will have to make a name for himself starting
by the continued use of the name of a deceased partner in from scratch. Another able lawyer, who can join an old
the firm name of a law partnership because Canon 33 of firm, can initially ride on that old firm's reputation
the Canons of Professional Ethics adopted by the established by deceased partners.
American Bar Association
Article 1840 treats more of a commercial partnership with
4. There is no possibility of imposition or deception a good will to protect rather than of a professional
because the deaths of their respective deceased partners partnership, with no saleable good will but whose
were well-publicized in all newspapers of general reputation depends on the personal qualifications of its
circulation for several days; the stationeries now being individual members. As a general rule, upon the
used by them carry new letterheads indicating the years dissolution of a commercial partnership the succeeding
when their respective deceased partners were connected partners or parties have the right to carry on the business
with the firm; under the old name, in the absence of a stipulation
forbidding it, (s)ince the name of a commercial
5. No local custom prohibits the continued use of a partnership is a partnership asset inseparable from the
deceased partner's name in a professional firm's name; good will of the firm.
The question involved in these Petitions first came under On the other hand, ... a professional partnership the
consideration by this Court in 1953 when a law firm in reputation of which depends or; the individual skill of the
Cebu (the Deen case) continued its practice of including members, such as partnerships of attorneys or physicians,
in its firm name that of a deceased partner, C.D. has no good win to be distributed as a firm asset on its
Johnston. The matter was resolved with this Court dissolution, however intrinsically valuable such skill and
advising the firm to desist from including in their firm reputation may be, especially where there is no provision
designation the name of C. D. Johnston, who has long in the partnership agreement relating to good will as an
been dead." asset.
The Court believes that, in view of the personal and A partnership for the practice of law is not a legal entity.
confidential nature of the relations between attorney and It is a mere relationship or association for a particular
client, and the high standards demanded in the canons of purpose. ... It is not a partnership formed for the purpose
professional ethics, no practice should be allowed which of carrying on trade or business or of holding property."
even in a remote degree could give rise to the possibility Thus, it has been stated that "the use of a nom de plume,
of deception. assumed or trade name in law practice is improper.
ISSUE: whether or not petitioners can still retain the Primary characteristics which distinguish the legal
names of the deceased partners? NO. profession from business are:
HELD: (take note of RULE 3.02 of CPR this ruling has 1. A duty of public service, of which the emolument is a
been abandoned) byproduct, and in which one may attain the highest
eminence without making much money.
The Court finds no sufficient reason to depart from the
rulings thus laid down.
2. A relation as an "officer of court" to the administration

of justice involving thorough sincerity, integrity, and
reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by

candor, fairness, and unwillingness to resort to current
business methods of advertising and encroachment on
their practice, or dealing directly with their clients. 13
It must be conceded that in the Philippines, no local

custom permits or allows the continued use of a deceased
or former partner's name in the firm names of law
partnerships. Firm names, under our custom, Identify the
more active and/or more senior members or partners of
the law firm. A glimpse at the history of the firms of
petitioners and of other law firms in this country would
show how their firm names have evolved and changed
from time to time as the composition of the partnership
changed. The continued use of a firm name after the
death of one or more of the partners designated by it is
proper only where sustained by local custom and not
where by custom this purports to Identify the active
members. ...
Custom has been defined as a rule of conduct formed by

repetition of acts, uniformly observed (practiced) as a
social rule, legally binding and obligatory. A custom must
be proved as a fact, according to the rules of evidence. 20
A local custom as a source of right cannot be considered
by a court of justice unless such custom is properly
established by competent evidence like any other fact. 21
We find such proof of the existence of a local custom, and
of the elements requisite to constitute the same, wanting
herein.
In fine, petitioners' desire to preserve the Identity of their

firms in the eyes of the public must bow to legal and
ethical impediment.
Case 2: Teck Seing and Co. v. Pacific Commercial members, of several of them, or of one only to
Company protect the public from imposition and fraud;
and that the provision of said article 126 is for the
protection of the creditors rather than of the
partners themselves. And consequently the
doctrine was enunciated that the law must be
CASE 2: G.R. No. 19892 September 6, 1923 unlawful and unenforceable only as between the
partners and at the instance of the violating
TECK SEING AND CO., LTD., petitioner-appellee.
party, but not in the sense of depriving innocent
SANTIAGO JO CHUNG, ET AL., partners,
parties of their rights who may have dealt with
vs.
the offenders in ignorance of the latter having
PACIFIC COMMERCIAL COMPANY, ET AL., creditors-
violated the law; and that contracts entered into
appellants.
by commercial associations defectively organized
are valid when voluntarily executed by the
parties, and the only question is whether or not
FACTS: they complied with the agreement.
- In this case, the respondents who are creditors of ISSUE: W/N Teck Seing & Co. is a general partnership
the petitioner partnership sought that TECK
SEING AND CO., LTD be adjudged insolvent. RULING: Yes. It would seem that Teck Seing & Co., Ltd.
- The counsel for the petitioners asserted that Teck has fulfilled the provisions of article 119.
Seing & Co., Ltd., is "una sociedad mercantil "de
The Supreme Court held that contract of
facto" solamente" (only a de facto commercial
partnership found in the document hereinbefore quoted
association)
established a general partnership or, to be more exact, a
- Article 125 of the Code of Commerce provides
partnership as this word is used in the Insolvency Law.
that the articles of general copartnership must
contain the names of the partners the names, RATIO: The legal intention deducible from the acts of
surnames, and domiciles of the partners; the firm the parties controls in determining the existence of a
name; the names, and surnames of the partners partnership. If they intend to do a thing which in law
to whom the management of the firm and the use constitutes a partnership, they are partners, although
of its signature is instrusted; the capital which their purpose was to avoid the creation of such relation.
each partner contributes in cash, credits, or Here, the intention of the persons making up Teck Seing
property, stating the value given the latter or the & co., Ltd. was to establish a partnership which they
basis on which their appraisement is to be made; erroneously denominated a limited partnership. If this
the duration of the copartnership; and the was their purpose, all subterfuges resorted to in order to
amounts which, in a proper case, are to be given evade liability for possible losses, while assuming their
to each managing partner annually for his private enjoyment of the advantages to be derived from the
expenses, while the succeeding article of the relation, must be disregarded. The partners who have
Code provides that the general copartnership disguised their identity under a designation distinct from
must transact business under the name of all its that of any of the members of the firm should be
members, of several of them, or of one only. penalized, and not the creditors who presumably have
- Teck Seing & Co., Ltd has complied with all the dealt with the partnership in good faith.
requirements except that relating to the
composition of the firm name.
- The contention of the creditors and appellants is
that the partnership contract established a
general partnership notwithstanding the fact that
Teck Seing & Co., Ltd., a general copartnership
failed to include the name of one of the partners
in the firm name.
RELEVANT PROVISIONS UNDER THE CODE OF

COMMERCE
Article 119 - requires every commercial

association before beginning its business to state
its article, agreements, and conditions in a public
instrument, which shall be presented for record
in the mercantile registry.
Article 120 - provides that the persons in charge
of the management of the association who violate
the provisions of the foregoing article shall be
responsible in solidum to the persons not
members of the association with whom they may
have transacted business in the name of the
association.
Article 126 - requires a general partnership to
transact business under the name of all its
Case 3: PNB v. Eugenio or only one of them to be followed in the last two cases,
by the words "and company" the partners agreed upon
"Tai Sing & Co." as the firm name. The Supreme Court
held that the anomalous adoption of the firm name above
noted does not affect the liability of the general partners
CASE 3: G.R. No. L-26937 October 5, 1927
to third parties under article 127 of the Code of
PHILIPPINE NATIONAL BANK, plaintiff-appellee, Commerce. Therefore, the defendants cannot invoke in
vs. their defense the anomaly in the firm name which they
SEVERO EUGENIO LO, ET AL., defendants. themselves adopted.
SEVERIO EUGENIO LO, NG KHEY LING and YEP
The judgment against the appellants is in accordance
SENG, appellants.
with article 127 of the Code of Commerce which provides
that all the members of a general partnership, be they
managing partners thereof or not, shall be personally and
FACTS: solidarily liable with all their property, for the results of
the transactions made in the name and for the account of
- A commercial partnership under the name of "Tai the partnership, under the signature of the latter, and by
Sing and Co.," with a capital of P40,000 was a person authorized to use it.
formed with appellants Severo Eugenio Lo and
Ng Khey Ling, together with J. A. Say Lian Ping,
Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng
as partners.
- In the article of copartnership it was agreed that
the partnership will last for 5 years and will
engage in the business of selling merchandise,
goods, and native, as well as Chinese and
Japanese, products.
- One of the partners, J. A. Say Lian Ping was
appointed general manager of the partnership.
He executed a power of attorney in favor of A. Y.
Kelam, authorizing him to act in his stead as
manager and administrator of "Tai Sing & Co.,".
- On July 26, 1918, A.Y. Kelam obtained a loan of
P8,000 from PNB and as a security for such loan,
mortgaged certain personal property of "Tai Sing
& Co. The loan as well as the mortgage was
renewed several times.
- On April 20, 1920, Yap Seng, Severo Eugenio Lo,
A. Y. Kelam and Ng Khey Ling, the latter
represented by M. Pineda Tayenko, executed a
power of attorney in favor of Sy Tit by virtue of
which Sy Tit, representing "Tai Sing & Co.,
obtained a credit of P20,000 from plaintiff bank
on January 7, 1921, executing a chattel mortgage
on certain personal property belonging to "Tai
Sing & Co.
- PNB now claims the amount of P20, 239.00 from
the partnership plus interests.
- Defendant Eugenio Lo sets up, as a general
defense, that "Tai Sing & Co. was not a general
partnership, and that the commercial credit in
current account which "Tai Sing & Co. obtained
from the plaintiff bank had not been authorized
by the board of directors of the company, nor was
the person who subscribed said contract
authorized to make the same, under the article of
copartnership.
- The trial court ruled in favor of the plaintiff Bank.
ISSUE: W/N defendants are jointly and severally liable for

the sums claimed - yes
RULING: The defendant association formed by the

defendants is a general partnership, as defined in article
126 of the Code Commerce and was even registered in the
mercantile registry of Iloilo. The only anomaly noted in
its organization is that instead of adopting for their firm
name the names of all of the partners, of several of them,
Case 4: Co-Pitco v. Yulo
CASE 4: G.R. No. L-3146 September 14, 1907
NICOLAS CO-PITCO, plaintiff-appellee,

vs.
PEDRO YULO, defendant-appellant.
FACTS:
- Florencio Yulo and Jaime Palacios were partners

inthe operation of a sugar estate in Victorias,
Island of Negros, and had commercial dealings
with a Chinaman named Dy-Sianco, who
furnished them with money and goods, and used
to buy their crop of sugar.
- In 1903, the defendant, Pedro Yulo, father of the s
aid Florencio, took charge of the latter's
interest in the above-mentioned partnership, and
he became a general partner with the said Jaime
Palacios in the same business, and he continued
as such partner until about the end of 1904,
dealing with Dy-Sianco in the same manner as
the old partnership had dealt with the latter.
- Pedro Yulo failed to the balance due of 1,638.40
pesos from the firm hence Dy-Sianco filed a case
against Yulo.
- The
lower court ordered the defendant to pay the enti
re amount with interest.
ISSUE: W/N Pedro Yulo shall pay the entire amount for
the partnership debt. (NO)
RULING: Being a civil partnership, the partners are not
liable each for the whole debt of the partnership. The
liability is Pro ratA and in this case Pedro Yulo is
responsible to plaintiff for only one-half of the debt.
The fact that the other partner, Jaime Palacios, had left
the country can not increase the liability of Pedro Yulo.
The judgment of the court below is reversed and
judgment is ordered in favor of the plaintiff
and against the defendant, Pedro Yulo, for the sum of
P819.20 pesos, Philippine Currency, with interest thereon
at the rate of 6 per cent per annum from the 12th day of
January, 1905, and the costs of the Court of First Instance.
No costs will be allowed to either party in this court. So
ordered.
merely condoned Lumauig's individual liability to

the plaintiff.
CASE 5: ISLAND SALES V. UNITED PIONEERS
GEN. CONSRUCTION COMPANY, et.al.GR L-
22493 July 31, 1975
PROVISION: ARTICLE 1816

Topic: Joint and subsidiary liability of the partners for the
obligations of the partnership
FACTS:
United Pioneers is a general partnership of which
there are 5 general partners: Benjamin Daco,
Daniel Guizona, Noel Sim, Romulo Lumauig and
Augusto Palisoc
United Pioneers purchased from Island sales a
motor vehicle on installment basis and for this
purpose, it executed a promissory note with the
condition that failure to pay any of the said
installments as they fall due would render the
whole unpaid balance immediately due and
demandable
United pioneers failed to pay.
Thus, a collection case was filed by Island Sales
Inc. against the company and the 5 general
partners.
However, complaint against 1 general partner:
Romulo Lumauig was dismissed on motion of
Island Sales.
RTC rendered a decision ordering United Pioneer
to pay the sum of P7, 119. The defendants
Benjamin, Daniel, Noel and Augusto are
sentenced to pay as well but only if the defendant
company has no more leviable properties with
which to satisfy the judgment against it.
Benjamin moved to reconsider the decision.
Contention of Benjamin: since there are 5 general
partners, the joint and subsidiary liability of each
partner should not exceed 1/5 of the obligations
of the defendant company.
RTC denied the motion and held the remaining
partners liable for the liability accruing to other
general partner whose case was earlier dismissed.
Hence, this appeal.
ISSUE:
WON the dismissal of the complaint to favor one
of the general partners of a partnership increases
the joint and subsidiary liability of each of the
remaining partners for the obligations of the
partnership
HELD: NO. LIABILITY IS PRO-RATA.
In the instant case, there were five (5) general

partners when the promissory note in question
was executed for and in behalf of the partnership.
Since the liability of the partners is pro rata, the
liability of the appellant Benjamin C. Daco shall
1 5
be limited to only one-fifth ( / ) of the
obligations of the defendant company. The fact
that the complaint against the defendant Romulo
B. Lumauig was dismissed, upon motion of the
plaintiff, does not unmake the said Lumauig as a
general partner in the defendant company. In so
moving to dismiss the complaint, the plaintiff
CASE 6: Elmo MUNASQUE V. COURT OF APPEALS,

HELD: SOLIDARY.
While it is true that under Article 1816 of CC, All

Celestino Galan, Tropical Commercial Company and partners, including industrial ones, shall be liable
Ramon Pons GR L-39780 November 11, 1985 pro rate with all their property and after all the
partnership assets have been exhausted, for the
contracts which may be entered into the name
PROVISION: 1816 in relation to 1824 (ref. 1822-1823)
and for account of the partnership, under its
Topic: solidary liability of the partners for the whole signature and by a person authorized to act for
rd
obligation transacted with 3 person the partnership. xxx, this provision should be
construed together with Article 1824 which
provides that: All partners are liable solidarily
FACTS: with the partnership for everything chargeable to
Munasque (petitioner) entered into a partnership the partnership under Articles 1822 and 1823.
with Galan under the registered name Galan and While the liability of the partners are merely joint
Associates as Contractor. in transactions entered into by the partnership, a
They entered into a written contract with third person who transacted with said
respondent Tropical for remodeling the latters partnership can hold the partners solidarily liable
Cebu branch building. Under the contract, the for the whole obligation if the case of the third
project totaled 25,000 to be paid in installments; person falls under Articles 1822 and 1823.
7, 000 upon signing and 6, 000 every 15 working
days. The obligation is solidary because the law
Tropical made the first payment by check in the protects him, who in good faith relied upon the
name of Munasque. Munasque indorsed the authority of a partner, whether such authority is
check in favor of Galan to enable Galan to deposit real or apparent.
it in the bank and pay for the materials and labor
used in the project. However, Galan allegedly Tropical had every reason to believe that a
spent P6, 183.37 for his personal use. When the partnership existed between Munasque and
second check came, Munasque refused to indorse Galan and no fault or error can be imputed
it again to Galan. against it for making payments to Galan and
Galan informed Tropical of the misunderstanding Associates because as far as it was concerned,
between him and Munasque as partners. Hence Galan was a true partner with real authority to
upon second payment, Tropical changed the transact in behalf of the partnership it was
name of the payee on the second check from dealing with (because in the first place they
Munasque to Galan and Associates which entered into a duly registered partnership name
enabled Galan to encash the second check. and secondly, Munasque endorsed the first check
Meanwhile, the construction was continued payment to Galan). This is even more true in the
through Munasques sole efforts by incurring cases of the intervenors who supplied materials
debts from various suppliers. The construction on credit to the partnership. Thus, it is but fair
work was finished ahead of schedule with the that the consequences of any wrongful act
total expenditure reaching P 34, 000 (note yung committed by any of the partners therein should
contract nila 25k lang). be answered solidarily by all the partners and the
Partnership also incurred debts from Cebu partnership as a whole.
Southern Hardware Company and Blue Diamon
Glass Palace for the construction project. However, as between Munasque and Galan,
Munasque filed a complaint for payment of sum Galan must reimburse Munasque for the
of money and damages against Galan, Tropical, payments made to the intervenors as it was
and Tropicals Cebu branch manager Pons. Cebu satisfactorily established that Galan acted in bad
Southern Hardware Company and Blue Diamond faith in his dealings with Munasque as a partner.
Glass Palace intervened in the case for the credit
which they extended to the partnership of OTHER SIDE ISSUES:
Munasque and Galan for the construction Was there really a partnership? Yes. There is
project. nothing in the records to indicate that the
Both trial court and Court of Appeals absolved partnership organized by the 2 men was not a
respondents Tropical and its Cebu manager, genuine one. If there was misundertstanding
Pons, from any liability. between the partners, such does not convert the
partnership into a sham organization.
RTC held Galvan and Munasque jointly and
severally liable to its creditors (Cebu Southern Was Tropicals payment to Galan proper? YES. It
and Blue Diamond) which decision was modified had every right to presume that Galan and
by CA and held them jointly liable. Munasque were true partners. The payments to
the partnership were valid payments. Payent to
ISSUES: Galan binds Munasque. Since the 2 were partners
Whether the obligation of the partnership in when the debts were incurred, they are also both
rd
favor of Cebu Southern and Blue diamond be liable to 3 persons who extended credit to their
shouldered exclusively by Galan? Is it joint or partnership.
solidary? Should Galan be held liable to the partnership
because it malversed the money? Such
malversation issue by one partner is not an issue

raised in the complaint. Thus SC did not discuss
about it.
CASE 7: J. TIOSEJO INVESTMENT CORP. V. privy to the Contracts to Sell executed by

SPOUSES BENJAMIN AND ELEANOR ANG PPGI and respondents, it did not receive any
portion of the payments made by the latter; and,
that without any contributory fault and
September 8, 2010 (Meditel Condo Project) negligence on its part, PPGI (and not the
petitioner) breached its undertakings under the
PROVISION: ARTICLE 1824 JVA by failing to complete the condominium
project.
Doctrines: The Housing and Land Use (HLU) ruled in favor
A joint venture is considered in this jurisdiction of respondents, rescinding the contract and
as a form of partnership and is accordingly, ordering petitioner and PPGI to pay refund,
governed by the law on partnerships. interest, damages, attorneys fees and
Under Article 1824 of the Civil Code of the administrative fines.
Philippines, all partners are solidarily liable with The HLURB Board of Commissioners affirmed
the partnership for everything chargeable to the the HLUs order. Motion for Reconsideration
partnership, including loss or injury caused to a (MR) was denied
third person or penalties incurred due to any The case was subsequently raised to the Office of
wrongful act or omission of any partner acting in the President (OP) which rendered a decision
the ordinary course of the business of the dismissing petitioners appeal on the ground that
partnership or with the authority of his co- the latters appeal memorandum was filed out of
partners. Whether innocent or guilty, all the time and that the HLURB Board committed no
partners are solidarily liable with the partnership grave abuse of discretion in rendering the
itself. appealed decision. MR was also denied.
FACTS: Petitioner filed before the CA a motion for
This is a petition for review seeking the reversal extension within which to file its petition for
of the CAs Resolution declaring J Tiosejo review, claiming heavy workload of its counsel.
(petitioner) solidary liable with Primetown This was denied by the CA. MR was denied for
Property Group, Inc. (PPGI) to pay Spouses Ang. lack of merit.
J. Tiosejo entered into a Joint Venture Agreeemtn
with PPGI for the development of a residential ISSUES:
condominium project known as Meditel in W/N J. Teosejo is solidarily liable with PPGI to
Mandaluyong City. Petitioner contributed the lot pay Spouses Ang.
while PPGI undertook to develop the
condominium. The parties further agreed to a HELD/RATIO: YES. The HLURB Arbiter and Board
17%-83% sharing as to developed units. PPGI correctly held petitioner liable alongside PPGI for
further undertook to use all proceeds from the respondents claims and the administrative fine.
pre-selling of its saleable units for the completion
of the Condominium Project. By express terms of the JVA, it appears that
Sometime in 1996, PPGI executed a Contract to petitioner not only retained ownership of the
Sell with Spouses Ang on a certain condominium property pending completion of the
unit and parking slot condominium project but had also bound
Spouses Ang then filed before the Housing and itself to answer liabilities proceeding from
Land Use Regulatory Board (HLURB) a complaint contracts entered into by PPGI with third
for the rescission of the Contract to Sell, parties. Article VIII, Section 1 of the JVA
against J. Tiosejo and PPGI. They claim that they distinctly provides as follows:
were promised that the condo unit would be
available for turn-over and occupancy by Section 1: Rescission and damages:
December 1998, however the project was not xxx
completed as of the said date. Spouses Ang In any case, the Owner shall respect
instructed petitioner and PPGI to stop depositing and strictly comply with any
the post-dated checks they issued and to cancel covenant entered into by the
said Contracts to Sell. Despite several demands, Developer and third parties with
petitioner and PPGI have failed and refused to respect to any of its units in the
refund the P611,519.52 they already paid under the Condominium Project. To enable
circumstances. the owner to comply with this
As defense, PPGI claim that the delay was contingent liability, the Developer
attributable to the economic crisis and to force shall furnish the Owner with a
majeure (unexpected and unforeseen inflation copy of its contracts with the said
and increase rates and cost of building materials). buyers on a month-to-month basis.
They also state that it offered several alternatives xxx
to Spouses Ang to transfer their investment to its
other feasible projects and for the amounts they Viewed in the light of the foregoing provision of
already paid to be considered as partial payment the JVA, petitioner cannot avoid liability by
for the replacement unit/s. claiming that it was not in any way privy to the
On a separate answer, petitioner claims that its Contracts to Sell executed by PPGI and
prestation under the JVA consisted of respondents.
contributing the property on which the
condominium was to be contributed. Not being
Moreover, a joint venture is considered in this

jurisdiction as a form of partnership and is,
accordingly, governed by the law of
partnerships. Under Article 1824 of the Civil
Code of the Philippines, all partners are
solidarily liable with the partnership for
everything chargeable to the partnership,
including loss or injury caused to a third
person or penalties incurred due to any
wrongful act or omission of any partner
acting in the ordinary course of the business
of the partnership or with the authority of his co-
partners. Whether innocent or guilty, all the
partners are solidarily liable with the
partnership itself.
DISSOLUTION AND WINDING UP trial court. Since the partnership has not been
terminated, the petitioner and complainant
remained as co-partners. The check was thus issued
by the petitioner to complainant as would a partner
CASE 1: IDOS vs CA to another, and not as payment from a debtor to a
creditor.
BACKGROUND: Petitioner is charged for violation of BP As to the issue on BP.22, the SC said that Petitioner may
22, for issuing a check to complainant, Eddie Alarilla, as not be held liable for violation of B.P. 22 for the following
payment for his share of assets of their partnership, which reasons: (1) the subject check was not made, drawn and
was in the process of liquidation, which check however issued by petitioner in exchange for value received as to
bounced. qualify it as a check on account or for value; (2) there is
no sufficient basis to conclude that petitioner, at the time
of issue of the check, had actual knowledge of the
insufficiency of funds; and (3) there was no notice of
FACTS:
dishonor of said check actually served on petitioner,
Irma Idos and Eddie Alarilla entered into a partnership of thereby depriving her of the opportunity to pay or make
manufacturing leather called Tagumpay Manufacturing. arrangements for the payment of the check, to avoid
However, the partnership did not last long and the criminal prosecution.
partners decided to terminate their partnership. Upon
liquidation of the business the partnership had as of May
1986 receivables and stocks worth P1,800,000.00. The
share of Alarilla of the assets was P900,000.00. To pay for
such amount, the accused-appellant issued 4 postdated
st nd th
checks. The 1 , 2 and 4 checks were cleared. However,
rd
the 3 check bounced. Her defense was that, she claimed
that the check had been given upon demand of
complainant only as "assurance" of his share in the assets
of the partnership and that it was not supposed to be
deposited until the stocks had been sold. (Therefore it
was issued without any consideration.)
ISSUE:
Whether or not petitioner could be held liable for the

checks issued?
HELD:
NO. She is not liable. Petitioner issued the check merely

to evidence the proportionate share of complainant in the
partnership assets upon its dissolution. Payment of that
share in the partnership was conditioned on the
subsequent realization of profits from the unsold goods
and collection of the receivables of the firm
The Supreme Court explained that there are three final

stages of a partnership: (1) dissolution; (2) winding-up;
and (3) termination. Dissolution is the change in the
relation of the partners caused by any partner ceasing to
be associated in the carrying on of the business. It is that
point of time that the partners cease to carry on the
business together. Winding up is the process of settling
the business affairs after dissolution. Termination is the
point in time after all the partnership affairs have been
wound up.
Art. 1829 of the NCC states that On dissolution, a

partnership is not terminated, but continues until the
winding up of partnership affairs is completed.
The best evidence of the existence of the

partnership, which was not yet terminated (though
in the winding up stage) were the unsold goods and
uncollected receivables, which were presented to the
CASE 2: TESTATE ESTATE OF MOTA vs SERRA

Defendant's contention is untenable, he is liable to pay
the amount to the plaintiffs.
FACTS:
On February 1, 1919, plaintiffs and defendant entered into The dissolution of a partnership must not be understood
a contract of partnership for the construction and in the absolute and strict sense so that at the termination
exploitation of a railroad line from the "San Isidro" and of the object for which it was created the partnership is
"Palma" centrals to the place known as "Nandong." They extinguished, pending the winding up of some incidents
agreed to raise 150,000 pesos as capital and that the and obligations of the partnership. In such case, the
plaintiffs were entrusted with the administration of the partnership will be reputed as existing until the juridical
partnership. However, the agreed capital of P150,000 was relations arising out of the contract are dissolved.
not enough for the project and so on January 29, 1920, the
defendant(Serra) entered into a contract of sale with
Venancio Concepcion, Phil. C. Whitaker, and Eusebio R.
de Luzuriaga, whereby he sold to the latter the central The dissolution of a firm does not relieve any of its
known as "Palma" with its running business, as well as all members from liability for existing obligations, although
the improvements, machineries and buildings, real and it does save them from new obligations to which they
personal properties, rights, choses in action and interests, have not expressly or impliedly assented, and any of them
including the sugar plantation of the harvest year of 1920 may be discharged from old obligations by novation of
to 1921, covering all his property! other form of release. It is often said that a partnership
continues, even after dissolution, for the purpose of
winding up its affairs.
BUT Before the delivery, one of the purchasers, Eusebio

R. de Luzuriaga, renounced all his rights under the
contract in favor of the other purchasers Venancio NB: (as to the issue on novation) - It should be noted
Concepcion and Phil. C. Whitaker. This gave rise to the that in order to give novation its legal effect, the law
fact of execution of another deed of absolute sale wherein requires that the creditor should consent to the
the purchasers guaranteed the unpaid balance of the substitution of a new debtor. This consent must be given
purchase price by a first and special mortgage in favor of expressly for the reason that, since novation extinguishes
the vendor. the personality of the first debtor who is to be substituted
by new one, it implies on the part of the creditor a waiver
of the right that he had before the novation which waiver
must be express under the principle that renuntiatio non
Afterwards, on January 8, 1921, Venancio Concepcion and praesumitur, recognized by the law in declaring that a
Phil. C. Whitaker bought from the plaintiffs their one-half waiver of right may not be performed unless the will to
share of the railroad line. So it results that the "Hacienda waive is indisputably shown by him who holds the right.
Palma," with the entire railroad, the subject-matter of the
contract of partnership between plaintiffs and defendant, The fact that Phil. C. Whitaker and Venancio Concepcion
became the property of Whitaker and Concepcion. Phil. were willing to assume the defendant's obligation to the
C. plaintiffs is of no avail, if the latter have not expressly
consented to the substitution of the first debtor.
However, Whitaker and Venancio Concepcion failed to

pay defendant Serra and so, Serra foreclosed the property.
So, in effect, defendant Salvador Serra failed to pay one-

half of the amount expended by the plaintiffs upon the
construction of the railroad line, that is, P113,046.46. And
so the plaintiff filed a case.
ISSUE: (related to dissolution)
Whether or not defendant is exempt from complying with

his obligation by the mere fact of the dissolution of the
partnership?
HELD:
CASE 3: TACAO vs CA and Nenita Anay registered as a sole proprietorship, it was merely for
convenience and therefore the name is not controlling.
As to the issue that it was not reduced in writing or

ratified, the SC said that where no immovable property is
FACTS: involved, an oral agreement will suffice to create a
partnership. Furthermore, since the partnership in the
Respondent Anay met the petitioner Tacao through Belo. case at bar has no fixed term and is therefore a
They entered into a joint venture for the local distribution partnership at will predicated on their mutual desire and
of kitchen wares. Belo volunteered to finance the joint consent, it may be dissolved by the will of a partner. Thus:
venture and assigned to Anay the job of marketing the
product considering her experience and established "x x x. The right to choose with whom a person wishes to
relationship with West Bend Company, a manufacturer of associate himself is the very foundation and essence of
kitchen wares in Wisconsin, U.S.A. Under the joint that partnership. Its continued existence is, in turn,
venture, Belo acted as capitalist, Tocao as president and dependent on the constancy of that mutual resolve, along
general manager, and Anay as head of the marketing with each partners capability to give it, and the absence
department and later, vice-president for sales. Anay of cause for dissolution provided by the law itself. Verily,
organized the administrative staff and sales force while any one of the partners may, at his sole pleasure, dictate a
Tocao hired and fired employees, determined dissolution of the partnership at will. He must, however,
commissions and/or salaries of the employees, and act in good faith, not that the attendance of bad faith can
assigned them to different branches. The parties agreed prevent the dissolution of the partnership but that it can
that Belos name should not appear in any documents result in a liability for damage.
relating to their transactions with West Bend Company.
Anay was made to receive commissions based on her
performance, as verbally agreed upon by her and Belo. Thus an unjustified dissolution by a partner can subject
The business was named Geminisse Enterprises and him to action for damages because by the mutual agency
registred as a sole proprietorship under the name of that arises in a partnership, the doctrine or delectus
Tocao. personae allows the partners to have the power although
not necessarily to dissolve the partnership.
Anay was performing well in the business, as a matter of
fact she was even invited in a dealership meeting of the
West Bend Company with the consent of Tacao. In 1987,
Belo signed a 37% commission to Anay for her business
transactions but after 2 days, she discovered that she was
no longer the head of marketing and has been barred
form holding office under the instructions of Tacao. Anay
tried to contact Belo for some explanation but there was
no response. And so she filed a case against them.
In their answer, Marjorie Tocao and Belo asserted that the

"alleged agreement" with Anay that was "neither reduced
in writing, nor ratified," was "either unenforceable or void
or inexistent." Furthermore, Tacao alleged that she Anay
was merely an employee. Belo, on the other hand, denied
the allegations and stated that he was merely a guarantor
of Tacao.
ISSUE:
Whether or not Anay was an employee or partner of the

business and thus entitled for damages.
RULING:
A partnership existed based on the facts presented. There

was an intention to create, a common fund was
established thru contributions, and there was a joint
interest in the profits. In this case, Anay contributed her
expertise in the business. It was through her reputation
with the West Bend Company that the partnership was
able to open the business of distributorship of that
companys cookware products; it was through the same
efforts that the business was propelled to financial
success. Petitioner Tocao herself admitted Anays
indispensable role in putting up the business. Hence, she
was considered an industrial partner with Tacao and Belo
as Capitalist partners. Also, although the business was
Case 4: GOQUIOLAY vs SYCIP land to Washington Z, Sycip and Betty Y. Lee, for
the purpose preliminary of settling the aforesaid
debts of Tan Sin An and the partnership.
Pursuant to a court order, a deed of sale of the 49
FACTS: parcels of land to the defendants Washington
Tan Sin An and Antonio C. Goquiolayentered Sycip and Betty Lee.
into a general commercial partnership under the Learning about the sale to Sycip and Lee, the
partnership name "Tan Sin An and Antonio C. surviving partner Antonio Goquiolay fileda
Goquiolay", for the purpose in dealing in real petition in the intestate proceedings seeking to
state. set aside the order of the probate court approving
The co-partnership shall be composed of said Tan the sale in so far as his interest over theparcels of
Sin An as sole managing and partner (sic), and land sold was concerned.
Antonio C. Goquiolayas co-partner. The affairs of ISSUE/HELD:
co-partnership shall be managed exclusively by 1. WON the widow of Kong Chai Pin is a general partner.
the managing and partner or by his authorized YES
agent, and it is expressly stipulated that the Appellants argue, however, that since the "new" members'
managing and partner may delegate the entire liability in the partnership was limited merely to the value
management of the affairs of the co-partnership of the share or estate left by the deceased Tan Sin An,
by irrevocable power of attorney to any person, they became no more than limited partners and, as such,
firm or corporation he may select. The co-partner were disqualified from the management of the business
shall have no voice or participation in the under Article 148 of the Code of Commerce. Although
management of the affairs of the co-partnership; ordinarily, this effect follows from the continuance of the
but he may examine its accounts once every six 3
heirs in the partnership, it was not so with respect to the
(6) months at any time during ordinary business widow Kong Chai Pin, who, by her affirmative actions,
hours. manifested her intent to be bound by the partnership
The lifetime of the partnership was fixed at ten agreement not only as a limited but as a general partner.
(10) years and also that Thus, she managed and retained possession of the
In the event of the death of any of the partners at partnership properties and was admittedly deriving
any time before the expiration of said term, the income therefrom up to and until the same were sold to
co-partnership shall not be dissolved but will Washington Sycip and Betty Lee. In fact, by executing the
have to be continued and the deceased partner deed of sale of the parcels of land in dispute in the name
shall be represented by his heirs or assigns in said of the partnership, she was acting no less than as a
co-partnership (Art. XII, Articles of Co- managing partner. Having thus preferred to act as such,
Partnership). However, the partnership could be she could be held liable for the partnership debts and
dissolved and its affairs liquidated at any time liabilities as a general partner, beyond what she might
upon mutual agreement in writing of the have derived only from the estate of her deceased
partners. husband. By allowing her to retain control of the firm's
property from 1942 to 1949, plaintiff estopped himself to
"Tan Sin An and Goquiolay" purchased the three deny her legal representation of the partnership, with the
(3) parcels of land. Another 46 parcels were power to bind it by the proper contracts.
purchased by Tan Sin An in his individual 2. Whether or not the consent of the other partners was
capacity. The two separate obligations were necessary to perfect the sale of the partnership properties
consolidated in an instrument executed by the to Washington Sycip and Betty Lee. NO
partnership and Tan Sin An, whereby the entire The answer is, we believe, in the negative. Strangers
49 lots were mortgaged in favor of the dealing with a partnership have the right to assume, in
"BancoHipotecario de Filipinas" the absence of restrictive clauses in the co-partnership
In 1942, Tan Sin An died, leaving as surviving agreement, that every general partner has power to bind
heirs his widow, Kong Chai Pin, and four minor the partnership, specially those partners acting with
children. ostensible authority. And so, we held in one case:
Repeated demands for payment were made by . . . Third persons, like the plaintiff, are not
the BancoHipotecarioon the partnership and on bound in entering into a contract with any of the
Tan Sin An. In 1944, the defendant Sing Yee and two partners, to ascertain whether or not this
Cuan, Co., Inc., upon request of defendant Yutivo partner with whom the transaction is made has
Sans Hardware Co., paid the remaining balance the consent of the other partner. The public need
of the mortgage debt, and the mortgage was not make inquiries as to the agreements had
cancelled. between the partners. Its knowledge is enough
Then in 1946, Yutivo Sons Hardware Co. and Sing that it is contracting with the partnership which
Yee and Cuan Co., Inc. filed their claims in the is represented by one of the managing partners.
intestate proceedings of Tan Sin An for P62,415.91 "There is a general presumption that each individual
and P54,310.13, respectively, as alleged obligations partner is an agent for the firm and that he has authority
of the partnership "Tan Sin An and Antonio C. to bind the firm in carrying on the partnership
Goquiolay" and Tan Sin An, for advances, interest transactions."
and taxes paid in amortizing and discharging In this case, the records fail to disclose that appellant
their obligations to "La Urbana" and the Goquiolay made any opposition to the sale of the
"BancoHipotecario". partnership realty to Washington Z. Sycip and Betty Lee;
Kong Chai Pin filed a petition with the probate on the contrary, it appears that he (Goquiolay) only
court for authority to sell all the 49 parcels of interposed his objections after the deed of conveyance
was executed and approved by the probate court, and,

consequently, his opposition came too late to be effective.
3.WON the sale of real properties resulted to dissolution
of the partnership. NO
Appellants also question the validity of the sale covering
the entire firm realty, on the ground that it, in effect,
threw the partnership into dissolution, which requires
consent of all the partners. This view is untenable. That
the partnership was left without the real property it
originally had will not work its dissolution, since the firm
was not organized to exploit these precise lots but to
engage in buying and selling real estate, and "in general
real estate agency and brokerage business"
CASE 5: NG CHO CIO vs NG DIONG register of deeds issued new titles' in his name covering
said lots
ISSUE:
WON by the termination of insolvency, Ng Diong
FACTS: In1925, Ng Diong, Ng Be Chuat, Ng Feng Tuan Ng reacquired his rights as managing partner and thereby
Be Kian Ng Cho Cio, Ng Sian King and Ng Due King having authority to sell and liquidate properties. YES
entered into a contract of general co-partnership under HELD:
the name NG CHIN BENG HERMANOS. The partnership It should be recalled that on August 8, 1940 the majority
was to exist for a period of 10 and Ng Diong was named as of the creditors of the partnership, as well as the
managing partner. The articles of co-partnership were representatives of the latter, submitted to the court
amended by extending its life to 16 years more. taking cognizance of the insolvency proceedings a
The partnership obtained from the National Loan and composition agreement whereby it was agreed that said
Investment Board a loan in the amount of P30,000.00, creditors would receive 20% of the amount of their claims
and to guarantee its payment it executed in its favor a in full payment thereof.This agreement was approved on
mortgage. October 10, 1940 which, in contemplation of law, has the
The partnership was declared insolvent upon petition of effect of putting an end to the insolvency proceedings.
its creditors. A majority of the creditors with claims It would, therefore, appear that for legal and practical
amounting to P139,704.81, and the partners of the firm, purposes the insolvency ended on said date. Since then
acting thru counsel, entered into a composition partnership became, restored to its status quo. It again
agreement whereby it was agreed that said creditors reacquired its personality as such with Ng Diong as its
would receive 20% of the amount of their claims in full general manager. From that date on its properties ceased
payment thereof. Prior to this agreement, however, to be in custodia legis. Such being the case, it is obvious
defendant Julian Go had already acquired the rights of 24 that when Ng Diong as manager of the partnership sold
of the creditors of the insolvent whose total claims the seven parcels of land to C. N. Hodges on April 2, 1946
amounted to P139,323.10. Said composition agreement by virtue of a deed of sale acknowledged before a notary
was approved by the insolvency court. public on April 6, 1946, the properties were already was at
The Agricultural and Industrial Bank which had liberty to do what it may deem convenient and proper to
succeeded the National Loan and Investment Board protect its interest. And acting accordingly, Ng Diong
assigned its rights and interests in the loans obtained made the sale in the exercise of the power granted to him
from it by the partnership in the aggregate amount of by the partnership in its articles of co-partnership. We do
P80,000.00 in favor of C.N. Hodges, together with the not, therefore, find anything irregular in this actuation of
right and interest in the mortgage executed to secure the Ng Diong.
loans. Since said loans became due and no payment was Since at the time of the sale the life of the partnership had
forthcoming, Hodges asked permission from the already expired, the question may be fixed: Who shall
insolvency court to file a complaint against the assignee wind up it business affairs? May its manager still execute
to foreclose the mortgage executed to secure the same in the sale of its properties to C. N. Hodges as was done by
a separate proceeding, and permission having been Ng Diong? The answer to this question cannot but be in
granted, Hodges filed a complaint for that purpose on the affirmative because Ng Diong was still the managing
May 13, 1941. In his complaint, Hodges prayed that the partner of the partnership and he had the necessary
assignee be ordered to pay him the sum of P75,622.90, authority to liquidate its affairs under its articles of co-
with interest at 8% per annum partnership. And considering that war had intervened
Meanwhile, war broke out and nothing appears to have and the affairs of the partnership were placed under
been done in the insolvency proceedings. The court receivership up to October 6, 1945, we are of the opinion
records were destroyed. However, they were that Ng Diong could still exercise his power as liquidator
reconstituted later and given due course. when he executed the sale in question in favor of C. N.
the partners of the insolvent firm and Julian Go, who Hodges. This is sanctioned by Article 228 of the Code of
acquired most of the claims of the creditors, filed a Commerce which was the law in force at the time.
1
petition with the insolvency court praying at the NB: the trial court should have declared the sale of the
insolvency proceedings be closed or terminated cause the lots made to C. N. Hodges null and void "because of the
composition agreement the creditors had submitted disparity, irrationality and unreasonableness between the
relative to the settlement of the claims had already been consideration and real value of the properties when sold."
approved on October 10, 1940. And on October 6, 1946,
the court, acting favorably on the petition, ordered,
closure of the proceedings directing the assignee to turn
and reconvey all the properties of the partnership back to
the latter.
Ng Diong, who continued to be the manager of the
partnership, to sell all its properties mortgaged to Hodges
in order that the excess may be applied to the Payment of
said other obligations, and to that effect Ng Diong
executed on April 2, 1946 a deed of sale thereof in favor of
Hodges for the sum of P124,580.00.
Ng Diong, in behalf of the partnership, transferred the
right of the latter to repurchase the same from Hodges to
Julian Go in full payment of the partnership's
indebtedness to him. And having Julian Go exercised the
option January 6, 1948, Hodges executed a deed of sale of
the properties in his favor, and pursuant thereto the
53
CASE 6: PRIMELINK vs LAZATIN part of the assets of the joint venture. The trial court
declared that respondents were entitled to the possession
not only of the parcels of land but also of the
FACTS: Primelinkis a domestic corporation engaged in improvements thereon as a consequence of its finding
real estate development. Rafaelito W. Lopez is its that petitioners breached their agreement and defrauded
3
President and Chief Executive Officer. respondents of the net income under the JVA.
Ma. Clara T. Lazatin-Magat and her brothers the Lazatins, We agree with the CA ruling that petitioner Primelink
are co-owners of two (2) adjoining parcels of land, with a and respondents entered into a joint venture as evidenced
combined area of 30,000 square meters, located in by their JVA which, under the Courts ruling in Aurbach,
Tagaytay City. is a form of partnership, and as such is to be governed by
the laws on partnership.
In 1994, the Lazatins and Primelinkentered into a Joint
5
Venture Agreement (JVA) for the development of the When the RTC rescinded the JVA on complaint of
aforementioned property into a residential subdivision to respondents based on the evidence on record that
be known as "Tagaytay Garden Villas." Under the JVA, the petitioners willfully and persistently committed a breach
Lazatin siblings obliged themselves to contribute the two of the JVA, the court thereby dissolved/cancelled the
parcels of land as their share in the joint venture. For its 54
partnership. With the rescission of the JVA on account
part, Primelink undertook to contribute money, labor, of petitioners fraudulent acts, all authority of any partner
personnel, machineries, equipment, contractors pool, to act for the partnership is terminated except so far as
marketing activities, managerial expertise and other may be necessary to wind up the partnership affairs or to
needed resources to develop the property and construct complete transactions begun but not yet finished. On
55
therein the units for sale to the public. dissolution, the partnership is not terminated but
continues until the winding up of partnership affairs is
56
Lazatins informed Primelink that they had decided to completed. Winding up means the administration of the
rescind the JVA effective upon its receipt of the saidletter. assets of the partnership for the purpose of terminating
The Lazatins demanded that Primelink cease and desist the business and discharging the obligations of the
from further developing the property. Subsequently, the partnership.
Lazatins filed a complaint for rescission accounting and
damages. Plaintiffs alleged, among others, that, despite The transfer of the possession of the parcels of land and
the lapse of almost four (4) years from the execution of the improvements thereon to respondents was only for a
the JVA and the delivery of the title and possession of the specific purpose: the winding up of partnership affairs,
land to defendants, the land development aspect of the and the partition and distribution of the net partnership
project had not yet been completed, and the construction 57
assets as provided by law. After all, Article 1836 of the
of the housing units had not yet made any headway. New Civil Code provides that unless otherwise agreed by
the parties in their JVA, respondents have the right to
The LAZATINs were able to establish fraud on the part of wind up the partnership affairs:
PRIMELINK which, in the words of the court a quo, was a
pattern of what appears to be a scheme or plot to reduce Art. 1836. Unless otherwise agreed, the partners who have
and eventually blot out the net incomes generated from not wrongfully dissolved the partnership or the legal
sales of housing units by the defendants. Under Article representative of the last surviving partner, not insolvent,
1838 of the Civil Code, where the partnership contract is has the right to wind up the partnership affairs, provided,
rescinded on the ground of the fraud or however, that any partner, his legal representative or his
misrepresentation of one of the parties thereto, the party assignee, upon cause shown, may obtain winding up by
entitled to rescind is, without prejudice to any other right the court.
is entitled to a lien on, or right of retention of, the surplus
of the partnership property after satisfying the It must be stressed, too, that although respondents
partnership liabilities to third personsfor any sum of
acquired possession of the lands and the improvements
money paid by him for the purchase of an interest in the
thereon, the saidlands and improvements remained
partnership and for any capital or advance contributed by partnership property, subject to the rights and obligations
him. In the instant case, the joint venture still has of the parties, inter se, of the creditors and of third parties
outstanding liabilities to third parties or the buyers of the
under Articles 1837 and 1838 of the New Civil Code, and
property.
subject to the outcome of the settlement of the accounts
between the parties as provided in Article 1839 of the New
NB: It is not amiss to state that title to the land or TCT Civil Code, absent any agreement of the parties in their
No. T-10848 which is now held by Chinabank for 58
JVA to the contrary. Until the partnership accounts are
safekeeping pursuant to the Escrow Agreement executed determined, it cannot be ascertained how much any of
between Primelink Properties and Development the parties is entitled to, if at all.
Corporation and Ma. Clara T. Lazatin-Magat.
ISSUE: WON the Lazatins have the right to retain
It was thus premature for petitioner Primelink to be
partnership property. YES demanding that it be indemnified for the value of the
HELD: The trial court was not proscribed from placing improvements on the parcels of land owned by the joint
respondents in possession of the parcels of land and the
venture/partnership. Notably, the JVA of the parties does
improvements on the said parcels of land. It bears
not contain any provision designating any party to wind
stressing that the parcels of land, as well as the up the affairs of the partnership.
improvements made thereon, were contributed by the
parties to the joint venture under the JVA, hence, formed
Case 7: Magdusa v. Albaran 5 SCRA 511 assetsof the enterprise (Civ. Code, Art. 1839), and the
firm's property cannot be diminished to their prejudice.
Facts: The appellant cannot be held liable in his

personalcapacity for the payment of partners' shares for
Appellant and appellees, together with various he doesnot hold them except as manager of, or trustee
otherpersons, had verbally formed a partnershipde facto for, the partnership. It is the latter that must refund their
forthe sale of general merchandise in Surigao, Surigao, sharesto the retiring partners. Since not all the members
towhich appellant contributed P2,000 as capital, and of thepartnership have been impleaded, no judgment
theothers contributed their labor, under the condition forrefund can be rendered, and the action should
that out of the net profits of the business 25% would havebeen dismissed
beadded to the original capital, and the remaining
75%would be divided among the members in proportion
tothe length of service of each.
The appellees expressed their desire to withdraw fromthe

partnership, and appellant thereupon made
acomputation to determine the value of the
partners'shares to that date.
Appellees thereafter made demands upon appellant

forpayment, but appellant having refused, they filed
theinitial complaint in the court below.
Appellant denied any partnership withappellees, whom

he claimed to be mere employees of his. He argued that
the appellees' action cannot beentertained, because in the
distribution of all or part of apartnership's assets, all the
partners have no interest and areindispensable parties
without whose intervention no decree of distribution can
be validly entered.
Court of Appeals:
A judgment ordering the defendant to pay might

affect the rights of other partners who were not made
partiesin this case. Plaintiffs' action was based on the
allegation,substantiated in evidence,that Gregorio
Magdusa,having taken delivery of their shares, failed and
refusedand still fails and refuses to pay them their claims.
Theliability, therefore, is personal to Gregorio Magdusa,
andthe judgment should be against his sole interest,
not against the partnership's although the
judgment creditors may satisfy the judgment against the
interest of Gregorio Magdusa in the partnership subject
to thecondition imposed by Article 1814 of the Civil Code.
Held:
Argument of the CA untenable.
A partner's share cannot be returned without

first dissolving and liquidating the partnership, for
thereturn is dependent on the discharge of the
creditors,whose claims enjoy preference over those of
thepartners; and it is self-evident that all members of
thepartnership are interested in his assets and
business,and are entitled to be heard in the matter of the
firm'sliquidation and the distribution of its property.
Theliquidation Exhibit "C" is not signed by the
othermembers of the partnership besides appellees
andappellant; it does not appear that they have
approved,authorized, or ratified the same, and, therefore,
it is not binding upon them. At the very least, they are
entitledto be heard upon its correctness.
Unless a proper accounting and liquidation of

thepartnership affairs is first had, the capital shares of
theappellees, as retiring partners, cannot be repaid, for
thefirm's outside creditors have preference over the
Case 8: Benjamin Yu v. National Labor Relations definite termor particular undertaking is specified;(2)
Commission in contravention of the agreement between the partners,
where the circumstances donot permit a dissolution
under any other provision of this article, by the express
& Jade Mountain ProductsCo. Ltd., Willy Co, will of anypartner at any time;
RhodoraBendal, Lea Bendal, Chiu ShianJeng and
Chen Ho-Fu No winding up of affairs in this case as contemplated
in Art. 1829: on dissolution thepartnership is not
G.R. No. 97212 June 30, 1993 terminated, but continues until the winding up of
partnership affairs iscompleted.
Feliciano, J. Thenew partnership simply took over the business enterp
rise owned by the oldpartnership, and continued using th
Facts:
e old name of Jade Mountain Products CompanyLimited,
Yu was the ex-Assistant General Manager of the marble without winding up the business affairs of the old
quarrying and export business operatedby a registered partnership, paying off its debts,liquidating and
partnership called Jade Mountain Products Co. Ltd. distributing its net assets, and then re-assembling the
said assets or mostof them and opening a new business
The partnership was originally organized with Bendals enterprise
as general partners and Chin ShianJeng,Chen Ho-Fu and
Yu Chang as limited partners; the partnership business 2. Yes. The new partnership is liable for the debts of the
consisted of exploitinga marble deposit in Bulacan old partnership
Yu, as Assistant General Manager, had a monthly salary Legal basis: Art. 1840 (see codal)
of 4000. Yu, however, actuallyreceived only half of his
Yu is entitled to enforce his claim for unpaid salaries, as
stipulated salary, since he had accepted the
well as other claims relating to hisemployment with the
promise of thepartners that the balance would be paid
previous partnership, against the new partnership.
when the firm shall have secured additionaloperating
funds from abroad. Yu actually managed the operations But Yu is not entitled to reinstatement. The new
and finances of thebusiness; he had overall supervision of partnership was entitled to appointand hire a new gen. or
the workers at the marble quarry in Bulacan andtook asst. gen. manager to run the affairs of the business
charge of the preparation of papers relating to enterprisetake over. An asst. gen. manager belongs to the
the exportation of the firms products. most senior ranks of management and anew partnership
is entitled to appoint a top manager of its own choice and
general partners Bendals sold and transferred their
confidence. Thenon-retention of Yu did not constitute
interests in the partnership to Co andEmmanuel Zapanta
unlawful termination.
The new partnership was constituted solely by Co and
The new partnership had itsown new General Manager,
Zapanta; it continued to use the old firmname of Jade
Co, the principal new owner himself.
Mountain. Yu was then dismissed by the new partners.
He filed a case for unlawful termination before the NLRC. Yus old position thusbecame superfluous or redundant.
Issues: Yu is entitled to separation pay at the rate of one months
pay for each year of service thathe had rendered to the
1. WON the
old partnership, a fraction of at least 6 months being
partnership which had hired Yu as Asst. Gen. Manager ha
considered asa whole year
d beenextinguished and replaced by a new partnership
composed of Co and Zapanta;
2. if indeed anew partnership had come into existence,

