AGENCY & TRUST
AGENCY:
Philpotts vs. Philippine Manufacturing
Rallos vs. Felix Go
Orient Air vs. Court of Appeals
Litonjua vs. Eternit
Doles vs. Angeles
Euro Tech vs. Cuison
Manila Memorial vs. Linsangan
Amon Trading Corp vs. Court of Appeals
Naguiat vs Court of Appeals
Veloso vs Court of Appeals
Pineda vs Court of Appeals
BPI vs De Carter
Sing Juco vs Sunyantong
Toyota Shaw vs Court of Appeals
Bacaltos vs Court of Appeals
Litonjua vs Fernandez
Yu Eng Cho vs Pan American
Terrado vs. Court of Appeals
Lavina vs. Court of Appeals
3B 2017
TRUST
Goyanco vs United Coco Planters
PNB vs Aznar
Canezo vs. Rojas
Torbela vs Rosario
Estate of Margarita Cabacungan vs. Laigo
Sime Darby vs Jesus Mendoza
Huang vs. Court of Appeals
Pilapil vs. Heirs of Briones
Osorio vs. Court of Appeals
Nito vs. Court of Appeals
Mendezabel vs. Apao
Gomez vs. Duyan
 AGENCY
W.G. PHILPOTTS v. PHILIPPINE MANUFACTURING COMPANY
G.R. No. L-15568 November 8, 1919

Facts:
The petitioner, W.G. Philpotts, a stockholder in the Philippine Manufacturing
Company, one of the respondents herein, seeks by this proceeding to obtain a writ of
mandamus to compel the respondents to permit the petitioner, in person or by some
authorized agent or attorney, to inspect and examine the records of the business transacted
by said company since January 1, 1918.

On the other hand, the respondents interposed a demurrer to evidence.

Issue:
Whether or not the right of a stockholder to inspect the records can be exercised by a
proper agent or attorney of the stockholder or the stockholder in person.

Decision:
YES. The SC ruled that the right to inspect given to a stockholder can be exercised
either by himself or by any proper representative or attorney in fact, either with or without
the attendance of the stockholder. The right of inspection of the stockholder of corporations
shall be liberally construed and that said right may be exercised through any other properly
authorized person. In one case, the Court held that, “the right may be regarded as personal,
in the sense that only a stockholder may enjoy it; but the inspection and examination may be
made by another. Otherwise it would be unavailing in many instances.”

In another case the Court also ruled that the stockholders have the right to inspect the
books of corporation, taking minutes from the same, at all reasonable times, and may be
aided in this by experts and counsel, so as to make inspection valuable to them, is a principle
too well settled to need discussion. Nonetheless, the corporations are not precluded from
keeping a secret from its stockholders for the protection of some process from publicity.
There is, however, nothing in the petition which would indicate that the petitioner in this
case is seeking to discover anything which the corporation is entitled to keep secret.

Thus, the demurrer is overruled.

 AGENCY
RAMON RALLOS vs. FELIX GO CHAN & SONS REALTY CORPORATION & COURT OFAPPEALS
G.R. No. L-24332 January 31, 1978

Facts:
Concepcion Rallos and Gerundia Rallos are siblings, and co-owners of a parcel of land
in Cebu(subject property). On April 21, 1954, the sisters executed a special power of attorney
in favor of their brother , Simeon Rallos, authorizing him to sell for and in their behalf the
subject property .On March 03, 1955, Concepcion died. On September 12, 1955, Simeon sold
the undivided shares of her sisters to Felix & Sons for Php 10,686.90.

On May 8, 1956, Ramon Rallos, as administrator of the Intestate Estate of Concepcion

filed a complaint with the Court of First Instance of Cebu praying that the sale of the
undivided share of Concepcion in the subject property be declared unenforceable, and share
be reconveyed to her estate. The Court of First Instance granted the prayer of Ramon. This
was however reversed by the Court of Appeals.

Issue:
Whether the sale of the subject property is unenforceable.

Decision:
Yes.

ART. 1919(3) of the Civil Code provides that “Agency is extinguished by the death,
civil interdiction, insanity or insolvency of the principal or of the agent.” By reason of the
very nature of the relationship between principal and agent, agency is extinguished by the
death of the principal or the agent. This is the law in this jurisdiction. This rule, however, is
not without an exception. The exception are found in Article 1930, which states that “The
agency shall remain in full force and effect even after the death of the principal, if it has
been constituted in the common interest of the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in his favor.”, and in Article 1931 which
provides that “Anything done by the agent, without knowledge the death of the principal or
of any other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good faith.”

In the instant case, it cannot be questioned that Simeon knew of the death of his
principal at the time he sold the latter’s share in the subject property to respondent
corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by
Simeon Rallos before the trial court. That Simeon Rallos knew of the death of his sister
Concepcion is also a finding of fact of the court a quo and of respondent appellate court when
the latter stated that Simeon 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 sisters Concepcion and Gerundia
Rallos without informing appellant (the realty corporation) of the death of the former."
Accordingly, the agent’s act is unenforceable against the estate of his principal.
 AGENCY
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES vs. COURT OF APPEALS AND AMERICAN
AIRLINES INCORPORATED
G.R. No. 76931, May 29, 1991

Facts:

On January 15, 1977, American Airlines, Inc., an air carrier offering passenger and air
cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives,
entered into a General Sales Agency Agreement, whereby the former authorized the latter to
act as its exclusive general sales agent within the Philippines for the sale of air passenger
transportation. In the said agreement, American Air may terminate the agreement within 2
days’ notice should Orient Air fail to transfer the funds payable to American Air. In addition,
both parties were given the right to terminate the agreement without cause within 30 days’
notice.

Subsequently, American Air alleged that Orient Air failed to remit the net proceeds of
sales for the months of January to March of 1981. As a result, American undertook the
collection of these proceeds and subsequently terminated the agreement pursuant to the
contract. Thereafter, American filed suit against Orient Air for accounting and collection
unpaid proceeds. Orient Air filed a counter claim for balance owed to them by American Air
for the unpaid sales commission.

After trial, the RTC ruled in favor of Orient Air and ordered American Air to pay the
unpaid commissions due to Orient Air. The court also ordered American Air to reinstate
defendant as its General Sales Agent in accordance with the agreement. On appeal, the CA
affirmed the decision of the RTC.

Issue:
May American Air be compelled by a court decision to reinstate Orient Air as its agent?

Decision:

NO. By affirming the ruling of the trial court, respondent appellate court, in effect,
compels American Air to extend its personality to Orient Air. Such would be violative of the
principles and essence of agency, defined by law as a contract whereby "a person binds
himself to render some service or to do something in representation or on behalf of another,
WITH THE CONSENT OR AUTHORITY OF THE LATTER." In an agent-principal relationship, the
personality of the principal is extended through the facility of the agent. In so doing, the
agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court. The Agreement
itself between the parties states that "either party may terminate the Agreement without
cause by giving the other 30 days' notice by letter, telegram or cable."

We, therefore, set aside the portion of the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of American Air.
 AGENCY
Eduardo V. Lintonjua, jr vs. Eternit Corporation
G.R. No. 144805 June 8, 2006

Facts:

Eternit Corporation (EC) engaged in the manufacture of roofing materials and pipe
products. Its manufacturing operations were conducted on eight parcels of land with a total
area of 47,233 square meters under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation organized and registered under the laws of Belgium. Jack
Glanville, an Australian citizen, was the General Manager and President of EC, while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC. Both had their offices in
Belgium.

ESAC grew concerned about the political situation in the Philippines and wanted to
stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams,
a member of EC’s Board of Directors, to dispose of the eight parcels of land. Adams engaged
the services of realtor/broker Lauro G. Marquez so that the properties could be offered for
sale to prospective buyers.

Marquez thereafter offered the parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. Marquez declared that he was
authorized to sell the properties for P27,000,000.00 and that the terms of the sale were
subject to negotiation. Glanville telexed Delsaux in Belgium, inquiring on his position/
counterproposal to the offer of the Litonjua siblings. Delsaux sent a telex to Glanville stating
that, based on the "Belgian/Swiss decision," the final offer was US$1,000,000.00 and
P2,500,000.00 to cover all existing obligations prior to final liquidation.

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux.
Litonjua, Jr. accepted the counterproposal of Delsaux. The Litonjua brothers deposited the
amount of US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and
drafted an Escrow Agreement to expedite the sale.

At the assumption of Corazon C. Aquino as President of the Republic of the

Philippines, the political situation in the Philippines had improved. Marquez received a
telephone call from Glanville, advising that the sale would no longer proceed.

Upon informing the Litonjuas the latter filed a complaint for specific performance and
damages against EC and the Far East Bank & Trust Company and ESAC. EC alleged that
Marquez had no written authority from the Board of Directors to bind it; neither were
Glanville and Delsaux authorized by its board of directors to offer the property for sale. Since
the sale involved substantially all of the corporation’s assets, it would necessarily need the
authority from the stockholders.

Petitioners assert that there was no need for a written authority from the Board of
Directors of EC for Marquez to validly act as broker/middleman/intermediary. As broker,
Marquez was not an ordinary agent because his authority was of a special and limited
character in most respects. His only job as a broker was to look for a buyer and to bring
together the parties to the transaction. He was not authorized to sell the properties or to
 AGENCY
make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the New
Civil Code does not apply.

Issue:
Whether Marquez needs a written authority from the respondent Eternit before the
sale can be perfected.

Decision:
YES. The property of a corporation, however, is not the property of the stockholders
or members, and as such, may not be sold without express authority from the board of
directors. Physical acts, like the offering of the properties of the corporation for sale, or the
acceptance of a counter-offer of prospective buyers of such properties and the execution of
the deed of sale covering such property, can be performed by the corporation only by officers
or agents duly authorized for the purpose by corporate by-laws or by specific acts of the
board of directors. Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in the
course of, or connected with, the performance of authorized duties of such director, are not
binding on the corporation. While a corporation may appoint agents to negotiate for the sale
of its real properties, the final say will have to be with the board of directors through its
officers and agents as authorized by a board resolution or by its by-laws. An unauthorized act
of an officer of the corporation is not binding on it unless the latter ratifies the same
expressly or impliedly by its board of directors. Any sale of real property of a corporation by a
person purporting to be an agent thereof but without written authority from the corporation
is null and void.

In this case the petitioner failed to adduce in evidence any resolution of the Board of
Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell,
let alone offer for sale, for and in its behalf, the eight parcels of land owned by respondent
EC including the improvements thereon

Marquez had no authority to bind respondent EC to sell the subject properties. A real
estate broker is one who negotiates the sale of real properties. His business, generally
speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the
owner. He has no authority to bind the principal by signing a contract of sale. Indeed, an
authority to find a purchaser of real property does not include an authority to sell.
 AGENCY
JOCELYN B. DOLES vs. MA. AURA TINA ANGELES
G.R. No. 149353, June 26, 2006

Facts:

Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific
Performance with Damages against Jocelyn B. Doles (petitioner). Respondent alleged that
petitioner was indebted to the former in the concept of a personal loan; that by virtue of a
"Deed of Absolute Sale", petitioner, as seller, ceded to respondent, as buyer, a parcel of land,
as well as the improvements thereon in order to satisfy her personal loan with respondent;
that this property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to
secure petitioner’s loan with that entity; that upon verification with the NHMFC, respondent
learned that petitioner had incurred arrearages; that upon informing the petitioner of her
arrears, petitioner denied that she incurred them and refused to pay the same; that despite
repeated demand, petitioner refused to cooperate with respondent to execute the necessary
documents and other formalities required by the NHMFC to effect the transfer of the title
over the property.

Petitioner, then defendant, while admitting some allegations in the Complaint, denied
that she borrowed money from respondent, and averred that from June to September 1995,
she referred her friends to respondent whom she knew to be engaged in the business of
lending money in exchange for personal checks through her capitalist Arsenio Pua. She alleged
that her friends borrowed money from respondent and issued personal checks in payment of
the loan; that the checks bounced for insufficiency of funds; that despite her efforts to assist
respondent to collect from the borrowers, she could no longer locate them; that she was
forced to issue eight checks amounting to P350,000 to answer for the bounced checks of the
borrowers she referred; that prior to the issuance of the checks she informed respondent that
they were not sufficiently funded but the latter nonetheless deposited the checks and for
which reason they were subsequently dishonored that she was forced by respondent to
execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal
prosecution.

The RTC held that the sale was void for lack of cause or consideration. The CA
reversed and set aside RTC's decision. A new one is entered ordering defendant- appellee to
execute all necessary documents to effect transfer of subject property to plaintiff-appellant
with the arrearages of the former’s loan with the NHMFC, at the latter’s expense. Hence, this
petition.

Issue: Is Angeles an agent by estoppel?

Decision:
YES. Respondent is estopped to deny that she herself acted as agent of a certain
Arsenio Pua, her disclosed principal. She is also estopped to deny that petitioner acted as
agent for the alleged debtors, the friends whom she (petitioner) referred.

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency
is representation. The question of whether an agency has been created is ordinarily a
question which may be established in the same way as any other fact, either by direct or
circumstantial evidence. The question is ultimately one of intention. Agency may even be
implied from the words and conduct of the parties and the circumstances of the particular
 AGENCY
case. Though the fact or extent of authority of the agents may not, as a general rule, be
established from the declarations of the agents alone, if one professes to act as agent for
another, she may be estopped to deny her agency both as against the asserted principal and
the third persons interested in the transaction in which he or she is engaged.

