operating contract which as renewed expired in 1947.
Under the terms thereof,
Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co. Case Digest
Nielson & Co. Inc. vs. Lepanto Consolidated Mining Co.
[GR L-21601, 28 December 1968]
Facts: [GR L-21601, 17 December 1966; Zaldivar (J): 6 concur, 2 took no
part] An operating agreement was executed before World War II (on 30
January 1937) between Nielson & Co. Inc. and the Lepanto Consolidated
Mining Co. whereby the former operated and managed the mining properties
owned by the latter for a management fee of P2,500.00 a month and a 10%
participation in the net profits resulting from the operation of the mining
properties, for a period of 5 years. In 1940, a dispute arose regarding the
computation of the 10% share of Nielson in the profits. The Board of Directors
of Lepanto, realizing that the mechanics of the contract was unfair to Nielson,
authorized its President to enter into an agreement with Nielson modifying the
pertinent provision of the contract effective 1 January 1940 in such a way that
Nielson shall receive (1) 10% of the dividends declared and paid, when and as
paid, during the period of the contract and at the end of each year, (2) 10% of
any depletion reserve that may be set up, and (3) 10% of any amount expended
during the year out of surplus earnings for capital account. In the latter part of
1941, the parties agreed to renew the contract for another period of 5 years,
but in the meantime, the Pacific War broke out in December 1941. In January
1942 operation of the mining properties was disrupted on account of the war.
In February 1942, the mill, power plant, supplies on hand, equipment,
concentrates on hand and mines, were destroyed upon orders of the United
States Army, to prevent their utilization by the invading Japanese Army.
The Japanese forces thereafter occupied the mining properties, operated the
mines during the continuance of the war, and who were ousted from the mining
properties only in August 1945. After the mining properties were liberated
from the Japanese forces, LEPANTO took possession thereof and embarked
in rebuilding and reconstructing the mines and mill; setting up new
organization; clearing the mill site; repairing the mines; erecting staff quarters
and bodegas and repairing existing structures; installing new machinery and
equipment; repairing roads and maintaining the same; salvaging equipment
and storing the same within the bodegas; doing police work necessary to take
care of the materials and equipment recovered; repairing and renewing the
water system; and retimbering. The rehabilitation and reconstruction of the
mine and mill was not completed until 1948. On 26 June 1948 the mines
resumed operation under the exclusive management of LEPANTO. Shortly
after the mines were liberated from the Japanese invaders in 1945, a
disagreement arose between NIELSON and LEPANTO over the status of the
the management contract shall remain in suspense in case fortuitous event or
force majeure, such as war or civil commotion, adversely affects the work of
mining and milling. On 6 February 1958, NIELSON brought an action against
LEPANTO before the Court of First Instance of Manila to recover certain sums
of money representing damages allegedly suffered by the former in view of
the refusal of the latter to comply with the terms of a management contract
entered into between them on 30 January 1937, including attorney's fees and
costs. LEPANTO in its answer denied the material allegations of the complaint
and set up certain special defenses, among them, prescription and laches, as
bars against the institution of the action.