WON Yu could nonetheless assert his rights underhis
employment contract with the old partnership as against
the new partnership
Held:
1. Yes. Changes in the membership of the partnership

resulted in the dissolution of the old partnership which
had hired Yu and the emergence of a new partnership
composedof Co and Zapanta.
Legal bases:
Art. 1828. The dissolution of a partnership is the change i

n the relation of thepartners caused by any partner ceasin
g to be associated in the carrying on asdistinguished from
the winding up of the business.
Art. 1830. Dissolution is caused:(1) without violation

of the agreement between the partners;(b) by the express
will of any partner, who must act in good faith, when no
Case 9: Dela Rosa vs Ortega GR NO. 24243 The record having been remanded and two of the
commissioners having filed their resignations, the court
Jan. 15, 1926 below appointed again Justo Cabo-Chan suggested by the
defendant and CuaPOco suggested by the plaintiff, as
commissioners, who submitted two reports.
Facts: During the Spanish regime the Chinamen Go-Lio One prepared by commissioners Tantengco and CuaPoco,
and Vicente Go-Sengco formed a society for the purchase and the other by commissioners Justo Cabo-Chan. The
and sale of articles of commerce, and for this purpose former stated in their report that they had examined the
they opened a store in the town of San Isidro, Nueva books for the years 1919 to 1922, for the reason, they said,
Ecija. that they appeared "to have been prepared by some
person in a careful way at a certain time." The later
Later Go-Lio went to China. Vicenyte Go-Sengco died and
commissioner examined all books and stated in his report
his son Enrique Ortega Go-Cotay took charge of the
that the business had suffered a net loss amounting to the
businesses.
sum of P89,099.22.
Go-Lio died in China in October, 1916, leaving a widow
The lower court, by order of December 13, 1924,
and three children, one of whom came to the Philippines
disapproved the report of the commissioners Tantengco
and filed a petition for the appointment of Ildefonso de la
and CuaPoco, but approved, with slight modifications,
Rosa as administrator of the intestate estate of his
the report of commissioner Cabo-Chan, holding that the
deceased father, which petition was granted.
result of the liquidation showed liabilities to the amount
Ildefonso de la Rosa, in his capacity as administrator of of P89,690.45 in view of which plaintiff had nothing to
the intestate estate of the deceased Go-Lio, requested recover from defendant, as there was no profit to divide.
Enrique Go-Cotay to wind up the business and to deliver
ISSUE: WON the RTC erred in deciding that there was no
to him the portion corresponding to the deceased Go-Lio.
profit to divide.
Enrique Ortega Go-Cotay denied the petition, alleging
that the business was his exclusively. Held: From the evidence it appears that the partnership
capital was P4,779.39, and the net profits until the year
In view of this denial, Ildefonso de la Rosa, as
1915 amounted to P5,551.40. Because some books of
administrator, on July 2, 1918, filed with the Court of First
account had been destroyed by white ants (anay), the
Instance of Nueva Ecija a complaint against Enrique
liquidation of the business of the partnership for the
Ortega Co-Cotay in which he prayed that the defendant
period from 1906 to 1912 could not be made. But knowing
be sentenced to deliver to the plaintiff one-half of all the
the net profit for the period between 1904 and 1905,
property of the partnership formed by Go-lIo and Vicente
which is P5,551.40, and finding the average of the profits
Go-Sengco, with costs against the defendant, and that the
for each of these years, which is P2,775.70; and knowing
said plaintiff be appointed receiver for the property of the
the net profit for the year 1913, which is P2,979, we can
said partnership.
find the average between the net profit for 1905, namely,
Defendant, in answering the complaint, denied each and P2,979. Said average is the sum of P2,877.35, which may
every allegation thereof, and as a special defense alleged be considered as the average of the net annual profits for
that more than ten years had elapsed before the filing of the period between 1906 and 1912, which in seven years
the complaint, and prayed that he be absolved therefrom, make a total of P20,141.45. The assets of the partnership,
with costs against the plaintiff. as well as the value of its property, could not be
determined when making the liquidation because there
On August 3, 1918, the Court of First Instance of Nueva was no inventory and for this reason it was not possible to
Ecija appointed Justo Cabo-Chan, Francisco T. Tantengco determine the capital of the partnership. The plaintiff,
and Go-Tiao, as commissioners to make an inventory, however, seems to be agreeable to considering the initial
liquidate and determine the one-half belonging to the partnership capital as the capital at the time of the
plaintiff of all the property of the store in question. winding up of the business.
On August 9, 1918, in order to prevent Justo Cabo-Chan August 3, 1918, defendant assumed complete
from assuming the office of receiver, pursuant to the responsibility for the business by objecting to the
order of the court dated August 3, 1918, the defendant appointment of a receiver as prayed for by plaintiff, and
filed a bond in the sum of P10,000. giving a bond therefor. Until that date his acts were those
of a managing partner, binding against the partnership;
Under the date of November 15, 1920, the said but thereafter his acts were those of a receiver whose
commissioners submitted to the court their report, authority is contained in section 175 of the Code of Civil
showing the net profits of the business between the Procedure.
period from 1913 to 1917, which amounted to the total sum
of P25,038.70. A receiver has no right to carry on and conduct a business
unless he is authorized or directed by the court to do
The parties entered into an agreement whereby they some, and such authority is not derived from an order of
agreed to suspend the liquidation ordered by the court. appointment to take and preserve the property (34 Cyc.,
283; 23 R. C. L., 73). It does not appear that the defendant
The SC in deciding case R. G. No. 18919, on October 5, as a receiver was authorized by the court to continue the
1
1922, held that the appeal was premature and ordered business of the partnership in liquidation. This being so,
that the record be remanded to the court of origin with he is personally liable for the losses that the business amy
instruction to enter a final order in accordance with the have sustained. (34 Cyc., 296.) The partnership must not,
liquidation made by the commissioners. therefore, be liable for the acts of the defendant in
connection with the management of the business until

August 3, 1918, the date when he ceased to be a member
and manager in order to become receiver.
As to the first semester of 1918, during which time the

defendant had seen managing the business of the
partnership as a member and manager, taking into
account that the profits had been on the increase, said
profits having reached the amount of P10,174.69 in the
year 1917, it would not be an exaggeration to estimate that
the profits for 1918 would have been at least the same as
the profits of 1917; so that for the first half of 1918, the
profit would be P5,087.34.
In conclusion we have the following profits of the

business of this partnership now in liquidation, to wit:
Total....................................................... 60,598.28
One-half of this total, that is, P30,299.14 pertains to the

plaintiff as administrator of the intestate estate of Go-Lio.
In view of the foregoing, we are of the opinion that the

case must be, as is hereby, decided by the reversing the
judgment appealed from, and sentencing the defendant
to pay the plaintiff the sum of P30,299.14 with legal
interest at the rate of 6 per cent per annum from July 1,
1918, until fully paid, with costs.
position even without amending its Answer. As to the

relationship between Loadmasters and Glodel, it contends that
Nature, Form & Kinds of Agency 8
a contract of agency existed between the two corporations.
Subrogation is the substitution of one person in the place of
another with reference to a lawful claim or right, so that he who
Case 1: Loadmasters Customs Services v. Glodel is substituted succeeds to the rights of the other in relation to a
Brokerage 9
debt or claim, including its remedies or securities. Doubtless,
R&B Insurance is subrogated to the rights of the insured to the
extent of the amount it paid the consignee under the marine
insurance
CASE 1: G.R. No. 179446 January 10, 2011
LOADMASTERS CUSTOMS SERVICES, INC., Petitioner, #2 ISSUE: who between Glodel and Loadmasters, is liable
to pay R&B Insurance for the amount of the indemnity it
vs.
paid Columbia?
GLODEL BROKERAGE CORPORATION and R&B
INSURANCE CORPORATION, Respondents.
HELD:
Based on the aforecited definition, Loadmasters is a common
carrier because it is engaged in the business of transporting
FACTS: goods by land, through its trucking service. It is a common
carrier as distinguished from a private carrier wherein the
carriage is generally undertaken by special agreement and it
R&B Insurance issued Marine Policy No. MN-00105/2001 in
favor of Columbia to insure the shipment of 132 bundles of does not hold itself out to carry goods for the general
10
electric copper cathodes against All Risks. public. The distinction is significant in the sense that "the
rights and obligations of the parties to a contract of private
Columbia engaged the services of Glodel for the release and
carriage are governed principally by their stipulations, not by
withdrawal of the cargoes from the pier and the subsequent 11
the law on common carriers."
delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to In the present case, there is no indication that the undertaking
transport the cargoes to Columbias warehouses/plants in in the contract between Loadmasters and Glodel was private in
Bulacan and Valenzuela City. character. There is no showing that Loadmasters solely and
exclusively rendered services to Glodel.
The goods were loaded on board twelve (12) trucks owned by
Loadmasters, driven by its employed drivers and accompanied
# 3 ISSUE: Whether Loadmasters claim that it was never
by its employed truck helpers. Six (6) truckloads of copper
privy to the contract entered into by Glodel with the
cathodes were to be delivered to Balagtas, Bulacan, while the consignee Columbia or R&B Insurance as subrogee, is a
other six (6) truckloads were destined for Lawang Bato, valid defense?
Valenzuela City. The cargoes in six truckloads for Lawang
Bato were duly delivered in Columbias warehouses there. Of HELD:
the six (6) trucks en route to Balagtas, Bulacan, however, only
five (5) reached the destination. One (1) truck, loaded with 11 It is not disputed that the subject cargo was lost while in the
bundles or 232 pieces of copper cathodes, failed to deliver its custody of Loadmasters whose employees (truck driver and
cargo. helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made
Later on, the said truck, an Isuzu with Plate No. NSD-117, was answerable for the damages caused by its employees who
recovered but without the copper cathodes. acted within the scope of their assigned task of delivering the
goods safely to the warehouse.
R&B Insurance, thereafter, filed a complaint for damages
Whenever an employees negligence causes damage or injury
against both Loadmasters and Glodel
to another, there instantly arises a presumption juris tantum
that the employer failed to exercise diligentissimi patris families
#1 ISSUE: Under the set of facts established and
undisputed in the case, can petitioner Loadmasters be in the selection (culpa in eligiendo) or supervision (culpa in
20
legally considered as an Agent of respondent Glodel? vigilando) of its employees. To avoid liability for a quasi-delict
committed by its employee, an employer must overcome the
HELD: presumption by presenting convincing proof that he exercised
7 the care and diligence of a good father of a family in the
Glodel, in its Comment, counters that Loadmasters is liable to 21
selection and supervision of his employee. In this regard,
it under its cross-claim because the latter was grossly
Loadmasters failed.
negligent in the transportation of the subject cargo. With
respect to Loadmasters claim that it is already estopped from Glodel is also liable because of its failure to exercise
filing a cross-claim, Glodel insists that it can still do so even for extraordinary diligence. It failed to ensure that Loadmasters
the first time on appeal because there is no rule that provides would fully comply with the undertaking to safely transport the
otherwise. Finally, Glodel argues that its relationship with subject cargo to the designated destination. It should have
Loadmasters is that of Charter wherein the transporter been more prudent in entrusting the goods to Loadmasters by
(Loadmasters) is only hired for the specific job of delivering the taking precautionary measures, such as providing escorts to
merchandise. Thus, the diligence required in this case is accompany the trucks in delivering the cargoes. Glodel should,
merely ordinary diligence or that of a good father of the family, therefore, be held liable with Loadmasters. Its defense of force
not the extraordinary diligence required of common carriers. majeure is unavailing.
R&B Insurance, for its part, claims that Glodel is deemed to

have interposed a cross-claim against Loadmasters because it
was not prevented from presenting evidence to prove its
Case 2: Victorias Milling v. CA "This is to authorize Consolidated Sugar Corporation or its

representative to withdraw for and in our behalf (stress
supplied) the refined sugar covered by Shipping List/Delivery
CASE 2: G.R. No. 117356 June 19, 2000 Receipt = Refined Sugar (SDR) No. 1214 dated October 16,
16
VICTORIAS MILLING CO., INC., petitioner, 1989 in the total quantity of 25, 000 bags."
vs. The Civil Code defines a contract of agency as follows:
COURT OF APPEALS and CONSOLIDATED SUGAR
CORPORATION, respondents. "Art. 1868. 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."
It is clear from Article 1868 that the basis of agency is
17
FACTS: representation. On the part of the principal, there must be an
18
actual intention to appoint or an intention naturally inferable
19
St. Therese Merchandising (hereafter STM) regularly bought from his words or actions; and on the part of the agent, there
sugar from petitioner Victorias Milling Co., Inc., (VMC). In the must be an intention to accept the appointment and act on
course of their dealings, petitioner issued several Shipping 20
it, and in the absence of such intent, there is generally no
List/Delivery Receipts (SLDRs) to STM as proof of purchases. 21
agency. One factor which most clearly distinguishes agency
On October 25, 1989, STM sold to private respondent from other legal concepts is control; one person - the agent -
Consolidated Sugar Corporation (CSC) its rights in SLDR No. agrees to act under the control or direction of another - the
1214M for P 14,750,000.00. CSC issued one check dated principal. Indeed, the very word "agency" has come to connote
22
October 25, 1989 and three checks postdated November 13, control by the principal. The control factor, more than any
1989 in payment. That same day, CSC wrote petitioner that it other, has caused the courts to put contracts between principal
23
had been authorized by STM to withdraw the sugar covered by and agent in a separate category. The Court of Appeals, in
SLDR No. 1214M. Enclosed in the letter were a copy of SLDR finding that CSC, was not an agent of STM, opined:
No. 1214M and a letter of authority from STM authorizing CSC
"This Court has ruled that where the relation of agency is
"to withdraw for and in our behalf the refined sugar covered by
dependent upon the acts of the parties, the law makes no
Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214
4 presumption of agency, and it is always a fact to be proved,
dated October 16, 1989 in the total quantity of 25,000 bags."
with the burden of proof resting upon the persons alleging the
On October 27, 1989, STM issued 16 checks in the total agency, to show not only the fact of its existence, but also its
amount of P31,900,000.00 with petitioner as payee nature and extent (Antonio vs. Enriquez [CA], 51 O.G. 3536].
Here, defendant-appellant failed to sufficiently establish the
Private respondent CSC surrendered SLDR No. 1214M to the existence of an agency relation between plaintiff-appellee and
petitioner's NAWACO warehouse and was allowed to withdraw STM. The fact alone that it (STM) had authorized withdrawal of
sugar. However, after 2,000 bags had been released, sugar by plaintiff-appellee "for and in our (STM's) behalf"
petitioner refused to allow further withdrawals of sugar against should not be eyed as pointing to the existence of an agency
SLDR No. 1214M. CSC then sent petitioner a letter dated relation ...It should be viewed in the context of all the
January 23, 1990 informing it that SLDR No. 1214M had been
circumstances obtaining. Although it would seem STM
"sold and endorsed" to it but that it had been refused further
withdrawals of sugar from petitioner's warehouse despite the represented plaintiff-appellee as being its agent by the use of
fact that only 2,000 bags had been withdrawn. the phrase "for and in our (STM's) behalf" the matter was
cleared when on 23 January 1990, plaintiff-appellee informed
Petitioner reiterated that all the sugar corresponding to the
defendant-appellant that SLDFR No. 1214M had been "sold
amount of STM's cleared checks had been fully withdrawn and
and endorsed" to it by STM (Exhibit I, Records, p. 78). Further,
hence, there would be no more deliveries of the commodity to
plaintiff-appellee has shown that the 25, 000 bags of sugar
STM's account. Petitioner also noted that CSC had
covered by the SLDR No. 1214M were sold and transferred by
represented itself to be STM's agent as it had withdrawn the
STM to it ...A conclusion that there was a valid sale and
2,000 bags against SLDR No. 1214M "for and in behalf" of
transfer to plaintiff-appellee may, therefore, be made thus
STM.
capacitating plaintiff-appellee to sue in its own name, without
24
On April 27, 1990, CSC filed a complaint for specific need of joining its imputed principal STM as co-plaintiff."
performance.
In the instant case, 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
ISSUE: Whether or not STM's and private respondent's
STM's control. The question of whether a contract is one of
specially informing petitioner that respondent was
sale or agency depends on the intention of the parties as
authorized by buyer STM to withdraw sugar against SLDR
gathered from the whole scope and effect of the language
No. 1214M "for and in our (STM) behalf," private 25
employed. That the authorization given to CSC contained the
respondent's withdrawing 2,000 bags of sugar for STM,
phrase "for and in our (STM's) behalf" did not establish an
and STM's empowering other persons as its agents to
agency. Ultimately, what is decisive is the intention of the
withdraw sugar against the same SLDR No. 1214M, 26
parties. That no agency was meant to be established by the
rendered respondent like the other persons, an agent of
CSC and STM is clearly shown by CSC's communication to
STM.
petitioner that SLDR No. 1214M had been "sold and endorsed"
27
to it. The use of the words "sold and endorsed" means that
STM and CSC intended a contract of sale, and not an agency.
HELD:
Hence, on this score, no error was committed by the
Petitioner heavily relies upon STM's letter of authority allowing respondent appellate court when it held that CSC was not
CSC to withdraw sugar against SLDR No. 1214M to show that STM's agent and could independently sue petitioner.
the latter was STM's agent. The pertinent portion of said letter
reads:
Case 3: Naguiat v. CA More fundamentally, whatever was the true relationship

between Naguiat and Ruebenfeldt is irrelevant in the face of
the fact that the checks issued or indorsed to Queao were
G.R. No. 118375 October 3, 2003 never encashed or deposited to her account of Naguiat.
CELESTINA T. NAGUIAT, petitioner,

vs.
COURT OF APPEALS and AURORA QUEAO, respondents.
FACTS:
Queano applied with Naguiat for a loan, which the latter
granted. Naguiat indorsed a check to cover the loan. Queano,
on the other hand, executed a Deed of Real Estate Mortgage
to secure the said loan.
Upon presentment on its maturity date, the Security Bank
check was dishonored for insufficiency of funds. On the
following day, 12 September 1980, Queao requested Security
Bank to stop payment of her postdated check, but the bank
rejected the request pursuant to its policy not to honor such
requests if the check is drawn against insufficient funds.
On 16 October 1980, Queao received a letter from Naguiats

lawyer, demanding settlement of the loan. Shortly thereafter,
Queao and one Ruby Ruebenfeldt (Ruebenfeldt) met with
Naguiat. At the meeting, Queao told Naguiat that she did not
receive the proceeds of the loan, adding that the checks were
retained by Ruebenfeldt, who purportedly was Naguiats
7
agent.
Naguiat questions the admissibility of the various written

representations made by Ruebenfeldt on the ground that they
could not bind her following the res inter alia acta alteri nocere
non debet rule. The Court of Appeals rejected the argument,
holding that since Ruebenfeldt was an authorized
representative or agent of Naguiat the situation falls under a
22
recognized exception to the rule. Still, Naguiat insists that
Ruebenfeldt was not her agent.
ISSUE: Whether or not Reubenfeldt was Naguiats agent.
HELD:
Suffice to say, however, the existence of an agency

relationship between Naguiat and Ruebenfeldt is supported by
ample evidence. As correctly pointed out by the Court of
Appeals, Ruebenfeldt was not a stranger or an unauthorized
person. Naguiat instructed Ruebenfeldt to withhold from
Queao the checks she issued or indorsed to Queao,
pending delivery by the latter of additional collateral.
Ruebenfeldt served as agent of Naguiat on the loan application
of Queaos friend, Marilou Farralese, and it was in connection
23
with that transaction that Queao came to know Naguiat. It
was also Ruebenfeldt who accompanied Queao in her
meeting with Naguiat and on that occasion, on her own and
without Queao asking for it, Reubenfeldt actually drew a
check for the sum of P220,000.00 payable to Naguiat, to cover
for Queaos alleged liability to Naguiat under the loan
24
agreement.
The Court of Appeals recognized the existence of an "agency

25 26
by estoppel citing Article 1873 of the Civil Code. Apparently,
it considered that at the very least, as a consequence of the
interaction between Naguiat and Ruebenfeldt, Queao got the
impression that Ruebenfeldt was the agent of Naguiat, but
Naguiat did nothing to correct Queaos impression. In that
situation, the rule is clear. One 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, to the prejudice of innocent third
parties dealing with such person in good faith, and in the
27
honest belief that he is what he appears to be. The Court of
Appeals is correct in invoking the said rule on agency by
estoppel.1awphi1.nt
Case 4: AF Realty & Development v. Dieselman Petitioner AF Realty maintains that the sale of land by an
unauthorized agent may be ratified where, as here, there is
Freight Services acceptance of the benefits involved. In this case the receipt by
respondent Cruz, Jr. from AF Realty of the P300,000.00 as
partial payment of the lot effectively binds respondent
G.R. No. 111448 January 16, 2002
Dieselman.
AF REALTY & DEVELOPMENT, INC. and ZENAIDA R.

RANULLO, petitioners, ISSUE: Whether or not Cruz is the agent of Dieselman, and
vs. its acts may be subsequently ratified to validate the sale.
DIESELMAN FREIGHT SERVICES, CO., MANUEL C. CRUZ,
JR. and MIDAS DEVELOPMENT
CORPORATION, respondents.
HELD:
FACTS: Involved in this case is a sale of land through an agent. Thus,

the law on agency under the Civil Code takes precedence.
This is well stressed in Yao Ka Sin Trading vs. Court of
Appeals:
Dieselman reight Service is a domestic corporation and a
registered owner of a parcel of commercial lot.
"Since a corporation, such as the private respondent,
can act only through its officers and agents, all acts
On May 10, 1988, Manuel C. Cruz, Jr., a member of the board
within the powers of said corporation may be
of directors of Dieselman, issued a letter denominated as
2 performed by agents of its selection; and, except
"Authority To Sell Real Estate" to Cristeta N. Polintan, a real
so far as limitations or restrictions may be imposed by
estate broker of the CNP Real Estate Brokerage. Cruz, Jr.
special charter, by-law, or statutory
authorized Polintan "to look for a buyer/buyers and negotiate
provisions, the same general principles of law
the sale" of the lot at P3,000.00 per square meter, or a total of
which govern the relation of agency for a natural
P6,282,000.00. Cruz, Jr. has no written authority from
person govern the officer or agent of a
Dieselman to sell the lot.
corporation, of whatever status or rank, in respect
to his power to act for the corporation; and agents
3
In turn, Cristeta Polintan, through a letter dated May 19, 1988, when once appointed, or members acting in their
4
authorized Felicisima ("Mimi") Noble to sell the same lot. stead, are subject to the same rules, liabilities,
and incapacities as are agents of individuals and
Felicisima Noble then offered for sale the property to AF Realty private persons." (Emphasis supplied)
& Development, Inc. (AF Realty) at P2,500.00 per square
5
meter. Zenaida Ranullo, board member and vice-president of Pertinently, Article 1874 of the same Code provides:
AF Realty, accepted the offer and issued a check in the
amount of P300,000.00 payable to the order of Dieselman.
"ART. 1874. When a sale of piece of land or any
Polintan received the check and signed an "Acknowledgement
6 interest therein is through an agent, the authority of
Receipt" indicating that the amount of P300,000.00 represents
the latter shall be in writing; otherwise, the sale
the partial payment of the property but refundable within two
shall be void." (Emphasis supplied)
weeks should AF Realty disapprove Ranullo's action on the
matter.
Considering that respondent Cruz, Jr., Cristeta Polintan and
Felicisima Ranullo were not authorized by respondent
On June 29, 1988, AF Realty confirmed its intention to buy the
Dieselman to sell its lot, the supposed contract is void. Being a
lot. Hence, Ranullo asked Polintan for the board resolution of
void contract, it is not susceptible of ratification by clear
Dieselman authorizing the sale of the property. However,
mandate of Article 1409 of the Civil Code, thus:
Polintan could only give Ranullo the original copy of TCT No.
39849, the tax declaration and tax receipt for the lot, and a
7 "ART. 1409. The following contracts are inexistent
photocopy of the Articles of Incorporation of Dieselman.
and void from the very beginning:
On August 2, 1988, Manuel F. Cruz, Sr., president of
Dieselman, acknowledged receipt of the said P300,000.00 as xxx
"earnest money" but required AF Realty to finalize the sale
8
at P4,000.00 per square meter. AF Realty replied that it has (7) Those expressly prohibited or declared void by
paid an initial down payment of P300,000.00 and is willing to law.
9
pay the balance.
"These contracts cannot be ratified. Neither can the
However, on August 13, 1988, Mr. Cruz, Sr. terminated the right to set up the defense of illegality be waived."
offer and demanded from AF Realty the return of the title of the (Emphasis supplied)
10
lot earlier delivered by Polintan.
Upon the other hand, the validity of the sale of the subject lot to
Claiming that there was a perfected contract of sale between respondent Midas is unquestionable. As aptly noted by the
them, AF Realty filed with the Regional Trial Court, Branch 24
Court of Appeals, the sale was authorized by a board
160, Pasig City a complaint for specific performance (Civil resolution of respondent Dieselman dated May 27, 1988.
Case No. 56278) against Dieselman and Cruz, Jr.
In the instant case, it is undisputed that respondent Cruz, Jr.

has no written authority from the board of directors of
respondent Dieselman to sell or to negotiate the sale of the lot,
much less to appoint other persons for the same purpose.
Respondent Cruz, Jr.'s lack of such authority precludes him
from conferring any authority to Polintan involving the subject
realty. Necessarily, neither could Polintan authorize Felicisima
Noble. Clearly, the collective acts of respondent Cruz, Jr.,
Polintan and Noble cannot bind Dieselman in the purported
contract of sale.
Case 5: Dizon v. CA stressing that the absence of any of these essential elements
negates the existence of a perfected contract of sale. Sale is a
consensual contract and he who alleges it must show its
25
existence by competent proof.
G.R. No. 122544 January 28, 1999 In an attempt to resurrect the lapsed option, private respondent
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. gave P300,000.00 to petitioners (thru Alice A. Dizon) on the
BLAZA, ESTER ABAD DIZON and JOSEPH ANTHONY erroneous presumption that the said amount tendered would
DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and constitute a perfected contract of sale pursuant to the contract
JOSE A. DIZON, JR., petitioners, of lease with option to buy. There was no valid consent by the
vs. petitioners (as co-owners of the leased premises) on the
COURT OF APPEALS and OVERLAND EXPRESS LINES, supposed sale entered into by Alice A. Dizon, as petitioners'
INC., respondents. alleged agent, and private respondent. The basis for agency is
representation and a person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the
26
FACTS: agent. As provided in Article 1868 of the New Civil
27
Code, there was no showing that petitioners consented to the
act of Alice A. Dizon nor authorized her to act on their behalf
Overland Express Lines, Inc. entered into a contract of lease with regard to her transaction with private respondent. The
with option to buy with Dizon. For failure of respondent to pay most prudent thing private respondent should have done was
the increased rental, petitioners filed an action for ejectment. to ascertain the extent of the authority of Alice A. Dizon. Being
Respondent, on the other hand questioned the jurisdiction of negligent in this regard, private respondent cannot seek relief
the lower court, and filed an injuction against petitioners. on the basis of a supposed agency.
8 28
On appeal, respondent Court of Appeals rendered a In Bacaltos Coal Mines vs. Court of Appeals, we explained
9
decision upholding the jurisdiction of the City Court of Quezon the rule in dealing with an agent:
City in the ejectment case. It also concluded that there was a
perfected contract of sale between the parties on the leased Every person dealing with an agent is put upon inquiry and
premises and that pursuant to the option to buy agreement, must discover upon his peril the authority of the agent. If he
private respondent had acquired the rights of a vendee in a does not make such inquiry, he is chargeable with knowledge
contract of sale. It opined that the payment by private of the agent's authority, and his ignorance of that authority will
respondent of P300,000.00 on June 20, 1975 as partial not be any excuse. Persons dealing with an assumed agency,
payment for the leased property, which petitioners accepted whether the assumed agency be a general or special one, are
(through Alice A. Dizon) and for which an official receipt was bound at their peril, if they would hold the principal, to ascertain
issued, was the operative act that gave rise to a perfected not only the fact of the agency but also the nature and extent of
contract of sale, and that for failure of petitioners to deny the authority, and in case either is controverted, the burden of
receipt thereof, private respondent can therefore assume that proof is upon them to establish it.
Alice A. Dizon, acting as agent of petitioners, was authorized
by them to receive the money in their behalf. The Court of
Appeals went further by stating that in fact, what was entered
into was a "conditional contract of sale" wherein ownership
over the leased property shall not pass to the private
respondent until it has fully paid the purchase price. Since
private respondent did not consign to the court the balance of
the purchase price and continued to occupy the subject
premises, it had the obligation to pay the amount of P1,700.00
in monthly rentals until full payment of the purchase price.
ISSUE: Whether or not there was a perfected contract of

sale between petitioners ad private respondent because of
the payment made to one Alice Dizon.
HELD:
There was no perfected contract of sale between petitioners
and private respondent. Private respondent argued that it
delivered the check of P300,000.00 to Alice A. Dizon who
acted as agent of petitioners pursuant to the supposed
authority given by petitioner Fidela Dizon, the payee thereof.
Private respondent further contended that petitioners' filing of
the ejectment case against it based on the contract of lease
with option to buy holds petitioners in estoppel to question the
authority of petitioner Fidela Dizon. It insisted that the payment
of P300,000.00 as partial payment of the purchase price
constituted a valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, "the contract of sale
is perfected at the moment there is a meeting of minds upon
the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts." Thus, the elements of a contract of sale are
consent, object, and price in money or its equivalent. It bears
CASE 6: RAMOS vs. CA and CESARIO P. what Ramos received in the Wellington & Co. transaction in
CALANOC excess of his original 23% mark-up price was only P13,330.00
and not P53,320.00, the amount claimed and awarded by the
trial court and the Court of Appeals.
FACTS: Emerito M. Ramos, a businessman engaged in the
import-export trade and using the firm name FIMCO, entered Calanoc never brought the buyer, Mrs. Salustiana Dee, to
into a contract with the Board of Liquidators of the Philippine Ramos. The agreement, if any, regarding the 25% buying price
Government for the purchase of 20,000 tons of rice from the was made solely between Calanoc and Mrs. Dee. Ramos did
now defunct National Rice and Corn Corporation (NARIC) at not intervene nor participate in any manner in that supposed
the rate of P404.00 per metric ton, F.O.B. Manila. agreement. While it is true, as Calanoc claims, that he
informed petitioner that Mrs. Dee had already agreed to pay
FIMCO entered into several contracts with local merchants for the 25% premium, there is absent in the records of this case
the resale to them of the imported goods and one such any evidence to show that Mrs. Dee confirmed such
contract was concluded with Mrs. Salustiana Dee, or agreement with petitioner and that the latter could have bound
Wellington & Co., in the amount of $1,333.000.00 or her to it.
1
P2,666,000.00. Cesario P. Calanoc, plaintiff in the lower
court, claiming that Emerito M. Ramos had engaged his A broker is never entitled to commissions for unsuccessful
services to procure purchasers for the imported goods and that efforts. The risk of failure is wholly his. The reward comes only
he was directly instrumental in bringing about the contracts in with his success. That is the plain contract and contemplation
question, instituted an action to recover his alleged agreed of the parties. The broker may devote his time and labor, and
commissions of 2% on the contract with Wellington & Co. and expend his money with ever so much of devotion to the interest
1% on those with the International Mercantile Co. of his employer, and yet if he fails, if without effecting an
agreement or accomplishing a bargain, he abandons the effort,
Lower court facts: Calanoc declared that sometime in 1953, or his authority is fairly and in good faith terminated, he gains
he went to Ramos' suite at the Manila Hotel upon the latter's no right to commissions.
invitation. Appellant told Calanoc to sell the merchandise at a
mark-up price of twenty-three percent of the invoice value of He failed to find or produce a purchaser upon the terms
the importation and that the overprice would constitute his prescribed in his employment, and the principal was under no
commission. obligation to wait longer that he might make further efforts. The
failure therefore and its consequences were the risk of the
Plaintiff was introduced to Mrs. Salustiana Dee, the owner of broker only however must be taken with one important and
Wellington & Co., by Jose Ang Uco. He explained to the necessary limitation If the efforts of the broker are rendered a
prospective buyer the terms of the contract between FIMCO failure by the fault of the employer; or if the latter declines to
and the NARIC. Plaintiff also explained to Mrs. Dee that she complete the contract because of some defect of title in the
was to open two letters of credit, and that she was to pay a ownership of the seller, some unremoved encumbrance, some
premium of 25% mark-up on the value of her imported defect which is the fault of the latter, then the broker does not
commodities. Calanoc, accordingly informed appellant that lose his commissions.
Mrs. Dee had agreed to pay a premium of 25% and that,
therefore, after deducting the 23% required mark-up, he It is significant that in his complaint Calanoc does not attribute
(plaintiff) had a commission of 2% on said transaction. bad faith, fraud or fault to Ramos. All that he claims is that
since he had informed Ramos of Mrs. Dee's alleged
Plaintiff's testimony also finds corroboration in appellant's own commitment to pay a 25% mark-up, the latter had
admission that in engaging the broker's services he specified consequently lost the right to reduce it. But as already
that the latter's compensation would consist of the excess of observed, there is no showing that such a commitment to
the required 23% mark-up price. Calanoc was a contract which Ramos himself could enforce
against Mrs. Dee, or that she was ready and willing to pay him
In the appellate court's thinking, there was "a clear the 25% mark-up, despite which he accepted only 23-1/2%,
preponderance of evidence that in compliance with his And certainly, if she was, vis-a-vis Ramos, willing to pay only
undertaking to procure purchasers for appellant's merchandise, 23-1/2%, he was not precluded from accepting it without being
he produced the importers, Wellington & Co. .. and as a result liable to Calanoc for the difference.
of his efforts said companies entered into the contracts in
question with the defendant-appellant (thereby entitling In the absence of independent proof that the non-payment by
plaintiff) to recover the commissions claimed by him as Mrs. Dee of the 25% premium over the mark-up price was due
compensation for his successful efforts. to the fault, fraud or bad faith of Ramos, we are not prepared to
share the Court of Appeals' view in this regard. He gained
ISSUE: w/n Ramos as principal was is liable to Calanoc to 2% nothing by the reduction, and it cannot be presumed that he
commission? NO. accepted it in order to cause prejudice to Calanoc.
HELD: The decision of the Court of Appeals is evidently

based on the assumption that since Calanoc was the efficient
agent who brought about the Wellington & Co. contract, it
follows that he was entitled to the 2% commission which he
claims was the overprice he secured for Ramos' merchandise.
The assumption is not borne out by the record. As already
observed, and this was confirmed by the Court of Appeals, the
arrangement was for Calanoc "to sell the merchandise at a
mark-up price of twenty-three percent of the invoice value of
the importation and the overprice would constitute his
commission." Nothing in the agreement guaranteed Calanoc a
fixed commission, which depended upon the overprice the
buyer would pay. And it is a fact, undisputed by Calanoc that
CASE7: INLAND REALTY INVESTMENT It is understandable, though, why petitioners have resorted to a
SERVICE, INC. vs. CA, ARANETA, EDUQUE, campaign for an automatic and blanket entitlement to
brokerage commission upon doing nothing but submitting to
private respondent Araneta, Inc., the name of Stanford as
FACTS: On September 16, 1975, defendant corporation thru prospective buyer of the latter's shares in Architects'. Of course
its co-defendant Assistant General Manager J. Armando petitioners would advocate as such because precisely
Eduque, granted to plaintiffs a 30-day authority to sell its . . . petitioners did nothing but submit Stanford's name as
9,800 shares of stock in Architects' Bldg., Inc. prospective buyer. Petitioners did not succeed in outrightly
selling said shares under the predetermined terms and
Plaintiff Inland Realty Investment Service, Inc. planned their conditions set out by Araneta, Inc., e.g., that the price per
sales campaign, sending proposal letters to prospective share is P1,500.00. They admit that they could not dissuade
buyers. One such prospective buyer to whom a proposal letter Stanford from haggling for the price of P1,000.00 per share
was sent to was Stanford Microsystems, Inc. with the balance of 50% of the total purchase price payable in
five (5) years at 12% interest per annum. From September 16,
Upon plaintiffs' receipt of the said counter-proposal, it
1975 to January 1, 1976, when petitioners' authority to sell was
immediately [sic] wrote defendant a letter to register Stanford
subsisting, if at all, petitioners had nothing to show that they
Microsystems, Inc. as one of its prospective buyers . . .
actively served their principal's interests, pursued to sell the
Defendant Araneta, Inc., thru its Assistant General Manager J.
shares in accordance with their principal's terms and
Armando Eduque, replied that the price offered by Stanford conditions, and performed substantial acts that proximately
was too low and suggested that plaintiffs see if the price and
and causatively led to the consummation of the sale to
terms of payment can be improved upon by Stanford The
Stanford of Araneta, Inc.'s 9,800 shares in Architects'.
authority to sell given to plaintiffs by defendants was extended
several times: the first being on October 2, 1975, for 30 days The Court of Appeals cannot be faulted for emphasizing the
from said date (Exh. "J"), the second on October 28, 1975 for lapse of more than one (1) year and five (5) months between
30 days from said date the expiration of petitioners' authority to sell and the
consummation of the sale to Stanford, to be a significant index
On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock
of petitioners' non-participation in the really critical events
[in] Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. for
leading to the consummation of said sale. Certainly, when the
P13,500,000.00 . . .
lapse of the period of more than one (1) year and five (5)
months between the expiration of petitioners' authority to sell
On September 6, 1977, plaintiffs demanded formally [from]
and the consummation of the sale, is viewed in the context of
defendants, through a letter of demand, for payment of their
the utter lack of evidence of petitioners' involvement in the
5% broker['s] commission at P13,500,000.00 or a total amount
negotiations between Araneta, Inc. and Stanford during that
of P675,000.00 . . . which was declined by [defendants] on the
period and in the subsequent processing of the documents
ground that the claim has no factual or legal basis.
pertinent to said sale, it becomes undeniable that the
Private respondents' defense that, after their authority to sell respondent Court of Appeals did not at all err in affirming the
expired thirty (30) days from December 2, 1975, or on January trial court's dismissal of petitioners' claim for unpaid brokerage
1, 1976, petitioners abandoned the sales transaction and were commission.
no longer privy to the consummation and documentation 6
Petitioners were not the efficient procuring cause in bringing
thereof, the trial court dismissed petitioners' complaint for
about the sale in question an July 8, 1977 and are, therefore,
collection of unpaid broker's commission.
not entitled to the stipulated broker's commission of "5% on the
CA: Court of Appeals was unswayed in the face of evidence of total price."
the expiration of petitioners' agency contract and authority to
sell on January 1, 1976 and the consummation of the sale to
Stanford on July 8, 1977 or more than one (1) year and five (5)
months after petitioners' agency contract and authority to sell
expired.
ISSUE: w/n petitioner is entitled to the said commission? No.

w/n the period to sell has already expired? Yes.
HELD: Petitioners take exception to the finding of the

respondent Court of Appeals that their contract of agency and
authority to sell expired thirty (30) days from its last renewal on
December 2, 1975.
This claim is a blatant lie. In the first place, petitioners have

conspicuously failed to attach a certified copy of this Letter
dated October 28, 1976. They have, in fact, not attached even
a machine copy thereof.
Finally, petitioners asseverate that, regardless of whether or

not their agency contract and authority to sell had expired, they
are automatically entitled to their broker's commission merely
upon securing for and introducing to private respondent
Araneta, Inc. the buyer in the person of Stanford which
ultimately acquired ownership over Araneta, Inc.'s 9,800
shares in Architects'. Petitioners' asseverations are devoid of
merit.
CASE 8: SIASAT vs. INTERMEDIATE APPELLATE usually authority either expressly conferred in general terms or
COURT in effect made general by the usages, customs or nature of the
business which he is authorized to transact.
FACTS: Sometime in 1974, respondent Teresita Nacianceno An agent, therefore, who is empowered to transact all the
succeeded in convincing officials of the then Department of business of his principal of a particular kind or in a particular
Education and Culture, to purchase without public bidding, one place, would, for this reason, be ordinarily deemed a general
million pesos worth of national flags for the use of public agent.
schools throughout the country. When Nacianceno was
informed by the Chief of the Budget Division of the Department A special agent is one authorized to do some particular act or
that the purchase orders could not be released unless a formal to act upon some particular occasion. lie acts usually in
offer to deliver the flags in accordance with the required accordance with specific instructions or under limitations
specifications was first submitted for approval, she contacted necessarily implied from the nature of the act to be done.
the owners of the United Flag Industry on September 17, 1974.
Indeed, it can easily be seen by the way general words were
This is to formalize our agreement for you to represent United employed in the agreement that no restrictions were intended
Flag Industry to deal with any entity or organization, private or as to the manner the agency was to be carried out or in the
government in connection with the marketing of our products- place where it was to be executed. The power granted to the
flags and all its accessories. For your service, you will be respondent was so broad that it practically covers the
entitled to a commission of thirty(30%) percent. negotiations leading to, and the execution of, a contract of sale
of petitioners' merchandise with any entity or organization.
Signed
Mr. Primitive Siasat Equally without merit is the petitioners' proposition that the
Owner and Gen. Manager transaction involved two separate contracts because there
were two purchase orders and two deliveries. The petitioners'
On October 16, 1974, the first delivery of 7,933 flags was evidence is overcome by other pieces of evidence proving that
made by the United Flag Industry. The next day, on October there was only one transaction.
17, 1974, the respondent's authority to represent the United
Flag Industry was revoked by petitioner Primitivo Siasat. This is also reflected in the Financial and Work Plan Request
for Allotment submitted by Secretary Juan Manuel for fiscal
According to the findings of the courts below, Siasat, after year 1975 which however, divided the allocation and release of
receiving the payment of P469,980.00 on October 23, 1974 for the funds into three, corresponding to the second, third, and
the first delivery, tendered the amount of P23,900.00 or five fourth quarters of the said year. Later correspondence between
percent (5%) of the amount received, to the respondent as the Department and the Budget Commission (Exhibits "D" and
payment of her commission. The latter allegedly protested. "E") show that the first allotment of P500.000.00 was released
She refused to accept the said amount insisting on the 30% during the second quarter. However, due to the necessity of
commission agreed upon. The respondent was prevailed upon furnishing all of the public schools in the country with the
to accept the same, however, because of the assurance of the Philippine flag, Secretary Manuel requested for the immediate
petitioners that they would pay the commission in full after they release of the programmed allotments intended for the third
delivered the other half of the order. The respondent states and fourth quarters. These circumstances explain why two
that she later on learned that petitioner Siasat had already purchase orders and two deliveries had to be made on one
received payment for the second delivery of 7,833 flags. When transaction.
she confronted the petitioners, they vehemently denied receipt
of the payment, at the same time claiming that the respondent The petitioners' evidence does not necessarily prove that there
had no participation whatsoever with regard to the second were two separate transactions. Exhibit "6" is a general
delivery of flags and that the agency had already been indorsement made by Secretary Manuel for the purchase of
revoked. the national flags for public schools. It contains no reference to
the number of flags to be ordered or the amount of funds to be
She filed an action in the Court of First Instance of Manila to released.
recover the following commissions: 25%, as balance on the
first delivery and 30%, on the second delivery. If the contracts were separate and distinct from one another,
the whole or at least a substantial part of the government's
ISSUE: w/n Nacianceno is entitled to the commission in the supply procurement process would have been repeated. In this
second delivery? case, what were issued were mere indorsements for the
release of funds and authorization for the next purchase.
HELD: YES.
The principal cannot deprive his agent of the commission
agreed upon by cancelling the agency and, thereafter, dealing
directly with the buyer. (Infante v. Cunanan, 93 Phil. 691).
There are several kinds of agents. To quote a commentator on
the matter: The fact that the respondent demanded only the commission
on the second delivery without reference to the alleged unpaid
An agent may be (1) universal: (2) general, or (3) special. A balance which was only slightly less than the amount claimed
universal; agent is one authorized to do all acts for his principal can only mean that the commission on the first delivery was
which can lawfully be delegated to an agent. So far as such a already fully paid, Considering the sizeable sum involved, such
condition is possible, such an agent may be said to have an omission is too glaringly remiss to be regarded as an
universal authority. oversight.
A general agent is one authorized to do all acts pertaining to a We also rule against the respondent's allegation that the
business of a certain kind or at a particular place, or all acts petitioners acted in bad faith when they revoked the agency
pertaining to a business of a particular class or series. He has given to the respondent.
Fraud and bad faith are matters not to be presumed but

matters to be alleged with sufficient facts. To support a
judgment for damages, facts which justify the inference of a
lack or absence of good faith must be alleged and proven.
There is no evidence on record from which to conclude that the
revocation of the agency was deliberately effected by the
petitioners to avoid payment of the respondent's commission.
What appears before us is only the petitioner's use in court of
such a factual allegation as a defense against the respondent's
claim. This alone does not per se make the petitioners guilty of
bad faith for that defense should have been fully litigated.
CASE 9: VELOSO vs. CA No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated
that:
FACTS: Petitioner Francisco Veloso was the owner of a parcel Whether the instrument be denominated as "general power of
of land situated in the district of Tondo, Manila. The title was attorney" or "special power of attorney", what matters is the
3
registered in the name of Francisco A. Veloso, single, on extent of the power or powers contemplated upon the agent or
4
October 4, 1957. The said title was subsequently cancelled attorney in fact. If the power is couched in general terms, then
and a new one, Transfer Certificate of Title No. 180685, was such power cannot go beyond acts of administration. However,
issued in the name of Aglaloma B. Escario, married to where the power to sell is specific, it not being merely implied,
5
Gregorio L. Escario, on May 24, 1988. much less couched in general terms, there can not be any
doubt that the attorney in fact may execute a valid sale. An
On August 24, 1988, petitioner Veloso filed an action for instrument may be captioned as "special power of attorney" but
annulment of documents, reconveyance of property with if the powers granted are couched in general terms without
damages and preliminary injunction and/or restraining order. mentioning any specific power to sell or mortgage or to do
Petitioner alleged therein that he was the absolute owner of the other specific acts of strict dominion, then in that case only acts
subject property and he never authorized anybody, not even of administration may be deemed conferred.
his wife, to sell it. He alleged that he was in possession of the
title but when his wife, Irma, left for abroad, he found out that We found, however, that the basis presented by the petitioner
his copy was missing. He then verified with the Registry of was inadequate to sustain his allegation of forgery. Mere
Deeds of Manila and there he discovered that his title was variance of the signatures cannot be considered as conclusive
already cancelled in favor of defendant Aglaloma Escario. The proof that the same were forged. Forgery cannot be presumed
transfer of property was supported by a General Power of
6
Attorney dated November 29, 1985 and Deed of Absolute We agree with the conclusion of the lower court that private
Sale, dated November 2, 1987, executed by Irma Veloso, wife respondent was an innocent purchaser for value. Respondent
of the petitioner and appearing as his attorney-in-fact, and Aglaloma relied on the power of attorney presented by
7
defendant Aglaloma Escario. Petitioner Veloso, however, petitioner's wife, Irma. Being the wife of the owner and having
denied having executed the power of attorney and alleged that with her the title of the property, there was no reason for the
his signature was falsified. He also denied having seen or even private respondent not to believe in her authority. Moreover,
known Rosemarie Reyes and Imelda Santos, the supposed the power of attorney was notarized and as such, carried with it
witnesses in the execution of the power of attorney. He the presumption of its due execution.
vehemently denied having met or transacted with the
defendant. Thus, he contended that the sale of the property, Even granting for the sake of argument, that the petitioner's
and the subsequent transfer thereof, were null and void. signature was falsified and consequently, the power of attorney
Petitioner Veloso, therefore, prayed that a temporary and the deed of sale were null and void, such fact would not
restraining order be issued to prevent the transfer of the revoke the title subsequently issued in favor of private
subject property; that the General Power of Attorney, the Deed respondent Aglaloma.
of Absolute Sale and the Transfer Certificate of Title No.
180685 be annulled; and the subject property be reconveyed
to him.
Defendant Aglaloma Escario in her answer alleged that she

was a buyer in good faith and denied any knowledge of the
alleged irregularity. She allegedly relied on the general power
of attorney of Irma Veloso which was sufficient in form and
substance and was duly notarized.
In the decision of the trial court dated March 9,

12
1990, defendant Aglaloma Escario was adjudged the lawful
owner of the property as she was deemed an innocent
purchaser for value.
ISSUE: w/n the land was transferred properly to Escario

through a general power of attorney? YES.
HELD: An examination of the records showed that the assailed

power of attorney was valid and regular on its face. It was
notarized and as such, it carries the evidentiary weight
conferred upon it with respect to its due execution. While it is
true that it was denominated as a general power of attorney, a
perusal thereof revealed that it stated an authority to sell.
Thus, there was no need to execute a separate and special

power of attorney since the general power of attorney had
expressly authorized the agent or attorney in fact the power to
sell the subject property. The special power of attorney can be
included in the general power when it is specified therein the
act or transaction for which the special power is required.
The general power of attorney was accepted by the Register of

Deeds when the title to the subject property was cancelled and
transferred in the name of private respondent. In LRC Consulta
CASE 10: LILY ELIZABETH BRAVO-GUERRERO real property without the wifes consent are merely voidable
et al vs. EDWARD P. BRAVO under the Civil Code that is, binding on the parties unless
19
annulled by a competent court and not void ab initio.
FACTS: Spouses Mauricio Bravo ("Mauricio") and Article 166 must be read in conjunction with Article 173 of the
5
Simona Andaya Bravo ("Simona") owned two parcels of land Civil Code ("Article 173"). The latter prescribes certain
("Properties") measuring 287 and 291 square meters and conditions before a sale of conjugal property can be annulled
located along Evangelista Street, Makati City, Metro Manila. for lack of the wifes consent.
Mauricio and Simona had three children - Roland, Cesar and Art. 173. The wife may, during the marriage and within ten
Lily, all surnamed Bravo. Cesar died without issue. Lily Bravo years from the transaction questioned, ask the courts for the
married David Diaz, and had a son, David B. Diaz, Jr. ("David annulment of any contract of the husband entered into without
Jr."). Roland had six children, namely, Lily Elizabeth Bravo- her consent, when such consent is required, or any act or
Guerrero ("Elizabeth"), Edward Bravo ("Edward"), Roland contract of the husband which tends to defraud her or impair
Bravo, Jr. ("Roland Jr."), Senia Bravo, Benjamin Mauricio her interest in the conjugal partnership property. Should the
Bravo, and their half-sister, Ofelia Bravo ("Ofelia"). wife fail to exercise this right, she or her heirs after the
dissolution of the marriage, may demand the value of
Simona executed a General Power of Attorney ("GPA") on 17 property fraudulently alienated by the husband. (Emphasis
June 1966 appointing Mauricio as her attorney-in-fact. In the supplied)
GPA, Simona authorized Mauricio to "mortgage or otherwise
hypothecate, sell, assign and dispose of any and all of my Under the Civil Code, only the wife can ask to annul a contract
property, real, personal or mixed, of any kind whatsoever and that disposes of conjugal real property without her consent.
6
wheresoever situated, or any interest therein xxx." Mauricio The wife must file the action for annulment during the marriage
subsequently mortgaged the Properties to the Philippine and within ten years from the questioned transaction. Article
National Bank (PNB) and Development Bank of the Philippines 173 is explicit on the remedies available if the wife fails to
7
(DBP) for P10,000 and P5,000, respectively. exercise this right within the specified period. In such case, the
wife or her heirs can only demand the value of the property
On 25 October 1970, Mauricio executed a Deed of Sale with provided they prove that the husband fraudulently alienated the
Assumption of Real Estate Mortgage the Properties to "Roland property. Fraud is never presumed, but must be established by
8 20
A. Bravo, Ofelia A. Bravo and Elizabeth Bravo" ("vendees"). clear and convincing evidence.
The sale was conditioned on the payment of P1,000 and on
the assumption by the vendees of the PNB and DBP Respondents action to annul the Deed of Sale based on
mortgages over the Properties. Article 166 must fail for having been filed out of time. The
marriage of Mauricio and Simona was dissolved when Mauricio
However, the Deed of Sale was not annotated on TCT Nos. died in 1973. More than ten years have passed since the
58999 and 59000. Neither was it presented to PNB and DBP. execution of the Deed of Sale. Further, respondents, who are
The mortage loans and the receipts for loan payments issued Simonas heirs, are not the parties who can invoke Article 166.
by PNB and DBP continued to be in Mauricios name even Article 173 reserves that remedy to the wife alone. Only
after his death on 20 November 1973. Simona died in 1977. Simona had the right to have the sale of the Properties
annulled on the ground that Mauricio sold the Properties
On 23 June 1997, Edward, represented by his wife, Fatima without her consent.
Bravo, filed an action for the judicial partition of the Properties.
Edward claimed that he and the other grandchildren of Simona, however, did not assail the Deed of Sale during her
Mauricio and Simona are co-owners of the Properties by marriage or even after Mauricios death. The records are bereft
succession. Despite this, petitioners refused to share with him of any indication that Simona questioned the sale of the
the possession and rental income of the Properties. Edward Properties at any time. Simona did not even attempt to take
later amended his complaint to include a prayer to annul the possession of or reside on the Properties after Mauricios
Deed of Sale, which he claimed was merely simulated to death.
prejudice the other heirs.
We also agree with the trial court that Simona authorized
The trial court upheld Mauricios sale of the Properties to the Mauricio to dispose of the Properties when she executed the
vendees. CA declared the sale void. GPA. True, Article 1878 requires a special power of attorney
for an agent to execute a contract that transfers the ownership
ISSUE: w/n the sale was valid? YES. of an immovable. However, the Court has clarified that Article
1878 refers to the nature of the authorization, not to its
HELD: We hold that the Court of Appeals erred when it 22
form. Even if a document is titled as a general power of
declared the Deed of Sale void based on Article 166.
attorney, the requirement of a special power of attorney is met
if there is a clear mandate from the principal specifically
Article 166 expressly applies only to properties acquired by the 23
authorizing the performance of the act.
conjugal partnership after the effectivity of the Civil Code of the
Philippines ("Civil Code"). The Civil Code came into force on
16 . While it is true that it was denominated as a general power of
30 August 1950. Although there is no dispute that the
attorney, a perusal thereof revealed that it stated an authority
Properties were conjugal properties of Mauricio and Simona, to sell
the records do not show, and the parties did not stipulate,
17
when the Properties were acquired. Under Article 1413 of the In this case, Simona expressly authorized Mauricio in the GPA
old Spanish Civil Code, the husband could alienate conjugal to "sell, assign and dispose of any and all of my property,
partnership property for valuable consideration without the real, personal or mixed, of any kind whatsoever and
18
wifes consent. wheresoever situated, or any interest therein xxx" as well as to
"act as my general representative and agent, with full authority
Even under the present Civil Code, however, the Deed of Sale
to buy, sell, negotiate and contract for me and in my
is not void. It is well-settled that contracts alienating conjugal 25
behalf." Taken together, these provisions constitute a clear
and specific mandate to Mauricio to sell the Properties. Even if As such, Edward can rightfully ask for the partition of the
it is called a "general power of attorney," the specific provisions Properties. Any co-owner may demand at any time the partition
in the GPA are sufficient for the purposes of Article 1878. of the common property unless a co-owner has repudiated the
51
These provisions in the GPA likewise indicate that Simona co-ownership. This action for partition does not prescribe and
52
consented to the sale of the Properties. is not subject to laches.
We point out that the law on legitime does not bar the
disposition of property for valuable consideration to
descendants or compulsory heirs. In a sale, cash of equivalent
26
value replaces the property taken from the estate. There is
no diminution of the estate but merely a substitution in values.
Donations and other dispositions by gratuitous title, on the
27
other hand, must be included in the computation of legitimes.
Simulation of contract and gross inadequacy of price are

distinct legal concepts, with different effects. When the parties
to an alleged contract do not really intend to be bound by it, the
28
contract is simulated and void.
In contrast, a contract with inadequate consideration may

nevertheless embody a true agreement between the parties. A
contract of sale is a consensual contract, which becomes valid
and binding upon the meeting of minds of the parties on the
30
price and the object of the sale. The concept of a simulated
sale is thus incompatible with inadequacy of price. When the
parties agree on a price as the actual consideration, the sale is
31
not simulated despite the inadequacy of the price.
Gross inadequacy of price by itself will not result in a void

contract.
Respondents even failed to establish that the consideration

paid by the vendees for the Properties was grossly inadequate.
As the trial court pointed out, the Deed of Sale stipulates that,
in addition to the payment of P1,000, the vendees should
assume the mortgage loans from PNB and DBP. The
consideration for the sale of the Properties was thus P1,000 in
cash and the assumption of the P15,000 mortgage.
xxx If there is a meeting of the minds of the parties as to the

price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. xxx
It is not the act of payment of price that determines the validity

of a contract of sale. Payment of the price has nothing to do
with the perfection of the contract.
Neither was it shown that the rentals from tenants were

sufficient to cover the mortgage payments. The parties to this
case stipulated to only one tenant, a certain Federico M. Puno,
who supposedly leased a room on the Properties for P300 per
42
month from 1992 to 1994. This is hardly significant, when we
consider that the mortgage was fully paid by 1974. Indeed, the
fact that the Properties were mortgaged to DBP and PNB
indicates that the conjugal partnership, or at least Mauricio,
was short of funds.
The Deed of Sale was notarized and, as certified by the