In the case at bar, both petitioner and respondent have undeniably disclosed to each
other that they are representing someone else, and so both of them are estopped to deny the
same. It is evident from the record that petitioner merely refers actual borrowers and then
collects and disburses the amounts of the loan upon which she received a commission; and
that respondent transacts on behalf of her "principal financier", a certain Arsenio Pua. If their
respective principals do not actually and personally know each other, such ignorance does not
affect their juridical standing as agents, especially since the very purpose of agency is to
extend the personality of the principal through the facility of the agent.

DESIGNATION OF RELATIONSHIP NOT CONTROLLING

With respect to the admission of petitioner that she is "re-lending" the money loaned
from respondent to other individuals for profit, it must be stressed that the manner in which
the parties designate the relationship is not controlling. If an act done by one person in behalf
of another is in its essential nature one of agency, the former is the agent of the latter
notwithstanding he or she is not so called. The question is to be determined by the fact that
one represents and is acting for another, and if relations exist which will constitute an
agency, it will be an agency whether the parties understood the exact nature of the relation
or not.

Both parties acted as mere agents is shown by the undisputed fact that the friends of
petitioner issued checks in payment of the loan in the name of Pua. If it is true that
petitioner was "re-lending", then the checks should have been drawn in her name and not
directly paid to Pua.
 AGENCY
Eurotech Industrial Technologies, Inc. vs. Edwin Cuizon and Erwin Cuizon
G.R. No. 167552 April 23, 2007

Facts:

Petitioner sold various products to Impact Systems owned by Erwin Cuizon. When
respondents ordered from petitioner a sludge pump worth P250,000, petitioner refused to
deliver the same without respondents having fully settled its indebtedness to petitioner.
Thus, Edwin Cuizon, Impact Systems sales manager, and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment in which respondents assigned, transferred and
conveyed unto Eurotech outstanding receivables from Toledo Power Corporation worth
P365,000. Respondents, however, proceeded to collect the said amount from Toledo Power
Corporation, prompting petitioner to make several demands for payment upon respondents.
The demands went unheeded. Petitioner thus instituted a complaint for sum of money,
damages, with application for preliminary attachment against respondents before the
Regional Trial Court which granted petitioner’s prayer for the issuance of the writ of
preliminary attachment.

In his defense, respondent Edwin alleged that he is not a real party in interest in this
case since he was acting as a mere agent of his principal, Impact Systems, a single
proprietorship business. The trial court agreed and dropped Edwin as party defendant in the
case. The Court of Appeals affirmed the Order of the trial court.

Issue: Did respondent Edwin Cuizon exceed his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to petitioner?

Decision:

NO. Article 1897 of the New Civil Code reinforces the familiar doctrine that an agent,
who acts as such, is not personally liable to the party with whom he contracts. The same
provision, however, presents two instances when an agent becomes personally liable to a
third person. The first is when he expressly binds himself to the obligation and the second is
when he exceeds his authority. In the last instance, the agent can be held liable if he does
not give the third party sufficient notice of his powers. Respondent Edwin does not fall within
any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent Edwin signed thereon as the
sales manager of Impact Systems. The position of manager is unique in that it presupposes the
grant of broad powers with which to conduct the business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a
general agent or manager; such a position presupposes a degree of confidence
reposed and investiture with liberal powers for the exercise of judgment and
discretion in transactions and concerns which are incidental or appurtenant to the
business entrusted to his care and management. In the absence of an agreement to
the contrary, a managing agent may enter into any contract that he deems reasonably
necessary or requisite for the protection of the interests of his principal entrusted to
his management. (3 Am Jur 2d, 91, p. 602)
 AGENCY
Applying the foregoing to the present case, the Court held that Edwin Cuizon acted
well within his authority when he signed the Deed of Assignment. The significant amount of
time spent on the negotiation for the sale of the sludge pump underscores Impact System’s
perseverance to get hold of the said equipment. There is, therefore, no doubt mind that
respondent Edwin’s participation in the Deed of Assignment was reasonably necessary or was
required in order for him to protect the business of his principal. Had he not acted in the way
he did, the business of his principal would have been adversely affected and he would have
violated his fiduciary relation with his principal.

As to the fact that petitioner is seeking to recover both from respondents Erwin, the
principal, and Edwin, the agent, it is well to state that Article 1897 does not hold that in case
of excess of authority, both the agent and the principal are liable to the other contracting
party. The first part of Article 1897 declares that the principal is liable in cases when the
agent acted within the bounds of his authority. Under this, the agent is completely absolved
of any liability. The second part of the said provision presents the situations when the agent
himself becomes liable to a third party when he expressly binds himself or he exceeds the
limits of his authority without giving notice of his powers to the third person. However, it
must be pointed out that in case of excess of authority by the agent, the law does not say
that a third person can recover from both the principal and the agent.

Since respondent Edwin acted within his authority as an agent, who did not acquire
any right nor incur any liability arising from the Deed of Assignment, it follows that he is not a
real party in interest who should be impleaded in this case. A real party in interest is one who
stands to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. In this respect, his exclusion as a defendant in the suit before the court a
quo is sustained.
 AGENCY
Manila Memorial Park Cemetery vs. Pedro Linsangan
G.R. No. 151319, November 22, 2004

Facts:
In 1984, Baluyot offered Linsangan a lot (covered by Contract No. 25012) called
Garden State at the Holy Cross Memorial Park owned by Manila Memorial. According to
Baluyot, a former owner of a memorial lot under Contract No. 25012 was no longer interested
in acquiring the lot and had opted to sell his rights subject to reimbursement of the amounts
he already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that
once reimbursement is made to the former buyer, the contract would be transferred to him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be
reimbursed to the original buyer and to complete the down payment to MMPCI. Baluyot issued
handwritten and typewritten receipts for these payments. In March 1985, Baluyot informed
Linsangan that he would be issued a new contract (Contract No. 28660) covering the subject
lot in the name of the latter instead of the old Contract 25012. Linsangan protested but
Baluyot told him that he would still be paying the old price of P95K with credited
downpayment of P19,838 leaving a balance of P75K. On April 1986, Baluyot brought an offer
to purchase the lot denominated as Contract No 28660 for the amount of P19,838. The
Contract however has a listed price of P132,250. Linsangan objected but to convince the
latter, Baluyot executed a document confirming that Linsangan would only pay P95K. By
virtue of this, Linsangan accepted the receipt of the Contract 28660. In 1987, Baluyot verbally
advised Linsangan that the contract was cancelled, and presented to him another offer for
the purchase of an equivalent property. He refused and insisted Baluyot and MMPCI to honor
the undertaking. For failing to do such, Linsangan filed a complaint for breach of contract and
damages. The trial court held MMPCI and Baluyot jointly and severally liable. It found that
Baluyot was an agent of MMPCI and that the latter was estopped from denying this agency,
having received and enchased the checks issued by Atty. Linsangan and given to it by Baluyot.
While MMPCI insisted that Baluyot was authorized to receive only the down payment, it
allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn
consistently encashed. MMPCI appealed but the CA affirmed the lower court’s decision.
Hence, this petition for review by MMPCI.

Issue: (a) Was there an agency as between MMPCI as principal and Baluyot as agent?
(b) Is MMPCI liable as principal?

Decision:

(a) YES. By the contract of agency, a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of the
latter. In this case, Baluyot as agency manager was authorized to solicit and remit to MMPCI
offers to purchase interment spaces belonging to and sold by the latter. Notwithstanding the
claim of MMPCI that Baluyot was an independent contractor, the fact remains that she was
authorized to solicit solely for and in behalf of MMPCI. As properly found both by the trial
court and the CA, Baluyot was an agent of MMPCI, having represented the interest of the
latter, and having been allowed by MMPCI to represent it in her dealings with its
clients/prospective buyers.

(b) NO. While there was an agency, nevertheless, MMPCI cannot be bound by the
contract procured by Linsangan and solicited by Baluyot. Baluyot was authorized to solicit and
remit to MMPCI offers to purchase interment spaces obtained on forms provided by MMPCI.
 AGENCY
The terms of the offer to purchase, therefore, are contained in such forms and, when signed
by the buyer and an authorized officer of MMPCI, becomes binding on both parties. However,
Baluyot went outside her authority.

A person dealing with an agent assumes the risk of lack of authority in the agent. He
cannot charge the principal by relying upon the agents assumption of authority that proves to
be unfounded. The principal, on the other hand, may act on the presumption that third
persons dealing with his agent will not be negligent in failing to ascertain the extent of his
authority as well as the existence of his agency.
 AGENCY
Amon Trading vs. Court of Appeals
G.R. No. 158585, July 1, 2012

Facts:

Private respondent Tri-Realty is a developer and contractor with projects in Bulacan

and Quezon City. Sometime in February 1992, private respondent had difficulty in purchasing
cement needed for its projects. Lines & Spaces, represented by Eleanor Bahia Sanchez,
informed private respondent that it could obtain cement to its satisfaction from petitioners,
Amon Trading Corporation and its sister company, Juliana Marketing. On the strength of such
representation, private respondent proceeded to order from Sanchez Six Thousand Fifty
(6,050) bags of cement from petitioner Amon Trading Corporation, and from Juliana
Marketing, Six Thousand (6,000) bags at P98.00/bag.

Private respondent, through Mrs. Sanchez of Lines & Spaces, paid in advance the
amount of P592, 900.00 through Solidbank Managers Check No. 0011565 payable to Amon
Trading Corporation, and the amount of P588, 000.00 payable to Juliana Marketing, through
Solidbank Managers Check No. 0011566. A certain Weng Chua signed the check vouchers for
Lines & Spaces while Mrs. Sanchez issued receipts for the two manager’s checks. Private
respondent likewise paid to Lines & Spaces an advance fee for the 12,050 cement bags at the
rate of P7.00/bag, or a total of P84, 350.00, in consideration of the facilitation of the orders
and certainty of delivery of the same to the private respondent. Solidbank Managers Check
Nos. 0011565 and 0011566 were paid by Sanchez to petitioners.

There were deliveries to private respondent from Amon Trading Corporation and
Juliana Marketing of 3,850 bags and 3,000 bags, respectively, during the period from April to
June 1992. However, the balance of 2,200 bags from Amon Trading Corporation and 3,000
bags from Juliana Marketing, or a total of 5,200 bags, was not delivered. Private respondent,
thus, sent petitioners written demands but in reply, petitioners stated that they have already
refunded the amount of undelivered bags of cement to Lines and Spaces per written
instructions of Eleanor Sanchez.

Thus, private respondent filed a case for sum of money against Amon Trading since
Sanchez left already the Philippines. In its defense, Amon Trading Argued that private
respondent had no privity of contract with them as it was Lines & Spaces/Tri-Realty, through
Mrs. Sanchez, that ordered or purchased several bags of cement and paid the price thereof
without informing them of any special arrangement nor disclosing to them that Lines & Spaces
and Respondent Corporation are distinct and separate entities. They added that there were
purchases or orders made by Lines & Spaces/Tri-Realty which they were about to deliver, but
were cancelled by Mrs. Sanchez and the consideration of the cancelled purchases or orders
was later reimbursed to Lines & Spaces. The refund was in the form of a check payable to
Lines & Spaces.

Issue:
Is there any Contract of Agency between Lines and Spaces Interior Center and Private
Respondent?
 AGENCY
Decision:

NO. Neither Eleanor Sanchez nor Lines & Spaces was an agent for private respondent,
but rather a supplier for the latter’s cement needs.

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.

The basis of agency is representation. The following must be considered:

On the part of the principal, there must be an actual intention to appoint or an

intention naturally inferable from his words or actions and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the absence of such
intent, there is generally no agency. One factor which most clearly distinguishes agency from
other legal concepts is control; one person - the agent - agrees to act under the control or
direction of another - the principal. Indeed, the very word "agency" has come to connote
control by the principal. The control factor, more than any other, has caused the courts to
put contracts between principal and agent in a separate category.

The fact that the deliveries were made at the construction sites of private respondent
does not by itself raise suspicion that petitioners were delivering for private respondent.
There was no sufficient showing that petitioners knew that the delivery sites were that of
private respondent and for another thing, the deliveries were made by petitioner’s men who
have no business nosing around their clients affairs.

Considering the vagaries of the case, private respondent brought the wrong upon
itself. As adeptly surmised by the trial court, between petitioners and private respondent, it
is the latter that had made possible the wrong that was perpetuated by Eleanor Sanchez
against it so it must bear its own loss. It is in this sense that we must apply the equitable
maxim that as between two innocent parties, the one who made it possible for the wrong to
be done should be the one to bear the resulting loss. First, private respondent was the one
who had reposed too much trust on Eleanor Sanchez for the latter to source its cement needs.
Second, it failed to employ safety nets to steer clear of the rip-off. For such huge sums of
money involved in this case, it is surprising that a corporation such as private respondent
would pay its construction materials in advance instead of in credit thus opening a window of
opportunity for Eleanor Sanchez or Lines & Spaces to pocket the remaining balance of the
amount paid corresponding to the undelivered materials. Private respondent likewise paid in
advance the commission of Eleanor Sanchez for the materials that have yet to be delivered so
it really had no means of control over her. Finally, there is no paper trail linking private
respondent to petitioners thereby leaving the latter clueless that private respondent was
their true client. Private respondent should have, at the very least, required petitioners to
sign the check vouchers or to issue receipts for the advance payments so that it could have a
hold on petitioners. In this case, it was the representative of Lines & Spaces who signed the
check vouchers. For its failure to establish any of these deterrent measures, private
respondent incurred the risk of not being able to recoup the value of the materials it had paid
good money for.
 AGENCY
CELESTINA T. NAGUIAT vs. COURT OF APPEALS and AURORA QUEAO
G.R. No. 118375. October 3, 2003

Facts:

Queao applied with Naguiat for a loan in the amount of P200,000.00, which Naguiat
granted. On 11 August 1980, Naguiat indorsed to Queao Associated Bank Check No. 090990 for
the amount of P95,000.00, which was earlier issued to Naguiat by the Corporate Resources
Financing Corporation. She also issued her own Filmanbank Check No. 065314, to the order of
Queao, also dated 11 August 1980 and for the amount of P95,000.00. The proceeds of these
checks were to constitute the loan granted by Naguiat to Queao. To secure the loan, Queao
executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat, and
surrendered to the latter the owners duplicates of the titles covering the mortgaged
properties. On the same day, the mortgage deed was notarized, and Queao issued to Naguiat
a promissory note for the amount of TWO HUNDRED THOUSAND PESOS, with interest at 12%
per annum, payable on 11 September 1980. Queao also issued a Security Bank and Trust
Company check, postdated 11 September 1980, for the amount of TWO HUNDRED THOUSAND
PESOS and payable to the order of Naguiat.