After trial, the court a quo rendered a decision dismissing the complaint with
costs. The court stated that it did not find sufficient evidence to establish
LEPANTO's counterclaim and so it likewise dismissed the same. NIELSON
appealed. The Supreme Court reversed the decision of the trial court and enter
in lieu thereof another, ordering Lepanto to pay Nielson (1) 10% share of cash
dividends of December, 1941 in the amount of P17,500.00, with legal interest
thereon from the date of the filing of the complaint; (2) management fee for
January, 1942 in the amount of P2,500.00, with legal interest thereon from the
date of the filing of the complaint; (3) management fees for the sixty-month
period of extension of the management contract, amounting to P150,000.00,
with legal interest from the date of the filing of the complaint; (4) 10% share
in the cash dividends during the period of extension of the management
contract, amounting to P1,400,000.00, with legal interest thereon from the date
of the filing of the complaint; (5) 10% of the depletion reserve set up during
the period of extension, amounting to P53,928.88, with legal interest thereon
from the date of the filing of the complaint; (6) 10% of the expenses for capital
account during the period of extension, amounting to P694,364.76, with legal
interest thereon from the date of the filing of the complaint; (7) to issue and
deliver to Nielson and Co. Inc. shares of stock of Lepanto Consolidated Mining
Co. at par value equivalent to the total of Nielson's 10% share in the stock
dividends declared on November 28, 1949 and August 22, 1950, together with
all cash and stock dividends, if any, as may have been declared and issued
subsequent to November 28, 1949 and August 22, 1950, as fruits that accrued
to said shares; provided that if sufficient shares of stock of Lepanto's are not
available to satisfy this judgment, Lepanto shall pay Nielson an amount in cash
equivalent to the market value of said shares at the time of default, that is, all
shares of stock that should have been delivered to Nielson before the filing of
the complaint must be paid at their market value as of the date of the filing of
the complaint; and all shares, if any, that should have been delivered after the
filing of the complaint at the market value of the shares at the time Lepanto
disposed of all its available shares, for it is only then that Lepanto placed itself approval of Lepanto. It is clear, therefore, that even in these cases Nielson
in condition of not being able to perform its obligation; (8) the sum of could not execute juridical acts which would bind Lepanto without first
P50,000.00 as attorney's fees; and (9) the costs. securing the approval of Lepanto. Nielson, then, was to act only as an
intermediary, not as an agent. Further, from the statements in the annual report
Lepanto seeks the reconsideration of the decision rendered on 17 December for 1936, and from the provision of paragraph XI of the Management contract,
1966. that the employment by Lepanto of Nielson to operate and manage its mines
was principally in consideration of the know-how and technical services that
Issue: Whether the management contract is a contract of agency or a contract Nielson offered Lepanto. The contract thus entered into pursuant to the offer
of lease of services. made by Nielson and accepted by Lepanto was a "detailed operating contract".
It was not a contract of agency. Nowhere in the record is it shown that Lepanto
Held: Article 1709 of the Old Civil Code, defining contract of agency, considered Nielson as its agent and that Lepanto terminated the management
provides that "By the contract of agency, one person binds himself to render contract because it had lost its trust and confidence in Nielson.
some service or do something for the account or at the request of another."
Article 1544, defining contract of lease of service, provides that "In a lease of
work or services, one of the parties binds himself to make or construct
something or to render a service to the other for a price certain." In both agency
and lease of services one of the parties binds himself to render some service to
the other party. Agency, however, is distinguished from lease of work or
services in that the basis of agency is representation, while in the lease of work
or services the basis is employment. The lessor of services does not represent
his employer, while the agent represents his principal. Further, agency is a
preparatory contract, as agency "does not stop with the agency because the
purpose is to enter into other contracts." The most characteristic feature of an
agency relationship is the agent's power to bring about business relations
between his principal and third persons. "The agent is destined to execute
juridical acts (creation, modification or extinction of relations with third
parties). Lease of services contemplate only material (non-juridical) acts."
Herein, the principal and paramount undertaking of Nielson under the
management contract was the operation and development of the mine and the
operation of the mill. All the other undertakings mentioned in the contract are
necessary or incidental to the principal undertaking these other
undertakings being dependent upon the work on the development of the mine
and the operation of the mill. In the performance of this principal undertaking
Nielson was not in any way executing juridical acts for Lepanto, destined to
create, modify or extinguish business relations between Lepanto and third
persons. In other words, in performing its principal undertaking Nielson was
not acting as an agent of Lepanto, in the sense that the term agent is interpreted
under the law of agency, but as one who was performing material acts for an
employer, for a compensation. It is true that the management contract provides
that Nielson would also act as purchasing agent of supplies and enter into
contracts regarding the sale of mineral, but the contract also provides that
Nielson could not make any purchase, or sell the minerals, without the prior
 1923, making use of the power conferred by his brother, Po Ejap sold
Topic: Agency absolutely said land to Katigbak.
1924, Po Tecsi wrote Po Ejap, promising to remit the balance of the
Case Title: Katigbak v. Tai hing co rents (meaning, Tecsi became a lessee).
Date: December 29, 1928 Nov 1926, Po Tecsi died and his son Po Sun Suy was appointed
administrator of Tecsi's estate in 1927.
Ponente: Villa-real, J. In Dec 1926, Po Sun Suy submitted to Po Ejap a liquidation of
accounts showing rents collected on the property.
Legal Doctrine:
Later, Katigbak sold the property to Po Sun Boo (son of Po Ejap).