Regional Trial Court of Manila, entered in the notarial books
submitted to that court. As a document acknowledged before a
notary public, the Deed of Sale enjoys the presumption of
45 46
regularity and due execution. Absent evidence that is clear,
convincing and more than merely preponderant, the
47
presumption must be upheld.
As Roland Bravo, Sr. is also the father of respondent Edward

Bravo, Edward is thus a compulsory heir of Roland Bravo, and
entitled to a share, along with his brothers and sisters, in his
fathers portion of the Properties. In short, Edward and
petitioners are co-owners of the Properties.
Case 11: Rivero v. CA relationship that must be judicially established, and it is for the
court to determine its existence or absence. It cannot be left to
the will or agreement of the parties.
JOSE RIVERO, JESSIE RIVERO and AMALIA RIVERO,
petitioners,
vs.
COURT OF APPEALS, MARY JANE DY CHIAO - DE Compromise is a contract whereby parties, making reciprocal
GUZMAN, and BENITO DY CHIAO, JR., represented by his concerns, avoid litigation or put an end to one already
uncle HENRY S. DY CHIAO, respondents. commenced. Like any other contract, it must comply with the
requisite provisions in Article 1318 of the New Civil Code, to
BACKGROUND: Benedick Arevalo filed a complaint against wit: (a) consent of the contracting parties; (b) object certain
Mary Jane Dy Chiao-De Guzman, Benito Dy Chiao, Jr., and which is the subject matter of the contract; and (c) cause of the
Benson Dy Chiao, in the RTC for compulsory recognition as obligation which is established. Like any other contract, the
the illegitimate child of their father, Benito Dy Chiao, Sr., and terms and conditions of a compromise agreement must not be
for the administration and partition of his estate. Since contrary to law, morals, good customs, public policy and public
Benedick was a minor, his natural mother and guardian ad order. Any compromise agreement which is contrary to law or
litem, Shirley Arevalo, filed the complaint on his behalf. public policy is null and void, and vests no rights and holds no
obligation to any party. It produces no legal effect at all.
Considering all these, there can be no other conclusion than
that the decision of the RTC on the basis of a compromise
FACTS: agreement where Benedick was recognized as the illegitimate
child of Benito, Sr. is null and void.
It was alleged that Benito Dy Chiao, Sr. (the father) was
engaged in business under the business name Benito As to the issue on the SPA, Article 1878 of the New Civil
Commercial. He courted and promised Concepcion of a good Code provides that an SPA is required for a compromise.
life and to provide for her needs as well as to provide for her Furthermore, the power of attorney should expressly
education. Benito Chiao Sr. delivered on his promises. During mention the action for which it is drawn; as such, a
their cohabitation, their son benedick was born. When Benito compromise agreement executed by one in behalf of
Sr. died, he left properties worth 100 million pesos. As such, another, who is not duly authorized to do so by the
benedick wanted the court to appoint a receiver to protect his principal, is void and has no legal effect, and the judgment
rights. based on such compromise agreement is null and void.
The judgment may thus be impugned and its execution
may be enjoined in any proceeding by the party against
Mary Jane Dy Chiao, in behalf of his brothers, denied all whom it is sought to be enforced. A compromise must be
allegations. Mary Janes brother were confined in a mental strictly construed and can include only those expressly or
hospital and so benedick asked the court to appoint mary jane impliedly included therein.
as their guardian ad litem which was granted because of a
On the assumption that the Dy Chiao brothers had signed
SPA allegedly signed by her brothers appointing her as their
the SPA on September 20, 1995, a cursory reading of the
guardian.
compromise agreement will show that they did not
specifically empower their sister to enter into a
compromise agreement with Benedick. It bears stressing
Now, armed with the SPA, Mary jane entered into a that the SPA was executed as early as September 20,
compromise agreement with benedick wherein it was stated 1995, while the complaint was filed with the RTC almost a
that they now recognize benedick as the illegitimate son of year thereafter, or on August 27, 1996.
their father and gave him 6 million pesos as his share of the
estate.
The Court is convinced that the compromise agreement was

the handiwork of Atty. Simando, the lawyer of benedick in this
When her brothers got out of the hospital, they alleged that case and the same lawyer who notarized the SPA dated
they did not give their authority to the compromise agreement. September 20, 1995 purportedly executed by the Dy Chiao
They sought the nullification of such SPA on the grounds of brothers
extrinsic fraud. Benito Jr. alleges that the compromise
agreement was the product of connivance between his sister
and Benedick, and their respective counsels.
ISSUE: Whether or not there was a valid compromise

agreement by virtue of the SPA?
HELD:
No. there was no valid compromise.
Article 2035(1) of the New Civil Code provides that no

compromise upon the civil status of persons shall be valid. As
such, paternity and filiation, or the lack of the same, is a
Case 12: Macapagal v. Remorin to enjoy and dispose of Lot 5 as well as to exclude any person
from such enjoyment and disposal. A waiver may not be
casually attributed when the terms thereof do not explicitly and
clearly prove an intent to abandon the right.
MARIQUITA MACAPAGAL, petitioner, In the case at bar, the Compromise Agreement dated
vs. September 9, 1988 cannot be taken as a waiver of Corazons
CATALINA O. REMORIN, CORAZON CALUZA- authority to sell and grant thereof to Catalina considering that
BAMRUNGCHEEP, and LAURELIA CALUZA-VALENCIANO, the Agreement merely provided that Catalina pay off her
respondents. mortgage obligation and incidental expenses from the
proceeds of the sale. Although it was imperative, as part of the
compromise, that the money come from the proceeds of the
sale, it was not expressly stated, nor did it necessarily mean,
FACTS:
that Catalina herself be the one to directly sell the property.
This case involve certain parcels of land located in Quezon The money may merely be handed over to her for such
City. The registered owner of the said properties is Candido payment. The rule is that any reasonable doubt that the
Caluza. Her second wife Purificacion, and Corazon, his legally language used conveys authority to sell will yield a
adopted daughter from his first marriage executed a Deed of construction that no such authority has been given. Authority to
Extrajudicial Settlement adjudicating between themselves the sell must be couched in clear and unmistakable language.
properties of Candido.
Moreover, intent to give Catalina authority to sell may not be
easily attributed to Corazon considering that the latter had to
file the reconveyance case as a result of Purificacions and
Subsequently, Corazon had to leave to Thailand because she Catalinas acts of transferring the disputed lot in their names
was getting married there. And so, she entrusted the notwithstanding the clear terms of the Deed of Extrajudicial
administration of her lands to Purificacion. Unknown to Settlement dated November 21, 1981. In contract
Corazon, Purification fraudulently executed an affidavit of loss interpretation, analysis is not to be limited to the words used in
of title and claimed that she was the only heir of Candido. And the contract, as they may not accurately reflect the parties true
so, another title was issued in her name. She in turn sold the intent. Ambiguities are construed against the drafter only when
lot to Catalina Remorin wherein Catalina mortgaged the said justified by the operative facts and surrounding circumstances.
lots. It is for this reason that the interpreter must look at the reason
behind and the circumstances under which the contract was
executed. If the words of the contract appear to be contrary to
the evident intention as revealed by the circumstances, the
After learning about it, Corazon filed a complaint for latter shall prevail over the former.
reconveyance and damages against Purificacion and Catalina.
She alleged that the two defendants connived with each other
in transferring the three lots in their names through simulated
sales. Corazon likewise filed a criminal complaint for Even assuming arguendo that the parties intended to confer
falsification and perjury against the two. upon Catalina authority to sell the disputed property, they
clearly did not intend the Agreement to be the document itself
considering that they agreed to execute such other documents
or papers as are necessary to implement the agreement, which
Purificacion and Catalina admitted the wrongful acts they did they never did. Under Article 1878, paragraph 5 of the Civil
and so they entered into a compromise agreement. However, Code, a special power of attorney is necessary for an agent to
purificacion died and so a new compromise agreement enter into any contract by which the ownership of an
between Corazon and Catalina was executed. Wherein it was immovable property is transmitted or acquired either
agreed that Corazon can sell the property to any buyer and gratuitously or for a valuable consideration. Catalina admittedly
that Catalina should continue to pay for the mortgage. did not have such a document in her favour
Also, petitioner cannot be considered a buyer in good faith

considering that she did not buy the disputed lot from its
The controversy erupted when Corazon sold the lot to registered owner. One who buys from a person who is not the
Laurelai. However, Catalina also sold the same lot to registered owner is not a buyer in good faith. Moreover, in
mariquita macapagal claiming that she was authorized to double sales of real property, ownership passes to the vendee
sell it under the compromise agreement. Laurelei filed an who, in good faith, first recorded it in the Registry of Property.
ejectment suit against macapagal but macapagal alleged that In this case, it was Laurelia who registered it first.
she was the rightful owner because Catalina had the authority
to sell the lots under the compromise agreement.
ISSUE: Whether or not Catalina was authorized to sell the

property under the compromise agreement?
HELD:
No. She is not authorized to sell the property.
Corazon was the registered owner of the disputed Lot 5 at the

time the two sales were executed. As owner, she had the right
Case 13: Air Philippines v. Intl Business Aviation plain "disregard of some duty imposed by law," a slight want of
care that "circumstances reasonably impose, and a mere
failure to exercise that degree of care that an ordinarily prudent
person would take under the circumstances. There was neither
a total abandonment or disregard of petitioners case nor a
AIR PHILIPPINES CORPORATION, petitioner, showing of conscious indifference to or utter disregard of
vs. consequences. Also, there was concurrent negligence on the
INTERNATIONAL BUSINESS AVIATION SERVICES PHILS., part of API for not extending to him the "necessary assistance.
INC., respondent. Furthermore, there was no denial of due process as claimed by
API because they were already given the chance to present
FACTS:
there side but they failed to do so.
Air Phil. Inc. (API for brevity) was in of service to ferry its plane
ISSUE # 2.) Whether or not the receipt/agreement was valid
from the United States to the Philippines. It engaged the
as it was allegedly entered into by atty. Manalo without any
services of International Business Aviation Services Phils.,
authority from a board resolution?
Inc., (IBASPI for brevity), as its agent to look for and engage,
for API, a business enterprise to ferry the airplane. IBASPI did HELD: It is valid. It was entered into by atty. Manalo as an
engage the services of Universal Weather [&] Aviation, Inc., agent for API and so it binds the company. It cannot be denied
(UWAI for brevity), to ferry the airplane. that, on its part, there was an actual intent to appoint its
counsel; and, on the latters part, to accept the appointment
and "act on it.
UWAI sent several billings to API, however, API did not
Estoppel likewise applies. If it was also true that petitioners
respond. And so, UWAI blamed IBASPI for the payments.
counsel exceeded his authority in entering into the
Unable to bear the pressure of UWAI and to avoid corporate
Receipt/Agreement, the negligence or omission of petitioner to
embarrassment for APIs intransigence, IBASPI was impelled
assert its right within a reasonable time only warranted a
to advance and pay to UWAI the said amount of US$65,131.55
presumption that it either abandoned or declined to assert it
for the account of API.
Furthermore, while it is true that a special power of
attorney (SPA) is necessary to a compromise, it is equally
In turn, IBASPI demanded from API the refund of the payment true that the herein Receipt/Agreement was not a
the made to UWAI. They sent several demand letters which compromise. The payment was made in the ordinary
were left unheeded by API. When IBASPI sent another letter course of business. Whether total or partial, the payment
with a SUMMARY STATEMENT OF ACCOUNT of API, API of an ordinary obligation is neither included among nor of
drew a check for 200,000 pesos as partial payment to IBASPI. a character similar to the instances enumerated in Article
IBASPI accepted the said check with a simultaneous 1878 of the Civil Code. All that the law requires is a
Receipt/Agreement executed by IBASPI and API, the latter, general power, not an SPA. Moreover, the
through Atty. Manolito A. Manalo, the Officer-in-Charge of the Receipt/Agreement is not a promise to pay that "amounts
Legal Department of the API, obliging itself to pay the balance to an offer to compromise and requires a special power of
of its account. However, despite several demands, API failed attorney or the express consent of petitioner." A
to pay the balance. compromise agreement is "a contract whereby the parties,
by making reciprocal concessions, avoid a litigation or put
an end to one already commenced." No such reciprocal
concessions were made in this case. Thus, the
On November 17, 1998, the court issued a pre trial notice and Receipt/Agreement is but an outright admission of
required the submission of their pretrail brief. However, there petitioner of its obligation, after making partial payment, to
was no submission on the part of API. During the pretrial, the pay the balance of its account. And even if we were to
counsel of API, Atty. Manalo appeared in behalf of the consider the same as a compromise, from its nature as a
company but without any SPA. And so the court gave 10 days contract, the absence of an SPA does not render it void,
extension for atty. Manalo to produce the pretrial brief and SPA but merely unenforceable.
but still failed to do so. Several motion for extension were
granted but to no avail, and so the court finally decided to rule
against API and ordered API to pay the balance. On the other
hand, API file for a motion for new trial as they were
deprived of their rights because of the acts of their
counsel and that Atty. Manalo had no authority to enter
into the Receipt/agreement because there was no board
resolution giving him authority to do so.
ISSUE # 1.)Whether or not API is entitle to a new trial?
HELD: NO. Axiomatic is the rule that "negligence of counsel

binds the client. The exceptions to this rule is when 1) where
reckless or gross negligence of counsel deprives the client of
due process of law; (2) when its application will result in
outright deprivation of the clients liberty or property; or (3)
1
where the interests of justice so require." None of these
exceptions aplly in the case at bar. Petitioners counsel is
guilty of simple, not gross, negligence. There was only a
Case 14: Woodchild Holdings v. Roxas Electric Article 1910 of the New Civil Code, acts done by such officers
and Construction beyond the scope of their authority cannot bind the corporation
unless it has ratified such acts expressly or tacitly, or is
estopped from denying them: Thus, contracts entered into by
WOODCHILD HOLDINGS, INC., petitioner, corporate officers beyond the scope of authority are
vs. unenforceable against the corporation unless ratified by the
ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC., corporation
respondent.
FACTS:
In this case, the respondent denied authorizing its then
Roxas Electric and Construction Company, Inc. (RECCI) was president Roberto B. Roxas to sell a portion of Lot B, and to
the owner of 2 parcels of land (lot A and lot B). A create a lien or burden thereon. The petitioner was thus
portion of Lot B was a dirt road accessing to the Sumulong burdened to prove that the respondent so authorized Roxas to
Highway. The respondents Board of Directors approved a sell the same and to create a lien. As shown in it resolution,
resolution authorizing the corporation, through its president, Roxas was not specifically authorized under the said
Roberto B. Roxas, t o s e l l L o t B a t a p r i c e a n d resolution to grant a right of way in favor of the
under such terms and conditions which he petitioner OR to agree to sell to the petitioner a portion
d e e m e d m o s t r e a s o n a b l e a n d advantageous to thereof. The authority of Roxas, under the resolution
the corporation; and to execute, sign and deliver the
pertinent sales documents a nd receive the proceeds of did not include the authority to sell a portion of the
the sale for and on behalf of the company. adjacent lot or to create or convey real rights.
Neither may such authority be implied from the

authority granted to Roxas to sell the lot t o t h e
Petitioner Woodchild Holdings, Inc (WHI) wanted to buy Lot p e t i t i o n e r o n s u c h t e r m s a n d conditions which
B on which it planned to construct its he deems most rea sonable and advantageous.
warehouse building, and a portion of the adjoining lot, so that
its 45-foot container van would be able to readily enter or leave
the property. WHI President Jonathan Y. Dy offered to buy said
Lot for P1,000 per square meter or at the price of P7,213,000 Under paragraph 12 of article 1878, a special power of
with the condition that it would be given a road right of attorney is required to convey real rights over immovable
way and in the event that the right of way is insufficient for property. Also under Article 1358, requires that contracts
the buyers purposes (example: entry of a45-foot which have for their object the creation of real rights over
container), the seller agrees to sell additional square immovable property must appear in a public instrument. The
meter from his current adjacent property to allow the rule is that if the act of the agent is one which requires
buyer to full access and full use of the property. Roxas authority in writing, those dealing with him are charged
accepted the offer and so they entered into a contract of with notice of that fact.
sale.
Powers of attorney are generally construed strictly and courts

After the warehouse was built, WHI complained to Roxas that will not infer or presume broad powers from deeds which donot
the vehicles of RECCI were always parked on the portion of sufficiently include property or subject under which the agent is
the property where they were granted a right of way. Also, to deal. The general rule is that the power of attorneymust be
WHI wanted to purchase additionally portions of RECCIs pursued within legal strictures, and the agent can neither go
property as earlier agreed upon. However, roxas died soon beyond it; nor beside it. The act done must be legallyidentical
thereafter. And so, WHI made demands to RECCI for the with that authorized to be done.
purchase of the additional lot and complained about the latters
In sum, then, the consent of the respondent to the assailed
failure to evict the squatters in the property sold.
provisions in thedeed of absolute sale was not obtained;
hence, the assailed provisions are not binding on it.
RECCI alleged that they only granted roxas the power to sell
the property but they never granted him the power to give a
RE: the issue on AGENCY BY ESTOPPEL - SC rejects the
right of way on the other property much more sell additional
petitioners submission that, in allowing Roxas to execute the
portions of it. Thus, they alleged that he acted ultra vires.
contract to sell and the deed of absolute sale and failing to
reject or disapprove the same, the respondent thereby gave
him apparent authority to grant a right of way. Absent
ISSUE: Is the respondent bound by the provisions in the deed estoppel or ratif ication, apparent authorit y cannot
of absolute sale granting to the petitioner beneficial use and a remedy the lack of the written power required under
right of way and granting the option to the petitioner to buy a the statute of frauds. In addition, the petitioners fallacy is its
portion thereof? wrong assumption of the unproved premise that the
respondent had full knowledge of all the terms and conditions
contained in the deed of absolute sale when Roxas executed
it. For the principle of apparent authority to apply, the
HELD: No, it is not bound. petitioner was burdened to prove the following:
Generally, the acts of the corporate officers within the scope of (a) The acts of the respondent justifying belief in the agency by
their authority are binding on the corporation. However, under the petitioner;
(b) knowledge thereof by the respondent which is sought to be

held; and
(c) reliance thereon by the petitioner consistent with ordinary

care and prudence.
In this case, there is no evidence on record of specific acts

made by the respondent showing or indicating that it had full
knowledge of any representations made by Roxas to the
petitioner that the respondent had authorized him to grant to
the respondent an option to buy a portion of subject Lot or to
create a burden or lien thereon, or that the respondent allowed
him to do so.
RE: the issue on IMPLIED AGENCY/RATIFICATION - The

petitioners contention that by recei ving and retaining
purchase price, the respondent effectively and
impliedly ratified the grant of a right of way on the adjacent lot,
and to grant to the petitioner an option to sell a portion thereof,
is barren of merit. T h e r e s p o n d e n t s o l d t h e l o t t o
the petitioner, and the latter had taken
possession of the property. As such, the
respondent had the right to retain the P5M the purchase price
of the property it had sold to the petitioner.
For an act of the principal to be considered as an implied

ratification of an unauthorized act of an agent, such act must
be inconsistent w i t h a n y o t h e r h y p o t h e s i s t h a n
that he approved and intended to adopt
what had been done in his name.
RATIFICATION is based on waiver, the intentional
relinquishment of a known right. Ratification cannot
be inferred from acts that a principal has a right to do
independently of the unauthorized act of the agent. Moreover,
if writing is required to grant an authority to do a particular act,
ratification of that act must also be in writing.
Since the respondent had not ratified the unauthorized acts of

Roxas, the same are unenforceable. Hence, by the
respondents retention of the amount, it cannot thereby be
implied that it had ratified the unauthorized acts of its agent,
Roberto Roxas.
Case 15: Litonjua v. Fernandez contemplated under Article 1403(2)(e) of the New Civil Code,
which reads:
Art. 1403. The following contracts are unenforceable, unless

they are ratified:
ANTONIO K. LITONJUA and AURELIO K. LITONJUA, JR.,
petitioners, (2) Those that do not comply with the Statute of Frauds as set
vs. forth in this number. In the following cases an agreement
MARY ANN GRACE FERNANDEZ, HEIRS OF PAZ TICZON hereafter made shall be unenforceable by action, unless the
ELEOSIDA, represented by GREGORIO T. ELEOSIDA, same, or some note or memorandum thereof, be in writing, and
HEIRS OF DOMINGO B. TICZON, represented by MARY subscribed by the party charged, or by his agent; evidence,
MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, therefore, of the agreement cannot be received without the
EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ, writing, or secondary evidence of its contents:
DOMINIC TICZON, JOSEFINA LUISA PIAMONTE, JOHN
DOES and JANE DOES, respondents. (e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest
therein.
FACTS: In Rosencor Development Corporation vs. Court of Appeals,

the term "statute of frauds" is descriptive of statutes which
Mrs. Lourdes Alimario and Agapito Fisico who worked as require certain classes of contracts to be in writing
brokers, offered to sell to the petitioners, Antonio K. Litonjua
and Aurelio K. Litonjua, Jr., several parcels of land. The In the case at bar, the letter of Fernandez can hardly be said to
brokers told the petitioners that they were authorized by constitute the note or memorandum evidencing the agreement
respondent Fernandez to offer the property for sale. After of the parties to enter into a contract of sale as it is very clear
making an ocular inspection, the petitioners met with that defendant-appellant as seller did not accept the condition
respondent Fernandez and the two brokers. Petitioners and that she will be the one to pay the registration fees and
respondent Fernandez agreed that the petitioners would buy miscellaneous expenses and therein also categorically denied
the property, they agreed to meet on December 8, 1995 to she had already committed to execute the deed of sale as
finalize the sale. It was also agreed upon that on the said date, claimed by the litonjuas. The tenor of the letter actually reveals
respondent Fernandez would present a special power of a consistent denial that there was any such commitment on the
attorney executed by the owners of the property, authorizing part of defendant-appellant to sell the subject lands to
her to sell the property for and in their behalf, and to execute a plaintiffs-appellees. When defendant-appellant used the words
deed of absolute sale thereon. However, only Agapito Fisico "changed our mind," she was clearly referring to the decision to
attended the meeting. He informed the petitioners that sell the property at all (not necessarily to plaintiffs-appellees)
respondent Fernandez was encountering some problems with and not in selling the property to herein plaintiffs-appellees as
the tenants. After a few weeks, the petitioners wrote defendant-appellant had not yet made the final decision to sell
respondent Fernandez demanding that their transaction be the property to said plaintiffs-appellees.
finalized. However there was no response from Fernandez, the
petitioners sent her another letter asking that the Deed of Also, there is no documentary evidence on record that the
Absolute Sale covering the property be executed in respondents-owners specifically authorized respondent
accordance with their verbal agreement. However, respondent Fernandez to sell their properties to another, including the
denied this allegation and said in a letter sent to the petitioners. Article 1878 of the New Civil Code provides that a
petitioners that due to the problems with the tenants, they special power of attorney is necessary to enter into any
have changed their mind and decided not to sell the contract by which the ownership of an immovable is
property. transmitted or acquired either gratuitously or for a valuable
consideration, or to create or convey real rights over
immovable property, or for any other act of strict dominion. Any
sale of real property by one purporting to be the agent of the
Petition filed a case for specific performance alleging that there registered owner without any authority therefor in writing from
has been a perfected contract of sale. On the other hand, the said owner is null and void. The declarations of the agent
respondent denied that there was already a perfected contract alone are generally insufficient to establish the fact or extent of
of sale. her authority. In this case, the only evidence adduced by the
petitioners to prove that respondent Fernandez was authorized
by the respondents-owners is the testimony of petitioner
Antonio Litonjua that respondent Fernandez openly
ISSUE: Whether or not there was a perfected contract of sale
represented herself to be the representative of the
between the parties?
respondents-owners, and that she promised to present to the
petitioners on December 8, 1996 a written authority to sell the
properties. However, the petitioners claim was belied by
HELD: NO. There is no perfected contract of sale. respondent Fernandez. Fernandez testified that she told them
that she was there representing as one of the owners of the
The petitioners contend that the perfection of the said contract properties, and she was just there to listen to his proposal
is evidenced by the Letter of respondent Fernandez stating because that time, they were just looking for the best offer and
that they changed their minds and they would no longer be did not have yet any written authorities from the other brother
selling the property. The petitioners argue that the letter is a and sisters and relatives.
sufficient note or memorandum of the perfected contract, thus,
removing it from the coverage of the statute of frauds. The
petitioners contention is bereft of merit. In its decision, the
appellate court ruled that the Letter of respondent Fernandez The petitioners cannot feign ignorance of respondent
dated January 16, 1996 is hardly the note or memorandum Fernandez lack of authority to sell the properties for the
respondents-owners. It must be stressed that the petitioners

are noted businessmen who ought to be very familiar with the
intricacies of business transactions, such as the sale of real
property.
Case 16: Shoppers Paradise Realty v. Roque "Q. So in effect, any information gathered by Biglang-
awa was of the same effect as if received by you
because you were members of the same team?
"A. Yes."
G.R. No. 148775 January 13, 2004
ISSUES/RULING:
SHOPPERS PARADISE REALTY & DEVELOPMENT
CORPORATION, petitioner, 1. WON knowledge by Biglang-Awa binds Petitioner. YES
vs.
EFREN P. ROQUE, respondent. The appellate court was not without substantial basis when it
found petitioner to have had knowledge of the donation at the
FACTS: time it entered into the two agreements with Dr. Roque. During
their negotiation, petitioner, through its representatives, was
Shoppers Paradise Realty & Development Corporation, apprised of the fact that the subject property actually belonged
represented by its president, Veredigno Atienza, entered into a to respondent.
twenty-five year lease with Dr. Felipe C. Roque, now
deceased, over a parcel of land.. Simultaneously, petitioner 2. WON Dr. Felipe C. Roque is an authorized agent of
and Dr. Roque likewise entered into a memorandum of respondent.NO
agreement for the construction, development and operation of
a commercial building complex on the property. In a contract of agency, the agent acts in representation or in
9
behalf of another with the consent of the latter. Article 1878 of
The contract of lease and the memorandum of agreement, the Civil Code expresses that a special power of attorney is
both notarized, were to be annotated on TCT No. 30591. The necessary to lease any real property to another person for
annotations, however, were never made because of the more than one year. The lease of real property for more than
untimely demise of Dr. Felipe C. Roque. The death of Dr. one year is considered not merely an act of administration but
Roque on 10 February 1994 constrained petitioner to deal with an act of strict dominion or of ownership. A special power of
respondent Efren P. Roque, one of the surviving children of the attorney is thus necessary for its execution through an
late Dr. Roque, but the negotiations broke down due to some agent.1awphil.ne+
disagreements.
3. WON Respondent is guilty of laches and of estoppel.
Respondent filed a case for annulment of the contract of lease NO
and the memorandum of agreement.. Efren P. Roque alleged
that he had long been the absolute owner of the subject The Court cannot accept petitioners argument that respondent
property by virtue of a deed of donation inter vivos executed in is guilty of laches. Laches, in its real sense, is the failure or
his favor by his parentsand that the late Dr. Felipe Roque had neglect, for an unreasonable and unexplained length of time, to
no authority to enter into the assailed agreements with do that which, by exercising due diligence, could or should
petitioner. The title to the property, however, remained in the have been done earlier; it is negligence or omission to assert a
name of Dr. Felipe C. Roque, and it was only transferred to right within a reasonable time, warranting a presumption that
and in the name of respondent sixteen years later. the party entitled to assert it either has abandoned or declined
10
Respondent, while he resided in the United States of America, to assert it.
delegated to his father the mere administration of the property.
Respondent came to know of the assailed contracts with Respondent learned of the contracts only in February 1994
petitioner only after retiring to the Philippines upon the death of after the death of his father, and in the same year, during
his father. November, he assailed the validity of the agreements. Hardly,
could respondent then be said to have neglected to assert his
During the cross-examination, it was shown that Architect case for unreasonable length of time.
Biglang-Awa (team mate of Plaintiff in building the project),
before the execution of the Contract of Lease and Neither is respondent estopped from repudiating the contracts.
Memorandum of Agreement, had knowledge that the parcels of It has not been shown that respondent intended to conceal the
land involved were donated to the sons of Dr. Roque. actual facts concerning the property; more importantly,
petitioner has been shown not to be totally unaware of the real
"Q. When was the information supplied to you by ownership of the subject property.
Biglang-awa? Before the execution of the Contract of
Lease and Memorandum of Agreement?
"A. Yes.
"Q. That being the case, at the time of the execution

of the agreement or soon before, did you have such
information confirmed by Dr. Felipe C. Roque
himself?
"A. Biglang-awa did it for us.
"Q. But you yourself did not?
"A. No, because I was doing certain things. We were

a team and so Biglang-awa did it for us.
Case 17: Bicol Savings v. CA 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
G.R. No. 85302 March 31, 1989 exclusively, foreclosing the same at any time before it is barred
by prescription, without right to file a claim for any deficiency.
BICOL SAVINGS AND LOAN ASSOCIATION, petitioner,
vs. It matters not that the authority to extrajudicially foreclose was
HON. COURT OF APPEALS, CORAZON DE JESUS, LYDIA granted by an attorney-in-fact and not by the mortgagor
DE JESUS, NELIA DE JESUS, JOSE DE JESUS, AND personally. The stipulation in that regard, although ancillary,
PABLO DE JESUS, respondents. forms an essential part of the mortgage contract and is
inseparabletherefrom. No creditor will agree to enter into a
FACTS: mortgage contract without that stipulation intended for its
protection.
Juan de Jesus was the owner of a parcel of land, containing an
area of 6,870 sq. ms., more or less, situated in Naga City. On Petitioner bank, therefore, in effecting the extrajudicial
31 March 1976, he executed a Special Power of Attorney in foreclosure of the mortgaged property, merely availed of a right
favor of his son, Jose de Jesus, "To negotiate, mortgage my conferred by law. The auction sale that followed in the wake of
real property in any bank either private or public entity that foreclosure was but a consequence thereof.
preferably in the Bicol Savings Bank, Naga City, in any amount
that may be agreed upon between the bank and my attorney- NB : Article 1879 of the Civil Code, relied on by the Appellate
in-fact." Court in ruling against the validity of the extrajudicial
foreclosure sale, reads:
By virtue thereof, Jose de Jesus obtained a loan of twenty
thousand pesos (P20,000.00) from petitioner bank on 13 April Art. 1879. A special power to sell excludes
1976. To secure payment, Jose de Jesus executed a deed of the power to mortgage; and a special power
mortgage on the real property. Juan de Jesus died in the to mortgage does not include the power to
meantime on a date that does not appear of record. sell.
By reason of his failure to pay the loan obligation even during We find the foregoing provision inapplicable herein.
his lifetime, petitioner bank caused the mortgage to be
extrajudicially foreclosed on 16 November 1978. In the The sale proscribed by a special power to mortgage under
subsequent public auction, the mortgaged property was sold Article 1879 is a voluntary and independent contract, and not
to the bank as the highest bidder to whom a Provisional an auction sale resulting from extrajudicial foreclosure, which is
Certificate of Sale was issued. precipitated by the default of a mortgagor. Absent that default,
no foreclosure results. The stipulation granting an authority to
Private respondents herein, including Jose de Jesus, who are extrajudicially foreclose a mortgage is an ancillary stipulation
all the heirs of the late Juan de Jesus, failed to redeem the supported by the same cause or consideration for the
property within one year from the date of the registrationof the mortgage and forms an essential or inseparable part of that
Provisional Certificate of Sale on 21 November 1980. Hence, a bilateral agreement (Perez v. Philippine National Bank, No. L-
Definite Certificate of Sale was issued in favor of the bank on 7 21813, July 30, 1966, 17 SCRA 833, 839).
September 1982.
On 31 January 1983 private respondents herein filed a

Complaint with the then Court of First Instance of Naga City for
the annulment of the foreclosure sale or for the repurchase by
them of the property.
ISSUE:
The pivotal issue is the validity of the extrajudicial foreclosure

sale of the mortgaged property instituted by petitioner bank
which, in turn hinges on whether or not the agent-son
exceeded the scope of his authority in agreeing to a stipulation
in the mortgage deed that petitioner bank could extrajudicially
foreclose the mortgaged property.
HELD:
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 latter's own protection. That power survives
the death of the mortgagor (Perez vs. PNB, supra). In fact, the
right of the mortgagee bank to extrajudicially foreclose the
mortgage after the death of the mortgagor Juan de Jesus,
acting through his attorney-in-fact, Jose de Jesus, did not
depend on the authorization in the deed of mortgage
executed by the latter. That right existed independently of
said stipulation and is clearly recognized in Section 7, Rule
86 of the Rules of Court, which grants to a mortgagee three
remedies that can be alternatively pursued in case the
mortgagor dies, to wit: (1) to waive the mortgage and claim the
principal. Neither is it ordinarily sufficient that in the mortgage

the agent describes himself as acting by virtue of a power of
Case 18: Rural Bank of Bombon v. CA attorney, if in fact the agent has acted in his own name and
has set his own hand and seal to the mortgage. This is
especially true where the agent himself is a party to the
instrument. However clearly the body of the mortgage may
show and intend that it shall be the act of the principal, yet,
G.R. No. 95703 August 3, 1992
unless in fact it is executed by the agent for and on behalf of
RURAL BANK OF BOMBON (CAMARINES SUR), INC., his principal and as the act and deed of the principal, it is not
petitioner, valid as to the principal.In view of this rule, Aquino's act of
vs. signing the Deed of Real Estate Mortgage in his name alone
HON. COURT OF APPEALS, EDERLINDA M. GALLARDO, as mortgagor, without any indication that he was signing for
DANIEL MANZO and RUFINO S. AQUINO, respondents. and in behalf of the property owner, Ederlinda Gallardo, bound
himself alone in his personal capacity as a debtor of the
FACTS: petitioner Bank and not as the agent or attorney-in-fact of
Gallardo.
Ederlinda M. Gallardo, married to Daniel Manzo, executed a
special power of attorney in favor of Rufina S. Aquino ISSUE 2: WON Gallardo can be considered as a surety. NO
authorizing him:To secure a loan from any bank or lending
institution for any amount or otherwise mortgage the property In effect, with the execution of the mortgage under the
covered by Transfer Certificate of Title No. S-79238, the same circumstances and assuming it to be valid but because the
being my paraphernal property, and in that connection, to sign, loan taken was to be used exclusively for Aquino's business in
or execute any deed of mortgage and sign other document the "bangus" and "sugpo" production, Gallardo in effect
requisite and necessary in securing said loan and to receive becomes a surety who is made primarily answerable for loans
the proceeds thereof in cash or in check and to sign the receipt taken by Aquino in his personal capacity in the event Aquino
therefor and thereafter endorse the check representing the defaults in such payment. Under Art. 1878 of the Civil Code, to
proceeds of loan. obligate the principal as a guarantor or surety, a special power
of attorney is required. No such special power of attorney for
A Deed of Real Estate Mortgage was executed by Rufino S. Gallardo to be a surety of Aquino had been executed.
Aquino in favor of the Rural Bank of Bombon over the three
parcels of land covered by TCT No. S-79238. The deed stated
that the property was being given as security for the payment
of "certain loans, advances, or other accommodations obtained
by the mortgagor from the mortgagee in the total sum of Three
Hundred Fifty Thousand Pesos only (P350,000.00), plus
interest at the rate of fourteen (14%) per annum . . ."
On January 6, 1984, the spouses Ederlinda Gallardo and

Daniel Manzo filed an action against Rufino Aquino and the
Bank because Aquino allegedly mortgaged the property to pay
personal loans obtained by Aquino from the Bank solely for
personal use and benefit of Aquino.
ISSUE 1: WON the deed of real estate mortgage, executed

between Rufino S. Aquino with the marital consent of his
wife Bibiana Aquino with the appellee Rural Bank of
Bombon, Camarines Sur, was enforceable against plaintiff
Ederlinda Gallardo. NO
The three (3) promissory notes respectively dated August 31,

1981, September 23, 1981 andOctober 26, 1981, were each
signed by Rufino Aquino on top of a line beneath which is
written "signature of mortgagor" and by Bibiana P. Aquino on
top of a line under which is written "signature of spouse,"
without any mention that execution thereof was for and in
behalf of the plaintiff as mortgagor. It results, borne out from
what were written on the deed, that the amounts were the
personal loans of defendant Aquino. As pointed out by the
appellant, Aquino's wife has not been appointed co-agent of
defendant Aquino and her signature on the deed and on the
promissory notes can only mean that the obligation was
personally incurred by them and for their own personal
account.
It is a general rule in the law of agency that, in order to bind the

principal by a mortgage on real property executed by an agent,
it must upon its face purport to be made, signed and sealed in
the name of the principal, otherwise, it will bind the agent only.
It is not enough merely that the agent was in fact authorized to
make the mortgage, if he has not acted in the name of the
Case 19: NFA v. IAC Consequently, when things belonging to the principal (in this
case, Superior Shipping Corporation) are dealt with, the agent
is bound to the principal although he does not assume the
NATIONAL FOOD AUTHORITY, (NFA), petitioner, character of such agent and appears acting in his own name.
vs. In other words, the agent's apparent representation yields to
INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) the principal's true representation and that, in reality and in
SHIPPING CORPORATION, respondents. effect, the contract must be considered as entered into
between the principal and the third person (Sy Juco and Viardo
FACTS: v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be
obliged to perform his duties under the contract, then it can
On September 6, 1979 Gil Medalla, as commission agent of
also demand the enforcement of its rights arising from the
the Superior Shipping Corporation, entered into a contract for
contract.
hire of ship known as "MV Sea Runner" with defendant
National Grains Authority. Under the said contract Medalla
obligated to transport on the "MV Sea Runner" 8,550 sacks of
rice belonging to National Grains Authority. Upon completion of
the delivery of rice at its destination, Superior Shipping on
October 17, 1979, wrote a letter requesting NGA that it be
allowed to collect the amount stated in its statement of account
(Exhibit "D"). The statement of accountincluded not only a
claim for freightage but also claims for demurrage and
stevedoring charges amounting to P93,538.70.
On November 5, 1979, Superior Shipping wrote again NGA,

this time specifically requesting that the payment for freightage
and other charges be made to it and not to defendant Medalla
because he was the owner of the vessel "MV Sea Runner"
(Exhibit "E"). In reply, NGA on November 16, 1979 informed
Superior Shipping that it could not grant its request because
the contract to transport the rice was entered into by NGA and
Medalla who did not disclose that he was acting as a mere
agent. Thereupon on November 19, 1979, NGA paid defendant
Medalla the sum of P25,974.90, for freight services in
connection with the shipment of 8,550 sacks of rice (Exhibit
"A").
On December 4, 1979, plaintiff wrote defendant Medalla

demanding that he turn over to plaintiff the amount of
P27,000.00 paid to him by defendant NFA. Defendant Medalla,
however, "ignored the demand."Petitioner submits that "(A)n
undisclosed principal cannot maintain an action upon a
contract made by his agent unless such principal was
disclosed in such contract. One who deals with an agent
acquires no right against the undisclosed principal."
ISSUE: WON Principal Superior Shipping has a cause of

action in this case. YES
HELD: Petitioner NFA's contention holds no water. It is an

undisputed fact that Gil Medalla was a commission agent of
respondent Superior Shipping Corporation which owned the
vessel "MV Sea Runner" that transported the sacks of rice
belonging to petitioner NFA. The context of the law is clear.
Art. 1883, which is the applicable law in the case at bar
provides:
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 persons
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 provision of this article shall be

understood to be without prejudice to the
actions between the principal and agent.
Case 20: Gold Star Mining v. Jimena From another standpoint, equally valid and acceptable, it can
be said that Lincallo, in transferring the mining claims to Gold
Star (without disclosing that Jimena was a co-owner although
GOLD STAR MINING CO., INC., petitioner, Gold Star had knowledge of the fact as shown by the proofs
vs. heretofore mentioned) acted as Jimena's agent with respect to
MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA JIMENA, Jimena's share of the claims.
AURORA JIMENA, JAIME JIMENA, DANTE JIMENA,
JORGE JIMENA, JOYCE JIMENA, as legal heirs of the Under such conditions, Jimena has an action against Gold
deceased VICTOR JIMENA, and JOSE HIDALGO, Star, pursuant to Article 1883, New Civil Code, which provides
respondents. that the principal may sue the person with whom the agent
dealt with in his (agent's) own name, when the transaction
FACTS: In 1937, Ananias Isaac Lincallo bound himself in "involves things belonging to the principal."
writing to turn to Victor Jimena one-half (1/2) of the proceeds
from all mining claims that he would purchase with the money As counsel for Jimena has correctly contended, "the remedy of
to be advanced by the latter. This agreement was later on garnishment suggested by Gold Star is utterly inadequate for
modified (in a 1939 notarial instrument duly registered with the the enforcement of Jimena's right against Lincallo because
Register of Deeds of Marinduque in his capacity as mining Jimena wanted an accounting and wanted to receive directly
recorder) so as to include in the equal sharing arrangement not his share of the royalties from Gold Star. That recourse is not
only the proceeds from several mining claims, which by that open to Jimena unless Gold Star is made a party in this
time had already been purchased by Lincallo with various action."
sums totalling P5,800.00 supplied by Jimena, but also the
lands constituting the same, and so as to bind thereby their
"heirs, assigns, or legal representatives." Apparently, the
mining rights over part of the claims were assigned by Lincallo
to Gold Star Mining Co., Inc., sometime before World War Il
because in 1950 the corporation paid him P5,000 in
consideration of, and as a quitclaim for, pre-war royalties.
Jimena commenced a suit against Lincallo for recovery of his

advances and his one-half share in the royalties. Gold Star
Mining Co., Inc., and Marinduque Iron Mines, Inc., together
with Tolentino, were later joined as defendants.
On 17 September 1954, the trial court issued, upon petition of

Jimena, a writ of preliminary injunction restraining Gold Star
Mining Co., Inc., and Marinduque Iron Mines Agents, Inc., from
paying royalties during the pendency of the case to Lincallo,
his assigns or legal representatives. Despite the injunction,
however, Gold Star Mining Co., Inc., was found out to have
paid P30, 691.92 to Lincallo and Tolentino.
After a protracted trial, the lower court rendered a decision xxx

Judgment is rendered condemning defendant Gold Star Mining
Company to pay to plaintiffs solidarily with Lincallo and to be
imputed to Lincallo's liability under this judgment unto Jimena,
the sum of P30,691.92;
ISSUE: WON Jimena has a cause of action against

GoldStar. YES
HELD: Here the evidence overwhelmingly established that

Jimena made prewar and postwar demands upon Gold Star for
the payment of his 1/2 share of the royalties but all in vain so
he (Jimena) was constrained to implead Gold Star because it
refused to recognize his right.
Jimena now seeks for accounting of the royalties paid by Gold

Star to Lincallo, and for direct payment to himself of his share
of the royalties. This relief cannot be granted without joining
the Gold Star specially in the face of the attitude it had
displayed towards Jimena.
Borrowing the Spanish maxim cited by Jimena's counsel, "el

deudor de mi deudor es deudor mio," this legal maxim finds
sanction in Article 1177, new Civil Code which provides that
"creditors, after having pursued the property in possession of
the debtor to satisfy their claims, may exercise all the rights
and bring all the actions of the latter (debtor) for the same
purpose, save those which are inherent in his person; they
may also impugn the acts which the debtor may have done to
defraud them (1111)."
Obligations of an Agent make any admission which would bind them. As a local
agent, it could not do that without express authority.
CASE 1: MACIAS VS WARNER That power could only exercised by an executive officer of
the company, or a person who was duly authorized to act
for, and represent, the company in legal proceedings, and
FACTS:
there is no claim or pretense, either express or implied,
The plaintiff is a corporation duly registered and that the defendant has any such authority.
domiciled in Manila. The defendant is a corporation duly
The only defendant in the instant case is "Warner, Barnes
licensed to do business in the Philippine Islands, and is
& Co., in its capacity as agents of:" the insurance
the resident agent of insurance companies "The China
companies. Warner, Barnes & Co. did not make any
Fire Insurance Company, Limited, of Hongkong," "The
contract with the plaintiff, and are not liable to the
Yang-Tsze Insurance Association Limited, of Shanghai,"
plaintiff on any contract, either as principal or agent. For
and "The State Assurance Company, Limited, of
such reason, plaintiff is not entitled to recover its losses
Liverpool. Macias applied for insurance policy against fire
from Warner, Barnes & Co., either as principal or agent.
from defendant. March 25, 1919, and while the policies
There is no breach of any contract with the plaintiff by
were in force, a loss occurred in which the insured
Warners, Barnes & Co., either as agent or principal, for
property was more or less damaged by fire and the use of
the simple reason that Warner, Barnes & Co., as agent or
water resulting from the fire. The plaintiff made a claim
principal, never made any contract, oral or written, with
for damages under its policies, but could not agree as to
the plaintiff.
the amount of loss sustained. It sold the insured property
in its then damaged condition, and brought this action
against Warner, Barnes & Co., in its capacity as agents, to
recover the difference between the amount of the policies
and the amount realized from the sale of the property.
(The material facts are not in dispute it must be conceded

that the policies in question were issued by the different
insurance companies, through the defendant as their
respective agent; that they were issued in consideration of
a premium which was paid by the insured to the
respective companies for the amount of the policies, as
alleged; that the defendant was, and is now, the resident
agent in Manila of the companies, and was authorized to
solicit and do business for them as such agent; that each
company is a foreign corporation. The principal office and
place business of the The China Fire Insurance Company
is at Hongkong; of The Yang-Tsze Insurance Association
is at Shanghai; and of The State Assurance Company is at
Liverpool. As such foreign corporations they were duly
authorized and licensed to do insurance business in the
Philippine Islands, and, to that end and for that purpose,
the defendant corporation, Warner, Barnes & Co., was the
agent of each company.)
ISSUE:
W/N Warner, Barnes & Co. is liable to Macias?- NO.
RULING:
Warner, Barnes & Co., as principal or agent, did not

make any contract, either or written, with the plaintiff.
The contracts were made between the respective
insurance companies and the insured, and were made by
the insurance companies, through Warner, Barnes & Co.,
as their agent.
There is not claim or pretense that Warner, Barnes & Co.

had any authority to act for, and represent the insurance
companies in the pending action, or to appear for them or
CASE 2: PNB VS RITTRATO GROUP In any case, the parent-subsidiary relationship between
PNB and PNB-IFL is not the significant legal relationship
involved in this case since the petitioner was not sued
FACTS:
because it is the parent company of PNB-IFL. Rather, the
Petitioner Philippine National Bank is a domestic petitioner was sued because it acted as an attorney-in-fact
corporation organized and existing under Philippine law. of PNB-IFL in initiating the foreclosure proceedings. A
Meanwhile, respondents Ritratto Group, Inc., Riatto suit against an agent cannot without compelling
International, Inc. and Dadasan General Merchandise are reasons be considered a suit against the principal.
domestic corporations, likewise, organized and existing Under the Rules of Court, every action must be
under Philippine law. On May 29, 1996, PNB International prosecuted or defended in the name of the real party-in-
Finance Ltd. (PNB-IFL) a subsidiary company of PNB, interest, unless otherwise authorized by law or these
organized and doing business in Hong Kong, extended a Rules.18 In mandatory terms, the Rules require that
letter of credit in favor of the respondents in the amount "parties-in-interest without whom no final determination
of US$300,000.00 secured by real estate mortgages. can be had, an action shall be joined either as plaintiffs or
Respondents made repayments of the loan incurred by defendants."19 In the case at bar, the injunction suit is
remitting those amounts to their loan account with PNB- directed only against the agent, not the principal.
IFL in Hong Kong. Pursuant to the terms of the real estate
All told, respondents do not have a cause of action
mortgages, PNB-IFL, through its attorney-in-fact PNB,
against the petitioner as the latter is not privy to the
notified the respondents of the foreclosure of all the real
contract the provisions of which respondents seek to
estate mortgages and that the properties subject thereof
declare void. Accordingly, the case before the
were to be sold at a public auction on May 27, 1999 at the
Regional Trial Court must be dismissed and the
Makati City Hall. Respondent filed a case for injunction
preliminary injunction issued in connection
which was granted. The petitioners on the other hand
therewith, must be lifted.
filed a petition for certiorari before the CA in relation to
the issuance of a restraining order, but the same was - On the issue of the restraining order: It must
denied. In this case, the petitioners assert that no cause of be lifted.
action exists against PNB, which is not a real party in
interest being a mere attorney-in-fact authorized to
enforce an ancillary contract. In their Comment,
respondents argue that even assuming arguendo that
petitioner and PNB-IFL are two separate entities,
petitioner is still the party-in-interest in the application
for preliminary injunction because it is tasked to commit
acts of foreclosing respondents' properties.
ISSUE: W/N PNB is real party in interest NO.
RULING: The contract questioned is one entered into

between respondent and PNB-IFL, not PNB. In their
complaint, respondents admit that petitioner is a mere
attorney-in-fact for the PNB-IFL with full power and
authority to, inter alia, foreclose on the properties
mortgaged to secure their loan obligations with PNB-IFL.
In other words, herein petitioner is an agent with limited
authority and specific duties under a special power of
attorney incorporated in the real estate mortgage. It is
not privy to the loan contracts entered into by
respondents and PNB-IFL.
Aside from the fact that PNB-IFL is a wholly owned

subsidiary of petitioner PNB, there is no showing of the
indicative factors that the former corporation is a mere
instrumentality of the latter are present. Neither is there a
demonstration that any of the evils sought to be
prevented by the doctrine of piercing the corporate veil
exists. Inescapably, therefore, the doctrine of piercing the
corporate veil based on the alter ego or instrumentality
doctrine finds no application in the case at bar.
CASE 3: NATIONAL POWER CORPORATION v. he contracts sufficient notice of his powers is

NATIONAL MERCHANDISING CORPORATION personally liable to such party.
The rule that every person dealing with

AND DOMESTIC INSURANCE COMPANY OF THE an agent is put upon an inquiry and must
PHILIPPINES OCTOBER 23, 1982 discover upon his peril the authority of the agent,
applies if the principal is sought to be held liable
on the contract entered into by the agent, but not
Nature: agent of seller guaranteed to purchaser in this case where it is the agent that is sought to
availability of vessel to ship quantity of sulfur purchased be held liable on a contract of sale which was
contrary to sellers instruction that sale be subject to expressly repudiated by the principal because the
availability of vessel agent took chances, it exceeded its authority,
and, in effect, it acted in its own name.
FACTS: NAPOCOR (NPC) and NAMERCO, the latter as
representative of its Principal International commodities The truth is that even before the contract of sale
corporation (a new York firm), executed in manila a was signed Namerco was already aware that its
contract for the purchase by NPC from the principal principal was having difficulties in booking
company of crude sulfur for NPCs Maria Cristina shipping space. In a cable dated October 16, 1956,
Fertilizer Plant in Iligan City. A performance bond was or one day before the contract of sale was signed,
executed by Domestic Insurance Company (DIC), in favor the New York supplier advised Namerco that the
of NPC to guarantee the principals obligation. However, latter should not sign the contract unless it
the principal was not able to deliver the sulfur due to its (Namerco) wished to assume sole responsibility
inability to secure shipping space. for the shipment.
Sycip, Namercos president, replied in his letter
Under the contract, the non-availability of a steamer to to the seller dated also October 16, 1956, that he
transport the sulfur was not a ground for non-payment of had no choice but to finalize the contract of sale
the liquidated damages in case of non-performance by the because the NPC would forfeit Namercos
seller, and the NaMerCo even guaranteed and made itself bidders bond in the sum of P45,100 posted by the
responsible for the availability of bottom or vessel. Domestic Insurance Company if the contract was
not formalized.
It appeared that before the contract was signed, the Three days later, or on October 19, the New York
Principal advised its agent Namerco that the sale was firm cabled Namerco that the firm did not
subject to the availability of a steamer and that Namerco consider itself bound by the contract of sale and
should not sign the contract unless it wished to assume full that Namerco signed the contract on its own
responsibility of the shipment. However, Namerco did not responsibility.
disclose the cable to NPC when it finalized the contract. In its letters dated November 8 and 19, 1956, the
Contrary to its principals instruction, it agreed that non- New York corporation informed Namerco that
availability of a steamer was not a justification for since the latter acted contrary to the formers
nonpayment of liquidated damages. cabled instructions, the former disclaimed
responsibility for the contract and that the
The principal company disclaimed responsibility for the responsibility for the sale rested on Namerco.
contract. Thus, NAPOCOR sued the principal company, The letters of the New York firm dated November
agent Namerco and surety DIC for the recovery of 26 and December 11, 1956 were even more
liquidated damages. revealing. It bluntly told Namerco that the latter
was never authorized to enter into the contract
The case against the principal was dismissed for lack of and that it acted contrary to the re-peated
jurisdiction because it was not doing business in the instructions of the former.
Philippines. Surety DIC contended that it was not liable VP of the NY firm to Namerco: As we have
to Napocor because its bond was posted, not for pointed out to you before, you have acted
Namerco, but for the principal company, which was not strictly contrary to our repeated instructions
liable on the contract of sale. and, however regretfully, you have no one
but yourselves to blame.
Defense of NAMERCO: it was incumbent upon
NAPOCOR to inquire into the extent of the agents Who should be held liable for the liquidated
authority and for its failure to do so, it could not claim damages?
any liquidated damages Answer to the defendants contention that every
person dealing with an agent is put upon inquiry
ISSUE: is the agent NAMERCO liable to NAPOCOR for and must discover upon his peril the authority of
the recovery of stipulated liquidated damages? the agent would apply in this case if the principal
is sought to be held liable on the contract entered
Held: into by the agent.
(1) Agent who exceeded his authority personally That is not so in this case. Here, it is the agent
liable. Yes. that is sought to be held liable on a contract of sale
which was expressly repudiated by the principal
NMC is liable for damages because under because the agent took chances, it exceeded its
Article 1897, the agent who exceeds the limits of authority and, in effect, it acted in its own name.
his authority without giving the party with whom
Manresa says that the agent who exceeds the

limits of his authority is personally liable and the
third person who contracts with the agent in
such a case would be defrauded if he would not
be allowed to sue the agent.
Unenforceable contract? Yes against the principal.