Upon presentment on its maturity date, the Security Bank check was dishonored for
insufficiency of funds. Queao received a letter demanding settlement of the loan. Shortly
thereafter, Queao and one Ruby 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 agent.

Naguiat applied for the extrajudicial foreclosure of the mortgage. Three days before
the scheduled sale, Queao filed the case before the Pasay City RTC seeking the annulment of
the mortgage deed. The trial court eventually stopped the auction sale.

RTC rendered judgment, declaring the Deed of Real Estate Mortgage null and void, and
ordering Naguiat to return to Queao the owners duplicates of her titles to the mortgaged lots.
CA affirmed RTC’s decision. Hence, the present petition.

Issue:

Was there an agency relationship between Naguiat and Ruebenfeldt?

Decision:

YES. The existence of an agency relationship between Naguiat and Ruebenfeldt is

supported by ample evidence. 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
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
agreement.
 AGENCY
The Court of Appeals recognized the existence of an agency by estoppel citing Article
1873 of the Civil Code. 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 honest belief that he is what he
appears to be.

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 never encashed or
deposited to her account of Naguiat. That being the case, it follows that the mortgage which
is supposed to secure the loan is null and void. The consideration of the mortgage contract is
the same as that of the principal contract from which it receives life, and without which it
cannot exist as an independent contract.
 AGENCY
FRANCISCO A. VELOSO vs. COURT OF APPEALS, AGLALOMA ESCARIO
G.R. No. 102737, August 21, 1996

Facts:
Petitioner Francisco Veloso owned a parcel of land and registered under his name
while he is still single. He alleged to be the sole person who has access to the TCT and his
other documents. When his wife left abroad, he discovered the title of the lot is missing and
upon verification with the Registry of Deeds, he discovered it to be cancelled and now under
the name of the respondents Aglaloma Escario.

He now filed for the annulment of documents, reconveyance of property with damages
and preliminary injunction and/or restraining order. Respondent on the other argued that she
is a buyer in good faith and denied any knowledge of the alleged irregularity. His wife sold to
them under a notarized general power of attorney thereby appearing his wife to be his
attorney-in-fact. She relied on said general power of attorney. Petitioner denied having made
such authorization. He contended that the sale of the property and the subsequent transfer
thereof, were null and void.

Issue: Whether or not there was a valid sale of the subject property?

Decision:
YES. The Supreme Court held that 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, to wit:

2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements

and hereditaments or other forms of real property, more specifically TCT No. 49138, upon
such terms and conditions and under such covenants as my said attorney shall deem fit and
proper.

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 canceled and transferred in the name of private respondent. In
LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:

Whether the instrument be denominated as general power of attorney or special

power of attorney, what matters is the extent of the power or powers contemplated upon the
agent or attorney in fact. If the power is couched in general terms, then such power cannot
go beyond acts of administration. However, where the power to sell is specific, it not being
merely implied, much less couched in general terms, there can not be any doubt that the
attorney in fact may execute a valid sale. An instrument may be captioned as special power
of attorney but if the powers granted are couched in general terms without mentioning any
specific power to sell or mortgage or to do other specific acts of strict dominion, then in that
case only acts of administration may be deemed conferred.
 AGENCY
We agree with the conclusion of the lower court that private respondent was an
innocent purchaser for value. Respondent Aglaloma relied on the power of attorney presented
by petitioners wife, Irma. Being the wife of the owner and having with her the title of the
property, there was no reason for the private respondent not to believe in her authority.
Moreover, the power of attorney was notarized and as such, carried with it the presumption
of its due execution. Thus, having had no inkling on any irregularity and having no
participation thereof, private respondent was a buyer in good faith. It has been consistently
held that a purchaser in good faith is one who buys property of another, without notice that
some other person has a right to, or interest in such property and pays a full and fair price for
the same, at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property.

Documents acknowledged before a notary public have the evidentiary weight with
respect to their due execution. The questioned power of attorney and deed of sale, were
notarized and therefore, presumed to be valid and duly executed.
 AGENCY
LUZ PINEDA, et.al vs. HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE
COMPANY G.R. No. 105562 September 27, 1993

Facts:
On September 1983, Prime Marine Services, Inc. (PMSI, for brevity), a
crewing/manning outfit, procured Group PoIicy Insular Life Assurance Co., Ltd. to provide life
insurance coverage to its sea-based employees enrolled under the plan. On 17 February 1986,
during the effectivity of the policy, six covered employees of the PMSI perished at sea when
their vessel, M/V Nemos, a Greek cargo vessel, sunk somewhere in El Jadida, Morocco. They
were survived by complainants-appellees, the beneficiaries under the policy.

Following the tragic demise of their loved ones, complainants-appellees sought to

claim death benefits due them and, for this purpose, they approached the President and
General Manager of PMSI, Capt. Roberto Nuval. The latter evinced willingness to assist
complainants-appellees to recover Overseas Workers Welfare Administration (OWWA) benefits
from the POEA and to work for the increase of their PANDIMAN and other benefits arising from
the deaths of their husbands/sons. They were thus made to execute, with the exception of
the spouses Alarcon, special powers of attorney authorizing Capt. Nuval to, among others,
"follow up, ask, demand, collect and receive" for their benefit indemnities of sums of money
due them relative to the sinking of M/V Nemos. By virtue of these written powers of attorney,
complainants-appellees were able to receive their respective death benefits. Unknown to
them, however, the PMSI, in its capacity as employer and policyholder of the life insurance of
its deceased workers, filed with respondent-appellant formal claims for and in behalf of the
beneficiaries, through its President, Capt. Nuval. Among the documents submitted by the
latter for the processing of the claims were five special powers of attorney executed by
complainants-appellees. The claims were approved by Insular Life.

On 3 July 1989, after complainants-appellees learned that they were entitled, as

beneficiaries, to life insurance benefits under a group policy with respondent-appellant, they
sought to recover these benefits from Insular Life but the latter denied their claim on the
ground that the liability to complainants-appellees was already extinguished upon delivery to
and receipt by PMSI of the six (6) checks issued in their names. On the basis thereof, the
public respondent filed a complaint with the Insurance Commissioner, who decided in their
favor.

Issue:
Is Captain Nuval, by virtue of the Special Power of Attorney executed by the
petitioners in favor of the former, a duly constituted agent of the petitioners in representing
them with their Insurance Benefit claims?

Decision:

NO.

1. Captain Nuval is Insular Life's Agent.

The Court ruled that Captain Nuval is a duly constituted agent of Insular Life, and that
his actions as the latter's agent binds them. His misdoings too bind the insurer. The coverage
terms for group insurance are usually stated in a master agreement or policy that is issued by
the insurer to a representative of the group or to an administrator of the insurance program,
 AGENCY
such as an employer. The employer acts as a functionary in the collection and payment of
premiums and in performing related duties. Likewise falling within the ambit of
administration of a group policy is the disbursement of insurance payments by the employer
to the employees. The employer is the agent of the insurer in performing the duties of
administering group insurance policies.

The most persuasive rationale for adopting the view that the employer acts as the
agent of the insurer, however, is that the employee has no knowledge of or control over the
employer's actions in handling the policy or its administration. An agency relationship is based
upon consent by one person that another shall act in his behalf and be subject to his control.
It is clear from the evidence regarding procedural techniques here that the insurer-employer
relationship meets this agency test with regard to the administration of the policy, whereas
that between the employer and its employees fails to reflect true agency. The insurer directs
the performance of the employer's administrative acts, and if these duties are not undertaken
properly the insurer is in a position to exercise more constricted control over the employer's
conduct.

2. The SPA in favor of Captain Nuval is not valid to be used in group policy claims.

The special powers of attorney "do not contain in unequivocal and clear terms authority to
Capt. Nuval to obtain, receive, receipt from respondent company insurance proceeds arising
from the death of the seaman-insured. On the contrary, the said powers of attorney are
couched in terms which could easily arouse suspicion of an ordinary man." The execution by
the principals of special powers of attorney, which clearly appeared to be in prepared forms
and only had to be filled in excludes any intent to grant a general power of attorney or to
constitute a universal agency. Being special powers of attorney, they must be strictly
construed. Certainly, it would be highly imprudent to read into the special powers of attorney
in question the power to collect and receive the insurance proceeds due the petitioners from
Group Policy No. G-004694. Insular Life knew that a power of attorney in favor of Capt. Nuval
for the collection and receipt of such proceeds was a deviation from its practice with respect
to group policies.

3. Even if the SPA is valid, Insular Life had been negligent.

Even granting for the sake of argument that the special powers of attorney were in due form,
Insular Life was grossly negligent in delivering the checks, drawn in favor of the petitioners,
to a party who is not the agent mentioned in the special power of attorney. The person
dealing with an agent must also act with ordinary prudence and reasonable diligence.
Obviously, if he knows or has good reason to believe that the agent is exceeding his authority,
he cannot claim protection. So if the suggestions of probable limitations be of such a clear
and reasonable quality, or if the character assumed by the agent is of such a suspicious or
unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or
improbable character, as would suffice to put an ordinarily prudent man upon his guard, the
party dealing with him may not shut his eyes to the real state of the case, but should either
refuse to deal with the agent at all, or should ascertain from the principal the true condition
of affairs.
 AGENCY
THE BANK OF THE PHILIPPINE ISLANDS vs. GABRIELA ANDREA DE COSTER Y ROXAS, ET AL.
G.R. No. L-23181, March 16, 1925

Facts:

The plaintiff Bank of the Philippine Islands filed a complaint which alleged that
defendant Gabriela Andrea de Coster, having consent and permission of her husband Jean
Poizat, and he acting as her agent, said defendants executed a promissory note for P292,
000.00 payable one year after date, in favor of the plaintiff. The note was a joint and several
note, and to secure the payment the defendant Jean Poizat executed a chattel mortgage on
the steamers of his company, Poizat Vegetable Oil Mills and a real mortgage over a
property, which is also subject to another mortgage in favor of La Orden de
Dominicos.

Defendants defaulted on their obligations to BPI and La Orden de Dominicos. Thus,

both creditors prayed for the forclosure of the mortgaged properties. The court on motion of
the plaintiff, for failure to appear or answer, the defendants were declared in default.
Without giving any notice of the defendants and after the introduction of evidence on the
part of the plaintiff the court rendered an opinion in substance and to the effect that the
plaintiff should have judgment as prayed for in its complaint.

De Coster alleges that she never had any knowledge of the actual facts until she
read about her default in the newspapers, since she was not in the Philippines when
the summons were served; that her husband fled the country; that the mortgages
executed by her agent –husband was without marital consent; and that he did not have
any authority to make her liable as surety on the debt of a third person—it being a
personal debt of her husband and his company.

Issue:

Whether Gabriela De Coster, as the principal-wife is liable for the mortgage executed
by her agent- husband Jean Poizat?

Decision:

NO. Under the power of attorney, the husband had no authority for and on behalf of
the wife to execute a joint and several note or to make her liable as an accommodation
maker. That the debt in question was a pre-existing debt of her husband and of the firm of
J.M. Poizat and Co., to which she was not a party, and for which she was under no legal
obligation to pay.

Paragraph 5 of the power of attorney authorizes the husband for in the name of his
wife to "loan or borrow any sums of money or fungible things, etc." This should be construed
to mean that the husband had power only to loan his wife's money and to borrow money for or
on account of his wife as her agent and attorney in fact. That does not carry with it or imply
that he had the legal right to make his wife liable as a surety for the pre-existing debt of a
third person. It is fundamental rule of construction that where in an instrument powers and
duties are specified and defined, that all of such powers and duties are limited and confined
to those which are specified and defined, and that all other powers and duties are excluded.
 AGENCY
It is very apparent from the face of the instrument that the whole purpose and intent
of the power of attorney was to empower and authorize the husband to look after and protect
the interests of the wife and for her and in her name to transact any and all of her business.
But nowhere does it provide or authorize him to make her liable as a surety for the payment
of the pre-existing debt of a third person.

Hence, it follows that the husband was not authorized or empowered to sign the note
in question for and on behalf of the wife as her act and deed, and that as to her the note is
void for want of power of her husband to execute it.