The power is general and authorizes Gabino Po Ejap to sell any kind of realty As Po Tecsi had not paid a part of the rent due up to the time of his death, and
"belonging" (pertenezcan) to the principal. The use of the subjunctive his son Sun Suy also, rent due from his father's death until
"pertenezcan" (might belong) and not the indicative "pertenecen" (belong),
means that Po Tecsi meant not only the property he had at the time of the
execution of the power, but also such as he might afterwards have during the
time it was in force.
While it is true that a power of attorney not recorded in the registry of deeds is
ineffective in order that an agent or attorney-in-fact may validly perform acts
in the name of his principal, and that any act performed by the agent by virtue
of said' power with respect to the land is ineffective against a third person who,
in good faith, may have acquired a right thereto, it does, however, bind the
principal to acknowledge the acts performed by his attorney-in-fact regarding
said property.
Facts:

Po Ejap was the owner of a titled land w/c was mortgaged to PNB in
1919
1921, Po Tecsi executed a general power of attorney in favor of his
brother Po Ejap to perform on his behalf the ff: "to buy, sell, or barter,
assign, admit in acquittance or in any other manner to acquire or
convey all sorts of property, real and personal, businesses and
industries, credits, rights, and actions belonging to me, for whatever
prices and under the conditions which he may stipulate, paying and
receiving payment in cash or in installments, and to execute the proper
instruments with the formalities provided by the law."
Po Tecsi executed a document acknowledging an indebtedness to his
brother Po Ejap of 68K, the price of the properties w/c the latter sold
to him.
Po Ejap then sold the said land with its improvements to his brother
Po Tecsi for the sum of P10,000.
 of the execution of the power, but also such as he might afterwards have during
the time it was in force.
Katigbak v. Tai Hing Co. (December 29, 1928)
Under Act 496, every document which in any manner affects the registered
(Po Sun Suy and Po Ching are owners of the commercial firm Tai Hing Co.) land is ineffective unless it is recorded in the registry of deeds. But such
inefficacy only refers to third persons who, in good faith, may have acquired
FACTS: Po Ejap was the owner of a titled land w/c was mortgaged to PNB in
some right to the registered land. While it is true that a power of attorney not
1919-1921, Po Tecsi executed a general power of attorney in favor of his
recorded in the registry of deeds is ineffective in order that an agent or
brother Po Ejap to perform on his behalf the ff: "to buy, sell, or barter, assign,
attorney-in-fact may validly perform acts in the name of his principal, and that
admit in acquittance or in any other manner to acquire or convey all sorts of
any act performed by the agent by virtue of said' power with respect to the land
property, real and personal, businesses and industries, credits, rights, and
is ineffective against a third person who, in good faith, may have acquired a
actions belonging to me, for whatever prices and under the conditions which
right thereto, it does, however, bind the principal to acknowledge the acts
he may stipulate, paying and receiving payment in cash or in installments, and
performed by his attorney-in-fact regarding said property.
to execute the proper instruments with the formalities provided by the law."
In the present case, while it is true that the non-registration of the power of
Po Ejap then sold the said land with its improvements to his brother Po Tecsi
attorney executed by Po Tecsi in favor of his brother Gabino Barreto Po Ejap
for the sum of P10,000. In 1923, making use of the power conferred by his
prevents the sale made by the latter of the litigated land in favor of Jose M.
brother, Po Ejap sold absolutely said land to Katigbak. After said sale, Po Tecsi
Katigbak from being recorded in the registry of deeds, it is not ineffective to
leased the property sold, from Gabino Barreto Po Ejap, who administered it in
compel Tecsi to acknowledge said sale.
the name of Jose M. Katigbak, at a rental of P1,500 per month, payable in
advance, leaving unpaid the rents accrued from that date until his death which
occurred on November 26, 1926, having paid the accrued rents up to October
22, 1925; from November 26, 1926, the defendants Po Sun Suy and Po Ching
leased said land for the sum of P1,500 per month; on February 11, 1927, Po
Sun Suy was appointed administrator of the estate of his father Po Tecsi, and
filed with the court an inventory of said estate including the land in question;
and on May 23, 1927, Jose M. Katigbak sold the same property to Po Sun Boo,
Katigbak filed this action for the recovery of the rent. Po Sun Suy contends
that Katigbak is not the owner of the property (so not entitled to rents) because
Po Ejap was not authorized under the power executed by Po Tecsi to sell said
land, because said power had been executed before Po Ejap sold said land to
Tecsi.