But it is enforceable against NAMERCO and the surety.
The defendants cite article 1403 of the Civil Code
which provides that a contract entered into in the
name of another person by one who has acted
beyond his powers is unenforceable.
This refers to the unenforceability of the
contract against the principal. In the instant
case, the contract containing the stipulation for
liquidated damages is not being enforced against
its principal but against the agent and its surety.
It is being enforced against the agent because
article 1897 implies that the agent who acts in
excess of his authority is personally liable to
the party with whom he contracted.
And that rule is complemented by article 1898 of
the Civil Code which provides that if the agent
contracts in the name of the principal, exceeding
the scope 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.
As priorly discussed, Namerco, as agent,
exceeded the limits of its authority in contracting
with the NPC in the name of its principal. The
NPC was unaware of the limitations on the
powers granted by the New York firm to
Namerco.
Namerco never disclosed to the NPC the cabled
or written instructions of its principal. For that
reason and because Namerco exceeded the limits
of its authority, it virtually acted in its own name
and not as agent and it is, therefore, bound by
the contract of sale which, however, is not
enforceable against its principal.
If, as contemplated in articles 1897 and 1898,
Namerco is bound under the contract of sale,
then it follows that it is bound by the stipulation
for liquidated damages in that contract.
It would be unjust and inequitable for Namerco
to escape liability after it had deceived the NPC.
Domestic Insurance Companys liability
ISSUE: Is the surety liable to NAPOCOR?

HELD:
(2) Surety liable on its performance bond. The
contention of DIC cannot be sustained.
The rule is that want of authority of the
person who executes an obligation as the agent
or representative of the principal will not, as a
general rule, affect the suretys liability thereon,
especially in the absence of fraud, even though
the obligation is not binding on the principal.
In this case, it was NMC that actually

solicited the bond from DIC and NMC is being
held liable under the contract of sale because it
virtually acted in its own name. It became the
principal in the performance bond. In the last
analysis, DIC acted as surety for NMC.
CASE 4: PHILIPPINE PRODUCTS COMPANY V. corporation.1 Although, the solution should not be
PRIMATERIA ZURICH, difficult, since we already held that such foreign
corporation may be sued here. And obviously, liability
Primateria Philippines, Alexander Baylin and Jose of the agent is necessarily premised on the inability to
Crame sue the principal or non-liability of such principal. In the
GR L-17160 November 29, 1965
absence of express legislation, of course.
rd
Nature: 3 person seeks to recover from both the
principal and agent (article 1897)
FACTS: Primateria Zurich is a foreign juridical entity

engaged in international trade with agricultural products.
In 1951, through its agent Primateria Philippines with
Alexander Baylin and Jose Crame as its officers, it entered
into an agreement with a domestic companyPhilippine
Products company whereby they undertook to buy copra
in the Philippines for the account of Primateria Zurich.
Philippine products company caused the shipment of
copra to foreign countries but it wasnt paid for such
transactions. Thus, an action to recover a sum of money
was filed against the foreign company and its agents in
the Philippines.
Lower court held the foreign company (Primateria

Zurich) liable but its agentsPrimateria Philippines,
Alexander and Jose were absolved from any and all
liabilities.
Contention of plaintiff PPC: it appealed from that error

where the court dismissed the complaint against the
agents because according to it, Primateria Zurich is a
foreign corporation doing transactions in the Philippines
without license; thus, its agents here are personally liable
for the contracts made in its behalf. It claimed recovery
from both principal and agent.
ISSUE #1: WON PPC can recover from BOTH the

principal and its agent
Held: NO.
PPC cannot recover from both the principal and

agent. PPC has been given judgment against the principal
Primateria Zurich for the whole amount. It asked for such
judgment and did not appeal from it. It clearly stated that
its appeal concerned the 3 other defendants.
ISSUE #2: WON its agents may be held personally liable

rd
on the contracts made in the name of the entity with 3
persons in the Philippines based on Article 1897
Held: NO.
There is no proof that, as agents,

they exceeded the limits of their authority. In fact, the
principal Primateria Zurich who should be the one
to raise the point, never raised it, denied its liability on
the ground of excess of authority. At any rate, the article
does not hold that in cases of excess of authority, both the
agent and the principal are liable to the other contracting
party.
This view of the cause dispenses with the

necessity of deciding the other two issues, namely:
whether the agent of a foreign corporation doing
business, but not licensed here is personally liable for
contracts made by him in the name of such
CASE 5: SAFIC ALCAN & CIE V. IMPERIAL authorize Monteverde to enter into speculative
VEGETABLE OIL contracts.7 In fact, Monteverde had earlier proposed
that the company engage in such transactions but the
GR 126751 March 28, 2001 IVO Board rejected his proposal.8 Since the 1986
contracts marked a sharp departure from past IVO
NATURE: ultra vires acts of corporate officers transactions, Safic should have obtained from
Monteverde the prior authorization of the IVO Board.
FACTS: In 1985, Safic Alcan & Cie (SAC), a corporation,
entered into an agreement with Imperial Vegetable Oil Safic cannot rely on the doctrine of implied
Co., Inc. (IVO) whereby the latter shall deliver tones of agency because before the controversial 1986
coconut oil to SAC. Both parties complied. IVO was contracts, IVO did not enter into identical contracts with
represented by its president, Dominador Monteverde. Safic. The basis for agency is representation and a
In 1986, SAC again entered into an several agreements person dealing with an agent is put upon inquiry and
with IVO but this time it was agreed that IVO shall must discover upon his peril the authority of the
deliver the coconut oil 8 months from the agreement or agent.9 In the case of Bacaltos Coal Mines v. Court of
sometime in 1987. This time, IVO failed to deliver and Appeals,10 we elucidated the rule on dealing with an
SAC sued IVO. agent thus, Every person dealing with an agent is put
upon inquiry and must discover upon his peril the
IVO in its defense aver that Monteverde was acting authority of the agent. If he does not make such inquiry,
beyond his power as president when he made the 1986 he is chargeable with knowledge of the agents
agreement with SAC; that Monteverde is acting beyond authority, and his ignorance of that authority will not be
his power because the 1986 contracts were speculative any excuse. Persons dealing with an assumed agent,
in nature and speculative contracts are prohibited by whether the assumed agency be a general or special
the by-laws of IVO. one, are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the agency
SAC insists that there is an implied agency between IVO but also the nature and extent of the authority, and in
and Monteverde because SAC and Monteverde has case either is controverted, the burden of proof is upon
been transacting since 1985 and that IVO benefited them to establish it.11
from said transactions.
The most prudent thing petitioner should have
ISSUE: Whether or not Monteverdes act in entering done was to ascertain the extent of the authority of
into the 1986 contracts is ultra vires. Dominador Monteverde. Being remiss in this regard,
petitioner can not seek relief on the basis of a supposed
HELD: Yes. agency.
It was proven by IVO, when they presented a Under Article 189812 of the Civil Code, the acts
copy of their by-laws, that Monteverde acted beyond of an agent beyond the scope of his authority do not
his authority when he entered into speculative bind the principal unless the latter ratifies the same
contracts with SAC in 1986. The 1986 contracts are expressly or impliedly. It also bears emphasizing that
speculative because at the time of the contracts, the when the third person knows that the agent was acting
coconuts are not even growing at that time and are yet beyond his power or authority, the principal can not be
to be harvested. Hence, the 1986 contracts are sales of held liable for the acts of the agent. If the said third
mere expectations and this is something prohibited by person is aware of such limits of authority, he is to
the by-laws and the Board of Directors of IVO. blame, and is not entitled to recover damages from the
agent, unless the latter undertook to secure the
It can be clearly seen from the foregoing principals ratification.13
provision of IVOs By-laws that Monteverde had no There was no such ratification in this case. When
blanket authority to bind IVO to any contract. He must Monteverde entered into the speculative contracts with
act according to the instructions of the Board of Safic, he did not secure the Boards approval.14 He also
Directors. Even in instances when he was authorized to did not submit the contracts to the Board after their
act according to his discretion, that discretion must not consummation so there was, in fact, no occasion at all
conflict with prior Board orders, resolutions and for ratification. The contracts were not reported in
instructions. The evidence shows that the IVO Board IVOs export sales book and turn-out book.15 Neither
knew nothing of the 1986 contracts6 and that it did not were they reflected in other books and records of the
corporation.16 It must be pointed out that the Board of

Directors, not Monteverde, exercises corporate
power.17 Clearly, Monteverdes speculative contracts
with Safic never bound IVO and Safic cannot therefore
enforce those contracts against IVO.
To bolster its cause, Safic raises the novel point

that the IVO Board of Directors did not set limitations
on the extent of Monteverdes authority to sell coconut
oil.
It must be borne in mind in this regard that a

question that was never raised in the courts below can
not be allowed to be raised for the first time on appeal
without offending basic rules of fair play, justice and
due process.18 Such an issue was not brought to the
fore either in the trial court or the appellate court, and
would have been disregarded by the latter tribunal for
the reasons previously stated. With more reason, the
same does not deserve consideration by this Court.
Be that as it may, Safics belated contention

that the IVO Board of Directors did not set limitations
on Monteverdes authority to sell coconut oil is belied
by what appears on the record. Rodrigo Monteverde,
who succeeded Dominador Monteverde as IVO
President, testified that the IVO Board had set down the
policy of engaging in purely physical trading.
CASE 6: SIREDY ENTERPRISES V. CA and HELD: By the relationship of agency, one party called
Conrado de Guzman the principal authorizes another called the agent to act
for and in his behalf in transactions with third persons.
The authority of the agent to act emanates from the
GR 129039 September 17, 2002
powers granted to him by his principal; his act is the act
of the principal if done within the scope of the
NATURE: The authority of the agent to act authority. He who acts through another acts himself.
emanates from the powers granted to him by his
principal, his act is the act of the principal if done
Was Santos then an agent of Siredy? Was he acting
within the scope of the authority . While third
persons are bound to inquire into the extent or scope within the scope of his authority?
of the agents authority, they are not required to go
beyond the terms of the written power of attorney. Resolution of the first issue necessitates a review
of the Letter of Authority executed by Ismael E. Yanga
FACTS: private respondent conrado de guzman is an as president of Siredy in favor of Santos. Within its
architect contractor doing business under Jigscon terms can be found the nature and extent of the
Construciton. Petitioner Siredy Enterprises is the owner authority granted to Santos which, in turn, determines
the extent of Siredys participation in the Deed of
and developer of Ysmael Village with Ismael Yanga as its
Agreement.
president.
On its face, the instrument executed by Yanga
Yanga executed an undated letter of authority to clearly and unequivocally constituted Santos to do and
Hermogenes Santos to negotiate and enter into execute, among other things, the act of negotiating
contract to build housing units, sell lots and represent and entering into contract or contracts to
build Housing Units on our subdivision lots in Ysmael
principal in its transactions. Santos was able to enter
Village, Sta. Rosa, Marilao,
into a Deed of Agreement with private respondent De
Bulacan.HTTP://SC.JUDICIARY.GOV.PH/JURISPRUDE
Guzman. The deed expressly stated that santos was NCE/2002/SEP2002/129039.HTM - _EDN20 Nothing
representing Siredy Enterprises Inc. could be more express than the written stipulations
contained therein.
De guzman constructed 26 residential units at Ysmael
village. 13 were fully paid but the other 13 reamain It was upon the authority of this document that De
Guzman transacted business with Santos that resulted
unpaid. He tried but failed to collect the unpaid account
in the construction contract denominated as the Deed
from Siredy. Thus, he instituted the action for specific of Agreement.
performance against siredy, yanga and Santos who all
denied liability. Testifying on the nature of the business and the
business practices of Siredy, its owner Yanga testified
Defense of siredy: petitioner denies any liability by that Siredy was interested only in the sale of lots. It was
stating that: (1) the nature of Siredys business did not up to the buyers, as owners, to construct their houses in
involve the construction of housing units since it was the particular style they prefer. It was allegedly never
merely engaged in the selling of empty lots; (2) the the practice of the company to sell lots with houses
Letter of Authority is defective, and hence needed already erected thereon. On the basis of the foregoing
reformation; (3) Santos entering into the Deed of testimony, petitioner states that despite the letter of
Agreement was invalid because the same was in excess authority, it is quite certain that such provision would
of his authority; and (4) there is now implied revocation go against the nature of the business of Siredy as the
of such Letter of Authority. same has absolutely no capability of undertaking such a
task as constructing houses.
ISSUES:
However, the self-serving contention of petitioner
1. whether or not Hermogenes B. Santos was a
cannot stand against the documentary evidence clearly
duly constituted agent of Siredy, with authority
showing the companys liability to De Guzman. As we
to enter into contracts for the construction of
stated in the case of Cuizon vs. Court of AppealS as it is,
residential units in Ysmael Village and thus the
the mere denial of petitioner cannot outweigh the
capacity to bind Siredy to the Deed of
strength of the documentary evidence presented by
Agreement; and
and the positive testimony of private respondents. As a
2. assuming arguendo that Siredy was bound by
jurist once said, I would sooner trust the smallest slip
the acts of Santos, whether or not under the
of paper for truth than the strongest and most retentive
terms of the Deed of Agreement, Siredy can be
memory ever bestowed on moral man.
held liable for the amount sought to be
collected by private respondent De Guzman.
Aside from the Letter of Authority, Siredys Articles
of Incorporation, duly approved by the Securities and
Exchange Commission, shows that Siredy may also
undertake to erect buildings and houses on the lots and instructions given by the principal to his agent outside
sell, lease, or otherwise dispose of said properties to of the written power of attorney.
interested buyers. Such Articles, coupled with the Letter
of Authority, is sufficient to have given De Guzman The essence of agency being the representation of
reason to believe that Santos was duly authorized to another, it is evident that the obligations contracted are
represent Siredy for the purpose stated in the Deed of for and on behalf of the principal. This is what gives rise
Agreement. Petitioners theory that it merely sold lots is to the juridical relation. A consequence of this
effectively debunked. representation is the liability of the principal for the acts
of his agent performed within the limits of his authority
Thus, it was error for the trial court to have ignored that is equivalent to the performance by the principal
the Letter of Authority. There is absolutely no question himself who should answer
that the Letter of Authority executed by appellee Yanga therefor.HTTP://SC.JUDICIARY.GOV.PH/JURISPRUDEN
constituted defendant Santos as his and appellee CE/2002/SEP2002/129039.HTM - _EDN27
Siredys agent. As agent, he was empowered inter
alia to enter into a contract to build housing units in the Other contentions:
Ysmael Village. This was in furtherance of appellees 1. Petitioner belatedly asserts, however, that the
business of developing and subdividing lands, erecting Letter of Authority was defective as it allegedly
houses thereon, and selling them to the public. failed to reduce into writing the real intentions
of the parties, and insists on its reformation
We find that a valid agency was created between Such an argument deserves scant
Siredy and Santos, and the authority conferred upon consideration. As found by the Court of
the latter includes the power to enter into a Appeals, being a doctor of medicine and a
construction contract to build houses such as the Deed businessman, Yanga knew the meaning and
of Agreement between Santos and De Guzmans import of this document and had in fact
Jigscon Construction. Hence, the inescapable admitted having signed it. As aptly observed by
conclusion is that Siredy is bound by the contract the Court of Appeals, there is no evidence
through the representation of its agent Santos. that ante litem, he abrogated the Letter of
Authority and withdrew the power conferred
The basis of agency is representation, that is, the on Santos.
agent acts for and in behalf of the principal on matters 2. Siredys contention that the present case is in
within the scope of his authority (Art, 1881) and said effect a revocation of the Letter of Authority
acts have the same legal effect as if they were also deserves scant consideration. This is a
personally done by the principal. By this legal fiction of patently erroneous claim considering that it
representation, the actual or legal absence of the was, in fact, private respondent De Guzman
principal is converted into his legal or juridical presence. who instituted the civil case before the RTC.
Moreover, even if arguendo Santos mandate was With regard to the second issue put forth by
only to sell subdivision lots as Siredy asserts, the latter petitioner, this Court notes that this issue is being raised
is still bound to pay De Guzman. De Guzman is for the first time on appeal. From the trial in the RTC to
considered a third party to the agency agreement who the appeal before the Court of Appeals, the alleged
had no knowledge of the specific instructions or violation of the Deed of Agreement by Conrado de
agreements between Siredy and its agent. What De Guzman was never put in issue. Heretofore, the
Guzman only saw was the written Letter of Authority substance of petitioners defense before the courts a
where Santos appears to be duly authorized. Article quo consisted of its denial of any liability under the
1900 of the Civil Code provides:Art. 1900. So far as Deed of Agreement.
third persons are concerned, an act is deemed to have
been performed within the scope of the agents DISPOSITION: Siredy Enterprises, Inc. is ordered to pay
authority, if such act is within the terms of the power of Conrado de Guzman actual damages in the amount of
attorney, as written, even if the agent has in fact P412,154.93, with legal interest thereon from the time
exceeded the limits of his authority according to an the case was filed until its full payment.
understanding between the principal and the agent.
The scope of the agents authority is what appears

in the written terms of the power of attorney. While
third persons are bound to inquire into the extent or
scope of the agents authority, they are not required to
go beyond the terms of the written power of attorney.
Third persons cannot be adversely affected by an
understanding between the principal and his agent as to
the limits of the latters authority. In the same way,
third persons need not concern themselves with
CASE 7: Green Valley Poultry v. IAC Held: We do not have to categorize the contract.
Whether viewed as an agency to sell or as a contract of
sale, the liability of Green Valley is indubitable. Adopting
Green Valley's theory that the contract is an agency to
GREEN VALLEY POULTRY & ALLIED PRODUCTS, sell, it is liable because it sold on credit without authority
INC., vs. THE INTERMEDIATE APPELLATE COURT from its principal. The Civil Code has a provision exactly
and E.R. SQUIBB & SONS PHILIPPINE in point. It reads:
CORPORATION, G.R. No. L-49395 December 26, 1984 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
FACTS: payment in cash, but the commission agent shall be
On November 3, 1969, Squibb and Green Valley entered entitled to any interest or benefit, which may result from
into a letter agreementto appoint Green Valley Poultry & such sale.
Allied Products, Inc. as a non-exclusive distributor for WHEREFORE, the petition is hereby dismissed; the
Squibb Veterinary Products. As a distributor, Green judgment of the defunct Court of Appeals is affirmed with
Valley Poultry & Allied Products, Inc. wig be entitled to a costs against the petitioner.
discount.
5% distributor commission is allowed when the
distributor furnishes copies for each sale of a
complete deal or special offer to a feedstore,
drugstore or other type of account.
Green Valley Poultry & Allied Products, Inc. win
distribute only for the Central Luzon and
Northern Luzon including Cagayan Valley areas.
We will not allow any transfer or stocks from
Central Luzon and Northern Luzon including
Cagayan Valley to other parts of Luzon, Visayas
or Mindanao which are covered by our other
appointed Distributors. In line with this, you will
follow strictly our stipulations that the maximum
discount you can give to your direct and turnover
accounts will not go beyond 10%.
It is understood that Green Valley Poultry &
Allied Products, Inc. will put up a bond of
P20,000.00 from a mutually acceptable bonding
company.
Payment for Purchases of Squibb Products will be
due 60 days from date of invoice or the nearest
business day thereto. No payment win be
accepted in the form of post-dated checks.
Payment by check must be on current dating.
It is mutually agreed that this non-exclusive
distribution agreement can be terminated by
either Green Valley Poultry & Allied Products,
Inc. or Squibb Philippines on 30 days notice.
For goods delivered to Green Valley but unpaid, Squibb
filed suit to collect. The trial court as aforesaid gave
judgment in favor of Squibb which was affirmed by the
Court of Appeals.
In both the trial court and the Court of Appeals, the
parties advanced their respective theories.
Green Valley claimed that the contract with Squibb was a
mere agency to sell; that it never purchased goods from
Squibb; that the goods received were on consignment
only with the obligation to turn over the proceeds, less its
commission, or to return the goods ff not sold, and since
it had sold the goods but had not been able to collect
from the purchasers thereof, the action was premature.
Upon the other hand, Squibb claimed that the contract
was one of sale so that Green Valley was obligated to pay
for the goods received upon the expiration of the 60-day
credit period.
Both courts below upheld the claim of Squibb that the
agreement between the parties was a sales contract.
Issue: What is the liability of Green Valley? Is it a

contract of agency to sell or contract of sale?
Case 8: Intl Films v. Lyric Film Exchange 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 Exhibit C. As soon as Lazarus Joseph had
G.R. No. L-42465 November 19, 1936 taken possession of the Philippine agency of the
INTERNATIONAL FILMS (CHINA), LTD., plaintiff- International Films (China) Ltd., he went to the office of
appellant, the Lyric Film Exchange, Inc., to ask for the return not
vs. only of the film "Monte Carlo Madness" but also of the
THE LYRIC FILM EXCHANGE, INC., defendant- films "White Devils" and "Congress Dances". On August
appellee. 13 and 19, 1933, the Lyric Film Exchange, Inc., returned the
J. W. Ferrier for appellant. films entitled "Congress Dances" and "White Devils" to
Juan T. Santos and ArsenioSolidum for appellee Lazarus Joseph, but not the film "Monte Carlo Madness"
because it was to be shown in Cebu on August 29 and 30,
FACTS: 1933. Inasmuch as the plaintiff would profit by the
Bernard Gabelman was the Philippine agent of the showing of the film "Monte Carlo Madness", Lazarus
plaintiff company International Films (China), Ltd. by Joseph agreed to said exhibition. It happened, however,
virtue of a power of attorney executed in his favor on that the bodega of the Lyric Film Exchange, Inc., was
April 5, 1933 (Exhibit 1). On June 2, 1933, the International burned on August 19, 1933, together with the film "Monte
Films (China), Ltd., through its said agent, leased the film Carlo Madness" which was not insured.
entitled "Monte Carlo Madness" to the defendant
company, the Lyric Film Exchange, Inc., to be shown in ISSUE: Whether or not the defendant company, the Lyric
Cavite for two consecutive days, that is, on June 1 and 2, Film Exchange, Inc., is responsible to the plaintiff,
1933, for 30 per cent of the receipts; in the Cuartel de International Films (China) Ltd., for the destruction by
Espaa for one day, or on June 6, 1933, for P45; in the fire of the film in question, entitled "Monte Carlo
University Theater for two consecutive days, or on June 8, Madness".
and 9, 1933, for 30 per cent of the receipts; in Stotsenburg
for two consecutive days, or on June 18 and 19, 1933, for 30 Held: The plaintiff company claims that the defendant's
per cent of the receipts, and in the Paz Theater for two failure to return the film "Monte Carlo Madness" to the
consecutive days, or on June 21 and 22, 1933, for 30 per former was due to the fact that the period for the delivery
cent of the receipts (Exhibit C). One of the conditions of thereof, which expired on June 22, 1933, had been
the contract was that the defendant company would extended in order that it might be shown in Cebu on
answer for the loss of the film in question whatever the August 29 and 30, 1933, in accordance with an
cause. On June 23, 1933, following the last showing of the understanding had between Lazarus Joseph, the new
film in question in the Paz Theater, Vicente Albo, then agent of the plaintiff company, and the defendant. The
chief of the film department of the Lyric Film Exchange, defendant company, on the other hand, claims that when
Inc., telephoned said agent of the plaintiff company it wanted to return the film "Monte Carlo Madness" to
informing him that the showing of said film had already Bernard Gabelman, the former agent of the plaintiff
finished and asked, at the same time, where he wished to company, because of the arrival of the date for the return
have the film returned to him. In answer, Bernard thereof, under the contract Exhibit C, said agent, not
Gabelman informed Albo that he wished to see him having a safety vault, requested Vicente Albo, chief of the
personally in the latter's office. At about 11 o'clock the film department of the defendant company, to keep said
next morning, Gabelman went to Vicente Albo's office film in the latter's vault under Gabelman's own
and asked whether he could deposit the film in question responsibility, verbally stipulating at the same time that
in the vault of the Lyric Film Exchange, Inc., as the the defendant company, as subagent of the International
International Films (China) Ltd. did not yet have a safety Films (China) Ltd., might show the film in question in its
vault, as required by the regulations of the fire theaters.
department. After the case had been referred to O'Malley, It does not appear sufficiently proven that the
Vicente Albo's chief, the former answered that the deposit understanding had between Lazarus Joseph, second agent
could not be made inasmuch as the film in question of the plaintiff company, and Vicente Albo, chief of the
would not be covered by the insurance carried by the film department of the defendant company, was that the
Lyric Film Exchange, Inc. Bernard Gabelman then defendant company would continue showing said film
requested Vicente Albo to permit him to deposit said film under the same contract Exhibit C. The preponderance of
in the vault of the Lyric Film Exchange, Inc., under evidence shows that the verbal agreement had between
Gabelman's own responsibility. As there was a verbal Bernard Gabelman, the former agent of the plaintiff
contract between Gabelman and the Lyric Film Exchange company, and Vicente Albo, chief of the film department
Inc., whereby the film "Monte Carlo Madness" would be of the defendant company, was that said film "Monte
shown elsewhere, O'Malley agreed and the film was Carlo Madness" would remain deposited in the safety
deposited in the vault of the defendant company under vault of the defendant company under the responsibility
Bernard Gabelman's responsibility. of said former agent and that the defendant company, as
About July 27, 1933, Bernard Gabelman severed his his subagent, could show it in its theaters, the plaintiff
connection with the plaintiff company, being succeeded company receiving 5 per cent of the receipts up to a
by Lazarus Joseph. Bernard Gabelman, upon turning over certain amount, and 15 per cent thereof in excess of said
the agency to the new agent, informed the latter of the amount.
deposit of the film "Monte Carlo Madness" in the vault of If, as it has been sufficiently proven in our opinion,
the defendant company as well as of the verbal contract the verbal contract had between Bernard Gabelman, the
entered into between him and the Lyric Film Exchange, former agent of the plaintiff company, and Vicente Albo,
Inc., whereby the latter would act as a subagent of the chief of the film department of the defendant company,
plaintiff company, International Films (China) Ltd., with 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.
ISSUE2: Whether or not the defendant company having
collected the entire proceeds of the fire insurance policy
of its films deposited in its vault, should pay the part
corresponding to the film in question which was
deposited therein
HELD 2: The evidence shows that the film "Monte Carlo
Madness" under consideration was not included in the
insurance of the defendant company's films, as this was
one of the reasons why O'Malley at first refused to receive
said film for deposit and he consented thereto only when
Bernard Gabelman, the former agent of the plaintiff
company, insisted upon his request, assuming all
responsibility. Furthermore, the defendant company did
not collect from the insurance company an amount
greater than that for which its films were insured,
notwithstanding the fact that the film in question was
included in the vault, and it would have collected the
same amount even if said film had not been deposited in
its safety vault. Inasmuch as the defendant company, The
Lyric Film Exchange, Inc., had not been enriched by the
destruction by fire of the plaintiff company's film, it is not
liable to the latter.
The defendant company, 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.
Case 9: PNB v. Bagamaspad filedapplications to buy public lands.Appellants in their

over-enthusiasm and seeminglyinordinate desire to grant
as many loans as possible and
inamounts disproportionate to the needs of the
G.R. No. L-3407 June 29, 1951 borrowers,admitted and passed upon more loan
PHILIPPINE NATIONAL BANK, plaintiff-appellee, applications than theycould properly handle. From July,
vs. 1946 to March, 1947 thetotal amount of about eight and
BERNARDO BAGAMASPAD and BIENVENIDO M. half (81/2) million pesos wasreleased in the form of
FERRER, defendants-appellants. special crop loans to about
Jose G. Flores, for appellants. 5,105borrowers and this, in a relatively sparsely populated
Nemesio P. Labunao for appellee. province like Cotabato.Also, contrary to the Bank's rules
and regulationsregarding the granting of special crops
FACTS: loans, the defendantsallowed intermediaries to intervene
The plaintiff Philippine National Bank, initiated this suit in the granting of specialcrop
in the Court of First Instance of Cotabato for the purpose loans. The trial court based the civil liability of theappella
of collecting from the defendants Bernardo Bagamaspad nts herein on the provisions of Arts. 1718 and 1719
and Bienvenido M. Ferrer who, in the years 1946 and 1947, of theCivil Code, defining and enumerating the duties an
were its Agent and Assistant Agent, respectively, in its dobligations of an agent and his liability for failure to
CotabatoAgency, the sum of P704,903.18, said to have bee complywith such duties, and Art. 259 of the Code of
ndisbursed and released by them as special crop loanswit Commercewhich provides that an agent must observe the
hout authority and in a careless manner to provisions of law and regulations with respect to business
manifestlyinsolvent, unqualified or fictitious borrowers, transactionsentrusted to him otherwise he shall be
all contrary tothe rules and regulations of the plaintiff responsible for the consequences resulting from their
Bank. The theory on which the Bank's claim and breach or omissions; andalso Art. 1902 of the Civil Code
complaintare based is that the two defendants which provides forthe liability of one for his tortious act,
Bagamaspad and Ferreracting as Agent and Assistant that is to say, any actor omission which causes damage to
Agent of the Cotabato Agency,in granting new crop loans another by his fault ornegligence. Appellants while
after November 13, 1946, agreeing with the meaning andscope of the legal
violatedthe instructions of the Bank, and that furthermor provisions cited, nevertheless insist thatthose provisions
e, ingranting said crop loans, they acted negligently and are not applicable to them inasmuch as theyare not guilty
did notexercise the care and precaution required of them of any violation of instructions or regulations
in order toprevent the release of the plaintiff Bank; and that neither are they guilty of ne
of crop loans to persons who gligence of carelessness as found by the trial court.
wereneither qualified borrowers nor entitled to the Acareful study and consideration of the record, however,c
assistancebeing rendered by the Government and the onvinces us and we agree with the trial court that
Bank, all contraryto the rules and regulations issued by thedefendants-appellants have not only violated
the Bank.In the course of the trial, upon petition of instructions of the plaintiff Bank, including things which
plaintiff'scounsel, the amount of the claim was reduced to said Bank wanteddone or not done, all of which were fully
P699,803.57, due to payments made by some of theborro understood by
wers. On March 31, 1949, the trial court rendered judgmen them,but they (appellants) also violated standing regulati
t in favor of the plaintiff, ordering both defendants to onsregarding the granting of loans; and, what is more,
pay jointly and severally to it the sum of P699,803.57,repr thru theircarelessness, laxity and negligence, they allowed
esenting the uncollected balance of the special croploans i loans to begranted to persons who were not entitled to
mproperly released by said defendants, with legalinterest receive loans.In view of all the foregoing, and finding no
thereon from the date of the filing of the complaint,plus reversibleerror in the decision appealed from, the
costs. The two defendants appealed from that same is herebyaffirmed with costs against the appellants.
decision. The appeal was first taken to the Court So ordered.
of Appeals but in viewof the amount involved it was
certified to this Tribunal by thesaid Court of Appeals.
ISSUE:
Whether the appellants, as agents were
extremelylax, negligent and careless in granting new speci
al croploans.
HELD:
The lower court as may be seen,
severelycritcizedand condemned the acts of laxity, neglige
nce andcarelessness of the appellants. But the severity of t
hiscriticism and condemnation would appear to be amply
warranted by the evidence. Out of the numerous
actsof laxity, negligence and carelessness established by t
he record, a few cases may be
cited. The evidence shows that in violation of theseinstruc
tions and regulations, the defendants released largeloans
aggregating P348,768.22 to about 103 borrowers whowere
neither landowners or tenants but only public land
salesapplicants that is to say, persons who have merely
CASE 10: DOMINGO vs. DOMINGO, GR No. L- severity by the courts, according to whether the agency
30573 | Oct. 29, 1971 was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith,
fidelity, honesty, candor and fairness on the part of the
agent, the real estate broker in this case, to his principal,
Facts: the vendor. The law imposes upon the agent the absolute
obligation to make a full disclosure or complete account
Gregorio Domingo, Vicente Domingos broker and agent, to his principal of all his transactions and other material
received P1,000 from Oscar de Leon as gift or facts relevant to the agency, so much so that the law as
propinawithout Vicentes knowledge. Oscar gave him said amended does not countenance any stipulation
amount after Gregorio succeeded in persuading Vicente exempting the agent from such an obligation and
to accept his offer to buy the lot for P1.20 instead of P2. considers such an exemption as void. The duty of an
His acceptance of said substantial monetary gift agent is likened to that of a trustee. This is not a technical
corrupted his duty to serve the interests only of his or arbitrary rule but a rule founded on the highest and
principal and undermined his loyalty to his principal, who truest principle of morality as well as of the strictest
2
gave him partial advance of Three Hundred Pesos justice.
(P300.00) on his commission. As a consequence, instead
of exerting his best to persuade his prospective buyer to An agent who takes a secret profit in the nature of
purchase the property on the most advantageous terms abonus, gratuity or personal benefit from the vendee,
desired by his principal, the broker, herein defendant- withoutrevealing the same to his principal, the vendor, is
appellee Gregorio Domingo, succeeded in persuading his guilty of abreach of his loyalty to the principal and forfeits
principal to accept the counter-offer of the prospective his right tocollect the commission from his principal,
buyer to purchase the property at P1.20 per square meter even if the principaldoes not suffer any injury by reason of
or One Hundred Nine Thousand Pesos (P109,000.00) in such breach of fidelity,or that he obtained better results
round figure for the lot of 88,477 square meters, which is or that the agency is agratuitous one, or that usage or
very much lower the the price of P2.00 per square meter custom allows it. The fact
or One Hundred Seventy-Six Thousand Nine Hundred thatthe principal may have been benefited
Fifty-Four Pesos (P176,954.00) for said lot originally by the valuable services of the said agent does not
offered by his principal. exculpate the agent who has only himself to blame for
such a result by reason of his treachery or perfidy.
Held: As a necessary consequence of such breach of trust,
Gregorio Domingo must forfeit his right to the
The duties and liabilities of a broker to his employer are commission and must return the part of the commission
1
essentially those which an agent owes to his principal. he received from his principal.
Consequently, the decisive legal provisions are in found The duty embodied in Article 1891 of the New Civil Code
Articles 1891 and 1909 of the New Civil Code. will not apply if the agent or broker acted only as a
Art. 1891. Every agent is bound to render an account of his middleman with the task of merely bringing together the
transactions and to deliver to the principal whatever he vendor and vendee, who themselves thereafter will
may have received by virtue of the agency, even though it negotiate on the terms and conditions of the transaction.
may not be owing to the principal. Neither would the rule apply if the agent or broker had
Every stipulation exempting the agent from the obligation informed the principal of the gift or bonus or profit he
to render an account shall be void. received from the purchaser and his principal did not
11
xxxxxxxxx object therto. Herein defendant-appellee Gregorio
Art. 1909. The agent is responsible not only for fraud but Domingo was not merely a middleman of the petitioner-
also for negligence, which shall be judged with more less appellant Vicente Domingo and the buyer Oscar de Leon.
rigor by the courts, according to whether the agency was He was the broker and agent of said petitioner-appellant
or was not for a compensation. only. And therein petitioner-appellant was not aware of
Article 1891 of the New Civil Code amends Article 17 of the the gift of One Thousand Pesos (P1,000.00) received by
old Spanish Civil Code which provides that: Gregorio Domingo from the prospective buyer; much less
Art. 1720. Every agent is bound to give an account of his did he consent to his agent's accepting such a gift.
transaction and to pay to the principal whatever he may The fact that the buyer appearing in the deed of sale is
have received by virtue of the agency, even though what Amparo Diaz, the wife of Oscar de Leon, does not
he has received is not due to the principal. materially alter the situation; because the transaction, to
The modification contained in the first paragraph Article be valid, must necessarily be with the consent of the
1891 consists in changing the phrase "to pay" to "to husband Oscar de Leon, who is the administrator of their
deliver", which latter term is more comprehensive than conjugal assets including their house and lot at No. 40
the former. Denver Street, Cubao, Quezon City, which were given as
Paragraph 2 of Article 1891 is a new addition designed to part of and constituted the down payment on, the
stress the highest loyalty that is required to an agent purchase price of herein petitioner-appellant's lot No. 883
condemning as void any stipulation exempting the agent of Piedad Estate. Hence, both in law and in fact, it was
from the duty and liability imposed on him in paragraph still Oscar de Leon who was the buyer.
one thereof. As a necessary consequence of such breach of trust,
Article 1909 of the New Civil Code is essentially a defendant-appellee Gregorio Domingo must forfeit his
reinstatement of Article 1726 of the old Spanish Civil Code right to the commission and must return the part of the
which reads thus: commission he received from his principal.
Art. 1726. The agent is liable not only for fraud, but also TeofiloPurisima, the sub-agent of Gregorio Domingo, can
for negligence, which shall be judged with more or less only recover from Gregorio Domingo his one-half share of
whatever amounts Gregorio Domingo received by virtue
of the transaction as his sub-agency contract was with

Gregorio Domingo alone and not with Vicente Domingo,
who was not even aware of such sub-agency. Since
Gregorio Domingo received from Vicente Domingo and
Oscar de Leon respectively the amounts of Three
Hundred Pesos (P300.00) and One Thousand Pesos
(P1,000.00) or a total of One Thousand Three Hundred
Pesos (P1,300.00), one-half of the same, which is Six
Hundred Fifty Pesos (P650.00), should be paid by
Gregorio Domingo to TeofiloPurisima.
Because Gregorio Domingo's clearly unfounded
complaint caused Vicente Domingo mental anguish and
serious anxiety as well as wounded feelings, petitioner-
appellant Vicente Domingo should be awarded moral
damages in the reasonable amount of One Thousand
Pesos (P1,000.00) attorney's fees in the reasonable
amount of One Thousand Pesos (P1,000.00), considering
that this case has been pending for the last fifteen (15)
years from its filing on October 3, 1956.
cancellation was a mistake and that the same shall be

rectified. However, petitioner did not receive any receipt
Obligations of the Principal from the insurance company. Hence, petitioner Areola sent
a demand letter to the insurance company demanding that
he be insured under the same policy. The respondent
Case 1: Areola v. CA
insurance company, through its Assistant Vice-President
Mariano M. Ampil III sent petitioner Areola a letter
confirming that the amount of P1,609.65 covered by
provisional receipt No. 9300 was in fact received by
SANTOS B. AREOLA and LYDIA D. Prudential on December 17, 1984. Hence, Ampil informed
AREOLA, petitioners-appellants, Areola that Prudential was "amenable to extending PGA-
vs. PA-BG-20015 up to December 17, 1985 or one year from
COURT OF APPEALS and PRUDENTIAL GUARANTEE the date when payment was received." The letter was
AND ASSURANCE, INC., respondents-appellees. personally delivered by Carlito Ang to Areola onAugust 13,
1985but unfortunately, Areola and his wife, Lydia, as early
BACKGROUND: Petitioner Santos Areola applied for and
as August 6, 1985 had filed a complaint for breach of
was granted Personal Accident Insurance Policy No. PA-
contract with damages before the lower court.
20015, by Prudential guarantee and Assurance Inc.
However On June 29, 1985, seven months after its The trial court ruled in favor of Areola but on appeal, the
approval, the respondent insurance company unilaterally Court of Appeals issued a reversal of the decision of the
cancelled the same since company records revealed that trial court. Hence, this petition.
petitioner-insured failed to pay his premiums. On August 3,
1985, the Prudential offered to reinstate said insurance ISSUE: W/N the Malapit's fraudulent act of
policy and even proposed to extend its lifetime to December misappropriating the premiums paid by petitioner-insured is
17, 1985. It has been found out by Prudential that the beyond doubt directly imputable to respondent insurance
cancellation was erroneous and that the premiums were company. YES.
paid in full by petitioner-insured but were not remitted by
Teofilo M. Malapit, respondent insurance company's branch (Petitioners Contention: It is petitioner-insured's
manager. Hence, Santos Areola filed an action for damages submission that the fraudulent act of Malapit, manager of
due to breach of contract against the respondent insurance respondent insurance company's branch office in Baguio, in
company. misappropriating his premium payments is the proximate
cause of the cancellation of the insurance policy. Petitioner-
FACTS: Petitioner is a lawyer. He applied for and was insured theorized that Malapit's act of signing and even
granted by the Baguio branch of private respondent sending the notice of cancellation himself, notwithstanding
insurance company a personal accident insurance covering his personal knowledge of petitioner-insured's full payment
the period of 1 year for which he was supposed to pay the of premiums, further reinforces the allegation of bad faith.
total amount of P1,609.65 which included the premium of Such fraudulent act committed by Malapit, argued
P1,470.00, documentary stamp of P110.25 and 2% petitioner-insured, is attributable to respondent insurance
premium tax of P29.40. He received a statement of account company, an artificial corporate being which can act only
which contains the following statement: through its officers or employees. Malapit's actuation,
concludes petitioner-insured, is therefore not separate and
This Statement of Account must not be considered a distinct from that of respondent-insurance company,
receipt. Official Receipt will be issued to you upon payment contrary to the view held by the Court of Appeals.)
of this account.
RULING: We uphold petitioner-insured's submission.
If payment is made to our representative, demand for a Malapit's fraudulent act of misappropriating the premiums
Provisional Receipt and if our Official Receipts is (sic) not paid by petitioner-insured is beyond doubt directly
received by you within 7 days please notify us. imputable to respondent insurance company. A corporation,
such as respondent insurance company, acts solely thru its
If payment is made to our office, demand for an OFFICIAL
employees. The latters' acts are considered as its own for
RECEIPT.
which it can be held to account. 11 The facts are clear as to
On December 17, 1984, respondent insurance company the relationship between private respondent insurance
issued collector's provisional receipt No. 9300 to petitioner- company and Malapit. As admitted by private respondent
insured for the amount of P1,609.65. On the same receipt it insurance company in its answer, 12 Malapit was the
was stated: manager of its Baguio branch. It is beyond doubt that he
represented its interest and acted in its behalf. His act of
Note: This collector's provisional receipt will be confirmed receiving the premiums collected is well within the province
by our official receipt. If our official receipt is not received by of his authority. Thus, his receipt of said premiums is
you within 7 days, please notify us. receipt by private respondent insurance company who, by
provision of law, particularly under Article 1910 of the Civil
On June 29, 1985, respondent insurance company, through Code, is bound by the acts of its agent. Malapit's failure to
its Baguio City manager, Teofilo M. Malapit, sent petitioner- remit the premiums he received cannot constitute a defense
insured Endorsement which cancelled flat the policy for private respondent insurance company; no exoneration
granted to petitioner for failure to pay the premium. from liability could result therefrom. The fact that private
Petitioner confronted Carlito Ang, agent of respondent respondent insurance company was itself defrauded due to
insurance company, and demanded the issuance of an the anomalies that took place in its Baguio branch office,
official receipt. He was informed by the agent that the such as the non-accrual of said premiums to its account,
does not free the same from its obligation to petitioner

Areola.
ISSUE: W/N Prudential is liable by way of damages to

Areola? YES.
RULING: Respondent insurance company is liable by way

of damages for the fraudulent acts committed by Malapit
that gave occasion to the erroneous cancellation of subject
insurance policy. Its earlier act of reinstating the insurance
policy can not obliterate the injury inflicted on petitioner-
insured. Respondent company should be reminded that a
contract of insurance creates reciprocal obligations for both
insurer and insured. Reciprocal obligations are those which
arise from the same cause and in which each party is both
a debtor and a creditor of the other, such that the obligation
of one is dependent upon the obligation of the other.
ISSUE: W/N offer of reinstatement of insurance is

equivalent to fulfillment of an obligation? NO.
RULING: Under the circumstances of instant case, the

relationship as creditor and debtor between the parties
arose from a common cause: i.e., by reason of their
agreement to enter into a contract of insurance under
whose terms, respondent insurance company promised to
extend protection to petitioner-insured against the risk
insured for a consideration in the form of premiums to be
paid by the latter. Under the law governing reciprocal
obligations, particularly the second paragraph of Article
1191, 16 the injured party, petitioner-insured in this case, is
given a choice between fulfillment or rescission of the
obligation in case one of the obligors, such as respondent
insurance company, fails to comply with what is incumbent
upon him. However, said article entitles the injured party to
payment of damages, regardless of whether he demands
fulfillment or rescission of the obligation. Untenable then is
reinstatement insurance company's argument, namely, that
reinstatement being equivalent to fulfillment of its obligation,
divests petitioner-insured of a rightful claim for payment of
damages. Such a claim finds no support in our laws on
obligations and contracts.
Case 2: Bedia v. White space of 15 square meter of which is $2,250.00 (Two

Thousand Two Hundred Fifty Dollars).
As the Participation Contract was signed by Bedia, the

above statement was an acknowledgment by White that
G.R. No. 94050 November 21, 1991 Bedia was only acting for Hontiveros when it recruited her
as a participant in the Texas State Fair and charged her a
SYLVIA H. BEDIA and HONTIVEROS & ASSOCIATED
partial payment of $500.00. This amount was to be fortified
PRODUCERS PHILS. YIELDS, INC., petitioners,
to Hontiveros in case of cancellation by her of the
vs.
agreement. The fact that the contract was typewritten on
EMILY A. WHITE and HOLMAN T. WHITE, respondents.
the letterhead stationery of Hontiveros bolsters this
BACKGROUND: The basic issue before us is the capacity conclusion in the absence of any showing that said
in which petitioner Sylvia H. Bedia entered into the subject stationery had been illegally used by Bedia.
contract with private respondent Emily A. White. Both the
Significantly, Hontiveros itself has not repudiated Bedia's
trial court and the respondent court held she was acting in
agency as it would have if she had really not signed in its
her own personal behalf. She faults this finding as
name. In the answer it filed with Bedia, it did not deny the
reversible error and insists that she was merely acting as
latter's allegation in Paragraph 4 thereof that she was only
an agent.
acting as its agent when she solicited White's participation.
FACTS: This case arose when Bedia and White entered In fact, by filing the answer jointly with Bedia through their
into a Participation Contract. In this contract, EMILY WHITE common counsel, Hontiveros affirmed this allegation.
ENTERPRISES agreed to participate in the 1980 Dallas
If the plaintiffs had any doubt about the capacity in which
State Fair to be held in Dallas, Texas on October 3, to
Bedia was acting, what they should have done was verify
October 19,1980. It requested for a 15 square meter booth
the matter with Hontiveros. They did not. Instead, they
space worth $2,250.00 U.S. Dollars. It was further
simply accepted Bedia's representation that she was an
stipulated in the contract that the same was non-cancellable
agent of Hontiveros and dealt with her as such. Under
after payment of the said down payment, and that any
Article 1910 of the Civil Code, "the principal must
intention on our part to cancel the same shall render
comply with all the obligations which the agent may
whatever amount we have paid forfeited in favor of
have contracted within the scope of his authority."
HONTIVEROS & ASSOCIATED PRODUCERS
Hence, the private respondents cannot now hold Bedia
PHILIPPINE YIELDS, INC. The document was signed by
liable for the acts performed by her for, and imputable
both Emily White and Sylvia Bedia.
to, Hontiveros as her principal.
On August 10, 1986, White and her husband filed a
ISSUE: W/N White had cause of action against Bedia- No.
complaint in the Regional Trial Court of Pasay City for
damages against Bedia and Hontiveros & Associated RULING: The plaintiffs' position became all the more
Producers Phil. Yields, Inc. for damages. White averred that untenable when they moved on June 5, 1984, for the
she was approached by Bedia to participate in the said fair dismissal of the complaint against Hontiveros, 7 leaving
for which she paid a down payment of $500.00. When she Bedia as the sole defendant. Hontiveros had admitted as
arrived at Texas along with her merchandise she was early as when it filed its answer that Bedia was acting as its
surprised to learn that defendants had not paid for or agent. The effect of the motion was to leave the plaintiffs
registered any display space in her name, nor were they without a cause of action against Bedia for the obligation, if
authorized by the state fair director to recruit participants. any, of Hontiveros.
She said she incurred losses as a result for which the
defendants should be held solidarily liable. Defendants Our conclusion is that since it has not been found that
have denied the allegation of the plaintiffs complaint. Bedia Bedia was acting beyond the scope of her authority when
on her part averred that she did not sign the Participation she entered into the Participation Contract on behalf of
Contract on her own behalf but as an agent of Hontiveros Hontiveros, it is the latter that should be held answerable
and that she had later returned the advance payment of for any obligation arising from that agreement. By moving to
$500.00 to the plaintiff. dismiss the complaint against Hontiveros, the plaintiffs
virtually disarmed themselves and forfeited whatever claims
The complaint against Hontiveros was dismissed on motion they might have proved against the latter under the contract
of the plaintiffs. The lower court on the other hand found signed for it by Bedia. It should be obvious that having
Bedia liable for damages. The decision was sustained by waived these claims against the principal, they cannot now
the Court of Appeals. assert them against the agent.
ISSUE: W/N Bedia acted in her own name? NO.
RULING: It is noteworthy that in her letter to the Minister of

Trade dated December 23,1984, Emily White began:
I am a local exporter who was recruited by Hontiveros &