The same thing is true as to the real mortgage to the bank. It was given to secure the
note in question and was not given for any other purpose. The real property described in the
mortgage to the bank was and is the property of the wife. The note being void as to her, it
follows that as to her the real mortgage to the bank is also void for want of power to execute
it.
 AGENCY
SING JUCO vs. SUNYANTONG
G.R. No. L-17131, June 30, 1922

Facts:
Sing Juco and Sing Bengco obtained from Maria Gay a written option to purchase an
estate known as "San Antonio Estate". The term of the option expired, but Sing Juco and Sing
Bengco had it extended verbally. Sunyantong was an employee of Sing Juco and Sing Bengco,
and the evidence shows that they reposed confidence in him and did not mind disclosing to
him their plans of purchasing the San Antonio estate and the status of their negotiations with
Gay.

In one of the conferences held by Sing Juco and Sing Bengco, Sunyantong was present.
At that time, Sunyantong remarked that it would be advisable to let some days elapse before
accepting the terms of the transfer as proposed by Maria Gay, in order that the Gay might not
think that they were desperate for the said property.

On the day that Sing Juco and Sing Bengco’s option to purchase was to expire,
Sunyantong called at the house of Gay and offered to buy the estate on the terms she
proposed, which were not yet accepted by Sing Juco and Sing Bengco. Sunyantong offered to
buy not for the benefit of Sing Juco and Sing Bengco, but for the benefit of his own wife.
Maria Gay informed the broker of Sing Juco and Sing Bengco that there was another
interested buyer and that she would like to know immediately Sing Juco and Sing Bengco’s
decision.

Sing Bengco instructed Sotelo to inform her, "siya ang bahala". Interpreting the phrase
to mean that Sing Juco and Sing Bengco waived their option to buy, Maria Gay closed the sale
of the estate in favor of Sunyantong. Sing Bengco and Sing Juco then filed a case against
Sunyantong. The lower court ordering the Sunyantong to execute a deed of conveyance to
Sing Bengco and Sing Juco of the San Antonio Estate for the same price and with the same
conditions as those of the purchase thereof from Maria Gay.

Issue: Is Sunyantong liable for damages?

Held:
YES. Even supposing that Sing Bengco intended to waive all claims to the option when
he said “bahala ka”, the action of the Sunyantong in intervening in the negotiations does not
make him innocent of infidelity in view of the fact that he was an employee of the plaintiffs
to whom he owed loyalty and faithfulness.

Despite the fact that when Sunyantong closed the contract of sale with Maria Gay, Sing
Juco and Sing Bengco option had expired, it can’t be denied that he was the cause of the
option having precipitously come to such an end. His disloyalty to his employers was
responsible for Maria Gay not accepting the terms proposed by Sing Juco and Sing Bengco,
because of being certain of another less exigent buyer. Without such intervention on the part
of the Sunyantong it is presumed, taking into account all the circumstances of the case, that
the sale of the estate in question would have been consummated between Maria Gay and Sing
Juco and Sing Bengco, perhaps with such advantages to Sing Juco and Sing Bengco, as they
expected to obtain by prolonging negotiations`
 AGENCY
Such an act of infidelity committed by a trusted employee calculated to redound to his
own benefit and to the detriment of his employers cannot pass without legal sanction. It is an
illicit act committed with culpa and, therefore, its agent is liable (art. 1089, Civil Code), for
the damage caused.
MILAN
 AGENCY
TOYOTA SHAW, INC. vs. CA AND LUNA SOSA
G.R. No. L-116650

Facts:
Luna L. Sosa and Popong Bernardo, an agent of Toyota Shaw, entered into an
agreement stating that Luna Sosa will give P100K as downpayment for a yellow light ace
which Toyota will release on June 17. It was agreed that the balance would be paid through
financing by B.A. On June 17, Mr Sosa was not able to get the car because according to
Bernardo, “nasulot ng iba” but as it turns out, the credit financing was not approved by BA.

Toyota then gave Mr Sosa the option to purchase the unit by paying full price in cash
but Sosa refused. Furthermore, Mr. Sosa claims that Popong Bernardo acted in his authority as
agent of Toyota, thereby binding Toyota in the agreement that they executed.

In its answer to the complaint, Toyota alleged that no sale was entered into between
it and Sosa, that Bernardo had no authority to sign in its behalf and merely signed in his
personal capacity.

As special and affirmative defenses, it alleged that: the VSP did not state date of
delivery; Sosa had not completed the documents required by the financing company, and as a
matter of policy, the vehicle could not and would not be released prior to full compliance
with financing requirements, submission of all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue was
improperly laid; and Sosa did not have a sufficient cause of action against it. It also
interposed compulsory counterclaims.

The trial court rendered on a decision in favor of Sosa. It ruled that the agreement between
Toyota and Sosa was a valid perfected contract of which bound Toyota to deliver the vehicle
to Sosa. CA affirmed in toto the RTC decision.

Issue: Is the agreement between the agent and Sosa binds Toyota?

Decision:
NO. Although there was a perfected contract a perfected contract of sale,the title of
the agreement between the two parties was “AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO OF TOYOTA SHAW INC”. Therefore, Popong Bernardo was acting on his personal
capacity and did not represent Toyota in said agreement, something that Mr. Sosa should
have been aware of.

Mr. Sosa knew that Popong Bernado was only a sales representative of Toyota, and
thus, a mere agent and was therefore limited in his authority to enter into contracts of sale
of Toyota’s vehicles. A person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent.
 AGENCY
BACALTOS COAL MINES and GERMAN A. BACALTOS vs. HON. COURT OF APPEALS and SMC
G.R. No. 114091 June 29, 1995

Facts:
Petitioners seek the reversal of the decision of 30 September 1993 of the Court of
Appeals in CA-G.R. CV No. 35180, 1 entitled "San Miguel Corporation vs. Bacaltos Coal Mines,
German A. Bacaltos and Rene R. Savellon," which affirmed the decision of 19 August 1991 of
the Regional Trial Court (RTC) of Cebu, Branch 9, in Civil Case No. CEB-8187 2 holding
petitioners Bacaltos Coal Mines and German A. Bacaltos and their co-defendant Rene R.
Savellon jointly and severally liable to private respondent San Miguel Corporation under a Trip
Charter Party. The Trip Charter Party was executed on 19 October 1988 "by and between
BACALTOS COAL MINES, represented by its Chief Operating Officer, RENE ROSEL SAVELLON"
and private respondent San Miguel Corporation (hereinafter SMC), represented by Francisco B.
Manzon, Jr.

Savellon claims that Bacaltos Coal Mines is the owner of the vessel M/V Premship II and
that for P650,000.00 to be paid within seven days after the execution of the contract, it "lets,
demises" the vessel to charterer SMC "for three round trips to Davao but only one trip was
done. SMC filed against Bacaltos for specific performance. Bacaltos stated that Savellon was
not their Chief Operating Officer and that the powers granted to him are only those clearly
expressed in the Authorization which do not include the power to enter into any contract with
SMC. They further claimed that if it is true that SMC entered into a contract with them, it
should have issued the check in their favor.

Issue: Whether or not Savellon was duly authorized by the petitioners to enter into the Trip
Charter under and by virtue of an Authorization.

Decision:
Every person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge
of the agent's authority, and his ignorance of that authority will not be any excuse. Persons
dealing with an assumed agent, whether the assumed agency be a general or special one, are
bound at their peril, if they would hold the principal, to ascertain not only the fact of the
agency but also the nature and extent of the authority, and in case either is controverted,
the burden of proof is upon them to establish it.

There is only one express power granted to Savellon, viz., to use the coal operating
contract for any legitimate purpose it may serve. Furthermore, had SMC exercised due
diligence and prudence, it should have known in no time that there is absolutely nothing on
the face of the Authorization that confers upon Savellon the authority to enter into any Trip
Charter Party. Since the principal subject of the Authorization is the coal operating contract,
SMC should have required its presentation to determine what it is and how it may be used by
Savellon. Such a determination is indispensable to an inquiry into the extent or scope of his
authority. SMC made no attempt to verify if Bacaltos owned the vessel and merely was
satisfied with Savellon's presentation.

There is an equitable maxim that between two innocent parties, the one who made it possible
for the wrong to be done should be the one to bear the resulting loss. In the present case, SMC is guilty
of not ascertaining the extent and limits of the authority of Savellon. In not doing so, SMC dealt with
Savellon at its own peril.
 AGENCY
LITONJUA vs. FERNANDEZ
G.R. NO. 148116, APRIL 14, 2004

Facts:
September 1995, Mrs Lourdes Alimario and Agapito Fisico who worked as brokers,
offered to sell to the petitioners, Antonio K. Litonjua and Aurelio K. Litonjua parcels of land.
The owners of the properties were represented by Mary Mediatrix Fernandez and Gregorio T.
Eleosida. On November 27, 1995, the petitioners and respondent Fernandez agreed that the
petitioners would buy the property for the sum of P5, 098,500. The petitioners and
respondent Fernandez also agreed to meet on December 8, 1995 to finalize the sale. It was
also agreed upon that on the said date, respondent Fernandez would present a special power
of attorney executed by the owners of the property. On the date of the meeting only Fisico
attended and informed the petitioners Fernandez was encountering some problems.

January 5, 1995 the petitioners wrote Fernandez demanding that their transaction be
finalized. Receiving no response petitioners sent another letter dated February 1, 1996 asking
that a Deed of Sale be executed and demanding the turnover of the property. February 14,
1996 Fernandez wrote the petitioners informing them that they are no longer selling the
property due to complications with the tenants. On April 12, 1996, the petitioners filed for
specific performance against Fernandez and the registered owners of the property. They
prayed for the execution of the Contract to Sell agreed upon by the parties.

On July 5, 1996, Fernandez filed her Answer. She claimed that while the petitioners
offered to buy the property during the meeting of November 27, 1995, she did not accept the
offer; thus, no verbal contract to sell was ever perfected. After trial, the trial court ordered
for the execution of the contract. On February 28, 2001, Court of Appeals reversed the trial
court decision. It concluded that no sale or contract to sell was perfected between the
parties. Hence, the present petition.

Issue: Whether or not Respondent Fernandez is an agent of the owners of the property

Decision:
The settled rule is that persons dealing with an assumed agent are bound at their
peril, and if they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to prove it. In this case, respondent Fernandez specifically denied that she
was authorized by the respondents-owners to sell the properties, both in her answer to the
complaint and when she testified. The Letter dated January 16, 1996 relied upon by the
petitioners was signed by respondent Fernandez alone, without any authority from the
respondents-owners. There is no evidence on record that the respondents-owners ratified all
the actuations of respondent Fernandez in connection with her dealings with the petitioners.
As such, said letter is not binding on the respondents as owners of the subject properties.

There is no documentary evidence on record that the respondents-owners specifically

authorized respondent Fernandez to sell their properties to another. Article 1878 of the New Civil
Code provides that a special power of attorney is necessary to enter into any contract, by which
the ownership of an immovable is transmitted or 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 registered
owner without any authority therefor in writing from the said owner is null and void.
 AGENCY
SPOUSES YU ENG CHO and FRANCISCO TAO YU vs. PAN AMERICAN WORLD AIRWAYS, INC.,
TOURIST WORLD SERVICES, INC., JULIETA CANILAO and CLAUDIA TAGUNICAR
G.R. No. 123560, March 27, 2000

Facts:
Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In
connection with business, he travels from time to time to Malaysia, Taipei and Hongkong. On
July 10, 1976, plaintiffs bought plane tickets from defendant Claudia Tagunicar who
represented herself to be an agent of defendant Tourist World Services, Inc. (TWSI). However
prior to the flight dates in the instant case, only the passage from Manila to Hongkong, then
to Tokyo, were confirmed. [PAA] Flight 002 from Tokyo to San Francisco was on "RQ" status,
meaning "on request". After calling up Canilao of TWSI, defendant Tagunicar told plaintiffs
that their flight is now confirmed all the way. Thereafter, she attached the confirmation
stickers on the plane tickets.

On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They
left Hongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Am
office for reconfirmation of their flight to San Francisco. Said office, however, informed them
that their names are not in the manifest. Since plaintiffs were supposed to leave on the 29th
of July, 1978, and could not remain in Japan for more than 72 hours, they were constrained
to agree to accept airline tickets for Taipei instead, per advise of JAL officials. Upon reaching
Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back
to Manila on August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines
(JAL) refunded the plaintiffs the difference of the price for Tokyo-Taipei [and] Tokyo-San
Francisco in the total amount of P2,602.00.

In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc.
cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system. The
agreement was for him to inspect the equipment and make final arrangement[s] with the said
company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng Cho
expected to realize a profit of P300,000.00 to P400,000.00.

Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she
learned from Adrian Yu, son of plaintiffs, that the latter were not able to take the flight from
Tokyo to San Francisco, U.S.A. After a few days, said Adrian Yu came over with a gentleman
and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar claims that
plaintiffs were asking for her help so that they could file an action against Pan-Am. Because
of plaintiffs' promise she will not be involved, she agreed to sign the affidavit prepared by the
lawyer

A complaint for damages was filed by petitioners against private respondents Pan
American World Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao
(Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of
tickets and hotel accommodations when petitioners were compelled to stay in Hongkong and
then in Tokyo by reason of the non-confirmation of their booking with Pan-Am.

Issue: Whether or not Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized
ticketing agent of Pan Am.
 AGENCY
Decision: WE DO NOT AGREE.

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. 7 The elements of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for himself; (4) the agent acts
within the scope of his authority. It is a settled rule that persons dealing with an assumed
agent are bound at their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in case either is
controverted, the burden of proof is upon them to establish it.

In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she
stated that she is an authorized agent of TWSI. This affidavit, however, has weak probative
value in light of respondent Tagunicar's testimony in court to the contrary. This purported
admission of respondent Tagunicar cannot be used by petitioners to prove their agency
relationship. The declarations of the agent alone are generally insufficient to establish the
fact or extent of his authority.