ISSUES: WON Po Ejap cannot have sold the property (on behalf of Tecsi)
because the power was executed by Tecsi before Tecsi owned the property.
RULING: The power is general and authorizes Gabino Po Ejap to sell any
kind of realty "belonging" (pertenezcan) to the principal. The use of the
subjunctive "pertenezcan" (might belong) and not the indicative "pertenecen"
(belong), means that Po Tecsi meant not only the property he had at the time
 property, or its proceeds, to the payment of debts owing by the principal to the
4.) PNB vs. Welch, Fairland & Co., Inc. (GR. L-19689, April 04, 1923) agent; and the circumstance that the principal assents to such application of the
property does not alter the case.

Facts:

Welch, Fairland & Co., Inc., a corporation and a shareholder of La Compania

Naviera, Inc., another corporation and engaged in the business of marine
shipping. They applied to PNB a loan of $125,000 to purchase a boat called
Benito Juarez found in the US market. Welch acting as an agent of La
Compania sent a cablegram from USA to PNB in the Philippines asking for
release of the loan of $125,000 as purchase price for the boat. In preparation
for the boats arrival, Welch took an insurance policy of $150,000. While the
boat is on its voyage to the Philippines, it was capsized due to a storm. Welch
collected the insurance with consent of La Compania.PNB is claiming from
Welch the $125,000 with interest. Lower court absolved Welch Co. PNB
appealed.

Issue:
Whether or not Welch Co. Should turnover the collected proceeds from the
insurance policy to PNB?

Held:
Yes. Welch Co. indeed acted only as agent in writing and sending the
cablegram, however, has intervened in the making of a contract in the character
of agent cannot be permitted to intercept and appropriate the thing which the
principal is bound to deliver, and thereby make performance by the principal
impossible. The agent in any event must be precluded from doing any positive
act that could prevent performance on the part of his principal. Despite the
promise held out jointly by principal and agent in the letters, the two have
conspired to make an application of the proceeds of the insurance entirely
contrary to the tenor of said letters. Under the New Civil Code, An agent who
obligates his principal to deliver specific property to a third party may not
thereafter, to the prejudice of such third party, appropriate and apply the same

ALBALADEJO Y CIA., S. EN C. v. PHILIPPINE REFINING CO.
[PRC]
1923 / Street
FACTS
Albaladejo y Cia is a limited partnership, which was engaged in the buying
and selling of copra in Legaspi, and in the conduct of a general mercantile
business. Visayan Refining Co. [PRCs successor] was engaged in operating
its extensive plant for the manufacture of coconut oil.
On August 1918, Albaladejo made a contract with the Visayan
Refining, wherein they agreed that VRC will buy for a period of 1 year all
the copra that Albaladejo purchased in Albay. It was also agreed upon
that during the continuance of the contract, VRC will not appoint any other
agent for the purchase of copra in Legaspi, nor buy copra from any
vendor in the same place. In addition, VRC would provide transportation
for the copra delivered to it by Albaladejo.
At the end of said year, both parties found themselves satisfied with
the existing arrangement, and they continued by tacit consent to govern
their future relations by the same agreement. On July 9, 1920, VRC
closed down its factory at Opon and withdrew from the copra market.
After VRC ceased to buy copra, the copra supplies already purchased
by Albaladejo were gradually shipped out and accepted by the VRC, and in
the course of the next 8-10 months, the accounts between the two parties
were liquidated. The last account rendered by VRC to Albaladejo showed a
balance of P288 in favor of VRC. Albaladejo addressed a letter to the PRC
(which had now succeeded to the rights and liabilities of VRC), expressing
its approval of said account.
Albaladejo filed a complaint against PRC, seeking to recover
P110k, the alleged amount that Albaladejo spent in maintaining and
extending its organization. Albaladejo alleges that such maintenance and
extension was made at the express request of PRC. On the other hand, PRC
contends that the contract between them created the relation of
principal and agent; therefore, the principal should indemnify the agent for
damages incurring in carrying out the agency. The lower court ruled in
favor of Albaladejo, but granted only 30% of the amount prayed for, in view
of the fact that Albaladejos transactions in copra amounted in the past to
only about 30% of the total business it transacted.
ISSUE & HOLDING
WON the contract is one of agency. NO
RATIO
The relation between the parties was not that of principal and agent in so far
as relates to the purchase of copra by Albaladejo. While VRC made
Albaladejo one of its instruments for the collection of copra, in making its
purchases from the producers, Albaladejo was buying upon its own account.