Associated Producers Phil. Yields, Inc. to participate in the
State Fair of Dallas, Texas which was held last Oct. 3 to 19,
1980. Hontiveros & Associated charged me US$150.00 per
square meter for display booth of said fair. I have paid an
advance of US$500.00 as partial payment for the total
Case 3: Prudential Bank v. CA bank to deliver the amount to her pursuant to the
Confirmation of Sale constituted its breach of their contract,
for which it should be held liable.
The liability of the principal for the acts of the agent is not
G.R. No. 108957 June 14, 1993 even debatable. Law and jurisprudence are clearly and
absolutely against the petitioner.
PRUDENTIAL BANK, petitioner,
vs. Such liability dates back to the Roman Law maxim, Qui per
THE COURT OF APPEALS, AURORA alium facit per seipsum facere videtur. "He who does a
CRUZ, respondents. thing by an agent is considered as doing it himself." This
rule is affirmed by the Civil Code thus:
FACTS: Private respondent Aurora F.Cruz with her sister
as co-depositor, invested P200,000.00 in Central Bank bills Art. 1910. The principal must comply with all the obligations
with the Prudential Bank. The placement was for 63 days at which the agent may have contracted within the scope of
a 13.75% annual interest. The transaction was evidenced his authority.
by a Confirmation of Sale delivered to Cruz two days later,
together with a Debit Memo in the amount withdrawn and Art. 1911. Even when the agent has exceeded his authority,
applied to the confirmed sale. These documents were the principal is solidarily liable with the agent if the former
issued by Susan Quimbo, the employee of the bank to allowed the latter to act as though he had full powers.
whom Cruz was referred and who was apparently in charge
of such transactions. Upon maturity of the placement on Conformably, we have declared in countless decisions that
August 25, 1986, Cruz returned to the bank to renew her the principal is liable for obligations contracted by the agent.
investment. Quimbo again attended to her and prepared a The agent's apparent representation yields to the principal's
Credit Memo crediting the amount of P200,000.00 in Cruz's true representation and the contract is considered as
savings account passbook. Quimbo likewise prepared a entered into between the principal and the third person. 18
debit memo for her. This time, Cruz was asked to sign a
Withdrawal Slip 6 for P196,122.98, representing the amount A bank is liable for wrongful acts of its officers done in the
to be re-invested after deduction of the prepaid interest. interests of the bank or in the course of dealings of the
Quimbo explained this was a new requirement of the bank. officers in their representative capacity but not for acts
Several days later, Cruz received another Confirmation of outside the scope of their authority. (9 c.q.s. p. 417) A bank
Sale and a copy of the Debit Memo. On October 27, 1986, holding out its officers and agent as worthy of confidence
Cruz returned to the bank and sought to withdraw her will not be permitted to profit by the frauds they may thus be
P200,000.00. After verification of her records, however, she enabled to perpetrate in the apparent scope of their
was informed that the investment appeared to have been employment; nor will it be permitted to shirk its
already withdrawn by her on August 25, 1986. There was responsibility for such frauds, even though no benefit may
no copy on file of the Confirmation of Sale and the Debit accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Memo allegedly issued to her by Quimbo. Accordingly, a banking corporation is liable to innocent third
persons where the representation is made in the course of
Cruz was assured by branch manager Roman Santos, its business by an agent acting within the general scope of
assured her that he would look into the matter however she his authority even though, in the particular case, the agent
received no definite answer, not even to the letter she wrote is secretly abusing his authority and attempting to
the bank which was received by Santos himself. perpetrate a fraud upon his principal or some other person,
Subsequently, the bank denied her request on the ground for his own ultimate benefit (McIntosh v. Dakota Trust Co.,
that she already withdrew her money. Hence, complaint for 52 ND 752, 204 NW 818, 40 ALR 1021.)
breach of contract against Prudential Bank. After trial,
Judge Rodolfo A. Ortiz rendered judgment in favor of the Application of these principles in especially necessary
plaintiffs. The decision was affirmed in toto on appeal to the because banks have a fiduciary relationship with the public
respondent court. and their stability depends on the confidence of the people
in their honesty and efficiency. Such faith will be eroded
ISSUE: W/N petitioner was liable for its failure or refusal to where banks do not exercise strict care in the selection and
deliver to Cruz the amount she had deposited with it YES. supervision of its employees, resulting in prejudice to their
depositors.
RULING: There is no question that the petitioner was made
liable for its failure or refusal to deliver to Cruz the amount ISSUE: W/N the bank acted in bad faith in denying Cruz
she had deposited with it and which she had a right to the obligation she was claiming against it YES.
withdraw upon its maturity. That investment was
acknowledged by its own employees, who had the apparent RULING: We agree with the lower courts that the petitioner
authority to do so and so could legally bind it by its acts vis- acted in bad faith in denying Cruz the obligation she was
a-visCruz. Whatever might have happened to the claiming against it. It was obvious that an irregularity had
investment whether it was lost or stolen by whoever been committed by the bank's personnel, but instead of
was not the concern of the depositor. It was the concern of repairing the injury to Cruz by immediately restoring her
the bank. money to her, it sought to gloss over the anomaly in its own
operations.
As far as Cruz was concerned, she had the right to
withdraw her P200,000.00 placement when it matured
pursuant to the terms of her investment as acknowledged
and reflected in the Confirmation of Sale. The failure of the
Case 4: De Castro v. CA Art. 1915. If two or more persons have appointed an agent
for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of the
agency.
G.R. No. 115838 July 18, 2002 The solidary liability of the four co-owners, however,
militates against the De Castros' theory that the other co-
CONSTANTE AMOR DE CASTRO and CORAZON AMOR
owners should be impleaded as indispensable parties. A
DE CASTRO, petitioners,
noted commentator explained Article 1915 thus
vs.
COURT OF APPEALS and FRANCISCO "The rule in this article applies even when the appointments
ARTIGO, respondents. were made by the principals in separate acts, provided that
they are for the same transaction. The solidarity arises
BACKGROUND: On May 29, 1989, private respondent
from the common interest of the principals, and not
Francisco Artigo sued petitioners Constante A. De Castro
from the act of constituting the agency. By virtue of
and Corazon A. De Castro to collect the unpaid balance of
this solidarity, the agent can recover from any principal
his broker's commission from the De Castros.
the whole compensation and indemnity owing to him
FACTS: The de Castros were co-owners of four (4) lots. In by the others. The parties, however, may, by express
a letter dated January 24, 1984, Artigo was authorized by agreement, negate this solidary responsibility. The solidarity
the de Castros to act as real estate broker in the sale of does not disappear by the mere partition effected by the
these properties for the amount ofP23,000,000.00, five principals after the accomplishment of the agency.
percent (5%) of which will be given to the agent as
If the undertaking is one in which several are interested, but
commission. It was Artigo who first found Times Transit
only some create the agency, only the latter are solidarily
Corporation, represented by its president Mr. Rondaris, as
liable, without prejudice to the effects of negotiorum
a prospective buyer. The sale of the two lots was
gestio with respect to the others. And if the power granted
consummated and Artigo was paid his corresponding
includes various transactions some of which are common
commission. The rift began when Artigo apparently felt
and others are not, only those interested in each
short changed because according to him, his total
transaction shall be liable for it."11
commission should be P352,500.00 which is five percent
(5%) of the agreed price of P7,050,000.00 paid by Times When the law expressly provides for solidarity of the
Transit Corporation to appellants for the two (2) lots, and obligation, as in the liability of co-principals in a contract of
that it was he who introduced the buyer to appellants and agency, each obligor may be compelled to pay the entire
unceasingly facilitated the negotiation which ultimately led obligation.12 The agent may recover the whole
to the consummation of the sale. Hence, he sued below to compensation from any one of the co-principals, as in this
collect the balance of P303,606.24 after having case.
received P48,893.76 in advance. The trial court ruled in
favor of Artigo. The Court of Appeals affirmed in toto the ISSUE 2: W/N Artigo's claim has been extinguished by full
decision of the trial court. payment, waiver or abandonment NO.
ISSUE 1: W/N the case should be dismissed for failure to RULING: (The De Castros claim that Artigo was fully paid
implead the other co-owners of the property- NO. on June 14, 1985, that is, Artigo was given "his
proportionate share and no longer entitled to any balance."
(The two lots were co-owned by Constante and Corazon According to them, Artigo was just one of the agents
with their other siblings Jose and Carmela whom Constante involved in the sale and entitled to a "proportionate share"
merely represented) in the commission. They assert that Artigo did absolutely
nothing during the second negotiation but to sign as a
RULING: An indispensable party is one whose interest will
witness in the deed of sale. He did not even prepare the
be affected by the court's action in the litigation, and without
documents for the transaction as an active real estate
whom no final determination of the case can be had. The
broker usually does.)
joinder of indispensable parties is mandatory and courts
cannot proceed without their presence. However, the rule The De Castros' arguments are flimsy.
on mandatory joinder of indispensable parties is not
applicable to the instant case. A contract of agency which is not contrary to law, public
order, public policy, morals or good custom is a valid
There is no dispute that Constante appointed Artigo in a contract, and constitutes the law between the parties.14 The
handwritten note dated January 24, 1984 to sell the contract of agency entered into by Constante with Artigo is
properties of the De Castros for P23 million at a 5 percent the law between them and both are bound to comply with
commission. The authority was on a first come, first serve its terms and conditions in good faith.
basis. Constante signed the note as owner and as
representative of the other co-owners. Under this note, a The mere fact that "other agents" intervened in the
contract of agency was clearly constituted between consummation of the sale and were paid their respective
Constante and Artigo. Whether Constante appointed Artigo commissions cannot vary the terms of the contract of
as agent, in Constante's individual or representative agency granting Artigo a 5 percent commission based on
capacity, or both, the De Castros cannot seek the dismissal the selling price. These "other agents" turned out to be
of the case for failure to implead the other co-owners as employees of Times Transit, the buyer Artigo introduced to
indispensable parties. the De Castros.
ISSUE 3: W/N Artigo's inaction as well as failure to protest properly the evidence. Hence, we find no other recourse but
estops him from recovering more than what was actually to affirm their finding on the actual purchase price.1
paid him pursuant to Article 1235 NO.
ISSUE 6: whether award of moral damages and attorney's
RULING: Art. 1235. When the obligee accepts the fees is proper- YES.
performance, knowing its incompleteness and irregularity,
and without expressing any protest or objection, the RULING: Law and jurisprudence support the award of
obligation is deemed fully complied with. moral damages and attorney's fees in favor of Artigo. The
award of damages and attorney's fees is left to the sound
The De Castros' reliance on Article 1235 of the Civil Code discretion of the court, and if such discretion is well
is misplaced. Artigo's acceptance of partial payment of his exercised, as in this case, it will not be disturbed on appeal.
commission neither amounts to a waiver of the balance nor There is no reason to disturb the trial court's finding that
puts him in estoppel. There is thus a clear distinction "the defendants' lack of good faith and unkind treatment of
between acceptance and mere receipt. In this case, it is the plaintiff in refusing to give his due commission deserve
evident that Artigo merely received the partial payment censure." This warrants the award of P25,000.00 in moral
without waiving the balance. Thus, there is no estoppel to damages and P 45,000.00 in attorney's fees. The amounts
speak of. are, in our view, fair and reasonable. Having found a buyer
for the two lots, Artigo had already performed his part of the
ISSUE 4: W/N Artigo's claim for the balance of his bargain under the contract of agency. The De Castros
commission is barred by laches NO. should have exercised fairness and good judgment in
dealing with Artigo by fulfilling their own part of the bargain -
(The De Castros further argue that laches should apply
paying Artigo his 5 percent broker's commission based on
because Artigo did not file his complaint in court until May
the actual purchase price of the two lots.
29, 1989, or almost four years later)
RULING: Actions upon a written contract, such as a

contract of agency, must be brought within ten years from
the time the right of action accrues.19 The right of action
accrues from the moment the breach of right or duty occurs.
From this moment, the creditor can institute the action even
as the ten-year prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within

the ten-year prescriptive period. The De Castros, however,
still maintain that Artigo's cause of action is barred by
laches. Laches does not apply because only four years had
lapsed from the time of the sale in June 1985. Artigo made
a demand in July 1985 and filed the action in court on May
29, 1989, well within the ten-year prescriptive period. This
does not constitute an unreasonable delay in asserting
one's right.
ISSUE 5: W/N the determination of the purchase price was

made in violation of the Rules on Evidence- NO.
(The De Castros believe that the trial and appellate courts

committed a mistake in considering incompetent evidence
and disregarding the best evidence and parole evidence
rules. They claim that the Court of Appeals erroneously
affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit
which were mere photocopies that do not satisfy the best
evidence rule. Further, these letters covered only the first
negotiations between Constante and Times Transit which
failed; hence, these are immaterial in determining the final
purchase price.)
RULING: peals, or P3.6 Million as claimed by the De

Castros, is a question of fact and not of law. Inevitably, this
calls for an inquiry into the facts and evidence on record.
This we can not do.
It is not the function of this Court to re-examine the

evidence submitted by the parties, or analyze or weigh the
evidence again.23 This Court is not the proper venue to
consider a factual issue as it is not a trier of facts. We find
no reason to depart from this principle. The trial and
appellate courts are in a much better position to evaluate
Case 5: Dominion Insurance Corp. v. CA Attorney, neither is it of a character similar to the acts
enumerated therein. A special power of attorney is required
before respondent Guevarra could settle the insurance
claims of the insured.
[G. R. No. 129919. February 6, 2002] Respondent Guevarras authority to settle claims is
embodied in the Memorandum of Management Agreement
DOMINION INSURANCE CORPORATION, petitioner,
dated February 18, 1987 which enumerates the scope of
vs. COURT OF APPEALS, RODOLFO S. GUEVARRA,
respondent Guevarras duties and responsibilities as
and FERNANDO AUSTRIA, respondents.
agency manager for San Fernando, Pampanga. In settling
BACKGROUND: This is an appeal via certiorari from the the claims mentioned above,
decision of the Court of Appeals[2] affirming the decisionof respondent Guevarras authority is further limited by the
the Regional Trial Court, Branch 44, San written standard authority to pay, which states that the
Fernando, Pampanga, which ordered petitioner Dominion payment shall come from respondent Guevarras revolving
Insurance Corporation (Dominion) to pay Rodolfo fund or collection.
S. Guevarra (Guevarra) the sum of
ISSUE: Whether respondent Guevarra is entitled to
P156,473.90representing the total amount advanced
reimbursement of amounts he paid out of his personal
by Guevarra in the payment of the claims of Dominions
money in settling the claims of several insured.
clients.
RULING: The instruction of petitioner as the principal could
FACTS: On January 25, 1991, plaintiff Rodolfo
not be any clearer. Respondent Guevarra was authorized to
S. Guevarra instituted Civil Case No. 8855 for sum of
pay the claim of the insured, but the payment shall come
money against defendant Dominion Insurance Corporation.
from the revolving fund or collection in his possession.
Plaintiff sought to recover thereunder the sum of
P156,473.90 which he claimed to have advanced in his Having deviated from the instructions of the principal, the
capacity as manager of defendant to satisfy certain claims expenses that respondent Guevarra incurred in the
filed by defendants clients. On August 8, 1991, defendant settlement of the claims of the insured may not be
filed a third-party complaint against Fernando Austria, who, reimbursed from petitioner Dominion. This conclusion is in
at the time relevant to the case, was its Regional Manager accord with Article 1918, Civil Code, which states that:
for Central Luzon area. The trial court ruled in favor of the
plaintiff Guevarra. On July 19, 1996, the Court of Appeals The principal is not liable for the expenses incurred by the
promulgated a decision affirming that of the trial agent in the following cases:
court.[6] On September 3, 1996, Dominion filed with the
Court of Appeals a motion for reconsideration.[7] On July 16, (1) If the agent acted in contravention of the principals
1997, the Court of Appeals denied the motion. instructions, unless the latter should wish to avail himself of
the benefits derived from the contract;
ISSUES: Whether respondent Guevarra acted within his
authority as agent for petitioner xxx xxx xxx
RULING: By the contract of agency, a person binds himself However, while the law on agency prohibits
to render some service or to do something in representation respondent Guevarra from obtaining reimbursement, his
or on behalf of another, with the consent or authority of the right to recover may still be justified under the general law
latter. The basis for agency is representation. On the part on obligations and contracts.
of the principal, there must be an actual intention to
appointor an intention naturally inferrable from his words or Article 1236, second paragraph, Civil Code, provides:
actions; and on the part of the agent, there must be an
Whoever pays for another may demand from the debtor
intention to accept the appointment and act on it, and in the
what he has paid, except that if he paid without the
absence of such intent, there is generally no agency.
knowledge or against the will of the debtor, he can recover
A perusal of the Special Power of Attorney would show that only insofar as the payment has been beneficial to the
petitioner (represented by third-party defendant Austria) debtor.
and respondent Guevarraintended to enter into a principal-
In this case, when the risk insured against occurred,
agent relationship. Despite the word special in the title of
petitioners liability as insurer arose. This obligation was
the document, the contents reveal that what was
extinguished when respondent Guevarrapaid the claims
constituted was actually a general agency.
and obtained Release of Claim Loss and Subrogation
The agency comprises all the business of the principal, but, Receipts from the insured who were paid.
couched in general terms, it is limited only to acts of
Thus, to the extent that the obligation of the petitioner has
administration. A general power permits the agent to do all
been extinguished, respondent Guevarra may demand for
acts for which the law does not require a special power.
reimbursement from his principal. To rule otherwise would
Thus, the acts enumerated in or similar to those
result in unjust enrichment of petitioner.
enumerated in the Special Power of Attorney do not require
a special power of attorney. Article 1878, Civil Code, The extent to which petitioner was benefited by the
enumerates the instances when a special power of attorney settlement of the insurance claims could best be proven by
is required. The payment of claims is not an act of the Release of Claim Loss and Subrogation Receipts which
administration. The settlement of claims is not included were attached to the original complaint as Annexes C-2, D-
among the acts enumerated in the Special Power of
1, E-1, F-1, G-1, H-1, I-1 and J-l, in the total amount of
P116,276.95.
However, the amount of the revolving fund/collection that

was then in the possession of respondent Guevarra as
reflected in the statement of account dated July 11,
1990 would be deducted from the above amount.
The outstanding balance and the production/remittance for

the period corresponding to the claims was P3,604.84.
Deducting this from P116,276.95, we get P112,672.11. This
is the amount that may be reimbursed to
respondent Guevarra.
period for making deficiency tax assessment or waiver of the

Extinguishment of Agency
notice requirement for such assessment.
Case 1: Estate of Juliana Gabriel v. CIR (2) The assessment was served not even on an heir or the
estate but on a completely disinterested party. This improper
service was clearly not binding on the petitioner. The most
ESTATE OF THE LATE JULIANA DIEZ VDA. DE crucial point to be remembered is that PhilTust had absolutely
GABRIEL, petitioner, vs. COMMISSIONER OF no legal relationship with the deceased or to her Estate. There
INTERNAL REVENUE, respondent. was therefore no assessment served on the estate as to the
alleged underpayment of tax. Absent this assessment, no
proceeding could be initiated in court for collection of said tax;
GR. No. 155541 therefore, it could not have become final, executory and
incontestable. Respondents claim for collection filed with the
January 27, 2004 court only on November 22, 1984 was barred for having been
made beyond the five-year prescriptive period set by law.
FACTS:
During the lifetime of the decedent Juliana vda. De Gabriel, her

business affairs were managed by the Philippine Trust
Company (PhilTrust). The decedent died on April 3, 1979 but
two days after her death, PhilTrust filed her income tax return
for 1978 not indicating that the decedent had died. The BIR
conducted an administrative investigation of the decedents tax
liability and found a deficiency income tax for the year 1997 in
the amount of P318,233.93. Thus, in November 18, 1982, the
BIR sent by registered mail a demand letter and assessment
notice addressed to the decedent c/o PhilTrust, Sta. Cruz,
Manila, which was the address stated in her 1978 income tax
return. On June 18, 1984, respondent Commissioner of
Internal Revenue issued warrants of distraint and levy to
enforce the collection of decedents deficiency income tax
liability and serve the same upon her heir, Francisco Gabriel.
On November 22, 1984, Commissioner filed a motion to allow
his claim with probate court for the deficiency tax. The Court
denied BIRs claim against the estate on the ground that no
proper notice of the tax assessment was made on the proper
party. On appeal, the CA held that BIRs service on PhilTrust of
the notice of assessment was binding on the estate as
PhilTrust failed in its legal duty to inform the respondent of
antecedents death. Consequently, as the estate failed to
question the assessment within the statutory period of thirty
days, the assessment became final, executory, and
incontestable.
ISSUES:
(1) Whether or not the CA erred in holding that the

service of deficiency tax assessment on Juliana
through PhilTrust was a valid service as to bind the
estate.
(2) Whether or not the CA erred in holding that the tax

assessment had become final, executory, and
incontestable.
HELD:
(1) Since the relationship between PhilTrust and the decedent

was automatically severed the moment of the taxpayers death,
none of the PhilTrusts acts or omissions could bind the estate
of the taxpayer. Although the administrator of the estate may
have been remiss in his legal obligation to inform respondent
of the decedents death, the consequence thereof merely refer
to the imposition of certain penal sanction on the administrator.
These do not include the indefinite tolling of the prescriptive
Case 2: New Manila Lumber v. Republic Republic of the Philippines, the same should have been lodged
with the Auditor General. The state cannot be sued without its
consent.
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 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.
HELD:
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.
Plaintiff also cites Article 1729 of the new Civil Code, which
provides that
Those who put their labor upon or furnish materials
for a piece of work undertaken by the contractor have
an action against the owner up to the amount owing
from the latter to the contractor at the time the claim is
made. . . .
This article, however, as expressly provided in its last
paragraph, "is subject to the provisions of special law." The
special law governing in the present case, as already seen, is
Act No. 3688.
There is another reason for upholding the order of dismissal
complained of. Plaintiff's action being a claim for sum of money
arising from an alleged implied contract between it and the
Case 3: Catan v. NLRC 2. Power of the agency to

sue and be sued jointly
and solidarily with the
G.R. No. 77279 April 15, 1988 principal or foreign-based
MANUELA S. CATAN/M.S. CATAN PLACEMENT employer for any of the
AGENCY, petitioners, violations of the
vs. recruitment agreement
THE NATIONAL LABOR RELATIONS COMMISSION, and the contracts of
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION employment. [Section
and FRANCISCO D. REYES, respondents. 10(a) (2) Rule V, Book I,
Rules to Implement the
Labor Code].
FACTS:
Thus, in the recent case of Ambraque International Placement
Petitioner, in this special civil action for certiorari, alleges grave & Services v. NLRC [G.R. No. 77970, January 28,1988], the
abuse of discretion on the part of the National Labor Relations Court ruled that a recruitment agency was solidarily liable for
Commission in an effort to nullify the latters resolution and thus the unpaid salaries of a worker it recruited for employment in
free petitioner from liability for the disability suffered by a Saudi Arabia.
Filipino worker it recruited to work in Saudi Arabia. This Court,
however, is not persuaded that such an abuse of discretion Even if indeed petitioner and the Saudi principal had already
was committed. This petition must fail. severed their agency agreement at the time private respondent
was injured, petitioner may still be sued for a violation of the
The facts of the case are quite simple. employment contract because no notice of the agency
Petitioner, a duly licensed recruitment agency, as agent of Ali agreement's termination was given to the private respondent:
and Fahd Shabokshi Group, a Saudi Arabian firm, recruited Art 1921. If the agency has been entrusted
private respondent to work in Saudi Arabia as a steelman. for the purpose of contra with specified
The contract was automatically renewed when private persons, its revocation shall not prejudice
respondent was not repatriated by his Saudi employer but the latter if they were not given notice
instead was assigned to work as a crusher plant operator. On thereof. [Civil Code].
March 30, 1983, while he was working as a crusher plant In this connection the NLRC elaborated:
operator, private respondent's right ankle was crushed under
the machine he was operating. Suffice it to state that albeit local respondent
M. S. Catan Agency was at the time of
On May 15, 1983, after the expiration of the renewed term, complainant's accident resulting in his
private respondent returned to the Philippines. His ankle was permanent partial disability was (sic) no
operated on at the Sta. Mesa Heights Medical Center for which longer the accredited agent of its foreign
he incurred expenses. principal, foreign respondent herein, yet its
On September 9, 1983, he returned to Saudi Arabia to resume responsibility over the proper implementation
his work. On May 15,1984, he was repatriated. of complainant's employment/service
contract and the welfare of complainant
On the basis of the provision in the employment contract that himself in the foreign job site, still existed,
the employer shall compensate the employee if he is injured or the contract of employment in question not
permanently disabled in the course of employment, private
having expired yet. This must be so,
respondent filed a claim, docketed as POEA Case No. 84-
09847, against petitioner with respondent Philippine Overseas because the obligations covenanted in the
Employment Administration. On April 10, 1986, the POEA recruitment agreement entered into by and
rendered judgment in favor of private respondent. between the local agent and its foreign
principal are not coterminus with the term of
such agreement so that if either or both of
HELD: the parties decide to end the agreement, the
Private respondents contract of employment can not be said to responsibilities of such parties towards the
have expired on May 14, 1982 as it was automatically renewed contracted employees under the agreement
since no notice of its termination was given by either or both of do not at all end, but the same extends up to
the parties at least a month before its expiration, as so and until the expiration of the employment
provided in the contract itself. Therefore, private respondent's contracts of the employees recruited and
injury was sustained during the lifetime of the contract. employed pursuant to the said recruitment
agreement. Otherwise, this will render
A private employment agency may be sued jointly and nugatory the very purpose for which the law
solidarily with its foreign principal for violations of the governing the employment of workers for
recruitment agreement and the contracts of employment: foreign jobs abroad was enacted. [NLRC
Sec. 10. Requirement before recruitment. Resolution, p. 4; Rollo, p. 18]. (Emphasis
Before recruiting any worker, the private supplied).
employment agency shall submit to the
Bureau the following documents:
(a) A formal appointment or agency contract
executed by a foreign-based employer in
favor of the license holder to recruit and hire
personnel for the former ...
xxx xxx xxx
property may prove that the contract is really a loan with

mortgage by raising as an issue the fact that the document
Case 4: Lustan v. CA does not express the true intent of the parties. In this case,
parol evidence then becomes competent and admissible to
prove that the instrument was in truth and in fact given merely
as a security for the repayment of a loan. And upon proof of
the truth of such allegations, the court will enforce the
[G.R. No. 111924. January 27, 1997] agreement or understanding in consonance with the true intent
of the parties at the time of the execution of the contract.
ADORACION LUSTAN, petitioner, vs. COURT OF
APPEALS, NICOLAS PARANGAN and SOLEDAD
PARANGAN, PHILIPPINE NATIONAL
BANK, respondents. 2. Whether the outstanding mortgages on the subject
property can be enforced against petitioner. YES.
Petitioner Adoracion Lustan is the registered owner of a parcel
of land otherwise known as Lot 8069 of the Cadastral Survey Third persons who are not parties to a loan may secure the
of Calinog, lloilo containing an area of 10.0057 hectares and latter by pledging or mortgaging their own property. So long as
covered by TCT No. T-561. On February 25, 1969, petitioner valid consent was given, the fact that the loans were solely for
leased the above described property to private respondent the benefit of Parangan would not invalidate the mortgage with
Nicolas Parangan for a term of ten (10) years and an annual respect to petitioner's property. In consenting thereto, even
rent of One Thousand (P1,000.00) Pesos. granting that petitioner may not be assuming personal liability
for the debt, her property shall nevertheless secure and
[21]
respond for the performance of the principal obligation. It is
. During the period of lease, Parangan was regularly admitted that petitioner is the owner of the parcel of land
extending loans in small amounts to petitioner to defray her mortgaged to PNB on five (5) occasions by virtue of the
daily expenses and to finance her daughter's education. On Special Powers of Attorney executed by petitioner in favor of
July 29, 1970, petitioner executed a Special Power of Attorney Parangan. Petitioner argues that the last three mortgages
in favor of Parangan to secure an agricultural loan from private were void for lack of authority. She totally failed to consider
respondent Philippine National Bank (PNB) with the aforesaid that said Special Powers of Attorney are a continuing one and
lot as collateral. On February 18, 1972, a second Special absent a valid revocation duly furnished to the mortgagee, the
Power of Attorney was executed by petitioner, by virtue of same continues to have force and effect as against third
which, Parangan was able to secure four (4) additional loans, persons who had no knowledge of such lack of
to wit: the sums of P24,000.00, P38,000.00, P38,600.00 authority. Article 1921 of the Civil Code provides:
and P25,000.00 on December 15, 1975, September 6, 1976,
July 2, 1979 and June 2, 1980, respectively. The last three "Art. 1921. If the agency has been entrusted for the purpose
loans were without the knowledge of herein petitioner and all of contracting with specified persons, its revocation shall not
the proceeds therefrom were used by Parangan for his own prejudice the latter if they were not given notice thereof."
[1]
benefit. These encumbrances were duly annotated on the
certificate of title. On April 16, 1973, petitioner signed a Deed The Special Power of Attorney executed by petitioner in
[2]
of Pacto de Retro Sale in favor of Parangan which was favor of Parangan duly authorized the latter to represent and
[3]
superseded by the Deed of Definite Sale dated May 4, 1979 act on behalf of the former. Having done so, petitioner clothed
which petitioner signed upon Parangan's representation that Parangan with authority to deal with PNB on her behalf and in
the same merely evidences the loans extended by him unto the absence of any proof that the bank had knowledge that the
the former. last three loans were without the express authority of
petitioner, it cannot be prejudiced thereby. As far as third
For fear that her property might be prejudiced by the persons are concerned, an act is deemed to have been
continued borrowing of Parangan, petitioner demanded the performed within the scope of the agent's authority if such is
return of her certificate of title. Instead of complying with the within the terms of the power of attorney as written even if the
request, Parangan asserted his rights over the property which agent has in fact exceeded the limits of his authority according
allegedly had become his by virtue of the aforementioned to the understanding between the principal and the
[22]
Deed of Definite Sale. Under said document, petitioner agent. The Special Power of Attorney particularly provides
conveyed the subject property and all the improvements that the same is good not only for the principal loan but also for
thereon unto Parangan absolutely for and in consideration of subsequent commercial, industrial, agricultural loan or credit
the sum of Seventy Five Thousand (P75,000.00) Pesos. accommodation that the attorney-in-fact may obtain and until
the power of attorney is revoked in a public instrument and a
Aggrieved, petitioner filed an action for cancellation of liens, [23]
copy of which is furnished to PNB. Even when the agent has
quieting of title, recovery of possession and damages against exceeded his authority, the principal is solidarily liable with the
Parangan and PNB in the Regional Trial Court of Iloilo City. agent if the former allowed the latter to act as though he had
[24]
full powers (Article 1911, Civil Code). The mortgage directly
and immediately subjects the property upon which it is
ISSUE/RULING: [25]
imposed. The property of third persons which has been
1. What is the nature of the contract? expressly mortgaged to guarantee an obligation to which the
said persons are foreign, is directly and jointly liable for the
fulfillment thereof; it is therefore subject to execution and sale
for the purpose of paying the amount of the debt for which it is
Deed of Definite Sale is in reality an equitable mortgage as it [26]
liable. However, petitioner has an unquestionable right to
was shown beyond doubt that the intention of the parties was
demand proportional indemnification from Parangan with
one of a loan secured by petitioner's land.
respect to the sum paid to PNB from the proceeds of the sale
[7] [27]
A contract is perfected by mere consent. More particularly, a of her property in case the same is sold to satisfy the unpaid
contract of sale is perfected at the moment there is a meeting debts.
of minds upon the thing which is the object of the contract and
[8]
upon the price. This meeting of the minds speaks of the intent
of the parties in entering into the contract respecting the (The facts of this case is a bit complicated because almost all
subject matter and the consideration thereof. If the words of details are important. Please do read the full text for better
the contract appear to be contrary to the evident intention of understanding. Thanks.)
[9]
the parties, the latter shall prevail over the former. In the case
at bench, the evidence is sufficient to warrant a finding that
petitioner and Parangan merely intended to consolidate the
former's indebtedness to the latter in a single instrument and to
secure the same with the subject property. Even when a
document appears on its face to be a sale, the owner of the
Case 5: Ramnani v. CA HELD:

The environmental circumstances of this case buttress the
claim of Ishwar that he did entrust the amount of US $
G.R. No. 85494 May 7, 1991
150,000.00 to his brother, Choithram, which the latter invested
CHOITHRAM JETHMAL RAMNANI AND/OR NIRMLA V. in the real property business subject of this litigation in his
RAMNANI and MOTI G. RAMNANI, petitioners, capacity as attorney-in-fact of Ishwar.
vs.
True it is that there is no receipt whatever in the possession of
COURT OF APPEALS, SPOUSES ISHWAR JETHMAL
Ishwar to evidence the same, but it is not unusual among
RAMNANI, SONYA JETHMAL RAMNANI and OVERSEAS
brothers and close family members to entrust money and
HOLDING CO., LTD., respondents.
valuables to each other without any formalities or receipt due
G.R. No. 85496 May 7, 1991 to the special relationship of trust between them.
SPOUSES ISHWAR JETHMAL RAMNANI AND SONYA JET Spouses Ishwar filed an urgent motion for the issuance of a
RAMNANI, petitioners, writ of preliminary attachment and to require Choithram, et al.
vs. to submit certain documents, inviting the attention of this Court
THE HONORABLE COURT OF APPEALS, ORTIGAS & CO., to the following:
LTD. PARTNERSHIP, and OVERSEAS HOLDING CO.,
a) Donation by Choithram of his 2,500
LTD., respondents.
shares of stock in General Garments
Corporation in favor of his children on
18
FACTS: December 29, 1989;
Ishwar, Choithram and Navalrai, all surnamed Jethmal b) Sale on August 2, 1990 by Choithram of
Ramnani, are brothers of the full blood. Ishwar and his spouse his 100 shares in Biflex (Phils.), Inc., in favor
19
Sonya had their main business based in New York. Realizing of his children; and
the difficulty of managing their investments in the Philippines
they executed a general power of attorney on January 24, c) Mortgage on June 20, 1989 by Nirmla through her attorney-
1966 appointing Navalrai and Choithram as attorneys-in-fact, in-fact, Choithram, of the properties subject of this litigation, for
empowering them to manage and conduct their business the amount of $3 Million in favor of Overseas Holding, Co. Ltd.,
concern in the Philippines. (Overseas for brevity), a corporation which appears to be
organized and existing under and by virtue of the laws of
On February 1, 1966 and on May 16, 1966, Choithram, in his Cayman Islands, with a capital of only $100.00 divided into 100
capacity as aforesaid attorney-in-fact of Ishwar, entered into shares of $1.00 each, and with address at P.O. Box 1790,
two agreements for the purchase of two parcels of land located Grand Cayman, Cayman Islands.
in Barrio Ugong, Pasig, Rizal, from Ortigas & Company, Ltd. All these contemporaneous and subsequent acts of Choithram,
Partnership (Ortigas for short) with a total area of et al., betray the weakness of their cause so they had to take
2
approximately 10,048 square meters. Per agreement, an steps, even as the case was already pending in Court, to
Choithram paid the down payment and installments on the lot render ineffective any judgment that may be rendered against
with his personal checks. A building was constructed thereon them.
by Choithram in 1966 and this was occupied and rented by
Jethmal Industries and a wardrobe shop called Eppie's The problem is compounded in that respondent Ortigas is
Creation. Three other buildings were built thereon by caught in the web of this bitter fight. It had all the time been
dealing with Choithram as attorney-in-fact of Ishwar. However,
Choithram through a loan of P100,000.00 obtained from the
evidence had been adduced that notice in writing had been
Merchants Bank as well as the income derived from the first served not only on Choithram, but also on Ortigas, of the
building. The buildings were leased out by Choithram as revocation of Choithram's power of attorney by Ishwar's
27
attorney-in-fact of Ishwar. Two of these buildings were later lawyer, on May 24, 1971. A publication of said notice was
burned. made in the April 2, 1971 issue of The Manila Times for the
28
information of the general public. Such notice of revocation
Ishwar and Sonya (spouses Ishwar for short) filed a complaint in a newspaper of general circulation is sufficient warning to
29
in the Court of First Instance of Rizal against Choithram and/or third persons including Ortigas. A notice of revocation was
spouses Nirmla and Moti (Choithram et al. for brevity) and also registered with the Securities and Exchange Commission
Ortigas for reconveyance of said properties or payment of its on March 29, 1 971.
value and damages. An amended complaint for damages was We have a situation where two brothers engaged in a business
thereafter filed by said spouses. venture. One furnished the capital, the other contributed his
The center of controversy is the testimony of Ishwar that during industry and talent. Justice and equity dictate that the two
the latter part of 1965, he sent the amount of US $150,000.00 share equally the fruit of their joint investment and efforts.
to Choithram in two bank drafts of US$65,000.00 and Perhaps this Solomonic solution may pave the way towards
US$85,000.00 for the purpose of investing the same in real their reconciliation. Both would stand to gain. No one would
estate in the Philippines. The trial court considered this lone end up the loser. After all, blood is thicker than water.
testimony unworthy of faith and credit. On the other hand, the However, the Court cannot just close its eyes to the devious
appellate court found that the trial court misapprehended the machinations and schemes that Choithram employed in
facts in complete disregard of the evidence, documentary and attempting to dispose of, if not dissipate, the properties to
testimonial. deprive spouses Ishwar of any possible means to recover any
Another crucial issue is the claim of Choithram that because he award the Court may grant in their favor. Since Choithram, et
al. acted with evident bad faith and malice, they should pay
was then a British citizen, as a temporary arrangement, he
arranged the purchase of the properties in the name of Ishwar moral and exemplary damages as well as attorney's fees to
who was an American citizen and who was then qualified to spouses Ishwar.
purchase property in the Philippines under the then Parity DECISION: Dividing equally between respondents spouses
Amendment. The trial court believed this account but it was Ishwar,on the one hand, and petitioner Choithram Ramnani, on
debunked by the appellate court. theother, (in G.R. No. 85494) the two parcels of land subject of
thislitigation, including all the improvements thereon,
presentlycovered by transfer Certificates of Title Nos. 403150

and 403152of the Registry of Deeds, as well as the rental
income of theproperty from 1967 to the present.
Case 6: Central Surety and Insurance v. C.N. publication, nor was Hodges notified of such
Hodges revocation despite the fact that he was a
regular client of the firm. And even if Hodges
would have inquired from Mrs. Mesa as to
G.R. No. L-28633 March 30, 1971 her authority to issue said bond, we doubt if
she would disclose the contents of the letter
CENTRAL SURETY and INSURANCE
of March 15, 1952 in view of Central Surety's
COMPANY, petitioner,
claim that she was committing irregularities
vs.
in her remittances to the main office.
C. N. HODGES and THE COURT OF
Secondly, some surety bonds issued by Mrs.
APPEALS, respondents.
Mesa in favor of Hodges after her authority
had allegedly been curtailed, were honored
FACTS: by the Central Surety despite the fact that
these were not reported to the main office at
Prior to January 15, 1954, lots Nos. 1226 and 1182 of the the time of their issuance. These accounts
Cadastral Survey of Talisay, Negros Occidental, had been sold were paid on January 31, 1957, to wit:
by C. N. Hodges to Vicente M. Layson, for the sum of Felicito and Libertad Parra issued on August
P43,000.90, payable on installments. As of January 15, 1954, 16, 1952; Estrella Auayan issued on
the outstanding balance of Layson's debt, after deducting the November 16, 1953; Dominador Jordan
installments paid by him prior thereto, amounted to issued on August 26, 1953; and Ladislao
P15,516.00. In order that he could use said lots as security for Lachica issued on February 28, 1953. (Exhs.
a loan he intended to apply from a bank, Layson persuaded F, G, H, I and J). By these acts Central
Hodges to execute in his (Layson's) favor a deed of absolute Surety ratified Mrs. Mesa's unauthorized acts
sale over the properties, with the understanding that he would and as such it is now estopped from setting
put up a surety bond to guarantee the payment of said forth Mrs. Mesa's lack of authority to issue
balance. Accordingly, on the date above-mentioned, Layson surety bonds after March 15, 1952. It has
executed, in favor of Hodges, a promissory note for been held that although the agent may have
P15,516.00, with interest thereon at the rate of 1% per month, acted beyond the scope of his authority, or
and the sum of P1,551.60, for attorney's fees and costs, in may have acted without authority at all, the
case of default in the payment of the principal or interest of principal may yet subsequently see fit to
said note. To guarantee the same, on January 23, 1954, the recognize and adopt the act as his own.
Central Surety and Insurance Company hereinafter referred Ratification being a matter of assent to and
to as petitioner through the manager of its branch office in approval of the act as done on account of
Iloilo, Mrs. Rosita Mesa, executed in favor of Hodges the the person ratifying any words or acts which
surety bond Annex B, which was good for twelve (12) months show such assent and approval are
from the date thereof. ordinarily sufficient. (Sta. Catalina vs.
When Layson defaulted in the discharge of his aforesaid Espitero, CA-G.R. No. 27075-R, April 28,
obligation, Hodges demanded payment from the petitioner, 1964, citing IV Padilla, CIVIL CODE. 1959
which, despite repeated extensions of time granted thereto, at ed., pp. 478-479; Roxas vs. Villanueva, CA-
its request, failed to honor its commitments under the surety G.R. No. 18928-R, June 20, 1958).
bond. On October 24, 1955, Hodges commenced, therefore. Moreover, the relocation of agency does not
the present action, in the Court of First Instance of Iloilo, prejudice third persons who acted in good
against Layson and petitioner herein, to recover from them, faith without knowledge of the revocation.
jointly and severally, the sums of P17,826.08, representing the (Joson vs. Garcia, CA-G.R. No. 29336-R.
principal and interest due up to said date, and P1,551.60, as Nov. 19, 1962).
attorney's fees. In his answer to the complaint, Layson Indeed, Article 1922 of our Civil Code provides:
admitted the formal allegations and denied the other
allegations thereof. If the agent had general powers, revocation
of the agency does not prejudice third
persons who acted in good faith and without
ISSUE: knowledge of the revocation. Notice of the
revocation in a newspaper of general
Whether or not petitioner "was liable on a bond issued by an
circulation is a sufficient warning to third
agent whose authority had already been withdrawn and
revoked. persons.
It is not disputed that petitioner has not caused to be published
any notice of the revocation of Mrs. Mesa's authority to issue
HELD:
surety bonds on its behalf, notwithstanding the fact that the
The first assignment of error is predicated upon the fact that powers of Mrs. Mesa, as its branch manager in Iloilo, were of a
prior to January 23, 1954, when the surety bond involved in general nature, for she had exclusive authority, in the City of
this case was executed, or on March 15, 1952, petitioner Iloilo, to represent petitioner herein, not with a particular
herein had withdrawn the authority of its branch manager in the person, but with the public in general, "in all the negotiations,
City of Iloilo, Mrs. Rosita Mesa, to issue, inter alia, surety transactions, and business in wherein the Company may
bonds and that, accordingly, the surety bond, copy of which lawfully transact or engage on subject only to the restrictions
was attached to the complaint as Annex B, is null and void. On specified in their agreement, copy of which was attached to
1
this point, the Court of Appeals had the following to say: petitioner's answer as Annex 3. Contrary to petitioner's claim,
Article 1922 applies whenever an agent has general powers,
... we are of the opinion that said surety bond
not merely when the principal has published the same, apart
is valid. In the first place, there appears to be
from the fact that the opening of petitioner's branch office
no showing that the revocation of authority
amounted to a publication of the grant of powers to the
was made known to the public in general by
manager of said office. Then, again, by honoring several surety

bonds issued in its behalf by Mrs. Mesa subsequently to March
15, 1952, petitioner induced the public to believe that she had
authority to issue such bonds. As a consequence, petitioner is
now estopped from pleading, particularly against a regular
customer thereof, like Hodges, the absence of said authority.
Case 7: Sanchez v. Medicard reduce his commission should the contract be renewed on its
third year, but he was obstinate.
CARLOS SANCHEZ vs. MEDICARD PHILIPPINES, INC., In order not to prejudice its personnel, Unilab, through
DR. NICANOR MONTOYA and CARLOS EJERCITO respondent Ejercito, negotiated with respondent Dr. Montoya
of Medicard, in order to find mutually beneficial ways of
FACTS: Medicard Philippines, Inc. appointed petitioner as its continuing the Health Care Program. The negotiations resulted
special corporate agent. As such agent, Medicard gave him a in a new contract wherein Unilab shall pay Medicard the
commission based on the "cash brought in." hospitalization expenses actually incurred by each employees,
plus a service fee. Under the "cost plus" system which
In September, 1988, through petitioners efforts, Medicard and replaced the premium scheme, petitioner was not given a
United Laboratories Group of Companies executed a Health commission.
Care Program Contract. Under this contract, Unilab shall pay
Medicard a fixed monthly premium for the health insurance of It is clear that since petitioner refused to reduce his
its personnel. Unilab paid Medicard and the latter then handed commission, Medicard directly negotiated with Unilab, thus
petitioner 18% of said amount or P746,640.90 representing his revoking its agency contract with petitioner. We hold that such
commission. revocation is authorized by Article 1924 of the Civil Code which
provides: "Art. 1924. The agency is revoked if the principal
Again, through petitioners initiative, the agency contract directly manages the business entrusted to the agent, dealing
between Medicard and Unilab was renewed for another year directly with third persons."
and petitioner received his commission.
Moreover, as found by the lower courts, petitioner did not
Prior to the expiration of the renewed contract, Medicard render services to Medicard, his principal, to entitle him to a
proposed to Unilab, through petitioner, an increase of the commission. There is no indication from the records that he
premium for the next year. Unilab rejected the proposal "for the exerted any effort in order that Unilab and Medicard, after the
reason that it was too high," prompting Dr. Nicanor Montoya expiration of the Health Care Program Contract, can renew it
(Medicards president and general manager), also a for the third time. In fact, his refusal to reduce his commission
respondent, to request petitioner to reduce his commission, but constrained Medicard to negotiate directly with Unilab. We find
the latter refused. no reason in law or in equity to rule that he is entitled to a
commission. Obviously, he was not the agent or the "procuring
In a letter dated October 3, 1990, Unilab, through Carlos
cause" of the third Health Care Program Contract between
Ejercito, another respondent, confirmed its decision not to
Medicard and Unilab.
renew the health program contract with Medicard.
Meanwhile, in order not to prejudice its personnel by the

termination of their health insurance, Unilab, through
respondent Ejercito, negotiated with Dr. Montoya and other
officers of Medicard, to discuss ways in order to continue the
insurance coverage of those personnel.
Under the new scheme, Unilab shall pay Medicard only the
amount corresponding to the actual hospitalization expenses
incurred by each personnel plus 15% service fee for using
Medicard facilities, which amount shall not be less than
P780,000.00.
Medicard did not give petitioner any commission under the new
scheme. Petitioner demanded from Medicard payment of
P338,000.00 as his commission plus damages, but the latter
refused to heed his demand.
Thus, petitioner filed with the RTC Makati City, a complaint for
sum of money against Medicard, Dr. Nicanor Montoya and
Carlos Ejercito
ISSUE: whetherthe contract of agency has been revoked by

Medicard, hence, petitioner is not entitled to a commission?
YES.
HELD: It is dictum that in order for an agent to be entitled to a

commission, he must be the procuring cause of the sale, which
simply means that the measures employed by him and the
efforts he exerted must result in a sale.
It may be recalled that through petitioners efforts, Medicard

was able to enter into a one-year Health Care Program
Contract with Unilab. As a result, Medicard paid petitioner his
commission. Again, through his efforts, the contract was
renewed and once more, he received his commission. Before
the expiration of the renewed contract, Medicard, through
petitioner, proposed an increase in premium, but Unilab
rejected this proposal. Medicard then requested petitioner to
Case 8: CMS LOGGING, INC. vs. CA is shown that such was done in order to evade the payment of
agent's commission.
In the case at bar, CMS appointed DRACOR as its agent for

the sale of its logs to Japanese firms. Yet, during the existence
FACTS: Petitioner CMS is a forest concessionaire engaged in of the contract of agency, DRACOR admitted that CMS sold its
the logging business, while private respondent DRACOR is logs directly to several Japanese firms. This act constituted an
engaged in the business of exporting and selling logs and implied revocation of the contract of agency under Article 1924
lumber. On August 28, 1957, CMS and DRACOR entered into of the Civil Code, which provides:
a contract of agency 1 whereby the former appointed the latter
as its exclusive export and sales agent for all logs that the Art. 1924 The agency is revoked if the principal directly
former may produce, for a period of five (5) years. The manages the business entrusted to the agent, dealing directly
pertinent portions of the agreement, which was drawn up by with third persons.
DRACOR, 2 are as follows:
Since the contract of agency was revoked by CMS when it sold
9. It is expressly agreed by the parties hereto that DRACOR its logs to Japanese firms without the intervention of DRACOR,
shall receive five (5%) per cent commission of the gross sales the latter is no longer entitled to its commission from the
of logs of SISON based on F.O.B. invoice value which proceeds of such sale and is not entitled to retain whatever
commission shall be deducted from the proceeds of any and/or moneys it may have received as its commission for said
all moneys received by DRACOR for and in behalf and for the transactions. Neither would DRACOR be entitled to collect
account of SISON; damages from CMS, since damages are generally not
awarded to the agent for the revocation of the agency, and the
About six months prior to the expiration of the agreement, case at bar is not one falling under the exception mentioned,
while on a trip to Tokyo, Japan, CMS's president, Atty. Carlos which is to evade the payment of the agent's commission.
Moran Sison, and general manager and legal counsel, Atty.
Teodoro R. Dominguez, discovered that DRACOR had used
Shinko Trading Co., Ltd. (Shinko for brevity) as agent,
representative or liaison officer in selling CMS's logs in Japan
for which Shinko earned a commission of U.S. $1.00 per 1,000
board feet from the buyer of the logs. Under this arrangement,
Shinko was able to collect a total of U.S. $77,264.67.
CMS claimed that this commission paid to Shinko was in

violation of the agreement and that it (CMS) is entitled to this
amount as part of the proceeds of the sale of the logs. CMS
contended that since DRACOR had been paid the 5%
commission under the agreement, it is no longer entitled to the
additional commission paid to Shinko as this tantamount to
DRACOR receiving double compensation for the services it
rendered.
After this discovery, CMS sold and shipped logs valued at U.S.
$739,321.13 or P2,883,351.90 directly to several firms in
Japan without the aid or intervention of DRACOR.
CMS sued DRACOR for the commission received by Shinko

and for moral and exemplary damages, while DRACOR
counterclaimed for its commission, amounting to P144,167.59,
from the sales made by CMS of logs to Japanese firms.
CMS's contention that DRACOR had admitted by its silence

the allegation that Shinko received the commissions in
question when it failed to respond to Atty. Carlos Moran
Sison's letter dated February 6, 1963, is not supported by the
evidence.
Moreover, even if it was shown that Shinko did in fact receive

the commissions in question, CMS is not entitled thereto since
these were apparently paid by the buyers to Shinko for
arranging the sale. This is therefore not part of the gross sales
of CMS's logs.
ISSUE: w/n DRACOR is entitled to the remaining commission

after CMS revoked the contract? No.
HELD: The principal may revoke a contract of agency at will,

and such revocation may be express, or implied and may be
availed of even if the period fixed in the contract of agency as
not yet expired. As the principal has this absolute right to
revoke the agency, the agent can not object thereto; neither
may he claim damages arising from such revocation, unless it
CASE 9: LIM vs. SABAN The pronouncements of the Court in the aforecited cases are
applicable to the present case, especially considering that
Saban had completely performed his obligations under his
FACTS: The late Eduardo Ybaez, the owner of a 1,000- contract of agency with Ybaez by finding a suitable buyer to
square meter lot in Cebu City entered into an Agreement and preparing the Deed of Absolute Sale between Ybaez and Lim
Authority to Negotiate and Sell (Agency Agreement) with and her co-vendees. Moreover, the contract of agency very
respondent Florencio Saban. Under the Agency Agreement, clearly states that Saban is entitled to the excess of the mark-
Ybaez authorized Saban to look for a buyer of the lot for up of the price of the lot after deducting Ybaezs share of
(P200,000.00) and to mark up the selling price to include the P200,000.00 and the taxes and other incidental expenses of
amounts needed for payment of taxes, transfer of title and the sale.
other expenses incident to the sale, as well as Sabans
commission for the sale. Agency coupled with Interest
Through Sabans efforts, Ybaez and his wife were able to sell However, the Court does not agree with the appellate courts
the lot to the petitioner Genevieve Lim. The price of the lot as pronouncement that Sabans agency was one coupled with an
indicated in the Deed of Absolute Sale is (P200,000.00). It interest. Under Article 1927 of the Civil Code, an agency
appears, however, that the vendees agreed to purchase the lot cannot be revoked if a bilateral contract depends upon it, or if it
at the price of (P600,000.00), inclusive of taxes and other is the means of fulfilling an obligation already contracted, or if a
incidental expenses of the sale. After the sale, Lim remitted to partner is appointed manager of a partnership in the contract of
Saban the amounts of (P113,257.00) for payment of taxes due partnership and his removal from the management is
on the transaction as well as (P50,000.00) as brokers unjustifiable. Stated differently, an agency is deemed as one
commission. Lim also issued in the name of Saban four coupled with an interest where it is established for the mutual
postdated checks in the aggregate amount of (P236,743.00. benefit of the principal and of the agent, or for the interest of
the principal and of third persons, and it cannot be revoked by
Subsequently, Ybaez sent a letter dated June 10, 1994 the principal so long as the interest of the agent or of a third
addressed to Lim to cancel all the checks issued by her in person subsists. In an agency coupled with an interest, the
Sabans favor and to "extend another partial payment" for the agents interest must be in the subject matter of the power
lot in Ybaezs favor. conferred and not merely an interest in the exercise of the
power because it entitles him to compensation. When an
After the four checks in his favor were dishonored upon agents interest is confined to earning his agreed
presentment, Saban filed a Complaint for collection of sum of compensation, the agency is not one coupled with an interest,
money and damages against Ybaez and Lim with the RTC. since an agents interest in obtaining his compensation as such
agent is an ordinary incident of the agency relationship.
Saban alleged that Ybaez told Lim that Saban was not
entitled to any commission for the sale since he concealed the Sabans compensation
actual selling price of the lot from Ybaez and because he was
not a licensed real estate broker. Saban further averred that Sabans right to receive compensation for negotiating as
Ybaez and Lim connived to deprive him of his sales broker for Ybaez arises from the Agency Agreement between
commission by withholding payment of the first three checks. them. Lim is not a party to the contract. However, the record
He also claimed that Lim failed to make good the fourth check reveals that she had knowledge of the fact that Ybaez set the
which was dishonored because the account against which it price of the lot at P200,000.00 and that the P600,000.00the
was drawn was closed. price agreed upon by her and Saban.
ISSUE: whether the agency was validly revoked by Ybanez? Ybaez, for his part, acknowledged that Lim and her co-
NO. vendees paid him P400,000.00 which he said was the full
amount for the sale of the lot.
HELD: The Court affirms the appellate courts finding that the
agency was not revoked since Ybaez requested that Lim Lims act of issuing the four checks amounting to P236,743.00
make stop payment orders for the checks payable to Saban in Sabans favor belies her claim that she and her co-vendees
only after the consummation of the sale on March 10, 1994. At did not agree to purchase the lot at P600,000.00. If she did not
that time, Saban had already performed his obligation as agree thereto, there would be no reason for her to issue those
Ybaezs agent when, through Sabans efforts, Ybaez checks which is the balance of P600,000.00 less the amounts
executed the Deed of Absolute Sale of the lot with Lim and the of P200,000.00 (due to Ybaez), P50,000.00 (commission),
Spouses Lim. and the P113,257.00 (taxes). The only logical conclusion is
that Lim changed her mind about agreeing to purchase the lot
To deprive Saban of his commission subsequent to the sale at P600,000.00 after talking to Ybaez and ultimately realizing
which was consummated through his efforts would be a breach that Sabans commission is even more than what Ybaez
of his contract of agency with Ybaez which expressly states received as his share of the purchase price as vendor.
that Saban would be entitled to any excess in the purchase Obviously, this change of mind resulted to the prejudice of
price after deducting the P200,000.00 due to Ybaez and the Saban whose efforts led to the completion of the sale between
transfer taxes and other incidental expenses of the sale. the latter, and Lim and her co-vendees. This the Court cannot
countenance.
In Macondray & Co. v. Sellner, the Court recognized the right
of a broker to his commission for finding a suitable buyer for The appellate court therefore had sufficient basis for
the sellers property even though the seller himself concluding that Ybaez and Lim connived to deprive Saban of
consummated the sale with the buyer. The Court held that it his commission by dealing with each other directly and
would be in the height of injustice to permit the principal to reducing the purchase price of the lot and leaving nothing to
terminate the contract of agency to the prejudice of the broker compensate Saban for his efforts.
when he had already reaped the benefits of the brokers
efforts. Considering the circumstances surrounding the case, and the
undisputed fact that Lim had not yet paid the balance of
P200,000.00 of the purchase price of P600,000.00, it is just improvements of the parcel of land to Primitivo Abad, the
and proper for her to pay Saban the balance of P200,000.00. agent, 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
Case 10: DEL ROSARIO et al vs. ABAD 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