Indeed, there is nothing in the records to show that respondent Tagunicar has been
employed by Pan Am as its agent, except the bare allegation of petitioners. This lends
credence to respondent Tagunicar's testimony that she was persuaded to execute an affidavit
implicating respondents because petitioners knew they would not be able to get anything of
value from her.

.
 AGENCY
SPOUSES LYDIA TERRADO & MARTIN ROSARIO vs. HON. COURT OF APPEALS
G.R. No. L-64489, August 24, 1984

Facts:
On January 21, 1973, the Philippine Legislature ceded a certain portion of Bayambang
Province of Pangasinan (which was once public land) to the municipality of the Bayambang to
be used or disposed of in accordance with the general municipal law relative to the letting of
fisheries in municipal waters. On 1974, the municipality of Bayambang enacted Ordinance No.
8, establishing the Bayambang Fishery and Hunting Park and Municipal Water Shed. Also in the
said ordinance, the municipality appointed and constituted private respondent Lacuesta as
Manager-Administrator of the watershed for a period of 25 years, renewable for another 25
years. This is under the condition that said respondent shall pay the municipality the sum
equivalent to 10% of the annual gross income that may be derived from the forest products,
wild game and fish. Such ordinance was approved by the Provincial Board of Pangasinan but
was disapproved by the Secretary of Agriculture and Natural Resources as it “grants fishery
privileges to respondent Lacuesta without the benefit of competitive public hearing in
contravention to law.”

The municipality then informed Lacuesta of the disapproval of the ordinance and
directed him to refrain and desist from acting as Administrator-Manager. However, Lacuesta
refused and insisted on retaining possession of the fisheries. Despite such refusal, the
municipality of Bayambang passed another resolution resolving to advertise for public bidding
the said fishery area. Among the winning bidders are herein petitioners. There was a long line
of petitions/motions filed in the RTC, CA, and SC filed by both parties. What is important is
that while the case was pending in the CFI of Pangasinan, Lacuesta died. The judge of said
court (Judge Villalon, also a respondent) sided with Lacuesta. As such, despite the fact that
Lacuesta died, she still ordered the restoration of the possession of all fisheries and areas
covered by the contract to Lacuesta and his party.

Issues:
(1) Whether or not the Management Administration contract between the municipality
and Lacuesta was valid (2) Whether or not the Management-Administration contract still
stands even if Lacuesta already died

Decision:
(1) NO. The Management-Administration contract entered into by Lacuesta and the
municipalty was void as it lacked a vital procedural aspect (public bidding) necessary for the
validity of the contract. Moreover, the Supreme Court held that the municipality had no
power to grant exclusive privileges of fishing for more than 5 years.

(2) NO. Essentially, the contract of management and administration between the
Municipality and Lacuesta is one of agency whereby a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or
authority of the latter. Lacuesta bound himself as Manager-Administrator of the Bayambang
Fishing and Hunting Park and Municipal Watershed to render service or perform duties and
responsibilities in representation or on behalf of the Municipality of Bayambang, with the
consent or authority of the latter. Under Art. 1919 of the Civil Code, agency is extinguished
by the death of the agent. His rights and obligations arising from the contract are not
transmittable to his heirs or predecessors-in-interest.
 AGENCY
Atty. Celso Laviña v. Hon. Court of Appeals
G.R. No. 78295, April 10, 1989

Facts:
In April 1983, Carmen Gabriel executed a donation mortis causa in favor of her
widowed sister-in-law, Josefina Gabriel, over a 3,081-sq-m parcel of land in Sampaloc. In Aug.
1983, Carmen executed a last will and testament in which she bequeathed the same property
to her cousin, Remedios Muyot, and willed a small 240-sq-m lot to Josefina. Then Carmen
executed a general power of attorney appointing Remedios as her attorney-in-fact.

In Nov. 1983, Josefina registered an adverse claim on the title of the Sampaloc
property. Remedios, as Carmen's attorney-in-fact, hired Atty. Celso Laviña as Carmen's
counsel.

Carmen thumbmarked an "affidavit of denial" repudiating the donation of the

Sampaloc property to Josefina because it was allegedly procured through fraud and trickery.
She also thumbmarked a "revocation of donation."

Remedios, as Carmen's attorney-in-fact, sold the Sampaloc property to Virgilio

Cebrero.

On Nov. 29, 1983, Carmen passed away. In Dec. 1983, the "revocation of donation" was
registered on the back of Carmen's TCT. Josefina filed a complaint to annul the deed of
revocation of donation, Remedios' GPA, and the sale of the Sampaloc property to Cebrero.

Atty. Laviña filed an answer for the estate and Remedios. Thereupon, Josefina filed a
motion to disqualify him on the ground that his authority as counsel for Carmen was
extinguished upon her death. The RTC denied Josefina's motion.

The CA held that Atty. Laviña may not appear as counsel for the estate of Carmen. It
also held that Remedios was not capacitated to receive summons for the estate because the
GPA became inoperative upon the death of the principal.

Issues:
1. Was Atty. Laviña's authority as counsel for Carmen extinguished upon her death?
2. Was Remedios capacitated to receive summons for the estate?

Decision:
1. Carmen's death divested Atty. Laviña of authority to represent her as counsel. A dead
client has no personality and cannot be represented by an attorney.

2. The estate of a dead person may only be summoned through the executor or administrator
of his estate for it is the executor or administrator who may sue or be sued and who may
bring or defend actions for the recovery or protection of the property or rights of the
deceased. The GPA appointing Remedios as Carmen's agent or attorney-in-fact was
extinguished upon Carmen's demise. Thereafter, Remedios was bereft of authority to
represent Carmen.

Also, the instrument itself explicitly provided that the powers conferred on the agent
were to be exercised for the "sole benefit" of the principal, Carmen Gabriel.
 TRUST
Joseph Goyanko, Jr. vs. United Coconut Planters Bank
G.R. No. 179096, February 6, 2013

Facts:

In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos
(P2,000,000.00) with Philippine Asia Lending Investors, Inc. family, represented by the
petitioner, and his illegitimate family presented conflicting claims to PALII for the release of
the investment. Pending the investigation of the conflicting claims, PALII deposited the
proceeds of the investment with UCPB on October 29, 19965 under the name "Phil Asia: ITF
(In Trust For) The Heirs of Joseph Goyanko, Sr." (ACCOUNT). On September 27, 1997, the
deposit under the ACCOUNT was P1,509,318.76.

On December 11, 1997, UCPB allowed PALII to withdraw One Million Five Hundred
Thousand Pesos (P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When
UCPB refused the demand to restore the amount withdrawn plus legal interest from
December 11, 1997, the petitioner filed a complaint before the RTC. In its answer to the
complaint, UCPB admitted, among others, the opening of the ACCOUNT under the name "ITF
(In Trust For) The Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the withdrawal on December
11, 1997.

The RTC dismissed the petitioner’s complaint and awarded UCPB attorney’s fees,
litigation expenses and the costs of the suit. Before the CA, the petitioner maintained that by
opening the ACCOUNT, PALII established a trust by which it was the "trustee" and the HEIRS
are the "trustors-beneficiaries;" thus, UCPB should be liable for allowing the withdrawal. The
CA partially granted the petitioner’s appeal. It affirmed the August 27, 2003 decision of the
RTC, but deleted the award of attorney’s fees and litigation expenses. The CA held that no
express trust was created between the HEIRS and PALII.

Issue: Whether UCPB should be held liable for the amount withdrawn because a trust
agreement existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the
ACCOUNT with UCPB

Decision:
We rule in the negative. A trust, either express or implied, is the fiduciary relationship
"x x x between one person having an equitable ownership of property and another person
owning the legal title to such property, the equitable ownership of the former entitling him
to the performance of certain duties and the exercise of certain powers by the latter."
Express or direct trusts are created by the direct and positive acts of the trustor or of the
parties. No written words are required to create an express trust. This is clear from Article
1444 of the Civil Code, but, the creation of an express trust must be firmly shown; it cannot
be assumed from loose and vague declarations or circumstances capable of other
interpretations.

In Rizal Surety & Insurance Co. v. CA, we laid down the requirements before an
express trust will be recognized:

Basically, these elements include a competent trustor and trustee, an ascertainable trust
res, and sufficiently certain beneficiaries. xxx each of the above elements is required to be
established, and, if any one of them is missing, it is fatal to the trusts. Furthermore, there
 TRUST
must be a present and complete disposition of the trust property, notwithstanding that the
enjoyment in the beneficiary will take place in the future.

Under these standards, we hold that no express trust was created. First, while an
ascertainable trust res and sufficiently certain beneficiaries may exist, a competent trustor
and trustee do not. Second, UCPB, as trustee of the ACCOUNT, was never under any equitable
duty to deal with or given any power of administration over it. On the contrary, it was PALII
that undertook the duty to hold the title to the ACCOUNT for the benefit of the HEIRS. Third,
PALII, as the trustor, did not have the right to the beneficial enjoyment of the ACCOUNT.
Finally, the terms by which UCPB is to administer the ACCOUNT was not shown with
reasonable certainty. While we agree with the petitioner that a trust’s beneficiaries need not
be particularly identified for a trust to exist, the intention to create an express trust must
first be firmly established, along with the other elements laid above; absent these, no express
trust exists.
 TRUST
Philippine National Bank vs. Aznar
G.R. No. 171805, May 30, 2011

Facts:
In 1958, RISCO ceased operation due to business reverses. In plaintiffs desire to
rehabilitate RISCO, they contributed a total amount of P212, 720.00 which was used to
purchase of three (3) parcels of land.

After the purchase of the lots, titles were issued in the name of RISCO. The amount
contributed by plaintiffs constituted as liens and encumbrances on the aforementioned
properties as annotated in the titles of said lots. Such annotation was made pursuant to the
Minutes of the Special Meeting of the Board of Directors of RISCO.

Under the Minutes of meetings, there was a stipulation that “the respective
contributions shall constitute as their lien or interest on the properties described, if and when
said property are titled in the name of RURAL INSURANCE & SURETY CO., INC., subject to
registration as their adverse claim in pursuance of the Provisions of Land Registration Act,
(Act No. 496, as amended) until such time their respective contributions are refunded to
them completely.”

Thereafter, various subsequent annotations were made on the same titles, including
the Notice of Attachment and Writ of Execution in favor of herein defendant PNB. As a result
of such, PNB was able to transfer the title of the properties in its name.

This prompted plaintiffs-appellees to file the instant complaint alleging that the
subsequent annotations on the titles are subject to the prior annotation of their liens and
encumbrances. Plaintiffs further contended that the subsequent writs and processes
annotated on the titles are all null and void for want of valid service upon RISCO and on
them, as stockholders.

The RTC, ruled against PNB. On appeal, the CA reversed the ruling of the RTC. Hence,
this appeal.

Issue: Whether or not there is was an express trust created between the stockholders of
RICO.

Decision:
None. Trust is the right to the beneficial enjoyment of property, the legal title to
which is vested in another. It is a fiduciary relationship that obliges the trustee to deal with
the property for the benefit of the beneficiary. Trust relations between parties may either be
express or implied. An express trust is created by the intention of the trustor or of the
parties. An implied trust comes into being by operation of law.

In other words, the creation of an express trust must be manifested with reasonable
certainty and cannot be inferred from loose and vague declarations or from ambiguous
circumstances susceptible of other interpretations.

No such reasonable certitude in the creation of an express trust obtains in the case at
bar. In fact, a careful scrutiny of the plain and ordinary meaning of the terms used in the
 TRUST
Minutes does not offer any indication that the parties thereto intended that Aznar, et al.,
become beneficiaries under an express trust and that RISCO serve as trustor.

Verily, Aznar, et al., who are stockholders of RISCO, cannot claim ownership over the
properties at issue in this case on the strength of the Minutes which, at most, is merely
evidence of a loan agreement between them and the company. There is no indication or even
a suggestion that the ownership of said properties were transferred to them which would
require no less that the said properties be registered under their names. For this reason, the
complaint should be dismissed since Aznar, et al., have no cause to seek a quieting of title
over the subject properties. At most, what Aznar, et al., had was merely a right to be repaid
the amount loaned to RISCO. Unfortunately, the right to seek repayment or reimbursement of
their contributions used to purchase the subject properties is already barred by prescription.
 TRUST
SOLEDAD CAEZO vs. CONCEPCION ROJAS
G.R. No. 148788, November 23, 2007

Facts:
Soledad Caezo bought the parcel of unregistered land with an area of 4,169 sq from
Crisogono Limpiado and immediately took possession of the property. The transaction was not
reduced into writing. When she and her husband left for Mindanao in 1948, she entrusted the
said land to her father, Crispulo Rojas, who took possession and cultivated, the same. In
1980, she found out that her stepmother, was in possession of the property and was
cultivating the same. She also discovered that the tax declaration over the property was
already in the name of her father (Crispulo).

Caezo then filed a Complaint for the recovery of real property plus damages with the
MTC of Naval, Biliran, against Rojas. Rojas asserted that it was her husband, Crispulo Rojas,
who bought the property from Crisogono Limpiado and until his death he possessed and
cultivated the property. The property was included in his estate, which was administered by a
special administrator, Bienvenido Ricafort. The petitioner, as heir, even received her share in
the produce of the estate. She also argued that the petitioner filed the complaint only in
1997 means that she had already abandoned her right over the property.