When Albaladejo turned over the copra to VRC, a second sale was effected.
In the contract, it is declared that during the continuance of the
agreement, VRC would not appoint any other agent for the purchase of copra
in Legaspi; and this gives rise indirectly to the inference that Albaladejo was
considered its buying agent. However, the use of this term in one clause of
the contract cannot dominate the real nature of the agreement as revealed in
other clauses, no less than in the caption of the agreement itself. This
designation was used for convenience. The title to all of the copra purchased
by Albaladejo remained in it until it was delivered by way of subsequent sale
to VRC.
Lastly, the letters from VRC to Albaladejo that the Court quoted did
not indicate anything to the effect that VRC is liable for the such expenses
incurred by Albaladejo, as the letters only noted the dire condition of VRCs
copra business, as well as its hopes to enter the market on a more extensive
scale [which was unfortunately unrealized].

G.R. No. L-8169 December 29, 1913
ANTONIO M. A. BARRETTO, plaintiff-appellant,
vs.
JOSE SANTA MARINA, defendant-appellee.
TORRES, J.:
FACTS:
The plaintiff, Antonio M.A. Barretto, was an agent and manager of Jose Santa
Marina, the defendant, a resident of Spain and the owner and proprietor of the
business known as the La Insular Cigar and Cigarette Factory. The petitioner
alleged that the defendant, without reason, justification, or pretext and in
violation of the contract of agency, summarily and arbitrarily dispensed with
the plaintiff's services and removed him from the management of the business.
The evidence showed that the plaintiff Barretto's renunciation or registration
of the position he held as agent and manager of the said factory was freely and
voluntarily made by him on the occasion of the insolvency and disappearance
of a Chinese man who had bought from the factory products and, without
paying this large debt, disappeared and has not been seen since. Barretto sent
a letter of resignation to Santa Marina and Santa Marina did not immediately
reply and tell him of his decision on the matter. After several months, Barretto
was informed that the power conferred upon him by the defendant has been
revoked and the latter had already appointed J. McGavin to substitute him.
ISSUE:
Whether the contract of agency was validly revoked.
RULING:
Yes, the contract of agency between the plaintiff and the defendant is validy
revoked. Barretto was not really dismissed or removed by Santa Marina.
Rather, Barretto resigned as the defendants agent and manager as evidenced
by the letter he sent to the defendant.
Article 1733 of the civil Code, applicable to the case at bar, according to the
provisions of article 2 of the Code of Commerce, prescribes: "The principal
may, at his will, revoke the power and compel the agent to return the
instrument containing the same in which the authority was given."
Article 279 of the Code of Commerce provides: "The principal may revoke the
commission intrusted to an agent at any stage of the transaction, advising him
thereof, but always being liable for the result of the transactions which took
place before the latter was informed of the revocation."1awphi1.net
The contract of agency can subsist only so long as the principal has confidence
in his agent, because, from the moment such confidence disappears and
although there be a fixed period for the exercise of the office of agent, the
principal has a perfect right to revoke the power that he had conferred upon
the agent owing to the confidence he had in him and which for sound reasons
had ceased to exist.
The fixing of the period by the Courts in their contracts cannot be invoked
since the rights and obligations existing between Barretto and Santa Marina
are absolutely different from those to which it refers, for, according to article
1732 of the Civil Code, agency is terminated:
1. By revocation.
2. By withdrawal of the agent.
3. By death, interdiction, bankruptcy, or insolvency of the principal or
of the agent.
It is not incumbent upon the courts to fix the period during which contracts for
services shall last. Their duration is understood to be implicity fixed, in default
of express stipulation, by the period for the payment of the salary of the
employee.
Article 302 of the Code of Commerce reads thus:
In cases in which no special time is fixed in the contracts of service,
any one of the parties thereto may dissolve it, advising the other party
thereof one month in advance.
 The factor or shop clerk shall be entitled, in such case, to the salary
due for one month.