FACTS: The plaintiffs are the children and heirs of the late
terminated upon the death of Tiburcio del Rosario, the
Tiburcio del Rosario. On 12 December 1936, the Secretary of
principal, sometime in December 1945, and Primitivo Abad, the
Agriculture and Commerce, issued under the provisions of the
agent, could no longer validly convey the parcel of land to
Public Land Act (Act No. 2874) homestead patent No. 40596 to
Teodorico Abad on 9 June 1947. The sale, therefore, to the
Tiburcio del Rosario. On 11 February 1937, the Registrar of
later was null and void. But granting that the irrevocable power
Deeds in and for the province of Nueva Ecija issued original
of attorney was lawful and valid it would subject the parcel of
certificate of title No. 4820 in the name of the homesteader.
land to an encumbrance.
On 24 February 1937, Tiburcio del Rosario obtained a loan
As the homestead patent was issued on 12 December 1936
from Primitivo Abad in the sum of P2,000 with interest at the
and the power of attorney was executed on 24 February 1937,
rate of 12% per annum, payable on 31 December 1941. As
it was in violation of the law that prohibits the alienation or
security for the payment thereof he mortgaged the
encumbrance of land acquired by homestead from the date of
improvements of the parcel of land in favor of the creditor. On
the approval of the application and for a term of five years from
the same day, 24 February, the mortgagor executed an
and after the issuance of the patent or grant. Appellants
"irrevocable special power of attorney coupled with interest" in
contend that the power of attorney was to be availed of by the
favor of the mortgagee, authorizing him, among others, to sell
agent after the lapse of the prohibition period of five years, and
and convey the parcel of land
that in fact Primitivo Abad sold the parcel of land on 9 June
Thereafter the mortgagor and his family moved to Santiago, 1947, after the lapse of such period. Nothing to that effect is
Isabela, and there established a new residence. Sometime in found in the power of attorney.
December 1945 the mortgagor died leaving the mortgage debt
As the sale to Teodorico Abad is null and void, the appellees
unpaid. On 9 June 1947, Primitivo Abad, acting as attorney-in-
cannot be compelled to reimburse Teodorico Abad for what he
fact of Tiburcio del Rosario, sold the parcel of land to his son
had paid to Primitivo Abad. The former's right of action is
Teodorico Abad for and in consideration of the token sum of
against the latter, without prejudice to the right of Primitive
P1.00 and the payment by the vendee of the mortgage debt of
Abad to foreclose the mortgage on the improvements of the
Tiburcio del Rosario to Primitivo Abad. On 29 December 1952
parcel of land if the mortgage debt is not paid by the appellees,
the plaintiffs brought suit against the defendants to recover
as heirs and successors-in-interest of the mortgagor.
possession and ownership of the land.
ISSUE: w/n there was an agency coupled with interest? No.
HELD: Lands acquired under the free patent or homestead

provisions shall not be subject to encumbrance or alienation
from the date of the approval of the application and for a term
of five years from and after the date of the issuance of the
patent or grant, nor shall they become liable to the satisfaction
of any debt contracted prior to the expiration of said period; but
the improvements or crops on the land may be mortgaged or
pledged to qualified persons, associations, or corporations.
The encumbrance or alienation of lands acquired by free

patent or homestead in violation of this section is null and void.
There is no question that the mortgage on the improvements of
the parcel of land executed by Tiburcio del Rosario in favor of
Primitivo Abad is valid.
The power of attorney executed by Tiburcio del Rosario in

favor of Primitivo 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
Case 11: BISAYA LAND TRANSPORTATION CO. was seriously impaired and undermined He could not solicit as
vs. SANCHEZ many passengers as he used to, because the passenger
tickets issued to him by BISTRANCO were limited.
The petitioners allege in their Memorandum 16 submitted to

this Court that they are void contracts under Article 1409(l) of
FACTS: Petitioner Bisaya Land Transportation Company, Inc. the Civil Code, whereas, in their Petition, 17 they labeled the
(BISTRANCO, for short) has been engaged in the shipping contracts as unenforceable under Article 1403(l) of the Civil
business and among the ports of call of these vessels has Code.
been Butuan City. As early as 1954, private respondent
Marciano Sanchez (Sanchez, for short) was an employee of ISSUE 1: w/n the unenforceable contract of agency between
BISTRANCO. In 1959, he ceased to be an employee as he Atty. Amor as receiver and Sanchez was ratified by
engaged in stevedoring services in the port of Butuan City and BISTRANCO? Yes.
rendered steverdoring services for the vessels of BISTRANCO.
HELD: The general powers of a court-appointed receiver are
Later, on 12 March 1976, when BISTRANCO was under provided in Section 7, Rule 59 of the Rules of Court. Under
receivership, Sanchez was appointed by its Receiver, Atty. such rule, the receiver is "subject to the control of the court in
Adolfo V. Amor, as acting shipping agent, also for M/V Doa which the action is pending" and he can "generally do such
Remedies, in addition to M/V Doa Filomena, in the port of acts respecting the property as the court may authorize". The
Butuan City "pending the execution of the formal contract of act of Receiver Amor in entering into a contract of agency with
agency. Sanchez is not one of the acts specifically allowed in the
mentioned rule. As held in one case, a court-appointed
Thereafter, or on 27 July 1976, a formal Contract of Agency receiver cannot validly enter into a contract without the
was executed between BISTRANCO, represented by Receiver approval of the court.
Atty. Adolfo V. Amor and Marciano C. Sanchez, represented
by his authorized representative Exequiel Aranas. A perusal of the Contracts in question would show that there is
nothing in their cause, object or purpose which renders them
By virtue of the Contract of Agency and the Supplemental void. The purpose of the Contracts was to create an agency for
Shipping Agency Contract, Sanchez performed his duties as BISTRANCO with Marciano Sanchez as its agent in Butuan
shipping agent of BISTRANCO, and he received his City. Even as to the other provisions of the Contracts, there is
corresponding commissions as such shipping agent. Pursuant nothing in their cause or object which can be said as contrary
to the Contracts, Sanchez leased a parcel of land owned by to law, morals, good customs, public order or public policy so
Jose S. Mondejar which was used as the wharf and berthing as to render them void.
facilities of BISTRANCO. At an expense of more than
P100,000.00, Sanchez constructed the wharf on the land he Consequently, the questioned Contracts can rightfully be
leased and the wharf was used to facilitate the loading and classified as unenforceable for having been entered into by
unloading of cargoes of the BISTRANCO vessels at the port of one who had acted beyond his powers, due to Receiver Amor's
Butuan City from 1976 to December 1979. As shipping agent, failure to secure the court's approval of said Contracts.
Sanchez put up billboards and other forms of advertisement to
enhance the shipping business of BISTRANCO. He These unenforceable Contracts were nevertheless deemed
established good business relations with the business ratified in the case at bar, based upon the facts and
community of Butuan City. In these endeavors, Sanchez circumstances on record which have led this Court to conclude
succeeded in increasing the volume of the shipping business that BISTRANCO had actually ratified the questioned
of BISTRANCO at the Butuan City port, so much so that his Contracts.
earnings on freight alone increased from an average of
Furthermore, it is clear that BISTRANCO received material
P8,535.00 a month in 1975 to an average of about P32,000.00
benefits from the contracts of agency of Sanchez, based upon
a month in the last seven months of 1979.
the monthly statements of income of BISTRANCO, upon which
While the shipping business of BISTRANCO in Butuan City the commissions of Sanchez were based. A perusal of the
flourished, evidently to the mutual benefit of both parties, on 26 Contracts will also show that there is no single provision
December 1979, co-petitioner Benjamin G. Roa, as Executive therein that can be said as prejudicial or not beneficial to
Vice-President of BISTRANCO, wrote Sanchez a letter BISTRANCO.
advising him that, effective 1 January 1980, BISTRANCO
Besides, in our considered opinion, the doctrine of estoppel
would commence operating its branch office in Butuan City.
precludes BISTRANCO from repudiating an obligation
Prior to this, on 11 December 1979, Sanchez was invited to
voluntarily assumed by it, after having accepted benefits
attend a meeting of the Board of Directors of BISTRANCO
therefrom. To countenance such, repudiation would be
wherein he was told by co-petitioner Antonio V. Cuenco that
contrary to equity and would put a premium on fraud or
the Board was to open a branch office in Butuan City and he
misrepresentation, which this Court will not sanction.
was asked what would be his proposals but these were not
acceptable to BISTRANCO.
Realizing that the letter, marked as Exhibit "FF", was in effect a

ISSUE 2: w/n the opening of BISTRANCO of a branch in
repudiation of the Contracts, Sanchez filed an action for
Butuan is a violation of the agency contract? YES
specific performance with preliminary injunction and damages
with the Regional Trial Court of Cebu City on 28 December HELD: Considering that the contract of agency and the
1979. supplemental shipping agency contract are valid and binding
between BISTRANCO and Sanchez, the former's opening of a
Pursuant to the letter (Exhibit "FF"), BISTRANCO actually
branch in Butuan City was, in effect, a violation of the
opened and operated a branch office in Butuan City on 15
Contracts. Sanchez entered into the agency Contract because
January 1980. Under these circumstances, the business of
Sanchez, as shipping agent of BISTRANCO in Butuan City,
of the expected income and profits for himself. A provision in

the Supplemental Shipping Agency Contract reads:
6. That in consideration of the foregoing additional particular

obligations of the AGENT, the COMPANY agrees not to
appoint or employ another agent in Butuan City or in any of the
City's neighboring towns without the written consent of the
AGENT first obtained.
It may be true that there is no express prohibition for

BISTRANCO to open its branch in Butuan City. But, the very
reason why BISTRANCO agreed not to employ or appoint
another agent in Butuan City was to prevent competition
against Sanchez' agency, in order that he might recover what
he invested and eventually maximize his profits. The opening
by BISTRANCO of a branch in Butuan City virtually resulted in
consequences to Sanchez worse than if another agent had
been appointed. In effect, the opening of a branch office in
Butuan City was a violation of the Contracts of agency.
In the case at bar, good faith required that BISTRANCO refrain

from opening its branch in Butuan City during the effectivity of
the agency contract with Sanchez, or until 27 July 1981.
Moreover, the opening of the branch office which, in effect,

was a revocation of the contracts of agency is not sanctioned
by law because the agency was the means by which Sanchez
could fulfill his obligations under Exhibits "F" and "G". Article
1927 of the Civil Code, among others, provides: "An agency
cannot be revoked if a bilateral contract depends upon it, or if it
is the means of fulfilling an obligation already contracted".
Case 12: RALLOS vs. FELIX GO CHAN & SONS necessary cause for its extinction. Laurent says that the
REALTY CORPORATION juridical tie between the principal and the agent is severed ipso
jure upon the death of either without necessity for the heirs of
the fact to notify the agent of the fact of death of the former.
FACTS: Concepcion and Gerundia both surnamed Rallos
were sisters and registered co-owners of a parcel of land The same rule prevails at common law the death of the
known as Lot No. 5983. On April 21, 1954, the sisters principal effects instantaneous and absolute revocation of the
executed a special power of attorney in favor of their brother, authority of the agent unless the Power be coupled with an
Simeon Rallos, authorizing him to sell for and in their behalf lot interest.
5983. On March 3, 1955, Concepcion Rallos died. On
September 12, 1955, Simeon Rallos sold the undivided shares It is the contention of respondent corporation which was
of his sisters Concepcion and Gerundia in lot 5983 to Felix Go sustained by respondent court that notwithstanding the death
Chan & Sons Realty Corporation for the sum of P10,686.90. of the principal Concepcion Rallos the act of the attorney-in-
The deed of sale was registered in the Registry of Deeds of fact, Simeon Rallos in selling the former's sham in the property
Cebu and a new transfer certificate of Title No. 12989 was is valid and enforceable inasmuch as the corporation acted in
issued in the named of the vendee. good faith in buying the property in question.
On May 18, 1956 Ramon Rallos as administrator of the Articles 1930 and 1931 of the Civil Code provide the
Intestate Estate of Concepcion Rallos filed a complaint exceptions to the general rule afore-mentioned.
docketed as Civil Case No. R-4530 of the Court of First
ART. 1930. The agency shall remain in full force and effect
Instance of Cebu, praying (1) that the sale of the undivided
even after the death of the principal, if it has been constituted
share of the deceased Concepcion Rallos in lot 5983 be d
in the common interest of the latter and of the agent, or in the
unenforceable, and said share be reconveyed to her estate; (2)
interest of a third person who has accepted the stipulation in
that the Certificate of 'title issued in the name of Felix Go Chan
his favor.
& Sons Realty Corporation be cancelled and another title be
issued in the names of the corporation and the "Intestate
ART. 1931. Anything done by the agent, without knowledge of
estate of Concepcion Rallos" in equal undivided
the death of the principal or of any other cause which
extinguishes the agency, is valid and shall be fully effective
ISSUE: w/n the sale of the undivided share of Concepcion
with respect to third persons who may have contracted with
Rallos in lot 5983 valid although it was executed by the agent
him in good. faith.
after the death of his principal? NO.
Article 1930 is not involved because admittedly the special
HELD: A contract entered into in the name of another by one
power of attorney executed in favor of Simeon Rallos was not
who has no authority or the legal representation or who has
coupled with an interest.
acted beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf
Article 1931 is the applicable law. Under this provision, an act
it has been executed, before it is revoked by the other
done by the agent after the death of his principal is valid and
contracting party
effective only under two conditions, viz: (1) that the agent acted
without knowledge of the death of the principal and (2) that the
Out of the above given principles, sprung the creation and
third person who contracted with the agent himself acted in
acceptance of the relationship of agency whereby one party,
good faith. Good faith here means that the third person was
caged the principal (mandante), authorizes another, called the
not aware of the death of the principal at the time he
agent (mandatario), to act for and in his behalf in transactions
contracted with said agent. These two requisites must concur
with third persons. The essential elements of agency are: (1)
the absence of one will render the act of the agent invalid and
there is consent, express or implied of the parties to establish
unenforceable.
the relationship; (2) the object is the execution of a juridical act
in relation to a third person; (3) the agents acts as a
In the instant case, it cannot be questioned that the agent,
representative and not for himself, and (4) the agent acts within
Simeon Rallos, knew of the death of his principal at the time he
the scope of his authority. 5
sold the latter's share in Lot No. 5983 to respondent
corporation. The knowledge of the death is clearly to be
There are various ways of extinguishing agency, but here We
inferred from the pleadings filed by Simon Rallos before the
are concerned only with one cause death of the principal
trial court. That Simeon Rallos knew of the death of his sister
Paragraph 3 of Art. 1919 of the Civil Code which was taken
Concepcion is also a finding of fact of the court a quo and of
from Art. 1709 of the Spanish Civil Code provides:
respondent appellate court when the latter stated that Simon
ART. 1919. Agency is extinguished. xxx xxx xxx Rallos 'must have known of the death of his sister, and yet he
proceeded with the sale of the lot in the name of both his
3. By the death, civil interdiction, insanity or insolvency of the sisters Concepcion and Gerundia Rallos without informing
principal or of the agent; ... appellant (the realty corporation) of the death of the former.
By reason of the very nature of the relationship between On the basis of the established knowledge of Simon Rallos
Principal and agent, agency is extinguished by the death of the concerning the death of his principal Concepcion Rallos, Article
principal or the agent. This is the law in this jurisdiction. 1931 of the Civil Code is inapplicable. The law expressly
requires for its application lack of knowledge on the part of the
Manresa commenting on Art. 1709 of the Spanish Civil Code agent of the death of his principal; it is not enough that the third
explains that the rationale for the law is found in the juridical person acted in good faith. Thus in Buason & Reyes v.
basis of agency which is representation. There being an Panuyas, the Court applying Article 1738 of the old Civil rode
integration of the personality of the principal integration that of now Art. 1931 of the new Civil Code sustained the validity , of a
the agent it is not possible for the representation to continue to sale made after the death of the principal because it was not
exist once the death of either is establish. Pothier agrees with shown that the agent knew of his principal's demise.
Manresa that by reason of the nature of agency, death is a
Trusts: General Provisions property sold. What is more, the provision of the will of
the decedent explicitly authorizing the trustee to sell
the property held in trust and to acquire, with the
Case 1: Trusteeship of minors Tuason v. Araneta proceeds of the sale, other property leaves no room for
doubt about the intent of the testatrix to keep, as part
of the trust, said proceeds of the sale, and not to turn
the same over to the beneficiary as net rentals.
G.R. No. L-16962 February 27, 1962
TRUSTEESHIP OF THE MINORS BENIGNO, ANGELA and
Thirdly, pursuant to the general law on trust, "a
ANTONIO, all surnamed PEREZ Y TUASON, ANTONIO
provision in the instrument to the effect that the
M. PEREZ, judicial-guardian-appellant, vs. J. ANTONIO
beneficiary shall be entitled to the 'income and profits
ARANETA, trustee-appellee.
of' of the trust estate is not ordinarily sufficient to
indicate an intention that he should be entitled to
receive gains arising from the sale of trust property ..."
Trustor: Angela Tuason
The corpus of the estate, no matter what changes of
Trustee: Antonio Araneta
form it undergoes, should be regarded as the same
Beneficiary: Benigno, Angela, Antonio (grandchildren of
property. That the trust property is originally money,
decedent)
later becomes bonds, and still later real estate, ought
Judicial guardian of the grandchildren: Antonio Perez
not to affect the status of the property as the capital
fund.
Facts: Sometime in 1948, Angela S. Tuason died leaving
a will. In conformity with this provision of said will, the
Hence, it is well settled that profits realized in the sale
present trusteeship proceedings was instituted and
of trust properties are part of the capital held in trust
certain properties of the estate of the deceased were
to which the beneficiaries are not entitled as income.
turned over in 1950 to J. Antonio Araneta, as trustee for
money or other property received by the trustee as the
the benefit of Benigno, Angela and Antonio, all
proceeds of a sale or exchange of the principal of trust
surnamed Perez y Tuason, the grandchildren of the
property is principal. Where it is provided by the terms
decedent. Portions of said properties constituting the
of the trust that the 'income and profits' of the trust
trust were sold. Thus, the judicial guardian and father of
estate shall be paid to the life beneficiary, it is a
said minors filed a motion in the trusteeship
question of interpretation whether the life beneficiary is
proceedings alleging that said proceeds of the sale
to receive more than he would receive if it were
represent profits or income of the trusteeship to which
provided that the 'income' should be paid to him.
said minors are entitled and praying that the trustee be
Ordinarily the inference is that he is not to receive
accordingly instructed to deliver said sum to the
more, and if trust property is sold at a profit, the profit
movant.
is principal.
Contention of PEREZ: The proceeds of the sale is a profit
or income as it was included as profit in the statements
of profits and losses attached to the corresponding
income tax returns.
Issue: whether or not the aforesaid sum of P98,828.88

is a profit or income which should be turned over to the
guardian of said minors according to the provisions of
the will
Held: NO.
Rationale: To begin with, the issue as to whether or not

the minors are entitled to the delivery of said sum of
P98,828.88 is a matter dependent exclusively upon the
conditions upon which the trust had been established,
as provided in the above quoted paragraph of the will of
the decedent, which in turn depends upon the latter's
intent, as set forth in said paragraph. Upon the other
hand, the question whether the sum in question is a
profit or not within the purview of our internal revenue
law depends upon the provisions of the latter,
regardless of the will of the decedent.
Secondly, the proceeds of the sale of portions of the

real estate held in trust, merely take the place of the
Express Trust
They filed a complaint for the collection of unearned
interest on the dollar balance of the insurance
Case 1: Rizal Surety v. CA proceeds.
Contention of Transocean and REPACOM: effective as of

the date of your receipt of a copy of the letter of the
G.R. No. 96727 August 28, 1996 Central Bank authorizing the deposit of the amount in
RIZAL SURETY & INSURANCE COMPANY, petitioner, vs. an interest-bearing special dollar account . . . , the same
COURT OF APPEALS and TRANSOCEAN TRANSPORT should bear interest at the authorized rates, and it was
CORPORATION, respondents. their duty as trustee of the said funds to see to it that
the same earned the interest authorized by the Central
Trustor: REPACOM and Transcocean Transport (insured) Bank. As trustee, they were morally and legally bound
Trustee: Rizal Surety to deposit the funds under terms most advantageous to
FACTS: REPACOM (Reparations Commission) sold to the beneficiaries.
Transocean Transport Corporation the vessel 'M/V
TRANSOCEAN SHIPPER' which was insured with Rizal Contention of RIZAL SURETY: that (i) there was no trust
Surety & Insurance Company and which was relationship, express or implied, involved in the
subsequently, reinsured by Rizal Surety with a foreign transaction as it never intended to enter into a fiduciary
insurance firm. Sometime in February 1975, the vessel relationship with the 2 insured and that it held on to the
was lost in the Mediterranean Sea. The 2 insured filed dollar balance only as a means to protect its interest. It
claims for the insurance proceeds. insists that the Loss and Subrogation Receipt signed by
Rizal Surety was authorized to receive the insurance the insureds effectively released it from any and all
proceeds from the reinsurance firm in foreign currency liabilities including liability to pay interest on the dollar
with any local bank in non-interest bearing account, balance of the insurance proceeds.
jointly in the names of Transocean and REPACOM
which was subsequently amended to be deposited in ISSUE:
the name of Rizal Surety and for the joint account of 1. Was a trust relationship established between an
Transocean and REPACOM. insurer and the two insureds over the balance
of the insurance proceeds being held by the
In January 1976--Transocean and REPACOM entered insurer for the account of the two insureds,
into a partial compromise agreement, wherein they pending a final settlement by and between the
agreed to divide and distribute the insurance proceeds two insureds of their respective claims to said
in such a manner that each would receive as its initial proceeds?
share thereof that portion not disputed by the other 2. Can the insurer whether or not considered a
party (thus, REPACOM US$434,618.00, and private trustee be held liable for interest on the said
respondent US$1,931,153.00), leaving the balance in insurance proceeds, which proceeds the said
dispute for future settlement, either by way of insurer failed or neglected to deposit in an
compromise agreement or court litigation, pending interest-bearing account, contrary to the
which the said balance would continue to be kept in the specific written instructions of the two
same bank account in trust for private respondent and insureds?
REPACOM unless the parties otherwise agree to
transfer said balance to another bank account. Copies HELD:
of this compromise agreement were sent to petitioner.
(final compromise agreement executed in 1978 where On the existence of Trust Relationship: RIZAL SURETY
all rights to the insurance proceeds were transferred to WAS A TRUSTEE OF REPACOM AND TRANSOCEAN.
Transocean) EXPRESS TRUST EXISTS.
A trust relationship existed. It is basic in law
In march 1976the 2 insured were authorized to that a trust is the right, enforceable solely in equity, to
transfer the balance of the insurance proceeds into an the beneficial enjoyment of property, the legal title to
interest bearing special dollar account with any local which is vested in another. 25 It is a fiduciary
commercial bank. relationship 26 concerning property which obliges a
person holding it (i.e., the trustee) to deal with the
CONTROVERSY: there was delay on the part of Rizal property for the benefit of another (i.e. the beneficiary).
Surety in depositing the remaining dollar deposit in an The Civil Code provides that:
interest-bearing account either by remitting the same Art. 1441. Trusts are either express or
to PNB in compliance with the request of the 2 insured, implied. Express trusts are created by
or by transferring the same into an interest bearing the intention of the trustor or of the
account with Prudential Bank (sister company). The parties. . . .
authorization was given by CB in 1976 and the actual Art. 1444. No particular words are
transfer to the bank they chose was only effected in required for the creation of an express
January 10, 1978 (lapse of 1 year and 9 months).
trust, it being sufficient that a trust is Undeniably, all the abovementioned elements are
clearly intended. present in the instant case.
Express trusts are created by direct and positive acts of ON THE ALLEGATION THAT IT WAS NOT A PARTY TO
the parties, by some writing or deed, or will, or by THE PARTIAL COMPROMISE AGREEMENT:
words either expressly or impliedly evincing an Petitioner's argument that it was never a party to the
intention to create a trust. Partial Compromise Agreement is unavailing, since,
upon being furnished a copy of the same, it
The evidence on record is clear that petitioner held on undoubtedly became aware if it was not already
to the dollar balance of the insurance proceeds because aware even prior thereto that the parties to said
(1) private respondent and REPACOM requested it to do agreement considered petitioner as their trustee in
so as they had not yet agreed on the amount of their respect of said dollar balance; in short, it is all too
respective claims, and the Final Compromise Agreement evident that petitioner fully grasped the situation and
was yet to be executed, and (2) they had not, prior to realized that private respondent and REPACOM were
January 31, 1977, signed the Loss and Subrogation constituting petitioner their trustee. Yet, petitioner not
Receipt in favor of petitioner. only did not manifest any objection thereto, but it
instead proceeded to accept its role and responsibility
Furthermore, petitioner's letter dated November 20, as such trustee by implementing the compromise
1975 addressed to the CB expressly stated that the agreement. Equally as significant, petitioner never
deposit in Prudential Bank was being made in its name committed any act amounting to an unequivocal
for the joint account of the private respondent and repudiation of its role as trustee.
REPACOM. Petitioner never claimed ownership over the
funds in said deposit. In fact, it made several tenders of ON THE ALLEGATION THAT NO FIDUCIARY
payment to the private respondent and REPACOM, RELATIONSHIP EXISTED BECAUSE OF THE JOINT
albeit the latter declined to accept since the dispute as INSUREDS ADVERSARY POSITIONS IN THE INSURANCE
to their respective claims could not yet be resolved at PROCEEDS:
that time. By its own allegation, petitioner held on to The so-called adversary positions of the parties had no
the dollar balance of the insurance proceeds to protect effect on the trust as it never changed the position of
its interest, as it was not yet granted the right of the parties in relation to each other and to the dollar
subrogation over the total loss of the vessel. As proceeds, i.e., petitioner held it for private respondent
petitioner continued holding on to the deposit for the and REPACOM, which were the real owners of the
benefit of private respondent and REPACOM, petitioner money.
obviously recognized its fiduciary relationship with said
parties. This is the essence of the trust flowing from the THE SIGNIFICANCE OF THE LOSS AND SUBROGATION
actions and communications of petitioner. RECEIPT
Said receipt absolved the petitioner only from all claims
In Mindanao Development Authority vs. Court of arising from the insurance policies it issued. It did not
Appeals, 28 this Court held:. . . It is fundamental in the exculpate petitioner from its liability for the accrued
law of trusts that certain requirements must exist interest as this obligation arose in connection with its
before an express trust will be recognized. Basically, role as trustee and its unjustified refusal to deposit the
these elements include a competent trustor and money in an interest-bearing account as required.
trustee, an ascertainable trust res, and sufficiently
certain beneficiaries. Stilted formalities are At most, the signing of the Loss and Subrogation Receipt
unnecessary, but nevertheless each of the above was a valid pre-condition before petitioner could be
elements is required to be established, and, if any one compelled to turn over the whole amount of the
of them is missing, it is fatal to the trusts (sic). insurance proceeds to the two insured. Thus, in
Furthermore, there must be a present and complete response to the letter of private respondent and
disposition of the trust property, notwithstanding that REPACOM to petitioner dated April 21, 1975, petitioner
the enjoyment in the beneficiary will take place in the reiterated its offer to pay the balance of the insurance
future. It is essential, too, that the purpose be an active claim provided the former sign the Loss and
one to prevent trust from being executed into a legal Subrogation Receipt. But this was done only on October
estate or interest, and one that is not in contravention 10, 1977.
of some prohibition of statute or rule of public policy.
There must also be some power of administration other LIABILITY OF PETITIONER FOR ACCRUED INTEREST
than a mere duty to perform a contract although the Contention of Rizal Surety: Petitioner argues, rather
contract is for a third-party beneficiary. A declaration of unconvincingly, that it was of the belief that, as it was
terms is essential, and these must be stated with never the trustee for the insured and thus was under no
reasonable certainty in order that the trustee may obligation to execute the instruction to transfer the
administer, and that the court, if called upon so to do, dollar balance into an interest-bearing account,
may enforce, the trust. (citing Sec. 31, Trusts, Am Jur therefore, it was also not obligated and hence it did
2d, pp. 278-279.) not bother to advise private respondent and
REPACOM that it would neither remit the dollar balance
to the insured's bank of choice as specifically instructed, petitioner), which beyond the shadow of a doubt must
nor just deposit the same in an interest-bearing account have earned income thereon by utilizing and relending
at Prudential Bank. Petitioner's other contention that it the same without having to pay any interest cost
was not bound by the CB order, despite its having been thereon. However one looks at it, it is grossly unfair for
informed thereof and copy furnished by private anyone to earn income on the money of another and
respondent and REPACOM, simply because said order still refuse to share any part of that income with the
was not directed to it, is even more ridiculous and latter. And whether petitioner benefited directly, or
undeserving of further comment. indirectly as by enabling its sister company to earn
income on the dollar balance, is immaterial. The fact is
HELD: Originally, petitioner, as shown by its November that petitioner's violation of its duty as trustee was at
25, 1975 letter, only agreed to receive and deposit the the expense of private respondent, and for the ultimate
money under its name for the joint account of the benefit of petitioner or its stockholders. This we cannot
private respondent and REPACOM in a non-interest let pass.
bearing account. At that point, as trustee, it could have
easily discharged its obligation by simply transferring
and paying the dollar balance to private respondent and
REPACOM and by so doing, would have dissolved the
trust. However, when the trustors instructed petitioner
as trustee to deposit the funds in an interest-bearing
account, the latter ought, as a matter of ordinary
common sense and common decency, to have at least
informed the insured that it could not or would not, for
whatever reason, carry out said instructions. This is the
very least it could have done if indeed it wanted to
repudiate its role as trustee or be relieved of its
obligations as such trustee at that point. Instead of
doing thus, petitioner chose to remain silent. After
petitioner's receipt of the April 21, 1976 letter of private
respondent and REPACOM requesting petitioner to
remit the the dollar balance to an interest-bearing
account, petitioner merely tendered payment of the
said dollar balance in exchange for the signed Loss and
Subrogation Receipt. This falls far short of the
requirement to clearly inform the trustor-beneficiaries
of petitioner's refusal or inability to comply with said
request/instruction. Such silence and inaction in the
face of specific written instructions from the trustors-
beneficiaries could not but have misled the latter into
thinking that the trustee was amenable to and was
carrying out their instructions, there being no reason for
them to think otherwise. This in turn prevented the
trustors-beneficiaries from early on taking action to
discharge the unwilling trustee and appointing a new
trustee in its place or from otherwise effecting the
transfer of the deposit into an interest-bearing account.
The result was that the trustors-beneficiaries, private
respondent and REPACOM, suffered prejudice in the
form of loss of interest income on the dollar balance. As
already mentioned, such prejudice could have been
prevented had petitioner acted promptly and in good
faith by communicating its real intentions to the
trustors.
ISSUE ON UNDUE ENRICHMENT:

The dollar balance of US$718,078.20 was certainly a
large sum of money. Leaving such an enormous amount
in a non-interest bearing bank account for an extended
period of time about one year and nine months
would undoubtedly have not only prejudiced the
owner(s) of the funds, but, equally as true, would have
resulted to the immense benefit of Prudential Bank
(which happens to be a sister company of the
Case 2: Heirs of Medina v. CA that whatever right, interest, title or participation

petitioners had or might have had in the property had
been lost by extinctive prescription and by virtue of the
33 years of exclusive actual possession in the concept of
G.R. No. L-26107 November 27, 1981
owner of the spouses Sotero and Restituta Medina who
THE HEIRS OF PEDRO MEDINA, represented by
had thereby acquired title thereto by acquisitive
MARGARITA MEDINA, petitioners vs. THE HON. COURT
prescription, even granting arguendo that petitioners
OF APPEALS, * RESTITUTA ZURBITO VDA. DE MEDINA
had some title, right or interest over the land.
and ANDRES NAVARRO, JR.,respondents.
ISSUE:
FACTS:
1. WON there exists an express trust--NO
Deceased: Francisco Medina (who has 8 children:
2. WON Medinas action for recovery has been
namely, Gregorio, Sotero, Narciso, Victorina, Simona,
barred by prescriptionYES.
Carmen, Pedro and Hospicia, all of whom are deceased)
Petitioner: Margarita Medina (daughter of Pedro
HELD:
Medina who predeceased his father Francisco Medina)
Private respondents: Restituta Zurbito Vda. de Medina
NO EXPRESS TRUST. Petitioners failed to prove their
(the widow of Sotero Medina who is the brother of
claim that respondents were holding the property on
Pedro Medina); and Andres Navarro, Jr.,(grandson)
the basis of an express trust, the existence of which,
according to law and to established jurisprudence,
Contention of Medina: Margarita Medina filed the
cannot be proven by mere parol evidence and cannot
complaint seeking to recover a parcel of land alleging
rest on vague and uncertain evidence or on loose,
that she inherited with her sister Ana Medina the said
equivocal or indefinite declarations.
parcel of land from their father Pedro Medina; that
upon their father's death, she and her sister Ana
Rationale: As provided by our Civil Code, "Trusts are
Medina being then minors were placed under the care
either express or implied. Express trusts are created by
and custody of the spouses Sotero Medina and
the intention of the trusts are of the parties. Implied
Restituta Zurbito, as guardians of their persons and
trusts come into being by operation of law." (Art. 1441)
property; that the land in dispute was placed under the
"No express trusts concerning an immovable or any
management of Sotero Medina as administrator
interest therein may be proven by parol evidence." (Art.
thereof, and upon Sotero's death under the
1443) "An implied trust may be proven by oral
management of his widow, Restituta Zurbito; that she
evidence." (Art. 1457) 3
later discovered that the land in question was
surreptitiously declared for taxation purposes in the
Applied to the case at bar, if an express trust had been
name of Andres Navarro, Jr., grandson of Restituta
constituted upon the occupancy of the property by
Zurbito; that said respondents as defendants had
respondents in favor of the petitioners, prescription of
without color of title denied petitioners' ownership and
action would not lie, the basis of the rule being that the
instead had claimed ownership thereof since the year
possession of the trustee is not adverse to the
1948 and exercised acts of possession and ownership
beneficiary. But if there were merely a constructive or
thereon to the exclusion of petitioners. That respondent
implied trust, the action to recover may be barred by
never rendered an accounting of the income of the
prescription of action or by acquisitive prescription by
property in question in spite of their repeated demands
virtue of respondents' continuous and adverse
and instead appropriated all the income therefrom to
possession of the property in the concept of owner-
her personal use and benefit.
buyer for thirty-three years.
Contention of Restituta: she alleged that Margarita and
her deceased sister Ana were but illegitimate children
The facts and evidence of record do not support
of Pedro Medina and for that reason did not enjoy the
petitioners' claim of the creation of an express trust and
status of recognized natural children, such that when
imprescriptibility of their claim, ruling squarely that "the
Pedro died intestate, Francisco Medina, Pedro's father
facts do not warrant the conclusion that an express
who was still living, succeeded to his properties; that
trust was created over the land in dispute. Although no
upon the death of Francisco, his children succeeded to
particular words are required for the creation of an
his properties and the land in dispute was adjudicated
express trust, a clear intention to create a trust must be
to Gregorio, Sotero, and Narciso Medina; that in a deed
shown; and the proof of fiduciary relationship must be
of extrajudicial partition the land was later adjudicated
clear and convincing. Express trusts are those
solely to Narciso Medina; that Narciso Medina having
intentionally created by the direct and positive act of
become sole and exclusive owner of the land in
the trustor, by some writing, deed or win, or oral
question by virtue of said partition sold the same to
declaration. The creation of an express trust must be
Restituta and her husband Sotero Medina on June 29,
manifested with reasonable certainty and cannot be
1924, as evidenced by a deed of sale; that from that
inferred from loose and vague declarations or from
day, respondents had actually possessed the land in
ambiguous circumstances susceptible of other
question in the concept of owners, publicly, openly and
interpretations.
continuously and adversely against the whole world so
Nowhere in the record is there any evidence, and the Act 190) 8 for unregistered lands such as the land herein
plaintiffs do not even raise the pretention, that the involved.
original owner of the property Pedro Medina, father of
plaintiff Margarita Medina, appointed, designated or the land was sold to Sotero Medina on June 29, 1924
constituted Sotero Medina (the husband of defendant from which date Sotero and his wife took open, public,
Restituta Zurbito Medina) as the trustee of the land in continuous and adverse possession of the land in the
dispute. Plaintiffs' contention that there was an express concept of owner. In 1957 when the present action was
trust must, therefore, fail." filed, thirty-three (33) years, much more than the 10-
year statutory period for acquisitive prescription, had
Concretely, petitioners anchor their claim of an express already elapsed.
trust on the following circumstances: (1) respondents'
possession of the titulo real covering the land; (2) the In addition, the appellate court further held that
deed of partition of the estate of the common petitioners' action to recover was likewise time-barred,
predecessor Francisco Medina dated February 3, 1924, pointing out that "the ten-year period under the statute
adjudicating the land solely to his son Narciso Medina; of limitation within which plaintiffs could file an action
(3) the deed of sale of the land dated June 29, 1924, for recovery of real property commenced to run, in
executed by Narciso Medina in favor of his brother 1933 when plaintiff Margarita Medina was informed
Sotero Medina; and (4) the testimony of respondent that the land in dispute belonged to her father Pedro
Restituta Zurbito Vda. de Medina (Sotero's wife) to the Medina, for in that year she could have brought an
effect that her husband used to "administer" and then action for reconveyance. The period of prescription
later on, she herself "administered" the land. commences to run from the day the action may be
brought (Article 1150, Civil Code of the Philippines), and
These circumstances do not make out the creation of in an action based on fraud, as is the basis of the
an express trust. Respondents' possession of the present action, the period of prescription begins from
Spanish title issued in the late Pedro Medina's name the discovery of the fraud; the reasons a party might
may just be the consequence of the sale of the land by have had for not immediately taking judicial action is
Narciso (to whom it had been adjudicated in the immaterial and does not stop the running of the
partition) to the spouses Sotero Medina and Restituta period. Respondent court had referred to such non-
Zurbito on June 29, 1924 and is by no means an action as "perhaps in deference to the defendants who
evidence of an express trust created for the benefit of had raised and clothed her."
petitioners. Spanish titles are defeasible, and "although
evidences of ownership . ... may be lost through
prescription." 5 Neither is the deed of partition (which
apparently excluded Pedro Medina) entered into earlier
any indication of an express creation of a trust. In fact,
these documents are adverse to petitioners' cause, and
are evidences of transfer of ownership of the land from
one owner/owners to another or others and they in fact
negate the creation or existence of an express trust.
Neither does the testimony of Sotero's widow, Restituta
Zurbito, to the effect that her husband and then later
she herself "administered" the land support petitioners'
claim of an express trust. There is no showing that the
term "administration" as used by said respondent in her
testimony is by reason of an appointment as such on
behalf of another owner or beneficiary, such as to
support the existence of an express trust. On the
contrary, it appears clear from the context of her
testimony that her use of the term "administer" was in
the concept of an owner-buyer "administering" and
managing his/her property,
ACTION FOR RECOVERY HAS ALREADY PRESCRIBED.

absent the existence of an express trust, that "The
legal construction most favorable to (petitioners) that
can be impressed upon the facts of the case is that a
constructive or implied trust was created by operation
of law upon the property in question," 7 but
petitioners' cause of action had prescribed upon the
lapse of the ten-year period of acquisitive prescription
provided by the then applicable statute (section 41 of
Case 3: Sotto v. Teves ownership of the properties to the name of his wife
Carmen Rallos, and finally to his name alone.
Contention of Sotto: denied the existence of any trust

G.R. No. L-38018 October 31, 1978
relation; the title to the lots in question were issued in
MARCELO SOTTO, Administrator of the Estate of
the name of Carmen pursuant to an agreement among
Filemon Sotto, petitioner, vs. PILAR TEVES,
the heirs of Florentino. It argued on the ff. points:
FLORENTINO TEVES, DULCE TEVES KIAMKO assisted by
1. No express trust because the Mocion presented
husband FELIPE KIAMKO DOLORES TEVES ARCENAS,
in 1913 did not expressly state and provide that
assisted by husband MARIANO ARCENAS, MARIA
it was to constitute an express trust. It cannot
CAMARA GUMBAN, assisted by husband NICANOR
be implied from such document.
GUMBAN, BELEN CAMARA BROWN, assisted by
2. He is not a co-trustee by virtue of the
husband ROGER BROWN and the HONORABLE COURT
subsequent marriage with Carmen because the
OF APPEALS, respondents.
trust given to him as family lawyer was
coterminous with the duration of proceedings
FACTS: 5 parcels of land were owned by spouses
itself. When he married Carmen, the trust is not
Florentino Rallos and Maria Fadullon. When Florentino
the trust that civil code refers to.
died, the land in question was inherited by his widow,
Maria and 2 children: Concepcion and Carmen Rallos.
ISSUES:
The lawyer to whom the RAllos heirs entrusted the
1. WON there exists an express trust relation
settlement of the estate was atty. Filemon Sotto.
exists;
Shortly after the closure of the probate proceeding in
2. WON there was actual partition between them
1913, Atty. Sotto married Carmen Rallos.
whereby the 5 lots were given to Carmen Rallos
as her share;
In 1913atty. Sotto, not only for the widow Maria but
3. Won Concepcion Rallos and her children after
also for the 2 daughters: Concpecion and Carmen filed a
her death were thus notified constructively and
motion in the probate proceedings of the estate of
actually by Carmen Rallos de Sotto's raising the
Florentino providing that they desire to conserve pro-
flag of exclusive ownership and repudiation of
indiviso the subject properties.
the trust relation, if there was any, and since
then the period of prescription of 10 years for
IN 1925they entered into an oral agreement
bringing the action tolled against an implied
providing that the 5 lots would remain in co-ownership
trust. Laches or inaction on the part of
of the 3 heirs with Carmen having been entitled a
Concepcion Rallos and her heirs have thus
lifetime usufruct but upon her death, ownership would
rendered their demand sale or no longer
devolve to concepcion and he heirs.
enforceable.
Maria Rallos predeceased her 2 daughters. Concepcion
HELD:
and Carmen died. It was alleged that at the time of
On the MOCION filed in 1913 created an express
Florentinos death, he was the owner of the subject 5
trust:
parcels of land. Competing for the ownership of the five
It may be true that the heirs of Florentino Rallos
lots are the direct descendants and blood relatives of
intended and desired to keep the properties in co-
Florentino Rallos and Maria Fadullon, opposed by the
ownership pro-indiviso when they signed
administrator of the intestate estate of Atty. Sotto. The
the Mocion filed in their behalf by Atty. Filemon Sotto in
children of Concepcion Rallos, or the grandchildren of
the probate proceedings to terminate the same but the
Florentino Rallos and Maria Fadullon, some of whom
legal effect of said agreement to preserve the
are assisted by their spouses, are the plaintiffs in this
properties in co-ownership as expressed in writing and
case. Defendant administrator represents Atty. Sotto's
embodied in the Mocion was to create a form of an
children out of wedlock.
express trust among themselves as co-owners of the
properties. In the case of Castrillo, et al. vs. Court of
Contention of the HEIRS: The complaint was based
Appeals, et al.,10 SCRA 549, the Supreme Court,
mainly upon the theory that a trust relation was
speaking thru Chief Justice Makalintal, said that "co-
established and created with respect to the said
ownership is a form of trust and every co-owner is a
properties, with Atty. Filemon Sotto as trustee and
trustee for the other." In co-ownership, the relationship
as cestuis que trust, his mother-in-law, Maria Fadullon
of each co-owner to the other co-owners is fiduciary in
Vda. de Rallos; his wife, Carmen Rallos; and his sister-in-
character and attribute. Whether established by law or
law, Concepcion Rallos (predecessor in interest of
by agreement of the co owners, the property or thing
herein private respondents); and that in gross violation
held pro-indiviso is impressed with a fiducial nature that
of the trust reposed upon him by Concepcion Rallos and
each co-owner becomes a trustee for the benefit of his
after her death, by her heirs, the said Atty. Filemon
co-owners and he may not do any act prejudicial to the
Sotto, through sheer manipulation, fraudulent acts and
interest of his co-owners.
means, non-existent and void decrees, fictitious sales
and transfers, succeeded in causing the transfer of the
Under the law on Trusts, it is not necessary, as reason, the grantee is in an especially intimate position
petitioner insists, that the document expressly state with regard to another and the latter reposes a degree
and provide for the express trust, for no particular of trust and confidence in the former, confidential
words are required for the creation of an express trust, relationship exists which prohibits the one entrusted
it being sufficient that a trust is clearly intended. (Art. from seeking a selfish benefit for himself during the
1444, N.C.C.) An express trust is created by the direct course of relationship, and affords a basis for imposing a
and positive acts of the parties, by some writing or constructive trust.
deed or will or by words evidencing an intention to
create a trust. Atty. Sotto's special relationship with the Rallos heirs
inhibited him from any act or conduct that would put
an express trust was created by the heirs of Florentino his interests above, or in direct collision with, the
Rallos in respect to the properties in litigation when interests of those who had reposed their trust and
they agreed to preserve said properties in co-ownership confidence in him." 15
among themselves as manifested and expressed into
writing and filed as a pleading captioned Mocion Sobre Atty. Sotto became a constructive trustee not only by
la Disposicion de los Bienes. Incidentally, this is the reason of his marriage to Carmen Rallos but also on
same finding of the original decision of the Eight account of his prestige and tremendous social and
Division, same Court which was, however, reconsidered political influence, also because Atty. Sotto enjoyed and
on other grounds. We find no reason to disturb this exercised a personal, domestic, social, political and
finding of the respondent Court, the same being in moral ascendancy and superiority over his wife, over
accordance with law and the facts as clearly Maria Fadullon, Concepcion Rallos and the latter's
established. children, besides being the protector of the rights and
interests of the Rallos family acting like a pater
ATTY. FILEMON SOTTO WAS A CO-TRUSTEE familias attending to their financial and medical needs,
Atty. Sotto can be regarded as the constructive trustee as well as the family lawyer.
of his wife and of the widow and descendants of
Florentino Rallos. there existed more than mere THERE WAS NO ADJUDICATION OF THE 5 LOTS TO
professional relationship of attorney and client between CARMEN IN 1925
Atty. Sotto and the members of the family of Florentino The evidence shows that they went to concepcion to
Rallos. Shortly after the closure of the testate pay a visit by saying that the lots were allowed to be
proceeding, Atty. Sotto contracted marriage with one of given to her and her children upon carmens death.
the daughters of Florentino Rallos. The attorney
thereby became not only a family lawyer but also an EXISTENCE OF EXPRESS TRUST DULY SUPPORTED BY
actual member on the Rallos family by affinity. By EVIDENCE
reason of his marriage to Carmen Rallos, and on In the first place, the respondent Court did not find that
account of his prestige and tremendous social and an express trust existed by the use of parol evidence.
political influence, Atty. Sotto enjoyed and exercised a Actually, the Court, on this point said: "On the basis of
personal, domestic, social, political and moral undisputed facts, we held in our decision that the heirs
ascendancy and superiority not only over his wife but of Florentino Rallos, by manifesting to the probate court
also over Maria Fadullon, Concepcion Rallos, and the that it was their desire to preserve and maintain the co-
latter's children. The evidence reveals that the Ralloses ownership over the inherited properties, thereby
looked up to Atty. Sotto as protector and benefactor, as intended and created, by direct positive acts, an express
one on whom they could repose their trust and trust among themselves. It is our view that this holding
confidence and who would take care of the properties should be maintained because it is in conformity with
inherited from Florentino Rallos, and on his part, Atty. the evidence and the law." 17 In a later portion of the
Sotto acknowledged his position as protector of the Resolution appealed from, the Court said: "As early as in
rights and interests of the Rallos family. Like a pater 1913, the Rallos heirs had already agreed expressly and
familias, he attended to the financial and medical needs in writing that the five parcels shall remain in co-
of the direct descendants of Florentino Rallos and Maria ownership, and that in regard to them each one of the
Fadullon. heirs shall be a trustee for the others." 18
The acts and conduct of the Ralloses and Atty. Sotto In the second place, the oral testimony of Pilar Teves
fostered a close and fiduciary relationship between simply affirmed the existence of such trust relation; it
them. Upon the facts and under the law, Atty. Sotto can gave proof that the heirs desired to continue the
be regarded as the constructive trustee of his wife and express trust and co-ownership over the five lots. It was
of the widow and descendants of Florentino Rallos. not necessary that the heirs create a new agreement of
co-ownership over the said properties. They merely
For the settled rule is that: The relation between parties, reiterated their written agreement made in 1913 that
in order to be a fiduciary relation" need not be legal, but the five parcels would be preserved in co-ownership but
may be moral, social, domestic or merely personal; and made provisions for their administration, collection of
where by reason of kinship, business association, rentals and final disposition upon the death of Carmen
disparity in age or physical or mental condition or other Rallos.
The registration of the property in the name of the

There is, therefore, no violation of Art. 1443, N.C.C trustee in possession thereof must be deemed to have
which provides that "no express trust concerning an been effected for the benefit of the cestui que trust.
immovable or any interest therein may be proved by
parol evidence," as the same is not applicable herein. Petitioner points to the fact that Concepcion Rallos had
expressly repudiated the trust by selling the Basak
As to the pretension that the respondent appellate properties which were converted into a subdivision, as
court disregarded the weight of a torrens title and a well as to acts of exclusive ownership over the
public document mutually admitted by the parties, the properties of the estate by each of the co-owners to
latter refering to the will executed by Carmen Rallos in show that the trust relationship and co-ownership was
1942 bequeathing all her properties to her husband, repudiated, renounced and terminated when the
Atty. Filemon Sotto, petitioner's reasoning holds no parties agreed to an actual partition of the estate.
water because from the very nature of a trust relation Petitioner's advocation is futile. Besides the falsity of its
which existed between Carmen Rallos and her co- basis for the reason that We found no partition as
owners, she cannot obtain and secure a torrens title to theorized by petitioner and that the trust relation
the properties in her name much less dispose of them subsisted and was maintained in 1925 and thereafter,
by testament to her husband, a constructive trustee, to the acts of exclusive ownership pointed by petitioner do
the prejudice and deprivation of the rights and interests not appear to be clear, open and unequivocal
of said co-heirs. repudiation of the trust.
A fiduciary relationship may exist even if the title to the The issuance of titles and the execution of the
property subject to the trust appears in the name of the purported sales and transfers, which all culminated in
trustee alone, because in cases of trusteeship, the legal Atty. Sotto's acquisition of titles in his name, occurred
title usually appears in the name of the trustee, while during the existence of the express trust, and were
the equitable title remains with the cestui que trust. shrouded by a cloud of secrecy, at least as far as
(Palma vs. Cristobal, 77 Phil. 712). True it is that Torrens Concepcion Rallos was concerned. AU the papers and
titles were issued in the name of Carmen Rallos, but the documents pertaining to the issuance of titles and to
principle holds that a trustee who takes a Torrens title the transfers and sales were kept in Atty. Sotto's
in his name cannot repudiate the trust by relying possession, and concealed from the knowledge of
Concepcion Rallos. At the time Concepcion Rallos was
Neither an the will executed by Carmen Rallos deprive being deprived of a valuable share in the inheritance,
the private respondents of their ownership over the five she was kept completely in the dark. Under the facts,
parcels of land. These lots were trust properties; appellee cannot rely on the certificates of title in the
Carmen Rallos was holding them in trust for her sister names of Atty. Sotto to defeat the plaintiffs' right and
Concepcion Rallos and the latter's children. Not being cause of action," 19 clearly appears to be correct and
the absolute owner thereof, Carmen Rallos could not well-founded that the same will not be disturbed by Us
legally convey their ownership by including them in in the present petition for review on certiorari.
their will. To all intents and purposes, the will and last
testament of Carmen Rallos was merely a vehicle of an The express trusts disable the trustee from acquiring for
existing trust and therefore, Atty. Filemon Sotto must his own benefit the property committed to his
be deemed to have received the properties not for management or custody, at least while he does not
himself but for the benefit of the cestui que trust. And openly repudiate the trust, and makes such repudiation
as a trustee of these trust properties, Atty. Sotto never known to the beneficiary or cestui que trust. For this
alienated or disposed any of these properties during his reason, the old Code of Civil Procedure (Act 190)
lifetime, thereby recognizing his position as trustee and declared that the rules on adverse possession do not
that he held them for the benefit and interest of apply to "continuing and subsisting" (i.e., unrepudiated)
the cestuis que trust. trusts.
NO REPUDIATION OF THE EXPRESS TRUST And from the standpoint of acquisitive prescription, or
We affirmed that the express trust and co-ownership prescription of ownership, this Court has held in
over the 5 parcels of land created and agreed in 1913 by numerous decisions involving fiduciary relations such as
and among the Rallos heirs did not terminate in 1925 those occupied by a trustee with respect to the cestui
but subsisted and was maintained by them thereafter. que trust that as a general rule the former's possession
We also declared that the registration of the 4 lots in is not adverse and therefore cannot ripen into a title by
the names of Carmen Rallos and Maria Fadullon Vda. de prescription. Adverse possession in such a case requires
Rallos and 1 lot in favor of Carmen Rallos alone was the concurrence of the following circumstances: (a) that
done in their capacities as trustees and not as absolute the trustee has performed unequivocal acts of
or exclusive owners, and not only in their own behalf repudiation amounting to an ouster of the cestui que
and benefit but also for the other co-owner, Concepcion trust; (b) that such positive acts of repudiation have
Rallos. 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
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.
NO LACHES AND ESTOPPEL