MTC ruled in favor of the petitioner and ordered Concepcion to vacate the land and to
pay damages. RTC amended its original decision and affirmed the MTC’s order. CA reversed
the RTC’s decision.

Issues:
1. Is there an express trust or a resulting trust between the petitioner and her father?
2. Is the case for Recovery of Real Property already barred by prescription and laches even
when?

Decision:
1. None. As a rule, the burden of proving the existence of a trust is on the party asserting its
existence, and such proof must be clear and satisfactorily show the existence of the trust and
its elements. The existence of express trusts concerning real property may not be established
by parol evidence.

Although no particular words are required for the creation of an express trust, a clear
intention to create a trust must be shown; and the proof of fiduciary relationship must be
clear and convincing.

In the case at bench, an intention to create a trust cannot be inferred from the
petitioner’s testimony and the attendant facts and circumstances. The petitioner testified
only to the effect that her agreement with her father was that she will be given a share in the
produce of the property.

This allegation, standing alone as it does, is inadequate to establish the existence of a trust
because profit-sharing per se, does not necessarily translate to a trust relation.

2.Yes. The Court hold that there was no express trust or resulting trust established between
the petitioner and her father. Thus, in the absence of a trust relation, Crispulos uninterrupted
 TRUST
possession of the subject property for 49 years, coupled with the performance of acts of
ownership, such as payment of real estate taxes, ripened into ownership.
Indeed, if no trust relations existed, the possession of the property by the respondent,
through her predecessor, which dates back to 1948, would already have given rise to
acquisitive prescription. Under Section 40 of Act No. 190, an action for recovery of real
property, or of an interest therein, can be brought only within ten years after the cause of
action accrues.

In express trusts and resulting trusts, a trustee cannot acquire by prescription a

property entrusted to him unless he repudiates the trust.

Assuming that such relation asserted existed, it was already terminated upon
Crispulo’s death in 1978. A trust terminates upon the death of the trustee where the trust is
personal to the trustee in the sense that the trustor intended no other person to administer
it.

Also the action is barred by laches. The petitioner allegedly discovered that the
property was being possessed by the respondent in 1980. However, it was only in 1997 that
she filed the action to recover the property.

Finally, the court a quo ought to have dismissed the complaint for the suit is in the
nature of an action for reconveyance and failure to implead the other heirs who are
indispensable parties will render subsequent actions null and void.

The complaint is already barred by prescription, estoppel and laches.

 TRUST
Maria Torblea vs. Sps. Rosario
G.R. No. 140528, December 7, 2011

Facts:
The controversy began with a parcel of land that was originally part of a larger parcel
of land, known as Lot No. 356 of the Cadastral Survey of Urdaneta in the name of Valeriano
Semilla (Valeriano), married to Potenciana Acosta. Under unexplained circumstances,
Valeriano gave Lot No. 356-A to his sister Marta Semilla, married to Eugenio Torbela (spouses
Torbela). Upon the deaths of the spouses Torbela, Lot No. 356-A was adjudicated in equal
shares among their children, the Torbela siblings, by virtue of a Deed of Extrajudicial
Partition dated December 3, 1962.

In 1964, Torbela siblings executed a Deed of Absolute Quitclaim over Lot No. 356-A in
favor of Dr. Rosario. Four days after, a TCT was issued in Dr. Rosario’s name covering the
property.

Another Deed of Absolute Quitclaim was subsequently executed this time by Dr.
Rosario, acknowledging that he only borrowed Lot No. 356-A from the Torbela siblings and
was already returning the same to the latter.

Dr. Rosario used the land as mortgage for a loan he obtained through DBP for
P70,000.00. He used the proceeds of the loan to build a 4-storey building which was initially
used as a hospital but later converted into a commercial space. Part was leased to PT&T and
the rest to Rosario’s sister who operated the Rose Inn Hotel and Restaurant.

Dr. Rosario fully paid the loan from DBP and the mortgage was cancelled and ratified
by a notary public. However, Dr. Rosario took another loan from PNB. He later acquired a
third loan from Banco Filipino and the property was extrajudicially foreclosed.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino.
They showed as proof the deed of absolute quitclaim presented executed by Rosario himself,
but their efforts were unsuccessful. Upon the expiration of the one-year redemption period in
April 1988, the Certificate of Final Sale and Affidavit of Consolidation covering all three
foreclosed properties were executed. TCT was issued to Banco Filipino.

In 1991, Banco Filipino filed before the RTC of Urdaneta City a Petition for the
issuance of a writ of possession. The RTC granted and ruled in favor of Banco Filipino. Upon
appeal, the CA affirmed the judgment of the lower court. Hence, this petition.

Issue: Whether or not an express trust was created between the Torbela siblings and Dr.
Rosario.

Decision:
Yes. The court held that here was an express trust between the Torbela siblings and
Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from
their parents, the Torbela spouses, who, in turn, acquired the same from the first registered
owner of Lot No. 356-A, Valeriano.
 TRUST
The Torbela siblings explained that they only executed the Deed as an accommodation
so that Dr. Rosario could have Lot No. 356-A registered in his name and use said property to
secure a loan from DBP, the proceeds of which would be used for building a hospital on Lot
No. 356-A – a claim supported by testimonial and documentary evidence, and borne out by
the sequence of events immediately following the execution by the Torbela siblings of said
Deed.

Express trusts are created by direct and positive acts of the parties, by some writing
or deed, or will, or by words either expressly or impliedly evincing an intention to create a
trust. Under Article 1444 of the Civil Code, "[n]o particular words are required for the
creation of an express trust, it being sufficient that a trust is clearly intended." It is possible
to create a trust without using the word "trust" or "trustee." Conversely, the mere fact that
these words are used does not necessarily indicate an intention to create a trust. The
question in each case is whether the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial whether or not he knows that
the relationship which he intends to create is called a trust, and whether or not he knows the
precise characteristics of the relationship which is called a trust.

When Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751
on December 16, 1964, an implied trust was initially established between him and the Torbela
siblings under Article 1451 of the Civil Code. Dr. Rosario’s execution of the Deed of Absolute
Quitclaim on December 28, 1964, containing his express admission that he only borrowed Lot
No. 356-A from the Torbela siblings, eventually transformed the nature of the trust to an
express one. The express trust continued despite Dr. Rosario stating in his Deed of Absolute
Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A
remained registered in Dr. Rosario’s name under TCT No. 52751 and Dr. Rosario kept
possession of said property, together with the improvements thereon.

The right of the Torbela siblings to recover Lot No. 356-A has not yet prescribed.
"Express trusts prescribe 10 years from the repudiation of the trust”. For repudiation of an
express trust to be effective, the unequivocal act of repudiation had to be made known to the
Torbela siblings as the cestuis que trust and must be proven by clear and conclusive evidence.
 TRUST
Estate of Margarita Cabacungan vs. Laigo
G.R. No. 175073, August 15, 2011

Facts:
Margarita Cabacungan owned three parcels of unregistered land, which were
individually covered by tax declaration all in her name. Margaritas son, Roberto Laigo, Jr.
applied for a non-immigrant visa to the United States, and to support his application, he
allegedly asked Margarita to transfer the tax declarations of the properties in his name. For
said purpose, Margarita, unknown to her other children, executed an Affidavit of Transfer of
Real Property whereby the subject properties were transferred by donation to Roberto.
Roberto’s visa was issued and he was able to travel to the U.S. as a tourist and returned in
due time. He adopted respondents and then he married respondent Estella.

Roberto sold a portion of the property to the spouses Mario and Julia Campos. Then,
he sold other lots to Marilou and to Pedro. Allegedly, these sales were not known to Margarita
and her other children.

At Roberto’s wake, that Margarita came to know of the sales as told by Pedro himself.
Margarita, represented by her daughter, Luz, instituted the instant complaint for the
annulment of said sales and for the recovery of ownership and possession of the subject
properties as well as for the cancellation of Ricardo’s tax declarations. Margarita admitted
having accommodated Roberto’s request for the transfer of the properties to his name, but
pointed out that the arrangement was only for the specific purpose of supporting his U.S. visa
application. She emphasized that she never intended to divest herself of ownership over the
subject lands and, hence, Roberto had no right to sell them to respondents and the Spouses
CamposShe imputed bad faith to buyers of the lots, as they supposedly knew all along that
Roberto was not the rightful owner of the properties. Hence, she prayed that the sales be
annulled; that Robertos tax declarations be cancelled; and that the subject properties be
reconveyed to her.

The trial court dismissed the complaint. It ruled that the 1968 Affidavit of Transfer
operated as a simple transfer of the subject properties from Margarita to Roberto. It found no
express trust created between Roberto and Margarita by virtue merely of the said document
as there was no evidence of another document showing Roberto’s undertaking to return the
subject properties. The appellate court dismissed petitioners claim that Roberto was merely
a trustee of the subject properties as there was no evidence on record supportive of the
allegation that Roberto merely borrowed the properties from Margarita upon his promise to
return the same on his arrival from the United States.

Issue: Whether or not there is an implied trust created between Margarita and her son
Roberto.

Decision:
Yes. Implied trusts are further classified into constructive trusts and resulting trusts.
Constructive trusts, on the one hand, come about in the main by operation of law and not by
agreement or intention. They arise not by any word or phrase, either expressly or impliedly,
evincing a direct intention to create a trust, but one which arises in order to satisfy the
demands of justice.
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Intention although only presumed, implied or supposed by law from the nature of the
transaction or from the facts and circumstances accompanying the transaction, particularly
the source of the consideration is always an element of a resulting trust and may be inferred
from the acts or conduct of the parties rather than from direct expression of conduct.
Because an implied trust is neither dependent upon an express agreement nor required to be
evidenced by writing, Article 1457 of our Civil Code authorizes the admission of parole
evidence to prove their existence. Parole evidence that is required to establish the existence
of an implied trust necessarily has to be trustworthy and it cannot rest on loose, equivocal or
indefinite declarations.

The Court found that petitioner had actually adduced evidence to prove the intention
of Margarita to transfer to Roberto only the legal title to the properties in question, with
attendant expectation that Roberto would return the same to her on accomplishment of that
specific purpose for which the transaction was entered into.

The complaint before the trial court alleged that the 1968 Affidavit of Transfer was
executed merely to accommodate Roberto’s request to have the properties in his name and
thereby produce proof of ownership of certain real properties in the Philippines to support his
U.S. visa application.

The Court also found that the inscription of Robertos name in the Affidavit of Transfer
as Margaritas transferee is not for the purpose of transferring ownership to him but only to
enable him to hold the property in trust for Margarita. As a trustee of a resulting trust,
therefore, Roberto, like the trustee of an express passive trust, is merely a depositary of legal
title having no duties as to the management, control or disposition of the property except to
make a conveyance when called upon by the cestui que trust. Hence, the sales he entered
into with respondents are a wrongful conversion of the trust property and a breach of the
trust. The question is: May respondents now be compelled to reconvey the subject properties
to petitioner? The Court ruled in the affirmative.
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SIME DARBY PILIPINAS, INC., vs. JESUS B. MENDOZA
G.R. No. 202247, June 19, 2013

Facts:
Petitioner Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus B. Mendoza
(Mendoza) as sales manager to handle sales, marketing, and distribution of the company's
tires and rubber products. On 3 July 1987, Sime Darby bought a Class "A" club share in Alabang
Country Club (ACC) from Margarita de Araneta as evidenced by a Deed of Absolute Sale. The
share, however, was placed under the name of Mendoza in trust for Sime Darby since the By-
Laws of ACC state that only natural persons may own a club share. As part of the
arrangement, Mendoza endorsed the Club Share Certificate in blank and executed a Deed of
Assignment, also in blank, and handed over the documents to Sime Darby. From the time of
purchase in 1987, Sime Darby paid for the monthly dues and other assessments on the club
share.

When Mendoza retired in April 1995, Sime Darby fully paid Mendoza his separation pay
amounting to more than ₱3,000,000. Nine years later, or sometime in July 2004, Sime Darby
found an interested buyer of the club share for ₱1,101,363.64. Before the sale could push
through, the broker required Sime Darby to secure an authorization to sell from Mendoza
since the club share was still registered in Mendoza’s name. However, Mendoza refused to
sign the required authority to sell or special power of attorney unless Sime Darby paid him the
amount of ₱300,000, claiming that this represented his unpaid separation benefits. As a
result, the sale did not push through and Sime Darby was compelled to return the payment to
the prospective buyer.

Issue:Is there a trust relationship between Sime Darby and Jesus Mendoza?

Decision:
YES. While the share was bought by Sime Darby and placed under the name of
Mendoza, his title is only limited to the usufruct, or the use and enjoyment of the club’s
facilities and privileges while employed with the company.
In Thomson v. Court of Appeals, we held that a trust arises in favor of one who pays
the purchase price of a property in the name of another, because of the presumption that he
who pays for a thing intends a beneficial interest for himself. While Sime Darby paid for the
purchase price of the club share, Mendoza was given the legal title. Thus, a resulting trust is
presumed as a matter of law. The burden then shifts to the transferee to show otherwise.
In fact, the circumstances which occurred after the purchase of the club share point to the
opposite. First, Mendoza signed the share certificate and assignment of rights both in blank.
Second, Mendoza turned over possession of the documents to Sime Darby. Third, from the
time the share was purchased in 1987 until 1995, Sime Darby paid for the monthly bills
pertaining to the share. Last, since 1987, the monthly bills were regularly sent to Sime
Darby’s business address until Mendoza requested in August 2004, long after he retired from
the employ of the company, that such bills be forwarded to his personal address starting
September 2004.