From the mere fact that the principal no longer had confidence in the agent, he
is entitled to withdraw it and to revoke the power he conferred upon the latter,
even before the expiration of the period of the engagement or of the agreement
made between them; but, in the present case, once it has been shown that,
between the deceased Joaquin Santa Marina and the latter's heir, now the
defendant, on the one hand, and the plaintiff Barretto, on the other, no period
whatever was stipulated during which the last-named should hold the office
and manager of the said factory, it is unquestionable that the defendant, even
without good reasons, could lawfully revoke the power conferred upon the
plaintiff and appoint in his place Mr. McGavin, and thereby contracted no
liability whatever other than the obligation to pay the plaintiff the salary
pertaining to one month and some odd days.

CONSEJO INFANTE v JOSE CUNANAN, Juan Mijares and the CA
31 Aug 1953 | Bautista-Angelo, J. | Topic: Obligations and liabilities of
principals to agents
FACTS:
Infante was the owner of two parcels of land, together with a house built
thereon, situated in Manila.
Infante contracted the services of Cunana and Mjiares to sell the above-
mentioned property for Php30,000 subject to the condition that the purchaser
would assume the mortgage existing thereon in favor of the Rehabilitation
Finance Corporation.
Infante agreed to pay them a commission of 5% on the purchaser
price plus whatever overprice they may obtain for the property.
Cunanan and Mijares found one Pio Noche who was willing to buy the
property under such terms.
When Noche was introduced to Infante, she informed them that
she was no longer interested in selling the property.
She made them sign a document stating that the written authority
she gave them was already cancelled.
A few weeks later, Infante dealt directly with Noche, selling him the property
for Php31,000.
Cunanan and Mijares demanded the payment of their
commission but Infante refused.
Infante admitted having contracted the service of Cunanan and Mijares to sell
her property but stated that she agreed to pay a commission of Php1,200 only
on condition that they buy her a property along Taft Avenue. While Cunanan
and Mijares took steps to selling her property as agreed upon, they sold the
property at Taft Avenue to another party which prompted her to cancel the
authority she gave them.
Lower court ruled in favor of Cunanan and Mijares and ordered Infante to
pay. CA affirmed in toto.
ISSUE: W/N petitioner has obligation to pay respondents - YES
Respondents were authorized by petitioner to sell her property with the
understanding that they will be given a commission plus whatever overprice
they may obtain. Infante avers that the authority has already been withdrawn
when, by voluntary act of respondents, they executed a document stating that
the authority shall be considered cancelled.
Under the old Civil Code, Infantes right to withdraw such authority is
recognized. A principa may withdraw the authority given to an agent at will.
However, respondents claim that although they agreed to cancel the written
authority, they did so upon the verbal assurance that should the property be
sold to Noche, they would be given the commission agreed upon.
There is enough justification to conclude that respondents are entitled to the
commission originally agreed upon. That petitioner had changed her mind
even if respondent had found a buyer who was willing to close the deal, is a
matter that would not give rise to a legal consequence if respondents agree to
call off the transactions. However, petitioner took advantage of the services
rendered by petitioner. Believing that she could evade payment of their
commission, she induced them to sign the deed of cancellation. This cannot
be sanctioned and cannot serve as basis for petitioner to escape payment of
the commission agreed upon.
Decision appealed from is affirmed.

G.R. No. L-20449
January 29, 1968
FACTS: Pablo Fabian bought from the Philippine Government lot 164 of the
Friar Lands Estate in Muntinlupa, Rizal. By virtue of this purchase, he was
issued sale certificate 547. He died on August 2, 1928, survived by four
children, namely, Esperanza, Benita I, Benita II, and Silbina.
On October 5, 1928 Silbina Fabian and Teodora Fabian, niece of the
deceased, executed an affidavit. On the strength of this affidavit, sale
certificate 547 was assigned to them.
The acting Director of Lands, on behalf of the Government, sold lot 164 to
Silbina Fabian Teodora Fabian. The vendees spouses forthwith took physical
possession thereof, cultivated it, and appropriated the produce. In that same
year, they declared the lot in their names for taxation purposes. In 1937 the
RD of Rizal issued a TCT over lot 164 in their names. They later subdivided
the lot into 2 equal parts.
The plaintiffs filed the present action for reconveyance against the
defendants spouses, averring that Silbina and Teodora,
through fraud perpetrated in their affidavit aforesaid. That by virtue of this
affidavit, the said defendants succeeded in having the sale certificate
assigned to them and thereafter in having lot 164 covered by said certificate
transferred in their names; and that by virtue also of these assignment and
transfer, the defendants succeeded fraudulently in having lot 164 registered
in their names. They further allege that the land has not been transferred to an
innocent purchaser for value. A reconveyance thereof is prayed for.