Because in fiduciary relationship, the beneficiaries have
the right to rely on the trust and confidence reposed in
the trustee. In the case at bar, there being no effective
repudiation of the express trust created by and among
the Rallos heirs, the defense of laches invoked by
petitioner is unvailing.
Moreover, 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.
Sotto's 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 Disposicion
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.
Case 4: Gutierrez v. CA ISSUE: whether or not petitioners' action for

reconveyance has already prescribed.
G.R. No. 76590 February 26, 1990
HELD: NO. The answer is in the negative.
HEIRS OF MARIA DE LA CRUZ Y GUTIERREZ, petitioners,
The action is one based on express trust and not on
vs. COURT OF APPEALS and HEIRS OF MARIA DE LA
implied or constructive trust. Petitioners' predecessor-
CRUZ Y GUEVARRA, respondents.
in-interest, Maria de la Cruz y Gutierrez, was an
unlettered woman, a fact borne out by her affixing her
FACTS: Herein petitioners are the heirs (children) of the
thumbmark in her answer in Cadastral Case. Because of
late Maria de la Cruz y Gutierrez, married to Mateo del
her mental weakness, in a prepared document for her,
Rosario Lansang, while herein private respondents are
she consented and authorized her niece Maria de la
the heirs of Maria de la Cruz y Guevarra, married to
Cruz y Guevarra to administer the lot in question. Such
Calixto Dimalanta, and Fermin de la Cruz.
fact is corroborated by the testimony of Daniel Lansay,
From 1921 until her death in 1951, Maria de la Cruz y
the son of Maria de la Cruz y Gutierrez that Maria de la
Gutierrez resided in the questioned lot in the concept of
Cruz y Guevarra was the one entrusted with the paying
an owner. She declared the lot for tax purposes in her
of land taxes.
name. Later, she entrusted the administration of the
said lot to her niece Maria de la Cruz y Guevarra. When
Private respondents argue that said Exhibit "B-3" is a
cadastral proceedings were had, Maria de la Cruz y
portion of the tax declaration (Exhibit "B") which was
Gutierrez filed an answer to the questioned lot. In the
prepared by the Office of the Municipal
said filed answer, over the handwritten name "Maria de
Assessor/Treasurer where the lot in question is located,
la Cruz y Gutierrez" is a thumb mark presumably affixed
and clearly not the written instrument constituting an
by her; that in paragraph 7, a person named therein as
express trust required under Article 1443 of the Civil
Fermin de la Cruz y Gutierrez is stated to have an
Code.
interest or participation on the said lot. However, in the
space provided in paragraph 8 to be filled up with the
This argument of private respondents, is untenable. It
personal circumstances of claimant Maria de la Cruz y
has been held that under the law on Trusts, it is not
Gutierrez, what appears therein is the name Maria de la
necessary that the document expressly state and
Cruz, married to Calixto Dimalanta, instead of Maria de
provide for the express trust, for it may even be created
la Cruz y Gutierrez,; and in the space provided in
orally, no particular words are required for its creation
paragraph 9, intended for the personal circumstances of
(Article 1444, Civil Code). An express trust is created by
other person or persons who may have an interest on
the direct and positive acts of the parties, by some
the said lot, the name Fermin de la Cruz, single,
writing or deed or will or by words evidencing an
appears,
intention to create a trust. No particular words are
Accordingly, the trial court rendered a decision
required for the creation of an express trust, it being
adjudicating Lot in favor of Maria de la Cruz, 26 years
sufficient that a trust is clearly intended. Hence,
old, married to Calixto Dimalanta and Fermin de la Cruz,
petitioner's action, being one based on express trust,
Single.
has not yet prescribed.
Petitioners, claiming to have learned of the same only
on July 1, 1974, on October 1, 1974 (allegedly barely
Be it noted that Article 1443 of the Civil Code which
three months after discovery of the registration, and
states "No express trusts concerning an immovable or
two years after the death of Maria de la Cruz y Guevarra
any interest therein may be proved by parol evidence,"
who, before she died in 1974, revealed to petitioners
refers merely to enforceability, not validity of a contract
Daniel Lansang and Isidro Lansang that the lot of their
between the parties. Otherwise stated, for purposes of
mother Maria de la Cruz y Gutierrez had been included
validity between the parties, an express trust
in her title, filed a complaint for reconveyance,
concerning an immovable does not have to be in
The main thrust of the complaint is that the claimant of
writing. Thus, Article 1443 may be said to be an
subject lot was Maria de la Cruz y Gutierrez and not
extension of the Statute of Frauds. The action to compel
Maria de la Cruz y Guevarra who by not using her
the trustee to convey the property registered in his
maternal surname "Guevarra" succeeded in registering
name for the benefit of the cestui for trust does not
Lot 1488 in her name and that of her brother Fermin de
prescribe. If at all, it is only when the trustee repudiates
la Cruz. Under the circumstances, it is claimed that
the trust that the period of prescription may run (
Maria de la Cruz married to Calixto Dimalanta and
Fermin de la Cruz hold the property in trust for the
petitioners.
private respondents claimed that the land in question is
their exclusive property, having inherited the same from
their parents and they asserted that petitioners have
lost their cause of action by prescription based on
implied trust.
Case 5: Gomez v. Duyan children of Eulogio. Notwithstanding the second

Pagpapahayag, petitioners caused the registration of
the deed of sale
G.R. No. 144148. March 18, 2005]
respondents filed a suit for reconveyance of real
SPS. FELIZA DUYAN GOMEZ and EUGENIO GOMEZ,
property and cancellation of title with damages against
petitioners, vs. PURISIMA DUYAN, ROLANDO DUYAN,
petitioners.
EMERITA DUYAN, DIGNA DUYAN, EDUARDO DUYAN,
LUCRECIA DUYAN, ROBERTO DUYAN, CRESENCIA
CA RULING: held that an implied trust arose in favor of
DUYAN, RODRIGO DUYAN, REULGINA DUYAN,
respondents over the disputed property by virtue of the
DOMINICIA DUYAN, AVECENCIO DUYAN, MARIA
Pagpapahayag dated 10 February 1978. It held that the
SALOME DUYAN and DIVINA DUYAN, respondents.
action for reconveyance of property was properly filed
by respondents against petitioners.
FACTS: The parties in this case are relatives residing at
96 General Avenue, Project 8, Quezon City which
ISSUE: WON an express trust exists; (RTC ruled it was an
consists of four houses registered in the name of
implied trust)
Eulogio Duyan (now deceased) married to Purisima
WON reconveyance of the land was proper (Petitioners
Duyan, one of the respondents in this case. The
argue that the action for reconveyance filed by
property in dispute which constitutes one-half of the
respondents against them is not proper, the latter not
property issued in the name of spouses Gomez.
being the owners of the property in question)
Eulogio Duyan and Feliza Duyan are siblings. In his
HELD: YES.
desire to help his sister, Eulogio allowed her to
construct a house on the disputed lot sometime in
EXPRESS TRUST EXISTS
1968.[5] Petitioners acknowledged the fact that the
disputed property was owned by Eulogio and that they
the trial court failed to consider the law on trusts
were staying in the disputed property solely due to his
despite the existence of uncontroverted evidence
benevolence. Accordingly, an instrument entitled
establishing the creation of a trust as it anchored its
Pagpapahayag was executed by the siblings on 5 May
decision solely on the indefeasibility of title aspect.
1974. The instrument provides that in the event that
Although it recognized the instruments creating the
the property will be registered in Felizas name, she will
trust, the trial court nevertheless held that: In the
continue to acknowledge Eulogio as the owner and will
document entitled Pagpapahayag, although the
never assert ownership over the same, except in
defendant Felisa Gomez stipulated therein that she will
accordance with her brothers wishes.
not claim ownership over the lot covered by TCT No.
41717, even in the event that the same will be
On 11 May 1974, a deed of sale covering a residential
transferred in her name, the same does not bar her
house situated on the disputed lot was executed by
totally from becoming as owner because of the
Eulogio and Regina Velasquez, a common-law wife of
exception provided therein that she can still own the lot
the former, in favor of petitioners. Thereafter,
or part thereof in accordance with the wishes of the
petitioners allegedly asserted ownership not only over
deceased which was clearly manifested when the
the said house but over the whole lot. This prompted
Absolute Deed of Sale of the half of the lot covered by
Eulogios legal wife, Purisima, to file a complaint for
TCT No. 41717 was executed between the deceased
recovery of possession and damages against petitioners
and his spouse Purisima Duyan (plaintiff) and the
defendants.
Eulogio and Purisima this time, as vendors, executed a
While citing the provisions of the Pagpapahayag dated 5
Deed of Absolute Sale in favor of petitioners with
May 1974 and concluding therefrom that Feliza was not
respect to the disputed lot. Purisima claims that the
actually prohibited from claiming ownership over the
deed of sale was executed merely to give color of
property, the trial court completely disregarded and
legality to petitioners stay in the disputed property so
missed the import of the other Pagpapahayag dated 10
that she and her children will not drive them away after
February 1978.
they (Purisima and her children) manifested their
opposition to Eulogios decision to let them stay
In express terms, Feliza undertook in the subsequent
therein.[12] Petitioners claim otherwise, contending
Pagpapahayag to convey the property subject of the
that the sale was freely agreed upon by the parties
fictitious deed of sale to her own nephews and nieces
thereto; hence, it was authentic and validly executed.
who are the children of her brother Eulogio. To
reiterate, Feliza stated At pag mangyari ang nasabing
Subsequent to the execution of the deed of sale or on
hatian ng lote, ay aming ilalagay agad sa pangalan ng
10 February 1978,[14] another Pagpapahayag was
aming mga pamangkin na sina Salome V. Duyan, Divina
executed between Eulogio and Feliza, where the latter
V. Duyan, Cresencia V. Duyan, Reulgina V. Duyan,
acknowledged that the lot subject of the deed of
Domincia, Rodrigo at Avencio C. Duyan. It must be
sale[15] will eventually be transferred to respondents
noted that this Pagpapahayag was entered into by
herein who are her nephews and nieces and the
Eulogio and Feliza after the supposed sale of the
property on 25 January 1978. Based on the clear Neither refutation nor denial of the existence of such
provisions of this document, the intent of the siblings to document exist in the records of the case at bar.
create a trust was manifest with Eulogio as the trustor, Particularly, Feliza did not even raise any objection as to
Feliza as the trustee and Eulogios children as the the due execution and authenticity of the
beneficiaries or the cestui qui trust of the res which was Pagpapahayag dated 10 February 1978. In relation
the disputed property. This is based on the provision of thereto, it is worthy to note that an objection as to the
the law on trusts which states that: purpose of its presentation is not tantamount to an
objection as to the authenticity and due execution of
Art. 1440. A person who establishes a trust is called the the document. In view of the absence of such
trustor; one in whom confidence is reposed as regards objection, the GOMEZES as signatories thereto, are
property for the benefit of another person is known as deemed bound by the stipulations therein.
the trustee; and the person for whose benefit the trust
has been created is referred to as the beneficiary.[32] A trust is sacred and inviolable. The courts have
therefore shielded fiduciary relations against every
However, the trust created was not merely implied as manner of chicanery or detestable design cloaked by
held by the Court of Appeals but belongs to the express legal technicalities. Considering this pronouncement of
kind. Based on the provisions of the Civil Code and the Supreme Court and the betrayal by petitioners of
jurisprudence, Express trusts are those which the the provisions of the Pagpapahayag creating the trust in
direct and positive acts of the parties create, by some this case, the Court of Appeals rightly ordered the
writing, deed or will, or words evincing an intention to reconveyance of the disputed property to respondents
create a trust. and the cancellation of TCT No. 21885.
In this case, the provisions of the Pagpapahayag dated Moreover, petitioners admitted in the Pagpapahayag
10 February 1978 left no room for doubt. It was clearly itself that the 25 January 1978 sale was fictitious. This is
intended therein by Eulogio and Feliza that the property evident by the use of the phrase conwaring pagbibili
subject of the sale will subsequently be placed by the which means simulated or fictitious sale. Thus,
latter in the name of respondents, thus creating a trust petitioners are estopped from claiming or asserting
relationship over the property in dispute. ownership over the subject property based on the 25
January 1978 deed of sale. Felizas admission in the
Even if the word trust was not expressly used by the said Pagpapahayag of the falsity of the sale is deemed
signatories to the 10 February 1978 Pagpapahayag and conclusive upon her and her co-petitioner Eugenio
the document did not expressly state that a trust was Gomez. Under the Civil Code, Through estoppel an
being established by reason thereof, the establishment admission or representation is rendered conclusive
of an express trust cannot be discounted. Under the upon the person making it, and cannot be denied or
Civil Code, No particular words are required for the disproved as against the person relying thereon.[40]
creation of an express trust, it being sufficient that a That admission cannot now be denied by Feliza as
trust is clearly intended.[34] In a decision penned by against Eulogio and his successors-in-interest, the latter
Justice Paras, this Court held that under the law on having relied upon her representation.
Trusts, it is not necessary that the document expressly
state and provide for the express trust, for it may even ACTION FOR RECONVEYANCE WAS PROPER
be created orally, no particular words are required for
its creation (Art. 1444, Civil Code).. The Pagpapahayag Reconveyance is precisely the proper action for
dated 10 February 1978 having been freely entered into respondents to take against petitioners since the former
by Eulogio and Feliza, it had the force of law between are claiming that they are the rightful owners of the
them. It was therefore incumbent upon Feliza as property in question, not petitioners. By filing an action
trustee to comply with the provisions of the instrument for reconveyance, a party seeks to show that the person
and have the subject property registered in the names who secured the registration of the questioned
of her nephews and nieces. property is not the real owner thereof.
Petitioners subsequent act of registering the disputed Petitioners cannot rely on the registration of the
property in their own names and resisting the action for disputed property and the corresponding issuance of a
reconveyance later filed by respondents was clearly a certificate of title in their name as vesting ownership on
betrayal of the provisions of the express trust created them simply because an express trust over the property
by the 10 February 1978 Pagpapahayag. By these was created in favor of respondents. It has been held
actions, petitioners not only failed to comply with the that a trustee who obtains a Torrens title over the
provisions of the Pagpapahayag, but actually property held in trust by him for another cannot
circumvented them. repudiate the trust by relying on the registration.
PETITIONERS NEVER DENIED EXISTENCE/AUTHENTICITY The law safeguards the rightful partys interest in titled
OF THE PAGPAPAHAG land from fraud and improper technicalities by allowing
such party to bring an action for reconveyance of
whatever he has been deprived of as long as the
property has not been transferred or conveyed to an

innocent purchaser for value. The action while
respecting the registration decree as incontrovertible,
seeks to transfer or reconvey the land from the
registered owner to the rightful owner. The Torrens
system was never calculated to foment betrayal in the
performance of a trust.
Case 6: Julio v. Dalandan
VICTORIA JULIO vs. EMILIANO DALANDAN and MARIA

DALANDAN
FACTS:
A private document labelled statement (salaysay)
recites that the riceland owned by Victoriana Dalandan,
the deceased mother of Victoria Julio was posted as
security for an obligation assumed by Clemente
Dalandan, the deceased father of Emiliano and Maria
Dalandan, but was foreclosed due to the failure of
Clemente Dalandan to fulfil his obligation. In said
document, it was agreed between Clemente Dalandan
and Victoria Julio that the former held himself liable to
Victoria Julios mother for such foreclosure and
promised that he would replace such riceland with
another of his own.
Victoria Julio brought this action because of emiliano

and maria dalandans failure to deliver the promised
land.
ISSUE:
Did the document create an express trust?
HELD:
YES. The document itself imposes a duty upon emiliano
and maria dalandan (the children of clemente) to turn
over both the fruits and the possession of the property
to A. An express trust is thereby created, imposed upon
emiliano and maria by their predecessor and no
evidence aliunde is necessary for its recognition,
considering that no particular words are required for
the creation of an express trust under Article 1444.
Article 1444. No particular words are required for the

creation of an express trust, it being sufficient that a
trust is clearly intended.
counterclaims. It found that the deed of extrajudicial

partition was an unenforceable contract as far
IMPLIED TRUSTS as Lot No. 1700 was concerned because petitioner
Catalina Buan vda. de Esconde, as mother and judicial
guardian of her children, exceeded her authority as
CASE 1: VDA. DE ESCONDE VS COURT OF
APPEALS and PEDRO ESCONDE such in donating the lot to private respondent or
waiving the rights thereto of Benjamin and Elenita in
favor of private respondent. Because of the
unenforceability of the deed, a trust relationship was
Trustee: Pedro created with private respondent as trustee and
Benjamin and Elenita as beneficiaries.
Beneficiary: Constancia, Benjamin, Elenita
Ruling of the CA: The appellate court held that the deed
A TRUST HAS BEEN CREATED IN THIS
CASE
of extrajudicial partition established an implied trust
arising from the mistake of the judicial guardian in
favoring one heir by giving him a bigger share in the
FACTS: Constancia, Benjamin and Elenita, and private hereditary property. It stressed that an action for
respondent Pedro, are the children of the late Eulogio reconveyance based on implied or constructive trust
Esconde and petitioner Catalina Buan. Eulogio Esconde
prescribes in ten (10) years counted from the
was one of the children and heirs of Andres Esconde.
registration of the property in the sole name of the co-
Andres is the brother of Estanislao Esconde, the original
owner of the disputed lot who died without issue on April
heir.
1942. Estanislao left an estate consisting of four (4) parcels
ISSUE: Whether Pedro owns the said lot or merely holds
of land in Samal to his only brother Andres.
it in trust in behalf of his other siblings? (Whether or
Eulogio, the son of Andres, died in April, 1944 survived not an implied trust has been created?)
by petitioners and private respondent. At that time,
HELD: Pedro merely holds in trust. In the case at
Lazara and Ciriaca, Eulogio's sisters, had already died
bench, petitioner Catalina Buan vda. de Esconde, as
without having partitioned the estate of the late
mother and legal guardian of her children, appears to
Estanislao Esconde.
have favored her elder son, private respondent, in
On December 5, 1946, the heirs of Lazara, Ciriaca and allowing that he be given the said lot in its entirety in
Eulogio executed a deed of extrajudicial partition, with the extrajudicial partition of the Esconde estate to the
the heirs of Lazara identified therein as the Party of the prejudice of her other children.
First Part, that of Ciriaca, the Party of the Second Part
The Supreme Court explained the different concept of
and that of Eulogio, the Party of the Third Part. Since
trust as follows:
the children of Eulogio, with the exception of
Constancia, were then all minors, they were Trust is the legal relationship between one person
represented by their mother and judicial guardian, having an equitable ownership in property and another
petitioner Catalina Buan vda. de Esconde who person owning the legal title to such property, the
renounced and waived her usufructuary rights over the equitable ownership of the former entitling him to the
parcels of land in favor of her children in the same performance of certain duties and the exercise of
deed. certain powers by the latter. Trusts are either express
or implied. An express trust is created by the direct and
When Benjamin was constructing a house, Benjamin
positive acts of the parties, by some writing or deed or
discovered that Lot No. 1700 was registered in the
will or by words evidencing an intention to create a
name of his brother Pedro. Believing that the lot was
trust. No particular words are required for the creation
co-owned by all the children of Eulogio Esconde,
of an express trust, it being sufficient that a trust is
Benjamin demanded his share of the lot from Pedro.
clearly intended.
However, Pedro asserted exclusive ownership thereof
pursuant to the deed of extrajudicial partition and, in On the other hand, implied trusts are those which,
1985, Pedro constructed a "buho" fence to segregate without being expressed, are deducible from the nature
the said lot. of the transaction as matters of intent or which are
super induced on the transaction by operation of law as
Ruling of Lower Court: n its decision of July 31, 1989,
matters of equity, independently of the particular
the lower court dismissed the complaint and the
intention of the parties. In turn, implied trusts are
either resulting or constructive trusts. These two are Court ruled that the ten-year prescriptive period for an
differentiated from each other as follows: action for reconveyance of real property based on
implied or constructive trust which is counted from the
Resulting trusts are based on the equitable date of registration of the property, applies when the
doctrine that valuable consideration and not plaintiff is not in possession of the contested property.
legal title determines the equitable title or In this case, private respondent, not petitioners who
interest and are presumed always to have been instituted the action, is in actual possession of Lot No.
contemplated by the parties. They arise from 1700. Having filed their action only on June 29, 1987,
the nature or circumstances of the
petitioners' action has been barred by prescription.
consideration involved in a transaction whereby
one person thereby becomes invested with
legal title but is obligated in equity to hold his
legal title for the benefit of another. On the
other hand, constructive trusts are created by
the construction of equity in order to satisfy the
demands of justice and prevent unjust
enrichment. They arise contrary to intention
against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to
property which he ought not, in equity and
good conscience, to hold.
In this case, although it does not appear on record

whether Catalina intentionally granted private
respondent that privileged bestowal, the fact is that,
said lot was registered in private respondent's name. ,
as petitioners insist, a mistake was committed in
allotting Lot No. 1700 to private respondent, then a
trust relationship was created between them and
private respondent. However, private respondent never
considered himself a trustee. If he allowed his brother
Benjamin to construct or make improvements thereon,
it appears to have been out of tolerance to a brother.
Consequently, if indeed, by mistake, private
respondent was given the entirety of Lot No. 1700, the
trust relationship between him and petitioners was a
constructive, not resulting, implied trust. Petitioners,
therefore, correctly questioned private respondent's
exercise of absolute ownership over the property.
NB - As to the issue of PRESCRIPTION: Unfortunately,

petitioners assailed it long after their right to do so had
prescribed.
The rule that a trustee cannot acquire by prescription

ownership over property entrusted to him until and
unless he repudiates the trust, applies to express trusts
and resulting implied trusts. However, in constructive
implied trusts, prescription may supervene even if the
trustee does not repudiate the relationship. Necessarily,
repudiation of the said trust is not a condition
precedent to the running of the prescriptive period.
Thus, in Heirs of Jose Olviga v. Court of Appeals, 22 the
CASE 2: VDA. DE RETUERTO VS. ANGELO and RULING: NO, the contention is bereft of merit.
Merlinda BARZ Constructive trusts are created in equity to prevent unjust
enrichment, arising against one who, by fraud, duress or
abuse of confidence, obtains or holds the legal right to
NO TRUST HAS BEEN CREATED IN THIS
property which he ought not, in equity and good
CASE.
conscience, to hold. Petitioners failed to substantiate
their allegation that their predecessor-in-interest had
acquired any legal right to the property subject of the
FACTS: Petitioners are the heirs of Panfilo Retuerto, present controversy. Nor had they adduced evidence to
while respondents are the heirs of Pedro Barz who is the show that the certificate of title of Pedro Barz was
sole heir of Juana Perez Barz. Juana Perez Barz was the obtained through fraud.
original owner of Lot No. 896 having an area of 13,160
Even assuming arguendo that Pedro Barz acquired title to
square meters. Before her death on April 16, 1929, Juana
the property through mistake or fraud, petitioners are
Perez executed a Deed of Absolute Sale in favor of Panfilo
nonetheless barred from filing their claim of ownership.
Retuerto over a parcel of land, identified as Lot No. 896-
An action for reconveyance based on an implied or
A, a subdivision of Lot No. 896, with an approximate area
constructive trust prescribes within ten years from the
of 2,505 square meters. On July 22, 1940, the Court issued
time of its creation or upon the alleged fraudulent
an Order directing the Land Registration Commission for
registration of the property. Since registration of real
the issuance of the appropriate Decree in favor of Panfilo
property is considered a constructive notice to all
Retuerto over the said parcel of land. However, no such
persons, then the ten-year prescriptive period is reckoned
Decree was issued as directed by the Court because, by
from the time of such registering, filing or entering. Thus,
December 8, 1941, the Second World War ensued in the
petitioners should have filed an action for reconveyance
Pacific. However, Panfilo failed to secure the appropriate
within ten years from the issuance of OCT No. 521 in
decree after the war.
November 16, 1968. This, they failed to do so.
Sometime in 1966, Pedro Barz, as the sole heir of Juana
Furthermore, relying on the case of Heirs of Jose Olviga
Perez, filed and application, with the then CFI of Cebu for
the confirmation of his title over Lot 896 which included vs. Court of Appeals, petitioners argue that the ten-year
the Lot sold to Panfilo Retuerto. The Court ruled in his period for filing an action for reconveyance of property
favor declaring him the lawful owner of the said property, arising from an implied or constructive trust applies
and thus Original Certificate of Title No. 521 was issued. only when the person enforcing the trust is not in
Lot No. 896-A however was continuously occupied by the possession of the property, since if a person claiming to
petitioners. Thus, a confrontation arose and as a result be the owner is in actual possession of the property, the
respondents filed an action on September 5, 1989 for action to seek reconveyance or to quiet title does not
Quieting of Title, Damages and Attorneys Fees. In their
prescribe. Petitioners claim that they and their
answer, petitioners claimed that they were the owners of
predecessors-in-interest were the ones in actual
a portion of the lot which was registered under the name
possession of the subject property alleging that in the
of Pedro Barz and therefore the issuance of the Original
Certificate of Title in Pedro Barzs name did not vest survey made by Geodetic Engineer Leopoldo
ownership but rather it merely constituted him as a Tuastumban, it was reported that there were "nine
trustee under a constructive trust. Petitioners further houses and one rattan shop owned by the heirs of
contend that Pedro Barz misrepresented with the land Loreto Retuerto constructed thereon.
registration court that he inherited the whole lot thereby
constituting fraud on his part. Again, the contention does not persuade us. In the
1966 decision of the Land Registration Court in LRC No.
Contention of petitioners: ; that the inclusion of the 529, it was found that Pedro Barz, private respondents'
subject property in Original Certificate of Title No. 521
predecessor-in-interest, was the lawful owner of the
issued to and under the name of Teofilo Barz did not vest
subject property as he and his predecessors-in-interest
ownership over the title in favor of Pedro Barz but
had been in peaceful, continuous and open possession
constituted the latter merely as a trustee under a
constructive trust with the concomitant obligation to thereof in the concept of owner since 1915
convey the said property to the Defendants Heirs of
Panfilo Retuerto and to the Defendants Spouses, as
vendees of the said property
ISSUE: Whether or not petitioners contention that Pedro

Barz is merely a trustee under constructive trust is
tenable?
CASE 3: SALTIGA DE ROMERO vs COURT OF LUTERO during the investigation of the homestead
APPEALS application of RICARDO to the effect that he transferred
and relinquished his rights as trustee of the lot to
RICARDO. The fact that LUTERO was able to cause the
Trustor: Eugenio
issuance of the Homestead title of the land in question
Trustee: Lutero under his name clearly shows that LUTERO employed
fraud in procuring the same. Consequently, herein
Beneficiary: heirs of Eugenio petitioners are entitled to recover the said lot. Petitioners
also rely on the three affidavits of sale executed by
-NO TRUST CREATED IN THIS CASE-
LUTERO wherein he sold portions of Lot 23 Pls-35 in
favor of GLORIOSA, PRESENTACION and her husband
and LUCITA and her husband. They claim that pursuant
Facts: On Dec. 12, 1939 Eugenio Romero bought from to these three affidavits, LUTERO no longer has a claim
spouses Jaug and Macan the latters rights, interest, over Lot 23 Pls-35
participation in a 12-hectare land. The land in question
was then public land. When Eugenio Romero applied for Respondents answer: Respondents also deny that
a homestead patent for said land, the same was LUTERO held the land in trust for the benefit of the heirs
disapproved by the Bureau of Lands because said Romero of his father EUGENIO. According to them, this violates
already had applied for a homestead patent for 24 the provisions of The Public Land Act. Even assuming
hectares and was disqualified from owning additional 12 that a trust in fact was created, such is null and void for
hectares. being contrary to law.
Eugenio Romero placed the application in the Issue: Was there a trust constituted?
name of his eldest son, Eutiquio Romero, allegedly in
trust for all the children of Eugenio. When Eutiquio got
married and had children, the application was Held: No trust is constituted. Petitioners contend that
transferred in the name of Lutero Romero. When Lutero Lutero merely holds Lot 23Pls-35 in trust for the benefit of
in turn got married, he relinquished the application in the heirs of his father Eugenio since it was actually
favor of his younger brother Ricardo. Eugenio who first applied for the homestead but
considering that Eugenio was already granted a
Eugenio Romero died in 1948. In 1961, his widow
homestead, the application had to be placed in the name
Teodora caused the land in question to be subdivided
of his eldest son, which was later transferred to Lutero.
among 6 of her children. The appellants claimed that
However, it has been held that a trust will not be
after the partition, they had been in occupancy of their
created when, for the purpose of evading the law
respective shares through their tenants.
prohibiting one from taking or holding real
However, Lutero claimed that in 1969, he was property, he takes conveyance thereof in the name
picked up by a policeman and brought to the office of the of a third person.
mayor. He was then made to sign 3 affidavits conveying
In the present case, the petitioners did not present any
his share to his sister Gloriosa, brother-in-law Sabdullah
and to Meliton Pacas for an alleged consideration of 3,000
evidence to prove the existence of the trust. Petitioners
each. He said that he could not sell his land because the merely alleged that LUTERO, through fraudulent means,
5-year period had not yet elapsed. He was made to sign had the title of Lot 23 Pls-35 issued in his name contrary
anyway. to the alleged agreement between the family that
LUTERO would merely hold the lot in trust for the
Subsequently, he repudiated the affidavits and
benefit of EUGENIO's heirs. The alleged agreement was
because of this, estafa charges were filed against him. He
not proven and even assuming that the petitioners
then filed an action for the annulment of the affidavits.
duly proved the existence of the trust, said trust would
Petitioners contention: Petitioners contend that LUTERO be of doubtful validity considering that it would
merely holds Lot 23 Pls-35 in trust for the benefit of the promote a direct violation of the provisions of the
heirs of his father EUGENIO since it was actually Public Land Act as regards the acquisition of a
EUGENIO who first applied for the homestead but homestead patent. A homestead applicant is required
considering that EUGENIO was already granted a
by law to occupy and cultivate the land for his own
homestead, the application had to be placed in the name
benefit, and not for the benefit of someone else.
of his eldest son EUTIQUIO. The application was
Furthermore, under Section 12 of The Public Land Act
subsequently transferred to the name of LUTERO who
later transferred the application in the name of Ricardo (CA 141), a person is allowed to enter a homestead not
Romero (RICARDO), his younger brother. To support exceeding twenty-four (24) hectares. In the present
their contention, petitioners point to the testimony of case, it is not disputed that EUGENIO already applied for
a homestead patent for twenty-four (24) hectares of

land and was disqualified from applying for an
additional twelve (12) hectares. If we uphold the theory
of the petitioners and rule that a trust in fact existed,
we would be abetting a circumvention of the statutory
prohibitions stated under the Public Land Act. We
therefore find no legal or factual basis to sustain the
contention of the petitioners that LUTERO merely held
Lot 23 Pls-35 in trust for the benefit of the heirs of
EUGENIO.
The Supreme Court discussed in this case that a trust is

the legal relationship between a person having an
equitable ownership in property and another person
owning the legal title to such property, the equitable
ownership of the former entitling him to performance
of certain duties and the exercise of certain powers by
the latter. Trust relations between parties may be
express or implied. Express trusts are those which are
created by the direct and positive acts of the parties, by
some writing or deed, or will, or by words evidencing an
intention to create a trust. Implied trusts are those
which without being express, are deducible from the
nature of the transaction as matters of intent, or which
are superinduced on the transaction by operation of
law as a matter of equity, independently of the
particular intention of the parties. Implied trusts may
either be resulting or constructive trusts, both coming
into by operation of law.
Resulting trusts are based on the equitable doctrine

that valuable consideration and not legal title
determines the equitable title or interest and are
presumed always to have been contemplated by the
parties. They arise from the nature or circumstances of
the consideration involved in a transaction whereby one
person thereby becomes invested with legal title but is
obligated in equity to hold his legal title for the benefit
of another. On the other hand, constructive trusts are
created by the construction of equity in order to satisfy
the demands of justice and prevent unjust enrichment.
They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or hold
the legal right to property, which he ought not, in equity
and good conscience, to hold.
NB - As for the alleged sale of three portions of the lot

for a consideration of P3,000.00 each evidenced by the
three affidavits of sale executed by LUTERO in favor of
GLORIOSA, PRESENTACION and LUCITA, the Court of
Appeals correctly declared the three conveyances void.
CA 141 prohibits the alienation of a homestead within
five years from the issuance of the patent and grant.
plaintiffs to negotiate with the Barretto family for the sale

of the units. It also found that a constructive trust was
CASE 4: MEYNARDO POLICARPIO vs. COURT created between the private respondent as "the cestui que
OF APPEALS and ROSITO PUECHI S. UY trust [should be trustee] and plaintiffs as beneficiaries
[or cestuis que trust] vis--vis the subject units.
A TRUST HAS BEEN CREATED IN THIS CASE
CA: there is no constructive trust.
Trustee: Uy
ISSUE: Whether or not a trust existed between the
Beneficiary: other tenants of the Baretto Apartment/ plaintiffs and defendant?
Policario
HELD: YES. There exists a trust between the parties. We

FACTS: Policarpio and Uy were former tenants of the 30- hold that an implied trust was created by the agreement
door Barretto Apartments. Sometime in April 1984, between petitioner (and the other tenants) and private
private respondent was elected President of the Barretto respondent. Implied trusts are those which, without being
Tenants Association, which was formed, among others, expressed, are deducible from the nature of the
"to promote, safeguard and protect the general interest transaction by operation of law as matters of equity,
and welfare of its members." Private respondent as independently of the particular intention of the parties.
president of the Association sought the assistance of the Constructive trusts are created in order to satisfy the
then Minister of Human Settlements to cause the demands of justice and prevent unjust enrichment. They
expropriation of the subject property under the Urban arise against one who, by fraud, duress or abuse of
Land Reform Program for subsequent resale to its confidence, obtains or holds the legal right to property
tenants. Failing to get the assistance of the government, which he ought not, in equity and good conscience, to
because according to the law such option is to be hold.
considered as a last resort only, the tenants undertook to
It is not necessary that the intention of the tenants to
negotiate directly with the owners of the Barretto
purchase their apartments units be categorically stated in
Apartments.
the purposes of their Association. A constructive trust as
invoked by petitioner can be implied from the nature of
the transaction as a matter of equity, regardless of the
The Barettos expressed their desire to sell the properties absence of such intention in the purposes of their
to the tenants. The tenants designated and appointed Association. During the negotiations, private respondent
private respondent as their president to negotiate admitted that he was not only representing himself but
the sale, but the negotiations apparently did not also the other tenants as president of the Association.
ripen into a perfected sale. This admission recognized the confidence reposed in
him by his co-tenants.
One and a half years later, petitioner and his co-

plaintiffs were notified that private respondent was Furthermore, Private respondent alleges that, after being
the new owner of the apartment units occupied by informed by the owner, petitioner, together with the
them. Believing that they had been betrayed by their latter's co-plaintiffs in the action for redemption (as the
Association president, petitioner sued for said property was under an encumbrance), did not
"Redemption and Damages with Prayer for want to contribute funds to redeem the encumbered
Preliminary Injunction." apartment. (Such redemption was required before the
units could be sold.) If only the tenants had been
informed by private respondent of this predicament of
Public respondent stated that "there was no common the owners, surely they would have raised the required
interest on the pan of the members of the association to amount to redeem the property and, in turn, acquired the
purchase units they were occupying. However, Petitioner units being rented by them. The incriminating
insists that the tenants had authorized and private admission of private respondent that he had not
respondent had agreed to negotiate with the owners informed the plaintiffs in the redemption case of the
regarding the terms of the sale, precisely to conform to prices at which the apartment units were sold
the desire of the owners to deal with only one person. demonstrated beyond cavil his betrayal of their
trust.
Trial courts finding: The trial court found that private

respondent had been designated and entrusted by The tenants could not be faulted for not inquiring into
the status of private respondent's negotiation with the
owners of the apartments. They had a right to expect

private respondent to be true to his duty as their
representative and to take the initiative of informing
them of the progress of his negotiations. Truly, the
actuations of private respondent show nothing but greed
on his part; he purchased the units for himself at bargain
prices so he could resell them at a profit at the expense of
the tenants.
This Court has ruled in the case of Sumaoang vs. Judge,

RTC, Br. XXXI, Guimba, Nueva Ecija that:
A constructive trust, otherwise known

as a trust ex maleficio, a trust ex delicto,
a trust de son tort, an involuntary trust,
or an implied trust, is a trust by
operation of law which arises contrary
to intention and in invitum, against one
who, by fraud, actual or constructive,
by duress or abuse of confidence, by
commission of wrong, or by any form of
unconscionable conduct, artifice,
concealment, or questionable means,
or who in any way against equity and
good conscience, either has obtained or
holds the legal right to property which
he ought not, in equity and good
conscience, hold and enjoy.
Having concluded that private respondent wilfully

violated the trust reposed in him by his co-tenants, we
consider it a serious matter of "justice, morality,
conscience and fair dealing" that he should not be
allowed to profit from his breach of trust. "Every person
who through an act of performance by another, or
any other means, acquires or comes into possession
of something at the expense of the latter without just
or legal ground, shall return the same to him." Thus,
petitioner is granted the opportunity to purchase the
property which should have been his long ago had private
respondent been faithful to his trust.
CASE 5: EMILIA O'LACO and HUCO LUNA vs.

VALENTIN CO CHO CHIT, O LAY KIA and
COURT OF APPEALS, HELD: YES, there is a trust relationship between the
parties. By definition, trust relations between parties
Trustor:
may either be express or implied. 15 Express trusts are
those which are created by the direct and positive acts
Trustee: Emilia olaco of the parties, by some writing or deed, or will, or by
words evincing an intention to create a trust. 16 Implied
Beneficiary: O Lay Kia, Valentin Co Cho Chit
trusts are those which, without being express, are
THERE IS A TRUST RELATION IN THIS CASE deducible from the nature of the transaction as matters
of intent, or which are superinduced on the transaction
by operation of law as matters of equity, independently
BACKGROUND: This case involves half-sisters each of the particular intention of the parties.17 Implied
claiming ownership over a parcel of land. While trusts may either be resulting or constructive trusts,
petitioner Emilia O'Laco asserts that she merely left the both coming into being by operation of law. 18
certificate of title covering the property with private
respondent O Lay Kia for safekeeping, the latter who is Resulting trusts are based on the equitable doctrine
the former's older sister insists that the title was in her that valuable consideration and not legal title
possession because she and her husband bought the determines the equitable title or interest 19 and are
property from their conjugal funds. presumed always to have been contemplated by the
parties. They arise from the nature or circumstances of
the consideration involved in a transaction whereby one
FACTS: Emilia O'Laco sold a piece of land to the Roman person thereby becomes invested with legal title but is
Catholic Archbishop of Manila for P230,000.00, with obligated in equity to hold his legal title for the benefit
assumption of the real estate mortgage constituted of another. 20 On the other hand, constructive trusts
thereon. Upon knowledge of this transaction, are created by the construction of equity in order to
respondent-spouses Valentin Co Cho Chit and O Lay Kia
satisfy the demands of justice 21 and prevent unjust
sued petitioner-spouses Emilia O'Laco and Hugo Luna to
enrichment. They arise contrary to intention against
recover the purchase price of the land before the then
Court of First Instance of Rizal, respondent-spouses
one who, by fraud, duress or abuse of confidence,
asserting that petitioner Emilia O'Laco knew that obtains or holds the legal right to property which he
they were the real vendees of the Oroquieta property ought not, in equity and good conscience, to hold
sold in 1943 by Philippine Sugar Estate Development
Company, Ltd., and that the legal title thereto was
Unlike express trusts concerning immovables or any
merely placed in her name. They contend that Emilia interest therein which cannot be proved by parol
O'Laco breached the trust when she sold the land to evidence, implied trusts may be established by oral
the Roman Catholic Archbishop of Manila. evidence. However, in order to establish an implied
trust in real property by parol evidence, the proof
should be as fully convincing as if the acts giving rise to
Petitioner-spouses deny the existence of any form of trust the trust obligation were proven by an authentic
relation. They aver that Emilia O'Laco actually bought the document. It cannot be established upon vague and
property with her own money; that she left the Deed of inconclusive proof.
Absolute Sale and the corresponding title with
respondent-spouses merely for safekeeping; that when After a thorough review of the evidence on record, we
she asked for the return of the documents evidencing her hold that a resulting trust was indeed intended by the
ownership, respondent-spouses told her that these were parties under Art. 1448 of the New Civil Code which
misplaced or lost; and, that in view of the loss, she filed a states
petition for issuance of a new title, and on 18 August 1944
the then Court of First Instance of Manila granted her "ARTICLE 1448. There is an implied trust when property
petition. is sold, and the legal estate is granted to one party but
the price is paid by another for the purpose of having
RTC: no trust relation
the beneficial interest of the property. The former is the
CA: there is a trust relation trustee, while the latter is the beneficiary . . ."
(emphasis supplied).
ISSUE: Whether or not a resulting trust exists between
the parties? In this case, the court cited five instances that prove a
trust relationship. First, sps. O Lay Kia were in possession
of all the pertinent documents of the sale from the respondent spouses learned that Emilia was getting
beginning until the end of the transaction. Second, there married to Hugo, O Lay Kia asked her to have the title to
is a previous case of similar facts involving O lay kia and the property already transferred to her and her husband
her brother on a different parcel of land decided in her Valentin, and Emilia assured her that "would be arranged
favor. Third, the circumstances leading to Emilia (maaayos na)" after her wedding. 36 Her answer was an
acquiring a title to the land was dubious. Fourth, until express recognition of the trust, otherwise, she would
the sale to the church, Emilia actually recognized the have refused the request outright. Petitioners never
trust (by promising to take care of the transfer to the objected to this evidence; nor did they attempt to
actual owners as soon as she is able.) And finally, fifth, controvert it.
Emilia actually had no source of income toshow how it
was possible for her to purchase the land. Fifth. The trial court itself determined that "Valentin Co
Cho Chit and O Lay Kia had some money with which they
First. As stipulated by the parties, the document of sale, could buy the property." 37 In fact, Valentin was the Chief
the owner's duplicate copy of the certificate of title, Mechanic of the Paniqui Sugar Mills, was engaged in the
insurance policies, receipt of initial premium of insurance buy and sell business, operated a gasoline station, and
coverage and real estate tax receipts ware all in the owned an auto supply store as well as a ten-door
possession of respondent spouses which they offered in apartment in Caloocan City. 38 In contrast, Emilia O'Laco
evidence. As emphatically asserted by respondent O Lay failed to convince the Court that she was financially
Kia, the reason why these documents of ownership capable of purchasing the Oroquieta property. In fact, she
remained with her is that the land in question belonged opened a bank account only in 1946 and likewise began
to her. 29 filing income tax returns that same year, 39 while the
property in question was bought in 1943. Respondent-
Indeed, there can be no persuasive rationalization for the spouses even helped Emilia and her brothers in their
possession of these documents of ownership by expenses and livelihood. Emilia could only give a vague
respondent-spouses for seventeen (17) years after the account on how she raised the money for the purchase of
Oroquieta property was purchased in 1943 than that of the property. Her narration of the transaction of sale
precluding its possible sale, alienation or conveyance by abounds with "I don't know" and "I don't remember." 40
Emilia O'Laco, absent any machination or fraud. This
continued possession of the documents, together with
other corroborating evidence spread on record, strongly
suggests that Emilia O'Laco merely held the Oroquieta NB as to the issue on prescription: As differentiated
property in trust for respondent-spouses. from constructive trusts, where the settled rule is that
prescription may supervene, in resulting trust, the rule
Second. It may be worth to mention that before buying
of imprescriptibility may apply for as long as the trustee
the Oroquieta property, respondent-spouses purchased
has not repudiated the trust. Once the resulting trust is
another property situated in Kusang-Loob, Sta. Cruz,
repudiated, however, it is converted into a constructive
Manila, where the certificate of title was placed in the
name of Ambrosio O'Laco, older brother of Emilia, under trust and is subject to prescription.
similar or identical circumstances.
A resulting trust is repudiated if the following requisites
Third. The circumstances by which Emilia O'Laco concur: (a) the trustee has performed unequivocal acts
obtained a new title by reason of the alleged loss of the of repudiation amounting to an ouster of the cestui qui
old title then in the possession of respondent-spouses trust; (b) such positive acts of repudiation have been
cast serious doubt on the veracity of her ownership. The made known to the cestui qui trust; and, (c) the
petitions respectively filed by Emilia O'Laco and evidence thereon is clear and convincing.
Ambrosio O'Laco for the Oroquieta and the Kusang-Loob
properties were both granted on the same day, 18 August In Tale v. Court of Appeals, the Court categorically ruled
1944, by the then Court of First Instance of Manila. These that an action for reconveyance based on an implied or
orders were recorded in the Primary Entry Book of the constructive trust must perforce prescribe in ten (10)
Register of Deeds of Manila at the same time, 2:35 o'clock
years, and not otherwise, thereby modifying previous
in the afternoon of 1 September 1944, in consecutive
decisions holding that the prescriptive period was four
entries, Entries Nos. 246117-18. 35 This coincidence lends
(4) years.
credence to the position of respondent-spouses that there
was in fact a conspiracy between the siblings Ambrosio
Neither the registration of the property in the name of
and Emilia to defraud and deprive respondents of their
petitioner Emilia O'Laco nor the issuance of a new
title to the Oroquieta and Kusang-Loob properties.
Torrens title in 1944 in her name in lieu of the alleged
Fourth. Until the sale of the Oroquieta property to the loss of the original may be made the basis for the
Roman Catholic Archbishop of Manila, petitioner Emilia commencement of the prescriptive period. For, the
O'Laco actually recognized the trust. Specifically, when issuance of the Torrens title in the name of Emilia
O'Laco could not be considered adverse, much less

fraudulent. Precisely, although the property was bought
by respondent-spouses, the legal title was placed in the
name of Emilia O'Laco. The transfer of the Torrens title
in her name was only in consonance with the deed of
sale in her favor. Consequently, there was no cause for
any alarm on the part of respondent-spouses. As late as
1959, or just before she got married, Emilia continued
to recognize the ownership of respondent-spouses over
the Oroquieta property. Thus, until that point,
respondent-spouses were not aware of any act of Emilia
which would convey to them the idea that she was
repudiating the resulting trust. The second requisite is
therefore absent. Hence, prescription did not begin to
run until the sale of the property, which was clearly an
act of repudiation.
Case 6: Abellana v. Ponce vendee of the lot, is credible to debunk the contrary
claim of respondent spouses. Indeed, the lone
testimony of a witness, if credible, is sufficient as in the
G.R. No. 160488 September 3, 2004
present case.21 Moreover, AquilinoCaldoza, brother of
FELOMINA1 ABELLANA, petitioner, the vendor and one of the witnesses22 to the deed of
vs. sale, categorically declared that Felomina was the buyer
SPOUSES ROMEO PONCE and LUCILA PONCE and the and the one who paid the purchase price to her sister,
REGISTER OF DEEDS of BUTUAN CITY,respondents. Estela.23
The fact that it was Felomina who bought the lot was
further bolstered by her possession of the following
Trustee: Lucila
documents from the time of their issuance up to the
Beneficiary: Felomina present, to wit: (1) the transfer certificate of title25 and
tax declaration in the name of Lucila;26 (2) the receipts
NO VALID TRUST IN THIS CASE of real property taxes in the name of FelominaAbellana
for the years 1982-1984, 1992-1994 and 1995;27 and
(3) the survey plan of the lot.28
FACTS: Felomina, a spinster, pharmacist and aunt of 2. WON there was a valid donation. NONE
private respondent Lucila Ponce, purchased from the In the instant case, what transpired between Felomina
late Estela Caldoza-Pacres an agricultural lot5 with the and Lucila was a donation of an immovable property
intention of giving said lot to her niece, Lucila. The total which was not embodied in a public instrument. Unlike
consideration of the sale was P16,500.00, but only ordinary contracts (which are perfected by the
P4,500.00 was stated in the deed upon the request of concurrence of the requisites of consent, object and
the seller.8 cause pursuant to Article 131838 of the Civil Code),
Subsequently, Felomina applied for the issuance of title solemn contracts like donations are perfected only
in the name of her niece. On April 28, 1992, Transfer upon compliance with the legal formalities under
Certificate of Title (TCT) No. 28749 over the subject lot Articles 74839 and 749.40 Otherwise stated, absent the
was issued in the name of Lucila.10 Said title, however, solemnity requirements for validity, the mere intention
remained in the possession of Felomina who developed of the parties does not give rise to a contract. The oral
the lot. The relationship between Felomina and donation in the case at bar is therefore legally inexistent
respondent spouses Romeo and Lucila Ponce, however, and an action for the declaration of the inexistence of a
turned sour. The latter allegedly became disrespectful contract does not prescribe.41Hence, Felomina can still
and ungrateful to the point of hurling her insults and recover title from Lucila.
even attempting to hurt her physically. Hence, Felomina
filed the instantcase for revocation of implied trust to 3. WON there is an implied trust between Felomina
recover legal title over the property.13 and Lucila. NONE
On August 28, 2000, the trial court rendered a decision Article 144842 of the Civil Code on implied trust finds
holding that an implied trust existed between Felomina no application in the instant case. The concept of
and Lucila, such that the latter is merely holding the lot implied trusts is that from the facts and circumstances
for the benefit of the former. It thus ordered the of a given case, the existence of a trust relationship is
conveyance of the subject lot in favor of Felomina. inferred in order to effect the presumed intention of
the parties.43 Thus, one of the recognized exceptions to
Private respondent spouses appealed to the Court of the establishment of an implied trust is where a
Appeals which set aside the decision of the trial court contrary intention is proved,44 as in the present case.
ruling that Felomina failed to prove the existence of an From the testimony of Felomina herself, she wanted to
implied trust and upheld respondent spouses give the lot to Lucila as a gift. To her mind, the
ownership over the litigated lot. The appellate court execution of a deed with Lucila as the buyer and the
further held that even assuming that Felomina paid the subsequent issuance of title in the latters name were
purchase price of the lot, the situation falls within the the acts that would effectuate her generosity. In so
exception stated in Article 1448 of the Civil Code which carrying out what she conceived, Felomina evidently
raises a disputable presumption that the property was displayed her unequivocal intention to transfer
purchased by Felomina as a gift to Lucila whom she ownership of the lot to Lucila and not merely to
considered as her own daughter. constitute her as a trustee thereof. It was only when
their relationship soured that she sought to revoke the
ISSUES & RULINGS: donation on the theory of implied trust, though as
1. Who, as between Felomina and respondent previously discussed, there is nothing to revoke because
spouses, is the lawful owner of the controverted lot? the donation was never perfected.
After a thorough examination of the records and In declaring Lucila as the owner of the disputed lot, the
transcript of stenographic notes, we find that it was Court of Appeals applied, among others, the second
Felomina and not Lucila who truly purchased the sentence of Article 1448 which states
questioned lot from Estela. The positive and consistent "x xx However, if the person to whom the title is
testimony of Felomina alone, that she was the real conveyed is a child, legitimate or illegitimate, of theone
paying the price of the sale, no trust is implied by law, it
being disputably presumed that there is a gift in favor of

the child."
Said presumption also arises where the property is
given to a person to whom the person paying the price
stands in loco parentis or as a substitute parent.45
The abovecited provision, however, is also not
applicable here because, first, it was not established
that Felomina stood as a substitute parent of Lucila; and
second, even assuming that she did, the donation is still
void because the transfer and acceptance was not
embodied in a public instrument. We note that said
provision merely raised a presumption that the
conveyance was a gift but nothing therein exempts the
parties from complying with the formalities of a
donation.
intention to create a trust. On the other hand, implied