It can be gathered then that Sime Darby did not intend to give up its beneficial interest
and right over the share. The company merely wanted Mendoza to hold the share in trust since
Sime Darby, as a corporation, cannot register a club share in its own name under the rules of the
ACC.1âwphi1 At the same time, Mendoza, as a senior manager of the company, was extended the
privilege of availing a club membership, as generously practiced by Sime Darby.
 TRUST
SPOUSES RICARDO AND MILAGROS HUANG vs. COURT OF APPELAS
G.R. No. 108525, September 13, 1994

Facts:
Respondent Dolores Sandoval wanted to buy two (2) lots in Dasmariñas Village, Makati,
but was advised by petitioner Milagros Huang, wife of her brother, petitioner Ricardo Huang,
that the policy of the subdivision owner forbade the acquisition of two (2) lots by a single
individual. Consequently, Dolores purchased Lot 21 and registered it in her name. She also
purchased the adjacent lot, Lot 20, but heading the advice of Milagros, the deed of sale was
placed in the name of Ricardo and registered the same in his name. Dolores also constructed
a residential house on Lot 21. Ricardo requested her permission to construct a small
residential house on Lot 20 to which she agreed inasmuch as she was then the one paying for
apartment rentals of the Huang spouses. She also allowed Ricardo to mortgage Lot 20 to the
Social Security System to secure the payment of his loan to be spent in putting up the house.
However, she actualy financed the construction of the house, the swimming pool and the
fence thereon on the understanding that the Huang spouses would merely hold title in trust
for her beneficial interest. To protect her rights and interests as the lawful owner of Lot 20
and its improvements, Dolores requested the Huangs to execute in her favor a deed of
absolute sale with assumption of mortgage over the property. The latter obliged.

Thereafter, the Huang spouses leased the house to Deltron-Sprague Electronics

Corporation for its various executives as official quarters without first securing the permission
of Dolores. Dolores tolerated the lease of the property as she did not need it at that time.
But, after sometime, the lessees started prohibiting the Sandoval family from using the
swimming pool and the Huangs then began challenging the Sandovals' ownership of the
property. Dolores then lodged a complaint before the office of the Barangay Captain praying
that the spouses Ricardo and Milagros Huang be made to execute the necessary request to the
SSS for the approval of the deed of sale with assumption of mortgage, as well as for the
release in her favor of the owner's duplicate certificate of title in its possession so that the
deed could be duly annotated on the title and/or a new certificate of title issued in her
name. No amicable settlement was reached, the Lupong Tagapayapa then issued a
certification that the controversy was ripe for judicial action.

Ricardo and Milagros Huang filed a complaint against the spouses Dolores and Aniceto
Sandoval in the then Court of First Instance, seeking the nullity of the deed of sale with
assumption of mortgage and/or quieting of title to Lot 20. They alleged that the Sandovals
made them sign blank papers which turned out to be a deed of sale with assumption of
mortgage over Lot 20.

Meanwhile, Dolores paid the balance of Ricardo's loan to the SSS and requested the
release to her of the land title and the real estate mortgage thereon, but SSS refused. On the
same date, she filed a complaint against the Huang spouses and the SSS before the same trial
court.

Both cases were consolidated and jointly tried. On the basis of the evidence
presented, the trial court found that it was indeed Dolores who brought Lot 20 but had it
registered in the name of Ricardo; and, it was she who built the house and swimming pool
thereon and the fence enclosing Lots 20 and 21. As regards the deed of sale with assumption
of mortgage, the trial court found that it was signed voluntarily by the Huang spouses so
much so that their claim that they were misled into signing it was unbelievable. Thus,
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judgment was rendered in favor of the Sandoval spouses. On appeal to the Court of Appeals,
the decision of the trial court was affirmed.

Issue: Was there a trust relationship created in this case?

Decision: Yes. The Supreme Court affirmed the Trial Court Decision.

Ricardo claimed that he bought Lot 20 with his own money on installment. He said
that the money came from his salary as employee of the Universal Textile Mills, his
commission as rice sales agent, his involvement in politics and other undeclared income. But
Ricardo's pretense was easily unmasked by the presentation of the records and statements of
his income from his employment. The only logical conclusion then is that the money which
was used to buy Lot 20 did not belong to him.

On the part of Dolores, she was able to prove by overwhelming evidence that she
purchased Lot 20 with her own funds. Moreover, the Agreements to Purchase and Sell the two
lots were both executed on the same date and the first installments for both lots were paid,
while the second installments were paid on another date. These facts suggest that the lots
were bought in a single transaction by only one person. Dolores also testified that she gave
the amount corresponding to the first installments for both lots to Milagros. In payment of the
second installments for the two lots, she withdrew from the First National City Bank and
issued a check. Viewed together with the foregoing circumstances is the admission of Ricardo
himself that Dolores constructed the swimming pool on Lot 20 and enclosed Lots 20 and 21
with a fence at her own expense.

Weighed against the testimony of Dolores that for the cost of labor alone in the
construction of the house she spent P45,000.00 while the other expenses are listed in Exhs.
"20," and "21" and "21-A" to "J," Ricardo could not have spent therefor because, as previously
shown, his income was not sufficient enough. Neither could the P19,200.00 loan which he
obtained from the SSS suffice. Dolores even had to shell out to pay for arrears in the rental of
the apartment being occupied by the Huangs, electric bills, and, water bills to prevent the
Huangs from being ejected from their apartment. Dolores' ownership of the house is
confirmed further by the presence of her personal properties. As a whole, spouses Huang's
evidence failed to help them in their bid to establish ownership over Lot 20 and its
improvements.

Regarding the deed of sale with assumption of mortgage, Ricardo's version of the
circumstances under which he signed the deed of question is incredible. Human experience
argues against the claim that a highly educated and mature man like Ricardo would sign a
deed of sale without reading or knowing its contents. There is no evidence on record that
Dolores "pressured" Ricardo to sign the deed. In fact, Milagros signed the document at the
instance of Ricardo himself. The deed, which was duly notarized, enjoys the presumption of
regularity in its execution. The claim of Ricardo that he was indebted to Dolores was never
established. On the contrary, the testimony of Dolores is more in accord with reason and
clearly disproves Ricardo's gratuitous allegations.

Trust is a fiduciary relationship with respect to property which involves the existence
of equitable duties imposed upon the holder of the title to the property to deal with it for the
benefit of another. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is known as the
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trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary or cestui que trust. Trust is either express or implied. Express trust is created by
the intention of the trustor or of the parties. Implied trust comes into being by operation of
law. The latter kind or neither constructive or resulting trust. A constructive trust is imposed
where a person holding title to property is subject to an equitable duty to convey it to
another on the ground that he would be unjustly enriched if he were permitted to retain it.
The duty to convey the property arises because it was acquired through fraud, duress, undue
influence or mistake, or through breach of a fiduciary duty, or through the wrongful
disposition of another's property. On the other hand, a resulting trust arises where a person
makes or causes to be made a disposition of property under circumstances which raise an
inference that he does not intend that the person taking or holding the property should have
the beneficial interest in the property. It is founded on the presumed intention of the parties,
and as a general rule, it arises where, and only where such may be reasonably presumed to be
the intention of the parties, as determined from the facts and circumstances existing at the
time of the transaction out of which it is sought to be established.

In the present case, Dolores provided the money for the purchase of Lot 20 but the
corresponding deed of sale and transfer certificate of title were placed in the name of
Ricardo Huang because she was advised that the subdivision owner prohibited the acquisition
of two (2) lots by a single individual. Guided by the foregoing definitions, the Supreme Court
is in conformity with the common finding of the lower courts that a resulting trust was
created. Ricardo became the trustee of Lot 20 and its improvements for the benefit of
Dolores as owner. The pertinent law is Art. 1448 of the New Civil Code which provides that
there is an implied trust when property is sold and the legal estate is granted to one party but
the price is paid by another for the purpose of having the beneficial interest for the property.
A resulting trust arises because of the presumption that he who pays for a thing intends a
beneficial interest therein for himself.

Petitioners state prefatorily in their petition that this case involves sibling oppression.
The Supreme Court states that it does not. Rather, it is a battle between greed and thirst for
justice, between a fortunate sister and a less fortunate brother, with the latter taking
advantage of the former's bounty.
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Erlinda Pilapil vs. Heirs of Briones
G.R No. 150175, February 5, 2007

Facts:
Petitioners are the heirs of the late Donata Ortiz-Briones (Donata), consisting of her
surviving sister, Rizalina Ortiz-Aguila (Rizalina); Rizalina’s daughter, Erlinda Pilapil (Erlinda);
and the other nephews and nieces of Donata,. Respondents, on the other hand, are the heirs
of the late Maximino Briones (Maximino), composed of his nephews and nieces, and
grandnephews and grandnieces, in representation of the deceased siblings of Maximino.

Maximino was married to Donata but their union did not produce any children. When
Maximino died, Donata instituted intestate proceedings to settle her husband’s estate, which
then issued appointed Donata as the administratrix of Maximino’s estate. Donata died. Erlinda
instituted a petition for the administration of the intestate estate of Donata. Erlinda and her
husband, Gregorio, were appointed as administrators of Donata’s intestate estate.

Silverio Briones, a nephew of Maximino, filed for Letters of Administration for the
intestate estate of Maximino, which was initially granted. The trial court also issued an order,
allowing Silverio to collect rentals from Maximino’s properties. But then, Gregorio filed with
the RTC a Motion to Set Aside the Order, claiming that the said properties were already under
his and his wife’s administration as part of the intestate estate of Donata. Silverio’s Letters of
Administration for the intestate estate of Maximino was subsequently set aside by the RTC.

The heirs of Maximino filed a complaint against the heirs of Donata for the partition,
annulment, and recovery of possession of real property. They alleged that Donata, as
administratrix of the estate of Maximino, through fraud and misrepresentation, in breach of
trust, and without the knowledge of the other heirs, succeeded in registering in her name the
real properties belonging to the intestate estate of Maximino. Furthermore, the facts show
that after Donata’s death, Erlinda took possession of the real properties, and continued to
manage the same and collect the rental fees thereon. Donata and, subsequently, Erlinda,
were so obviously exercising rights of ownership over the real properties, in exclusion of all
others, which must have already put the heirs of Maximino on guard if they truly believed
that they still had rights thereto.

The heirs of Maximino knew he died on 1 May 1952. They even attended his wake.
They did not offer any explanation as to why they had waited 33 years from Maximino’s death
before one of them, Silverio, filed a Petition for Letters of Administration for the intestate
estate of Maximino on 21 January 1985. After learning that the intestate estate of Maximino
was already settled in aspecial proceeding, they waited another two years, before instituting,
on 3 March 1987, a complaint for partition, annulment and recovery of the real property
belonging to the estate of Maximino.

Issue: Was the respondents’ right to recover possession of the disputed properties, based on
implied trust, barred by laches?

Decision:
YES. Respondents’ right to recover possession of the disputed properties, based on
implied trust, is also barred by laches.
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Considering the circumstances in the afore-quoted paragraphs, as well as respondents’
conduct before this Court, particularly the belated submission of evidence and argument of
new issues, respondents are consistently displaying a penchant for delayed action, without
any proffered reason or justification for such delay.

It is well established that the law serves those who are vigilant and diligent and not
those who sleep when the law requires them to act. The law does not encourage laches,
indifference, negligence or ignorance. On the contrary, for a party to deserve the
considerations of the courts, he must show that he is not guilty of any of the aforesaid
failings.
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MIGUEL J. OSSORIO PENSION FOUNDATION, INCORPORATED vs. COURT OF APPEALS
G.R. No. 162175, June 28, 2010

Facts:
Petitioner, a non-stock and non-profit corporation, was organized for the purpose of
holding title to and administering the employees’ trust or retirement funds (Employees’ Trust
Fund) established for the benefit of the employees of Victorias Milling Company, Inc. (VMC).5
Petitioner, as trustee, claims that the income earned by the Employees’ Trust Fund is tax
exempt under Section 53(b) of the National Internal Revenue Code (Tax Code).

Petitioner alleges that on 25 March 1992, petitioner decided to invest part of the
Employees’ Trust Fund to purchase a lot6 in the Madrigal Business Park (MBP lot) in Alabang.
Petitioner alleges that its investment in the MBP lot came about upon the invitation of VMC,
which also purchased two lots. Petitioner claims that its share in the MBP lot is 49.59%.
Petitioner’s investment manager, the Citytrust Banking Corporation (Citytrust),8 in submitting
its Portfolio Mix Analysis, regularly reported the Employees’ Trust Fund’s share in the MBP lot.
VMC eventually sold the MBP lot to Metrobank.

Petitioner alleges that the parties who co-owned the MBP lot executed a notarized
Memorandum of Agreement as to the proceeds of the sale. Petitioner claims that it is a co-
owner of the MBP lot as trustee of the Employees’ Trust Fund, based on the notarized
Memorandum of Agreement presented before the appellate courts. Petitioner asserts that
VMC has confirmed that petitioner, as trustee of the Employees’ Trust Fund, is VMC’s co-
owner of the MBP lot. Petitioner maintains that its ownership of the MBP lot is supported by
the excerpts of the minutes and the resolutions of petitioner’s Board Meetings. Petitioner
further contends that there is no dispute that the Employees’ Trust Fund is exempt from
income tax.

Issue: Whether they have sufficiently established that the Employees’ Trust Fund is the
beneficial owner of 49.59% of the MBP lot, and thus entitled to tax exemption for its share in
the proceeds from the sale of the MBP lot.