In their answer, the defendants spouses claim that Pablo Fabian was not the
owner of lot 164 at the time of his death on August 2, 1928 because he had
not paid in full the amortizations on the lot; that they are the absolute owners
thereof, having purchased it from the Government, and from that year having
exercised all the attributes of ownership thereof up to the present; and that
the present action for reconveyance has already prescribed. The dismissal of
the complaint is prayed for.
The lower court rendered judgment declaring that the defendants spouses had
acquired a valid and complete title to the property by acquisitive prescription,
and accordingly dismissed the complaint. The latters motion for
reconsideration was thereafter denied. Hence, the present recourse.
ISSUE:
(1) Was Pablo Fabian the owner of lot 164 at the time of his death, in the
face of the fact, admitted by the defendants-appellees, that he had not then
paid the entire purchase price thereof?
(2) May laches constitute a bar to an action to enforce a constructive trust?
(3) Has title to the land vested in the appellees through the mode of
acquisitive prescription?
HELD: The judgment a quo, dismissing the complaint, is affirmed
1. YES. Lot 164 was a part of the Friar Lands Estate of Muntinlupa, Rizal; its
sale to Pablo Fabian was therefore governed by Act 1120, otherwise known
as the Friar Lands Act. While under section 15 of the said Act, title to the
land sold is reserved to the Government until the purchaser makes full
paymentof all the required installments and the interest thereon, this
legal reservation refers to the bare, naked title. The equitable and
beneficial title really went to the purchaser the moment he paid the first
installment and was given a certificate of sale. The reservation of the title
in favor of the Government is made merely to protect the interest of the
Government so as to preclude or prevent the purchaser from encumbering or
disposing of the lot purchased before the payment in full of the purchase
price. Outside of this protection the Government retains no right as an
owner. For instance, after issuance of the sales certificate and pending
payment in full of the purchase price, the Government may not sell the lot to
another. It may not even encumber it. It may not occupy the land to use or
cultivate; neither may it lease it or even participate or share in its fruits. In
other words, the Government does not and cannot exercise the rights and
prerogatives of owner. And when said purchaser finally pays the final
installment on the purchase price and is given a deed of conveyance and a
certificate of title, the title at least in equity, retroacts to the time he first
occupied the land, paid the first installment and was issued the corresponding
certificate of sale. In other words, pending the completion of the payment
of the purchase price, the purchaser is entitled to all the benefits and
advantages which may accrue to the land as well as suffer the losses that
may befall it.
That Pablo Fabian had paid five annual installments to the Government, and
in fact been issued a sale certificatein his name, are conceded. He was
therefore the owner of lot 164 at the time of his death. He left four daughters,
namely, Esperanza, Benita I, Benita II and Silbina to whom all his rights and
interest over lot 164 passed upon his demise.
In case a holder of a certificate dies before the giving of the deed and does
not leave a widow, then the interest of the holder of the certificate shall
descend and deed shall issue to the person who under the laws of the
Philippine Islands would have taken had the title been perfected before the
death of the holder of the certificate, upon proof of the holders thus entitled
of compliance with all the requirements of the certificate.
2.
The assignment and sale of the lot to the defendants Silbina and Teodora
were therefore null and void. To the extent of the participation of the
appellants, application must be made of the principle that if property is
acquired through fraud, the person obtaining it is considered a trustee of an
implied trust for the benefit of the person from whom the property comes.
Laches may bar an action brought to enforce a constructive trust such as the
one in the case at bar. Illuminating are the following excerpts from a decision
penned by Mr. Justice Reyes:
But in constructive trusts, . . . the rule is that laches constitutes a bar to
actions to enforce the trust, and repudiation is not required, unless there is a
concealment of the facts giving rise to the trust
The assignment of sale certificate was effected in October 1928; and the
actual transfer of lot 164 was made on the following November 14. It was
only on July 8, 1960, 32 big years later, that the appellants for the first time
came forward with their claim to the land. The record does not reveal, and it
is not seriously asserted, that the appellees concealed the facts giving rise to
the trust. Upon the contrary, paragraph 13 of the stipulation of facts of the
parties states with striking clarity that defendants herein have been in
possession of the land in question since 1928 up to the present publicly and
continuously under claim of ownership; they have cultivated it, harvested
and appropriated the fruits for themselves.
3. it is already settled in this jurisdiction that an action for reconveyance of
real property based upon a constructive or implied trusts, resulting from
fraud, may be barred by the statute of limitations. the discovery in that case
being deemed to have taken place when new certificates of title were issued
exclusively in the names of the respondents therein.
[A]lthough, as a general rule, an action for partition among co-heirs does not
prescribe, this is true only as long as the defendants do not hold the property
in question under an adverse title. The statute of limitations operates, as in
other cases, from the moment such adverse title is asserted by the possessor
of the property
Inasmuch as petitioners seek to annul the aforementioned deed of extra-
judicial settlement upon the ground of fraud in the execution thereof, the
action therefor may be filed within four (4) years from the discovery of the
fraud. Upon the undisputed facts in the case at bar, not only had laches set in
when the appellants instituted their action for, reconveyance in 1960, but as
well their right to enforce the constructive trust had already prescribed.
It logically follows from the above disquisition that acquisitive prescription
has likewise operated to vest absolute title in the appellees, pursuant to the
provisions of section 41 of Act 190 that:
Ten years actual adverse possession by any person claiming to be the owner
for that time of any land or interest in land, uninterruptedly continued for ten
years by occupancy, descent, grants, or otherwise, in whatever way such
occupancy may have commenced or continued, shall vest in every actual
occupant or possessor of such land a full and complete title

Upon the foregoing disquisition, we hold not only that the appellants action
to enforce the constructive trust created in their favor has prescribed, but as
well that a valid, full and complete title has vested in the appellees by
acquisitive prescription.
DUQUE VS DOMINGO valid must be made in a public document, specifying therein the property
donated and the value of the charges which the donee must satisfy.
Facts: The complaint alleged that plaintiff, Julia Duque, is a niece of Juana
Duque who died in 1928. Juana Duque, through her other nephew, Faustino At any rate, granting, that such an implied or constructive trust existed, the
Duque, whom she had employed as her agent, purchased from the government right of action upon the same has prescribed. From 1931 when Transfer
Lot 1083 of the Malinta Estate at Polo, Bulacan. Faustino Duque, the agent, Certificate of Title covering the land in question was issued to Mariano Duque
caused the document of purchase, to be issued by the government in his name until 1966 when the present case was commenced a period of 35 years had
with the consent of his principal, Juana Duque. On June 22, 1915, Faustino passed.
Duque transferred his Sale Certificate No. 1138 with the permission of Juana
Duque to his brother, Mariano Duque, who later received in 1931 Transfer
Certificate No. 7501 for Lot 1083 from the government; it was alleged that
since then, Juana Duque had been in the exclusive possession of Lot 1083 as
owner paying the installments stipulated in the contract to the government
through Faustino Duque and Mariano Duque or reimbursing their advances
therefor; that in 1927, Juana Duque verbally donated and delivered Lot 1083
to plaintiff Julia Duque, her niece; that from then on up to the present, the
plaintiff Julia Duque has been the exclusive and the beneficial owner thereof.
However, when Mariano Duque, the title holder, died and in 1957, his
children, Emilio Duque, Potenciana Duque, Amadeo Duque and Arsenic
Duque registered Lot 1083 in their names in the Registry of Deeds of Bulacan.
Then the plaintiff, Julia Duque, requested the defendants to reconvey to her
the title of Lot 1083 but they refused to comply with her request.
Issue: W/N there was implied trust between Juana Duque and either Faustino
Duque or Mariano Duque?
Held: No implied trust between Juana Duque and either Faustino Duque or
Mariano Duque has been established by sufficient evidence. The alleged
possession by the private respondents of the land in question did not divest the
petitioners, as registered owners, of their rights to Lot 1083. Adverse
possession under claim of ownership for the period fixed by law is ineffective
against a Torrens title. There is no adequate showing that Mariano Duque
consented in 1927 to a verbal partition made by Juana Duque wherein she gave
the property in question, Lot 1083, to Julia Duque. On the contrary, in 1931,
after full payment of the purchase price, Mariano Duque obtained in his name
Transfer Certificate of Title for Lot 1083 from the government.
The alleged oral donation by Juana Duque in favor of Julia Duque did not
transfer any right over Lot 1083 to the donee. Both under the Spanish Civil
Code and the Civil Code of the Philippines, a donation of an immovable, to be