Case 7: Cuaycong v. Cuaycong trusts are those which, without being expressed, are
deducible from the nature of the transaction by
operation of law as matters of equity, in dependently of
the particular intention of the parties.3Thus, if the
G.R. No. L-21616 December 11, 1967
intention to establish a trust is clear, the trust is
GERTRUDES F. CUAYCONG, ET AL., plaintiffs-
express; if the intent to establish a trust is to betaken
appellants,
from circumstances or other matters indicative of such
vs.
intent, then the trust is implied. From these and from
LUIS D. CUAYCONG, ET AL., defendants-appellees.
the provisions of paragraph 8 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.lawphil Such a situation
definitely falls under Article 1443 of the Civil Code.
FACTS: Eduardo Cuaycong, married to Clotilde de Leon,
Appellants point out that not only paragraph 8 should
died on June 21, 1936 without issue but with three
be considered but the whole complaint, in which case
brothers and a sister surviving him: Lino, Justo, Meliton
they argue that an implied trust should be construed to
and Basilisa. Upon his death, his properties were
exist. Article 1453, one of the cases of implied trust, is
distributed to his heirs as he willed except two
also cited: "When property is conveyed to a person in
haciendas in Victorias, Negros Occidental, devoted to
reliance upon his declared intentions to hold it for or
sugar and other crops the Haciendas Sta. Cruz and
transfer it to another or the grantor, there is an implied
Pusod both known as Hacienda Bacayan. Hacienda
trust in favor of the person whose benefit is
Bacayan is comprised of eight (8) lots all of which are
contemplated." Said arguments are untenable, even
titled in the name of Luis D. Cuaycong, son of Justo
considering the whole complaint. The intention of the
Cuaycong.
trustor to establish the alleged trust may be seen in
paragraphs 5 and 6.4 Article 1453 would apply if the
LinoCuaycong died and was survived by his children.
person conveying the property did not expressly state
Meliton and Basilisa died without any issue.
that he was establishing the trust, unlike the case at bar
On October 3, 1961, the surviving children of Lino
where he was alleged to have expressed such intent.
Cuaycongfiled as pauper litigants, a suit against Justo,
Consequently, the lower court did not err in dismissing
Luis and Benjamin Cuaycong1 for conveyance of
the complaint.
inheritance and accounting.
Besides, even assuming the alleged trust to be an
implied one, the right alleged by plaintiffs Would have
The Court of First Instance ruled that the trust alleged,
already prescribed since starting in 1936 When the
particularly in paragraph 8 of the complaint, refers to an
trustor died, plaintiffs had already been allegedly
immovable which under Article 1443 of the Civil Code
refused by the aforesaid defendants in their demands
may not be proved by parole evidence. Plaintiffs were
over the land, and the complaint was filed only in 1961
given 10 days to file an amended complaint mentioning
more than the 10-year period of prescription for the
or alleging therein the written evidence of the alleged
enforcement of such rights under the trust.lawphil It is
trust, otherwise the case would be dismissed.
settled that the right to enforce an implied trust in one's
Paragraph 8 of the complaint state:
favor prescribes in ten (10) years.5 And even under the
That as the said two haciendas were then the subject of
Code of Civil Procedure, action to recover real property
certain transactions between the spouses Eduardo
such as lands prescribes in ten years (Sec. 40, Act 190).
Cuaycong and Clotilde de Leon on one hand, and Justo
and Luis D. Cuaycong on the other, Eduardo Cuaycong
told his brother Justo and his nephew, defendant Luis D.
Cuaycong, to hold in trust what might belong to his
brothers and sister as a result of the arrangements and
to deliver to them their shares when the proper time
comes, to which Justo and Luis D. Cuaycong agreed.
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 is an implied trust. NONE
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.2 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
Case 8: Roa v. CA aforestated and further to pay said defendants

the amount of P1,000.00 as attorney's fees plus
costs.
G.R. No. L-27294 June 28, 1983
ALFREDO ROA, JR., LETICIA ROA DE BORJA, RUBEN On appeal taken by Alfredo Roa, the appellate
ROA, CORNELIO ROA and ELSIE ROA-CACNIO (as heirs court affirmed the decision of the lower court
of the late Alfredo Roa, Sr.). petitioners, and declared that (a) the compromise
vs. agreement created an express trust between
HON. COURT OF APPEALS and the spouses JOAQUIN the Roa brothers and sisters, including Alfredo,
CASIO and CUSTODIA VALDEHUESA, respondents. Sr., (b) that the respondent spouses' action for
FACTS: reconveyance was imprescriptible on the
Plaintiff and his brothers and sisters Trinidad authority of Mirabiles, et al. v. Quito, et al., L-
Reyes Roa, Esperanza Roade Ongpin, Concepcion Roa 14008, October 18, 1956; and (c) that Alfredo
and ZosimoRoa, husband of the latter, were the owners Roa cannot invoke the indefeasibility and
pro-indiviso of a parcel of land located in Tagoloan, imprescriptibility of the Torrens title issued in
Misamis Oriental, and sometime in 1925, and for the his name for the land in dispute since the said
purpose of registering their title to said parcel of land, title was secured by him in breach of an express
the said co- owners filed an application trust, and thus, the Court ordered the
One Pablo Valdehuesa filed an opposition in reconveyance of the property within fifteen (15)
said Expediente No. 12, G.L.R.O. Record No. 10003. days from the finality of the decision.
claiming absolute and exclusive ownership over a
portion which is now the property under litigation.
Sometime during the year 1925, the co-owners,
ISSUES & RULINGS:
said Concepcion Roa, Esperanza Roa de Ongpin and
1. WON there is an EXPRESS trust. NONE
Trinidad Reyes Roa and ZosimoRoa entered into an
We do not agree with the holding of the respondent
agreement with the said Pablo Valdehuesa
appellate court that an express trust was created
In compliance with his obligation under and by
between the parties by reason of the compromise
virtue of said Exhibit " 1" the said Pablo Valdehuesa
agreement entered into between them. Express trusts
withdrew the opposition filed by him in said case
are created by the intention of the trustor or one of the
Expediente No. 12, G.L.R.O. Record No. 10003, and as
parties (Article 1441, New Civil Code). While no
the result of said withdrawal, the plaintiff and his co-
particular words are required for the creation of an
owners succeeded in registering their title to their
express trust, it being sufficient that a trust is clearly
property, including the portion owned by Pablo
intended (Article 1444, New Civil Code), in the case at
Valdehuesa as claimed in his opposition.
bar, We find no direct and positive intent to create a
That sometime after the issuance of title in
trust relationship between the parties to the
favor of the plaintiff (Transfer Certificate of Title No. 21-
compromise agreement under which Pablo Valdehuesa
A) and his aforementioned brothers and sisters covering
agreed to withdraw his opposition to the application for
the parcel of land subject matter of the application filed
registration upon the commitment of the Roas to give
by them in Expediente No. 12, G.L.R.O. Record No.
Valdehuesa another piece of land of equal area or pay
10003, the said plaintiff and his brothers and sisters
its price of P 400.00. It seems clear to Us that the Roas
partitioned among themselves said property, and
under the compromise agreement did not commit
plaintiff was adjudicated a share in said property, of
themselves to hold the lot claimed by Pablo Valdehuesa
which the parcel of land covered by the opposition of
for Pablo Valdehuesa and in Pablo Valdehuesa's name.
Pablo Valdehuesa withdrawn under the terms of Exhibit
" 1" is a part or portion of said charge, and covered by
3. WON there is an IMPLIED trust. NONE
T-21-D
(contention: Private respondents claim that under the
An action for recovery of possession of a parcel
terms of the compromise agreement, the land claimed
of land was filed before the Court of First Instance of
by Pablo Valdehuesa should be deemed held in trust by
Misamis Oriental by Alfredo Roa, Sr. (now deceased and
the Roas when the latter failed to relocate him or pay
subsequently substituted by his heirs, the herein
the price therefor.)
petitioners) against respondent spouses, Joaquin Casio
and CustodiaValdehuesa (real name appears to be
We rule that Art. 1456 is not applicable because it is
TeodosiaValdehuesa), successors-in- interest of one
quite clear that the property ofPablo Valdehuesa was
Pablo Valdehuesa, now deceased.
acquired by the Roas not through mistake or fraud but
On March 6, 1964, the lower court rendered the by reason of the voluntary agreement of Valdehuesa to
decision ordering the plaintiff Alfredo Roa to withdraw his opposition to the registration of the land
reconvey the land in dispute to the defendants, under the Torrens system.
now the respondent spouses, on the ground There is incontrovertible evidence that the Roas
that same could not have been registered in the intended to abide by the compromise agreement at the
name of the plaintiff and his brother and sisters time of the execution of the same. The private
if not for the compromise agreement respondents themselves introduced additional evidence
which showed that on May 11, 1927, Trinidad Roa,

Esperanza Roa de Ongpin, Concepcion Roa and
ZosimoRoa confirmed in writing the terms and
conditions of the agreement they had entered into with
Pablo Valdehuesa in the land registration proceedings.
Even the respondent appellate court expressly
determined the aforesaid failure of the Roas to comply
with the terms of the compromise agreement to be an
afterthought; thus,
The change of mind of the plaintiff-appellant later is of
no moment in the case at bar. 4
3. WON there is a CONSTRUCTIVE trust. YES

A constructive trust, otherwise known as a trust ex
maleficio, a trust ex delicto, a trust de son tort, an
involuntary trust, or an implied trust, is a trust by
operation of law which arises contrary to intention and
in invitum, against one who, by fraud, actual or
constructive, by duress or abuse of confidence, by
commission of wrong, or by any form of unconscionable
conduct,artifice, concealment, or questionable means,
or who in any way against equity and good conscience,
either has obtained or holds the legal right to property
which he ought not, in equity and good conscience,
hold and enjoy. It is raised by equity to satisfy the
demands of justice. However, a constructive trust does
not arise on every moral wrong in acquiring or holding
property or on every abuse of confidence in business or
other affairs; ordinarily such a trust arises and will be
declared only on wrongful acquisitions or retentions of
property of which equity, in accordance with its
fundamental principles and the traditional exercise of
its jurisdiction or in accordance with statutory provision,
takes cognizance. It has been broadly ruled that a
breach of confidence, although in business or social
relations, rendering an acquisition or retention of
property by one person unconscionable against
another, raises a constructive trust. (76 Am. Jur. 2d, Sec.
221, pp. 446-447).
And specifically applicable to the case at bar is the
doctrine that "A constructive trust is substantially an
appropriate remedy against unjust enrichment. It is
raised by equity in respect of property, which has been
acquired by fraud, or where, although acquired
originally without fraud, it is against equity that it
should be retained by the person holding it." (76 Am.
Jur. 2d, Sec. 222, p. 447).
The above principle is not in conflict with the New Civil
Code, Code of Commerce, Rules of Court and special
laws. And since We are a court of law and of equity, the
case at bar must be resolved on the general principles
of law on constructive trust which basically rest on
equitable considerations in order to satisfy the
demands of justice, morality, conscience and fair
dealing and thus protect the innocent against fraud. As
the respondent court said, "It behooves upon the courts
to shield fiduciary relations against every manner of
chickanery or detestable design cloaked by legal
technicalities."
Case 9: Mindanao Development Authority v. CA ISSUE: WON there is an express trust. NONE, only
implied trust.
G.R. No. L-49087 April 5, 1982
HELD:
MINDANAO DEVELOPMENT AUTHORITY, now the
The above-quoted stipulation, however, is nothing but a
SOUTHERN PHILIPPINES DEVELOPMENT
condition that AngBansing shall pay the expenses for
ADMINISTRATION, petitioner,
the registration of his land and for Juan Cruz to shoulder
vs.
the expenses for the registration of the land sold to
THE COURT OF APPEALS and FRANCISCO ANG
him. The stipulation does not categorically create an
BANSING, respondents.
obligationon the part of AngBansing to hold the
property in trust for Juan Cruz. Hence, there is no
FACTS:
express trust. It is essential to the creation of an express
Francisco AngBansing was the owner of a big tract of
trust that the settlor presently and unequivocally make
land with an area of about 300,000 sq.m., situated in
a disposition of property and make himself the trustee
Barrio Panacan Davao City. On February 25, 1939,
of the property for the benefit of another. 16
AngBansing sold a portion thereof, with an area of
In case of a declaration of trust, the declaration must be
about 5 hectares to Juan Cruz Yap ChuyThe contract
clear and unequivocal that the owner holds property in
provided, among others, the following:
trust for the purposes named. 17
That I hereby agree to work for the titling of the entire
While AngBansing had agreed in the deed of sale that
area of my land under my own expenses and the
he will work for the titling of "the entire area of my land
expenses for the titling of the portion sold to me shall
under my own expenses," it is not clear therefrom
be under the expenses of the said Juan Cruz Yap Chuy.1
whether said statement refers to the 30-hectare parcel
After the sale, the land of Ang Banging was surveyed
of land or to that portion left to him after the sale. A
and designated as Lot 664-B, Psd-1638. Lot 664-B was
failure on the part of the settlor definitely to describe
further subdivided into five (5) lots and the portion sold
the subject-matter of the supposed trust or the
to Juan Cruz Yap Chuy shortened to Juan Cruz, was
beneficiaries or object thereof is strong evidence that
designated as Lot 664B-3, with an area of 61.107 square
he intended no trust.
meters, more or less. 2 On June 15-17 and December
Nor will the affidavit executed by Ang Banging on April
15, 1939, a cadastral survey was made and Lot 664-B-3
23, 1941, 21 be construed as having established an
was designated as Lot 1846-C of the Davao Cadastre. On
express trust. As counsel for the herein petitioner has
December 23, 1939, Juan Cruz sold Lot 1846-C to the
stated, "the only purpose of the Affidavit was to clarify
Commonwealth of the Philippines for the amount of
that the area of the land sold by AngBansing to Juan
P6,347.50.
Cruz Yap Chuy is not only 5 hectares but 61,107 square
On February 25, 1965, the President of the Philippines
meters or a little over six (6) hectares." 22
issued Proclamation No. 459, transferring ownership of
But, even granting, arguendo, that an express trust had
certain parcels of land situated in Sasa Davao City, to
been established, as claimed by the herein petitioner, it
the Mindanao Development Authority, now the
would appear that the trustee had repudiated the trust
Southern Philippines Development Administration,
and the petitioner herein, the alleged beneficiary to the
subject to private rights, if any. Lot 1846-C, the disputed
trust, did not take any action therein until after the
parcel of land, was among the parcels of land
lapse of 23 years.
transferred to the Mindanao Development Authority in
Needless to say, only an implied trust may have been
said proclamation.
impressed upon the title of Ang Banging over Lot 1846-
On March 31, 1969, Atty. Hector L. Bisnar counsel for
C of the Davao Cadastre since the land in question was
the Mindanao Development Authority, wrote
registered in his name although the land belonged to
AngBansing requesting the latter to surrender the
another. In implied trusts, there is neither promise nor
Owner's duplicate copy of TCT No. 2601 so that Lot
fiduciary relations, the so-called trustee does not
1846-C could be formally transferred to his client but
recognize any trust and has no intent to hold the
AngBansing refused. 9 Consequently, on April 11, 1969,
property for the beneficiary." 24 It does not arise by
the Mindanao Development Authority filed a complaint
agreement or intention, but by operation of law. Thus,
against Francisco AngBansing.
if property is acquired through mistake or fraud, the
In this case, the herein petitioner relies mainly upon the
person obtaining it is, by force of law, considered a
following stipulation in the deed of sale executed by
trustee of an implied trust for the benefit of the person
AngBansing in favor of Juan Cruz to prove that an
from whom the property comes. 25
express trust had been established with AngBansing as
If a person obtains legal title to property by fraud or
the settlor and trustee and Juan Cruz as the cestuique
concealment, courts of equity will impress upon the
trust or beneficiary:
title a so-called constructive trust in favor of the
That I hereby agree to work for the titling of the entire
defrauded party. 26
area of my land under my own expenses and the
There is also a constructive trust if a person sells a
expenses for the titling of the portion sold to me shall
parcel of land and thereafter obtains title to it through
be under the expenses of said Juan Cruz Yap Chuy.
fraudulent misrepresentation. 27
Such a constructive trust is not a trust in the technical
sense and is prescriptible; it prescribes in 10 years. 28
Here, the 10-year prescriptive period began on March

31, 1941, upon the issuance of Original Certificate of
Title No. 26 in the names of Victoriana
AngBansingOrfelinaAngBansing and Francisco Ang
Banging. From that date up to April 11, 1969, when the
complaint for reconveyance was filed, more than 28
years had passed. Clearly, the action for reconveyance
had prescribed.
Case 10: Adille v. CA We agree with the respondent Court of Appeals that
fraud attended the registration of the property. The
petitioner's pretension that he was the sole heir to the
G.R. No. L-44546 January 29, 1988
land in the affidavit of extrajudicial settlement he
RUSTICO ADILLE, petitioner,
executed preliminary to the registration thereof betrays
vs.
a clear effort on his part to defraud his brothers and
THE HONORABLE COURT OF APPEALS, EMETERIA
sisters and to exercise sole dominion over the property.
ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA
The aforequoted provision therefore applies.
ASEJO and SANTIAGO ASEJO, respondents.
It is the view of the respondent Court that the
FACTS:T]he land in question originally belonged to one
petitioner, in taking over the property, did so either on
FelisaAlzul as her own private property; she married
behalf of his co-heirs, in which event, he had
twice in her lifetime; the first, with one BernabeAdille,
constituted himself a negotiorumgestor under Article
with whom she had as an only child, herein defendant
2144 of the Civil Code, or for his exclusive benefit, in
RusticoAdille; in her second marriage with one
which case, he is guilty of fraud, and must act as
ProcopioAsejo, her children were herein plaintiffs,
trustee, the private respondents being the beneficiaries,
now, sometime in 1939, said Felisa sold the property in
under the Article 1456. The evidence, of course, points
pacto de retro to certain 3rd persons, period of
to the second alternative the petitioner having asserted
repurchase being 3 years, but she died in 1942 without
claims of exclusive ownership over the property and
being able to redeem and after her death, but during
having acted in fraud of his co-heirs. He cannot
the period of redemption, herein defendant
therefore be said to have assume the mere
repurchased, by himself alone, and after that, he
management of the property abandoned by his co-
executed a deed of extra-judicial partition representing
heirs, the situation Article 2144 of the Code
himself to be the only heir and child of his mother Felisa
contemplates. In any case, as the respondent Court
with the consequence that he was able to secure title in
itself affirms, the result would be the same whether it is
his name alone also, so that OCT. No. 21137 in the
one or the other. The petitioner would remain liable to
name of his mother was transferred to his name, that
the Private respondents, his co-heirs.
was in 1955; that was why after some efforts of
2. WON prescription lies. NO
compromise had failed, his half-brothers and sisters,
In the case at bar, the property was registered in 1955
herein plaintiffs, filed present case for partition with
by the petitioner, solely in his name, while the claim of
accounting on the position that he was only a trustee on
the private respondents was presented in 1974. Has
an implied trust when he redeemed,-and this is the
prescription then, set in?
evidence, but as it also turned out that one of plaintiffs,
We hold in the negative. Prescription, as a mode of
EmeteriaAsejo was occupying a portion, defendant
terminating a relation of co-ownership, must have been
counterclaimed for her to vacate.
preceded by repudiation (of the co-ownership). The act
ISSUE: May a co-owner acquire exclusive ownership
of repudiation, in turn is subject to certain conditions:
over the property held in common?NO
(1) a co-owner repudiates the co-ownership; (2) such an
HELD: The right of repurchase may be exercised by a co-
act of repudiation is clearly made known to the other
owner with aspect to his share alone. 5 While the
co-owners; (3) the evidence thereon is clear and
records show that the petitioner redeemed the
conclusive, and (4) he has been in possession through
property in its entirety, shouldering the expenses
open, continuous, exclusive, and notorious possession
therefor, that did not make him the owner of all of it. In
of the property for the period required by law. 9
other words, it did not put to end the existing state of
The instant case shows that the petitioner had not
co-ownership.
complied with these requisites. We are not convinced
Necessary expenses may be incurred by one co-owner,
that he had repudiated the co-ownership; on the
subject to his right to collect reimbursement from the
contrary, he had deliberately kept the private
remaining co-owners.
respondents in the dark by feigning sole heirship over
Neither does the fact that the petitioner had succeeded
the estate under dispute. He cannot therefore be said
in securing title over the parcel in his name terminate
to have "made known" his efforts to deny the co-
the existing co-ownership. While his half-brothers and
ownership. Moreover, one of the private respondents,
sisters are, as we said, liable to him for reimbursement
EmeteriaAsejo, is occupying a portion of the land up to
as and for their shares in redemption expenses, he
the present, yet, the petitioner has not taken pains to
cannot claim exclusive right to the property owned in
eject her therefrom. As a matter of fact, he sought to
common. Registration of property is not a means of
recover possession of that portion Emeteria is
acquiring ownership. It operates as a mere notice of
occupying only as a counterclaim, and only after the
existing title, that is, if there is one.
private respondents had first sought judicial relief.
The petitioner must then be said to be a trustee of the
For the same reason, we cannot dismiss the private
property on behalf of the private respondents. The Civil
respondents' claims commenced in 1974 over the
Code states:
estate registered in 1955. While actions to enforce a
ART. 1456. If property is acquired through mistake or
constructive trust prescribes in ten years, 12 reckoned
fraud, the person obtaining it is, by force of law,
from the date of the registration of the property, 13 we,
considered a trustee of an implied trust for the benefit
as we said, are not prepared to count the period from
of the person from whom the property comes.
such a date in this case. We note the petitioner's sub
rosa efforts to get hold of the property exclusively for

himself beginning with his fraudulent misrepresentation
in his unilateral affidavit of extrajudicial settlement that
he is "the only heir and child of his mother Feliza with
the consequence that he was able to secure title in his
name also." 14 Accordingly, we hold that the right of
the private respondents commenced from the time
they actually discovered the petitioner's act of
defraudation. 15 According to the respondent Court of
Appeals, they "came to know [of it] apparently only
during the progress of the litigation." 16 Hence,
prescription is not a bar.
Case 11: Sumaoang v. Guimba recognized by our Civil Code is that set forth in Article
1456:
G.R. No. 78173 October 26, 1992 If property is acquired through mistake or fraud, the
person obtaining it is, by force of law, considered a
ANDRES SUMAOANG, petitioner,
trustee of an implied trust for the benefit of the person
vs.
from whom the property comes.
HON. JUDGE, REGIONAL TRIAL COURT, BRANCH
XXXI, GUIMBA, NUEVA ECIJA and ATTY. JORGE A. The "mistakes" or "fraud" that results in an implied trust
PASCUA, respondents. being impressed upon the property involved, may be the
mistake or fraud of a third person, and need not be a
On 15 July 1933, the late Sebastian Sumaoang filed with
mistake or fraud committed directly by the trustee
the Bureau of Lands a homestead application. He then 16
himself under the implied trust. Accordingly, in the
took possession of and cultivated the lot. Due to illness
instant case, an implied trust was established upon the
and the dangerous conditions then prevailing in Santiago,
land acquired by Atty. Pascua even though the operative
Isabela immediately after the second World War, he
mistake was a mistake of respondent trial judge.
transferred his residence to his native town of Sta.
Respondent Judge may be seen to have intended to
Ignacia, Tarlac where he died on 22 August 1952.
convey only one-half (1/2) of the land involved as
Meanwhile, Florencio and Regino, both surnamed
attorney's fees to Atty. Pascua. Atty. Pascua, however,
Domingo applied for a homestead patent over Lot No.
took advantage of the Judge's mistake in order to acquire
3098 during Sebastian Sumaoang's absence. On 11 may
all the 21.3445 hectares for himself. Atty. Pascua obviously
1950, Florencio Domingo was granted a homestead
knew that under his contract with his clients, he was
patent. To protect their interests over the homestead,
entitled to ask only for one-half (1/2) of the land. When
petitioner and his brothers, Vitaliano and Pedro
he purchased the entire land at public auction for
Sumaoang, engaged the services of private respondent
P110,000.00 (leaving his clients still owing him P1,500.00),
Atty. Jorge A. Pascua. As counsel for the Sumaoangs, Atty.
the amount and character of his attorney's fees became
Pascua filed a formal protest with the Bureau of Lands
unreasonable and unconscionable and constituted unjust
contesting the legality of the issuance of Homestead
enrichment at the expense of his clients.
Patent No. V-5218 to Florencio Domingo. On 7 February
3
1962, the Bureau of Lands rendered a decision declaring The conclusion we reach in this case rests not only on
Homestead Patent No. V-5218 inoperative. Pursuant to Article 1456 of the Civil Code but also on the principles of
the above decision of the Bureau of Lands, the Solicitor the general law of trusts which, through Article 1442 of
General filed, on behalf of the Republic of the Philippines, the Civil Code, have been adopted or incorporated into
a reversion case against Florencio and Regino Domingo our civil law, to the extent that such principles are not
for the cancellation of Homestead Patent No. V-5218 and inconsistent with the Civil Code and other statutes and
Original Certificate of Title No. T-1201 before the CFI of the Rules of Court.
Isabela. After trial, the lower court rendered a
5
decision dated 17 February 1971 declaring the homestead A constructive trust, in general usage in the United
19
patent, as well as the certificate of title, null and void and States, is not based on an expressed intent that it shall
ordered the reversion of the land to the State subject to exist, or even on an implied or presumed intent. A
the rights of petitioner and his brothers. This decision constructive trust is created by a court of equity as a
6 20
was affirmed by both the Court of Appeals and the means of affording relief. Constructive trusts constitute
Supreme Court. Not having received compensation for his a remedial device "through which preference of self is
21
professional services as counsel, Atty. Pascua filed made subordinate to loyalty to others." In particular,
sometime in 1979 a complaint for collection of attorney's fraud on the part of the person holding or detaining the
fees against his former clients, petitioner and his property at stake is not essential in order that an implied
brothers, before the CFI of Guimba, Nueva Ecija. The trial trust may spring into being. In other words of Judge
22
court stated in its judgment dated 31 August 1982 that Cardozo, inBeatty v. Guggenheim Exploration Co.:
Atty. Pascua was entitled only to "the equivalent of one-
half of the property in its peso valuation" and [w]hen property has been acquired in such circumstances
somehow ordered petitioner and his brothers to pay that the holder of the legal title may not in good
attorney's fees in the amount of P110,000.00. conscience retain the beneficial interest, equity converts
him into a trustee.
Issue: W/N a trust exists in this instant case yes
The consequences of an implied trust are, principally,
RULING: We believe and so hold that respondent Atty. that the implied trustee shall deliver the possession and
Pascua, under the circumstances of this case, must be reconvey title to the property to the beneficiary of the
regarded as holding the title of the property acquired by trust, and to pay to the latter the fruits and other net
him at public sale under an implied trust in favor of profit received from such property during the period of
petitioner and his brothers, to the extent of one-half (1/2) wrongful or unconscionable holding, and otherwise to
of that property. Among the species of implied trusts
adjust the equities between the trustee holding the legal

23
title and the beneficiaries of the trust.
Applying the provisions of Article 1456 of the Civil Code

and the foregoing principles of the general law of trusts,
we treat the present so-called "Petition for Annulment of
the Decision of the CFI, etc." as a "Petition for
Reconveyance" and, accordingly, require private
respondent Atty. Pascua to reconvey or cause the
reconveyance of one-half (1/2) of the 21.3445 hectares of
land here involved, plus one-half (1/2) of all profits (net of
expenses and taxes) which Atty. Pascua may have derived
from or in respect of such land during the time he has
held the same, to petitioner and his brothers, Vitaliano
and Pedro Sumaoang.
Case 12: Marquez v. CA present Civil Code. Under Article 887 thereof, her
compulsory heirs are her legitimate children, petitioners
and private respondent therein, and her spouse, Rafael
Marquez, Sr. Now, in 1982, Rafael Marquez, Sr. decided to
G.R. No. 125715 December 29, 1998 adjudicate the entire property by executing an "Affidavit
of Adjudication" claiming that he is the sole surviving heir
RICARDO F. MARQUEZ, AUREA M. CABEZAS, of his deceased wife Felicidad F. Marquez.
10
EXEQUIEL F. MARQUEZ, SALVADOR F. MARQUEZ,

ANTONIO F. MARQUEZ, and RAFAEL F. MARQUEZ, As such, when Rafael Marquez Sr., for one reason or
JR., petitioners, another, misrepresented in his unilateral affidavit that he
vs. was the only heir of his wife when in fact their children
COURT OF APPEALS, ALFREDO F. MARQUEZ and were still alive, and managed to secure a transfer of
BELEN F. MARQUEZ, respondents. certificate of title under his name, a constructive trust
11
under Article 1456 was established. Constructive trusts
During their lifetime, the spouses Rafael Marquez, Sr. and are created in equity in order to prevent unjust
Felicidad Marquez begot twelve children, namely: (1) enrichment. They arise contrary to intention against one
Natividad; (2) Aurea; (3) Herminigildo; (4) Filomena; (5) who, by fraud, duress or abuse of confidence, obtains or
Exequel; (6) Salvador; (7) Guadencio; (8) Rafael, Jr., (9) holds the legal, right to property which he ought not, in
Belen; (10) Alfredo; (11) Ricardo; and (12) Antonio. 12
equity and good conscience, to hold. Prescinding from
Sometime in 1945, the spouses acquired a parcel of land. the foregoing discussion, did the action for reconveyance
In 1952, Felicidad Marquez died intestate. Thirty years filed by the petitioners prescribe, as held by the Court of
later or in 1982, Rafael Marquez, Sr. executed an "Affidavit Appeals?
of Adjudication" vesting unto himself sole ownership to
the property. Consequently, TCT No. 47572 was cancelled In this regard, it is settled that an action for reconveyance
2
and TCT No. 33350 was issued in his name on June 16, based on an implied or constructive trust prescribes in
1982. Thereafter, on December 29, 1983 Rafael Marquez, ten years from the isuance of the Torrens title over the
3 13
Sr. executed a "Deed of Donation Inter Vivos" covering property. For the purpose of this case, the prescriptive
the land described in TCT No. 33350, as well as the house period shall start to run when TCT No. 33350 was issued,
constructed thereon to three of this children, namely: (1) which was on June 16, 1982. Thus, considering that the
petitioner Rafael, Jr.; (2) Alfredo; and (3) Belen, both action for reconveyance was filed on May 31, 1991, or
private respondents herein, to the exclusion of his other approximately nine years later, it is evident that
children, petitioners herein. As a result of the donation, prescription had not yet barred the action.)
TCT No. 33350 was cancelled and TCT No. 47572 was
To bolster the foregoing position, the Court of Appeal's
issued in private respondents' name. From 1983 to 1991, 14
reliance on Gerona v. de Guzman, is misplaced.
private respondents were in actual possession of the land. 15
InAmerol v. Bagumbaran, we ruled that the doctrine laid
However, when petitioners learned about the existence of
down in the earlier Gerona case was based on the old
TCT No. 47572, they immediately demanded that since 16
Code of Civil Procedure which provided that an action
they are also children of Rafael Marquez, Sr., they are
based on fraud prescribes within four years from the date
entitled to their respective shares over the land in
of discovery. However, with the effectivity of the present
question. petitioners, now joined by Rafael Jr., filed a
Civil Code on August 30, 1950, the provisions on
complaint on May 31, 1991 for "Reconveyance and
4 prescriptive periods are now governed by Articles 1139 to
Partition with Damages" before the trial court alleging
1155. Since implied or constructive trusts are obligations
that both the "Affidavit of Adjudication" and "Deed of
created by law then the prescriptive period to enforce the
Donation Inter Vivos" were fraudulent. After due 17
same prescribes in ten years.
proceedings, the trial court, on April 29, 1993, rendered its
6
decision in favor of the petitioners. Cognizant of the fact that the disputed land was conjugal
property of the spouses Rafael, Sr. and Felicidad,
PETITIONERS CONTENTION: Petitioners, in
ownership of the same is to be equally divided between
contending that the action had not yet prescribed, assert
both of them.
that by virtue of the fraudulent "Affidavit of Adjudication"
and "Deed of Donation" wherein they were allegedly ISSUE 2: can Rafael Marquez Sr., as trustee of his wife's
deprived of their just share over the parcel of land, a share, validly donate this portion to the respondents?
9
constructive trust was created. Forthwith, they maintain
that an action for reconveyance based on implied or RULING: Obviously, he cannot, as expressly provided in
constructive trust prescribes in ten (10) years. Art. 736 of the Civil Code, thus:
ISSUE: W/N a trust has been created Art. 736. Guardians and trustees cannot donate the
property entrusted to them.
RULING: (It must be noted that Felicidad Marquez died
in 1952; thus, succession to her estate is governed by the
Moreover, nobody can dispose of that which does not

belong to
18
him.
Be that as it may, the next question is whether he can

validly donate the other half of the property which he
owns? Again, the query need not detain us at length for
the Civil Code itself recognizes that one of the inherent
19
rights of an owner is the right to dispose of his property.
Whether this donation was inofficious or not is another

matter which is not within the province of this Court to
determine inasmuch as it necessitates the production of
evidence not before it.
Case 13: Armamiento v. Guerrero justice may be dispended to the party litigants. To affirm
the trial Court's Order of dismissal would leave the
present controversy unresolved and pending investigation
G.R. No. L-34228 February 21, 1980
at the administrative level. Aside from the length of time
SOTERO ARMAMENTO, plaintiff-appellant, it would pr probably take for the case to reach the highest
vs. administrative authority, any final adjudication rendered
CIPRIANO GUERRERO, defendant-appellee. by the latter may eventually be raised to the appellate
Courts for judicial review. This circuitous and tedious
The Complaint alleges that plaintiff is the possessor- process can be eliminated for the sake of the speedy
actual occupant of, and the homestead applicant, over Lot administration of justice by remanding the case to the
No. 974, having continuously possessed and cultivated trial Court for determination on the merits of the issue of
the same since 1955 and having filed his Homestead validity of the issuance of Free Patent No. V-19129 and of
Application No. 37-31, therefore on July 7, 1979; that the the title which followed as a matter of course.
aforesaid application was approved bY the Bureau of
Lands on July 7, 1959 the (correct date is January 6, 1964); A court of equity which has taken jurisdiction and
that when he was following up his homestead cognizance of a cause for any purpose will ordinarily
Application, he was shocked to discover that defendant, retain jurisdiction for all purposes (Texas v. Florida, 306
through fraud and misrepresentation, succeeded in US 298; Yarnell v. Hillsborough Packing Co., 92 ALR 1475;
obtaining Free Patent No. V-19129 and OCT No. V-16135 Erkskine v. Upham 132 P 2d 219, and other cases cited),
by falsely stating in his Free Patent Application that he decide all issues which are involved in the subject matter
had continuously possessed the lot in question since July of the dispute between the litigants (Russel v. Clark, 3 L
4, 1945 or prior thereto, when, in truth and in fact, ed 271 and other cases cited), and award, relief which is
defendant was never in possession thereof. complete and finally disposes of the litigation Katchen v.
Landy 382 US 323 and other cases cited so as to
Defendant, in his Answer, denied that he was not in accomplish full justice between the parties litigants,
possession, alleging that he had been in occupation of (Hepburn v. Dunlop [US] 4 L ed 65; Henderson v.
said lot and had even authorized Macario Caangay to Henderson, 46 SE 2d 10 and other cases cited), prevent
administer the same while he was temporarily away for future litigation (Sonnicksen v. Sonnicksen, 113 P 2d 495
missionary work in Cagayan de Oro that he had filed his and other cases cited), and make performance of the
application on August 1, 1958 prior to plaintiff's court's decree perfectly safe to those who may be
application filed on July 7, 1959, and that title was issued compelled to obey it (Wright v. Scotton 121 A 69; Olsen v.
in his favor on July 20, 1961. National Memorial Gardens, Inc. 115 NW 2d 312) (cited in
27 Am Jur 2d Equity, sec. 108).
It will thus be seen that the disputed land was the subject
of two Patent Applications. Defendant filed his Free Likewise to satisfy the demands of justice, the doctrine of
Patent Application on August 1, 1958. Plaintiff filed his implied trust may be made to operate in plaintiff's favor,
Homestead Patent Application approximately one year assuming that he can prove his allegation that defendant
later or on July 7, 1959. Defendant was issued Free Patent had acquired legal title by fraud.
No. V-19129 on July 20, 1961 and Original Certificate of
Title No. V-16135 on February 23, 1962. Plaintiff's ... a constructive trust is a trust 'raised by construction of
Homestead Application was approved on January 6, 1964. law, or arising by operation of law. In a more restricted
The present suit was instituted on January 27, 1967. sense and as contra-distinguished from a resulting trust, a
constructive trust is a trust not created by any words,
RTC dismissed the complaint. either expressly or impliedly evincing a direct intention to
create a trust, but by the construction of equity in order
ISSUE: Does the plaintiff have the personality to file the
to satisfy the demands of justice. It does not arise by
said complaint?
agreement or intention but by operation by law.' (89
RULING: While plaintiff is not the "owner" of the land he C.J.S. 726- 727). "If a person obtains legal title to property
is claiming so that, strictly speaking, he has no by fraud or concealment, courts of equity will impress
5
personality to file this action, he pleads for equity and upon the title a so-called constructive trust in favor of the
invokes the doctrine of implied trust enunciated in defrauded party." A constructive trust is not a trust in the
Article 1456 of the Civil Code as follows: technical sense (Gayondato vs. Treasurer of the Phil., 49
6
Phil. 244; see Art, 1456 of the Civil Code.)
Art. 1456. If property is acquired through mistake or
fraud, the person obtaining it is, by force of law, Plaintiff's action for reconveyance may not be said to have
considered a trustee of an implied trust for the benefit of prescribed, for, basing the present action on implied
7
the person from whom the property comes. trust, the prescriptive period is ten years. Title was
obtained by defen dant on February 23, 1962. Plaintiff
The particular circumstances obtaining herein impel us to commenced this suit for reconveyance on January 27,
exercise our equity jurisdiction to the end that substantial 1967. And if plaintiff's cause of action is based on fraud,
which should ordinarily be brought within four years

from the discovery of the fraud, deemed to have taken
8
place when the certificate of title was issued, it need
only be recalled that the conflicting rights of the parties
were already pending investigation before District Land
Office VIII-4 General Santos, Cotabato, even before
plaintiff instituted the present suit for reconveyance.
Case 14: Municipality of Victorias v. CA registered owner, she is unquestionably entitled to the
protection afforded to a holder of a Torrens Title.
G.R. No. L-31189 March 31, 1987 Admittedly, it is well-settled that under the Torrens
System "Every person receiving a certificate of title in
MUNICIPALITY OF VICTORIAS, petitioner,
pursuance of a decree of registration, . . . shall hold the
vs.
same free of all encumbrance except those noted on said
THE COURT OF APPEALS, NORMA LEUENBERGER
certificate ... " (Sec. 39, Act 496; now Sec. 43, PD 1529).
and FRANCISCO SOLIVA, respondents.
In the instant case, however, respondent Norma
Lot No. 76 containing an area of 208,157 sq. meters forms
Leuenberger admitted that she inherited the land covered
a part of Cadastral Lot No. 140 (Rollo, p. 11), a 27.2460 ha.
by Transfer Certificate of Title No. T-34036 from her
sugar land located in Bo. Madaniog, Victorias, Negros
grandmother, who had already sold the land to the
Occidental, in the name of the deceased Gonzalo
petitioner in 1934; hence, she merely stepped into the
Ditching. He was survived by his widow Simeona Jingeo
shoes of her grandmother and she cannot claim a better
Vda. de Ditching and a daughter, Isabel, who died in 1928
right than her predecessor-in-interest. When she applied
(TSN, July 1, 1964, p. 7) leaving one off-spring, respondent
for registration of the disputed land, she had no legal
Norma Leuenberger, who was then only six months old
right to do so as she had no ownership of the land since
(TSN, July 1, 1964, p. 34). Respondent Norma
land registration is not a mode of acquiring ownership
Leuenberger, married to Francisco Soliva, inherited the
but only of confirming ownership of the land. (Grande, et
whole of Lot No. 140 from her grandmother, Simeona J.
al. vs. Court of Appeals, et al., 115 Phil. 521.)"The Torrens
Vda. de Ditching (not from her predeceased mother
System was not established as a means for the acquisition
Isabel Ditching). In 1952, she donated a portion of Lot No.
of title to private land, ..." It is intended merely to confirm
140, about 3 ha., to the municipality for the ground of a
and register the title which one may already have on the
certain high school and had 4 ha. converted into a
land. Where the applicant possesses no title or ownership
subdivision. In 1963, she had the remaining 21 ha. or
over the parcel of land, he cannot acquire one under the
208.157 sq. m. relocated by a surveyor upon request of
Torrens system of Registration. (Torela, et al., vs. Torela,
lessee Ramon Jover who complained of being prohibited
et al., L-27843, October 11, 1979).
by municipal officials from cultivating the land. It was
then that she discovered that the parcel of land, more or While an inherently defective Torrens title may not
less 4 ha. or 33,747 sq.m. used by Petitioner Municipality ordinarily be cancelled even after proof of its defect, the
of Victorias, as a cemetery from 1934, is within her lawnevertheless safeguards the rightful party's interest in
property which is now Identified as Lot 76 and covered by the titled land from fraud and improper use of
TCT No. 34546. On January 11, 1964, Respondents filed a technicalities by snowing such party, in appropriate cases,
complaint in the Court of First Instance of Negros to judicially seek reconveyance to him of whatever he has
Occidental, Branch 1, for recovery of possession of the been deprived of as long as the land has not been
parcel of land occupied by the municipal cemetery. The transferred or conveyed to a purchaser in good faith.
lower court decided in favor of the Municipality. On (Pedro Pascua, et al., vs. Mariano Gopuyoc et al., L-23197,
appeal Respondent appellate Court set aside the decision May 31, 1977.)
of the lower court (Record on AppeaL p. 9); hence, this
petition for review on certiorari.
ISSUE: W/N the municipality is entitled to the land in Issue: W/N the municipality can be deprived of its
question possession of the land in question
Ruling: In the case at bar it is undisputed that petitioner RULING: The Civil Code provides:
had been in open, public, adverse and continuous
possession of the land for a period of more than thirty Art. 1456. If the property is acquired through mistake or
years. In fact, according to the municipal treasurer there fraud, the person obtaining it is, by force of law,
are over 1000 graves in the cemetery. Unfortunately, the considered a trustee of an implied trust for the benefit of
purchaser Municipality of Victorias failed to register said the person from whom the property comes.
Deed of Sale; hence, when Simeona Jingco Vda. de
Thus, it has been held that where the land is decreed in
Ditching died, her grand-daughter, respondent Norma
the name of a person through fraud or mistake, such
Leuenberger claimed to have inherited the land in dispute
person is by operation of law considered a trustee of an
and succeeded in registering said land under the Torrens
implied trust for the benefit of the persons from whom
system. Said land is now covered by Transfer Certificate
the property comes. The beneficiary shag have the right
of Title No. T-34036 (Exhibit A, supra) issued by the
t enforce the trust, notwithstanding the irrevocability of
Register of Deeds of -Negros Occidental on March 11, 1963
the Torrens title and the trustee and his successors-in-
in the name of Norma Leuenberger, married to Francisco
interest are bound to execute the deed of reconveyance.
Soliva, containing an area of 208,157 square meters. As
(Pacheco vs. Arro, 85 Phil. 505; Escobar vs. Locsin, 74

Phil. 86).
As the land in dispute is held by private respondents in

trust for the Municipality of Victorias, it is logical to
conclude that the latter can neither be deprived of its
possession nor be made to pay rentals thereof. Private
respondent is in equity bound to reconvey the subject
land to the cestui que trust the Municipality of Victorias.
The Torrens system was never calculated to foment
betrayal in the performance of a trust. (Escobar vs.
Locsin, 74 Phil. 86).
Case 15: Salao v. Salao Ambrosia Salao sold under pacto de retro for P800 the
Calunuran fishpond to Vicente Villongco. Benita Salao
and her nephews and niece filed their original complaint
G.R. No. L-26699 March 16, 1976
against Juan S. Salao, Jr. on January 9, 1952 in the Court of
BENITA SALAO, assisted by her husband, GREGORIO First Instance of Bataan (Exh. 36). They amended their
MARCELO; ALMARIO ALCURIZA, ARTURO complaint on January 28, 1955. They asked for the
ALCURIZA, OSCAR ALCURIZA and ANITA ALCURIZA, annulment of the donation to Juan S. Salao, Jr. and for the
the latter two being minors are represented by reconveyance to them of the Calunuran fishpond as
guardian ad litem, ARTURO ALCURIZA, plaintiffs- Valentin Salao's supposed one-third share in the 145
appellants, hectares of fishpond registered in the names of Juan Y.
vs. Salao, Sr. and Ambrosia Salao. After trial the trial court in
JUAN S. SALAO, later substituted by PABLO P. its decision consisting of one hundred ten printed pages
SALAO, Administrator of the Intestate of JUAN S. dismissed the amended complaint and the counter-claim.
SALAO; now MERCEDES P. VDA. DE SALAO, The trial court found that there was no community of
ROBERTO P. SALAO, MARIA SALAO VDA. DE property among Juan Y. Salao, Sr., Ambrosia Salao and
SANTOS, LUCIANA P. SALAO, ISABEL SALAO DE Valentin Salao when the Calunuran and Pinanganacan
SANTOS, and PABLO P. SALAO, as successors-in- (Lewa) lands were acquired; that a co-ownership over the
interest of the late JUAN S. SALAO, together with real properties of Valentina Ignacio existed among her
PABLO P. SALAO, Administrator, defendants- heirr after her death in 1914; that the co-ownership was
appellants. administered by Ambrosia Salao and that it subsisted up
to 1918 when her estate was partitioned among her three
children and her grandson, Valentin Salao.
The spouses Manuel Salao and Valentina Ignacio of Barrio Issue: W/N a trust has been constituted/created in this
Dampalit, Malabon, Rizal begot four children named case
Patricio, Alejandra, Juan (Banli) and Ambrosia. Manuel
Salao died in 1885. His eldest son, Patricio, died in 1886 RULING: Trusts in Anglo-American jurisprudence were
survived by his only child. Valentin Salao. There is no derived from thefideicommissa of the Roman law
documentary evidence as to what, properties formed part (Government of the Philippine Islands vs. Abadilla, 46
of Manuel Salao's estate, if any. His widow died on May Phil. 642, 646).
28, 1914. After her death, her estate was administered by
"In its technical legal sense, a trust is defined as the right,
her daughter Ambrosia. It was partitioned extrajudicially
enforceable solely in equity, to the beneficial enjoyment
in a deed dated December 29, 1918 but notarized on May
of property, the legal title to which is vested in another,
22, 1919 (Exh. 21). The deed was signed by her four legal
but the word 'trust' is frequently employed to indicate
heirs, namely, her three children, Alejandra, Juan and
duties, relations, and responsibilities which are not
Ambrosia, and her grandson, Valentin Salao, in
strictly technical trusts" (89 C.J.S. 712).
representation of his deceased father, Patricio. To each of
the legal heirs of Valentina Ignacio was adjudicated a A person who establishes a trust is called the trustor; one
distributive share valued at P8,135.25. In satisfaction of his in whom confidence is reposed as regards property for the
distributive share, Valentin Salao (who was then already benefit of another person is known as the trustee; and the
forty-eight years old) was given the biggest fishpond with person for whose benefit the trust has been created is
an area of 50,469 square meters, a smaller fishpond with referred to as the beneficiary" (Art. 1440, Civil Code).
an area of 6,989 square meters and the riceland with a net There is a fiduciary relation between the trustee and
area of 9,905 square meters. In that deed of partition thecestui que trust as regards certain property, real,
(Exh. 21) It was expressly stipulated that Ambrosia Salao personal, money or choses in action (Pacheco vs. Arro, 85
was not obligated to render any accounting of her Phil. 505).
administration. The documentary evidence proves that in
1911 or prior to the death of Valentina Ignacio her two "Trusts are either express or implied. Express trusts are
children, Juan Y. Salao, Sr. and Ambrosia Salao, secured a created by the intention of the trustor or of the parties.
Torrens title, OCT No. 185 of the Registry of Deeds of Implied trusts come into being by operation of law" (Art.
Pampanga, in their names for a forty-seven-hectare 1441, Civil Code). "No express trusts concerning an
fishpond located at Sitio Calunuran, Lubao, Pampanga immovable or any interest therein may be proven by parol
(Exh. 14). It is also known as Lot No. 540 of the Hermosa evidence. An implied trust may be proven by oral
cadastre because that part of Lubao later became a part of evidence" (Ibid, Arts. 1443 and 1457).
Bataan. there can be no controversy as to the fact that
after Juan Y. Salao, Sr. and Ambrosia Salao secured a "No particular words are required for the creation of an
Torrens title for the Calunuran fishpond in 1911 they express trust, it being sufficient that a trust is clearly
exercised dominical rights over it to the exclusion of their intended" (Ibid, Art. 1444; Tuason de Perez vs. Caluag, 96
nephew, Valentin Salao. Thus, on December 1, 1911 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21
SCRA 543, 546). "Express trusts are those which are
created by the direct and positive acts of the parties, by evidence cannot be used to prove an express trust
some writing or deed, or will, or by words either expressly concerning realty.
or impliedly evincing an intention to create a trust" (89
C.J.S. 72). Issue: was there an implied trust?
"Implied trusts are those which, without being expressed, Ruling: Plaintiffs' pleadings and evidence cannot be relied
are deducible from the nature of the transaction upon to prove an implied trust. The trial court's firm
asmatters of intent, or which are superinduced on the conclusion that there was no community of property
transaction by operation of law as matter of during the lifetime of Valentina; Ignacio or before 1914 is
equity,independently of the particular intention of the substantiated by defendants' documentary evidence. The
parties" (89 C.J.S. 724). They are ordinarily subdivided existence of the alleged co-ownership over the lands
into resulting and constructive trusts (89 C.J.S. 722). supposedly inherited from Manuel Salao in 1885 is the
basis of plaintiffs' contention that the Calunuran fishpond
"A resulting trust. is broadly defined as a trust which is was held in trust for Valentin Salao. The plaintiffs utterly
raised or created by the act or construction of law, but in failed to measure up to the yardstick that a trust must be
its more restricted sense it is a trust raised by implication proven by clear, satisfactory and convincing evidence. It
of law and presumed to have been contemplated by the cannot rest on vague and uncertain evidence or on loose,
parties, the intention as to which is to be found in the equivocal or indefinite declarations (De Leon vs. Molo-
nature of their transaction, but not expressed in the deed Peckson, 116 Phil. 1267, 1273).
or instrument of conveyance (89 C.J.S. 725). Examples of
resulting trusts are found in articles 1448 to 1455 of the Trust and trustee; establishment of trust by parol evidence;
Civil Code. (See Padilla vs. Court of Appeals, L-31569, certainty of proof. Where a trust is to be established by
September 28, 1973, 53 SCRA 168, 179; Martinez vs. Grao oral proof, the testimony supporting it must be
42 Phil. 35). sufficiently strong to prove the right of the alleged
beneficiary with as much certainty as if a document
On the other hand, a constructive trust is -a trust "raised proving the trust were shown. A trust cannot be
by construction of law, or arising by operation of law". In established, contrary to the recitals of a Torrens title, upon
a more restricted sense and as contra-distinguished from vague and inconclusive proof. (Syllabus, Suarez vs.
a resulting trust, a constructive trust is "a trust not Tirambulo, 59 Phil. 303).
created by any words, either expressly or impliedly
evincing a direct intension to create a trust, but by the Trusts; evidence needed to establish trust on parol
construction of equity in order to satisfy the demands of testimony. In order to establish a trust in real property
justice." It does not arise "by agreement or intention, but by parol evidence, the proof should be as fully convincing
by operation of law." (89 C.J.S. 726-727). as if the act giving rise to the trust obligation were proven
by an authentic document. Such a trust cannot be
Thus, "if property is acquired through mistake or fraud, established upon testimony consisting in large part of
the person obtaining it is, by force of law, considered a insecure surmises based on ancient hearsay. (Syllabus,
trustee of an implied trust for the benefit of the person Santa Juana vs. Del Rosario 50 Phil. 110).
from whom the property comes" (Art. 1456, Civil Code).
The foregoing rulings are good under article 1457 of the
Or "if a person obtains legal title to property by fraud or Civil Code which, as already noted, allows an implied
concealment, courts of equity will impress upon the title trust to be proven by oral evidence. Trustworthy oral
a so-called constructive trust in favor of the defrauded evidence is required to prove an implied trust because,
party". Such a constructive trust is not a trust in the oral evidence can be easily fabricated.
technical sense. (Gayondato vs. Treasurer of the P. I., 49
Phil. 244).
Issue: was there are express trust? NONE
Not a scintilla of documentary evidence was presented by

the plaintiffs to prove that there was an express trust over
the Calunuran fishpond in favor of Valentin Salao. Purely
parol evidence was offered by them to prove the alleged
trust. Their claim that in the oral partition in 1919 of the
two fishponds the Calunuran fishpond was assigned to
Valentin Salao is legally untenable.
It is legally indefensible because the terms of article 1443

of the Civil Code (already in force when the action herein
was instituted) are peremptory and unmistakable: parol

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BUSINESS ORGANIZATION 1 Digested Cases 2012

Based on the Syllabus of Atty. Catherine Guerzo 1 of 172

A5 PEDRO MARTINEZ vs.ONG PONG CO and ONG

OBLIGATIONS OF THE PARTNERS ................................. 25 Case 3: PNB v. Eugenio .................................................... 49

A1 Ortega v. CA ................................................................. 25 Case 4: Co-Pitco v. Yulo ................................................... 50

DISSOLUTION AND WINDING UP .................................56 Case 15: Litonjua v. Fernandez ........................................ 84

Case 4: GOQUIOLAY vs SYCIP .......................................59 Case 19: NFA v. IAC ..........................................................89

CASE 6: PRIMELINK vs LAZATIN .................................. 62 Obligations of an Agent ...................................................... 91

Case 1: Loadmasters Customs Services v. Glodel CASE 4: PHILIPPINE PRODUCTS COMPANY V.

CASE 9: VELOSO vs. CA .................................................76 Case 1: Areola v. CA ........................................................ 106

Case 1: Trusteeship of minors Tuason v. Araneta ........ 129

Case 5: Gomez v. Duyan ................................................ 140

Case 6: Julio v. Dalandan ................................................143

IMPLIED TRUSTS .............................................................. 144

CASE 1: VDA. DE ESCONDE VS COURT OF APPEALS

CASE 2: VDA. DE RETUERTO VS. ANGELO and

CASE 3: SALTIGA DE ROMERO vs COURT OF

profits among themselves. Respondent commissioner

In the Evangelista case, there was a series of transactions

real estate for profit in the absence of other

Persons who contribute property or funds for a common

In the present case, there is clear evidence of co-

HELD: YES. Said cancelling provision was necessary for

Petitioner contends that because of the said stipulation

adversely affect appellants herein, is to erroneously

On June 19, 1954 Republic Act No. 1180 was enacted to

On April 15, 1958 prior to the expiration of the five-year

ISSUE: Whether or not the extension is violative of the

The question before us is too clear to require an extended

To argue that because the original articles of partnership

Issue: W/N a partnership exists between Chua, Yao and

Held: Yes. Art. 1767 By the contract of partnership, two

Chua, Yao and Lim had decided to engage in a fishing

each of the partners." The partners cannot be held liable

Aguila contends that he is not the real party in interest

Issue: Whether or not the case should be dismissed

Held: Yes, the case should be dismissed.

Under Art. 1768 of the Civil Code, a partnership "has a

It is but logical that in cases of inheritance, there should

The incomes from the business ventures by Lorenzo are

So the CIR decided that the petitioners formed an

The issue raised by the petitioners in the present case is

Instead of distributing the estate among the heirs after

Facts: WHEREFORE, the present petition is denied.

Private Respondent Romeo Acojedo filed an action for

Based on the contentions of Sardane, WON Acojedo is a

First, the parole evidence rule under Rule 130 Section 7

Sec. 7. Evidence of written agreements.

(a) Where a mistake or imperfection of

(b) When there is an intrinsic ambiguity

In the present case, the promissory notes and vales are

Second, Article 1769(4) of the Civil Code is explicit that

When the dissolution of an unlawful partnership is

should reimburse the amount of their respective

Second, the testimony of Josephine is not covered by the

2. With regard to petitioners' insistence that laches

3. In a desperate bid to cast doubt on the validity of the

Article 1797 - The losses and profits shall be distributed

In short, the alleged nullity of the partnership will not

Partnership Agreement Not the Result of an Earlier Illegal

Petitioners also contend that the Joint Venture

This argument is puerile. The Joint Venture Agreement

The rulings cited by the petitioner (Collector of