Decision:
YES. The law expressly allows a co-owner (first co-owner) of a parcel of land to
register his proportionate share in the name of his co-owner (second co-owner) in whose
name the entire land is registered. The second co-owner serves as a legal trustee of the first
co-owner insofar as the proportionate share of the first co-owner is concerned. The first co-
owner remains the owner of his proportionate share and not the second co-owner in whose
name the entire land is registered. Article 1452 of the Civil Code provides:

Art. 1452. If two or more persons agree to purchase a property and by common consent the
legal title is taken in the name of one of them for the benefit of all, a trust is created by
force of law in favor of the others in proportion to the interest of each.

For Article 1452 to apply, all that a co-owner needs to show is that there is "common
consent" among the purchasing co-owners to put the legal title to the purchased property in
the name of one co-owner for the benefit of all. Once this "common consent" is shown, "a
trust is created by force of law." The BIR has no option but to recognize such legal trust as
well as the beneficial ownership of the real owners because the trust is created by force of
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law. The fact that the title is registered solely in the name of one person is not conclusive
that he alone owns the property.

Thus, this case turns on whether petitioner can sufficiently establish that petitioner,
as trustee of the Employees’ Trust Fund, has a common agreement with VMC and VFC that
petitioner, VMC and VFC shall jointly purchase the MBP lot and put the title to the MBP lot in
the name of VMC for the benefit petitioner, VMC and VFC.

We rule that petitioner, as trustee of the Employees’ Trust Fund, has more than
sufficiently established that it has an agreement with VMC and VFC to purchase jointly the
MBP lot and to register the MBP lot solely in the name of VMC for the benefit of petitioner,
VMC and VFC.

No particular words are required for the creation of a trust, it being sufficient that a
trust is clearly intended.36 It is immaterial whether or not the trustor and the trustee know
that the relationship which they intend to create is called a trust, and whether or not the
parties know the precise characteristic of the relationship which is called a trust because
what is important is whether the parties manifested an intention to create the kind of
relationship which in law is known as a trust.37

The fact that the TCT, Deed of Absolute Sale and the Remittance Return were in
VMC’s name does not forestall the possibility that the property is owned by another entity
because Article 1452 of the Civil Code expressly authorizes a person to purchase a property
with his own money and to take conveyance in the name of another.

Since the MBP lot was registered in VMC’s name only, a resulting trust is created by
operation of law. A resulting trust is based on the equitable doctrine that valuable
consideration and not legal title determines the equitable interest and is presumed to have
been contemplated by the parties.39 Based on this resulting trust, the Employees’ Trust Fund
is considered the beneficial co-owner of the MBP lot.

Petitioner has sufficiently proven that it had a "common consent" or agreement with
VMC and VFC to jointly purchase the MBP lot. The absence of petitioner’s name in the TCT
does not prevent petitioner from claiming before the BIR that the Employees’ Trust Fund is
the beneficial owner of 49.59% of the MBP lot and that VMC merely holds 49.59% of the MBP
lot in trust, through petitioner, for the benefit of the Employees’ Trust Fund.
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FELICIANO NITO vs. COURT OF APPEALS
G.R. No. 102657 August 9, 1993

Facts:
The former Agricultural Credit Administration (ACA), now the Land Bank, owned three
parcels of land in Bangkal, Meycauayan, Bulacan. Petitioner used to lease a portion of the
said lots. When the lease expired, ACA put up the parcels of land for sale at a public bidding
scheduled on March 22, 1979.

Conrado Villarama, Renato Carlos, Soledad de Guzman, Rosita de Leon, Lamberto

Angeles, Pedro Nicolas, Crisanta Miranda, Encarnacion Eribal, Bonifacio Pascual, and Andrea
Pascual expressed interest in participating in the bidding. The ACA told them to organize
themselves as a group and to appoint their representative because it did not deal with
individuals. After forming their alliance to deal with ACA, they appointed private respondent
Conrado Villarama to be their representative. Each member also contributed money to raise
P133,000.00 which was deposited as the bid bond. Petitioner was included in the group
because he also occupied a portion of the ACA property. He, however, did not contribute to
the bid bond.

On March 22, 1979, Villarama was the only bidder at the public bidding. The Bids and
Awards Committee advised him to negotiate directly with the ACA Central Office in Manila.
Subsequently, the bid bond was withdrawn and was redeposited as performance bond. The
group also formalized their, alliance in a manifesto, wherein they also authorized Villarama
to negotiate with ACA for the purchase of the property. Petitioner was not a signatory to the
manifesto. On September 10, 1979, he gave Villarama a cash deposit amounting to
P10,000.00.

As agreed, the members of the group met on March 16, 1982 and paid Villarama their
respective shares. Petitioner did not attend the meeting; neither did he pay his share. The
reason he gave for his non-payment was that he wanted a lot with a frontage of 32 meters but
he was only being given a lot with a 12- meter frontage. Instead of coursing his payment
through Villarama, petitioner went to ACA and tendered P125,000.00 in cheek as payment for
his lot. ACA did not accept the payment but instead told him to give the same to Villarama.

On March 17, 1982, the group waited for petitioner until 5:00 P.M. to give him a
chance to pay but he failed to appear. So the group used Milan's money to help pay the full
purchase price minus the cash deposit of P133,500.00. Afterwards, ACA issued the Deed of
Sale to Villarama, who caused the resurvey of the property and the issuance of the
corresponding deeds of sale and certificates of title to the individual buyers.

Issue: Is Villarama, by virtue of his deposit, a co-purchaser or co-owner of the property, thus
his non-payment of his full share on the purchase price should not result in the forfeiture of
his right as co-purchaser?

Decision:
The petition is anchored on Article 1452 of the Civil Code of the Philippines, which
provides:
If two or more persons agree to purchase property and by common consent the legal
title is taken in the name of one of them for the benefit of all, a trust is created by force of
law in favor of the others in proportion to the interests of each.
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Article 1452 presupposes the concurrence of two requisites before an implied or
resulting trust can be created. First, that two or more persons agree to purchase a property
and second, that they consent that one should take the title in his name for everyone's
benefit.

The evidence on record does not show that petitioner had agreed to join the group
organized to purchase the parcels of land from ACA. Rather, the evidence shows that while
petitioner was offered to join the group, he rejected the offer because of a disagreement on
the frontage of the portion to be alloted to him and he preferred to negotiate directly with
ACA.

Petitioner, did not contribute his share to the amount deposited with ACA as bid bond.
He did not sign the manifesto, the formal agreement to organize the group, to negotiate with
ACA in the purchase of the parcels of land.

While it, is true that petitioner gave Villarama P10,000.00 as deposit, the deposit was
conditioned on his being given a lot with a frontage of 32 meters, not one with a frontage of
only 12 meters as was offered to him by the group. Petitioner's claim that he did not receive
the letter of the group asking for payment of his share is belied by the return card signed by
his wife.
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NESTOR MENDIZABEL et. al. vs. FERNANDO APAO and TEOPISTA PARIDELA-APAO
G.R. No. 420427, July 1, 2012

Facts:
On 21 March 1955, Fernando Apao (Fernando) purchased from spouses Magbanua
(vendors) a parcel of land with an area of 61,616 square meters (property) situated in
Malangas, Zamboanga del Sur. Fernando bought the property in a pacto de retro sale. The
vendors failed to repurchase the property. Fernando thus took possession of the same. After
surveys, Fernando immediately filed an application with the Bureau of Lands for a free
patent. Fernando learned that Ignacio Mendizabel (Ignacio) had filed prior to the Bureau of
Lands survey a homestead application over a part of his land subdivided as Lot 1080. Thus,
Fernando became the claimant-protestant in Ignacio's application but thhe Bureau of Lands
rendered a decision awarding Lot No. 1080 to Ignacio.

On appeal, the Secretary of Agriculture and Natural Resources modified the decision of
the Bureau of Lands. Dissatisfied with the decision of the Secretary of Agriculture and Natural
Resources, Fernando appealed to the Office of the President. Fernando did not receive any
notice of the decision on his appeal. Later, Fernando found out that Lot No. 1080 had been
partitioned between Ignacio and his son Nestor Mendizabel (Nestor) and was titled
accordingly. In 1987, Fernando and his wife Teopista Paridela-Apao (respondents) filed before
the trial court a complaint for Annulment of Titles, Reconveyance and Damages against
spouses Nestor and Elizabeth Mendizabel and spouses Ignacio Mendizabel and Adelina Villamor
(petitioners). Sps Fernando alleged that they are actually cultivating the property in dispute
when the petitioners applied for a homestead patent, that petitioners acquired the titles
through fraud. The RTC and the Court of Appeals ruled in favor of Sps. Fernando. The Court of
Appeals ruled that the doctrine of implied trust as enunciated in Article 1456 of the Civil
Code operates in favor of respondents.

Issue: Is their existence of implied trust in this case?

Decision:

YES. The act of petitioners in misrepresenting that they were in actual possession and
occupation of the property, obtaining patents and original certificates of title in their names,
created an implied trust in favor of the actual possessors of the property. The Civil Code
provides:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the person
from whom the property comes.

In other words, if the registration of the land is fraudulent, the person in whose name
the land is registered holds it as a mere trustee, and the real owner is entitled to file an
action for reconveyance of the property. Petitioners would nonetheless insist that
respondents failed to present any proof of fiduciary relation between them and respondents
and breach of such trust by petitioners.

Whether there is fiduciary relation between petitioners and respondents is of no

moment. Construing the provision of Article 1456, the Court in Aznar Brothers Realty
Company v. Aying. A constructive trust, unlike an express trust, does not emanate from, or
generate a fiduciary relation. While in an express trust, a beneficiary and a trustee are linked
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by confidential or fiduciary relations, in a constructive trust, there is neither a promise nor
any fiduciary relation to speak of and the so-called trustee neither accepts any trust nor
intends holding the property for the beneficiary.

Implied trusts are those which, without being expressed, are 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 of the particular intention of the
parties. In turn, implied trusts are either resulting or constructive trusts. 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.
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SPS. FELIZA DUYAN GOMEZ and EUGENIO GOMEZ vs. PURISIMA DUYAN
G.R. No. 144148. March 18, 2005

Facts:
The property in dispute is a 800 sqm lot. One-half of the property was in the name of
petitioner spouses (Feliza and Eugenio). Eulogio Duyan and Feliza Duyan are siblings. In his
desire to help his sister, Eulogio allowed her to construct a house on the disputed lot
sometime in 1968.

Feliza acknowledged the fact that the disputed property was owned by Eulogio and
that they were staying in the disputed property solely due to his benevolence.

To that effect, an instrument was executed by the siblings providing that in the event
that the property will be registered in Feliza’s name, she will continue to acknowledge
Eulogio as the owner and will never assert ownership over the same, except in accordance
with her brothers wishes.

Afterwards, a deed of sale covering the residential house situated on the disputed lot
was executed by Eulogio and Regina Velasquez (common-law wife of the former) in favor of
Feliza for 1K. Thereafter, petitioners allegedly asserted ownership not only over the said
house but over the whole lot. This prompted Eulogio’s legal wife, Purisima, to file a
complaint for recovery of possession and damages against petitioners with the CFI.

The trial court ordered petitioners to surrender possession of the property to her. CA
dismissed the case after the parties entered into an amicable settlement.

On 25 January 1978, Eulogio and Purisima (legal wife) executed a Deed of Absolute
Sale in favor of petitioners with respect to the disputed lot for the sum of 20K. Purisima
claims that the deed of sale was executed merely to give color of legality to petitioners stay
in the disputed property so that she and her children will not drive them away. However,
Feliza contends that the sale was freely agreed upon by the parties hence, it was authentic
and validly executed.

Subsequent to the execution of the deed of sale, another Pagpapahayag was executed
between Eulogio and Feliza, where the latter acknowledged that the lot subject of the deed
of sale will eventually be transferred to respondents herein who are her nephews and nieces
and the children of Eulogio.

Notwithstanding the second Pagpapahayag, petitioners caused the registration of the

deed of sale with the Register of Deeds and a TCT was issued in the name of petitioners.
Respondents filed a suit for reconveyance of real property and cancellation of TCT.

RTC dismissed the complaint. CA reversed the decision and held that an implied trust
arose in favor of respondents over the disputed property by virtue of the Pagpapahayag. It
held that the action for reconveyance of property was properly filed by respondents against
petitioners.

Issue: Was there an implied trust in favour of the respondent warranting the action for
reconveyance proper?
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Decision:
YES. The CA did not err in ordering the reconveyance of the property in dispute. As
found by the appellate court, the trial court failed to consider the law on trusts despite the
existence of uncontroverted evidence establishing the creation of a trust as it anchored its
decision solely on the indefeasibility of title aspect.

In express terms, Feliza undertook in the subsequent Pagpapahayag to convey the

property subject of the fictitious deed of sale to her own nephews and nieces who are the
children of her brother Eulogio.

Based on the clear provisions of this document, the intent of the siblings to create a
trust was manifest with Eulogio as the trustor, Feliza as the trustee and Eulogios children as
the beneficiaries or the cestui qui trust of the res which was the disputed property.

This is based on the provision of the law on trusts which states that:

Art. 1440. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is known as the
trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary.

It was clearly intended therein by Eulogio and Feliza that the property subject of the
sale will subsequently be placed by the latter in the name of respondents, thus creating a
trust relationship over the property in dispute. Even if the word trust was not expressly used
by the signatories to the 10 February 1978 Pagpapahayag and the document did not expressly
state that a trust was being established by reason thereof, the establishment of an express
trust cannot be discounted.

Under the Civil Code, No particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended.